Trading NQ via Price Action

[k p]

LOL.. we were replying to each other Bon! I am making a post about how I am switching things up a bit. This 1 minute chart, as much as I love it, is causing me to see things that aren't there. Db says that I'm missing the macro, and he doesn't even day trade. NoDoji says that she can't make money using just the 1 minute consistently, so do I really think I could make it work when she can't? If there was a way, she would have found it! LOL

So I think what she is really saying jives with me. Let the 5 minute chart guide you, and the 1 minute chart help you hunt for entries. I just have to learn how she uses her trend lines.

I don't know about you, but this 30 point move... almost 40 now and missing out is killing me!

 

[k p]

Oh, and also, when you go back to Db's PDFs, the charts use hourly bars, so I'm sure there is a very good reason for that. If swing points that we see on a 1 minute chart are major, they also appear on a 5 minute or even an hour chart. But we are getting chopped up thinking that we see important stuff in a 1 minute chart that really is just fluff.

 

[BonScott]

The 5 min/1 min combinations that she talks about sound more reliable than pure 1 min. The 1 min is good for learning, because you get more trades to watch, although she may be right about it being unprofitable for us. I'll know that if i can ever elliminate my "mistake" trades.

 

[k p]

Ok.. so using the 5 minute chart, it is a bit hard to find places to enter because not much seems to happen for a good chunk of the day. But here is what I see today.

After price climbed up and came down, I could have drawn in my SL. Swing points on a 5 minute chart seem to have more weight because they take longer to form and hence seem more solid.

After price drops below the OL at 38, it does come back up, and on the next bar breaks through the SL and closes above it. The next bar is now an inside bar. (jesus, I hate talking bars though). At any rate though, the bar after drops a bit lower, as if testing the area of the breakout. I never looked at this before, but since ND has been pointing this out in my journal, I try and look for ways to make this work. Here, price beautifully tests this level and takes off. Had an entry above the previous bar been made, we could be into the trade around 48. Well above the low of 33, but hey, we want highly probable trades.

When price bounces off the overnight high at 52 and comes back down, it goes barely 2 points against our entry before shooting off much higher. Sure things are easy on a strong trend day, but at least here is what I have today using these 5 minute charts.

 

[llIHeroic]

Preamble:


I think it is a good idea to use adjacent bar intervals in order to help yourself get a better picture of what is happening in the market. I find your discussion interesting, and I hope it will not be an imposition to use a post in your thread to indulge the desire that occasionally comes upon me to share knowledge I find exciting with others. Brevity is not a strong point of mine, so please do not feel obliged to read on if you are dis-interested in the content.


I have noticed that a lot of the journals here seem to be focused on trading NQ, so I thought I would trade it during an open and attempt to offer some useful material for people to consider. Hopefully you can find something of value in my discourse. If anyone finds my contribution distasteful or intruding, please just ignore it and allow it to fade. I have no intention of derailing the journal by being an hindrance of any kind.


In recent years, there seems to have been a major shift, at least in this forum, towards pure price action trading. My first exposure to the market was seen through this lens, and I definitely learned many things of value from it. However, as I began to go back to older threads and resources after having worked through all of the current content, I noticed that there were many traders in years past who learned to apply a basic volume-based model of interlocking trends and found success that way.


As I continued to read and learn this method, I found that it offered certain degrees of clarity and freedom that I hadn't been able to personally develop with the observation of price alone. I definitely believe that success can be attained with a variety of methods, including price action trading, and I don't frequent these boards very often anymore because I find the pessimistic and often adversarial attitudes that are prevalent here distasteful. That being said, I will try to offer a few points which can be useful for any thoughtful individual's continual formation and learning process.


Content:


I have attached all of the related materials that I used to place my trades this morning. When I first attempted to trade, I would rely heavily on key points such as the overnight extremes, larger fractal trend intersections, and mid-points. I would try to create monologues about what traders would be thinking or how price was reacting to certain points. I now find it much easier and more relaxing to simply keep track of the current trends and hop along for the ride as price moves within them.


Trends are a very relaxing way to eliminate a large amount of possibilities and leave a basic landscape to operate within. Before every open, I take the trends that were in progress at yesterday's close and carry them over into the next morning, accounting for any overnight gaps. I have found personally that the volatility during yesterday's close is a lot more reliable than overnight trading, since liquidity is reduced so severely overnight.


I have included a basic sketch of how I have found trends to form and behave. In the following example, I use some vocabulary words that may be unfamiliar, but hopefully with the sketch, and an image of my chart at the time, an individual will be able to piece together the key components of my personal decision-making process if they wish to better understand it.

 

[llIHeroic]

First Trade Example:


I had a strong bias that since the RTL of my previous up-trend was broken on a convincing run of accelerating volume, the market would open with a segment upward that was less severe than the downward rally at the previous close. The first change from long to short after the open would be the third point at which a larger-fractal downtrend could be bounded. From there, I would hold during the trip back to the newly formed LTL and exit if the volatility of the trend was not expanded.


I was early on my first two short trades, but losses can be cut so small that a few re-entries aren't the end of the world. Personally, I've noticed that I usually tend to err on the early side of things during entry rather than later, and it's something that I am continuing to work on optimizing. The resulting volume spike downward failed to reach the LTL, so I exited the trade.

With such a wide, steep channel, and a decently powerful push downward, I was not convinced that the RTL would be successfully broken. As you can see, I even wrote 'FBO?' [Failed Break Out] for Bar 5 of my log, since I was anticipating that the dominant sentiment hadn't changed yet, and was planning to get another short after the non-dominant tape upward concluded.


