Trading NQ via Price Action

Sorry.. didn't do prep today. Have been feeling sick and exhausted so I'm waking up a bit later just to catch the open.

A - Once again the platform time being wrong is an issue. I had to move the "O" already for the open, but here I had an opportunity to go long on my original charts and when I tried to place the trade, the system kept cancelling it. I think perhaps I need to make sure to restart both the connection to the broker and the platform and not leave anything open from the day before.

Anyway, so I had to shut it down and restart, which of course reloads the data, and now you see in this entire up-move at the open that there is no RET to enter. Had my trade been accepted, it would have filled, then gone against me by less than 2 points, so hopefully I would still be holding, and this would have been an excellent trade.

B - Anyway, so this whole time I'm shutting down and restarting the platform, and once its up and running, I take this little trade here that just turns into a scalp. The reason for this trade was simply to see if everything was working ok now, and the exit was just because there was a bit of hesitation so I got out for a tiny profit. If price took off I would have held it of course, but I'm just messing with this trade, especially since the real entry should be lower, just one point above the previous bar.

So I'm up +$16

C - So the DL has to be fanned 3 times now, but the uptrend is still on. The drop overnight was quite a bit, and so far the climb up isn't too bad either. That first long that I tried to take but couldn't because of technical difficulties sure is looking good.

D - Here is a possible short below the RET. Its practically 9 points below the high there of 66 where price turned around, so I'd say this is riskier, and it does run out of steam quickly, and price just turns around and keeps on climbing. I didn't take this trade as you can see.

Ok... back to bed for me. Not a bad day so far, could have been quite profitable.

I am looking forward to analyzing these charts of the past couple of weeks to see where I went wrong and what tweaks I need to make to stop the account from bleeding. I will make a firm rule about what to do when price reaches either the overnight high or low, or previous day high or low. I'm sure after analyzing just this, and looking at only one month back, I should be able to see something that I can use.

I mention this because price yesterday got to within 2 ticks of the previous day low and then took off. These things happen far too much for me to not have a firm rule about what to do. I just have to figure out what I need to see if price penetrates and what a continuation looks like, or what a reversal looks like when price gets to within a point. This trade comes up over and over again, so just having confidence here and knowing exactly what to do should I think turn things around to at least BE for me.

Oh... before the open, you can see that wedge in my chart about 15 mins before the start. This one didn't go anywhere, and price broke through just a tick or so I think but quickly turned back down. This is my other setup I want to test as I find a penetration of resistance works quite well, or, if instead its a reversal off resistance, this is just as good too. Basically, something happens after the buildup of energy, so knowing what side to get on and how, complete with exits, should also be a good addition to my bag of tricks!
 
O - The open is roughly around here. My wedge pattern didn't lead to much here, it ended up just forming more of a range.

A - So here is my first entry, and based on the 15 sec, it didn't look too bad I don't think. I really have this inner struggle between wanting to get into a move early, and then of course, like today, getting into a move that isn't exactly established yet and getting caught up in the frenzy at the open.

I took this long based on the higher low which allowed me to draw the DL, and it was even one tick higher than the previous high at the open. Price goes just a bit higher and then comes down quick, going through the DL and I'm out. Only about a 2.25 point loss on this one so I'm at I think -$49.

B - So there really isn't much to do for a while. Sure I see the series of lower highs and lower lows, but based on these fanned SLs, its anybody's guess where the top would be, so shorting at the top and buying at the bottom sounds easy, but I'm not sure how I would actually go about doing it other than with random entries and hoping for the best.

C - This is of course a hindsight trade, a nice long after the SL break and a higher low, but its in the middle of all this mess, so no way am I even thinking of this in real time.

D - As we get close to here, I bring forward the previous high. We have a solid REJ at this level again for now.

E - The selling stops here, still above the DL, and the next approach to 88.50 is successful at breaking through.

F - I am very keenly watching this level. I fully remember just a day or two ago where price came to within 2 ticks of the previous day low I think it was, and turned around. Here we are two ticks below the PDH and we turn around as well, and quite strongly.

Where is it safe to short? I guess I should throw safe out the window, its never a zero risk trade. Once we go down through the level at D, that resistance level doesn't now become support, and price is dropping very quickly.

G - The DL is broken as well, and I finally short here, one point below some RET. I'm out quite quickly, just the slightest bit of hesitation, but also because my entry is now well below where this downtrend started.

H - So here I think is another good place to short, and I'm out for just over 2 points loss. The DL was drawn in after we made the higher low on the next bar. When I entered my short I of course thought the downtrend was still going to continue.

I - The area on the way up to here is just too messy now, so staying clear, but as we approach here, I'm keeping an eye on both the previous swing high at F, which I carry forward with the yellow line, and of course the PDH.

