Trading NQ via Price Action

[k p]

You can see that he and I saw many of the same behaviors, independently of one another, without any communication passing between us.

One more point I'd like to make is this. Yes your charts looked similar, and I too had some of these same lines. But what you say here is that you two saw many of the same behaviors, but from what I have read, you guys haven't discussed behaviors. You have discussed levels. I have been wanting to discuss behaviors for so long... what these behaviors are at these levels.

Eminiman had also asked a question in your journal when you posted last week about this, and your reply was to just look at the price action "between approx. 10:30 - 10:32 had me exit the short with a small profit, and what happened between approx. 10:34 - 10:38 had me enter a long trade."

Now once again, I'm not saying you have to tell me and I fully accept that it is my job to find these answers. But there is a huge difference between saying you and Db are watching the same levels and saying that the two of you saw the same behavior. There has been no discussion of what you saw, and you cannot say that you saw the same thing Db did. Perhaps the TQ is a major factor in Db's decision making process, and you don't even talk about the TQ.

Please do understand that I'm not trying to have a fight here. I'm just trying to analyze this down to the most microscopic level that it can be looked at for my own understanding, and for anyone else who is following. The differentiation between watching a level and what price does at this level is of paramount importance.

 

[fourtiwinks]

...I'm just trying to analyze this down to the most microscopic level that it can be looked at for my own understanding, and for anyone else who is following...

Dear k p,

I'm afraid that your journal has turned into what we struggling traders should not be doing or asking.

I'm sad because I know you're trying your best. Unfortunately, you have taken the wrong path for some time already and refuse to admit it.

Also, you seem to have invested too much emotions and they are affecting your posts as well. (Have you realised that you have been writing very, very long posts lately? They are getting really hard to read to the end.)

Take it easy, bro. Let's start over again.

Let's take a step back and observe. (Db's post #1628 made me realise I myself have still have not done any proper observation phase yet again.)

Btw fortydraws is giving really good feedback, although you might not realise it at this time.

In fact, his charts in his thread are very helpful in guiding us to observe what needs to be observed. I certainly hope he'll continue to post more charts.

 

[fortydraws]

Here is actually my 1 minute chart from Jan 30. I saw the exact same short as well just below 4204, but I didn't take it for 2 reasons. One, price didn't come close enough.. it didn't retest the level, it didn't hesitate, it just dropped. The further away it got, the larger the risk was because price could still come up to test this level. Two, I just wasn't psychologically able to enter any more trades because I had already lost some money this day.

Those are your reasons. If the result you got from deploying those reasons is not what you'd like it to be, then examine your reasons and the basis, if any, for those reasons.

I have kept asking for help with the observation phase, but nobody has been specific enough.

Specific: Put up a five minute chart of what ever market you intend to trade, and watch it for two months from 9 AM EST to 11:30 AM EST. Unless you are absolutely not meant to understand price and how it behaves, you will learn. Just watch. Don't even draw lines for the first week. Don't think buyers/sellers/long/short. Just watch. After the first week, you should be able to start identifying levels where price reversed and watch what price does if and when it comes back. I do not mean every little retracement as price moves 20 points. I mean watch price when it goes down, stops going down, and then makes a steady climb until it can climb no more. Do not think in terms of long or short, don't think buyers and sellers - think supply & demand. Maybe in week three you can start tracking the midpoint of swings. But this should all be without thinking "let me see, if I go short at X my stop loss would be X-Y, and I'd be a bazillionaire!" Just look at what I posted in my journal and note specifically how I characterized the price action as I was observing it.

In reference to the short that was worth almost 50 points, I show this same chart again but highlight via the blue rectangle an area that I would think should provide a major issue to the short. It happens at a swing low that would be evident on the 5 min chart at 4172

His short entry was 97.50, the low of the NY session at that point was 54.50. He had a limit order at 50. At no point before that did price retrace more than 50% of leg down.

I see no "swing low" at 4172. Here is my chart. I drew you some arrows and made some lines heavier to highlight them.

Last thoughts: I remind you that you found a way to lose $1000 in one day trading one contract just a couple of weeks ago by just "winging it.". Why should you now find it difficult to believe that someone else might, under similarly volatile conditions, have developed a plan to take advantage of that volatility the same way that volatility took advantage of you, and thus found a way to make a mere $700/day average trading twice as many contracts as you used to lose $1000.

