Trading NQ via Price Action

[k p]

Not much to really say today... will explain below.

A - Before open, saw this hinge forming and price breaks to the upside... long could have been taken as shown.

B - At open, we hit a high and turn around. I'm think today might be a long day since we are above the mean of the channel, so thinking we will visit the top of the channel. This is the danger of being married to a position.

C - We hit a low here, but our RET to D is less than 50% and forms a range. The fact we don't RET more than 50% should be a clue.

E - Many of the guys went short here. The consolidation between lows of C and highs of D went on for over 10 minutes. Dropping below this is good reason for a short, which many guys took here at E. I love these trades where price essentially moves in your favor right away and never comes back. Impossible to plan out in real time, but nice to see on the hindsight chart.

And that's it. Price just kept going down. Each RET is an opportunity for a short. Each time you think you hit a bottom, it isn't so. Supply lines would keep breaking, RETs to go long might be triggered, but they all fail.

What is on my mind is the open. Today when I look at the open, the REJ at 94 sticks out.

In the insert, I show a 15 second chart. From the open, we hit a high at A but it doesn't hold. I'm not sure actually of the order of events here since lots could have happened in that 15 second bar, but by the time we get to B, we know that A was rejected (maybe it was rejected twice within the 15 second bar???). A climb up to C is a feeble attempt to go higher. We can place a stop to sell at the arrow above D. This is filled on the next bar and keeps going down. But here we still climb up to the high at E. If we get in right at the tip of the red arrow, price only moves against us by maybe a tick, but it is still a worry for price to hit out stop to get short, go down, and come back up to above our entry. Since this is a 15 second chart, we are in the clear in under a minute. I know as an amateur I expect price to immediately move in my favor which is just silly, but when things are moving quick at the open, they can also quickly move against you.

I will study openings in more detail. Going short today below the consolidation was a great trade, but I wonder if getting short right at open based on my insert is a legitimate trade as well. Its hard to think about shorting so quickly at the open though when I wasn't really prepared for such a huge drop.

 

[Fluke]

In the insert, I show a 15 second chart. From the open, we hit a high at A but it doesn't hold. I'm not sure actually of the order of events here since lots could have happened in that 15 second bar, but by the time we get to B, we know that A was rejected (maybe it was rejected twice within the 15 second bar???). A climb up to C is a feeble attempt to go higher. We can place a stop to sell at the arrow above D. This is filled on the next bar and keeps going down. But here we still climb up to the high at E. If we get in right at the tip of the red arrow, price only moves against us by maybe a tick, but it is still a worry for price to hit out stop to get short, go down, and come back up to above our entry. Since this is a 15 second chart, we are in the clear in under a minute. I know as an amateur I expect price to immediately move in my favor which is just silly, but when things are moving quick at the open, they can also quickly move against you.

I will study openings in more detail. Going short today below the consolidation was a great trade, but I wonder if getting short right at open based on my insert is a legitimate trade as well. Its hard to think about shorting so quickly at the open though when I wasn't really prepared for such a huge drop.

At first, I ran into trouble when using the 15 second chart, as I would take RETs and REVs that would never materialize as something I would have traded on the 1M chart and I would allow myself to get frustrated thinking "if I had only just watched the 1m....". After much frustration, and much more backtesting, I came to the conclusion that the lower bar intervals can be used to great advantage in a) specific time frames of the day and b) specific locations.

So as not to be too vague with that comment, when testing the extremes of a range as located on your larger bar interval charts (i.e. 10M & 2500 tick are two of my favorites), as we did this morning at ~92/93, and/or during the typically more volatile opening 15-20 minutes, I am primarily watching the 15 second chart.

The advantage for me in doing so is that I don't have take that trade as a REV from the 1M bar interval, but rather get the crystal clear image of the initial rejection, followed by, as you noted, the feeble attempt to again get back to 92/93, all of which forms a clear RET for one to short. Further, in managing the trade, the RET on the 15s (versus the REV on the 1M) allows for a SL to be drawn immediately, either in your head or on the chart. And further still, the RET having formed as high as it did, would allow one to sit more comfortably during the next RET (which does break the initial 15s SL so you have to decide before hand what that means to your trade), and weigh their options from the vantage of a profitable position versus being underwater in it.

View attachment 145187

 

[k p]

At first, I ran into trouble when using the 15 second chart, as I would take RETs and REVs that would never materialize as something I would have traded on the 1M chart and I would allow myself to get frustrated thinking "if I had only just watched the 1m....". After much frustration, and much more backtesting, I came to the conclusion that the lower bar intervals can be used to great advantage in a) specific time frames of the day and b) specific locations.

So as not to be too vague with that comment, when testing the extremes of a range as located on your larger bar interval charts (i.e. 10M & 2500 tick are two of my favorites), as we did this morning at ~92/93, and/or during the typically more volatile opening 15-20 minutes, I am primarily watching the 15 second chart.

The advantage for me in doing so is that I don't have take that trade as a REV from the 1M bar interval, but rather get the crystal clear image of the initial rejection, followed by, as you noted, the feeble attempt to again get back to 92/93, all of which forms a clear RET for one to short. Further, in managing the trade, the RET on the 15s (versus the REV on the 1M) allows for a SL to be drawn immediately, either in your head or on the chart. And further still, the RET having formed as high as it did, would allow one to sit more comfortably during the next RET (which does break the initial 15s SL so you have to decide before hand what that means to your trade), and weigh their options from the vantage of a profitable position versus being underwater in it.

