Trading the NQ: Take 2

[NoDoji]

I did actually think of shorting right here where I indicate based on the fact that it was the lowest risk entry for a short. We are below the ONH, this is at the top of the little range, so if a short will eventually work, then this would be the most ideal place. Of course I didn't place it, I saw price drop, and then I went to sleep.

Your blue arrow short idea at that point in time is an idea without a signal. Price is in a range with range support at previous resistance. There's no short signal yet.

Then the 2nd bar past your blue arrow breaks that support level. Ahh! A short signal!

Quick, subtract your 2 point stop loss allowance from 1 tick above the range high. That's the price where you place your offer to sell . You get filled as price rises back up and removes all the nervous early shorts from their positions by triggering their break even stops. Then, once your offer is taken, you can make 10 points of profit while you sleep

 

[k p]

Your blue arrow short idea at that point in time is an idea without a signal. Price is in a range with range support at previous resistance. There's no short signal yet.

This is interesting. I find that if I wait for some indication of what price is going to do, then for me, this means that I have some confirmation, and then this gets me into a trade too late, and a tight stop makes this even more difficult.

My idea here is that I have no idea what price will do, and it can just as easily continue down as well as up (although just the fact that we are below the ONH makes me favor a short position). But even without this bias, the whole way that I've been framing my mental process is to think of where does the trade have to go to very quickly invalidate the trade. So for a short, its best to short just before price breaks above the range, because if it breaks above, that seriously negates the short. And if I was looking for a long, then I'd have to take this at the bottom of the range.

Now the funny thing is that in real time, I don't actually want to do this because even though this is my very intention based on analyzing charts and trying to use stats to my advantage, what I am faced with in real time is seeing price bounce off the bottom of the range, and here is me coming to say that it cannot go any further, after already showing some strength.

This is exactly what you mentioned just the other day, about how I need to shout out loud that "what if price in fact drops and goes to profit right away", and of course the fact that the best trades look the scariest. If I honestly didn't care about the outcome, I would take the short, but I clearly care, because I don't want a third losing trade. Once this idea is in your head though, you might as well just go right back to bed!

Quick, subtract your 2 point stop loss allowance from 1 tick above the range high. That's the price where you place your offer to sell . You get filled as price rises back up and removes all the nervous early shorts from their positions by triggering their break even stops. Then, once your offer is taken, you can make 10 points of profit while you sleep

So here is the illustration of what you are saying. I also mark where I would be looking for a short if I didn't take it where I originally indicate, playing the BO now (or breakdown rather), and waiting for a slight retrace back up, thinking support is now resistance. On a 5 sec chart, I even see some possible entries, that would clearly stop me out.

I simply don't think that after seeing price come all the way back inside the range that I could ever thinking of shorting again, but the fact that price doesn't this time break above the range, but falls out the bottom again, with a short working anywhere below there, could at least still lead to a profitable trade.

Your rationale for the trades you describe is such an interesting viewpoint, just like the other day where you blew my brain wide open! Given what I describe up above, I do think I'm in harmony with this though process, but its still not the way I'm acting.

I am getting PM's from members, even some lurkers that you never see posting, to say they are learning quite a bit from this journal already, and especially all the charts being posted and the discussions about price action, entries and stops. So thanks to everyone for their contributions, and especially you ND for making it so clear.

(I also got some messages that people liked i960's charts... especially the one with multiple failed shorts with tight stops and then the eventual nice wins. Its proving to be quite a good teaching tool to show that expert traders have their fair share of losses, but they just keep on truckin' as RN would say I'm sure! LOL)

 

[MarketAddict]

Excellent question. At the root of it is absolutely that I don't have a solid enough trading plan that tells me exactly what to do and when, how many times I try the same trade, at what point I stop and reverse, and at what point I just leave it alone in that price ara. I do believe that since trading is a bit of an art form, and no moment is ever the same, and the fact that there are no absolutes, then you have to be a bit flexible with what you want to see, with where your levels are, etc. So a trading plan has to be somewhat firm, and yet somewhat loose.

Saying this though, I do also believe that perhaps much of this doesn't matter. At some point, you just put the trade on and let it hit either profit or stop. And since I can see over and over again that juicy trades of easily 10 points can be achieved at the levels that I am looking at, then it should be a no brained to take the trades and just accept the risk.

But in the moment, I of course start to question. I use the excuse that I don't have a solid enough trading plan to give myself permission to get out of the trade at BE, even before hitting the stop, just because it initially goes against me, but at the same time, just knowing that with a 10 point target and 2 point stop, I've only really got to get it right one out of every 4 to reach BE.

So essentially, I've got excuses for taking trades, and excuses for not taking trades/getting out of them too soon. I think I should be doing more work to analyze better what needs to be seen to enter trades, but with such tight stops, there is only so much you can analyze before you just leave it up to the stats of chance.

One of the big things I've also seen is that when the day starts not too well, I go into catch-up mode because I just want to end at BE for the day, but of course where I start the day has no bearing on how the next trade will turn out. I might start with a string of wins, a string of losers, or anything in between, and none of this is dependent on that first trade, other than the fact of course that I am the variable.

