Given how interesting the afternoon was, I would like to do a further analysis. I was watching some of this in real time, saw most of the drop, and was scared to get in.
What was on my mind was that I missed the first and best entry, which perhaps was any of the rejections higher up, or perhaps once it started to fall through various levels, depending of course on how I define these levels. For a good while, it all still looked like chop, but I am sure at some point, that view point had to be abandoned given how swift the drop was.
My last update ended with penetration of the ultimate high at 3803, only getting to just under 3805, and then I drew in price unable to go lower, but also unable to make new highs. This should really be a clue, that for right now, nobody wants to pay more, in fact, as the minutes ticked, the transactions were all at subsequently less.
I think I get myself into trouble because when buyers show up, I assume that I was wrong. But perhaps the better way to think about this is that at the time, buyers weren't willing to pay higher, as evidenced by the falling SL. If buyers all of a sudden show up, it had nothing to do with my reading of price... who is to know they were getting ready to buy? Perhaps they decided to buy just because they see price isn't going lower, and none of this should really be my concern.
So lets start with the lettering scheme again for the afternoon at A again.
A - Although 3801 wasn't breached, price is unable to make a significant rise.
B - In fact, it turns around just below 3803.. so does this look like a serious breakout or no? Here at B we in fact form a lower high. Now this might not be confirmed until the drop below 3801 which happens on the bar below B, but this action certainly validates the wedge behavior at A... buyers simple didn't want to pay more.
C - So here we have another ledge forming at 3800, which can be said to break, but it barely drops, resting at 3799. I extended the apex line from the hinge earlier on in the day. With so many hinges and levels and apexes, its easy to find something that fits, so I'm fully aware of this, but this line does act as a mean for quite a bit of the action... traders are finding lots of trades around this level.
D - The climb up to D is quite unexpected, especially if watching in real time, which I no longer was by this time.
E - A drop to E and a climb to F is really just more chop.
F - We should note here that we fail to reach the high of 3805 and then quickly drop.
G - We come to rest at that mean and just chop away for 45 minutes.
H - Should we note that we fail to break 3801 this time? Too many levels, I know, and its all chop anyway, except maybe for the scalping inclined. But lets note that H is a lower high from G, and this is a lower high from the initial poke to get to the high of the day at 3805.
Should it be obvious by now that most traders don't find price above 3800 to be attractive? Its true that it isn't dropping, but it isn't going up. Now if traders are looking for trades.... where is the LOLR? That poke up was a failure, probably only technical in nature in that stops were run and it didn't stay up there long. Can we therefore conclude that they are more likely to try down first before they try up again? I don't have the answer to that question, and I'm not sure if a statistical answer would help. Perhaps we need to just focus on looking to see what they are doing, to see if they are venturing up or down at an attempt to exit from this area which they are clearly happy trading in now.
I - By the time we get here, we can see that we have gone through a series of lower highs, and we are now even making lower lows. I can once again draw in a SL that refuses to be broken, yet a ledge at 3795 that is holding up well. For 7 minutes price is getting squeezed until it falls out the bottom.
J - Note here that I drew in a yellow line to match up with a previous double bottom that propelled price up. Once again, I have far too many levels drawn in to make any profound statements, but we should keep noting that previous levels of support are all getting broken now. Of course by now we are at 3793, 10 points below where I wish I was already short from.
I am also not very good at watching 50% levels, but this would be the place. If the poke down to 84 at the open we call the bottom, and the rise to 3804 we call the top, then here at 94 is exactly 50%, and price melts through no problem.
K - This level, can't even remember where its from, causes a bit of a pause, but the extremes of this RET are only 2.25 points. I note this because I am casually noting how big are RETs that are in fact the end of a move. What I have seen in my brief study is that a RET of 5 points or less is usually not a problem. So if we hit a low of 80 for example, I can let it go to 85 before I have to really worry that the bottom was in fact 80.
Of course context is huge, especially if that low matches up with an important level, but I mention this as a way to talk myself into staying in a trade. Price hitting a low and coming up 2 or 3 points is hardly a reason for worry, expect of course if I got into the move right at the very bottom and now each tick is against me. Getting in much higher up is easier to swallow. Each tick against me still causes me to lose money, but in this case, its only less profit, but not more loss. Is there a difference? I'm not sure...
L - We do in fact drop lower, and come to rest just above 83, the low on Monday the 9th.
M - We note that we retrace to 87, a difference of 4 points, and sure enough we do turn down again, but we start forming a serious of higher lows. Point being that an exit at 4 points above the low might be taken because of fear, but an exit lower down to get an extra couple of points was possible.
N - By the time this low forms, we should be thinking about an exit, and price moving higher, above M, should really cause us to exit the trade if we haven't already.
Now its really hard to say where I should have gotten in. It all looks like chop, and although I see the series of lower highs, F is in fact a higher high. I think right around I, and certainly dropping through J should have been taken. By now of course, the move is over 10 points in, and all I'm worried about is selling the bottom.
Mark Douglas talks about beliefs, and where they come from. If your first experience with a dog is a bad one, in that he bites you, you will from now on always think dogs should not be trusted. When meeting the next dog, even if he is nice, its too late, your belief is already formed and you will have a long road ahead to change this belief.
If on the other hand your first dog encounter is with a friendly dog, upon meeting a bad dog later, you will realize that you will need some qualifications to help you better assess for the next time. Your friend experience was good, so your belief is that dogs are nice, and your second encounter, since it wasn't good, just teaches you that you need to be more selective. So the first encounter is critical, it is what sets the belief, and if the encounter is negative, it will be an uphill road to change.
My belief about buying below RETs causes me fear. I have tried several times, and one day in particular, I wasted over 6 points in total, shorting 3 different times with a market order, exiting each time with a 2 point loss, only to see the move go in the direction I was trading seconds later. If I waited mere seconds, the first short would have turned around and dropped again, and perhaps that move would have netted me 10 points if I could stand to hold through the next RET. So perhaps I wouldn't be as scared to take trades below minor RETs in a down move.
Now I'm not sure if my conclusion is that I should be shorting every time I see a cascade down and just hang on for longer if price starts going against me. But what I am saying is that buying below the RET is more than likely a profitable strategy in the long run. My stop was super tight, and it got hit because the entry wasn't ideal, it was already well into the move. Its the first entry that usually works right away, but each subsequent entry might require a little more patience. If I do this at least 10 times, I think statistics will be on my side, but I am emotionally clearly not ready yet.
I have also since realized that a 2 stop loss is just far too tight. So my choice is to either hang in longer, or get in sooner, and I think I am subconsciously looking for the move even before it starts, to get into a trade that hopefully allows for a better exit if needed, and is already in the money when the first hesitation arises.
I'm clearly still putting it all together, but I find I am getting freaked out less, I find that my initial desperation exit is usually a waste because a better place to exit will present itself if I hang in a bit longer, and if I hang in a bit longer, the trade ended up working at least half of the time. Rarely have I actually sold the ultimate bottom or bought the ultimate top (meaning it was good that I got out when I did). I have just caught a bad part in the little RET. (this also means that I shouldn't do the opposite of what I think I should do since I'm really not fishing out the ultimate tops and bottoms of moves)
Anyway.. who would have known there was another 10 points at least on the way up. Oh well... moving forward... (oh ya, price came to rest at that mean of 99... granted, it was bound to land on a level given that I outlined so many, but its still kinda cool how this all works!)
