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Trading Price Action On Renko Charts - Live Trades
Started:May 1st, 2015 (06:04 PM) by macgwrite Views / Replies:4,573 / 57
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Trading Price Action On Renko Charts - Live Trades

Old May 12th, 2015, 04:16 PM   #21 (permalink)
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Tuesday - 05_12_15

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Summary/Review:

Today was my first losing day in FX since I switched to the new method. The loss caused me some trouble on the next trade, but I'm proud of myself for not deviating from the plan too much. In the end, I was able to make back a large part of the loss and end up down only $5, which is about the size of my average winning day. This is great because I generally have far more winning days, so the math should work out well.

The market was tricky in my defense. I'd gotten used to the 66% PB levels being hit with price then going straight to my target. Today, the levels were hit, but price sort of flopped around for a bit before it reached the target (2nd trade is a good example). Also, the MKT had brief bursts of 2-3 bars and then virtually no movement for 20-30 minutes or more. That threw my 'internal momentum sensor' off a bit.

Regarding scaling in, I've got a few ideas I need to investigate more:

1. I'm not sure I actually need to scale in. Today was only the 2nd trade I've needed to do it on, and this trade was bad from the beginning the way I had it structured. I've done it one other time because I sold the 33% PB level and added on at the 66% level. I wouldn't have needed to add-on if I had waited on the 66% level. If I wait on the 66% level, a tighter stop above/below the leg seems to be sufficient most of the time.

2. If I continue to allow for scaling in, I think I need to add-on higher/lower than I have been. Bull case example: If I think MKT might dip below the bottom of the bull leg where my limit for the scale in entry usually is waiting, I usually am thinking it won't go far down. In this case, most of the time the move back up will likely go farther than the 66% PB level (which would be the initial entry). I'm looking into adding on 33% below the bottom of the bull leg with a stop 33% below that. The logic here is that a successful BO below the bottom of the leg likely will come back to test the BO point. If I scale in this way, my BE price on the entire position will be at the BO point. I think the ideal scenario would be to scale in twice - once at the bull leg low and then 33% lower. But I don't think I'm ready for that yet. Another option is to simply use the wide stop but don't scale in. Also not sure how I feel about that either...

I'm not going to make any changes based on one loss, but I've been thinking about this now for a few weeks. On the one hand, I like scaling in because I don't have to be so precise. It feels better psychologically. On the other hand, the extra risk and open loss is unpleasant. I have to trade so small to account for it that it might be better mathematically to use the tighter stop without scaling in and trade bigger on the initial entry. I just need more data to assess how much my probability drops if I do not scale in, or how much it changes if I adjust the levels a bit as stated above.

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Old May 13th, 2015, 01:18 PM   #22 (permalink)
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Wednesday - 05_13_15

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Summary/Review:

I didn't make nearly as much money as I could have, but I made some, so I can't complain. One thing I'm doing that's not working is: micromanaging the swing portions of my trades. I may try putting in an OCO with the nearest logical target as the area to take profits, and just walk away for a while.

Today is also a good example of the limitations of buying/selling only the 66% PB levels - you miss most of these types of SPB trends. I'm ok with that, though, since the MKT spends much more time going sideways. Buying/selling the 66% level works well most of the time, even though I understand I'll miss these infrequent, big moves. (My plan allows for trading the 33% level, but I really haven't needed to do it; usually, I can just wait for the 66% level and find plenty of trades most days.)

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Old May 14th, 2015, 12:09 PM   #23 (permalink)
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Hi Mac,

Nice going so far!

How do you decide which waves to enter your trades against? Do you consider 2 or three legs as a complete wave? or channel touches maybe?

Thanks,

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Old May 14th, 2015, 05:26 PM   #24 (permalink)
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Thursday - 05_14_15

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Summary/Review:

It was ugly - so ugly that I'm embarrassed to share it. But it happens, and I'm still learning. I ended up down $11 today because of mismanagement and impulse, stemming from emotional responses instead of logical ones. I was unable to accept a BE or small losing day psychologically and as a result, stupidity took over and magnified the loss...

Regarding scaling in:

For now, I think I will stop doing it. My psychology is still a work in progress, and since it's causing me management issues, I'm not sure scaling in is actually increasing my probability of success. If I can't manage it right, then it's probably ultimately not going to be successful. Furthermore, it looks like I can probably win 60% of the time with 1:1 R:R without it. That's all I really need to be profitable - especially since I can trade a bit larger on the initial entry. I'll probably try using the tighter stop above/below the leg for the next couple of weeks. Still undecided, but heavily leaning in that direction since most of my trades don't need the scale-in and since I mismanage the ones that do and take a loss anyway.

