How to know when a retracement ends? - Traders Hideout | futures io social day trading
futures io futures trading


How to know when a retracement ends?
Updated: Views / Replies:4,037 / 9
Created: by ikeaboy Attachments:1

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

How to know when a retracement ends?

  #1 (permalink)
Elite Member
Stockholm
 
Futures Experience: Intermediate
Platform: NinjaTrader, Multicharts, Tradestation
Favorite Futures: US and Canadian Stocks
 
ikeaboy's Avatar
 
Posts: 59 since Jun 2010
Thanks: 21 given, 5 received

How to know when a retracement ends?

My trading method is mainly about finding an entry in the direction of the prevailing trend... So I am entering when I see some hints that the pullback might end...

However I often take entries just to see my trade stopped out a short term later because the pullback hasnt ended... A lot ot times the pullback ends afterwards and price goes in the original direction...

So how do you make sure that a pullback has indeed ended?


I use retracement trendline breaks, candlestick patterns, stochastics in extreme zones... however i am not really satisfied with the results...


Last edited by ikeaboy; August 24th, 2010 at 05:46 PM.
Reply With Quote
The following 2 users say Thank You to ikeaboy for this post:
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
  #3 (permalink)
Elite Member
Quebec
 
Futures Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker/Data: Stage 5 trading/AMP/CQG
Favorite Futures: ES, NQ, YM
 
trendisyourfriend's Avatar
 
Posts: 3,697 since Oct 2009
Thanks: 3,041 given, 4,496 received


How to know when a retracement ends?

You can never know for sure when a retracement will end. You can only use prior information and make some educated guess based on what is available. For example, in a trening market price will move in a stair-step fashion. So you can expect price to retrace and test a previous level. In a downtrend, what was previously support becomes resistance and vice versa. So you can expect price to test this resistance in its was down. You have this stair step pattern when two moving averages open up as in the case of a 21 and 89 EMA. When these two EMA get flat or converge then you can expect a deeper pullback. Some of these pullbacks might take the form of a channel in the opposite direction of the trend. In this case i would tend to select one side of this channel to enter, the side that will give you the lowest risk and greatest reward if the trend resume. You can measure a previous pullback using a line and expect price will retrace about the same distance on the next swing. Usually such price action will produce a clear channel or at least one side of the channel will be clearly defined.

Here are some of these ideas in action (see picture)

Attached Thumbnails
How to know when a retracement ends?-pullback.jpg  
Reply With Quote
The following user says Thank You to trendisyourfriend for this post:
 
  #4 (permalink)
Trading Apprentice
new jersey
 
Futures Experience: Intermediate
Platform: ninja
 
Posts: 5 since Aug 2010
Thanks: 1 given, 3 received

Retracement

Ikeaboy

As trendisyourfriend stated, there is no clear cut way to determine if a pullback has completed. There
are only signs. One way is if you use a MA, if price is in an up trend and you want to go long on a pullback,
let price get close to the MA and then look to enter on a bull trend bar. If you trade price action, there is a
good thread on a book written by Al Brooks. He is a price action trader and I try to follow his set ups. If you don't do this already, you might want to try and let the market take you into a trade instead of entering at a specific price. This way you have the market sweep you into the trade. It is not fool proof, but then again nothing is.

Cheers

TC

Reply With Quote
The following user says Thank You to tomcav56 for this post:
 
  #5 (permalink)
Just starting out...
Australia (ex UK)
 
Futures Experience: Advanced
Platform: IB TWS, IRESS, SC, (ex MC,NT)
 
Posts: 26 since Aug 2010
Thanks: 14 given, 27 received


ikeaboy View Post
So how do you make sure that a pullback has indeed ended?

You cant.
There will always be a tradeoff between going too early, or too late, and then it will all depend on you tolerance for stops and how far you are willing to run something if you get onto the trend.
Al Brooks has some good info on it - there is a thread here.
Alternatively use a Ross Hook method to enter.

Given your frustration with the stops, possibly change your thinking..... work out where you think the pullback is more than a pullback, work out where your stop is first and then work out what a fair entry level (or zone) would be.
Of course you may miss some pullbacks but then you might choose to have a failsafe entry level for those shallow pullbacks.
Unfortunately its all a trade off and always will be.

Reply With Quote
 
  #6 (permalink)
Elite Member
Stockholm
 
Futures Experience: Intermediate
Platform: NinjaTrader, Multicharts, Tradestation
Favorite Futures: US and Canadian Stocks
 
ikeaboy's Avatar
 
Posts: 59 since Jun 2010
Thanks: 21 given, 5 received

thanks for your help... it is a tricky topic... i personally think that if you see a horizontal S/R level holding price, it is one of the strongest signs that the retrace might end...

i also want the retrace to be at least 38,2 %, rather 50 % (fib levels) from the last move...


one thing i stopped using are diagonal trendlines... because they are never the same on the different charts... depending on the chart style (volume, tick, minute, range,...) they are different... so i dont use them anymore... i feel most comfortable with horizontal levels.. but still it is hard for me to find entries which are close to the end of the retrace but also make sure that the retrace has indeed ended...

Reply With Quote
 
  #7 (permalink)
Elite Member
Springfield,Missouri, USA
 
Futures Experience: Advanced
Platform: NinjaTrader (It's a love/hate relationship)
Favorite Futures: CL, TF, 6E
 
Slipknot511's Avatar
 
Posts: 176 since May 2010
Thanks: 60 given, 312 received

I use volume. Can't sum it up in this thread, but when buyers step in to resume the trend, it usually will leave it's footprint in the volume. I've been using volume for about a year now, and feel like I am only scratching the surface. I can't even imagine trying to trade off a chart without volume now.

