Jonbig04's Log

[Head2k 10]

Say if price breaks out on a 10,000 vol chart and then pauses a little, this may be just a single 10,000 vol. bar above the s/r level, but in, say, a 30 second chart, this could be a consolidation (digestion) of the BO and following this congestion a possible continuation. Also, maybe the 5 second is too fast. I read that Anek advised traders to master the 1 min. before trying to read the 5 second (his idea of the tape).

 

A breakout is a breakout regardless of the method or chart used to display it. A breakout has several atributes, but none of them depends on the method or interval you choose to display the tape data. First, there must be something important to break. You can anticipate the importance because of historical action. Then the importance must be confirmed by the current action, that means traders must work hard to break the level, i.e. there must be volume suggesting that there was somthing to break. Then, the difference between a breakout and a thrust (i.e. rejection above R or below S) lies in what happens after the level is broken. Either price is rejected from the new ground or it is not. And if it is not immediatelly rejected, then the breakout either attracts a follow-through or it does not.

Whatever chart you use to watch the potential breakout, you can see the level getting broken. But if you want to observe what happens immediatelly after the break, to watch the immediate response, you need a very high level of detail, even the highest one.

[johnjohn1hew 10]

A breakout is a breakout regardless of the method or chart used to display it. A breakout has several atributes, but none of them depends on the method or interval you choose to display the tape data. First, there must be something important to break. You can anticipate the importance because of historical action. Then the importance must be confirmed by the current action, that means traders must work hard to break the level, i.e. there must be volume suggesting that there was somthing to break. Then, the difference between a breakout and a thrust (i.e. rejection above R or below S) lies in what happens after the level is broken. Either price is rejected from the new ground or it is not. And if it is not immediatelly rejected, then the breakout either attracts a follow-through or it does not.

Whatever chart you use to watch the potential breakout, you can see the level getting broken. But if you want to observe what happens immediatelly after the break, to watch the immediate response, you need a very high level of detail, even the highest one.

 

That's the simple logic behind breakouts of past support and resistance used as present indicators. As Blowfish put it: the bar intervals we use to display price are samplings. We could use line charts, but bars are easier to interpret - everyone who posts in the forums so far has been using bars charts (including you, head), so obviously there is something of value in them. All you really need is a sampling of what is happening and then base your opinion on that information.

 

Sorry Jon for posting in your journal - this is the last one. I hope next time that a comment to one of my statements is either messaged to me or posted in my own journal.

[jonbig04 10]

That's the simple logic behind breakouts of past support and resistance used as present indicators. As Blowfish put it: the bar intervals we use to display price are samplings. We could use line charts, but bars are easier to interpret - everyone who posts in the forums so far has been using bars charts (including you, head), so obviously there is something of value in them. All you really need is a sampling of what is happening and then base your opinion on that information.

 

Sorry Jon for posting in your journal - this is the last one. I hope next time that a comment to one of my statements is either messaged to me or posted in my own journal.

 

No problem, I'm not one of those thread nazis haha.

 

Gonna keep this short for now. Hit a large trade last night for +11.5ES, and actually would have the break down to 1082.75 too if I had been awake or aware that the damn market was open today. I'm an idiot. As you can see from my above post, my entry would have been at 92 with a target of 82.75 which actually wouldn't have filled just yet. Kind of frustrating as last night could have been a +20ES night. Oh well though. I'll post details later. For now, here's the trade.

 

[jonbig04 10]

Will try to get this done as quick as possible because I want to watch my broncos. There has been a significant addition to my trading. Basically, I have added what Thales does to what I already do. I think this might be the missing link to my trading. My goal is +20ES a month. With the exception of this month (I'm not positive, but I think I'm only up single digits), I have been coming fairly close. Hopefully this additional information in the form of HHs, HLs, LHs, and LLs will put me on the path to netting 20ES per month no matter what. The main difference between what I do and what I see Thales doing is that I'm usuing the S/R as my primary reasoning for a trade and the HH, LLs etc are just additional confirmation (hence I use a 5 min chart while Thales uses a 15 in chart I believe).

 

If you remember I changed my entry method a few weeks ago to allow for more confirmation, basically I am just taking that to the next step. Once price reaches major S or R I now wait for the following to happen:

 

 

 

 

 

Also, here is the trade I missed last night b/c I was asleep:

 

 

 

 

Here is something else that may be important. The S&P could be in for a rough time in the next couple weeks.

 

[jonbig04 10]

This is why on breakouts I don't usually wait for a PB

 

 

So why didn't get in? I was waiting around all day for the S at 82.75 to break down. I literally left my computer to make a turkey sandwich. Seriously! During the time I was gone, the Bo happened and I missed it. lol! That's 2 now that i've missed. Now I have to hope for a PB. :crap::crap::crap::crap:

[jonbig04 10]

Well reached the S at 72.