To sum up, I find it a bit difficult to take a loss because I assume that I'm getting in too early, too late, and this has certainly been the opinion of some trades here, but its all based on how they trade. Without putting on the same trade 10 times though, i really have no idea if that type of trade has an edge or not. On Monday and Tuesday, I think I put on one trade each that would have gone 10 points, but I got out too soon. My not so great day on Thursday I think it was has a bunch of losing trades, and then I didn't hold on to the one that would have gotten me my 10 points. In essence, I'm not allowing myself to let stats work for me because I assume I'm doing things wrong, but at the same time, I can see that my results would be so much better if I just let the stats do their thing, and as i960 keeps saying, just leave the damn trade alone. I might very well have been up for the week if I just took every trade as I wanted to and let it hit either my profit or stop.

Jesus, I think I just babbled too much without even answering the question well enough.

It's amazing how people have the answers to their own problems.. You said it the best "I don't have a solid enough trading plan that tells me exactly what to do and when". You also said "So essentially, I've got excuses for taking trades, and excuses for not taking trades/getting out of them too soon".

I don't know about you, but I hate being a consistent loser.. Kp, you are doing something over and over and keep getting the same result.. I think they call that insanity.. What is so hard for you to pick one setup and back test it, create a plan and then forward test it.. It's not hard at all.. In order to be successful you have to become a market addict.. Study all day, all night..

 

[NoDoji]

The entry method I described and that you illustrated so nicely above is same concept that blew your mind the other day. The nice thing about entering this way is that if it's going to fail, it tends to fail quickly so there's not a lot wringing of hands and gnashing of teeth involved. The major downsides of entering this way are that price may not retrace far enough to fill your order, and it's extremely difficult to convince yourself to place the order once you get a valid signal.

So many elegant trading methods have been shared with you. Now get yourself on the RIGHT PATH, ditch the quest for the magic security blanket, and focus on being able to execute one of these methods.

 

[Autodidact]

Kp,

You are too crude to be using very fast timeframes.

The analysis you do is too basic, with very little regard to inherited price action dna that is imperative to gaining an understanding good enough to attempt to scalp future's market.

That and the fact that you getting suggestions from all directions can lead to eternal confusion which translates to getting nowhere.

Price action is full of surprises, it's full of lies and deceit, become an expert at failures, some you will see, and you exploit, others will make you the failure, least for the last attempted trade.

There is no certainty in signals, all signals work and all signals fail, it's your job to detect surprises in price as they tend to lead to profit.

You need to get intimate with price, more intimate than what I see in your charts, present or past.

I did some markings on NQ with basic mini lines and placed #s all around it. See if you can understand the reason for every line and gain an understanding, in time, as to why the #s mean something to a scalper.

Feel free to ditch it, no hard feelings, this is not for everyone.

 

[i960]

My advice with that chart above is to see that weakness around 10:05 and enter on a retrace at 10:09. It's pushed past the value area high and price is being rejected back into the value area (aka range).

There's a couple things IMO that I think make shorting from up here a bit more difficult than normal:

* All time highs, there's not a lot of recent S/R, volume/market profile, etc. data for this area so one is just going to have to sit and watch or use something else like fibs/price extensions to try and determine where the next resistance really is.
* Lots of sitting and waiting - easy area to get stopped out repeatedly on if one doesn't recognize the range they're in.
* Based on the above lack of recent data, I can imagine personally getting stopped out on this thing 1-2 times before finally hooking something up.

However, this thing has been raging all last week and I wouldn't imagine yet another week of shooting towards another ATH. All things considered, it's no surprise the overall bias seemed bearish today.

I've uploaded a youtube video of what I would consider a solid trade, but it has a significant caveat in that I've already seen the chart and am tainted by hindsight. It's also paper trading although I'm pretty sure the fill would have happened. If anything maybe it's an example of:

* Spotting notable weakness.
* Entering on a retrace after seeing said weakness and not chasing to avoid being shaken out. If you get filled you get filled, if you don't, next trade or next retrace.
* Placing stop 2 ticks beyond total invalidation (I don't like using 1 tick).
* Placing exit near/in a LVN (low volume node) and (in this case) PDH (which is usually tested) or some other significant area where price will likely reverse.
* The idea that it's going to test the value area low and potentially break under it before returning back into the range (much as it did with breaking out of the high and then returning to it). It could continue to keep breaking down but a reasonable non-homerun target is the first "shelf" past the low volume area. Remember: 80% ranging, 20% trending.
* Patience and trust in the plan. Aside from initial stop/target setting, don't mess with anything (although admittedly there's a minor reversal in there which would test the patience). IMO the more one can sit through the better, but it's instrument specific. Indexes do different things than something like crude which can be like guerrilla warfare at times. It's also good to be aware of all economic events (I use forexfactory and IB calendars).

