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salisem's Major Trend Reversal journal


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salisem's Major Trend Reversal journal

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  #1 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

I've gotten too far ahead of myself in trading, trying to master too many setups at once. So I've decided to choose just one type of trade, and do nothing but that. My favorite type of trade is what Al Brooks calls a Major Trend Reversal. I find them to be the least stressful and the easiest to spot. I accept that this style of trading has a lower winning percentage, but over time is profitable (when managed correctly) due to the risk/reward ratio. Maybe I will add other setups to my plan in the future, and maybe I won't. I'm not going to concern myself with that now, and just focus on MTRs.

Because MTRs happen less frequently than other setups, I will be looking for them on several instruments, all on 5 minute charts:
ES and YM - I know they are strongly correlated, but sometimes I see a better pattern on one over the other.
AAPL, AMZN, and GLD - using weekly options.
I might add more instruments to this list in the future, but that's what I've been watching so far, and I think it's plenty for now. I also accept that I can only manage one trade at a time. Once I spot an entry in one instrument, I will not enter any other trades until I have exited the current trade. Maybe that will change in the future, but if not, I am OK with that.

I think I am pretty good at finding entries, but I know I am terrible about trade management. I hope this journal will help me improve that. I know my poor trade management stems from my psychology. Over the summer I took Rande Howell's Developing a Traders State of Mind group course. I found it to be incredibly helpful, but I am a long way from mastering everything he taught. I will be retaking the group course that starts next week.

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  #3 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received


Here is the trade I took this morning:



When the third bull bar tested down first, and then ticked up above the previous bar, I bought the 126.5 call. After the bull spike, I suspected a channel would follow, or at least a second leg up after a 2-legged pullback. When the spike was followed by 4 bear bars, I started to wonder if my read was wrong. When the second entry short triggered at 11:00, I exited, worried that there would be a second leg down. I shouldn't have, because the stop on the second entry long hadn't gotten hit, and had I waited, I would have seen there was more bull follow through. I let my emotions get to me, and missed out on a perfectly good trade because of it.

I'll try and do a better job marking up the chart next time... the TOS platform doesn't seem to have the best tools for marking exits and entries, but I use it because it's free and I get dirt cheap commissions there.

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  #4 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

This is the trade I took on Friday. It wasn't a good trade, because it didn't meet the criteria for a good MTR. I haven't outlined those rules yet, so here they are:

1. Market must be trending
2. Must be a strong break of the trendline
3. There must be a retest of the extreme, and this test should show weakness. (In a bear trend, this retest should show some strength from the bulls, and in a bull, there should be strength from the bears)
4. There must be a strong signal bar in the direction of the new trend.
5. The trade must trigger by ticking above the signal bar in a new bull trend, and below a signal bar in a new bear trend.

This trade from Friday only met 2 of 5 rules. The market had been trending up and there had been a strong break of the trendline. However the retest was strong, so there was likely more bullishness to follow. The signal bar was quite weak, and the trade never actually triggered, but I had set a sell stop entry below the bear doji before it. I had a nagging thought when I was taking this trade, and I should have listened to it. I know I was fearful of missing out, and I have to practice overcoming this fear. Mindfulness, not mindlessness.


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  #5 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

Here is the MTR I took a short while ago. I exited the trade early because I had to take an important phone call, and didn't want to try and manage the trade while on the phone. That was my choice and I accept that I didn't earn what I could have on this trade. I'm just proud of myself to sticking to the rules today. Trending market, strong break, weak retest, good signal bar, trade triggered.


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  #6 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

I didn't forget about my journal last week. I hadn't been trading because I was so stressed out about things that were going on in my personal life. I think most of it has been resolved, so hopefully this week will be better.

Here's the trade I tried to take today. I wanted to buy a put on the bar with the red arrow, but for some reason my order went in at the wrong price and didn't get filled. Then I had trouble changing it and got frustrated. Since I was frustrated I deleted the order and walked away. Any time I am feeling frustration, anger, fear, etc., I just walk away. Seems to be the best course of action for me.