View attachment 145187

I too ran into trouble when using smaller time frame charts. Everything looks like RET or REV. The key I guess is when this happens somewhere interesting based on context. Overnight highs or lows often are good areas that are protected/ fought over, as are previous days highs or lows. Db is teaching us to look at 50% levels as well, be that 50% retracement levels, or the means of ranges, and the the apex of a hinge.

I would really like to crack this opening though.. have to work on it. Thanks for your comments.

 

[game]

I too ran into trouble when using smaller time frame charts. Everything looks like RET or REV. The key I guess is when this happens somewhere interesting based on context. Overnight highs or lows often are good areas that are protected/ fought over, as are previous days highs or lows. Db is teaching us to look at 50% levels as well, be that 50% retracement levels, or the means of ranges, and the the apex of a hinge.

I would really like to crack this opening though.. have to work on it. Thanks for your comments.

Second Fluke on that. The bar interval should be proportional to the 'energy' in the situation. More energy = Faster Interval. But you will have to find the balance and you will most likely be whipped around until you find some control. But it's worth it.

 

[dbphoenix]

Second Fluke on that. The bar interval should be proportional to the 'energy' in the situation. More energy = Faster Interval. But you will have to find the balance and you will most likely be whipped around until you find some control. But it's worth it.

Yes. That's why I suggest moving to a larger bar interval on a day like today if one has overcome his fear issues (in fact, a larger bar interval may help to achieve that objective). Even a 5m interval shows that there wasn't much reason to exit after the drop below 3560. I've found AMT to be of enormous help here.

 

[game]

Yes. That's why I suggest moving to a larger bar interval on a day like today if one has overcome his fear issues (in fact, a larger bar interval may help to achieve that objective). Even a 5m interval shows that there wasn't much reason to exit after the drop below 3560. I've found AMT to be of enormous help here.

Something I need to work on. There is only so much that clever entries can achieve. Gotta be right and sit tight

 

[dealmaker]

Second Fluke on that. The bar interval should be proportional to the 'energy' in the situation. More energy = Faster Interval. But you will have to find the balance and you will most likely be whipped around until you find some control. But it's worth it.

Succinct!

 

[Fluke]

Something I need to work on. There is only so much that clever entries can achieve. Gotta be right and sit tight

Same here - looking back over my journey, so much time was initially spent on the entry. Ultimately, that is the less complicated part. Its what you do with it afterwards that makes all the difference. [Of course entering in the right location can simplify to some degree what to do with it afterward.]

DBs "find reasons to stay in" was contrary to so much I had initially read/practiced (then again 90% of what I have read is nonsensical garbage) that it is still what I struggle with more than anything.

 

[k p]

I worked my way through the discussion yesterday about the new possible channel and have gone ahead and put it on my chart. I would not have thought that its proper to start with the swing lows to draw the channel and extend the parallel to the top, for a down-sloping channel, but hey, whatever works!

In the attached pic, this would be the red channel. As Db said in his post, we are now at the bottom line of this channel, so lets see if we bounce off. The mean would be at 3519, but right here, at 3515, is also the lower line of the March channel, if that is still in play.

If we do break through, we would have to use a longer term channel from last year. Also, I have included a second hourly chart, much more compressed, which shows a level at 3414 where price has halted in the past. Perhaps it can do so again today if it drops?

 

[k p]

A - So it was quite the drop over night, but we appeared to hit a low of 40 and then started to go back up, hence the DL here.

B - 30 mins before open, even though our DL hasn't broken yet, price is following a SL down which eventually breaks the DL now. Hard to see now what the market will do.

C - We hit a low at C at the open and rally up to D where we turn. All this activity was quite frantic, not surprising given the huge drop yesterday.

E - As we approach the bottom, I am waiting to see if we clear the low of C, which we do, so hard to figure out if we are establishing a range or not. 49/50 is the 50% of this range.

F - Hitting 57 again and bouncing off sure looks like we have a range now, but the next bar breaks through.

G - Lots of guys went long here, not a bad area. We break out of the range and have a bit of a consolidation which is our RET and eventually we take off from here. What's nice about this entry is that price moves in your favor right away, and even though the DL gets broken soon, I think I would be out for 5 points.

H - Another long taken by the guys. Had you drawn in a steep SL, it would have been broken, so this could be seen as just a deep RET. Once again, price just takes off.

I - And yet another long. Two bars latter though, we can see a flat top so to speak, and the bottoms just keep getting lower until price begins to roll over.

J - Here a short now taken by some of the guys. Although it works eventually, price moves against you 3 points on the next bar, so for myself, it would be impossible to hold this position. This of course makes you worry more about getting in again. Even if you have a tight supply line, your entry is a few points away from it, so if you will hold until it breaks, it means you have to accept a few point loss. And this tight supply line, as pictured, surely breaks with this little consolidation. Stepping back to look at the bigger picture really is important.

K - This level here represents roughly the 50% of the opening range and price appears to be holding.

L - We drop lower here, but don't break the low at E.

And here I tune out and am just chatting.

I have gone back to looking for reasons to not enter a trade. I say to myself, lets just clear this range first, then its what if it drops back into the range, then I wonder if the move will continue. And 10 minutes later, I see the first entry was the best. Its easy to say in hindsight of course.

Its great to hear the guys calling out their trades, it reminds me that I should be doing more.

I have also been trying myself to introduce too much. The 5 simple rules of SLA work just fine. I think I am keeping myself out of trouble by adding in more, but all its doing it causing me to not take any trades.