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I wholeheartedly agree with @DbPhoenix and his recommendation. I think market replay is the more underrated and unused tool available to traders because it's time consuming. In addition to what DB already mentioned:
1) At the end of the day mark all the areas that were trades and replay them by clicking the mouse button and executing the trade to perfection. Develop muscle memory.
2) If you took trades that you shouldn't have, replay those areas, try to remember what you were thinking, and correct your thinking.
This has helped me tremendously over time and it's very similar to what professional athletes do after a game (known as "watching game tape") to improve their themselves. Hope it helps you as well.
In trading, shortcuts lead to the longest path possible.
In order to identify some observations regarding to the losing trades, below are stated some points:
• There are some loser trades (taken under conditions of AMT, SLA or both) that result from the normal process of trading and is a fact that one has to accept. (1, 3)
• When the trader takes a trade close to a level of interest, before it is surpassed, like the PDH, PDL, Limits of the PMTR, ONH or the ONL the trader should be aware of the PA around this levels, because is likely that occurs a reversal; because those are areas that represent a point of interest for many traders of several timeframes. (2.)
• Sometimes the PA is framed under too tight trend lines (following the Lows of the highs of the bars without a swing point in order to anchor the PA), therefore the attention focuses in the micro context and the consolidated trend lines are not taken into account, this situation could lead into a trade that is not according to the context of the day. (4)
• Trade “Set ups” that are not defined in the trading plan such as DB, DT or REV. For the moment the only strategy that should be tested is RET. (5)
• Some trades are executed, under the conditions defined in the trading plan, notwithstanding because of the price action the trade is discarded or stopped out prematurely, however the price continues in the direction forecast initially. (7)
• Sometimes after the break of a Trend line with an extended movement (approximately 11 pts in 4 minutes in average) the price is framed under an overbought or an oversold condition therefore the RET taken after a fall of this type of magnitude ends up like the last downward push after reversed its movement for a change in the direction or a deeper retracement. (8)
• In some occasions, after the trend is going on. In order to go in the direction of the movement a trend continuation trade is taken, notwithstanding because the trade is executed several RET`s after the begging of the trend, is likely that the price reversed at this point or spike certain levels something that can cause an exit in the position (9)
• Although a small fraction of trades where closed as a result of fear, this is something that the trader needs to eliminate, because from a professional point of view the trader knows exactly what to do in each situation, therefore is no room for fear or other emotions to interfere with the trading strategy (10).
• Sometimes there are reentries in the general movement of a trend, notwithstanding the reentry is given around a secondary trend line and not close to the consolidated one, therefore in some occasions the price tend to go closer to the consolidated trend line and the trade is close with a lost (11)
• When the trade has already lifted of and a consolidated trend line is already going on, in some occasions when the trade is managed with secondary trend line the trader falls into the cycle of exit/entry/reentry which generates a premature exit of the winner trade, entry into a loser trade and later a reentry in the direction of the initial forecast movement. (12).
Conclusions:
• Been aware that the levels of PDH, PDL, ONH, ONL represent zones of interest for different types of traders regarding to the time frame they work with. Notwithstanding one must follow the price action and be careful regarding to the amount of risk around these areas because strong movements can happen, therefore the price could break decisively or make a fail BO.
• Been aware of the context that the price is given not only in the “long term” (Weekly, daily, hourly) but also the context that the day is providing in each trading session, therefore is imperative to identify the price action around the consolidated trend lines in order to focus the attention in the behavior of the PA, and try to avoid tight trend lines that can cause premature exits and entries.
• For the moment trade only Retracements.
• Leave the emotional aspects aside and follow the rules of the trading plan.
• Be careful for take a RET after an extended movement that could cause an overbought or oversold condition, and even more when the price has not made a swing point that could be used as an anchor to draw the trend line.
• In some occasions when the trader is trying to enter in a trend that is already going on, the probability of success decrease because a trend continuation trade does not offer the same advantage of enter at the beginning, and the advantage is not only regarding to the price but also to the management of the position.