Keeping a Log:


This brings me to my next point of interest, which is the process of keeping a log. I find that every increment of order and clarity that one can create when dealing with the market is useful and beneficial. I keep a log in order to force myself to solidify my thoughts to a point of decision, and also to be able to review the times when my perception was not parallel to the reality.


I keep track of volume events of tapes, which have all been observed and categorized by Jack Hershey, and I also keep track of how the tapes fit into the larger trend which I typically seek to trade only on the dominant side of in order to have favorable volatility. I am sure many traders have personalized logs quite different from mine, but regardless of what one's log may look like, I believe it to be a very helpful tool for staying focused, enhancing clarity, and especially for reviewing spots of confusion.


Conclusion:


So, I have attempted to share some of the basic concepts and practices that I've found to be helpful towards profitable trading. I do not think any two individuals trade alike, and I am not attempting to share a method to be copied, but rather to introduce some material that individuals may find useful to analyze and adapt to some degree into their own personalized skillsets.


If there's one thing I've found in regards to trading, it's that it much more than a method that can be taught; it's a skill-set that has to be developed individually. I found a lot more success when I stopped looking at other individuals as teachers, but rather people who's contributions can help me learn.


Synopsis:


If I had to summarize a few key take-away points from my post, they would be:


-Develop a comfortable frame-work for yourself. Stay away from subjectivity, guess-work, and don't settle for uncertainty.


-Volume is a key variable in the operation of the market. At least consider observing it and making connections with how the movement of price relates to it.


-Thoroughly define your thought-process in a concrete, yet not overly wordy or complicated way to increase clarity and decisiveness. This also helps immensely with review after the fact.


-Take responsibility for the development of your own skill-set. Do not rely heavily on others; do the work yourself. Be patient as you form your own understanding of the market, and try to avoid getting complacent with a routine. Always seek to make optimizations, changes, and improvements.

 

[k p]

So, I have attempted to share some of the basic concepts and practices that I've found to be helpful towards profitable trading. I do not think any two individuals trade alike, and I am not attempting to share a method to be copied, but rather to introduce some material that individuals may find useful to analyze and adapt to some degree into their own personalized skillsets.

If there's one thing I've found in regards to trading, it's that it much more than a method that can be taught; it's a skill-set that has to be developed individually. I found a lot more success when I stopped looking at other individuals as teachers, but rather people who's contributions can help me learn.

Thanks for taking the time to post. I have read through the material you have provided and it confused the heck out of me! LOL... I certainly see where you are going with it, and I like the idea of introducing volume as I believe this can be helpful, but price is ultimately the most important. I have enough to worry about without adding yet another variable. I know that in previous posts Db has sometimes mentioned volume, so it can really help, but I would say its more of an advanced tool.

I do also like that you are using 5 minute bars for this, but it seems like you are scalping for mere points here. I am just trying to get into a good more early and then ride it along after a firm trend has been established, so I'm trying to work less rather than more.

You are absolutely right with your conclusions though. The system really has to match the individual, and hence has to be mostly developed by the individual.

Your last line about always making changes really rings true for me now after reading the book ND suggested. Its part of the growth mind-set, and the only way to really achieve consistent positivity in your life. When you fall into the trap of a fixed mindset, bad are primed to fall to the way side!

 

[bh_prop]

Brilliant stuff iii Heroic, please post more often

 

[k p]

Not sure if any of this stuff means anything, but here we go with the 5 minute chart for the rest of the afternoon. I came back too late to do anything, and walked away when price was around F and seemed to be heading down lower.

A - Here we hit the top with the huge trend up.

B - This is now shaping up to be a level that we cannot penetrate. On the one minute chart there are multiple attempts to cross 74.75 but no luck.

C - Below here, we have a break of our DL.

D - Coming down to D, we even penetrate the previous swing low.

E - We fail to make a higher high, so we practically have our 123 setup and could try to short below any of these bars. I wouldn't mess with such a strong trend day I have come to learn, but I will mark it in on the chart. (technically we never know what will happen, so if a trade sets up, maybe it should be taken. how often do we go up 30 points and then drop down just as much!)

This is also the high I use to draw in my initial SL.

F - We do reach a lower low, so by now we need to start thinking the downtrend is good.

G - Oh oh... SL breaks, but price closes below.

H - Oh ohhh, we form a higher low.

I - Here we close above, and the next bar beside is completely above the SL.

J - Price comes down to here... is it really testing the breakout level from the break of the SL???

K - Maybe here is a good place to put a long?

L - This low now tests the previous level of resistance at A and B and price bounce off. Could we go long above this bar as well? Its worth 10 points easily.

 

[NoDoji]

And please do keep illustrating! Here is an attached chart but I am not sure what you are trying to show. I have an upper trend line that slopes down, and I see that my 2:35 bar (your 3:35 ET), above the letter A, does in fact come down below the line, but then goes higher. Now I'm not exactly sure what setup you're trying to illustrate. Are you saying that price went above the UTL, but only by just over 3 points before coming down... so entering a short somewhere meant that price only went against you 3 points before dropping down majorly? I am totally lost on this one! (I labelled the bars to make this easier, starting with "a", just before my big "A", and then the rest of the letters for the subsequent bars)

Also, why the huge drop right at the end of the day? Its rare to see such a big drop, even if there are trading just getting out of their long before the close, and even after the 4pm ET cutoff, although I realize the NQ keeps trading till 4:15 ET.

I had my trend lines in place from the majority of the day and removed the tighter adjusted line when the lower channel level held as support.