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One of the challenges with trading smaller time frames is that it is easy to get chewed up on big volatile days. To combat this I am trying to work with a concept I use in another endeavor I enjoy, fly fishing. I am by no means an expert in the sport, but I know enough to be dangerous.
Around my part of Oregon there are small streams, medium rivers, and large rivers like the Deschutes. Fishing on the small streams and medium rivers is not as challenging, because the lanes and obstacles where the fish might hold are fairly limited, well defined, and easily accessed. When folks, who are used to fishing streams, encounter the mighty Deschutes, the first reaction is one of being overwhelmed by the size. "Where do I even begin?!"
The way to overcome this is to visualize smaller "streams" within the larger river. Then, pick out areas within these streams where the fish might hold. From here the options for catching fish are almost limitless. There are lots of "streams", and therefore lots of places to hold, and therefore lots of fish waiting to be caught!
On a big move with a lot of volatility, entering on a small pullback can be daunting for a small stop trader. How can one be confident that this small retracement is not part of a larger retracement within the big move, a retracement that in relative terms is not that large at all compared to the size of the move?
The trader has two choices. 1) give it a go and hope luck and momentum in that particular instance carries price away. This can be both dangerous and lucrative. Sometimes these moves can result in multiples of the stop. But often the larger pull back does indeed materialize, resulting in a stop out. This can happen many times as the trader attempts in vain to get on board the big juicy trend.
Option 2: Wait for a medium sized pull back, a smaller stream if you will, within the larger river. Then wait for the proper sized retracement, more commiserate with the stop size, that is coming out of that medium sized retracment. Break the big river into small parts.
The challenge is, of course, waiting for that medium sized retracement while watching price zoom to new territory without us. Sometimes trading a big day with small stops results in fewer trades, which is the price we with small accounts must pay.
Took two trades and couldn’t stay with them. Both BE. I have no confidence in my reads. If they fiddle fart around for any length of time I’m out. Eventually I’ll get one that takes off quickly.
Based on past performance I have no reason to have confidence, to be honest. Hopefully over time that will change. I again did a nice job of identifying valid successful trades in real time (circles). 8 for 9 in getting to 1R, some further. Build on that.
I have also been putting notes on the charts of real-time thoughts.
Still banging away here in my little corner of Oregon. Trying some new things the past couple days. At the risk of being accused of changing my trading style, well, I’m experimenting with changing my trading style. Kind of, but not completely. I am mostly fiddling with tactics, when and where to enter, not necessarily changing my charts (although I would love to get a hold of Bookmap someday. Too expensive for now. Wife would leave me!)
The past few days I have been trading in more of an “information risk” manner than the usual “price risk” manner. It is a little disconcerting to enter as price is coming at me, but I like the idea of getting in earlier, and price seems to be spending a lot more time in the positive on each trade. So far results are nothing to write home about, but I have seen some encouraging signs. I tried it in sim on Tuesday and went 7 for 9, which is highly unusual for me, even in sim. I did not know the terms ‘information risk” and “price risk until I watched an FT71 webinar last night. His opinion is that traders should lean towards a more information risk style of trading, so it is nice to hear I am in good company. We’ll see what happens. Can’t be worse than what I’ve been doing!
Today I got back about half of what I lost yesterday (near max daily loss). I was much more in tune with the market today. Yesterday I made a big mistake that cost me in material and mental capital when I clicked "sell" when I meant to click "buy". Got out with -4 ticks but missed the initial push up and then tried in vain the rest of the day to get on board the huge trend. I even went counter-trend a couple times and of course lost. Only 1 trade out of 7 made it to +1R before -1R.
Contrast that with today when 7 of 8 trades made it to +1R before -1R, and 4 of the 8 made it to +2R or more. I was more patient today and concentration was better.
Of course, I don’t always take full stop outs when the market moves against me, nor do I always stay in trades that move in my favor. But, take it from me, when you are generally entering trades that move in your favor more than they move against, it is a lot easier to make money! Right now that is what I care most about, taking good entries. The gains will follow eventually.
Traded less today for whatever reason. I tend to yo-yo between trading a lot and trading little. Being consistent in this area is definitely something I need to work on. Today would have been a nice day. I feel I am seeing opportunity better.
I allowed myself to get lulled into complacency today as the market displayed confusing action early, then picked up later. Took two trades early when things were a bit confusing, then sat on the sidelines later when the picture was clearer. Boredom can be a killer.
Two trades, one loss, one BE. Neither trade had any potential.
Stacked orders working the offer at the top of the opening range told me there was a good chance CL was going up today. The only question was when? I took a couple of shots at it early after a failure to break out of the bottom of the OR.
The second trade was after a higher low with order flow.
The market didn’t have enough willing buyers to capture all those offers so it needed one more shake out at the bottom of the OR to reset the demand. Once that happened it was off to the races.
I guess in hindsight I should have waited for a clear breakout and pause before engaging the market. Once again I got bit by trying to catch the first move.
As fortune would have it I switched over to sim, while waiting for a grade A set up, to “try” a trade based on a footprint set up I have been watching, and low and behold made 57 ticks. Whoopy!
