Trading NQ via Price Action

[k p]

O - We open right near the OL, and although we have had many little bounces from this level, I am looking out for a short.

A - After breaking through, and coming back up to 86, I had a sell stop here at 85. Price went right past without getting filled. I'm bummed out, but then I see price come back up so I'm thinking maybe its a good thing I didn't get filled.

B - Then price bounces off the OL again, and right around here is where I should be going short.

C - I finally get into a short here after a quick drop down, which is a bit risky given that price sometimes does retrace a quick move, but I figured best to get in if this is going to be a big down move.

D - You see an exit here. I was already 5 points ahead, and although I know this might just be an area of congestion before further drop, I decide to take what I have.

So I'm at +$76.

E - We do get another drop here, and this was quite quick during this bar.

F - But notice how this bar retraces that move all the way back up.

G - This look like a good area to go long. We have that rejeciton at E-F, a higher high, and a couple of bounces off 76.75. If I took this long, it very quickly doesn't work. I expect it to go up, but it doesn't, so could this be a Dog That Didn't Bark??

H - So perhaps a quick short here would make sense, but I can only say that since I know what happened.

I - Given the strong move down, and given breaking below that previous swing low at E, I enter a short here. But god, price races up so quick I don't even have time to manually hit my close button before I'm stopped out for a 3 point loss.

So now I'm at +$12.

Its really a shame because price turned back down only 2 ticks higher, and then we go below my entry.

That short at "I" was very much an "off the cuff trade" that should not have been taken, and although I do see weakness in all of this today, when the entry is no good, it doesn't matter if you're still trading in the right direction.

J - This was another quick drop down to here... good thing I didn't get caught up in the excitement of this because after hitting the low here, its just straight up.

CONCLUSION

So although price dropped 20 points tody, I have a whole $12. Its good that its Friday because I need to focus on formulating something solid.

I had an interesting conversation with Db yesterday in another thread. He was very much encouraging trading with higher time frame charts. It was a bit dissapointing because there is just so much information in the threads about trading the 1 minute charts and I am using all of this to learn. The other issue is that once the best trade is gone in the daily charts, there would be nothing to do and you might be left out. What I want to do is to make an income from this every day, a steady stream of profits, so learning to trade the 1 minute charts is essential. Plus, how on earth am I going to hold through an initial loss or keep more than 5 points profit on long term trades if I can't even do it from one minute to the next???

Well.. lets call it a day... this is all in the middle of nowhere for me now.

 

[YMOCA]

kp,

Just pointing out to you that things are rolling over into the Dec contract, and that that is where the most volume is today. The lower volume on the Sept contract may have been the reason you weren't filled on the first short you tried, and you are also more likely to get slipage on any stop outs.

 

[k p]

kp,

Just pointing out to you that things are rolling over into the Dec contract, and that that is where the most volume is today. The lower volume on the Sept contract may have been the reason you weren't filled on the first short you tried, and you are also more likely to get slipage on any stop outs.

OMG... pure genius! LOL... Yes, I see now that the contract I'm trading has 125K for today and the Dec one has 186K. Ok.. lets use that as a reason why I didn't make a killing today!

Thanks for pointing this out.

 

[k p]

I hate this now actually because I have no idea where my levels are. The 54 I've been talking about that was a swing low on Aug 28 has a low of 47 on this new contract, but with no volume. Using the level of 54 on this contract means that this doesn't have as much significance since this level is penetrated many times, it doesn't really act as a support level like 54 does. So I can't really use the levels from the previous contract and put them on this new contract. Aye... I'm lost.

 

[bh_prop]

I hate this now actually because I have no idea where my levels are. The 54 I've been talking about that was a swing low on Aug 28 has a low of 47 on this new contract, but with no volume. Using the level of 54 on this contract means that this doesn't have as much significance since this level is penetrated many times, it doesn't really act as a support level like 54 does. So I can't really use the levels from the previous contract and put them on this new contract. Aye... I'm lost.

