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let's use this very easy chart. assume i take 3 trades, first one's stop is bottom of the day/chart. second one is the first one's bottom(the higher low), third one is the second one's bottom(the new higher low).
my risk per trade is $100.
so i put in 3 trades and hold them till the end of the day and take profits.
my questions:
1. Does this violate the rule that i should not risk more than $100?
2. should my 2nd and 3rd entry also stop at low of the day? or just the higher low?
2. what's the better way to trade this always in long chart? theoretically, i should buy for any reasons with stop/market/limit orders, but how much? and when to take profits? i know i can take profits at 2xinitial risk.
When you get a BO like the one that came after the first long, the day will likely be a bull day (here became the strongest one, small PB bull trend) or a TR. In both cases, you can hold thru a PB and expect the MKT to come back and test the high (while AIL), so if you are swing trading you need to give it time and don't rush to the doors at minor reversals (taking for granted that you could bear the risk, otherwise you should not be in the trade).
Yet, you can also exit (half off, for instance) below the PW if you fear the risk and you are able to reenter below. Because most traders can't, better to hold until you get a major trend reversal (MTR or wedge) expecting anything else will likely be a PB, like here.
In this particular case, exiting at the PW and not entering again wouldn't be a problem from the profit point of view, the trader would get a nice one. But from the strategy point of view, if you usually exit too early your swings you will find quite often that you exited with a small profit, and then the MKT keeps going three or four times your profit. When this happens, you will regret because that money that you leave on the table is needed for the strategy to work in the long run or, else, you will not be able to overcome your loses.
I'd like to ask for your opinion on the following point if you don't mind.
In both cases, you can hold thru a PB and expect the MKT to come back and test the high (while AIL)
Here, would you consider the yellow arrow third (or fourth) consecutive bull bars as flipping the market to AIL?
If it did flip the market to AIL, given the swing strategy, should trader just exit at the market and look to enter short later (since the premise now is a trading range)? Or it it still better to hold on short for a test of the low?
Similarly, here, would you consider the consecutive bear bars before 2 as flipping the market to AIS?
Should swing trader exit at the market or better to hold on to the long position, relying on stop loss bellow (given that the trader can bear the risk as you pointed out)?
1. Does this violate the rule that i should not risk more than $100?
Even if with the minimum position size allowable, if at any point, you're having to risk more than your self-imposed restriction of $100, you don't take the trade. The risk per trade depends on your position size and its management.
should my 2nd and 3rd entry also stop at low of the day? or just the higher low?
2nd entry stop should be at low of the prior breakout point.
3rd entry is interesting, you can actually use low of the signal bar as stop, although the size of signal bar being small, it is not as high probability for a scalp, so you can swing.
2. what's the better way to trade this always in long chart? theoretically, i should buy for any reasons with stop/market/limit orders, but how much? and when to take profits? i know i can take profits at 2xinitial risk.
You can buy anywhere on this chart(preferably early), and hold till the end of session. The bears never created enough reason to exit. If at any point, your notional profit exceeds the point where your trailed stop would cause you to risk more than your allowed limit - you can reduce your position size(book partial profits) and keep on holding.
I don’t think so. I think it’s reasonable to exit here bellow this bear bar closing on its low.
Sure. You can have a different opinion, it is not necessary that we need to agree on everything.
Parabolic W, we expect a PB, could be sideways, could be to MA, could be very deep, better to book profit and buy again when it reversing up again.
With 35 odd bars above EMA, best the bears can hope is a scalp down. Once it gets to the EMA, bulls would then look to buy for a new high. This is an incredibly tight channel and what appears to be a SPBL and not parabolic wedge(which just in itself is not a reason enough to exit - need 2 reasons like Al says). What's your second reason? I think the bulls are strong enough to test the MA visible above, being a magnet. Still not TR or channel behavior and the market is rallying up, unlike the chart you shared. Not much room available to the EMA, so it is not a great scalp down for the bears.
If you search the Encyclopedia you can see many examples of strong trend grow into endless pullback.
Already having gone through a part of it, could you share some of the slides you are talking about and we can discuss your point? So far, you didn't mention much other than a parabolic W.
Remember what Al said regarding “Other people’s money”.
Yes, I remember it every single day, sometimes resulting in managing my position more than I need to. So, I answered keeping that in mind - as you can understand if you have gone through my last point.
I know Al said need 2 reasons for enter. Did Al also said need 2 reasons for exit?
Yes.
By that time, I think the trader risks give back too much profit.
