[jonbig04]

Frustrating 2 days...or 2 weeks. Not going to write much right now because if I do it will just be me bitching,

Anyways I want to add some new setups to the plan. I'm going to keep doing what I'm doing, but I'm also going to see if I can start entering on the pullbacks, instead of just the beginning at end of the trend. If I miss the trade then ideally I can wait and enter on a pullback. If i get stopped and price bursts through R or S then that tells me that trend is strong and I can enter on a pullback. Of course, its not that easy. this is a departure for me, usually I test and test something before i try it. I'm not going to do that because backtests mean dick anyway. Here's what I'm going to try: wait for indicator of trend strength (above), wait for pull back on 1 min chart with low vol (that's key), when I'm satisfied that it is retracing, move to 5 sec and chase it with a tight stop. We'll see if it works. Like I said, I'm still going to be doing the exact same thing, just adding some new stuff.

[jonbig04]

So I've been doing some thinking and I've come to the conclusion that my trading just isn't good enough. Sometimes it is, sometimes its not; and that's not enough. I need more consistency. Last week wasn't horrible, but it sure wasn't great. What I'm doing now is playing the odds (which I think is what trading is about), but the odds are too sporadic with just these rules. With my high reward and the slight edge that the S/R levels give me, I'm sure I can stay profitable on a monthly basis or at least very close. That's not good enough. I'm in the red right now for this month but that could easily change with one trade, and dramatically change with 2. I don't want my trading to be like this when I know I can be better and have more control over my net. I think its time to take things to the next level.

To me selling R and buying S is all we need to do, and its what I'm going to try to keep doing. I've been using the 30k vol chart for s/r and the 5 sec chart for entries. What I really need is higher accuracy without higher risk. How could I do that? Well the answer has been in the back of my mind for the last few months. And its amazing I've came this far without utilizing them. Its simply, price action patterns. Duh, right? I don't think anyone here will deny the effectiveness of the patterns. The hard part is becoming fluent in them. I really do feel, and have felt for the past few months, that I'm almost there. I'm almost a good trader, just not quite yet. Something has been eluding me and stopping me from really doing well. Perhaps I'm kidding myself, but I think this is it. I think becoming fluent in patterns and using them as further confirmations of my trades will push me to the next level.

The idea is do keep doing what I'm doing, except instead of simply buying potential R and catching a falling knife all the time, I look to the 10k chart for reversal confirmation then the 5 sec for entry. Price rarely reverses without giving clues. I'm going to attempt to identify and profit off of those clues. Along with that I'm also going to try to play any reversal formations and the failure of reversal formations on the 30k chart itself, which are rare. Another area this helps is the issue of multiple S/R levels. 926 is a good example, it was a valid level, but the price made a DB below it at 923 so I scrubbed it at changed the level it 923, then we get all these great reactions at 926. This happens all the time and it was hard for me entering without confirmation because I could play them all. Using confirmation I can have more levels and hopefully catch more moves without fear of being whipsawed all the time.

The formations I'm dealing with now are double tops and double bottoms. From what I've seen, price usually reverses via one of these. The variations I will be trying to play are: standard dt/db with neckline break as confirmation, dragons and inverse dragons (trendline confirmation), and 2b/2t's. The rules I'm using regarding pattern definition come straight from Suri Dudella who I think actually surfs these forums.

I don't see this as changing what I'm doing, but adding to it...if that makes sense. I'm not going to sit here and pretend (as I have before) that this idea is going to make me a better trader over night. But I do think its a step in the right direction and an intro to a whole new part of PA that will only improve my trading.

[atto]

Keep in mind that the more confirmation you have, the higher your price risk will be. If you've read The Nature of Risk by Justin Mamis (link), you know all about this. One of the greatest insights of my past year's trading is the purpose of stops (and thus, the purpose of risk). As I've told you before, if you trade on support/resistance, your stop's location should not be dependent on your entry. Wyckoff's 1930-1931 analysis sheds light on this.

If you want to use price patterns (and there's nothing wrong with that), know that if you intend to hold to this tenant, your risk will generally be greater. If you enter on the neckline break, you have to decide: do you put your stops at the low, or elsewhere?

I do agree that your previous trades have been often stabbing in the dark (with little local confirmation of a reversal). I'm sure you have a list of several patterns that you're working on, but remember this: a price pattern's value lies in what it represents, not because price happened to fit some criteria. For example, Hinges represent a condition between the suppliers and demanders. When one side takes charge and breaks the "pattern", a directional move usually follows.

I applaud your diligence and dedication so far in your adventure.

[Head2k]

Originally Posted by atto »

Keep in mind that the more confirmation you have, the higher your price risk will be.

I don't think you can put an equation here. This statement is valid only if you are looking only at one "time frame", or better to say "wave scale". But if you watch more wave scales simultaneously then you can eventually keep both price risk and information risk low. The price risk needn't to be exactly the same as if you entered right at the extreme, but only slightly higher. While the information risk can decrease substantially.
But then you must define what do you want to see on larger wave scale before your entry (setup), and then you must enter aggressively on the small wave scale. This is in fact what one does if he enters on tests. He waits for confirmation on a larger wave scale to decrease information risk, but then takes an aggressive entry on a small wave scale to decrease price risk.

[jonbig04]

Thanks for the input guys.

Friday's DB at 933 (predetermined level)

[atto]

Head, good point. My reply was more geared towards the way he currently trades. Being aware of one's place in the larger trend is extremely important.

Originally Posted by jonbig04 »

Thanks for the input guys.

Friday's DB at 933 (predetermined level)

Since it's not a double bottom to the tick, where's your entry? Where do you place the initial stop? What's the trade management plan (are you moving the initial stop)? Where's the exit(s)?

It's easy to spot those in retrospect, and concoct a plan that would work for that trade. It's harder to design a plan that you'll stick to every time (that has an edge!).

[jonbig04]

Originally Posted by atto »

Head, good point. My reply was more geared towards the way he currently trades. Being aware of one's place in the larger trend is extremely important.

Since it's not a double bottom to the tick, where's your entry? Where do you place the initial stop? What's the trade management plan (are you moving the initial stop)? Where's the exit(s)?

It's easy to spot those in retrospect, and concoct a plan that would work for that trade. It's harder to design a plan that you'll stick to every time (that has an edge!).

Good points.

Regarding a plan, I'm not going to make one that's too specific. It will depend on that day. I will be employing some of my old entry techniques to get in. This one for example. The 2 bottom legs were just below 933, which actually isn't all that strange because globex low is at 932. I know from playing globex levels (actually any sort of levels that are close) that price usually break to the extreme level, not the closest. I can see 1 of 2 potential plays, one would have worked would wouldn't have.

The first is to wait for the hump to really be taken, the hump is opening range high (ORH) and we can expect R there and it could be wise to wait for some follow through above it. Once that is taken we can wait for a retrace back to it (flip), then buy it. This would have been stopped.

The other play is to wait for the hump to be taken out even buy a tick (technically confirming the DB), then buy any pullback-which would have been ORL which held to the tick. The stop protection would be the ORL levels, globex levels, or major S/R that I have identified. Once I see the pattern, I still have to wait to get a good entry...if that a makes sense.

Or you could try both entries. As you said, hindsight it one thing-real time is quite different.

[nkhoi]

check out the thread "Approach to trading the ES contract" by stevesbg same approach so you might get some more insights.