Market remains in a balance area. Perhaps it will until election ends? The edges are essentially 5800 to 5900. Market needs to accept above or below these prices to break its range. So remember you are in a range market so do not chase trends and odds are market will settle into intra day ranges. 

Last night it did trade down and test 5800 during Europe. This is the low end of the range. Being down at these prices I want to be a buyer. There is potential to break and trend higher as higher time frame buyers may be participating. Risk is if it breaks the 5800 level and it truly breaks. You can get run over buying it. 

 Yesterday I did a pretty decent job with my management and risk control. There were some bad trades in there again, too aggressive, too high risk. But at least I wasn't being stubborn and selling it out at the lows. You have to adjust your strategy when the market is in balance. Which is was yesterday and it is today. You also need to get better at taking those emotional sellers supply as opposed to missing it and then buying for continuation. These work sometimes but not enough to build a business upon. 

These types of entries are more likely in a range environment, in an uptrend environment you need to be more aggressive and in a down trend environment you will get run over. Know the trend of the day, the 1 minute trend and then know the context of the overall market via 30 min profile. Sometimes the market can be in a balance or range situation, but near the top of the range and the day's momentum could be to the downside as those longer term buyers are liquidating their inventory.  

 The lightbulb moment is that I need to use good management and risk control to trade properly. That means taking partial profits, moving trailing stops. Using hard risk and size rules. That coupled with entry guidelines and sound strategy is how I need to trade. Each of these parts are separate but work together and need to be trained. Where I have gotten into trouble last week was in poor trade management. Almost all those losing trades I could have made out okay on if I had managed the trade better. I also had poor strategy on the early trend gap open entry and poor tactics on the entry. You have to wait for those more meaningful "used gun" entries. Too much FOMO at work. 

Anyway, the market got caught short. Yesterday it opened higher and in a way all it did was bring the market into balance. In hindsight this should have been the yellow light for chasing long the gap higher. But the market closed in a 3 day balance at the lows. Well Europe took it higher overnight and now you have the potential of a break out higher. It is still in balance technically so beware of buying in the upper part of this balance as you leverage off intra day supports for longs. Keep your risk tight, your targets tight and trail your stops. Also play on the defensive when it comes to an intra day trend lower as well.  

25 Oct 24

 Yesterday was a an early attempt to push lower and test the prior day low. It failed to get down there and that was the best opportunity on the day. I think I was busy at the time so was not at the "store" when those distressed sellers showed up and some other dealer was able to take the supply. I did try to play it later int he afternoon buying the breaks as it was clear shorts were stuck and there was going to be demand throughout the day. With that said, I still had some bad buys getting stuck with some lame inventory. This comes from a lack of patience and discipline for those better entries - tails, oversold conditions etc.

Lastly the risk control was good. The stop use was good and coming at the trades from a the perspective of how do I manage that 2% risk as opposed to how do I make as much on this trade as possible has been a major shift. Look at the stops as high% sell locations and then size accordingly. Today try using the 5 minute as the main screen and the 1 minute for confirmation - maybe ill shrink it down to  3 or 4 minute to manage some of the risk. 

Anyway, yesterday failed to break low, closed near highs and continued trending overnight. Will open gap higher. Look for longs, watch the gap. Beware of overbought conditions however. 

Today two things happened. One I was buying up at the highs expecting a trend day to continue and then I tried buying as the market was pulling back. Note how the market consolidated mid day. The ADX dropped and the market broke down from consolidation and there was no buying. But the trades today where I lost were spec. trades. I spec. bought a possible range break high that failed and I spec. bought the early trend. So what system can I put in place to SOOT during these markets? The risk management is definitely one. Actually the problem is not the analysis. It's the FOMO buying especially coupled with more management and risk controls. You know when it is a FOMO buy, and if you still do it, you have to manage that risk with small sizes, trail stops and tight targets. But really, just minimize the FOMO. Wait for some emotional selling. Wait for more clear technical signals.  

24-Oct-24 Journal Entry

 Yesterday was a trend day down as the market broke the downside a longer term range. You had a High ADX as the EMA's were clearly flashing red. I had even planned to SOH if the prior day's lows were breached, but I still bought inventory and took some pretty ugly losses. My usual strategy of using this 3LB as a turn indicator whipsawed as the day was a down trend. Important lesson here on the odds of that strategy working when you not only don't have support to lean on but you are actually spitting in the wind of a down trend. Any buying in these instances are contra-trend scalps only. HOWEVER, there is good odds that at some point during the day there will be a short term reversal and the air will fill on the 5 minute because eventually the down trend will reach a higher time frame support. Yesterday it was signaled by a change in the TICK - but you run a very high risk of getting destroyed as you try to pick when it may happen. Another important factor is that it occurred after the symmetry of the down trend broke. This is because people follow crowds and crowds follow patterns. When that pattern breaks uncertainty afflicts the market and emotion sets in. This sets up the great buying opportunities where that reversal can finally play out as you now have pent up demand of stuck shorts and puking longs selling at the lows. 

