In Trading Strategy Examples: Quick Charts

This is late – and it is very hard for me to get stuff posted prior to this time of day but here it is:

Most recent measured move article / very spike base'ish scenario – regarding the measured move you probably would have identified this on an horly (this is a 15). Cable tends to respect these very much:

Cable First Lunge

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Showing 4 comments
  • LA-Trader
    Reply

    Steve: for this particular price action setup. I’ve identified a few additional overlapping tech levels: (1) as you’ve pointed out, the 1.618 measured move from the Consolidation Zone spike low / spike highs; (2) If you were to just measure the consolidation zone using only the levels which had the highest number of price hits (from about the 0.382 / 1.6373 level to the 100 / 1.6433 level), you would have a 100% measured expansion to the entry level; (3) Fractal Top Demand Level overlapping with the 1.618; (4) Triple Tap price action into the level; and (5) the 1.6490 to 1.6500 Psyche Level. So, this was an excellent set up. Especially, if you had a fluid, “inefficient” move into the level referencing the 5 Minute / 1 Minute Charts. I have a couple questions for you . . . . where would you have placed your Stop Loss and Target? . .. and do you ever break you entry levels up into a zone . . . i.e., partial entries just below the level and partial entries just above the level. Also, many, many times price will hit a zone or a level . . . then retrace quickly off it (giving the level a quick respect bounce), then maybe => 70 % of the time, price will retest the zone another 1, 2 or more times before finally breaking it, or making a significant retracement. I will often, enter on the first test of the level .. then close that first quick order (a quick contra-short in this context), locking in a relatively high probability trade. I will then wait for price to re-attack the level, and I then risk the profit made on the initial trade (or some of it at least), for a shot at the more significant price retracement. Do you ever anticipate this type of level retesting price action and use mutiple entries (1st Trade to capture the anticipated quick/high probability respect bounce, and 2nd Trade to attempt the higher return, lower probability significant retracement). Thanks for your patience with this long comment – and thanks for the chart.

    • Steve W.
      Reply

      I almost didn’t even grab this because I was afraid of the yield on the stop. There are no surprises out there happening these days and so that usually means rangebound activity. This range is particularly tight but that also means sharp pullbacks on pretty much standard technical levels. This one was initially 6430 until I saw that the bottom of the channel was being resilient yet again. So I collapsed instead of basically gambling, becase I don’t have another downward indication yet. As usual it might be there but I don’t see it. <-----Not perfect. A lot of my trades are done like this. I would be totally full of it if I stated that I go for the long haul because that is not the case many times. Again I go with obstacles. One gets beaten, used in the opposing direction as S/R, good. If not, forget it. A longer term strategy this simply does not matter as much. Stop on this one appx 6520. Not the best RR but still within parameters. I am not a fan of multiple positions, but will use them and no more than 2, on rare occasion. It better be really, really good though. I fall into the camp of "well you missed it, deal with it". This is an important concept for me. In terms of multiple bounces, I have yet to really quantify this. I have been trading too long now and, as was the case with EURUSD's triple tap/multiple lows the other day I said "this will keep paying out" I can't say the same here. In spike base'ish scenarios I have yet to find much of a norm. It is usually a story of underlying sentiment. Ultimately, go for high probability/stuff you know that works the best, and don't touch anything else until it makes sense to you. You are definitely on the right track in terms of what to look at, however, much more than many other people.

      • Chris
        Reply

        To follow-on from this comment, I personally avoided this setup because it didn’t quite extend high enough for me. I watched the entire move play out and felt it was an ideal scenario for an intraday short. Problem for me was the fact that the 1.6500 figure (and to a lesser extent the 61.8%R of the larger swing) was sitting right above the spike base high. In instances such as this I’ve witnesses countless times how the proximity of the big figure acts as a magnet, and as a result was only willing to engage with a pop through 1.6500. That’s trading and I’m not disappointed in the missed opportunity, but I am interested to know whether this thought-process factored in your decision to take the trade?

        • Steve W.
          Reply

          Actually I’ve got an article in queue about round numbers and the placement of orders/targets. Bottom line is that round numbers, when unseen for extended periods, are the ones likely to get plowed down. Those seen over short periods accumulate much less interest, due wholly in fact that more time = more eyes = more volume. And pending volume is a magnet to get executed. It is in these cases where round numbers are hit “locally” (less time has passed) that they tend to act as the stereotype goes: points to fade.

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