J - I try a short here, but once again I'm out fairly quickly. Price didn't instantly drop like before so given a chance to exit at a slight profit, I take it.

K - So we finally go slightly above the PDH but it doesn't last long.

L - We drop back down, and this little ledge forms here at about 89.50. The trouble is that I'm not watching super closely right now as I'm already typing.

M - Moving to the 15 sec insert chart, we see the drop below this ledge, and a short right here at M, about a point below this ledge is where I tried to get in, but price was just dropping far too quickly. The DL on the one minute is broken at about 89, but what's really more important I think is the inability to stay above the previous day high.

N - So now of course I'm playing catch up, and my entry for a short here catches a bottom a I'm out for a 3 point loss. Worst of all, price drops very quickly shortly after my exit.

P - So because I am clearly not learning from my lesson, I think to try this one more time, and although it works for a few points, price comes back up and I exit at BE, minus my commissions of course, hence another $4 loss.

So my day ends at -$139.

CONCLUSION

Ok.. its time for a rant!

Its getting rather frustrating. Anything would work better than what I'm actually doing. Taking the exact opposite trades of mine would be better. Taking random entries I'm sure would work better. Putting on just one trade a day based on the initial direction at the open and then walking away for 2 hours would I'm sure be better.

I sat out most of the mess at the open after my first failed trade, so this was a good move I think. Perhaps even trying to get into an initial move but keeping a tight stop isn't bad either, especially on those trending days where price just takes off, so this first trade can be justified, even if it was rather early. Yesterday I tried this same thing, and it would have worked quite well if my platform didn't cancel my trade. So perhaps I do have something here.

I keep coming back to PDHs PDLs and the overnight range highs and lows. I honestly think that when price gets to this level, or within a point, I should just take it, flip a coin, long or short. Keep a wide 4 point stop loss, give it some room, and price will either keep going or turn back down. A 4 point loss is $80, so who cares if I'm wrong because based on my past few weeks, I'm having an average of at least $100 loss a day anyway, and more like $200 on the bad days. But these trades at these important levels really go somewhere. Waiting for the RETs just stops me out, they show up 5-10 points past the initial move, or the move is so good that I'm stuck chasing it. So if I just take it, who cares about confirmation, I don't think I would do any worse.

Today we only went 1.25 points above the PDH, and even though I was shorting... I lost money!

Anyway, I got a few hundred dollars to go before I reach my $2000 loss, which I guess would make me take a break.

I have quite a bit of time today so I will hammer out a strategy for what to do at the PDH or PDH low. Basically, I will just see how many points I need to give a trade before it clearly isn't working, and what do I need to look for to know what direction to trade in. But basically, I think putting on a trade at the PDH or PDL should be a good strategy. Rarely is this level ignored, meaning that price just goes sideways. It either bounces off, or continues, so this would be a good place to take a gamble.
 
So I started this journal on Feb 10, and hence Aug 10 will be my 6 month anniversary, but since this falls on a Sunday, why not just celebrate today.

Happy Fucking 6 Month Anniversary To Me! :p
 
Thank you for sharing your journal. It is insightful and I hope you continue. Also thank you to those who added (and I hope continue to add) insights to this journal.
 
dratsum said:
Thank you for sharing your journal. It is insightful and I hope you continue. Also thank you to those who added (and I hope continue to add) insights to this journal.
More...

Thanks dratsum. I do plan to continue, but hopefully with something a bit different than how I'm doing it! :D

I am writing in such detail so that those trying to learn can understand exactly where I'm at, and use this journal as an example of what not to do! :D

Gosh, it really is incredible to see how the trader himself is absolutely the weakest link in all of this.
 
So I decided to check in again, and yup, it looks like just going short at the previous day high would have been a $1000 pay check on only one contract! (50 points... 92-42)

So I decided to take one more trade, completely recklessly, and just because.

A - My entry is here, and not the best entry, but I planned to hold through a deep RET, with the idea being that I know we will hit the PDL outlined by the green line at 3842. The entry was even a market order because fuck, who cares if its a tick higher or lower, I'm not exactly putting on a well tested trade here.

B - It is barely in the green before it turns back up and already this trade is about -$50, but I keep holding. Yes, I'm scared, but I did go into it saying who cares!

C - So sure enough, we come back down, and I start sliding the profit target up. The fear takes over now, and I want to make just a bit of profit. Never mind the original intent of this trade, I just want out! I'm out for 1 point profit, so $15 when you take away commissions.

This brings my day to -$123.