But my big losses were not because I didn't properly time the market, which is impossible, it was because I failed in my risk management. I put on way too much size in especially inappropriate scenarios, basically scenarios where I was fading a 5 min. downtrend. I don't have a risk management plan in place yet. My sizing is random and I was adding in low probability settings - settings where I was fading a downtrend. So there needs to be a system built for trading down trend days, up trend days and range days. 

I will use the 2%/6% rule. No more than 2% loss per trade and once 6% drawdown on the day, trigger a shot off of trading for rest of day. Pretend my account balance is 50,000 and I am trading E-minis so that means no greater loss than 20 points per trade and no greater loss than 60 points per day. 

So far my strategy for range day: buy when 5 min. stochastic is oversold and the market, use supports to guide good prices, use 1min. 3lb as a turn signal. Essentially the strategy is to buy below value and sell when it returns to value, maybe leave one on for retail sale. Risk on these trades is you make a bad buy, in which case you have some bad inventory and you want to just let it go - this is where stochastic and support are used. 3LB is used for adding to the trades. Other major risk is that something shakes up the market and it triggers into a trend day down, this is where your 2% stop is put into play. But know the market. Know where you want to be a buyer and know where you don't.

I flesh out the other strategies at a later day.  

 

Yesterday the market trended lower. Perhaps filled air on a higher time frame up trend and is continuing higher as overnight saw the market trade up and hold higher prices. There is support near the low of yesterday's range and resistance near the highs. Run system 1 today. beware of bad buys at too high prices though and getting stuck with bad inventory that could flush you out and hit 2%. Know where you are in the day's range, don't get caught on the wring side of the 1 min trend and don't get caught long with 5 min Overbought stochastics.  

Trading mid range has always been one of my weaknesses. Regardless of what time frame you are on, if you are in the middle of a range or a channel, the market is at a tipping point and it is difficult to determine the probability of what a given rhythm will be. Yesterday was an example of that. Without a doubt trading yesterday, I developed experience in trading a certain rhythm. Yesterday was a low VIX, low vol. grind higher. It traded in a very tight 5 minute channel and consisted of mini consolidations follow by mini breaks with very hard to navigate retracements.

I had the early bull bias nailed, but price neared prior day resistance, I got into trouble. My initial bias was that price would remain in the consolidation/range it had been in after Wednesdays run higher. My trade premises were thus shorts with the expectation of it rotating back down. As you can see that never happened, and I was doomed to fighting the tape, scratching and reentering higher getting squeezed all the way up. I gave back the nice profit I created this morning. When I finally realized what was happening, I started looking for fades, but given the low VIX grind rhythm, to find a fade that paid adequately was something I could not accomplish. The entries were nearly impossible to time. As the old saying goes, never short a dull market. Fades work best in emotional markets. Yesterday, that panic and emotional overshoot was not there. The rhythm was setup by the daily bull channel, supported by hourly bull trends within the channel.

 

The pink bar represents yesterday. Before the day opened, you can see air to the upside as price was in the middle of this channel. Price had also been somewhat consolidated over the past 2 days or so. That pink circle shows the bear trap that drove my bullish bias in the early part of the session. Shorts were stuck and they got chewed out. I'm not saying I should have bought and held long, or got long as it retraced from the 3rd/4th/5th pushes, but I need to recognize this market rhythm and no to not try to short it. Oh yeah, and look at 3 line break.

 

 

Trading is all about remaining objective and adapting to different market rhythms and conditions. I will admit I got a tiny bit emotional yesterday, after giving some back, I was too eager to try to get it back. I was afraid of missing the one and only fade opportunity, thinking it would really be my only chance to scrape out a winning trade. The result was loss and frustration. With each day in front of the screen, I get better at identifying when I'm dialed in and when I am not. As I build the armor each day, I get closer to that tipping point where my trading potential will breakout and my very own Chinese Bamboo Tree will grow to the sky.

 

 



Today was one of those very strange days where I had the market rhythm pegged to the tick. I was able to feel where the market was likely to go, placed my orders got filled and saw price move in my favor almost immediately. It is fascinating how some days this can happen, and others it feels like you are fighting the current all day long. I believe what it has to do is aligning yourself with the current market environment. For me, certain market patterns, chart patterns etc. are more easily identifiable. For example today, the 60 min had put in a nice bull cup, at the bottom of a daily bull channel, and we opened up gap down (the blue line on the 60 minute chart) with air to the upside to fill. Tick opened at -900 and price just wasn't really going down. All day I was able to maintain my bull bias and take advantage of any tests lower. The key will be screen time. Learning how to identify the immediate rhythm with conviction and knowing when I don't have it and to avoid any trouble. The daily bull still seems to be in control. That doesn't mean that everyday is a bull day, but it serves as further confirmation for bullish price zones.