You either continue spending time on DB's fancy idea (looks excellent in hindsight) and hope/wish you could make 50 or 100 points a day, or work hard (back testing/taking pictures at right edge/make trading plan) on Nodoji's instruction(looks scary in real time), and make 10 or 15 points everyday consistently. It is your choice.
Trading NQ via Price Action
- Thread starter k p
- Start date
I don't I believe I need to educate myself further... what I need to do is come up with a system that takes advantage of what I have already been shown.
If we take Db's post today, his chart, I think I can better explain this. I am reproducing it here in case some don't see it in his thread.
Going into the open today, that level at 3793 was very much on my mind. Why I didn't react to it, I'm not sure. I already outlined in my journal that an entry above 99 was possible, and although its not a traditional SLA entry, lets not forget that if price actually came up to trigger the entry, this would mean that at least for the short term, price is rejecting going lower. Because price came so close to this bottom level that has acted as support now, it makes sense that it would act as support again, so looking for a long is quite justified. So often, just getting into a trade seems hard, but at least once you're in, managing it is almost one less thing to worry about. Before you enter, you're not only having to think about entering but also where you might want to exit and where you might want to take profits, but once you're in, its one less thing to worry about.
I know this is a hindsight trade I marked on my chart in some respects, the long at 99, but when you're aware of these levels, you simply just have to wait and watch to see what traders do at this level, and given the rejection of 93, just 10 minutes before the open, you've gotta figure that this is almost a gift of a trade.
The next pertinent note on his chart is the 50% level. The idea is that if price can stay above the 50% level of the up move (ie. not retrace back down more than 50% of this move up), then the trend is still intact. Sure this may not work every time.. but what works every time? What even works 80% of the time? This is also crucial in that even if you wait till price drops 50% and then exit and think you have given up too many points, I know that in the long run, being generous with this waiting will actually make more money. For every time that you have to exit the trade at less than 50% of the up move and hence think you've given up too much, there will be more instances of making more money because you held.
He has two levels of support outlined, the short one after the open, and then a longer line an hour into the session. Its interesting to me that he outlines these levels as they don't seem as all too prominent, but I know that Db is far too methodical to do anything just because. If I dig a little deep, I can see that as price came down to this support level, it either bounced off, or penetrated. The thing though is that a trade in the opposite direction never set up. There was no RET followed by a trade that would trigger at 1 point below the crest. So once again, no reason to exit your long.
I have seen so often that whenever price goes down what I consider too far and I exit just because I don't want to lose any more points, its not a problem for the trade unless it forms a higher low. You have to let price drop a bit, and then wait for it to come back up. Rarely will price just go straight down as if its a V reversal. So even though we dropped below the support level, price came up again and quite strongly. I'm pretty sure that ND might even say something like the algos are just running stops, looking to see where the weak longs are, wanting to take a long at a much better price. When you aren't worried about every point, there simply isn't enough on the chart to scare you out of the trade. This is truly what it means to not care one bit about what price is doing. When you are concerned about how many points you just lost, then you are too attached to the trade. I of course cannot be in this state, but I know deep down that when you master this, you have found the holy grail of trading.
Lastly, you see the resistance line in pink. This he drew in from the chart he started the day with. I usually have my overnight levels marked, so my line was at 32, but resistance levels, or support levels for that matter, I believe form not when price bounces off once, its multiple attempts to penetrate a level (the hourly or daily chart is a bit different in this regard as these levels are more pronounced).
So given that this level was resistance before, we can see how much traders are fighting over this level. It takes practically 3 hours to find out which way they want to go. I can even see instances where the top of this range is tested on the right at 3840 before price takes off again and the day ends practically 70 points above the low.
Now I'm sure Db wouldn't say that he knew price would go up 70 points. But I can damn well bet you that given the support level at 93/94 he got into a long very early (if he was even day trading as I suspect he was already in a long from much earlier), and all of this stuff that happened above wouldn't give him reason enough to exit that long.
If he is still reading, perhaps he can clarify further what the important points are on his chart, but this is my interpretation. Of course the question is how to do this in real time. You have to know what you are looking for that tells you to exit, and even if you exited, then seeing that price didn't drop even though a short might have been set up, you have to be prepared to go long again. Let's face it... today was a major trending day, its just that it took 8 hours to fully play out!
