Trading NQ via Price Action

[k p]

O - So here we have the open and although we go above that resistance level I outlined (not surprised by the way since this level wasn't at an important level), I am waiting to see something solid.

A - We do go above the new overnight high formed earlier as result of the buying at the news release, but this also doesn't look that good to me and we drop back down anyway.

From here on out, its just not trade-able so going to wait. That level at 83 that you see played a role on the 23rd and 24th, so I'm gonna leave it there and see what happens when price gets there.

B - So nothing to do until we get to here, just slightly below all those other lows formed after the open, and the yellow line brings forward the swing low that formed the opening price.

C- So dropping below finally seems to show that we have broken out of that range at the open that lasted almost half an hour. I see a RET and take a short. I'm unfortunately out less than 2 points below because my stop got hit too quickly before I could move it further down. Usually its set much further away, but since it was off my chart, I dragged it up, then moved my chart, and before I could move it to track price down I was out.

D - No worries, right beside D you see another short below a RET, but yikes, this one stops me out, and of course I bought it back right at the top.

E - So no worries again, I'm back in again here on another RET, but more importantly, going below the previous swing lows this time.

F - This short works well and I'm out here based on some hesitation. The move down looked good, but watching that right tick really does give you a sense of the pace of trades and when there is a bit of exhaustion with the selling. Doesn't mean it can't continue, but I'm out.

I sit at about $50 profit at the moment. The best trade really was shorting where I did and holding as that trade was worth almost 8 point by now but oh well. The unfortunate early exit messed things up a bit, and I would like to think that I would have held since price never did come back up to my entry, which would have been my firm exit, but rather dropped below again.

G - So I try to short again here, but you know, I had my doubts. I saw on the 15 sec that the downtrend was broken, and although I didn't have a SL drawn in at the time, I could visualize the line and where the higher low was maybe going to form since I could see the break it trend. But I just thought why the hell not try anyway since the down move was strong. (really stupid, and the voice inside my head was right!)

Let me attach the 15 sec to show what I mean. Its funny because I put the trade on thinking "I hope this doesn't go against me" as opposed to "I think this short really looks good" which is what I should be thinking when I put a trade on. Having little confidence in a trade is just dumb. Look at how dumb that short looks on the 15 sec chart!!! I should be looking for a long at this point!

Anyway, so I'm out at the top on the same bar and maybe I'm at -$6 right now.

H - So since the short didn't work, this looks like a good place to try a long.

I - It didn't go anywhere and the exit is terrible, right at the bottom of this little range that is forming, just before price comes back up again. Its not a bad trade actually, the trend looks like its up and there is the RET to take it, it just didn't go anywhere.

J - So I try another short here just off to the right of J. This one was stupid, no good reason, just watching the one minute bars coming down and I think why not, but I'm selling right in the middle of it. The exit is just as bad.

It looks like I was a bit out of control by this point, but I really wasn't. Perhaps this last short was based on needing to make my money back. I was at -$80 and wanted to make it up, and instead, I got to -$144 I think.

So after this, its time to take a little break.

K - I resume here, noting the previous swing low and dropping below this level, complete with a RET on the tick chart and hence the entry. The slightest bit of hesitation gets me out. The fear of another loss is strong, and I just want a winner. Db said in a posting yesterday how some traders trade their plan, and others are playing video games. Spot on I would say.

Anyway, so I'm now at -$123. Only 6 more scalps to go to make it all back! LOL (if I was serious, that would of course also have to be 6 successful scalps in row of at least one point each!)

I will say this though, this machine gun approach is my sick and twisted way of forcing myself to put the trade on, and forcing myself to see that what I'm doing isn't working so I need to really test these things out. Some trades I'm very happy with, like shorting at C, below the opening level, and the short here at K, below that previous swing low. So I am doing something right, but once again, with trading, you have to do almost everything right every time. My initial gut reaction to get in seems good, but I don't, I get in much later. My initial gut reaction to get out also seems good, but I don't, I hesitate.

Watching the tick chart has also been making me open my eyes up. The tick chart is terrible for watching the trend, but its excellent for spotting an entry and perhaps an exit if you don't have a level in mind that you are waiting for and don't care how long it takes price to get there or the route it takes.

