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johnjohn1hew

Price and Volume Trading - Hindsight and Real

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I don't know where to post this so i thought here would be fine.

 

Price hit resistance at 77.5, is rejected and supply significantly overwhelms demand and drives price down to 81.25 (a short-term support level that i did not have marked). 81.25 is rejected and the test is unable to make it to the low on low volume, indicating the supply required is not coming in. I took this trade and was stopped out around 88. I did not have as sound a reason for taking this trade as i have outlined here, but i had an idea that price was rejected at 81.25 and the test was a weak one.

5aa70f4ed81b7_NQ12-0904_11_2009(5Seconds).thumb.jpg.87549d69dada5403ab7635b3a3a9a341.jpg

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At the 98 to 99 level that i had marked, price offered an opportunity to go long. At 96.25 price was being supported and went up from there. Supply drove it down a few times with each time on less volume. Then at 97.00 supply ran out and the buyers had a great opportunity. This is where i could have entered. But i didn't since my ninjatrader was not open and i was in a psych101 lecture. Price tested this point again, and was supported. This could have been another entry point if i had missed the first one. I might not even have noticed these points in real-time, so it is impossible to say what i would have done. That is why i need to develop a trading plan, so that i know exactly what to look for and what i am going to do.

 

For one of my actual trades of the day i got in around the 1712.00 zone of resistance i had marked. Price hit the level, retraced to the previous swing high and was met with higher volume, so support came in. I took the long based on this action. I was stopped out around 1713.00. My reasoning for placing my stop here was because i thought it was a supporting point. But in hindsight it actually wasn't. Price just died off because of a lack of supply and not because of demand. After this happened, price took off, which leads me to my second trade of the day.

 

For my second trade i got in around 1716.75, but it was not at any important level of S/R (that i had marked anyways) so i really should not have taken it. My reasoning was because of the pullback after the sharp rise was fueled by drying up supply and demand was starting to come in. So i took a long. I watched price go up to about 22.00 and then right back down to where it hit my stop at 18.75. In hindsight, at the 22.00 high, demand wasn't coming in on the test. This could have been a signal to exit. Also, i had not noticed a possible level of S/R in the 22.00 to 24.00 zone. This could have helped in my exit as price would have been just at the bottom of this zone and demand would not have appeared to be sufficient to push price farther.

 

Do not be too critical of what i have laid out here. Most of this reasoning is in hindsight, so i need to work on applying it in real-time. I also need to start developing a trading plan.

5aa70f4f63c94_NQ12-0905_11_2009(5Seconds).thumb.jpg.5c287eb301c3444306698e36baaec4af.jpg

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Low volume test of 13.25 (top of S/R zone i had marked) had me take a long and i got 14 as my entry. My first stop was around 13.25 and then i progressively moved it up under supporting points. When i was in the long trade, my stops weren't hit, so i didn't exit....as simple as that. I ended up being stopped out at 25.00

 

The short trade thrusted upwards on low volume and appeared to be unable to hold, so i took a short and got in around 30.75. I had placed my stop just above the tail end of the thrust at 32.00. I then moved it down to break even and then to the top of the S/R zone i had marked at 29.75. My stop was then hit and price eventually made a test of the high.

 

Edit: i did not get a chance to take a screenshot of the short trade when i got stopped out.

5aa70f508216e_nqtrade.thumb.jpg.842f864882c02315b8d7f3c77f24b2f4.jpg

5aa70f50874e9_nqtrade2.thumb.jpg.888e7ed17b3168407a0925d87d780b2e.jpg

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nice charts

 

can you put some labels or descriptions as to what the lines represent?

 

or notes on which lines are strategical and which lines are tactical?

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Today I used the 30 second chart and Yesterday I used the 5 second chart. I do not have any other reason for using these intervals other than that they are what I chose to use - the 30 second shows more than the 1 minute and less than the 5 second... I don't know. Note that I am just starting out and I have a lot to correct and develop in my strategy. So far, I know to find S/R levels to have for the next trading day; to watch price movements and volume at these levels of S/R; to not over-analyze the market; and to let winners run and hopefully they will be larger than my losings that I cut short when trying to get a good entry.

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Took a short around 48.75. Demand did not appear to be sufficient to overcome the supply that was coming in right below a marked resistance level (a lot of activity, little progress). So i took the trade with a 3 tick stop. Stop was hit, position was closed.

5aa70f525e109_NQ12-0909_11_2009(30Seconds).thumb.jpg.cac6755181b0aea0cf4919b2131540a3.jpg

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Ya, i was reading something about that today. Easier to remember?

 

IMO for whatever psychological reason, it's easy for traders to gravitate to the round numbers. You see this especially on stocks.

 

Again, just an observation, maybe it can be used in conjunction w/ what you are doing.

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Took one trade at the breakout of 77.50 and was stopped out break even. This breakout was on little activity so i should have waited for a possible retest. When the retest came, i assumed it was short covering given the substantial increase in volume, so i shorted at 77.75 with my stop above the bar that broke resistance and continually set my stop above resistance points and was eventually stopped out at 75.00 after price had failed to successfully break below 74.00 support.

 

Now price is just chopping around at the midpoint of the 77.5-74.00 zone. Most likely because it's lunchtime.

5aa70f55b71b8_NQ12-0911_11_2009(5Seconds).thumb.jpg.db401dc15f79fc2f446fe235264b9a64.jpg

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Right now price is at 1771.00 in-between s/r levels i have marked at 1774.00 and 1768-69. Based on price action, looking at a larger timeframe, i would think that price would continue to decline maybe opening around the 62.00 area tomorrow?

 

Plan:

 

I will trade breakout pullbacks with the breakouts being on higher volume (more interest in the direction of the breakout) and the pullback being on lower volume (little interest in the direction opposite of the breakout). My stop will be below the s/r level that price breaks out from. This is what i will trade tomorrow if an opportunity does arise. Until s/r is approached i will stand aside and observe the behavior of the relationship between price and volume.

 

So, if price nears 68-69 and 62.00 i will more closely observe the price and volume and their on the way to these s/r levels and if a breakout occurs, i will wait for the pullback.

5aa70f57c2322_NQ12-0912_11_2009(30Seconds).thumb.jpg.b6b0c38c77f33b60950229694fa9a3eb.jpg

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At around 10:20-21 there was a breakout, but i missed it and it would have stopped me out anyways. Other than that, the market gave me no opportunities to trade...so i didn't.I noticed that sticking to a planned setup for the trading day rids my trading of directional bias. I have no idea where price is going to go the next trading day, and neither does anyone else. We can guess, but in the end...it's just a guess. I would rather have price do something and then base my trading decision on the behavior of that movement and then look for an opportunity to enter, not try to predict where price is going even before it points the way.

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