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12:15 When you are a trader, sometimes the hardest thing to do is nothing. Watching this morning, at the opening of my trading window, the mkt was near the highs of the session and my buy area was quite a way away. By the time the mkt started getting close to my buy area, the volatility filters had pushed my buy point ridiculously close to the stops, so I declined to enter the orders. That was the best decision because the stops would have been taken out almost as soon as the buys got filled.
Can you help answer these questions from other members on NexusFi?
I have no idea what sort of points your average winner is or what any of your stats are but given the 30 minute rolling range is north of 5 points for much of the day and the 5m atr is 1.5 points and more the volatility is killing you . Clearly the market since feb has changed dramatically compared to 2017 . Dont know what else to say , hope it improves for you .
Thanks for the encouragement. Volatility is certainly a factor in my entry points. Volatility to a day trader is much like wind to a sailor. You gotta have some or you won't make any progress. But a hurricane can destroy you. There are periods of higher and lower volatility. When it gets too high, you gotta batten down the hatches and weather the storm. My way of dealing with it is to adjust entry point levels to account for wider swings. But nothing is perfect. Yesterday, Wednesday, the volatility was so high that it pushed my entry points almost to the same levels as my stop prices. Two buys and one sell had entry prices within .5-.75pt of the stop prices. So I elected to stand aside. Two of those signals were hit and the stops promptly hit too. The other didn't quite get to the entry.
The logical question here is: Why not adjust the stops like I do the entry points? I do, but to a lesser extent than the entry levels. The reason is this: initial placement of the stop has two functions. Of course it is to limit losses. But the placement price level is also significant insomuch as, if the market gets to that point, it negates the validity of the trade itself. So, if I buy, expecting support at a certain level, and the market breaks below that level, then the notion that the market is going up from there was wrong.
Try to activate your system only when the market conditions are favorable for your system. Define the ideal market conditions (atr etc) and filter out the days that are not favorable (atr too high or too low etc). Creating a "universal" system that works under all market conditions, might be too difficult.
Good trading !
>>So, if I buy, expecting support at a certain level, and the market breaks below that level, then the notion that the market is going up from there was wrong.<<
It is generally a bad idea to get in front of price and act as though you know with certainty when and where the market will do what you think it will do. You have to make decisions based on what price is doing not upon what you think / want / hope it will do. At whatever price level support or resistance is going to be found you should be able to see that activity as it builds. There will be a change in price behavior that over time and with experience you will come to associate with the event you expect. You need to identify an indicator and/or bar behavior on your trading chart or on charts from higher and lower time frames that show you something that is unique to and consistent with the change in short term trend that results when support / resistance does not break. A simplistic example of this is to look at 5 min candles and where the bodies open and close. Find those instances where the bar closes up, the next bar opens at the prior close and then closes down. A Double Body High. Do the opposite and find bars that close down and the next bar opens at the prior close and then closes higher. A Double Body Low. Draw a horizontal line at these common Body Highs and Body Lows and look at the subsequent price movement. You should see that most, but not all, short term swings on the 5 min chart will end (encounter support or resistance that does not break) with these patterns. Think about the dynamic that creates this pattern. Price pushes up, runs into resistance and get a little pushback putting in a wick. The next candle makes another attempt to move higher but then reverses as the sellers assert themselves, moving below it's open and closing lower..... a Double Body High. If resistance is there you will see it's effect on price behavior. Only then do you have a justified reason to take on risk because you now know where the resistance is. This 5 Min bar behavior is reasonable consistent for the swings that play out on an hourly basis. Take the same technique and move up in time and look at 15 min, 60 min and 360 min candles and notice that the end of the swings ( support and resistance does not break ) where these higher time frame Double Body patterns are found, are accordingly much bigger. Look at the Weekly Highs/Lows and see how often these major turns contain 360 min, 60 min, and 5 min Common Body Highs/Lows.
>>Would you mind providing a chart example of a Double Body?<<
I suggest you make the effort outlined below. You'll learn more that way.