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 Bermudan Option 
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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Hey man, nice to see another journal that uses options. I use ThinkOrSwim as well as one of my brokers and it isn't hard to annotate the charts but it does take a bit of effort to save it and then upload it online, etc. Have you thought about using tradingview.com? It is a free charting service that allows you to plot your entry/stop/target easily. Notating charts and uploading charts are easy as well. Here is one I made in 30 seconds that shows the 5m AMZN chart:



Also, if you actually create a (free) account, they save all of your chart drawings

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  #8 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

Hi Bermudan, thanks. Aside from a trendline or two and arrows to indicate the bar that the entry/exit occurred, I don't mark up my charts much. For me it's more about reading price action correctly, following my rules, and keeping my head on straight. I struggle a lot with the psychology of trading. Even with as few entries as my journal has, every single one mentions some sort of negative emotion. Not good!

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 Bermudan Option 
Chicago, Illinois
 
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salisem View Post
Hi Bermudan, thanks. Aside from a trendline or two and arrows to indicate the bar that the entry/exit occurred, I don't mark up my charts much. For me it's more about reading price action correctly, following my rules, and keeping my head on straight. I struggle a lot with the psychology of trading. Even with as few entries as my journal has, every single one mentions some sort of negative emotion. Not good!

That is part of the game when it comes to trading trend reversals. Trends can only reverse 1% of the time right... the other 99% it is trending. Counter trend trading is the hardest form of trading and the most stressful imo.

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  #10 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received


An MTR isn't exactly counter trend. It's the start of a new trend after a reversal, provided the context is right. If all the criteria are met, they're successful about 40% of the time. The rest, if managed well, are small winners and small losers, which seem to cancel each other out.

I feel less stressed trading MTRs than any other kind of trade, and that's why I've whittled down to nothing but MTRs.

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  #11 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

AMZN trade today. It did not adequately fit my rules:

1. Market trending? Check.
2. Strong break of the trendline? Check.
3. Weak retest of the trend extreme? I thought so at the time. In hindsight the bears were still overwhelming the bulls.
4. Strong signal bar? No. It has the looks of a strong signal bar (marked with the green arrow), but the context is more important. Here, instead of being a rejection of lower prices, it was just an overlapping bar in a range.
5. Trade triggered? Check, but there wasn't enough reasons to take it. I got out on the following bar with a small loss.

It just dawned on me that I don't have those rules printed or written anywhere... I have them in my head and saved in a Word document. Little good that does me. Failing to plan is planning to fail, or something like that...


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  #12 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

Here's what I saw today in GLD.


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  #13 (permalink)
 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

This is what happened later on in GLD. I don't think my initial analysis was wrong, but maybe it was? If I draw a different trendline it makes more sense, and it's easier to see the bulls getting stronger. There's also a failed L2 before it rocketed up, so I think that might have been a big contributing factor.



I'm leaving tomorrow for a short trip, so I won't be trading Thursday or Friday. But I do plan to study each day while I'm gone. Hope you all have a strong finish to your week.

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 salisem 
Virginia, USA
 
Experience: Intermediate
 
Posts: 76 since Mar 2012
Thanks: 64 given, 63 received

I got back from my trip late Sunday night, and didn't have time to post yesterday.

I did my homework over the weekend as planned. Learned a few things, but I'm still left with a few questions. I've decided I'm best off moving my journal to the forum on Al Brooks' site, in hopes of getting more feedback on how well I'm reading the price action. Nothing against futures.io (formerly BMT) because it is a great resource, but I think a smaller community focused on one style of trading will be better for me. If that doesn't work out, I'll be back. Cheers!

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 Bermudan Option 
Chicago, Illinois
 
Experience: Intermediate
Platform: Tradingview
Broker: ThinkOrSwim
Trading: Forex, Stock & Options
 
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good luck

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