Trading NQ via Price Action

[k p]

KP, you've been at this for a year.

And throughout this whole time you and your poster friends keep talking about
more and more abstract non quantifiable ideas. And even blaming
psychology and trying to find the "trading zone" state of mind.

Don't you think there's a small chance that all this approach to discretionary trading
just plain doesn't work ?
Believing in something doesn't make it real.

And having said that, index futures are the most difficult instrument to day trade.
You'll be surprised of what the proffesional traders @ prop firms and funds
average point per contract per year on the ES and thats with heavy martingaling
and using external non price/volume data.

Yup... I have been at this for a year... and worse than that.. I'm down I think 8k!

And yes, my "friends" trying to help are frustrating the shit out of me!

I think that its not that there is a small chance that this approach doesn't work, I think that there is a very big chance that what I do with it, and what most people do with it, doesn't work. And yes, believing it doesn't make it real, for sure.

I'd love to read about the results of guys at prop firms and such. So far all we have is 40D's friend making 6k in a week and me losing 8k in one year... those are about the only two stats I have! LOL (40D has of course posted impressive stats himself last year if you wanted to look those up in the Straight Line threads from the summer of 2013)

I'm totally with you Adrian in that my results suck, those that are helping are being a bit coy, and what I need very much is statistical analysis so that I can make all of this more concrete, but alas, I need to regroup first.

 

[k p]

No worries k p, I'll be most glad if I had barked up the wrong tree. It was just that those words/phrases in your earlier post struck a cord in me and made me respond in that way. Guess I was a little thick in failing to see the humour behind them.



I guess the proof has to come from yourself, as what you want to see as proof may not be what Db or others want to see as proof. Hence, when they provide their proofs or suggestions, the information just do not gel with you. Interestingly, you have defined the problem so you have to formulate an answer to it, given the concepts that Db has advocated. If you cannot prove it, then SLA simply doesn't work for you. Let's try something else then.



I believe fortydraws has provided his specific way of observing:

1) 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.
2) 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.
3) Don't think buyers/sellers/long/short. Just watch.
4) 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.
5) Do not think in terms of long or short, don't think buyers and sellers - think supply & demand.
6) 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!"
7) Just look at what I posted in my journal and note specifically how I characterized the price action as I was observing it.

It is very helpful to me as I couldn't follow Db's postings, to be honest. Somehow, most of his comments and charts in his thread are cryptic to me. So fortydraws' suggested steps made me realise that I should focus on "supply and demand". And I believe he is posting charts to help us better observe in that aspect, not because he wants to post the best trades only.

Who knows who is really buying or selling, right? It could be just GS and other banks' algos happily trading off each other. But the aggregate results of their actions (and others) provide areas to observe and act upon, and I believe SLA/AMT is used to identify those areas.

Anyway I have digressed and don't wish to clutter your journal. I will read your chart and comments after this post. All the best and may you find your proof soon!

Don't worry about the clutter... most of these pages in my journal written by me are pure clutter!

Yes, 40D provided how to observe, but I still never see the end result. Show me what one does with this. I don't deny that I need to observe more, but when working on what to do about it, the reply always seems to be that once I observe enough, I will know. (way too spiritual for me!)

Also, and this isn't meant as a jab at him but just frustration, why the heck is he plotting so much stuff on his 5 min chart when it happens in the middle of all the other action? If his suggestion is to only look for stuff at the important levels which he gets from hourly charts, perhaps even a high or low of the day on a 5 min chart, but never anything in the middle, then why is he plotting all of these micro supply and demand lines on his 5 minute chart that break? Is this like from the karate kid where the guy has to wax cars for weeks to develop the hand movement??? He plots these micro lines, but then says to not worry about every little retracement.

 

[fourtiwinks]

...Yes, 40D provided how to observe, but I still never see the end result. Show me what one does with this...He plots these micro lines, but then says to not worry about every little retracement.

If you compare your chart (post #1645) with the chart in post #65 in fortydraws' thread, don't you notice a difference? Fortydraws made only one comment and that is to record how price reacts to 50% and bounces off. So this is his main learning point in that situation, despite the many lines drawn. As for yours, er.. I feel a sense of disillusion in your comments, even though you had identified a hinge and observed how price reacted to OH and PDH.

...I'd love to read about the results of guys at prop firms and such...

If you are interested in such information, you can check it out with Peter Davis of Jigsaw Trading: http://www.jigsawtrading.com/category/blog/

His field of expertise is in reading order flow and he deals with traders from prop firms in that aspect. He is likely to provide you with reliable information.
Disclaimer: I bought his software but it just doesn't work me personally.

I don't like to increase post counts unnecessarily, so here are a few replies to later posts:

To k p (#1658): I guess if you observe this kind of bounces occurring 60-80% of the time, you'll want to formulate a trading strategy to take advantage of it.

To eminiman414 (#1660): That wasn't Peter and it was an advert of his. But he is a recognised vendor in BMT, so that counts for something as Big Mike vets vendors carefully.

To k p (#1664): Sorry, I tend to edit my post(s) for grammar/spelling mistakes.. and also extending my replies like now.

 

[Pigsky]

KP, you've been at this for a year.

