When the day opens with a clear trading range presented by multiple legs, there is a very good chance that any trend attempt away from it will at least attempt to turn back into the range due to the magnetic effect of the consolidation. Often, the trend will reverse exactly at the measured move of the opening range as shown today. If the reversal is successful, then it turns into a extreme of the day (XOD) 1Rev.
A successful XOD 1Rev will attempt to take out the other extreme of the day (b29) and will often result in a BP trend in the new direction. When the breakout attempt is during lunch hour, the pullback could be complex and drawn out (b29-46)
Sometimes, the attempt to turn back fails in a one or two legged move and results in a 1PB resumption of the trend move. The fewer the bars before the pullback, the higher the chances of 1PB resumption of the original trend.
There isn't much rhyme or reason to the trades you do take and the trades you do not take and
ReplyDeletethe reasons for them are all over the place.
Your blog trades seem very hindsight oriented/fake and not believable. The 1/3 'correction' doesn't help. Ninja playback.
You are so rude!
DeleteSpike, your skepticism is noted.
ReplyDeleteCad,
ReplyDeleteDid you enter on limit order on bar 7? or Did you enter 1t below bar 6? I didn't take this one due to large signal bar & too much overlap.
Thanks.
Hi Cad
ReplyDeleteI got a little confused after the first paragraph. Let me see if I can put the rest of what you outlined here and you tell me if I am correct or not. I appreciate your reply in the matter.
"A successful XOD 1Rev will attempt to take out the other extreme of the day (b29) and will often result in a BP trend in the new direction. When the breakout attempt is during lunch hour, the pullback could be complex and drawn out (b29-46)" What you mean by this quote is that you consider bars 11 to 29 to be a BO and bars 30 to 46 to be the pb of this trend. Am I correct?
"Sometimes, the attempt to turn back fails in a one or two legged move and results in a 1PB resumption of the trend move. The fewer the bars before the pullback, the higher the chances of 1PB resumption of the original trend." By this quote you mean that to gauge whether the pull back of bars 30 to 46 is going to remain a pull back and not a trend resumption of the original bar 6 to 11 trend depends mainly on the number of bars during the trend period of bars 11 to 29. So the fewer the bars in this trend (bars 11 to 29) the higher the chances the pull back is going to be a trend resumption (and therefor not a pull back of 11 to 29)and the higher the number of bars in this trend (bars 11 to 29 the higher the chance that the pull back is going to terminate and the bull move of bars 11 to 29 (in this case) will continue. Am I correct about this?
By the way is there a way you gauge these bar counts? For example do you compare the number of bars in the first trend attempt from bars 6 to 11 (in this case 6) to the number of bars in the second trend from bars 11 to 29 (in this case 19) as a ratio (in this case 19/6=3.2) or do you just go by the visual effect of what you see on the chart (eye balling each move)? Also does the deepness of the pull back has any effect on your decision of considering the pull back as successful or not? In this case the market pulled back to the mid point of 62% and 76.4%, which was also the area of the 1st pb of the 11 to 29 trend.
Interesting post by the way. Thanks.
z.cui, the correct entry is below b6 or b7 after the bar has closed. I entered below the close of b6 on a stop order. Sometimes when the tail is large and the signal bar is an inside bar or inside bar variant, I will treat just the body as a signal bar. Note that this is not a proven strategy and I'm still collecting data on it.
ReplyDeleteShideh, b11-29 is the expected attempt to take out the other extreme of the day. b29 is a breakout attempt that failed. b30-46 is a drawn out complex pullback.
The idea of a 1PB off a opening range BO is that the pullback occurs very quickly. If the pb occurs after 4 bars and many points as today at b11, then it is more likely to be a successful reversal. The fact that its at a place where buyers would enter (MM of opening range) increases the chances of a reversal rather than pb. However, a 2 or 3 legged move after a reversal that stops at a resistance point such as ema, opening range etc. is likely to result in 1PB resumption of the opening range BO.
This is a 1PB vs 1Rev consideration and does not apply to later trends reliably (i.e. the b29-46 pb)
1PB/1Rev are complex and Im attempting to break them down into multiple setups so that they can be easily understood by traders and coded into indicators.
OK. So what you are saying is that after the opening range which was a trading range, the first BO (b6 to b11) is going to have either a pb or a 1Rev and you want to gauge which one it is as the counter trend bull move after b11 unfolds, but at the same time since the opening range was a trading range one option that you also expect as another possibility is that the other side of the range is going to be tested before the market reveals its hand whether the BO from 6-11 continues or the counter trend that tested the other extreme is a successful reversal.
ReplyDeleteNow as a general rule a 1pb after the opening range BO should occur quickly before many bars and many points. So the sell off from b6 to b11, because it encompassed 5 or 6 bars (depending on where you start the count for the BO) and was about 10 points makes the possibility of a 1pb from it slim, precisely because if there was going to be a 1pb it should have happened a lot sooner (perhaps after 2-5 points and in 2-4 bars). So right off the bat when the reversal bar forms at b11 you suspect the reversal is a true reversal and not a 1pb. This suspicion of yours increases as the reversal continues and puts out many bars (since a 1pb should contain just a few bars). At this point you suspect that the scenario of the test of the other side of the opening range is unfolding. In addition to the above since the location of b11 low is at mm, a place where bears may scale out and bulls may scale in makes it even more likely that the bear trend from b6 to b11 has come to an end.
But on the other hand you carefully monitor the reversal at b11 for more clues of whether the bear trend is likely to continue or a successful reversal has taken place. If the move up from b11 has bear legs and fails at a recognizable resistance point then it is likely that the bear trend will continue, and so the reversal at b11 will be considered a possible 1pb and not a reversal.
Since the move up from b11 continues for many bars and successfully test the other extreme a failed BO from it at b29 has a good chance of continuing in the same direction of the failed BO (bull move) after a pb. This pb if it happens near the lunch time hour can be complex and drawn out. In this case the pb was in the form of a 3 push wedge (b33, b38, b46).
Shideh, thats about right. I plan to break this complex but profitable pattern into simpler rules so that its easier to recognize.
ReplyDeleteCad,
ReplyDeletedid you enter below b6 because b5 was the 2nd failed attemp to close the gap (being b2 the 1st attempt)?
Racer, it was a second attempt to go down after two failed attempts to go up on a gap down day. Its a very high probability trade.
ReplyDelete