I would also remind you that while I have been able to help my friend directly, I myself have accomplished what I accomplished with "just a pdf" and a couple of months of dedicated observation. DbPhoenix not once flew in to help me. And to refer to it as disparagingly as you do really indicates how little you understand it, or you would value it as I do - and not only DbPhoenix's work, but Wyckoff's as well. While you spent much of your free time writing lengthy emotional, hand-wringing posts, I spent a few of my free hours re-reading Wyckoff's Studies in Tape Reading. You'll get out of this what you put into it, KP. You should perhaps start examining what it is you want, and then make the changes necessary to get it.

I have no more time for this. I cannot give anymore of my time and energy to your thread. If you make the required changes, I might step in to help. But if you make the required changes, you'll probably find you don't need anyone's help.

 

[k p]

His short entry was 97.50, the low of the NY session at that point was 54.50. He had a limit order at 50. At no point before that did price retrace more than 50% of leg down.

I see no "swing low" at 4172. Here is my chart. I drew you some arrows and made some lines heavier to highlight them.

Thank-you.

 

[k p]

In fact, his charts in his thread are very helpful in guiding us to observe what needs to be observed. I certainly hope he'll continue to post more charts.

Perhaps you can help me out here fourtiwinks because I need another set of eyes as my observation skills are completely useless. (fortydraws, I just want to use your chart illustrate the difficulty I'm having with this so it may sound like this is against you in some ways, but it isn't at all. These points I make are just questions in my head.)

So please tell me what you see, because here is what I see.

My lines were really quite similar to what Db and 40D had. At "A", we have what appeared to be a high, but then price did break higher, although it dropped below. So although I too had the thick line at roughly 97, I also had the thinner line at 4203.

So when price comes back up to B... which line is in play? Price bounced off beautifully from the thicker line, but this was no longer the high. (It certainly does look to be the high of that trading range that formed, and this would very much be in line with how Db draws his boxes which I spent quite a bit of time on).

The reason I want to point this out though is because I want to contrast this with what 40D said about how he doesn't see a swing low at C. Why doesn't he consider this a swing low? Its quite prominent on this 5 min chart, but its true that its in the middle of all the price action to the left, its not an extreme at this point. But likewise, the line at A is no longer the high a few minutes later because the climb up to 4203, which I shall label as "D", is now the new high. So as price is coming up to B, he points out that we should be watching this thicker line, but it no longer represents the high.

Moving along, when price is coming down to E, I asked about this price action around here because it looked quite choppy. But 40D responded that he doesn't see the swing low at C as being of any significance. I understand that price never retraced more than 50% of the down move, but I just don't understand how the low at C isn't given any consideration. If its because it wasn't the ultimate low of the day, then my brain tells me when price approached the high at B, this wasn't the ultimate high of the day anymore either... the high now stood at D. So in the first case, the swing at at A which forms this line has significance, but in the second case, when price approaches the swing low at C, this doesn't matter. It seems to me that we should either use the ultimate extremes (ie. the highest high of the day up to that point or the lowest low of the day up to that point, but this would contrast with looking for the highs and lows of ranges as they develop), or include everything, which I would think should therefore make the action at C of importance.

Now the second point of where I'm failing badly at observation I guess is this. Lets look at F. Here price has just cleared the area at B where it turned before. So once we break above 4197, it looks solid. Sure we have the ultimate high at D of roughly 4203 to contend with, but we are breaking out above B. On the next chart I post which has both a 5 sec chart and the 150 LOC chart, I see reasons to accept this breakout higher and go long, since we did after all break above a level that 40D outlined as being important and that I saw as important as well. If was important enough for the short you could take at B, so why isn't it important enough for a long that could be taken above this level at F.

But what happens next? We don't go far, we do in fact not even make it to the previous high and stop 1 point short of this level before turning down. So ok... this is pretty significant. But at what point do we see this, and at what point do we do something about it?

