[forrestang]

I thought I'd start a conversation on this topic, I'm expecting there to be no simple answer to this question, or even if there is one.

So, if there are 3 basic types of strategies or entries one might use to enter the market, is it fair to assume that each is suited for a specific purpose, or is it personality dependant? If the former: then it could be the difference between expecting to trade the initial breakout of a rectangle for example vs. waiting for a pullback after a breakout? If the latter, maybe it is based on ones risk tolerance for entering early vs. taking on a bigger stop?

The next issue is how should one enter? I understand this is a relatively vague question

Let's assume the focus of your trading activity is centered around areas of potential for price movement, S/R. So you know the areas you want to trade. You also have some idea of the direction in which you want to place that trade. But then, what is it that actually makes one click the 'transmit' button?

For example, the NQ has been making new highs almost everyday. And price really hasn't "flipped" any areas of Support. It prettey much has just been stopping and pausing before going up. So your options if one wants to play the edges has been pretty much either been:

• -A reversal of some sort at that edge, anticipating price to bounce (but when do you enter)
• -A breakout above or below a newly established range (these scare me)
• -Or a retracement of some sort after one of the two listed above occurs(I feel late to the party, and what if retracement doesn't occur till your back in the middle?)
• -And possibly heaven forbid some type of entry in the middle of a range?

Trading is not mechanical. This is obvious to me now. But can entries be? Or is this something that one has to use intuitivenes to gauge the best possible entries? Or is this simply a matter of preference for the individual?

Hopefully the explanation above makes sense, as I had a plan for this chart, but I can't remember what it was, and since I spent time creating it I am posting it!

[DbPhoenix]

I had to laugh when I saw this thread title. Teresa Lo said way back when that there were three types of strategies: breakouts, retracements, and reversals. Her credo was simplicity, and this was about as simple as it gets.

Wyckoff, on the other hand, didn't like breakouts. He liked to enter inside the crest or the trough after testing support or resistance. His preferred entry -- though the most aggressive -- was to enter inside the crest or trough of the climax. Second favorite was to wait for the test and enter the same way. The least favorite was to enter on the break beyond the swing point inbetween.

But there's nothing particularly intuitive about it. And it's a matter of preference only if the preference yields a profit. That is, one may "prefer" breakouts, but if he hasn't thought through the general strategy and the specific tactics, his preference is irrelevant.

So breakouts are more or less off the table. The retracement after the breakout is preferred, partly because one avoids getting trapped by a fade (in case the breakout was nothing more than a thrust) and partly because the retracement gives the trader the opportunity to gauge genuine interest (if there isn't any, the "retracement" becomes a failed breakout). The problem here is that one must often work his way down to a pretty small interval in order to find a good retracement. Otherwise, price may seem to take off without ever giving him an opportunity to jump on board (this is yet another reason why I like the 1-tick chart).

As for reversals, the best are most likely to take place at S or R, but we've been through that ad nauseum. One isn't always dead on when it comes to plotting S/R, but that's just a matter of practice and experience. Entry, on the other hand, is very flexible depending on how much risk the trader is willing to assume, and he needs to think about the three types of risk (information, price, and opportunity) very early on. If he doesn't, his stops are going to be in the wrong place and he's going to end up either with big losses or a lot of little stopouts that precede continuations that he'll miss because he got stopped out.

BTW, the chart is gorgeous. When you remember what it's supposed to be about, let us know.

[Gringo]

From what I believe, major S/R are independent of time frame. This may mean getting s/r on larger bar interval and zooming in to say 1min bar to see what's happening. This zooming in doesn't change where S/R really is just shows you faster action at the same price range or level.

With the current market it's tougher to find proper s/r which is causing some problem in picking the right spots (atleast in my case). I perfer 60min/Daily s/r and then zoom in to 1min or shorter for entry at the s/r determined by larger interval.

I'll talk to you guys in a week. This is vacation time for me.

[DbPhoenix]

Originally Posted by Gringo »

From what I believe, major S/R are independent of time frame.

Not independent of time frame but of bar interval. Otherwise, you're correct. Once the S & R have been determined, the bar interval is irrelevant, and there's no need to consult more than the entry chart.

[Gringo]

Originally Posted by DbPhoenix »

Not independent of time frame but of bar interval. Otherwise, you're correct. Once the S & R have been determined, the bar interval is irrelevant, and there's no need to consult more than the entry chart.

Yes, you're right Db. I realized this while shaving, ran back and you had me nailed .

[DbPhoenix]

Here's an example from this morning. As noted on Forrest's chart posted in the Foresight Trading thread, 1590 was and is a support level to pay attention to. And, as discussed in chat, 92 was a minor support level provided premkt (my chart is off by a minute; I neglected to correct it before the open).

Price bounced off 88 and back up thru 90 fairly easily, then thru 92, the latter taking a little more effort, but the result was a break thru R. This tells you to look for an entry. The tick chart shows a brief retracement after the reversal and the subsequent break thru 92. This retracement is your entry, if your strategy calls for entering on retracements (if it instead focuses on reversals, your entry might be earlier).

This can't be seen, of course, on even the 1m chart, much less a 5m chart. But there's your retracement.

[BlowFish]

Originally Posted by DbPhoenix »

What is the difference between time frame and bar interval?

Bar interval is absolute be it 5 tick 5 minute 5 range 5 contracts or whatever. It is the 'sampling frequency' if you like. A bunch of trades make up a bar but as most would agree that is rigorously defined.

Time frame is less absolute (you could even say vague) but it is altogether larger, a collection of bars if you like. One way of thinking about time frame is the whole sample, though most people don't. So for example if you had 3 days of 5 minute bars the time frame might be 3 days. Most people simply use time frame as a vague measure of a larger period of time than the bars on the chart.

Personally I tend to use time frame to describe the magnitude (in time...which dictates price range to a degree) of the swings that are my interest (or focus). So for example I might trade a 'daily time frame' and try to catch the main swing of the day. To do this a variety of 'bar intervals' might be useful and 'daily time frame' S/R might prove useful.

[Gringo]

Originally Posted by DbPhoenix »

[LEFT]Price bounced off 88 and back up thru 90 fairly easily, then thru 92, the latter taking a little more effort, but the result was a break thru R. This tells you to look for an entry. The tick chart shows a brief retracement after the reversal and the subsequent break thru 92. This retracement is your entry, if your strategy calls for entering on retracements (if it instead focuses on reversals, your entry might be earlier).

[/CENTER]

Hi Db,
Doesn't the falling of price below 92 nullify retracement? I thought retracement is falling backward towards s/r but not really undercut it in case of a long. I understand your example has only tick showing retracement and may require some screen time to figure out what behaviour is tradeable or normal.