You risk that by exiting early as well, and being emotionally exhausted/trapped and thereby never re-entering a perfectly good swing trade. Better to trade the charts infront of you and not assume what is going to happen.
Sure:
Not sure, how the slide you shared is relevant in this context. Doesn't this prove that a strong trend pulls back to the EMA and goes on to create a new high? Traders had ample opportunities to exit their swing longs without giving away much profit. On the contrary, the chart being discussed in this thread is a lot stronger than the one you shared and hence it still went on far longer.
Sorry, here is more:
- PW yellow
- FBO above PW blue
- NW green
- FFs purple, red
We already discussed the PW you were talking about. You are expecting the market to F BO of wedge, when in fact that is what the market had been doing all day, creating wedge looking patterns and instead of getting a reversal, the market continues up - does that sound familiar with SPBL?
Also, chasing FFs without context is a witch hunt. You never know which one will end up as the actual FF. It becomes evident after the fact unless extremely conspicuous.
Strong trends as above turn into opposite trend(without any transition) in only 10% of the cases. Even in those cases, market acts extremely climactic, for example streak of bull bars at a stretch and a lot more prominent parabolic wedge than here - with resistance nearby, CC climaxes with bad FT etc. So, better to focus on the 90% where you can make plenty of money and prepare countermeasures for the 10% cases.
As Al said ALWAYS IN LONG and buy for any reasons, is it possible to trade this strong bull trend like this:
Since it is in break out mode, use stop orders to buy when the new bar exceeds previous bar. Also buy every high 1 and high 2. For every buy, sizing according to most recent higher low. when the price pull back, stop out break even every trade.
As long as the trend premise exists, hold it. If it shows any signs of transition into trading channels, take profits.
so, if for every trade i risk $100, then i may end up risking 20X100 = 2000, however, i stop out break even as needed.
At the end of the day, or when the bull trend reverses, i take profits.
Not sure, how the slide you shared is relevant in this context.
It's relevant because my point is that it's reasonable to exit bellow this big bear bar closing on its low
Do you not think it's reasonable to exit bellow the bear bar here?
Doesn't this prove that a strong trend pulls back to the EMA and goes on to create a new high?
It could have a deep pullback as well and a smaller possibility of being endless. It's only high probability that a bear trend is unlikely at that point.
On the contrary, the chart being discussed in this thread is a lot stronger than the one you shared and hence it still went on far longer.
I don't think it looks stronger. I think OP's chart just looks more parabolic. They're probably comparable in strength.
We already discussed the PW you were talking about. You are expecting the market to F BO of wedge, when in fact that is what the market had been doing all day, creating wedge looking patterns and instead of getting a reversal, the market continues up - does that sound familiar with SPBL?
Also, chasing FFs without context is a witch hunt. You never know which one will end up as the actual FF. It becomes evident after the fact unless extremely conspicuous.
But more than 2 reasons regardless right? Not enough to hope for a major reversal, but good enough for the bull to exit, wait for 2 legs sideway to down correction, then buy again.
Strong trends as above turn into opposite trend(without any transition) in only 10% of the cases
It's not about it turning into opposite trend but about it having a deep pullback, transitioning into a trading range, or endless pullback (lower probability).
use stop orders to buy when the new bar exceeds previous bar.
I think this is good. Better to buy above a bull bar closing near its high but you need to check that it's not climatic.
stop out break even every trade.
Al said break even stop doesn't make mathematical sense. Better to move stop loss to break even when the entry price has been tested once.
so, if for every trade i risk $100, then i may end up risking 20X100 = 2000
I think not a good idea. Better to calculate your position size base on entry price and stop loss price. The bigger the difference, the smaller your position size is.
But in realtime, you can just stick with something simple such as "full size", "1/2 size", "1/4 size". If the stop loss is far away, use "1/2 size". If it's really really far away, use "1/4 size". If it's crazily far away, don't trade.
Thanks! I watched a few Al's video again today and what you mentioned is what he described. perhaps better to trade with a fixed max risk, not NXmax_risk.
It's relevant because my point is that it's reasonable to exit bellow this big bear bar closing on its low
I think it goes on to show that best the bears could hope for a scalp down and market tested back up and created a new HOD. When bears can make money by scalping only, I think only the PA that follows would be relevant to my decision making. I don't exactly recall, but the odds of market creating a new HOD after testing back down to EMA is either 60% or 80%(not sure about this figure). When that's the case, I wouldn't feel the need to manage my positions for PA consideration.