D - And of course, right after my exit, right after I work through the pain of climbing up to B and holding, the drop is pretty quick and we make our way to the PDL. Lets see, my entry for short was at 48, the PDL is at 42, that is 6 points, so that would be $120 profit which would almost bring my day to BE.

E - So we break through the PDL, although slowly you can see (ie. traders are starting to buy here, not just sell), and I have this level at 41 outlined as well, but no idea from where as its been a while since we have been this low. And here I am thinking, just buy, who cares, just buy. If it goes down 5 points, fine, take a $100 loss, but if it goes down that low, then clearly is gonna go lower, so the exit there would at least be solid in that the down trend is continuing and I didn't get out too early. If I wait for a legit entry for a long, I could be buying much higher, and then the process starts again where price would go against me a bit but still not invalidate the long but still stop me out because of taking a couple of points loss.

Well, I do nothing. I don't actually want to be reckless. I don't want to be trading with emotion, and I consider myself lucky for making $15 earlier even though I was prepared for a $60 or $80 loss.

F - Anyway, here would be a nice SLA long that would fill two minutes later.

G - And here could be another long if I wanted to clear that previous swing high at 47.50 that seemed to provide a bit of resistance.

I was typing this up by the time it happened, so not really prepared to take those two longs, but if I went long right from 41 of 42, where my gut told me to just buy and keep a wide stop, well this could be another 10 points, or at least 5 for sure if I got out at the bit of congestion around 46.

So in conclusion, I could have made 10 points I think based on these two somewhat reckless trades. In a way, I'm sure they are a result of watching every day live for 6 months, so perhaps they are backed up with a bit of wisdom.

My personality is clearly not designed for trading, and at the moment, my instincts to get in and out are based on greed, fear, and missing out. But I do believe this can be overcome. I really thought I'm smarter than average, and although they say that trading isn't about brains, I thought my brain would be smart enough to control my emotions, but I guess it doesn't work this way.

I know it is possible to make this work though. I see it every day in the charts, and since I am the classic example of the average trader who trades based on fear and greed, I just have to learn to work in a completely different framework.

H - Here is a perfect example of how that previous level of resistance, the one I might have wanted to cross before going long at G instead of at F, turns to support. It is to the tick!

And of course this long from 41/42 is now worth over 13 points and its eating away at me. :(
 
deaddog said:
That's the Holy Grail!:):)
More...

Hey fellow Canadian! I just poked around your message history and came across this post where you outline your trading....

http://www.elitetrader.com/vb/showthread.php?p=4006070#post4006070

Thanks for sharing. When you fully embrace the power of statistics, its incredible how a 37% win rate can lead to such a good outcome!

I bet you also make good use of your TFSA? Since I'm dabbling in futures I'm leaving my TFSA alone until I learn to trade with confidence and then hopefully this account will grow which should help the tax situation plenty. I imagine there are traders out there who have this account at well over $100,000, even though the initial deposit is now only at about $30,000 max I believe. I'm sure some have grown it nicely.

I'm curious what the CRA does with futures trading, if you can in fact get away with claiming it as capital gains, but I will cross that bridge once I become consistently profitable. Do you have any info on this? Everything I read points to "different strokes for different folks". It seems that the government doesn't even know what to do since there are so few Canadians that are making any money trading futures.
 
THE MAKINGS OF A TRADING PLAN

So I spent most of yesterday preparing for the study session of all study sessions! I'm filling up a lovely binder and sheet protectors with my charts, exactly as I prepare them in the morning, with the overnight highs and lows and the PDH and PDL.

I've got as far back as mid June, roughly when this new contract started, and plan to eventually have a whole year. But I'm going under the assumption that I need to see something that turns out to be profitable in only the previous month to have something solid. I'm not saying that a trading plan can be based on just one month of data, but what I am saying is that I better damn well see that doing something is profitable in that one month, heck, doing it better be profitable in any given week. Some days are tough, but usually by the end of the week, there has a been a mix of trending day and ranging days, complete with good breakouts and then pauses/congestions.

So as I have been suspecting all along, marking in these levels is absolute gold. When you flip through these chart, I would say 75% of the time, a good trade sets up at one of these levels, be it a reversal off this level or a breakthrough where price never looks back. The trouble is that first, you need to figure out if you're going to be breaking through of bouncing off, and in the case of bouncing off, sometimes you get to within a point of the level and don't even make it there to the tick. Conversely, we might have a tiny break of a point, and then price coming right back, so it is a reversal, just slightly on the other side of the level.

This is where the wide stops come in. Taking SLA entries in the middle of nowhere is problematic, as I have seen, but taking them at these levels, the extremes, as pointed out by AMT, is really where the money is. I once again see this.

So I really need to define these parameters, but just this will be plenty for a solid trading plan.
 
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