L - This arrow here just points to the bar where I exited my short as per the platform, but as price was coming down, I was watching like a hawk. This line is the overnight low, and I know something will happen. I don't know what, but I know something. Either we go through, or we bounce off, or we go through in a bit of a fake-out to catch some shorts and then turn back up.

Anyway, the trade was there, so pretty on the tick chart. Nice little RET's on the way up, a nice higher low. But darnit, didn't take it. I think I was closer than ever before, and although I just took my short earlier, I was quite prepared to go long because this reversal at a prominent level was solid. Who knows how long I would have held, but I think I might have gotten at least 4 points.

So back to typing....

M - Now I see this support level forming, and I can't remember now if I tried to get a short in there or not, but breaking below would certainly make me think that. I should also note that it looks like the highs above M are roughly 50% of the down move from the highs at 74, so price turning around here and coming back down makes sense as price was unable to retrace above 50% of the down move.

N - So missing that short, that low at 56 is on my radar again. That tick chart is all I'm focusing on, with the mouse hovering over the DOM to place a trade. Looking at the inserted tick chart, you can see how price first bounces off, but I'm waiting for that RET which isn't there, and then price drops below, once again, looking for that RET which isn't there, and eventually it goes higher. But too late for me now. I wasn't prepared for up, down, and then up again. I was only prepared for up or down.

We do come down again to this level, but it looks messier this time around so I'm gonna stay out. Price dips even lower, but ultimately goes up, although I would be waiting to clear the highs of 65 before I was going to do something.

SUMMARY

So it looks like my day ends at -$123.

Once again, just a couple of minor tweaks would make all the difference. The first unfortunate exit would make that short worth so much more and not set up that send short that was a loss. Not taking that stupid short at G when I could clearly see on the 15 sec chart that it didn't look good would also have been a big help to the bottom line. Lastly, putting that long on after the bounce from the overnight low that I saw so clearly and was prepared for would have also been a huge boost. So close.... yet so far.

 

[NoDoji]

Finally, I had to find a method to determine when to place the trade (entry trigger). I settled on "when price pulls back and then turns back toward the original price direction, I place the trade".

If the 1-min chart was my main trading chart, I wouldn’t look at any smaller bar interval unless I was a micro-scalper. I once tried using a micro chart with CL years ago and it distracted me from the bigger (and clearer) picture.

Here’s how I use trend lines to watch for the market to tip its hand and to find a low risk entry point, which is very similar to Toucan's description above:

1) Shortly after the open, you can draw the initial LTL

2) Price comes back to the LTL following a HH; trend intact

3) Price comes back to the LTL following a HH; trend intact

4) Price breaks thru the LTL following a HH and closes below the LTL; initial breaks of a well-defined trend line tend to fail, so I watch for a “hook” setup. This means I look for a pullback bar where an entry via a trailing sell stop would occur below the LTL off a significantly LH. The 6:56 bar on the chart sets up appropriately; however, if you’re not comfortable with the narrow airspace between the 3977.00 entry and the range low at the horizontal line, you could sell a break of the range low because the pullback high at 3978.75 is so much lower following the breakout that a measured move down would take price to around 3970.00. I treat a break of a range off a significantly LH (or HL in the case of an upside break) like a pure breakout trade, meaning if it doesn’t break decisively, I quickly move my stop close to the breakout level.

5) This is where a new LTL can be initially drawn.

6) Price breaks the LTL, but closes above it following a HH, so the pullback uptrend is intact. Some people add a second LTL because the break was more than a few ticks. The 7:32 and 7:33 bars break the initial LTL and close below it, but the adjusted LTL remains intact as price makes a HH without ever triggering a hook entry back in the direction of the initial LTL break.

7) Both LTLs are broken decisively and a short of the horizontal support shelf can again be treated like a pure breakout. The 3978.75 LH earlier to the 3961.75 swing low at 7:06 sets up a measured move target of around 3956.50 from the 3973.50 swing high.

 

[k p]

Hi NoDoji... thanks for taking the time!

Ok... so in response to using a smaller bar interval, this is because I find I'm too late into the move because I'm waiting for a retracement that doesn't appear in the one minute, and when it does, I see that this causes me to get into the move at the end, or at least during a brief consolidation which stops me out.

