Paradoxically you'll learn much faster if you stop trading. There are several people here who've blown me off in this regard, thinking that continuing to trade is a short cut. Instead, after months of pushing a string, they're no better off than when they started. The "short cut" is laying the foundation. After that, the finish work is a relative breeze.
Everyone must learn at there own pace and what they are comfortable with there is not one concrete set in stone way to learn this.
Went through around few weeks of observation and I am ready to devise my trading plan. From observing I feel the "plan" almost needs to be called more of a method as opposed to a hard fast plan. Learning more of how to read price or the balance/imbalance of supply and demand has lead me to feel this way. So trying to keep this simple: Supply & Demand, Trend, Support & Resistance Want to act in harmony with the trend using SLA (supply & demand) at key areas (support & resistance) 1. Entries based around the breaking of extremes (highs/lows of current ranges, highs/lows of previous ranges, midpoints of a previously exited range) *If price breaks an extreme according to AMT it is my understanding that there is a change in trend or that a new trend MAY be forming? *Waiting for the extremes will hopefully reduce some of the trading in chop. If chop happens to happen around the extremes so be it but that will be observed and quantified during backtesting. I have reviewed also some of my trading after some work w the SLA and noticed most of the time when I had multiple quick losses happened because price was pretty much in the middle of no where. 2. Using the SLA, waves (speed, duration, extent, 50%) failures at previous swings etc. to see how price travels up and down to these extremes as well as when price breaks the extreme to confirm if the break is "real". Taking the first retracement after the break of the extreme as my entry. * I have noticed at times the exit must be quick bc price at times retraces all the way back to where the break occured. Being prepared for that and re-entering if the break/retrace holds at that extreme. *Also if the break/ret fails and fails quickly near the break of the extreme and price re-enters the range, take the next line break/retracement in the opposite direction, playing for the opposite end of the range to be tested again, however keeping focus on the midpoint of the range. *Also watching how far price actually breaks out I've noticed price hesitates (using "bars" for the example) i've seen after an extended break before any retracement sometimes that first little "inside bar" doesn't really pan out to be the best retracement and waiting for a test at or near the 50% area of the wave of the breakout is the best entry. If that makes sense. *If both of these trades fail, stand aside. 3. Exits....still deciding on how many contracts to trade but there are basically 5 types of exits i'd be looking for. 1. line break 2. 50% of wave break 3. failure to make a HH or LL 4. Break of LSH or LSL 5. I call this my discretionary exit moving stop to BE and pretty much choosing an exit above based on how price is moving. *Note on exits: when the entry is right and price moves far away from your entry point trading becomes rather leisurely with having an exit strategy as well the exits also help to understand the dynamic btw supply and demand. Example if theres a failure to make a HH and immediately after the LSL breaks that says a lot about who's in control at the moment. This is pretty much what I have for now. I could probably write more but I'm trying to keep it simple. I may have missed saying somethings that I have been contemplating. I'll re-read this later and see what I missed. *Last Note: Some things I've said about need to be quantified...as in saying things in my plan like price moves "far away" etc. Thanks for reading. Any and all critiques welcome.
Given that you are considering S/R for the entry, why dont include that as one of your variables for exiting. I mean, if you buy at the bottom of the range and you get weakness at the top what does that tell you? Seems you are onto somenthing
That's a good point to consider. I'd still wait for one of the exits I've listed anyway even if at the opposite end of the range as S or R only is S or R when the behaviors at those levels says so. But I think that's something to add. Where are the exit criteria happening. Thanks Niko
Yes, at the beginning, it does need to be a hard and fast plan. Otherwise you will be far more likely to wander off the edge of the road, then off the road altogether, then into the weeds. Develop a set of rules that any moron could follow. If you were to drop dead in the street tomorrow, whoever found your body could trade your plan and make a fortune. Aside from that, I urge you to confine yourself to one strategy, either (1) retracements after BOs or (2) reversals. Then wait for the other until you've mastered the one. If you have a tendency to get sucked into chop, work on rets after BOs first. Make money first. Money gives you confidence (it an also give you an inflated sense of competence, but that's another matter).
Thanks DB. Question. Any links, resources, or info you can provide in terms of back testing? Is it just a matter of going back in time and going day by day?
I assume you've seen the pdf below. Others go so far as to put it all in spreadsheets. And if you have to go that far, you should. But this can't be that precise, anymore than behavior can, nor can it be mechanical, anymore than behavior can. So do what you need to do and do as much of it as you have to. The less you can do and still "get it", the better.