And throughout this whole time you and your poster friends keep talking about
more and more abstract non quantifiable ideas. And even blaming
psychology and trying to find the "trading zone" state of mind.

Don't you think there's a small chance that all this approach to discretionary trading
just plain doesn't work ?
Believing in something doesn't make it real.

And having said that, index futures are the most difficult instrument to day trade.
You'll be surprised of what the proffesional traders @ prop firms and funds
average point per contract per year on the ES and thats with heavy martingaling
and using external non price/volume data.

This reminds me of myself. I went down a similar road 2-3 yrs ago.... back then there was a lot of talk from people claiming to be making big money by drawing lines on 5-minute futures charts.

Even though I soon realized there was something fishy about many of the gurus and experts, I still believed in the approach. I somehow rationalized it that way, and thought I could make a living from it.

Now I see the truth but I had to find it out for myself the hard way.... wasted a lot of time on this type of trading approach. I can tell KP is going to have to do the same and find out for himself, hopefully without much financial loss or emotional damage.

 

[k p]

If you compare your chart (post #1645) with the chart in post #65 in fortydraws' thread, don't you notice a difference? Fortydraws made only one comment and that is to record how price reacts to 50% and bounces off. So this is his main learning point in that situation, despite the many lines drawn. As for yours, er.. I feel a sense of disillusion in your comments, even though you had identified a hinge and observed how price reacted to OH and PDH.

LOL... sweet... my sense of disillusion came across perfectly!

Yes, 40D made only one comment, but there are more lines. The fact that a line is drawn means that when price reacts to that line, either bounces off or penetrates, there is for sure a thought associated with that event.

Now I do agree that he made a great observation. But here is the thing... (and yes, this is a comment based on getting ahead of myself). Its great to notice a 50% level be penetrated, and then price not go far, and hence go the other way. (Db even made a really good post in gears' journal about how when this 50% penetration happens and price reverses, panic sets in... a really nice post) But here is the thing for me, what to do about it? At first the penetration seems likes weakness now, then when it doesn't go anywhere its strength. Once you can see that price has gone back above the 50% level successfully, the trade is gone.

Here is the link to that chart

http://www.elitetrader.com/et/index.php?threads/observations-an-example.288938/page-7#post-4081316

When price dropped below the 50% level of 4125, there is a damn nice RET in there, even on this 5 min chart to go short. Then when this doesn't work, you're left confused. And wen you see price break the SL that tracks price down and shoots up, price is already above 4135 and so much higher! Sure in this instance it kept going higher, but its a very high risk trade to be taking trades at 50% levels. So its great to observe, but if the observation doesn't lead to a trade, how do you act based on this observation? If the intention is never to act, then why bother observing? Now after I say all this, if I do go back and find that 80% of the time if these 50% levels are penetrated and price climbs back above and continues, then we got something here, but I doubt this will be the case.

 

[AdrianHagh81]

This reminds me of myself. I went down a similar road 2-3 yrs ago.... back then there was a lot of talk from people claiming to be making big money by drawing lines on 5-minute futures charts.

Even though I soon realized there was something fishy about many of the gurus and experts, I still believed in the approach. I somehow rationalized it that way, and thought I could make a living from it.

Now I see the truth but I had to find it out for myself the hard way.... wasted a lot of time on this type of trading approach. I can tell KP is going to have to do the same and find out for himself, hopefully without much financial loss or emotional damage.

Like organized religion their main selling point is HOPE.

 

[k p]

Now I see the truth but I had to find it out for myself the hard way.... wasted a lot of time on this type of trading approach. I can tell KP is going to have to do the same and find out for himself, hopefully without much financial loss or emotional damage.

Financial loss is there... emotional damage is clearly there too! LOL.... But I'm gonna struggle through a little longer. I do like that I'm talking back to all these guys to be honest. Not in a bad way and I hope they don't see it like this, but my entire life, I've enjoyed challenging people. It makes life interesting, and either I learn something, or they learn to explain it better, or we just both learn the art of walking away peacefully accepting the differences.

 

[k p]

Now would also be a good time to point out that while I was typing an earlier reply, price bounced off the overnight low of 65.75 almost to the tick. I tried to come up with something around buying just above the bar, or selling below the bar that rejects the overnight high months ago.... but alas, i see it would trip me up too much.

Looking at the 5 sec chart.. that rejection sure is strong.

EDIT: and of course that green line at 88, the previous day high is acting as both support and then resistance... but once again... what are you gonna do about it???

 

[AdrianHagh81]

Now would also be a good time to point out that while I was typing an earlier reply, price bounced off the overnight low of 65.75 almost to the tick. I tried to come up with something around buying just above the bar, or selling below the bar that rejects the overnight high months ago.... but alas, i see it would trip me up too much.

Looking at the 5 sec chart.. that rejection sure is strong.

EDIT: and of course that green line at 88, the previous day high is acting as both support and then resistance... but once again... what are you gonna do about it???

Ask for a live call, just once from the line drawing posters.

 

[eminiman414]

Funny I clicked on the jigsaw link and then the first link about order flow and whoever was speaking goes the first time you try to learn this you are going to be bad at it and basically says to just sit and watch with a smile on your face and DO NOT sim trade yet it will build too much negativity (paraphrasing). He then goes on to say we can and can't tell you what to see.....I'd check that link out.