Adding to your chart, this little bar below A has that RET that I'm looking for, so I could place the entry one point below its low, at roughly 3969. But suppose that the way these ticks were packaged together in such a way that this bar didn't have the slightly higher low to form the clear retracemnt, I wouldn't have an SLA entry until the little red bar just below B that I squished in there. And now this entry would be over 10 points away from where the move first started.

But at A, as per my hypothetical example if that bar didn't have the higher low, the RET is still in there because of the entry and exit between the adjoining bars, but this isn't in the SLA rules if that low wasn't in fact slightly higher than the previous low. So on the one hand, I'm struggling to follow rules, and on the other hand I'm trying to figure out if there are better entries. They might be triggered more often, but perhaps getting in sooner and exiting sooner can still be more profitable in the end, it just means you will have to work a little more.

The 15 sec chart will have these entries... too many of them in fact. So if I use the one minute chart as my main chart, and see the drop below the trend line as you outline or below the horizontal support, and hence see the change in trend and the trade set up on the one minute, the 15 second chart will hopefully have the clean entry.

I think this is essentially what I did on my chart when I got my first entry, which was excellent, and it was only because of technical errors that I got stopped out too soon. Gosh, I do wonder where I would be at if this didn't happen, if I exited for at least 5 points, and then was able to take advantage of the next drop.

What do you think of my rationale though?

4. This point is spot on. I love the entry, but that horizontal support is what I am focusing on, so yes, I want to see it drop below there. Truth be told, when I get nimble enough, when the brain can process faster and the finger click exactly when necessary, then I'm all for getting in sooner, just before everyone else sees what's going on and helps you on your way, so I love it!

But for now, as I take some charts with me to bed, just as you said you had done in the past, what I see best is how price bounces around between ranges, so if I wait to clear a range first before thinking of an entry, I hope I can improve my stats.

5-6. Your discussion about the second setup is quite intriguing, but when I look at what I have on my chart... I have nothing! LOL.... This was all a range to me, and I was waiting for price to drop below that swing low at 62. Your trendlines absolutely make it clear, and there is no reason why I couldn't have drawn them the same way, but I'm sad to say that now after being in the negative, I was as prepared, and really, just wanted price to go somewhere completely different.

I especially like how at 7, with the way you have that horizontal level drawn in, you can see each bar makes a lower high, the type of behavior that makes me drawn in my little wedge, so its just a matter of time until we get a break of that level and drop out the bottom, or someone decides to finally pay more and price goes back up. This is exactly the sort of thing that I can easily spot, and right below the break, where the one bar closes and the next bar opens, you can see the RET in there... wow.. what a perfect trade for me!

Your measured moves I remember reading from Brooks, and I like it, but my brain is just overloaded at the moment. I think that if I just picked one thing to focus on and did just this I would get out of my rut, but even though I'm losing money, I do think I'm still making progress.

 

[NoDoji]

Hi NoDoji... thanks for taking the time!

Adding to your chart, this little bar below A has that RET that I'm looking for, so I could place the entry one point below its low, at roughly 3969. But suppose that the way these ticks were packaged together in such a way that this bar didn't have the slightly higher low to form the clear retracemnt, I wouldn't have an SLA entry until the little red bar just below B that I squished in there. And now this entry would be over 10 points away from where the move first started.

I consider A late to the party, but that is a fine continuation setup if you didn't catch the first break 4 bars after the initial LTL break at my #4. That little pause at your A doesn't even qualify as a pullback except on a 15-second chart. There are simply no buyers.

The 15 sec chart will have these entries... too many of them in fact. So if I use the one minute chart as my main chart, and see the drop below the trend line as you outline or below the horizontal support, and hence see the change in trend and the trade set up on the one minute, the 15 second chart will hopefully have the clean entry.

What do you think of my rationale though?