Some other keys to success:

1. Focus on being logical and doing what makes sense. I've been spending too much time thinking about winning/losing, outcomes, and risk/reward. I do better when I just read the market and trade sensibly without thinking too much about anything else.

2. Learn to accept a small loss. As a scalper, anything smaller than an average win is a good loss to take, if there's a reason for it. I need to learn to embrace this.

3. Be selective, but stop cherry picking all the time. I'm gradually slipping back into hesitation and worrying too much about outcomes. This is causing me to pass on reasonable trades too often. Even today, I would have caught most of the move down if I had simply placed the trades I saw.

4. Rely on your stop and don't micromanage trades. I'm pretty bad at trade management. Most of the time, I do better if I just leave the trade alone. Since I'll probably be using the tighter stop, and my entries are very mechanical, I'm going to try hard to rely on my stop. Based on the data I have, this should work fine, as long as I don't interfere.

5. Trade a little bigger. This might seem like an odd one. But it's here because I think a little more size might force me to take the losses and deal with psychological issues. Nothing too crazy - maybe just 6K or so. It's within my risk tolerance and should force me to care just a bit more. I don't want to care too much, but too little is equally bad, I think.

Since I have a plan that suits me now, it's pretty clear to me that most of my problems are psychological in nature. So, I'll be making a more serious effort with Andrew Menaker's MYMYT course over the next few weeks in addition to my trading.

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Old May 18th, 2015, 11:54 AM   #25 (permalink)
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Monday - 05_18_15

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Summary/Review:

Today was my largest winning day in FX, which was very nice since Thursday was my largest losing day... I got started earlier today, which might need to become a habit - just more opportunity most days when I start around 6am EST it seems. I don't feel as much FOMO since I feel like I have more time before the MKT slows down.

I spent this weekend working on the psychology course, and I think it's going to help me out a lot. For now, I'm trying hard to stick to the plan without changing too much. I'm still considering scaling in but can't quite make a final determination.

On a side note, US regulations require FXCM/NT to close earlier orders first. This will get me confused when I review my journal. I may manually calculate the PnL numbers for the Trading Journal Spreadsheet entries. I want the PnL to reflect the management more than order sequence, so that I can generate some valid stats and improve. The totals will be the same, but they won't be as helpful in their current state.


Last edited by macgwrite; May 18th, 2015 at 10:40 PM. Reason: Image attachment
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Old May 18th, 2015, 07:05 PM   #26 (permalink)
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macgwrite View Post
On a side note, I hate that NT/FXCM closes the earliest positions first.

Hi Macgwrite, please note that this order restriction is imposed by US trading regulations (FIFO). Traders living outside the US are not limited to closing positions in FIFO order.

If you have questions about our services at FXCM please send me a Private Message.
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Old May 18th, 2015, 10:38 PM   #27 (permalink)
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Hi Macgwrite, please note that this order restriction is imposed by US trading regulations (FIFO). Traders living outside the US are not limited to closing positions in FIFO order.

Jason,

Thanks very much for the information! I didn't mean to imply that I was dissatisfied specifically with FXCM about this. I had heard that all US brokers did the same thing, but I never knew why until now.

I'll revise the wording in the last post, so other people won't get the wrong impression and interpret what I said in a negative light.

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Old May 19th, 2015, 01:04 PM   #28 (permalink)
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Tuesday - 05_19_15

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Summary/Review:

A small win today. I felt unsettled, so I hesitated on a good trade, and then price didn't reach my entry orders on some others. On the flip side, when I feel off-balance, I'd rather hesitate and miss a bunch of good trades rather than force it and take a lot of bad ones. I found my mind dwelling on outcomes too much today as well.

A small positive: I've made about $42 in 13 days trading 2-3K units. This doesn't seem like much, but it's actually pretty good. I could theoretically pay some of my small household bills with the profits. It's not a living, of course, but it'll help to remember this when I get frustrated with trading small. As my equity and abilities grow, these small profits will become much larger.

I'm planning to spend the rest of the day working on my brain

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Old May 19th, 2015, 06:33 PM   #29 (permalink)
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Hi Mac,

Nice going so far!

How do you decide which waves to enter your trades against? Do you consider 2 or three legs as a complete wave? or channel touches maybe?

Thanks,

Hey pvlee,

Thanks for the encouragement! Sorry it took so long to respond; I had to think about how to describe what I see/think. For me, it's sort of an ebb and flow of constantly shifting ideas - sort of like 'if-then' conditional logic inside my head.

I loosely define a leg as: at least 5 bars in the same direction without 2 consecutive opposing bars. So, I won't trade any move that is smaller than 5 bars for 2 reasons: 1) usually not enough room for a 10 tick scalp between the 33% & 66% PB levels, and 2) I've just seen a lot of 4 bar moves fail to get any follow through. (This is specific to renko charts; I think time or tick charts probably need a definition based on the size of a move vs # of bars.)

