Learning from an unsuccessful trading setup on a smaller time frame

[kingking]

One of my favorite trading setup is to trade in the direction of a possible trend after price leaving the coil of a smaller time frame (60tick). But one need to pay attention on the big time frame as well for filtering (300tick).

In this particular trade on the YM on 21 Feb 2007, I took a short trade (red arrow) at 12740 with 12 points of stop placement and a taget of 12 points. The reason for taking the trade was that YM form a coil between 12764 amd 12740 before 10:15. Then, price started probing lower at 10:30 to reach 12720ish and retraced to the daily S1 at 12740. This is where I short and lose my 12points. From hindsight, I should skip this trade as price tested yesterday’s low (20 Feb 2007) and rebounded (blue arrow on both the small and big time frames indicated the lows). Price trade higher on 21 Feb after bounding off this low. Next time, I will pay more attention to the support or resistance levels on the big time frame as a filter when taking my favorite setup.

[Soultrader]

Professionals loveeee the previous day high/low. Markets will often test these areas for supply and demand. I also focus on these levels and will not fade any move down to the previous days low if it is right below it.

It always a good level to watch

[walterw]

Excellent entry on that trade King, you know it could had been a succesfull trade anyway... if the market had taken that low you would have had a super down move... my positive critic to you is on stop placement, why do you use the same profit target as your stop level +-12 points... in this case when you took your trade at 12740 and things started to go on your way you had a clear pivot formed at 12740 a 2 point violation of that pivot at 12742 would had tell you that trend was not good and you would had taken a 2 points stop changing your RRR from 1:1 to 6:1... you see price action there clearly told you when that 12740 pivot was breaken that the trade was over.... no need to wait for a 12 point stop.... you want to reconsider that, remember that if you want to trade with a 1:1 RRR then you obligatory need at least a +60 % performance on good trades... thats statistically dificult... now if you have at least a 2:1 RRR then you can ease a little more your performance and be more relaxed.... that RRR has to be implemented as to my understanding on your stop placement taking into acaount the inmediat pivot prior to your entry... cheers Walter.

[kingking]

Hi Walter,

Thanks for the new thought about my stop placement, I may try to reduce it to 8 instead of 12. A 2 point stop seems to be too difficult to master.