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Diary of a simple price action trader


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Diary of a simple price action trader

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  #61 (permalink)
Netherlands
 
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Reflections of a price action trader 1: Stop placement.

I like my stops to be tight (small risk) but logical. I know I should give the market some room but buying sugar contracts, like Jim Rogers, and then hold on (for months or years) for a possible bull market is not my cup of tea. Same for longer term trend trading. I simply don't have the budget for it. I need to build up a stake and maybe then I will invest in stocks or futures.

Linda Raschke wrote: "The number one determining factor for which time frame to trade on should be the amount a trader can afford to risk". For that reason I chose the 1m chart (and sometimes lower in cases of high volatility).

Stop placement has all to do with your entry. When trading the 1m chart your entry is often too early or against the higher time frame trend. That's why it's important to look at higher time frames. "Trend analysis on multiple time frames is used to improve risk/reward ratios as well as determining leverage. If there is an established trend on multiple time frames leverage should be used. If two time frames are in opposing trends, the market is in a consolidation period and lower leverage should be used. Concentrate on the particular time frame you choose to trade on, but look at higher time frames to determine if a small or large target should be played for as well." - Linda Raschke

For that reason I used to look at the 3m, 15m, 30m and 1H chart as this is normally the accepted way to go for an intraday trader. But I found it to be too much. I want my method as plain and simple as possible. So recently I decided to look at the 1H chart for direction & levels and the 1m (and/or 5m) for entries.

Although you should give your trade some room you want to enter as close to the danger point as possible so you will know right away if you're wrong or right. I like to think of it as buying a cheap lottery ticket with a high probability of a good profit (and no, I am not a gambler).

Wyckoff thought stops should be placed at obvious danger points. In other words, look for key support or resistance levels that, when broken, would change the initial assessment. He wrote "There are critical points which occur in each swing, just as in the life of a business or individual. At these junctures it seems as though a featherís weight on either side would determine the immediate trend. Anyone who can spot these points has much to win and little to lose". I like that.

So the entry is most important in determining where to place a stop. Danger points are key support and resistance levels. A breakout failure (in Wyckoff terms a Spring or an Upthrust) near these levels can provide a good opportunity with a tight stop.

Yesterday, Friday 26th, the 1H chart of the NQ showed rejection of higher prices (with a double top) and a trend down. Looking on the 1m for with-trend entries with a tight stop we watch for breakout failures (BOF) to the upside (upthrust), a breakout pullback (BOPB) or breakout of a pattern like a bear flag or wedge. These patterns are a kind of consolidation pattern and will show a high volume node (HVN) on the volume profile which acts as resistance and will give us a good idea where to enter and where to place a stop.

We don't take the 1st leg PB short on the 1m because we should wait for some kind of consolidation (and possibly some confirmation). The market goes from trend (high volatility) to consolidation (low volatility) to trend. A clear consolidation is a must. Often the range of the candle in relation to the volume shows who is in charge, the bulls (demand) or the bears (supply).

As you can see on the chart there are quite some good opportunities to take a small risk entry. Short on an upside BOF is selling high and buying lower. As you can see also although my entry was spot on (I waited for a no demand test of the small range high) my exit was way too early. I excited on the swing low where buying emerged (see volume), good for a scalp but a bigger profit is tempting and may be necessary to compensate for the bad days. Taking profits too early is one of my weak spots (my demons) I have to work on. But that's for later. Enjoy your weekend.

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  #62 (permalink)
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200627 Week in review

I was a little surprised to see I ended the week with a small profit of 18.25 pts (-5.25 pts in the micro-ES & 23.5 pts in the micro-NQ). This is the first profitable week after I started journaling begin this month. I had a bad day on Tuesday (-$63.75) and thought this would lead to a negative balance for the week but the other four days ended positive ($22.50 + $5 + $10 + $47).

Last week (post #46) I wrote the losses per week were getting smaller and that I hoped for this trend to continue. So far so good. First week: -$322.50, second week: -$165.00, third week: -$61.25 and last week: +$20.75 for a total loss of -$528 for this month (I don't dare to look at the costs).

I like to point out that it's not so much about the total loss for the month as it is about making progress. One step at a time.

Still two more days to go for this month. Then I will be three days off. For next week I will do like always, I will work on my demons and try to do a little better each and every day.

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  #63 (permalink)
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200629 US AM session trading recap.

Traded the MNQ

Trade 1: Long 1m PB at 1H level on strong momentum (bullish engulfing). Closed too early. Next 1H level should be minimum target for a total of 20 pts (2.75 pts).