Your trading platform *should* have some kind of continuous contract available for charting where prices are back adjusted but volume data remains accurate (ie uses the "old" contract for volume data prior to yesterday). I use Tradestation and the Dec contract is NQZ14 but the continuous contract is @NQ. I'm sure your data provider has something similar.

 

[k p]

Your trading platform *should* have some kind of continuous contract available for charting where prices are back adjusted but volume data remains accurate (ie uses the "old" contract for volume data prior to yesterday). I use Tradestation and the Dec contract is NQZ14 but the continuous contract is @NQ. I'm sure your data provider has something similar.

I trade with IB, and their Trader Workstation doesn't have this to the best of my knowledge. But my charting platform is Multicharts (I find the look much cleaner), and although I can build continuous contracts, using the free version only allows me to add a max of 2 instruments, and since each contract is considered one instrument, I can only add 2 contracts. So I've got the current and previous, barely 6 months worth of data.

 

[k p]

So I decided to come back to this, using the NQZ4 contract now.

A - So the PDL is here for this contract.

B - Although I wasn't around, this seems like a really good place to go long. The thrust down to the PDL gets rejected, so go long just above the bar I've seen works quite often. In this case, it would take a while to take off, but whats nice is that it goes sideways for 20 minutes just above the entry price so I wouldn't be in any danger.

b - Of course an exit should be made somewhere, and this spike up, on fairly high volume is great for getting a few points, but these generally do retrace back down, so once I saw it come back down over the next few bars I might exit. It would have been good for at least 6 points, if I managed to hold it that long of course.

C - So now I'm watching live, and I see price coming back down again to the PDL and watching that last swing low from B. It breaks through quite strongly and even goes 3 points below, but then its sideways action for a few minutes. I decide to put in a buy stop just above that congestion area which will also put me just above the PDL. I get filled and for once, price jumps up right after my entry.

D - Of course now I'm aware that because of the jump up, it could retrace back down, and so I do exit at not too bad of a place.

I'm at +$74 now for the day.

E - Price does come down again and seeing this hesitation, I think going long again would be appropriate above these bars here, but I'm not as trigger happy this time around.

F - Price would ultimately come down here which forms a higher low before coming up and triggering that entry. The worry is that price will now just go back and forth around this level, but at least getting in at E allows price to go up above the level, and if it should come down again I could get out in time.

G - Here is an area of congestion, and price would come to even below the entry at E, so who knows if I could hold.

H - But once this congestion area was cleared, I can see going long here again to be sensible, with the caveat that I'd be buying at the top of the line if this is forming a hinge around the level, just before it turns back down.

Well price continues up, and now even though I want in, it just seems much too late.

My 54 level from the previous contract is about about 47 it seems on this contract, so we got really close, and bounced off again. For over 7 days price has been in this huge trading range, and traders are clearly not wanting to go below this firm level of support. Buying anywhere here and holding seems sensible from a macro perspective, but of course price is already 10 points away from me so I better not jump on.

I am of course trying to protect my $74 as well.

Gosh, that missed trade at E really bugs me. It was right for so many reasons... oh well.

 

[NoDoji]

I - Given the strong move down, and given breaking below that previous swing low at E, I enter a short here. But god, price races up so quick I don't even have time to manually hit my close button before I'm stopped out for a 3 point loss.

Shorting a break of a swing low only makes sense in a strong trending move where you have significantly lower highs and lower lows.

The downside break of "E" on your chart came off higher highs a bit earlier. This is the signal that price will likely act like a range at least briefly. The initial break out of a range usually fails, so it's best to either fade the range extremes or be the second mouse and only short off a lower high. Taking the second mouse entry got you in close to the same price, with a clear area to place a stop loss.

 

[k p]

So it got interesting as a hinge started to form. I am showing this on a chart for the whole day so its a bit compressed, but I think you can make out what's going on.