I can relate totally because I use a 5-min chart for my signals and a 1-min chart for my clean entries. I would find it quite difficult to drill down from a 1-min to a 15-second for cross-referencing because I'd be afraid of seeing bunnies in clouds, LOL! If you can manage that without losing the forest for the trees, don't let me discourage you from it

As for the setup at #7, that's tricky because the pullback isn't "orderly" like it was after the breakout at #4. The first pullback bar had a low almost equal to the breakout bar low, so trailing a sell stop would have to clear the support shelf which starts around 7:10. Then the same thing happens again. On your 15-second chart this would look like a very clear (small) range with a slightly lower high by the close of the 3rd bar after the #7 breakout bar. Because of the lack of clarity there on the 1-min chart, I'd choose the pure breakout entry of that horizontal line and if the break was only a couple ticks, I'd likely look to scratch quickly. All in all it's just not as clean a setup as the earlier one.

 

[k p]

I consider A late to the party

I'd be afraid of seeing bunnies in clouds, LOL! If you can manage that without losing the forest for the trees, don't let me discourage you from it

As for the setup at #7, that's tricky because the pullback isn't "orderly" like it was after the breakout at #4. The first pullback bar had a low almost equal to the breakout bar low, so trailing a sell stop would have to clear the support shelf which starts around 7:10. Then the same thing happens again. On your 15-second chart this would look like a very clear (small) range with a slightly lower high by the close of the 3rd bar after the #7 breakout bar. Because of the lack of clarity there on the 1-min chart, I'd choose the pure breakout entry of that horizontal line and if the break was only a couple ticks, I'd likely look to scratch quickly. All in all it's just not as clean a setup as the earlier one.

You are of course correct about being very late and another member who messaged me is saying the same thing, and I of course know this as well when I wait for SLA entries that are more than 5 points already into a move. In this example, the SLA entry is actually just above the horizontal support line just after A, but its just me who is trying to use a horizontal line as more of a sure trade.

Bunnies in the clouds... yes.... big problem. Losing the forest... absolutely something that I've seen myself doing.

And in reference to 7, I cannot argue with anything you say as I know you have dissected this down to the tiniest detail. What I'm focusing on the most here isn't so much that the pullback isn't strong (this isn't even something I knew to watch out for...hmmm...), I'm just seeing that with each bar, buyers are paying less and less, and although there is no selling going on below the lows of each of those bars, its just a matter of time until something breaks. But once again, your trend line does a much better job of showing the short much higher up.

Thanks once again for the awesome analysis!

 

[k p]

PREP FOR JULY 31

Got up early today because of the news release, thinking I would play it for a quick scalp... which I did... just that I was scalping in the opposite direction. Yikes! First short as shown got out at BE, and the next short made me take a loss of 1.5 points, so I start my day at -$38. Its interesting to note that had I waited for a RET on purely the one minute chart, its there with an entry just below 42 so a couple of points could have been made. Yup.. nothing about this trading is easy, that is for sure! I was trying to just get into the initial move early and hop on for an easy ride. Time to focus on taking only high quality trades. Oh.. the box I have drawn in just highlights a range I was seeing as I was working on my morning prep, but for a news release event, I think price is quite erratic initially, no matter where the levels might be.

Ok, so overnight has been quite the drop, which is a shame, because now I'm left wondering if at the open there is still enough strength left for a down more or if first there will be a bit of a rally or who knows what.

So our overnight low of 31 is plotted, as is the high of 69. Yesterday's highs and lows are 83 and 53.

30 mins before the open, price is coming down again, getting very close to that 31 overnight low. Will be watching to see what happens here. There is a low of 29 from July 28th, but dropping below this would certainly get us into a price level that we haven't been in for almost 2 weeks and hence could be a nice drop. As you can see, I have a short bias, but I won't be ignoring an up move. It of course has to happen for all the shorts to buy back their contracts, which is just one of many reasons for a rally, none of which matter of course.

Just as I'm about to post... yup, a higher low at 34 and a little rally to almost 40 with a definite break in the SL. So up or down are both on the table.

 

[k p]

A - Price really started to move here... I swear the market opens up 30 seconds before my platform tells me it does! I will refresh the chart once I'm done my summary and see if the bars change at all. I did refresh it a few times a few minutes into the open, but it didn't move. Perhaps the data on the server takes a while to be updated.

O - So here we have the open, so close to the overnight low.

B - Oh... going backwards, here is a possible SLA short that comes up after a DL break. The SL is drawn in as price comes down and triggers the entry, but since price just goes sideways, the SL is broken.

