Trading NQ via Price Action

[k p]

To emphasize,

1. Limit yourself to only one strategy at the beginning.

2. Focus on one setup.

This of course seems logical, and what many of the expert traders do suggest. Its seems like I have too many options now in my head. What I'm trying to say is that I could just focus on getting my levels from an hourly chart and waiting for price to hit this and getting into either a continuation or reversal trade. But this I find too limiting now. As I go through my analysis, I see things that are legitimate enough to initiate a trade. Of course since none have been tested thoroughly enough then I shouldn't be taking them but..... Aye... I'm just fighting the process too much.

I'm also trying to go back to the SLA roots in some ways as an entry method, and then use context as a reason to hold and not rely on line breaks, or use context as a reason to eliminate some SLA trades (I clearly remember when I asked you a while back why a particular short you didn't mark on your chart when it was in fact set up by a DL break and had a clear RET, and your reply was that by this point, price was in a range. So this filtering method I'm working on as well.)

ND's BOPB trade is excellent because it focuses on the 5 min trend line being broken and gets me away from drawing my micro trendlines that I used to go crazy with. But this is essentially just a form of SLA. So I'm in a away applying SLA to many different circumstances, or rather, just being selective about which retracements I take (I'd like to see the RET when price bounces off an important level, just like the bounce off 3793 yesterday). Of course the selection process has to be back tested... perhaps my carefully selected entries would be no better than random SLA trades or just taking all of them.

But focusing on just one setup that setups up based on only one particular set of parameters just seems too limiting right now.

 

[Roffe]

* - 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.

Don't forget that we've now retraced more than 50% of the last down swing on the daily chart, as well as more than 50% of the whole move down since the top. See what we did yesterday and today.

 

[k p]

Don't forget that we've now retraced more than 50% of the last down swing on the daily chart, as well as more than 50% of the whole move down since the top. See what we did yesterday and today.

Hi Roffe... excellent of you to point out. Attaching a chart with the two 50% levels that you mention.

When you say "see what we did yesterday and today"... do you mean that yesterday we reached the 50% of the more immediate downswing and today we breached the 50% of the ultimate down move from top to bottom? This is how I understand what you're saying so please correct me if I'm missing something.

 

[k p]

What a great day we are having today... will this not stop going up?

Of course now I'm too scared to enter anywhere, but if I had to pick a place, I outline this range, complete with the mean. At L, price doesn't even touch the mean of this range as it comes down to test and continues up. A buy stop above any of those bars would be a great place to go long, and at worst, that swing high at 3930 would give you at least 3 or 4 points of airspace. Of course price just kept going higher so one could have held.

 

[Roffe]

When you say "see what we did yesterday and today"... do you mean that yesterday we reached the 50% of the more immediate downswing and today we breached the 50% of the ultimate down move from top to bottom? This is how I understand what you're saying so please correct me if I'm missing something.

I have no answers, but more tell-tales that the trend might be continuing strengthens my inclination to continue to hold my long position.

Yesterday's close was just at the first 50% mark. Some kind of retracement during Asian and European hours is just expected so I would just wait and see. Then when German cash markets opens the bull trend continues and the 50% is breached again. Idling just above it (i.e. yesterday's close) for a while, and then continues marching higher until it stalls again at the second 50% mark for lunch time.

There it retraces some during the afternoon until it takes out the new high just before it is time for US. US opens up by testing the demand from the previous trading range by dropping below the last 50% line (and therefore the last high during European session) just briefly, until it continues even higher.

 

[dbphoenix]

This of course seems logical, and what many of the expert traders do suggest. Its seems like I have too many options now in my head. What I'm trying to say is that I could just focus on getting my levels from an hourly chart and waiting for price to hit this and getting into either a continuation or reversal trade. But this I find too limiting now. As I go through my analysis, I see things that are legitimate enough to initiate a trade. Of course since none have been tested thoroughly enough then I shouldn't be taking them but..... Aye... I'm just fighting the process too much.

I'm also trying to go back to the SLA roots in some ways as an entry method, and then use context as a reason to hold and not rely on line breaks, or use context as a reason to eliminate some SLA trades (I clearly remember when I asked you a while back why a particular short you didn't mark on your chart when it was in fact set up by a DL break and had a clear RET, and your reply was that by this point, price was in a range. So this filtering method I'm working on as well.)

ND's BOPB trade is excellent because it focuses on the 5 min trend line being broken and gets me away from drawing my micro trendlines that I used to go crazy with. But this is essentially just a form of SLA. So I'm in a away applying SLA to many different circumstances, or rather, just being selective about which retracements I take (I'd like to see the RET when price bounces off an important level, just like the bounce off 3793 yesterday). Of course the selection process has to be back tested... perhaps my carefully selected entries would be no better than random SLA trades or just taking all of them.

But focusing on just one setup that setups up based on only one particular set of parameters just seems too limiting right now.

Attempting to shortcut this process merely expands the amount of time it will take to develop the necessary skills. Nothing is gained by painting the house before scraping it, cleaning it, and priming it since you'll have to do it all over again sooner rather than later.

 

[k p]

I have no answers, but more tell-tales that the trend might be continuing strengthens my inclination to continue to hold my long position.