One of the important things about volume is not what it is doing, but where it is doing it. I look for volume at points of support and resistance. For example, in the retrace, I would be hesitant to think the pullback has finished if I don't see any significant change in volume at key S&R. I'd expect a response at 38.2 and then a bigger one at 50%. If not, it shows a lack of conviction on the part of sellers or buyers.

Reply With Quote
The following user says Thank You to Slipknot511 for this post:
 
  #8 (permalink)
Elite Member
Stockholm
 
Futures Experience: Intermediate
Platform: NinjaTrader, Multicharts, Tradestation
Favorite Futures: US and Canadian Stocks
 
ikeaboy's Avatar
 
Posts: 59 since Jun 2010
Thanks: 21 given, 5 received


Slipknot511 View Post
I use volume. Can't sum it up in this thread, but when buyers step in to resume the trend, it usually will leave it's footprint in the volume. I've been using volume for about a year now, and feel like I am only scratching the surface. I can't even imagine trying to trade off a chart without volume now.

One of the important things about volume is not what it is doing, but where it is doing it. I look for volume at points of support and resistance. For example, in the retrace, I would be hesitant to think the pullback has finished if I don't see any significant change in volume at key S&R. I'd expect a response at 38.2 and then a bigger one at 50%. If not, it shows a lack of conviction on the part of sellers or buyers.

i often tried to incorporate volume in my trading because everything sounds so logical and meaningful in the books... but when i apply it on the charts it just doesnt really confirm the stuff from the books... sometimes it does yes... but more often than not it would keep me out of good trades... and to sum it up i would probably better off without it..

nevertheless how do you use it? just the normal volume bars on the chart or OBV or anything else?

btw, do you use it for intraday trading? say on 2-5 minute charts?

Reply With Quote
 
  #9 (permalink)
Elite Member
Berlin, Europe
 
Futures Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
Favorite Futures: Keyboard
 
Fat Tails's Avatar
 
Posts: 9,651 since Mar 2010
Thanks: 4,226 given, 25,601 received
Forum Reputation: Legendary

Entering Retracements

Basic steps

(1) Identify a confirmed trend (use trend filter)

(2) Look for a short term oversold or overbought situation (use oscillator such as RSI or Stochastics)

(3) Watch out for a logical point for the price to reverse (pivot, Fib retracement, trend channel)

(4) Wait for price action to confirm the retracement (for a long entry price should be above the high of the prior bar, for a short entry below the low of the prior bar)

The difficult part

Now comes the difficult part. The correction prior to the retracement may have 1 leg or 2 legs, and it could go further than you like. So you need to decide with some discretion, whether your entry setup is valid or whether it will stall.

In some rare case you will get a churn bar showing support or resistance, but usually volume is not very helpful to enter a retracement trade.

So you need to develop a scenario. Some points to look at:

Is the confirmed trend young or mature? Do I still expect a push? Has there been a climax type situation, so that a retest of the high or low can be expected? After three pushes up or down, you can expect a two-legged correction, so you may not want to enter at the first occasion.

Is there any logical target for the correction (measured move or ABC pattern)?

Where is the trendline? Has the trendline already been broken, or will the current correction end above (for a long setup) or below (for a short setup) the trendline?

What is the time of the day? Is it trend continuation or grim reaper time? Is volatility rising or settling down?

For index futures, what does the NYSE Tick show, is is still strong enough to enter long or weak enough to enter short?

The Reward-to-risk or R-Multiple

The retracement trade is based on the reward-to-risk ratio. Some of these trades can go very far and the initial risk is limited to the range of the setup bar of the setup bar plus a few ticks. Even, if half of your entries goes wrong, the setup still should be profitable, if you let your winners run.

Reply With Quote
The following 4 users say Thank You to Fat Tails for this post:
 
  #10 (permalink)
Big game hunter
NY
 
Futures Experience: Advanced
Platform: Esignal, MBT navigator
Favorite Futures: Currencies
 
Posts: 2,526 since Jun 2009
Thanks: 1,397 given, 2,570 received


ikeaboy - check out how Im using Macd to find retracements and LLs / HHs to enter into the prevailing trend . This might help you develop an objective way to quantify when a retracement is turning back towards strength . I find that when I try to pin down something by " knowing " if its over or its started Im left pulling my hair out , and I dont have much hair . Rather , I do better when I recognize when the odds are leaning in my favor and the evidence is strong enough to make the trade . Strong evidence plus trading towards strength is a pretty high odds scenario .

https://futures.io/journals-daily-charts-chart-reading/5115-factor-n-3.html

Reply With Quote

Reply



futures io > > > How to know when a retracement ends?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Session begins / ends in X minutes indicator josh NinjaTrader 15 January 21st, 2012 12:45 AM
Fib retracement property in NT7? jz166 NinjaTrader Programming 4 June 26th, 2011 01:54 PM
Another Market Worry: What Happens When Stimulus Ends? Quick Summary News and Current Events 3 June 13th, 2010 07:58 PM
Adding a Auto Fib Retracement to an indicator vast NinjaTrader 0 July 4th, 2009 08:31 AM


All times are GMT -4. The time now is 03:39 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-13 in 0.15 seconds with 20 queries on phoenix via your IP 54.226.132.197