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It's so easy to get trapped on breakouts like that, I have been many times! Always check for final flags if you're buying/selling late in a trend. A triangle that forms late in a trend is often the final flag. In this case, the triangle at the MM target with the 5 bars before your short entry was a sign that the bears were taking profits and that bulls were starting to buy.
Excellent post! I WILL keep a look out for the final flag. Getting trapped like that is not a fun experience, and it's worse only trading 1 contract. On that particular trade I took alot of heat just to avoid The Big Loss, but had to accept a loss nonetheless. Those have been a drag on the P/L.
No trades. The open was inside yesterday's range (thurs.) I thought there would be follow-through from Thurs. Globex was in a narrow channel down. There was a 3 bar breakout shortly after the open. No follow through. I had a buy stop 1 tick above the 650 bar. The next bar was a bear bar. Good. I took my order off. I wasn't crazy about a long. I'd like better to trade the failed BO.
The market opened within yesterday’s range and continued to range for about an hour and a half and then the fun began. Two trades, 1 winner and 1 loser, 0t.
Trade 1: I sold the close of a bear reversal bar in the upper portion of the trading range. There was one tick slippage so my fill was at 2702.50. I put my STOP one tick above the prior high (2707). My profit target was set to 2698.25, an attempt to get 1x risk. The range was 10 points wide, so there was potential for an OK trade with favorably probability (IMO). Well…the market reversed prior to reaching my profit target and I ended up getting stopped out. -18t.
But here is what I found interesting. Using the prior high as a logical location to put my STOP, a 1x risk measurement put my profit target at 2698.25 (the orange measurement on my chart). If you were to use the same STOP location and measured out 1x risk using the ACTUAL close of the reversal bar (teal measurement on my chart), the profit target is 2698.75. The sell-off reversed at that price to the exact tick. Which is logical. Trading range scalpers are selling that big bull bar (715) and selling the close of the reversal. So there are a lot of scalpers buying back their shorts at 2698.75 or in that area. I only discovered this after the trade during autopsy. Had I been aware of this I could have exited at the (730) doji for a scalp, or at the very least salvaged break-even. By the way, sorry for all the chart clutter. I wanted to illustrate the different profit target measurements and couldn't really find a clear way to do that.
Trade 2: Bought long after a spike and channel breakout over the ONH and above the trading range. I was pretty sure the market was long here. There was steady buying until ~930 (PDT) when the market broke out below the bottom of the tight channel. I anticipated breakout failure. And the breakout DID fail. My profit target was just below the high of yesterday. But I lost my resolve and sold out at 1x initial risk. Manyx actual risk. +18
I probably won't be able to trade RTH much this week due to work. Sometimes I'm able to trade frequently, other times not so much. BUT I'm finding these replays very useful!
When measuring a 1R target like this, the logical place for the stop is 1 tick above the high rather than at the high itself. In this case, your measurement is off by a tick, the target would have been 2698.50. However, I'm not sure bear scalpers would have put their stop above the HOD, but rather above the signal bar. If it's not clear, best to consider both possibilities. A few other things to notice about this trade, the stop entry bulls who were long from the reversal at the LOD were on a 17 tick trap and the bears who sold the big bear bar previous to the bull reversal were probably eager to get out breakeven. Your trade turned around one tick above the close of that big bear bar. Hope that helps.
The signal bar! This was exactly what I was thinking about after waking up this morning...I used HOD because of the trading range. I had considered that there could be a test back up to the top of the range. But was basically asleep at the wheel on this one. But like you said, it's best to consider both possibilities. This gets you out at the right time.
I have time for one trade this morning on SIM. One trade was made on ES, 1 winner, +9t.
The trade: I bought the close of the 655 (PDT) bar, for a 2933.5 long. It appeared that there were two attempts to go below 2930, both attempts were met with buying. I put my STOP at 2935.75 and my profit target at 1x risk. And we got there. +9t.
I've been doing a lot of reading lately and studying. And this has led to an observation I have made about my trading during live and SIM sessions: I haven't got a f#@!'ing clue what I'm doing right now! So I need to parse through the information and figure out what to use and what to discard. Incorporate the good, use it in trading, and further distill the method to eliminate elements that suck. I'll probably be in SIM more often during this process, but live sometimes. I feel like I'm swimming a little bit. I feel like I need some time to work on and evaluate my methodology.
I will be trading on SIM here for what will probably be an extended period to conduct an experiment. My initial goal is to increase my R/R from where it is now, only a small fraction of risk, to a higher level. My win rate has been generally 60%-70% but this has not produced a robust edge...or edge of any form at all ! My plan is to trade as I normally would, however, I will be holding each position until it hits a profit target or gets stopped out. Each trade will have a minimum profit target of 2x actual risk. Stops will be placed at logical locations, meaning at a price where the trade is mostly likely invalid if touched. This stop strategy is the same one I use during live trading.
My goal is to find some insight into the kind of market context and setups that generally produce 2R trades. I also hope complete this experiment with a higher R-multiple. How high? I haven't decided on a goal yet. I suspect as I focus on this single metric it will expose other issues in my trading which will be addressed later. I also expect that my win rate will plummet and this could get really ugly. And I thought I might go dark for this process due to my naturally instinct of avoiding public embarrassment. But I decided it would probably be better for myself and maybe benefit others to share this process with the forum. And I invite all to please share ideas, comment, criticize, and critique as needed.
I was going to post my trades for today during this post...but I'm out of time for now. Be back later!
Do you mean actual risk or initial risk? In the way Al defines it, the actual risk is the MAE + 1 tick of the trade. It's hard to calculate without the benefit of hindsight, although you could calculate it after the close of the entry bar. The initial risk is the distance to your stop, much more useful! Often on good trades the actual risk is tiny.
I was thinking I would use initial risk in the beginning. I want to get experience finding context and setups that are most likely to produce 2r trades using initial risk as the basis. But I imagine we maximize profitability, at times at least, by exiting at 2r ACTUAL risk. That may stray into the realm of the 'exit efficiency' metric...I don't know. But I do know that I want to stick to the most narrow scope of study possible with my little experiment. Any suggestions mg?
! My plan is to trade as I normally would, however, I will be holding each position until it hits a profit target or gets stopped out. Each trade will have a minimum profit target of 2x actual risk. Stops will be placed at logical locations, meaning at a price where the trade is mostly likely invalid if touched. This stop strategy is the same one I use during live trading.