I was thinking earlier in the day, and its even mentioned in my post to ND, that it seems price was giving a few indications that it was going to reverse, but each time it gets bought up. There were simply too many traders, too many algos, that were programmed to buy today and wanted to get good prices. They perhaps are programmed to stop buying, to let price drop, scare away the weak hands and find sellers at much lower price so they can buy low because lets face it, of all the setups to go short, and I do see some, none of them went anywhere... so why all the buying just when it seems like price is dropping? Today way a buying day. Even after the close, price just keeps going up!
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That is still is mystery. I guess I just have lots of competing things in my head.
On the one hand is the fact that the trade wasn't set up particularly well. My entry didn't allow me to be close enough to the level, so I'm thinking that an entry of 99 with a stop below 93 just seems too big, and then of course once price is moving away from the level, therefore confirming the trade, then I was left thinking that I would be chasing.
Once we broke above the 5 min SL, I felt that tiny 1 tick RET was too shallow and the overlapping bars were quite choppy. It just so happens that an entry of 11.50 would have gone into profit right away which would be nice, but it rarely happens this way. And then of course, the next few RETs would be stopped out since price would drop 5 points after each of the two RETs, and that tiny lower high would form, and these would all be solid reasons at the time to stay clear of longs. The 50% level of course held up.
Granted, none of this is a problem if one was to enter right away as he could then just become an interested observer during this 15 minutes of uncertainty.
This is certainly one missed opportunity. I have never held a trade for longer than 15 or 20 minutes I would say, yet I'm fully aware of how the most profits can usually be reaped if you just give price a few hours to work its way up or down.
Darn... I'm already faltering at the second step of keeping meticulous records. Yikes!
Having gone through the PDF again, its amazing how much clearer everything seems. I did read Apendix E in its entirety several times, and although my note taking is lacking, I couldn't help but take special note of this sentence "The first and probably most important step is therefore to think in terms of trader behavior for it is that, not TinkerToys, that moves price." This part I have a very firm grasp on.
I especially found this chart of incredible importance this second time around. At first it looks like its a bit busy, but each arrow is obviously there for a reason and each provides a high probability trade if you know how to read this.
Perhaps it would be useful to review the beginning of Step Three:
The third step is to develop your system.
A system consists of (a) a set of rules that you use to select profitable positions and (b) a set of rules that you use to manage the trade once you're in it (again, whether you call it a system, a method, a strategy, a plan, a scheme, an approach, a procedure, or a modus operandi is not as important as sitting down and doing it).
To emphasize,
1. Limit yourself to only one strategy at the beginning.
2. Focus on one setup.
The third step is to develop your system.
A system consists of (a) a set of rules that you use to select profitable positions and (b) a set of rules that you use to manage the trade once you're in it (again, whether you call it a system, a method, a strategy, a plan, a scheme, an approach, a procedure, or a modus operandi is not as important as sitting down and doing it).
- Developing a system begins with deciding just what it is you're looking for. Therefore, begin by studying price movement (1) in real time (or at the end of the day through "replay", if your charting program offers it). By "study", I mean to observe it with intent, not just read about it or listen to somebody talk about it. You have to understand what you're looking at before you know what to look for. Note the conditions under which price rises, falls, drifts. Make every effort to avoid imposing your biases onto what you observe. You may see trading as a war, a competition, a game, or a puzzle. You may think you're out to kill somebody, outwit somebody, or are out only to detect the flow and slip into it, riding the waves as if you were sailing. None of this should be allowed to affect what you observe.
- Develop a set of preliminary hypotheses which exploit the profit opportunities presented by these movements, e.g. price began trending "here". Price broke out "there". Price reversed "there". What can I do to take advantage of that? What do I have to look for?
- Decide what strategy will best take advantage of what you think you've found. Are you looking to catch a reversal in the hopes that it will become a trend? Or are you looking to trade series of reversals within the day's or week's range? Or do you prefer to wait for a breakout and trade what may become a trend? Or would you rather wait for a retracement in what may be shaping up to be a trend? Limit yourself to only one strategy at the beginning.
- Carefully define the setup (the set of circumstances which you define which triggers an entry) which implements this strategy, preferably using old charts (attempting to define the setup by studying realtime charts is inefficient since you don't yet know what it is that you're looking for). This is called "backtesting"2. All else flows from this. Unless you know what you're looking for, you cannot test it, much less screen for it. If you have not tested it, you have no idea of the probability of its success. With no idea of the probability of success, any trades made are essentially guesses.
