For those price action traders out there, how do you get in on strong trend days. The kind of trend that gets going on the open and doesn't look back all day.
My trading essentially revolves around price reacting at support/resistance levels. That presents a problem on days where the trend is so strong that there aren't any significant pullbacks or "patterns" that form.
A few days ago we had a strong trend day on the market I trade and I literally sat there and watched price climb all day long. It was great to have the discipline not to enter when I didn't see a setup, but at the same time I would like to develop a setup im comfortable with on days like this.
I've been trying to think about why it seems so difficult (for me at least) to get in on these days. I mean, looking at the day in hindsight it seems so easy, just pile on size in the morning and ride it all day. Hmmm, not so easy in the moment. The conclusion i've come to is that it is because I can't define my trade risk. My normal setups rely on how price reacts around levels of S/R, so I am able to place my stop at a point which is clearly on the other side of the S/R and if hit, I am wrong. Easy, trade risk defined.
However on strong trend days, there often aren't S/R levels that develop which form logical places for stops, I therefore just dont enter. Sometimes significant S/R levels from the previous day can be used, or pivots, but in general I find it difficult finding areas I can enter where I am able to define my risk.
In some of Al Brooks books, he mentions that it is common on strong trend days for setups to look terrible precisely because the trend is so strong and pullbacks dont develop. He advises being much looser on rules and getting in for just about any reason on days like this.
Any thoughts on this? What do you look for on strong trend days to get you in.
Have you tried higher time/range/tick charts? Pulling back to the 40,000 ft level should provide opportunities to spot additional S/R levels you can exploit on the lower timeframes. Here's one interesting link where Sharky discusses establishing the trend and dealing with entries using a donchian channel.
Have you considered that maybe, that type of market environment is not the environment that your method is suited for, and therefore you should not trade that type of market? Those strong trends tend to favor breakout traders, and not pullback traders. My personal method was designed for ranging markets, so consequently, I am less profitable generally the stronger the trend. But, that is ok with me, I know my method's bread and butter is in ranging price action, so I either don't trade strong trends, or understand that I will be less profitable in that type of market.
Thanks for the link. Sharky's idea looks interesting.
With regards to the higher time frame S/R, yes I agree that additional opportunities may be visible there. But the problem with some strong trend days is that it just blows right through those. The day I mentioned in my first post was a good example of this. I was waiting for some kind of pause or pullback at a S/R level so that I could define my risk and get in, but it just blew straight through it.
Thanks Monpere. Yes at the moment I seem to trade most days reasonably well as long as defined S/R levels develop or are reacted to from previous days. So you're right, strong trend days just aren't in my arsenal. However as a discretionary trader, im never the less looking to grow as a trader and look at ways to trade those days.
Here's an example of the kind of day im refering to. Maybe not the best example, but you get the idea. On a day like this, what would you veteran traders look for as signals to enter (keeping in mind the day didn't always look this "trendy" as it was happening).
To me, price traded at one general level until about 11:00, then moved down to the next level which lasted from roughly 12:00 to 15:00, then down for the remainder of the day. I guess you could trade a breakout from each level? (my usual plan would be to wait for a test/pull back to the previous level which doesn't happen on days like this)
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I'm with Monpere on this one. You don't have a ticket for the bus that goes this way (yet). If you want to be able to get on different buses you will be able to ride more. But what happens when two turn up at the same time and they are going different directions?
If you have different set-ups for different scenarios they to need fit together without overlap. Otherwise you will get conflict.
I empathise with you as I am in the exact same situation. I have two set-ups I trade live and am testing a third. In isolation they all 'work' but in practice trading them in concert is proving a challenge. If you trade one set up on one instrument on one time frame at set hours, etc, i.e. there is rigid consistency, then you are only dealing with one 'item' add a second these issues are squared add a third and it's to the power of 3. I think there is an exponential rise in the information to process and that may have subtle impacts on your clarity, levels of distraction, energy levels, etc. as a result. I know those issues are effecting me right now.
Having said all that if you follow Rachel's thread she recently posted up a summary of the set-ups she trades and I think there were at least 8. She has been trading full time with CL for 6 years I think.
I guess it comes down to what you 'need' out of your trading and how you go about arranging things so that need is most likely to be filled. I started looking for another set-up as a result of a quiet July and August. Another solution (for me) may be just to accept that's likely to happen every year and scale up a bit on current set-ups for the rest of the year to make up the shortfall in the 'need'. Or perhaps the need is novelty?