Trade 2: Long 1-leg PB (1m) after wide 1m bull bar. Entry is too early (just 1-leg), closed on the 2nd-leg of the PB (-10.00 pts). I could have used a wider stop (below swing low) but I am not comfortable with that because the market can go al the way down to the low or stop me out on a spring and rally back up. I much prefer to close and then re-enter.

Trade 3: Re-entry long after the 2nd leg of the PB had formed with a HL and buying tail. Not yet in an uptrend on the 5m. Therefore closed near the high but still too early. Market reached the daily level for what would have been an extra 25 pts (13.75 pts).

Trade 4: Long PB (1m). Entry is early, just 1-leg. Better wait for a 2nd-leg. Scalped for 7.25 pts.

Trade 5: Re-entry long 2-leg PB (ABC, 1-leg PB to daily level on the 5m). Failed breakdown with buying tail (at daily level). Could be a test of the prior breakdown IB (white line) so closed early. Market reached the high (an 1H level) for what would have been an extra 30 pts. (5.00 pts)

Total +18.75 pts.

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  #64 (permalink)
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200629 US PM session trading recap.

Placed no more trades in the afternoon, only one in sim (+16 pts).

To win is one thing, to keep it is something else.

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  #65 (permalink)
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Open range breakout failure (BOF) in the DAX.

Closed at the first trouble area for a quick 20 pts. Always nice to start the day with.

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  #66 (permalink)
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200630 US AM session trading recap.

Traded the MNQ

Trade 1: Long PB for the RTH high. Didn't wait for a second leg PB because of strong momentum. Also the 5m just started to move and wasn't in pullback mode yet (+7.00 pts). Should try to hold on for a higher time frame level (1H at 10033.00).

Missed the next PB with H2 long.

Trade 2: Long CPB (-0.75 pts). Too early, in a range & near the high.

Trade 3: Re-entry long (-7.25 pts). Too early, in a range & near the high.

Trade 4: Re-entry long. Closed at high (8.00 pts).

Trade 5: Short on impulse move down for a (counter-trend) pullback (distribution at 1H possible resistance level?).
Trade 6: Scale-in short for at least another leg down. Stopped at the high (-21.75 & -19.50). Sometimes I will give the trade some more room. Often regret it. Especially when trading against the trend.

Trade 7: Long BO (accumulation) for a move to next 1H level (10120.00). Long near high resistance.

Trade 8: Scale-in long. Didn't wait for a pullback and went long at the high so I had to sit through the pullback and took some heat (+16.75 & +18.25). Closed because possible pullback to test the breakout.

200630 US PM session trading recap.

Trade 9: Long low ascending triangle (HLs) for a move to 1H level (10120.00). Too early. Stopped (-5.25 pts).

Trade 10) Re-entry long. Too early (-3.75).

Trade 11) Re-entry long (+17.25).

Trade 12) Scale-in long (+0.75). Closed because of a possible pullback to test the breakout. Came later and I missed it. 1H level was reached at the end of the session.

Total for the day +9.75 pts.

I have three days off now. Don't know when I will be able to post the Monthly evaluation.

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  #67 (permalink)
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For me ...this topic and refered Youtube videos "PATs Trading" were helpful. thanks.

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  #68 (permalink)
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rrpp13579 View Post
For me ...this topic and refered Youtube videos "PATs Trading" were helpful. thanks.

@rrpp13579 There are no referred YouTube videos in this thread. "Thanks" under right every post. Cheers.

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  #69 (permalink)
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Monthly stats for June 2020

Total result for June trading MES: -$575 (period 6/1 - 6/25)
Total result for June trading MNQ: +$104.00 (period 6/26 - 6/31, only three days)

Total result for June is -$471.00 (before commissions).

The three biggest losing days occurred in the first week of journaling. The second week had 3 losing days (smaller than in week 1) & 2 winning. The third week had 2 losing days & 3 winning (1 small). The fourth week had 1 losing day & 4 winning. Last 2 days of the month were winning days.

During the month the losses were getting smaller and I managed to turn positive (albeit small).

Two things contributed to this:
1) I went from trading 2 lots to trading 1 lot. When trading continues to go well the next days/weeks I will go back to trading 2 lots and more.
2) At the end of the month I switched to the MNQ. The results are better than in MES and look quite promising. Therefore I will continue to trade the MNQ for the time being.

When looking at the 1H chart I noticed a lot of trades in congestion areas. Therefore I think I would do good to take less trades and try to hold on for a bigger swing target. I am still not sure to go for this path or choose for more kind of a scalping approach. Fact is I closed many trades way too early and therefore my goal for next month will be to try to hold on to my winners a little longer if the situation lends itself to it (and risk some unrealized profits).

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