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DP/Wave 5 Short on the NQ -3/14/2012
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DP/Wave 5 Short on the NQ -3/14/2012

  #1 (permalink)
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DP/Wave 5 Short on the NQ -3/14/2012

Here is a trade I am in at the moment on the NQ - a short manual DP trade coming in at higher timeframe DP resistance at the end of a clean Wave 5 pattern on the 15m.

As you can see, there was a 1.) move to new highs on the day, 2.) a basis for the trade on the higher timeframe, c.) VSA at the DP level, indicating professionals may be active in looking to sell those new highs, and most importantly, a small controlled risk.

The initial target on the trade is the DP off the higher timeframe Wave 4 swing, for a potential +4.3R profit.

As a side note, something helpful to keep in mind is that the best time to trade is when it is psychologically the hardest to do so- that is where strict risk control can give you the mental edge to enter the trade and capitalize on the best opportunities for larger profits.


As I also noted, I would not be surprised to see an ABC correction there yielding an opportunity for a potential Holy Grail setup later on in the afternoon....

[Note, as I was writing this, it hit my target to the tick where I exited for a nice profit.....]

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  #2 (permalink)
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On another note - the STF did go strong on that as it hit the target, making it a good candidate to trail for a bigger profit. But, I had already come out. I guess with such strength lately particularly in the NQ, I was a little leary about staying in.

Personally, that goes as an error in my journal, and I will see how much the error costs me (if anything). On that note, one thing I highly recommend for anyone (in addition to having a complete trading plan and tracking your results at all) is to not only track your errors in judgement, discipline and trade management, but to assign a cost to those errors - both positive and negative. In this instance, if the NQ runs much further, it may cost me in lost profits that I otherwise would have had were I have to caught that and followed my trade management in this particular case.

I have been doing this for a long time, and the results of doing that are truly eye opening and can't help but have a positive impact on your trading. One brilliant example is that early on I really had a hard time holding on to the trades for fear of a winner turning into a loser, and accruing a -1R loss. Well, when I began tracking the outcome of those trades to their natural and properly managed conclusion versus how I managed (or mismanaged) them, I discovered that it cost me exponentially more in lost profit than I would have lost even if every single trade was a losing trade, and was a huge motivator for me to accept that potentially the majority of my trades would result in a -1R loss knowing that the mathematical probabilities of failure over time were virtually nonexistent.

Based on my experience, next to managing risk, seeking to identify and approach your trades and managing them with consistency and discipline are the most important skills to develop.

Back to this example: price rallied to just tag the ATR stop (I may have actually been behind it by a tick, so maybe still in), which would have brought me out at +3.6R, so the cost of the error may have been about +0.7R - an error that might have worked slightly in my favor were I actually a tick above the ATR with my stop.

In short, my experience is that failure to act consistently according to my plan will cost far more than those occasions where it yields a financially positive outcome....

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  #3 (permalink)
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As I mentioned anticipating before, the NQ had a nice rally off of the 15m DP support of of the Wave 4 that unfolded as a picture perfect ABC correction, marking a classic Holy Grail trade setup, with a target of the Wave 3 WPT. It's a bit late in the session for my taste, so it could go either way, but the process for identifying the setup is always consistent. It's all about probabilities.

It doesn't take too many of these that work to bank a very healthy overall profit in your trading:

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  #4 (permalink)
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Holy Grail

Shawn,

Thanks for the post...Great analysis..Always learn something from more experienced traders

I know it got stopped out but it definitely met the parameters of a Holy Grail with potential to capture R12

Gotta make a decision based on the info available at the time

Razor

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  #5 (permalink)
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5 wave targets for nq and es 15 min chart 5/8/2012

Here are two charts for today's targets

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