I know 40D or Db might cut me up for looking for entries, but heck, this is my journal, so I'm gonna let it fly! I plot where his friend took the short at 97.50 on both a 5 sec chart, 1 min chart, and 150 vol LOC chart. And you know what, I cannot find any reason why the short is here. (its not 1 point below the bar of a 1 min chart.... its not below a RET we might see on the 5 sec chart, and its not below the low of a wave that would be seen on the 150 LOC chart.) Who knows, maybe he just entered late, but it sounds like he must have very solid rules if he has done so well so my observation skills are just not seeing this short.

The main point of this though isn't where the short was taken, but that something in the observation phase told him to short, but I don't know what. If its a failure to push past 4203, the short is too late. If its price dropping below that prominent level at 4198, the short is too early.

Anyway, I'm not looking for a reply from 40D or Db because I realize I'm talking about entries which they have objected to (plus I think they are both done with me.. LOL). Nor I guess am I really looking for a reply from you either and its not like I want to put you on the spot. I just wanted to illustrate that given the important points that 40D outlines, and observing what happens at these areas, the observations that I make don't lead to any ability to act on it. By the time I can say for sure that yes, price rejected this level, its far too late to do anything about it, and at that point, the observation would tell me that I can't enter now because anything is likely to happen (ie. a retest higher or continued drop).

Perhaps I will fail at this because I cannot separate the observation phase from looking for entries. But I think if someone is excellent at observation without looking for entries, this will be just as useless.

 

[fortydraws]

Specific: Put up a five minute chart of what ever market you intend to trade, and watch it for two months from 9 AM EST to 11:30 AM EST.

My friend doesn't even look at anything but the 5 minute bar interval which is where I started him.

I spent almost a year trading nothing but stocks from a 5 minute bar interval chart before I started using SLA to trade the NQ.

Five traders trading the same price activity will likely have five different entry techniques, stop loss rules, and trade management practices - same opportunity, but each with his or her own way on how to profit from it while minimizing risk. I suggest you stop obsessing over what someone else does, and crack open that 5 minute bar interval chart, lean back, and enjoy the ticks.

The elusive concept that befuddles you so with respect to Friday afternoon's short entry is that of "failure." Think about the dog that didn't bark. That dog doesn't bark all the time. In fact, he's failed to bark three times so far this morning alone.

 

[MarketAddict]

Kp,

What I learned from my years of trading and doing research is nobody is going to tell you exactly how they trade.. So if you are waiting for that then you are wasting your time.. Trading isn't simple.. The reason why having a plan (a system) is very important, is because without it, it will be hard to produce repeatable results.. If you buy a McDonalds franchise, you are not just buying the brand.. You are also buying the system that makes McDonalds run successful.. Without the system, McDonalds wouldn't be successful.. They have a certain way they prepare their food so it can taste good and be serve fast at the same time.. But guess what? Building a system isn't easy.. It takes time.. A lot of research and back testing..

I know that you like DB and Nodoji.. but if the information that you are learning from them isn't working for you, then you should move on and look for another way to trade.. Never keep doing the same thing if it's not giving you results..

 

[k p]

Five traders trading the same price activity will likely have five different entry techniques, stop loss rules, and trade management practices - same opportunity, but each with his or her own way on how to profit from it while minimizing risk. I suggest you stop obsessing over what someone else does, and crack open that 5 minute bar interval chart, lean back, and enjoy the ticks.


View attachment 148947

The elusive concept that befuddles you so with respect to Friday afternoon's short entry is that of "failure." Think about the dog that didn't bark. That dog doesn't bark all the time. In fact, he's failed to bark three times so far this morning alone.

I think there is a lot that befuddles me!

Telling your friend to just focus on the 5 min bar interval is a great clue, and thanks for digging up your 3 posts on this very same thing.

The problem that I have with the failure is this. Where does the failure happen? (ie. at what point can you call it a failure?) If watching the 5 min bar chart, I can see where the highest tick is. My right tick on the price scale tells me where I am right now. And if I'm watching the right tick move, I can see how it behaves after it printed the highest tick and continued on down. But all of this would be no different than what happens at each and every RET on the way up in a trend. We hit a high tick, price comes down a few points, then we hit a low tick, price continues higher, and eventually goes higher than that high tick is previously turned down from.