To emphasize,
1. Limit yourself to only one strategy at the beginning.
2. Focus on one setup.
Ok... so I'm clearly back to posting... maybe just for today. You see, I find that posting is my form of backtesting (ie forward testing). Its not the best method, and its incredibly slow because I'm only testing one day at a time, but I'm stubborn, so this is where I'm at.
First chart shows the hourly. Of course that level of 3793 was pure magic, but its gone now. I do have another level at 3886 outlined though. This comes from that swing high on the 12th. Its a bit lost on a daily chart, but fairly prominent here.
* - At the asterisk symbol, we stop just short of this level going into the close yesterday and then overnight we head back down. We stop short of the 50% level of that big up move yesterday during the overnight session... hence our LOLR is still up.
$ - We do break through the level as we come back up, but you'll note above the $ symbol that as we come down, we aren't able to penetrate this level again. Perhaps its nothing, too small to mention, and certainly not as well tested as the 3793 level, but this is what I see, perhaps a case of resistance then support.
Moving onto the 1 minute chart.
A - So overnight we had a good rise up but hit a high 2.5 hours before the open. We form a hinge, and this pink line here, our SL, is both a 5 min SL but also a hinge upper line.
B - We break above, and on this bar above "B", you can see we do in fact retrace back down to this line before taking off higher. I know that with 2 bars of the same height we can consider this a RET, heck, often each of these minute bars even have a RET contained within, and I suppose there is no reason why you couldn't take a trade if you know you just bounced off an important level and want to get in early. This is also essentially the BOPB trade setup as per ND, but for some reason I'm not considering a trade just yet though. (Gosh... as I review this, its perfect.. no idea why the feeling wasn't strong enough to take it. Perhaps I'm waiting for the open to take a BOPH, but what is especially nice about this is that there are 4 points of airspace to that previous swing high... so at worst we should probably just test this level if only to bounce off, but this still gives plenty of time for a BE exit.)
C - So of course by now that trade is worth about 5 points, and before here we have a quick spike down. For those scalping, I guess this is the type of thing that takes you out of your trade. Its is so quickly bought up though that you have to wonder if this is in fact indicative of behavior, or if this is in fact just the algos doing their thing. Maybe if you're reading ND and have a hunch, I'd love to read it. These spikes just happen so quick and are bought up so quick that stops must be hit, this is probably the intention, yet buy programs are all ready to jump in there and buy up all what's offered at a much better price given that the trend so far is strongly up.
D - So below here, I decide to try a trade. (I know.. no trading plan yet) Here I try for a limit order getting into a long from below thinking that I will just scalp a few points. Well that dosen't work out so well and right after entry, price drops.
E - I have a level of support in mind, and I certainly don't want to be shaken out of a trade, so luckily the previous drop down holds and I'm able to make my exit here for, yes, just one tick. After we bounce a third time off this level I mark it in though.
F - After the open, we start by dropping.
No problem as I have context very much in mind today. First Db posted the updated chart for the channel, and we are very much back inside now, and still far enough away from the mean that there might be more points to make on the way up. No guarantee of course, but gotta keep this in mind.
I also very clearly remember the post that Roffe made to me last week about how traders at the open were just testing that level for themselves, I believe he said the NY mkrt traders since the Asian/Euro traders had their own go at this level. This makes perfect sense to me. I of course have no idea what level they might test, nor do I know if the reason price is dropping is because we are really going down or just testing some level, but at least if I'm aware of all this, nothing can surprise me.
Anyway, so the point to this low at "F" is that price stops just short of that level of support already outlined. On the 15 sec chart, its obvious to see that we try a couple of times to go lower and just can't. I would normally put a green arrow above this bar, but this is a trade I really want to take so I do. Its about a 5 point stop if I'm just looking to break the previous lows as my stop, but today I'm also very much thinking of context so even if we still hit a lower low, I've still got going up as my LOLR.
G - My exit is here, sure seems lucky, and not exactly based on anything too fundamental other than seeing some congestion and being already 5 points ahead so lets just take it. At least my reward equals my risk.
So I'm at +$107.
H - So rather dramatically, we drop down, even breaking the previous level of support at F to come to rest here.
Now this one is tricky. On the one hand, I've got this marked in as the level where we broke above the 5 min SL/hinge. But on the other hand, this is exactly where my 5 min DL meets that I can draw from the bottom. Both of these might be significant, so lets try for a buy stop above.
I only mark in these trades, and I show two arrows because they have to be trailed down on the following bar. The stop on this one would be a bit wide, but the trade does work, and I could either take a profit in that congestion area up above, or just keep holding.