 

That was the most expensive turkey sandwich I've ever had. It was good though.

[jonbig04 10]

Sorry for the journal inactivty. I've been working on some stuff and wanted to wait until I figured out what I was going to do. I've been trying to figure out a way to employ Thales 1-2-3 method into my test 1 s/r plays for extra confirmation. Since the 1-2-3 is a method in itself, it was difficult figuring out how many of my rules to change and how many to keep the same, but after some pondering, testing, and watching I thin I have come up with what I am going to be doing. I will be looking for the 1-2-3 (described in drawing I posted above) on a 2 minute time frame during RTH or a 5 min time frame during globex. I will be looking fo rthis setuup only after we have reach a major level and seen some climactic volume. I'm also not going to chase it. If I don't get a good entry/set up and price goes without be, so be it. I'm looking for the set up near the top or bottom with a stop requirement I'm comfortable with.

 

Here's a hindsight example:

 

I have also added the 6E to my trading, but only LARGE time frame breaks outs. Just like this one. Only hopefully next time I won't have to watch a 13ES equivalent turn to BE (ouch!). I would like to an one other instruments too. The large time frames BO's don't happen very often, but as you can see the moves are pretty sick when they do happen. I figure its worth watching some other instruments to try to catch this set up a little more often.

 

[Gabe2004 10]

Well reached the S at 72.

 

That was the most expensive turkey sandwich I've ever had. It was good though.

 

Why don't you set up some audiable alarms to let you know that a level has been reached?

 

Gabe

[jonbig04 10]

I'm the king of those things haha. The alert had already sounded as we were only a few points away from the level. I watched it for like 30 min. It was like paint drying. I assumed it was safe to leave to make that damn sandwich haha. I was wrong! Stupid reason to miss a trade.

[jonbig04 10]

[jonbig04 10]

[jonbig04 10]

Thought I would update the log since it;s been a while. I haven't traded pretty much of all of December, and spent the beginning of the month looking for new instruments to play with. I don't like trading just after roll over, combined with the holidays, I just decided to skip it all entirely.

 

But I'll be back at it soon.

[thalestrader 14]

Hi Jon,

 

I'm looking forward to your return.

 

Best Wishes,

 

Thales

[jonbig04 10]

Thanks Thales!

[jonbig04 10]

Holidays are over, and I'm glad. I was having market withdrawals. It's time to take my trading to the next level. Though, that is mostly a matter of increasing size which isn't really a focus in this journal. In real life trading though, it's what I'm working towards so I figure its worth mentioning.

 

I thought it would be a good idea too write out my trading plan as it has been tweaked a bit since I last did it. I don't want to go into too much detail though, only because I have done it so much in the past. Explaining why I'm doing what I'm doing might be like beating a dead horse in this journal. Of course if anyone has any specific questions I'll be glad to answer.

 

Side note: For whatever reason, volume based charts seem to me to ridiculously superior to time based ones when it comes to identifying S/R levels.

 

Trading Plan

 

 

ES is still my bread and butter instrument, and my favorite. But I foresee that in the future I will favor other instruments more and more. It is also the only instrument on which I am employing the strategy below. I haven't perfected this setup yet and don't want to move it over to other instruments until I do so. I will also be trading 6E and ZN (which which I recently fell in love with at first sight), but I will only be taking the brea out set up on these for now.

 

Standard S/R fades and major levels.

 

1. Wait for price to approach major S/R (taken from larger time frame chart)

 

2. Wait for strong climactic volume. The ONLY purpose this serves for me is to show me that other people are watching this level.

 

3. Then move to a 2 min chart (after-hours I use 5 min) and wait for the 1-2-3 setup for further confirmation, and stop placement accordingly.

 

4. Stop can be moved to BE when I deem necessary. Otherwise, all in/all out*. Minimum Risk/Reward of 1:6.5

 

Break Out Setup

 

Is 'breakout' one word? Ha, I have always wondered. Any who, I love this setup. I've droned on enough about why I love it an how it works enough though. I really use only 2 charts here, a large one (30kCVB on ES or 10kCVB on ZN) and a very fast one with volume, usually 5 sec.

 

1. Look for clearly defined patterns or ranges. Usually DT or DB or a very defined range. I should make it clear that I'm not looking for formations that might look like a pattern. I want it to be clean and defined. We're talking a chart that may span a few days with tops that are equal to within a a tick or two.

 

2. I then wait for price to break out of that pattern or range resulting in a confirmed DT/DB or a failed DT/DB.

 

3. I move to the 5 sec chart and expect to see large volume expansion. In other words, I expect to see a breakout.

 

4. I have 2 separate methods for entering. The first is immediate entry at market upon seeing price breakout. If price stalls, stops, or retraces to my entry I exit. Usually for a 203 tick loss. I do this because 70% of the time, the momentum of the break out is significant enough to A. make the fact that I entered at market irrelevant and B. send price going a long ways before it ever pulls back.