Now don't get me wrong, I realize that this is at a level where price has turned before and hence a major extreme, not just some random area in the middle somewhere. But how does one know that price coming down from this high tick at 4202.25 isn't just another RET? I take it the answer is that its in the behavior of how it comes down. But if I can't point to this behavior on a chart (be it tick chart or 5 sec chart), to give it a tangible signature, to be able to show where in the market this behavior happens, then I'm scared this gets too close to the idea of "feel". The last thing I want to venture into is to conclude that price had the "feel" of rejecting that high tick which just so happens to be within a point of the high that day.

Anyway, I realize its up to me to find this answer, but I just want to say that I have observed, I have looked high and low, and far too often, the rejection that I think I see sucks me into a short just before price shoots up even higher.

 

[k p]

Kp,

What I learned from my years of trading and doing research is nobody is going to tell you exactly how they trade.. So if you are waiting for that then you are wasting your time.. Trading isn't simple.. The reason why having a plan (a system) is very important, is because without it, it will be hard to produce repeatable results.. If you buy a McDonalds franchise, you are not just buying the brand.. You are also buying the system that makes McDonalds run successful.. Without the system, McDonalds wouldn't be successful.. They have a certain way they prepare their food so it can taste good and be serve fast at the same time.. But guess what? Building a system isn't easy.. It takes time.. A lot of research and back testing..

I know that you like DB and Nodoji.. but if the information that you are learning from them isn't working for you, then you should move on and look for another way to trade.. Never keep doing the same thing if it's not giving you results..

Hi MA,

Yes, I absolutely see this, and your analogy is bang on. Based on what I think is a rejection of an important level thus far, I have not been able to reproduce repeatable results. I've kept trying to ask for this behavior that shows the rejection but they certainly aren't drilling it down to concrete enough terms that I can plot it on a chart. They of course don't have to tell me exactly how they trade, that's fine, but its just frustrating that they claim that I'm not observing because if I was observing, I would have found it. Perhaps I just don't have the ability to see this yet, or ever.

Its like before we had microscopes, we had no idea that tiny microorganisms were floating around on everything making us sick. We observed our skin, and it looked clean, but we weren't observing with a microscope. No amount of more observation without that microscope would have helped us to see these microorganisms. I guess in this way, I'm asking for a microscope! (and its clearly patented technology... LOL)

The biggest bitch is when price penetrates a level, but doesn't go far, crosses that level again as if really rejecting it this time, and still doesn't go anywhere. (perfect example is in these two pink areas here on the attached chart). We dropped below a prominent swing low from 2 days ago, but no clear rejection or penetration. Then we broke above the high today after the extraordinary climb, dropped below, but still no real drop until a retest of that.

Anyway... thanks for sharing. (Oh yes, and it also doesn't help that what Db and ND do is so completely different!)

 

[MarketAddict]

Hi MA,

Yes, I absolutely see this, and your analogy is bang on. Based on what I think is a rejection of an important level thus far, I have not been able to reproduce repeatable results. I've kept trying to ask for this behavior that shows the rejection but they certainly aren't drilling it down to concrete enough terms that I can plot it on a chart. They of course don't have to tell me exactly how they trade, that's fine, but its just frustrating that they claim that I'm not observing because if I was observing, I would have found it. Perhaps I just don't have the ability to see this yet, or ever.

Its like before we had microscopes, we had no idea that tiny microorganisms were floating around on everything making us sick. We observed our skin, and it looked clean, but we weren't observing with a microscope. No amount of more observation without that microscope would have helped us to see these microorganisms. I guess in this way, I'm asking for a microscope! (and its clearly patented technology... LOL)

The biggest bitch is when price penetrates a level, but doesn't go far, crosses that level again as if really rejecting it this time, and still doesn't go anywhere. (perfect example is in these two pink areas here on the attached chart). We dropped below a prominent swing low from 2 days ago, but no clear rejection or penetration. Then we broke above the high today after the extraordinary climb, dropped below, but still no real drop until a retest of that.

Anyway... thanks for sharing. (Oh yes, and it also doesn't help that what Db and ND do is so completely different!)

I really don't understand your question about when price penetrates a level.. Are trying to find out if the level going to hold ? What time frames are you looking at? 1min and what else?