C - Here I say is an entry for a long. We have a great REJ at the overnight low, price drops just a couple of ticks below. On the 15 sec chart as inserted, this opening range is much clearer. The resistance line stands out for me, and once it breaks through, it just keeps going. I was looking for that RET to get in, and eventually did, but much too late at 3938. 3936 is one point above the resistance line, and there really isn't a good RET in there anyway, but I just took it by placing a trade one point above whereever price was at the moment.

D - I didn't have a DL drawn in, but including it now on the 15 sec chart to show the exit which I'm happy with. You know, I'm also happy I took the long. I said before the open that I had a short bias, but I saw the long setting up and took it. I think this is progress!

E - Here you can see both a SL line, the thin line, and also the upper line of the hinge. This hinge isn't drawn in till much later, you can see the swing high that connects it.

F - Here would technically be a short, but I want something better.

G - By this point I have a good bottom line forming for my hinge as well, so the hinge is on!

H - Right after I finish drawing the hinge, it breaks out the bottom. But we have 5 minutes of hesitation here. Perfect! Such a good trade is setting up here. We have support at the overnight low again and a break of the hinge, either it goes up, or breaks through. But where to get in once traders make up their mind?

I - By this point, we are already 3 points below... and I'm hunting for a RET on the 15 sec.

J - Jesus.. I'm still not in... still hunting...

K - Oh to hell with it.. market order! Sigh... I'm out for even less than a point loss. What can I expect... I'm shorting a full 10 points below where it was getting juicy and the trade was setting up.

L - So price comes up, and I have a DL down below along with this resistance line I was watching which looks more solid on a 15 sec. It breaks through quite well, but we are just below the support at 31.

M - Sure enough, support from earlier becomes resistance and down we come.

N - I pull forward the previous swing low and we have a bit of congestion here, but you can see the purple down arrow indicating a possible short. I put the trade on. I was a little worried because for 3 minutes price went sideways.

And just like that.. price jumps right through the entry. At pretty much exactly the same time, the connection goes dead. Not the internet this time, but data feed and connection to the broker. I assume I'm not filled, but no way to know.

P - So this is where I get reconnected and OMG.... the trade was on! I notice that I'm actually in the money, and instead of being down $50 which is where I was at from the little losses today, I was actually ahead $20. I exited right away. Lucky exit, as price came up to my entry, but of course if the platform had been down for 20 minutes, I might have been 20 points ahead as price just kept going down as the day wore on! LOL

Q - These yellow lines show the swing lows that I'm bringing forward. Here, once we drop below, we don't come back, so this is something I'm really watching there days.

R - Here I take a little scalp and get out just in time for a point or so, so I sit at +$37 now.

S - When this swing low from R is brought forward, price dips below but comes up. Yes the down trend still looks good, but since I'm not in, where is a good entry? I'm wondering if price going below a previous swing low is good, but here it wouldn't be.

T - Here price going below the swing low at S is a great trade.

U - Here price barely pokes below the swing low.

V - And here is another poke, but too much buying to make it drop further.

After this is a clear range, and a further poke below is quickly bought up. The tops on the range are each lower by a tick, but this is all just sideways after all.

SUMMARY

So I'm up $37. The regular session was certainly better because I started the day down $50 so I was able to make a few points, but lets face it, price dropped at least 40 points today and I have $37 to show for it.

Well, lets learn from the opportunity not taken.

 

[k p]

Yup.. I'm still here. Watching price go down without me, letting the feelings of missing out eat away at me, but at the same time wanting to protect my $37.

Ok, so enough about that.

That range at U/V eventually broke, but visually, I'm not sure how to define it, the limits aren't all that clear to me. The highs are ever so slightly lower, and the lows are ever so slightly lower as well. Maybe that in itself should be a clue.

W - Anyway, so I'm watching here, and once again, although we have support, the SL at the top is being tracked down quite well. I have to redraw the support line, and the SL has to be fanned, but this is still all part of a down move.

X - This level at 3889 came out of nowhere. Its still on my chart, and when I look back I can see why it was drawn in although we haven't been here for a while, but bam, price turns around here. The fanned SL doesn't break till about 5 minutes later though.