I always try to stick with the trend as much as possible. So, for example, if I think the market is either in a bear channel or trading range, I mostly look to sell. I trade a bit differently in a trading range vs a trend, and here are a few main price action concepts that I use to try and stay on the right side.

1. Most strong breakouts will get at least a 2nd leg down. The logic is that many traders will be surprised by the breakout and exit on any small bounce. And pullback traders like me will see the strong breakout and want to enter the breakout direction on the pullback. It creates an environment where both bulls and bears are trading the same direction at the immediate moment.

Application: In trends and ranges, I'm always looking for strong breakouts from logical support/resistance areas, or from valid price action setups. My second trade yesterday (5/18) is a good example. I expected the market to turn down in that area, and the bears got a nice leg down (strong breakout), so I expected at least another attempt down. I also like when the pullback levels match S/R like a trend line or prior H/L, etc. I view the PB levels themselves as a form of S/R, but it's always nice to have multiple S/R around your entry price.

2. Most breakouts from trading ranges fail. Trading ranges often have 2 legs up to the top, and then 2 legs down to the bottom.

3. Any '3-push/3-leg pattern' can be considered a wedge, even if it doesn't look like one. A wedge bottom usually leads to 2 legs up to test the top of the wedge, and vice versa for a wedge top.

4. Tight channels usually function as one large leg. If you look at a higher timeframe chart, the tight channel on your chart probably will actually be just 1 clear leg or microchannel.

Application of 2, 3, 4:

Due to 2, in larger trading ranges, I try not to sell in the bottom 1/3 of the range or buy in the top 1/3. So, if the market has a strong leg up to the top of the range, I usually won't buy the PB from that leg. Instead, I'll wait to see what the market does. If it breaks strongly above the range (like 5 or more bars), I'll look to buy a PB from that move. I'd expect at least 2 legs up since strong breakout and then maybe a measured move based on the height of the range. If, instead, price makes a strong move down, I'll look to sell a PB from that leg down. <--This is my default assumption at the top of a range. The opposite is true at the bottom of the range. The first trade I passed on today (5/19) is a good example of a strong breakout below a possible range bottom that led to another leg down.

In tight trading ranges, like 20-30 pips, I usually want to see a strong leg up from some support near the bottom of the range. I'll then look to buy the PB from that, but I won't usually buy the PB from the 2nd leg due to the '2 legs' part of 2. If the range is big, I can usually trade it more like a trend, so I don't worry as much about the '2 legs' part.

Due to 3, in trends, I'll usually stop trading after I see 3 clear legs in the direction of the trend because that might be a wedge variant and lead to 2 or more counter-trend legs. I won't necessarily take trades in the other direction, though, since at that moment, I believe the countertrend move will probably end up as just a larger PB and the trend will continue. This holds true for tight channels with 3 legs, too. The trade I took today (5/19) is a good example. Even though it worked, I should have waited for the larger correction to complete. I probably could have gone long down there since the market had a lot trading range action as well.

Due to 4, when I see those larger tight channels, I start to look at PB levels for the height of the entire channel. It's possible that any larger, complex correction on my chart is just a simple PB on a higher timeframe chart - like an 8 or 10 renko for example. So, traders on those charts will be trading those levels just like I would on mine for the smaller levels. This was the entire basis for my first trade yesterday (5/18). For this, the context has to make sense. If the tight channel stops right at the bottom of a trading range, then, I'm not sure I'd sell a PB, especially if it's already the 2nd leg down. It might just be a case of 2. on the higher timeframe under those circumstances.

The last thing I'm always doing is comparing buying vs selling pressure, and I like to go with whichever side I think is winning and has the best context right now. Sometimes, if it's not clear on the renko, I'll take a look at the 5 or 10 minute chart. I like to ask these questions when comparing buying vs. selling pressure:

1. What do the breakouts look like compared to the pullbacks? How big are they compared to the pullbacks?
2. Are there consecutive, big trend bars in one direction?
3. (for time/tick charts) What do the signal bars look like for each side?
4. If I had to be long or short right now, which would I choose? Where would my stop be? (Al's "always in" concept)
5. Are there any gaps between the bars? (another of Al's concepts)

I know it's not a simple answer, but I hope it helps some. If anything's unclear, just let me know, and I can try to provide better examples with charts, etc.

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Old May 20th, 2015, 01:15 PM   #30 (permalink)
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Wednesday - 05_20_15


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Summary/Review:

I felt pretty relaxed today and didn't hesitate. I'll try to keep up that positive behavior in the future. My BE stop was taken out on both trades, but I expect that to occur more often when entering on the 33% PB levels. I may come back for FOMC to see if there is any opportunity, but I'm not sure yet.

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