As a guide, if you look at Friday's NQ on a 15 min chart you will see a Double Body High at 845-900 CMT, Double Body Lows at 930-945 CMT, Double Body Highs at 1100 - 1115 CMT again at 1130-1145 CMT and finally at the Session High at 1400-1415 CMT and 1445-1500 CMT. So.. notice that in each instance the first bar of the pair makes the higher high...the first stab into resistance (or down into support as occurred at 930 CMT) that triggers the sellers (or buyers). The second bar of the pair puts in a lower high as selling increases. So if you are in a area where you expect there to be support / resistance, how the bar behaves will show you if the other side is able to stop and turn the trend. The bigger the bar...5 min, 15 min, 60 min... the larger the swing it is commenting upon. Think of it logically... to stop and turn a swing that may have run 50 NQ points requires considerable volume from the other side. That level of volume accumulation / distribution takes time and a commitment to stand and hold the line. Most of the major intra day turning points will play out over at least 30 min... that's two 15 min bars. Often that first higher 15 min low and a higher 15 min close after a run of lower 15 min closes will be the signature pattern of the turn. Look at your charts... there is a story being told there if you know what to look for and its up to you to figure out how to read it.
>>A simplistic example of this is to look at 5 min candles and where the bodies open and close. Find those instances where the bar closes up, the next bar opens at the prior close and then closes down. A Double Body High. Do the opposite and find bars that close down and the next bar opens at the prior close and then closes higher. A Double Body Low. Draw a horizontal line at these common Body Highs and Body Lows and look at the subsequent price movement.<<
Here is something that may help you see what I see and illustrate the value of the Double Body High / Low concept.
This chart gets you inside a 5 Min Candle using 15 Sec bars. The squares are the 5 Min block of time the colored bands in each square represent the Open and Close of the 5 Min time period. 5 Min bars are inserted into the chart as a data2 and are set to plot HiLo, width 1, color same as background. Gomi MP is sourced to these 5 Min bars to show the volume distribution within each 5 min time period with Cyan as the POC.
In the second block you can see that although price made a higher high, on a 5 min basis it closed below the 5 min Open. That Open equaled the prior 5 Min Close triggering the Double Body High setup as the dashed red horizontals highlight. In the third block price makes an attempt to push higher but encounters sellers in the high volume area of the prior 5 Min time period. This lower high occurs 4 Min after the prior high making it slightly left translated. This swing is followed by a lower swing high in 1.75 Min. If you study the cyclic behavior of price you will recognize this as significant. On the chart you will see that the smallest cyclic movement in price is @ 6 bars or 90 Sec. The white ma represents the trend of those 90 Sec cycles. Price will be above the white ma and find support on that ma on the way to the High of the 5 Min bar. When that support breaks, the 5 Min high is in and price is now looking for the next 5 min Low. The holding and then breaking of that 90 Sec ma is the pulse (for lack of a better analogy) of price movement. The black ma shows the 5 Min trend of price. Notice in the third block that the white 90 Sec ma has moved below the black 5 Min ma and not only is it unable to cross back above the black ma but it rolls over while the black ma also rolls over and the attempt by price to push up out of the higher low at 2.75 Min is stopped with a Doji at the black 5 Min ma. What this is showing you is the classic behavior of support breaking and becoming resistance.
Also on the chart are, from the left, two blue horizontal bars followed by two red horizontal bars. These bars are the pivot point for each 5 Min time period. In an uptrend, the 5 Min bars will close above its 5 Min Pivot and will make higher highs and higher lows. In a downtrend, the 5 Min bars will close below its 5 Min pivot and will make lower highs and lower lows. When this behavior changes and you go from closing above the Pivot to closing below the Pivot, and you make the first lower 5 Min high and lower low... and you have the Double Body High setup you would be well advised to consider that a change of short term trend is at hand. If you see this same behavior with 15 Min bars or 60 Min bars then a much larger trend change is likely being worked out.
Now for the caveat. Not all turns that you wish you had caught will be announced by the Double Body High.Low behavior. In applying this concept there will be instances where the Close / Open pair are not the same price but are off by a tick or so. In developing this concept I've stuck with the purist expectation of equal levels but it's really up to you to decide what to do with this observation of price behavior.
ps. the code of the excellent Price Action Swing indicator has been modified so that Duration is not the swing length but instead the H to H, L to L duration. If you want to make the same modification search in the Price Action Swing code for: curLowDuration and replace curLowBar - curHighBar with curLowBar - lastLowBar. ( should be around line 2354 ). Then find curHighDuration and use curHighBar - lastHighBar. Comment out the original code rather than deleting it as a best practice.
Also, all my indicators are custom and contain proprietary coding that is bound by NDA's as well as residing is a big ass encrypted .dll....so please don't ask.