Y - So now we have this lovely DL.

Z - Price shoots down a bit here, but is quickly bought up... a great rejection bar.

A - By this point, I draw in this resistance line. Perfect setup for me. Traders are showing they want to buy each time price goes down, but they don't yet want to buy above this resistance line yet. Something will have to give!

B - And this is where the long should be. I had quite a bit to go on here. Even if I'm worried about a trading range setting up, the high outlined at C is easily 3 points away so lots of room to get out if price comes back down. The trade isn't taken, but its good for at least 5 points if not much more. Even if I wanted to wait for a RET, that is there too about 2 points higher.

I just wanted to share with everyone reading my many moments of self inflicted agony. Thanks for reading!

 

[NoDoji]

I hope you don't mind if I share one more set of breakout/pullback setups. This is a favorite of mine when using the 1-min chart to pinpoint my entries.

The first one is pretty clean because the strong overnight downtrend has resumed by the open and there's plenty of room (airspace) for price to go from the pullback area.

The second one is problematic in that there's a battle between the bulls and the bears - a lower low at the open followed by a higher high. The HH was a weak breakout, so any remaining bulls are trapped in a bad way by the time the LTL breaks. However, because the setup allows no decent airspace for an early entry, I'd look to short the break of the opening Low and treat is as a pure breakout, meaning if the breakout is weak, scratch the trade quickly.

In hindsight, we might think the early entry (break of the 6:54 bar low) was "better", but in real time, a break of that bar doesn't really cause anyone pain; a break of the opening Low is far more likely to trigger enough stops to give you a quick escape route if it fails.

I hope this adds a little clarity for you. I'll be taking a bit of a break, so all the best to you!

 

[k p]

I hope you don't mind if I share one more set of breakout/pullback setups. This is a favorite of mine when using the 1-min chart to pinpoint my entries.

The first one is pretty clean because the strong overnight downtrend has resumed by the open and there's plenty of room (airspace) for price to go from the pullback area.

The second one is problematic in that there's a battle between the bulls and the bears - a lower low at the open followed by a higher high. The HH was a weak breakout, so any remaining bulls are trapped in a bad way by the time the LTL breaks. However, because the setup allows no decent airspace for an early entry, I'd look to short the break of the opening Low and treat is as a pure breakout, meaning if the breakout is weak, scratch the trade quickly.

In hindsight, we might think the early entry (break of the 6:54 bar low) was "better", but in real time, a break of that bar doesn't really cause anyone pain; a break of the opening Low is far more likely to trigger enough stops to give you a quick escape route if it fails.

I hope this adds a little clarity for you. I'll be taking a bit of a break, so all the best to you!

I don't mind at all!

In the first example, I find it interesting the way you draw your lines. Maybe not that its interesting, but that you keep the very first one you draw. With this upper line so shallow (ie. opposite of steep... is there a better word???), it makes me think that it won't provide much info to track price, but you're clearly using them very well.

Its interesting to read about how you said the HH and LL was problematic after the open because this didn't jump out at me as being problematic at all. I consider the open somewhat different, which I guess is wrong since price is continuous and hence the prior action of course matters, but it seems to me like a whole different set of traders enter the picture who very often have a different idea of what they want. So thanks for giving me a different view point. This is especially what I liked about Db in the chat sessions... talking through the action as it was unfolding and trying to figure out what is significant.

If I may ask real quick before you take a break, how do you take your trade? The SLA entry of course is to put your trade on one point away from the previous bar, be it above or below, and price either comes to you to trigger the trade or it doesn't. So when you mention shorting a break of the trend line, lets say in the first example where you mention to short a break of the low of that bar, where are you putting your entry and is it a stop limit order?

As you mention in the second chart, shorting a break of the opening low is I think quite juicy as well. I'm trying to think in terms of what traders want, and if after a move up there are no more left to pay above the opening low, then this certainly opens up the down move potential. So many charts (no idea about the %) have price going a good distance away from the open, be it up or down. Its not that often where price just gyrates around the opening level with less than 10 points in either direction. So getting it right at the open once the dust settles after a few minutes seems like a lazy but good approach to trading if you can nail down the direction early on.