 

The second method of entry (assuming I took a few tick loss on the first try and price is pulling back) place a stop entry a tick below the low of the previous move. So if it's a breakout to the downside, I entry as soon is at makes a lower low.

 

5. 6.5 minimum R/R all in/ all out*

 

Those are my two setups!

 

*I will continue to use all in/ all out until I hit a certain size in contracts I'm trading. As of now my size is small enough for me to stomach a +10ES coming back to BE, but once I increase my size beyond a certain point I'm not going to be able to stomach that. Yes, its a weakness haha,

[jonbig04 10]

It may take me a few days to get back to 100% trading. The low vol holiday mess chopped up a lot of my levels and patterns. Right now the cleanest instrument for me is ZN. Funny, I don't even know how ZN really works. I know that its a future of the 10 year T-bill, but thats it. It's quoting doesn't really make sense to me. But really...who cares? All I need is it's PA.

[thalestrader 14]

Minimum Risk/Reward of 1:6.5

 

Hi Jon,

 

6.5R! Excellent!

 

I may have missed this along the way, but I am curious as to your R-level: Are you risking the same percent equity per trade, i.e. are you adjusting your position size to the size of the stop on each trade? Or do you use a fixed dollar stop?

 

Best Wishes,

 

Thales

[jonbig04 10]

Hmm I'm not sure I understand the question, but my stop changes with the PA of the trade of course, but often a trade requires a stop that I'm not comfortable with, usually anything over 2.5ES and I'll just skip it.

 

I try to look for a semi-strategic place to exit within my R/R parameters, i.e. previous day's high/low etc.

 

I never really thought about it, but no I'm not risking the same amount on each trade in terms of the initial stop, but it doesn't vary that much. Usually the stop is 1-2 ES points.

 

Sorry if I misunderstood the question.

[ziebarf 10]

It may take me a few days to get back to 100% trading. The low vol holiday mess chopped up a lot of my levels and patterns. Right now the cleanest instrument for me is ZN. Funny, I don't even know how ZN really works. I know that its a future of the 10 year T-bill, but thats it. It's quoting doesn't really make sense to me. But really...who cares? All I need is it's PA.

 

 

I have started to call the ZN/ZF the "stair masters". The price action is so nice most days. They also let you get in on 1-2-3's without much risk, so nice!

[jonbig04 10]

So I know I said I was going to start back trading, but I haven't yet. The reasons are two-fold: 1. The low vol holiday action combined with rollover made a lot of my S/R areas obsolete, I needed time to mark off some new, more relevant ones. 2. I'm in the process of moving. I have my s/r levels down and the move will be over this week. Hopefully I will be back 100% next week.

 

I was watching ES today and saw what is very close to my standard S/R play. I wouldn't have gotten in because the retracement (on the 5 min chart in the 1-2-3) wasn't very full. I would have liked to retrace another couple ticks. But it does give me a chance to show in the charts what I'm looking for in this setup. It's not a would-coulda thing, just an illustration. So here goes:

 

 

The double bottom is what cemented the 1127.5 area as an important area in my mind. The hump retest is just one way to enter off a double bottom. I used to do it a lot. Just pointed it out for fun there.

 

 

I should mention that this is my "tape", 5 sec chart.It should say switch to the 5 minute.

 

Edited January 12, 2010 by jonbig04

[jonbig04 10]

Here's an illustration of the breakout setup. This time it's on ZN. This is exactly what I'm looking for, hopefully I get one a clear as this next week.

 

 

[jonbig04 10]

I think I have everything set up and ready to be back 100%. Of course it's a 3 day weekend haha. I'm glad I have it sometime after rollover for some PA to develop on the larger charts. We have some good stuff in the charts. I'm going to try to be more diligent with the journal. Sometimes, win or loss, I just get lazy and don't update. I'm going to try to do better.

 

BTW as far as I understand it, globex is going to open at regular time tomorrow evening and the hours will be normal until 10:30CT at which time the trading is halted. I hope I have that right.

 

 

Click for full size - Uploaded with plasq's Skitch

 

Click for full size - Uploaded with plasq's Skitch

 

6E is still looking a little funky to me, though we are approaching a major S level. Looking for a nice reaction there.

[jonbig04 10]

Not a bad way to start off 2010. I didn't realize though that the S was so close, so I only ended up with 8ES. oops. Price is now back above where I shorted last night. Here's to using s/r for exits too!

 

Click for full size - Uploaded with plasq's Skitch

[jonbig04 10]

Click for full size - Uploaded with plasq's Skitch

 

Click for full size - Uploaded with plasq's Skitch

[thalestrader 14]

 

Don't you just hate when that happens?

 

Great journal, Jon. Would you have gone short the ES on the retest of today's high for a test of the prior break out level? (I hope you don;t mind me asking you here)

 

Best Wishes,

 

Thales