I am going a bit back and forth so all you readers will just have to deal with it. ND has really helped with great entries and stops based on price action, based on her extensive research, and based on her understanding of the markets, especially the algos. But as outlined earlier, I am trying to focus on trading trend. So it might be baby steps for a while until I can learn to hold, and even if I mess up one day by holding a loser too long, I should have the skills to make this back via price action trades to capture a determined amount of points versus using behavior and context to trade major trends if I'm a bit shaken by the longer trend approach.
I - Once again, a quick drop down, and once again, its bought up. Seriously, are retail traders like you and I deciding one minute that they don't want to buy so price drops 6 or 7 points but then decide to buy right away to bring price all the way back up? I doubt this, so this is more than likely the work of the algos and hence why its important to be trading trend in a higher time frame. With my reluctance for in-depth backtesting, I certainly know that I cannot beat them.
J - So is the main up trend in jeopardy? I wouldn't say so, and although it looks like we have a lower high and a lower low, the fact that price comes all the way up here and would trigger this entry means that we are still rising above this higher low at "I".
K - So finally a higher high, and lets marks in these longs, neither of which would fill if you use the 1 point above the RET rule.
SUMMARY
Ok.. that's enough typing. About the only thing that matters is the trades I take. I'm happy to be up +$107 today, and although it could have certainly been more, I'm not after money right now, I'm after trading well.
Of particular importance is that as messy as today looks, we have so far hit a high of 3920 without too much downward risk. Being awake for the Asian/Euro session has been so profitable in the past few weeks/months, but I just can't be up early enough. Those bars today are much smaller and they trend much better.
If one is trading behavior and using context (albeit with wide stops), and of course focusing on the forest and not just the trees, then I think its entirely possible to succeed at this.
My ego has been reluctant to start over again, and this especially hurt when Db mentioned this a while back, but I certainly can't fault this analysis since I have skipped over some of those steps. The good thing is that there are certain things that are already set in stone, and much of what has gotten me into my account being down is based on stupid things that are easy to eliminate if the will is there. Its not that the right thing was done and I still lost... the wrong thing was done so its no wonder that I lost.
Its funny to look at this chart now and see that any one of those longs are in fact worth much more than the profit I actually took. Oh well... in due time I will care less and reap more reward. (the right tick is already off the chart as I take this screen capture! LOL)
First chart shows the hourly. Of course that level of 3793 was pure magic, but its gone now. I do have another level at 3886 outlined though. This comes from that swing high on the 12th. Its a bit lost on a daily chart, but fairly prominent here.
* - At the asterisk symbol, we stop just short of this level going into the close yesterday and then overnight we head back down. We stop short of the 50% level of that big up move yesterday during the overnight session... hence our LOLR is still up.
$ - We do break through the level as we come back up, but you'll note above the $ symbol that as we come down, we aren't able to penetrate this level again. Perhaps its nothing, too small to mention, and certainly not as well tested as the 3793 level, but this is what I see, perhaps a case of resistance then support.
Moving onto the 1 minute chart.
A - So overnight we had a good rise up but hit a high 2.5 hours before the open. We form a hinge, and this pink line here, our SL, is both a 5 min SL but also a hinge upper line.
B - We break above, and on this bar above "B", you can see we do in fact retrace back down to this line before taking off higher. I know that with 2 bars of the same height we can consider this a RET, heck, often each of these minute bars even have a RET contained within, and I suppose there is no reason why you couldn't take a trade if you know you just bounced off an important level and want to get in early. This is also essentially the BOPB trade setup as per ND, but for some reason I'm not considering a trade just yet though. (Gosh... as I review this, its perfect.. no idea why the feeling wasn't strong enough to take it. Perhaps I'm waiting for the open to take a BOPH, but what is especially nice about this is that there are 4 points of airspace to that previous swing high... so at worst we should probably just test this level if only to bounce off, but this still gives plenty of time for a BE exit.)
C - So of course by now that trade is worth about 5 points, and before here we have a quick spike down. For those scalping, I guess this is the type of thing that takes you out of your trade. Its is so quickly bought up though that you have to wonder if this is in fact indicative of behavior, or if this is in fact just the algos doing their thing. Maybe if you're reading ND and have a hunch, I'd love to read it. These spikes just happen so quick and are bought up so quick that stops must be hit, this is probably the intention, yet buy programs are all ready to jump in there and buy up all what's offered at a much better price given that the trend so far is strongly up.