In the same line of thought of the loser trades study, below are stated some characteristics of the winners trades regarding to the PA and the interaction with the context (attached is the file with all the images, in folders with their respective numbers)
1. Winner trade after the Price Break out an interest level (such as PDH, PDL, ONH, ONL etc)
2. Winner trade after the price failed to break out certain level of interest, later a trend line is broken and the RET is triggered and confirmed
3. Trade winner after break a trend line, which is taken in order to go in the direction of the prevailing movement, therefore could be consider as a trend continuation trade.
4. Trade taken using only the SLA
5. Winner trade after the price broke the Trend Line but there were no a LH, instead was a DT.
6. Scratch Winner trade.
Conclusions.
• Once again is shown the importance of the interest levels. Because almost the 40% of all the winners trades came after a BO or a FBO of these areas.
• The 20% of the winner’s trades came after a counter trend movement, in which a small trend line is drawn and is used as an anchor to take the trade in the direction of the underlying trend.
• The 32% of the winners came with the only use of the SLA without taking into account the AMT.
• Almost the 86% of the trades lifted off during the first 3 minutes after the trade was triggered, therefore this kind of action allows to understand the kind of behavior that one is looking after enter into the trade.
First is important to mention that the entry of my trading plan is located one tick above/below, the bar that eventually triggered the RET (those who are familiarized with the SLA will have a better understanding).The results shown in the table below represent the MFE of the loser trades, therefore after taking in consideration 188 loser trades in Forward testing and Sim trading, the data shows that the 51% of those trades had a MFE of 1 point, in this order of ideas in order to optimize the process, the entry should be modify to 4 or 5 ticks from the point where the trade is triggered; in order to “avoid” fake RET`s or in other words take those RET`s that show more willingness to going in the forecast direction.
I would like to know the opinion of those who work with this methodology especially @DbPhoenix
I know I should know this by now, but what exactly do you mean by "the bar that eventually triggered the RET"? (A picture would be nice; I'm sure you have one lying around).
And this is an example of what would change if I put my entry one tick above the "V" (I dont remember the word to say the deepest point of a retracement ) which is the scenario 1 and the other entry with 5 ticks above the "V" is the scenario 2
No, but people generally become frustrated and quit by now.
You may find that you have to venture off from the mechanical at this point. The exact number of ticks above (for a long) the "trigger bar" is not as important as the intent of the buyers. If they are "intentful", then the entry will be successful. If they're just screwing around, then it may not be, depending on how long it waffles around and whether or not you want to wait for it. If price just dithers for a minute or two or five or ten, then the eventual exit becomes a different trade with a different set of traders. It may "look" like the same setup, but the traders who were trading a minute or so ago are done. This is why the number of bars in the retracement and/or the depth of the retracement are not as important as how badly, if at all, traders want in. To pick up on that, it becomes necessary to focus on the price movement, not the "bar", i.e., the flow of price. Defining one's entrance as being so many ticks or points above the "high" of a bar of some sort is entirely in the mind of the trader. By choosing this level, he is measuring intent, though he may not be aware of it. And, as I said, if the intent is there, the entry will be successful.
But aside from all that, there is also the matter of the danger point. If you'll recall, Wyckoff was not specific about exactly where one enters a retracement. Granted he was looking a daily bars, and the exact entry on a daily bar isn't all that important. What was more important was the location of the danger point, how far away from the danger point the entry would be, and how willing the trader would be to assume the risk. If counting ticks is not productive, you may want to investigate danger points instead and use those as a measure of where to enter. You may find that locating an exact entry within the retracement itself is not particularly necessary, which is why I was general in the SLAB about entering "a few ticks" above the trough or below the crest.
Remember also that W did not use bars at all for intraday trading; he focused on the tape. Today we have the ladder, but we also have real-time 1t charts if one prefers to look at a plot and the context. Not that I'm suggesting trading off a tick chart, but one sometimes needs to be reminded that the bar is in the mind of the trader, not in the market. All that is in the market is the trade itself.
) which is the scenario 1 and the other entry with 5 ticks above the "V" is the scenario 2