I probably wouldn't have tried trading this with a 2 pt stop personally, and most likely would have taken 3-6 points of loss before getting anywhere. BTW: I tried to label value area high with the text tool in Sierra but forgot it just follows the chart around so ignore where it ended up. The VAH is the upper grey line. If you don't understand volume/market profile concepts like value area, balance, and low/high volume nodes, that's fine - you'll probably understand what it means just by seeing or you can follow the link. I also screw around with the speed to get past the "uninteresting" parts.

If there's one thing to take away here it would be: spot the weakness and enter on a retrace. You don't need a 5 second chart to do this and it may in fact be hurting you.

 

[k p]

You are too crude to be using very fast timeframes.

The analysis you do is too basic, with very little regard to inherited price action dna that is imperative to gaining an understanding good enough to attempt to scalp future's market.

This is a very interesting assessment, and one I cannot properly evaluate so you might be right. It isn't really my intention to scalp the market, I'm simply looking for an entry at what I think is support or resistance, and developing a plan to tell me if I am looking for a bounce from the level or penetration. Your chart outlines interesting things, and the horizontal levels do especially catch my eye as this is what I look for. Your triangles though (what I call hinges) seem to be tiny, but perhaps if these were 1 min bars or smaller, then the significance of these would stand out.

You need to get intimate with price, more intimate than what I see in your charts, present or past.

Sometimes I think though that this leads to over analysis. Much of the stuff in the middle, in between the levels, I don't really care to analyze too much. This is the domain of the bots and quants and nothing I could ever hope to conquer, so I'm happy to leave this alone. I wish I actually knew less, but was more firm on what I was looking for, and knowing exactly how to act when I saw it with conviction.

I did some markings on NQ with basic mini lines and placed #s all around it. See if you can understand the reason for every line and an understanding for why the #s mean something to a scalper.

Things that you mark on this chart are I'm sure the domain of Handle123, but I simply do not want to analyze price action to this great deal of intimacy. The funny thing is that some of the things I mark on my chart, and the trades that I do take, seem to show that I am looking for this level of detail, so this is interesting to see.

Another member pointed out to me the other day that he wasn't sure what I was doing because even though I said I was looking to short a rejection of R for example at 41, then he wasn't sure why my short entries were down at 38, because this is clearly far too late given my tight stops.

Your chart is very interesting, but there is far too much to think about at every number you outline. Once I see a level forming as resistance or support, I just want to be able to place a trade. As an example, on your chart at 8, this is the opening low, and price initially rejects it, so I want to look for a long. Then as price comes down again, between points 10 and 11, I notice that it didn't make it up to the top, only reaching half way, so now this has me favor price breaking through this level that initially provided support. Simple things like this, with a firm set of rules is really all I'm looking for at the moment because I think it enough to become profitable.

 

[k p]

All time highs, there's not a lot of recent S/R, volume/market profile

Yes, absolutely agree. The only thing I had going into today really was the overnight high, which was put in just before the open, and then the previous day high. But you know, now that I know how the day ended, this would have been enough I think.

However, this thing has been raging all last week and I wouldn't imagine yet another week of shooting towards another ATH. All things considered, it's no surprise the overall bias seemed bearish today.

Yes, this was very much on my mind too, but the last thing I was to do is call a top, because frankly, I was ready to call a top much earlier than this last week!

I've uploaded a youtube video of what I would consider a solid trade, but it has a significant caveat in that I've already seen the chart and am tainted by hindsight. It's also paper trading although I'm pretty sure the fill would have happened. If anything maybe it's an example of:

To be honest, I didn't even see the trade in the video... maybe I'm too dense. Its funny how even though doing the video on your part was extremely generous, I found it not very useful to me at all. So first, I barely knew what I was looking at because your levels just didn't match what I had on my chart going into the open. Then of course, you're using 237 volume chart, and it also doesn't help that the pace kept changing, which of course I understand because you're gonna fast forward the unimportant parts. So unfortunately, whatever you were trying to show was lost on me.

* Spotting notable weakness.

This would be the holy grail, but just as often as I think I see weakness, I see price shoot back up, having fulfilled the objective of shaking out all the weak longs. So I'm clearly not reading this properly, but I guess ultimately, I don't need to, I just need to see my setup and take it.

Placing stop 2 ticks beyond total invalidation (I don't like using 1 tick).

Agreed. The market may not be out to get you, but stops 1 tick beyond levels or bars are prime targets that are exploited.

My brain is spinning right now with so much info that it may be a bit too much. It certainly is interesting though how different people are looking at so many different things. Its too much to look at I think, but at the same time, you're dead on when you say to just place a trade and leave it alone. I've been PMing with another member and he has gone through his charts and seen that if all he ever did was leave his trades alone to hit either stop or target, he'd be profitable!

I need to do some thinking....

 

[Autodidact]

but there is far too much to think about at every number you outline

Then you have no business trading fast time frames.

Like i said, no hard feelings

 

[k p]

Then you have no business trading fast time frames.

Like i said, no hard feelings

You might very well be right. ND did tell me flatly that if I wan to trade S or R, I don't need a 5 sec chart, I just need a limit order waiting at S or R to either go long or short. It was elegantly simple, and perhaps much better than everything else I'm doing.