D - So below here, I decide to try a trade. (I know.. no trading plan yet) Here I try for a limit order getting into a long from below thinking that I will just scalp a few points. Well that dosen't work out so well and right after entry, price drops.
E - I have a level of support in mind, and I certainly don't want to be shaken out of a trade, so luckily the previous drop down holds and I'm able to make my exit here for, yes, just one tick. After we bounce a third time off this level I mark it in though.
F - After the open, we start by dropping.
No problem as I have context very much in mind today. First Db posted the updated chart for the channel, and we are very much back inside now, and still far enough away from the mean that there might be more points to make on the way up. No guarantee of course, but gotta keep this in mind.
I also very clearly remember the post that Roffe made to me last week about how traders at the open were just testing that level for themselves, I believe he said the NY mkrt traders since the Asian/Euro traders had their own go at this level. This makes perfect sense to me. I of course have no idea what level they might test, nor do I know if the reason price is dropping is because we are really going down or just testing some level, but at least if I'm aware of all this, nothing can surprise me.
Anyway, so the point to this low at "F" is that price stops just short of that level of support already outlined. On the 15 sec chart, its obvious to see that we try a couple of times to go lower and just can't. I would normally put a green arrow above this bar, but this is a trade I really want to take so I do. Its about a 5 point stop if I'm just looking to break the previous lows as my stop, but today I'm also very much thinking of context so even if we still hit a lower low, I've still got going up as my LOLR.
G - My exit is here, sure seems lucky, and not exactly based on anything too fundamental other than seeing some congestion and being already 5 points ahead so lets just take it. At least my reward equals my risk.
So I'm at +$107.
H - So rather dramatically, we drop down, even breaking the previous level of support at F to come to rest here.
Now this one is tricky. On the one hand, I've got this marked in as the level where we broke above the 5 min SL/hinge. But on the other hand, this is exactly where my 5 min DL meets that I can draw from the bottom. Both of these might be significant, so lets try for a buy stop above.
I only mark in these trades, and I show two arrows because they have to be trailed down on the following bar. The stop on this one would be a bit wide, but the trade does work, and I could either take a profit in that congestion area up above, or just keep holding.
I am going a bit back and forth so all you readers will just have to deal with it. ND has really helped with great entries and stops based on price action, based on her extensive research, and based on her understanding of the markets, especially the algos. But as outlined earlier, I am trying to focus on trading trend. So it might be baby steps for a while until I can learn to hold, and even if I mess up one day by holding a loser too long, I should have the skills to make this back via price action trades to capture a determined amount of points versus using behavior and context to trade major trends if I'm a bit shaken by the longer trend approach.
I - Once again, a quick drop down, and once again, its bought up. Seriously, are retail traders like you and I deciding one minute that they don't want to buy so price drops 6 or 7 points but then decide to buy right away to bring price all the way back up? I doubt this, so this is more than likely the work of the algos and hence why its important to be trading trend in a higher time frame. With my reluctance for in-depth backtesting, I certainly know that I cannot beat them.
J - So is the main up trend in jeopardy? I wouldn't say so, and although it looks like we have a lower high and a lower low, the fact that price comes all the way up here and would trigger this entry means that we are still rising above this higher low at "I".
K - So finally a higher high, and lets marks in these longs, neither of which would fill if you use the 1 point above the RET rule.
SUMMARY
Ok.. that's enough typing. About the only thing that matters is the trades I take. I'm happy to be up +$107 today, and although it could have certainly been more, I'm not after money right now, I'm after trading well.
Of particular importance is that as messy as today looks, we have so far hit a high of 3920 without too much downward risk. Being awake for the Asian/Euro session has been so profitable in the past few weeks/months, but I just can't be up early enough. Those bars today are much smaller and they trend much better.
If one is trading behavior and using context (albeit with wide stops), and of course focusing on the forest and not just the trees, then I think its entirely possible to succeed at this.
My ego has been reluctant to start over again, and this especially hurt when Db mentioned this a while back, but I certainly can't fault this analysis since I have skipped over some of those steps. The good thing is that there are certain things that are already set in stone, and much of what has gotten me into my account being down is based on stupid things that are easy to eliminate if the will is there. Its not that the right thing was done and I still lost... the wrong thing was done so its no wonder that I lost.
Its funny to look at this chart now and see that any one of those longs are in fact worth much more than the profit I actually took. Oh well... in due time I will care less and reap more reward. (the right tick is already off the chart as I take this screen capture! LOL)