Just posting this because I think I have had an aha moment and I wanted to put it to paper to read later and see if it still makes sense in my head lol. DB has said that "bars" don't matter, the lines are in the traders head, etc etc (paraphrasing obv). I think I get it now. None of these entities really exists. They are visible but they do not exist to the market the only thing that exists is the price of what we are trading and the people trading it. I've read this countless times and I would even say I understood it bc it makes sense but now I think I get it. One could even say that the idea of a bar could potentially even be a distraction just as if one gets too crazy with the straight lines and placing too much significance on them. What's important is the movement of price up vs the movement of price down. How far price moves, how long price moves, how fast or slow price moves, and the comparisons of the moves up and down. In terms of being focused for the trading day while I feel as if I have been focued I still think where my focus was was still not 100%. Looking at lines, retracements etc and while trading based on those things has improved my performance and helped me to understand certain concepts it still is not trading behavior. Taking a break and retracement without the focus on trader behavior would essentially be the same as trading "patterns" such as flags, triangles, h&s patterns etc etc. Again what's important are the behaviors of traders bc these bars and patterns don't necessarily even exist (this all makes sense in my head I hope im writing it right). What really exists is the price ticker (price) and the behavior/characteristics (traders) of how it moves. The bar intervals, the lines only help in terms of adding a visual representation of what has already happened so the trader doesnt necessarily have to remember every up and down tick. The lines just help to see up vs down. An example is once price moves back 50% the bar interval helps us to quickly see price has moved back 50%. What's truly important is that price moved down 50%, how fast it got there, and how long it took to do so. How one chooses to depict all that is irrelevant. The bars/lines help you're eye so that the past doesn't have to be memorized although remembering the activity of the ticker during the moves helps to detect a change if there is some sort of test of a prev swing or of a line break depicting a change in the stride of price. The pauses, the dead stops, the swatting away of a price are important and have meaning. If the ticker is acting like a teenager (teenager A) rolling out of bed on a monday morning slow and lethargic that means something. If the ticker is acting like a teenager jumping around, doing backflips on xmas morning (teenager B) that also means something. This is then where the lines, and bars come in. When the stride of price changes depicted by the breaking of lines does it do so like teenager A or teenager B. How the price moves, where the price moves, and why the price moves provides us information about the people behind these price movements. I could prob ramble on about this trying to get these thoughts out there, but the last thing I'll say is regarding focus. I think once a bar prints my mind almost turns off/forgets about the past bc of the visual representation of the bar. The previous 1 min bar/series of 1 mins bars the spreads/slopes of the moves are important, at a glance to see what happened, but I think I can't turn off the fact of how these "bars" formed. Price movement is continuous so my focus must be continuous and not ease up so to speak after a 1 min period of time. If that makes sense. Once the bar prints I cant forget about the past activity of the ticker when/if traders move price back to those areas. Last example lets say price is moving up slowly, not a lot of excitability etc then price moves aggressively downward. This may be depicted but shortening of the spreads of the bars for lets say 4 or 5 bars and price moving sideways and then a longer one or two bars to the down side. If price moves back up to the area of those bars with the shorter spreads my mind hasnt really remember how those bars formed (the activity/characteristics of what happened at those prices). What I've seen when price moves back up to that type of area if price testing an area where smaller bars previous formed. If I can remember what happened at that point I will have the ability to compare then the test of that area more effectively. On the test then if price gets swatted away at that same area that has more weight then just watching the bar. Price getting swatted away at a previous price level after there being a lack of interest up shown by the activity of the ticker at that level sheds a ton of light on what traders are thinking. Sorry to ramble and i feel like this all makes sense in my head now just not sure if i explained it right. If anyone does read all of this and has anything to add or comments they would be much appreciated.
Yes, you have. Learning how tape readers traded before intraday charts was enlightening. How does one organize the information reeling off the tape? It's not possible to write down every trade with the attendant volume. And even if one could, how to make sense of it all? The obvious course is to look for patterns, e.g., an inability of price to move above or below certain levels, followed by a "break" of price out of one or the other of these levels. Hence, point and figure, a type of shorthand. One can also detect changes in pace on the tape, in acceleration, deceleration, hesitation, that few people even notice when looking at bars. Once one experiences this, it's difficult to see price movement in terms of bars even though one is looking at bars, just as it is difficult for a musician not to "hear" the music even though he is reading the transcribed notes.