Yesterday's close was just at the first 50% mark. Some kind of retracement during Asian and European hours is just expected so I would just wait and see. Then when German cash markets opens the bull trend continues and the 50% is breached again. Idling just above it (i.e. yesterday's close) for a while, and then continues marching higher until it stalls again at the second 50% mark for lunch time.

There it retraces some during the afternoon until it takes out the new high just before it is time for US. US opens up by testing the demand from the previous trading range by dropping below the last 50% line (and therefore the last high during European session) just briefly, until it continues even higher.

What an excellent analysis! I see that when I mark my 50% levels on my hourly chart, they match up almost exactly with yours. I like that you're using the same type of technique that I have been taught, so it makes it easier to follow what you are saying.

 

[lotto]

But focusing on just one setup that setups up based on only one particular set of parameters just seems too limiting right now.

Too limiting? From what I have read of your journal, limits are precisely what you need. Hence RN's advice to grab ahold of nodoji's set up and focus on it. You yourself have said you need to focus - a focus is necessarily a limit, as all that falls outside your focus will be effectively "off limit" to your gaze. You only need one set up.

 

[k p]

Attempting to shortcut this process merely expands the amount of time it will take to develop the necessary skills. Nothing is gained by painting the house before scraping it, cleaning it, and priming it since you'll have to do it all over again sooner rather than later.

So with this in mind, I think focusing on SLA via a larger time frame is really what's key.

I always say that I'm worried about wide stops, but on days when I lose $200, this is essentially a 10 point wide stop (of course the loss is from micro managing 3 or 4 trades very poorly)! So then I have to ask myself, if I used SLA on a 5 min chart, would I have better results? I will of course still use the 1 min chart for the entries, but most of my loses are from being shaken out of trades too soon, only to see them continue without me 15 or 20 minutes later. The question of course is would price moving against me stop me out if I turned to the 5 min chart for my stop loss.

Its funny because at first my inclination really was to make a system around scalping to alleviate the fear. I simply didn't want to be in a trade for too long because of the fear that it would move against me. So I thought at the time that if I simply take my profits at 2 or 3 points, I could limit my exposure to risk. But what I saw was that even though I could have some winners, the times it didn't work, and I held on for longer than I should have, all my profits were wiped out.

So I guess that what I'm saying is that by actually looking at the bigger picture, by using wider stops, by not getting scared if when in a long a 1 minute bar with lower high and lower low prints, then I can more than likely reach a level of consistency sooner. By trading the 1 minute bars, this introduces a huge amount of fear and discomfort. The larger time frame can I think almost help a scared trader as long as he is going to accept the larger loss, but at the same time, make sure to take the larger gain.

This is an interesting thought that maybe someone can help me with. If you have entries that you think are good, but your stop loss is only 3 points and you take profits at 3 points... what are the chances that you will be statistically positive? (of course it depends on your ability to call good entries) Conversely, if you take that same trade, but now widen the stop to 10 points for a stop loss or 10 points for a profit, can this increase your win rate?

I could be wrong, but my inclination is that second system would work much better. If your trade is good, the wider stop will be hit less often. The smaller stop loss might be hit just because of the algos or even a temporary pause or even a normal RET before price really has the chance to take off. But with the wider stop, a good trade now has more time to actually work.

 

[dbphoenix]

So with this in mind, I think focusing on SLA via a larger time frame is really what's key.

I always say that I'm worried about wide stops, but on days when I lose $200, this is essentially a 10 point wide stop (of course the loss is from micro managing 3 or 4 trades very poorly)! So then I have to ask myself, if I used SLA on a 5 min chart, would I have better results? I will of course still use the 1 min chart for the entries, but most of my loses are from being shaken out of trades too soon, only to see them continue without me 15 or 20 minutes later. The question of course is would price moving against me stop me out if I turned to the 5 min chart for my stop loss.

Its funny because at first my inclination really was to make a system around scalping to alleviate the fear. I simply didn't want to be in a trade for too long because of the fear that it would move against me. So I thought at the time that if I simply take my profits at 2 or 3 points, I could limit my exposure to risk. But what I saw was that even though I could have some winners, the times it didn't work, and I held on for longer than I should have, all my profits were wiped out.

So I guess that what I'm saying is that by actually looking at the bigger picture, by using wider stops, by not getting scared if when in a long a 1 minute bar with lower high and lower low prints, then I can more than likely reach a level of consistency sooner. By trading the 1 minute bars, this introduces a huge amount of fear and discomfort. The larger time frame can I think almost help a scared trader as long as he is going to accept the larger loss, but at the same time, make sure to take the larger gain.

This is an interesting thought that maybe someone can help me with. If you have entries that you think are good, but your stop loss is only 3 points and you take profits at 3 points... what are the chances that you will be statistically positive? (of course it depends on your ability to call good entries) Conversely, if you take that same trade, but now widen the stop to 10 points for a stop loss or 10 points for a profit, can this increase your win rate?

I could be wrong, but my inclination is that second system would work much better. If your trade is good, the wider stop will be hit less often. The smaller stop loss might be hit just because of the algos or even a temporary pause or even a normal RET before price really has the change to take off. But with the wider stop, a good trade now has more time to actually work.

So why not test all of this?