There are primarily three kinds of trend terminations that turn strong trends into trading ranges (rather than reverse the trend direction). The first one is a TTR, where the bars gradually become tiny and dojiish. This is rather easy to identify and is usually seen in bull trends. The second is a double top or double bottom that triggers but does not result in a breakout on the other side. The last one is a failed reversal followed by a failed A2. This is usually the case with the termination of a bear trend.
b22 was an inside bar signal following three pushes down (and a slight TCL overshoot). However, since it wasn't a bull reversal bar, a shaved inside bar near the bottom of b21 or a second entry, its a poor signal and unlikely to attract many bulls. This was followed by two sideways legs and the second attempt to sell off at b27 was off a poor signal bar (a 3t bull doji) in the middle of the range. This is unlikely to attract a lot of bears. This is the earliest indication of a terminated trend.
The 1t nominal new low (1tf) at b29 is caused by the remaining bears exiting at the low of b21 and confirms the end of the trend. From b30 to the end of the day is a trading range composed of small trend legs like all trading ranges. As expected almost all signal bars were very poor and there were no large moves.
Cadaver, i was wondering how many contracts do you trade on each entry? At what distance is your stop placed? And at what points do you take profit and do you move the stop to break-even at any stage?
ReplyDeleteI Currently trade 2 contracts, use a stop of 2 points and aim for 2 points on one contract and 4 points on the other. However it doesn't seem right that when i get it completely wrong i lose $400 and when i get it completely right i gain $300. These odds make trading extremely difficult to be profitable.
Especially when recently the market finds it difficult to reach 4 point target but having a 2 point loss is fairly easy.
What suggestions do you have for this problem? I know you make very few complete losing trades so even with my targets you would make money. But for myself its hard to do slightly better than break-even.
If you follow my recommendation and only trade strong signal bars on deep pullbacks, you should never need more than 1.5 point stop. This approach will lead to a 3 point loss when you are wrong and 6 points when you are right. See this post http://ninetrans.blogspot.com/2011/11/two-strikes.html
DeleteOmar, if you trade 2 contracts with 2 point stop and you are wrong you lose 4 points = USD 200. If you are right you get 6 points = USD 300, right?
DeleteCarmen - Sorry your right but still that only equates to a 1-1.5 risk to reward ratio which is difficult to make a profit with. Especially when you are starting off.
DeleteCadaver - when you say deep pullback, is that two or three bars or beyond the ema? Just as a reference what would you define as a deep pullback? I understand it difficult to be specific because every pullback is different.
Omar, I highly recommend you to watch Cad's YouTube videos at "11cadaver".
DeleteCad, Would you please advise which bar you would had entered a long trade in today's (2/1/12) 5m chart? Is it b8, 1t above b7's high or 1t above b2's high? Thank you!
i have watched all the videos, a few times over. I am just confused on what to concentrate on and how to trade it.
DeleteCadaver i would really appreciate if you could do a post for advice for new traders. What set up you suggest, a few examples of the setup and where to place stops and take profits. Ive been trading for a while now and continue to break even.
Omar, I just ordered Al Brooks' latest books today over Amazon. The cost is $142, that's less then what I lost today (fighting the trend and making the dump mistakes Cad mentioned in his Greed post on November 24, 2011). I believe Brooks is like a master/teacher who would show us the basics, the principals and trading techniques. On the other hand Cad is like a mentor who gives us daily advice and wisdom via his blog and someone we could practice and trade along with. That said, there're other essential qualities to successful trading that cannot be taught. Some of them are hard work in studying new skills, patience and discipline.
DeleteCadaver, could you tell me if you some how consider the bull channel from yesterday when you placed sell order below b13 A2?
ReplyDeleteThank you very much for your reply.
Carmen, due to the strength of the down move (all shaved or 1t tails), there was an extremely high chance of the market at least testing the low of b8. As long as there was an entry 2 pts above it, I would take it.
DeleteCadaver, is there a way that you could provide the BarOfSession indicator? I've been trying to code it myself, but I have little experience programming.
ReplyDeleteThank you!
Search for NinjaTrader BarOfSession indicator. Its available on the NT support forums.
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