A - To the right of A is a quick drop back down that of course retraces back up.

B - To the right of B is also a quick drop that retraces back up. But since we have lower highs and higher lows, we have a hinge.

C - It drops out the bottom, and I almost put a short in at 58, but it moved quick so who knows if it would fill. I liked this hinge because it was so pretty, so perfect.

It hits a low here, and retraces back up. No surprise there, although of course if you wait till later to short than right away at 58, you might be selling a bottom like how I usually do. So either get in right away or don't get in at all.

D - It comes back up to where I have the apex drawn in, and it goes above, clearly lots of buying pressure and not just a test of the apex.

Its mostly going sideways now above D, but we clearly rejected going down and don't want to touch the level of 48 again.

Just before the official close, it spikes up, and I'm guessing mostly because traders need out of their shorts.

E - Now as for the whole day, I can almost draw a hinge around much of the action. On a higher time frame chart, this hinge might look prettier, but its still not as nice as what formed down below.

F - I try for a short here I didn't mention earlier, its quite far below the exit from the hinge, if in fact the hinge is in play (these lines aren't in the market after all), and I'm out for only a tick profit.

G - So price fakes dropping out the bottom and comes back up, but it can only make it to the apex, so although I tried my short down below and failed, being aware of not going above the apex could be a legitimate reason to short again. This is what sets up the nice move down to the bounce at the PDL.

H - I note here how for this whole day, if you drew a SL from just the two swing points at the open, it holds up nicely, and once price turns at E, just below where the SL is, it confirms this down move even more.

Now of cousre Db says to drop the lines as soon as you can, and its hard to trade off this line since price doesn't stay near it long, but its just interesting.

Of course the best trades of the day were shorting right at the top, and getting out of the short and going long after seeing the higher low from just below the PDL, which happens to be just above that important swing point which is roughly 47 in this contract.

Sigh... its so easy at the end of the day but at least I end with +$74.

THOUGHTS ON MY CONVERSATION WITH DbPHOENIX

To follow up with the conversation I had with Db yesterday about higher time frame charts and what I want.... what I want is to make money. It seems that using 1 minute charts gets you into the moves right away, but I guess you have to use the macro view to be able to hold on because so much of this stuff in the middle of the day might be not that important.

So for the record, I don't want to be trading just to trade. I want to maximize profits and that's it. I just figure the more involved I am the more I can understand and the better trader I can become, but often I do see how just one trade during the day is plenty, and Db said that he hasn't traded this entire range for the past 7 or 8 days because he is still just holding his longs from the bounce of the mean of the long term channel from a month ago.

So we are still of course stuck in that range, and when we do leave, I hope to monopolize on it somehow, but I just don't have enough experience with where entry and exit stops have to be on a daily chart as 1 point away for entry and a line break for exit surely isn't the right way. At least I have a whole weekend to look into this.

 

[k p]

Shorting a break of a swing low only makes sense in a strong trending move where you have significantly lower highs and lower lows.

The downside break of "E" on your chart came off higher highs a bit earlier. This is the signal that price will likely act like a range at least briefly. The initial break out of a range usually fails, so it's best to either fade the range extremes or be the second mouse and only short off a lower high. Taking the second mouse entry got you in close to the same price, with a clear area to place a stop loss.

Hey NoDoji.. lovely to have you reading! Yes, the higher highs you mention I see now but this told me nothing. (If anything, by just drawing a trend line connecting the lows at E/F and H, and then seeing the break of this line could get me in my short much sooner and hence an exit for even a profit. Gosh, this really is a terrible place to short, or at least one that would requite a much larger stop, which therefore makes it a terrible place to short anyway.

So in essence, the bar where I exit for a loss forms the higher low, and hence shorting below this bar? I indicate this by the red dot. This essentially makes me short again at exactly where I tried the first time, but this of course means nothing to the trade since the market doesn't know where I got in or out, its only hard in my head!