If I'm not terribly mistaken, I recall Al saying this - anything less than 40% is not worth paying too much attention to. Best you can do, is prepare yourself for such eventuality.
It could have a deep pullback as well and a smaller possibility of being endless. It's only high probability that a bear trend is unlikely at that point.
Deep PB or an endless PB is the result of bulls having given up and bears slowly starting to take control of the markets - the chart being discussed does not show any such sign.
I don't think it looks stronger. I think OP's chart just looks more parabolic. They're probably comparable in strength.
With the so many gaps and microgaps open - I really doubt that. Even the bars don't look like bull leg in a TR but bull trend. Where is the overlap, compared to the chart you shared?
But more than 2 reasons regardless right? Not enough to hope for a major reversal, but good enough for the bull to exit, wait for 2 legs sideway to down correction, then buy again.
Other than PW, the reasons you shared are micro-patterns. Not something I pay a lot of attention to when the bull case is strong(60%). This is BO on a HTF chart - proof of that being so many open gaps on the current chart. As evidenced by that fact - there was no TBTL correction.
It's not about it turning into opposite trend but about it having a deep pullback, transitioning into a trading range, or endless pullback (lower probability).
And we're circling back to where we started from. 2 reasons for the opposite side means, relevant swing for the bears - where is the relevant swing trade present on this chart?
Maybe some expert could weigh in because I frankly am not sure how to explain better. @ludopuig - would you care to weigh in? It would mean a lot. Thanks!
I don't exactly recall, but the odds of market creating a new HOD after testing back down to EMA is either 60% or 80%(not sure about this figure)
I don't exactly recall either. But could it possibly for when there is a buy setup at EMA?
the chart being discussed does not show any such sign.
By the time these signs are visible, trader already give back much profit.
With the so many gaps and microgaps open - I really doubt that. Even the bars don't look like bull leg in a TR but bull trend. Where is the overlap, compared to the chart you shared?
I think both have gaps. OP's chart just look more parabolic which doesn't exactly make it stronger.
Other than that, I think you've make fair points. Maybe I'm wrong.
Maybe some expert could weigh in because I frankly am not sure how to explain better. @ludopuig - would you care to weigh in? It would mean a lot. Thanks!
Very big threat with a lot of posts, I don't even know where is the problem because I am not going thru all the messages 🙂
Thank you for your time - the problem is, if the chart shared by OP is a long through the day, or did bears create enough reasons for bulls to fully exit their long at any point in the day?
Would appreciate it if you could share your views, briefly explaining the reasoning.
Here, would you consider the yellow arrow third (or fourth) consecutive bull bars as flipping the market to AIL?
No, to switch to long you needed consecutive strong bull bars with bodies above the EMA. Therefore, you can either exit at the DB (which would be like exiting at the wedge in the previous chart) and reenter at EMA, or hold and exit at the low test, near the end of the day.
Similarly, here, would you consider the consecutive bear bars before 2 as flipping the market to AIS?
Yes, consecutive bear bars closing on the low below the EMA so AIS, but the second leg down in the context of a Small PB bull trend so it can be a trap. Therefore, you either exit when AIS and then reenter at the bull bar, or you keep holding with the stop-loss at the low of the day.
In both charts, when you have a tight trend going, the first reversal is probably going to be minor but it can be deep (the deeper, the more likely the MKT transitions to a TR instead of following trending), so you need to be prepared for this to happen and trade small, because the stop-loss is far away!
I stumbled upon another case related this weekend and would like to pick your brain on this (no zombie tho) if you don't mind.
Here, would you say that we're AIL now at the blue arrow 3 consecutive bull bar closing on its high?
What about wait for the 4th consecutive bull bar?
If trader decides to keep holding with a stop-loss at the high of the day for example, the low was never reached. Would you say that trader should exit above the DD at EMA at the red arrow?
Or definitely should get out when see the next outside up big bull bar closing on its high and above the high of many bars just before that?
Here, would you say that we're AIL now at the blue arrow 3 consecutive bull bar closing on its high?
Yes, most traders would see AIL after 2 consecutive bull bars closing on the high and breaking above the EMA coming from a decent swing buy setup.
What about wait for the 4th consecutive bull bar?
Now second bar with body above EMA so increased probability for a swing up.
If trader decides to keep holding with a stop-loss at the high of the day for example, the low was never reached.
This would be a mistake. Bulls had a decent swing setup plus a wonderful entry bar (reason already to exit shorts) and then it was added two follow-thru bars breaking above EMA. The trend now is up and bears have to exit the sooner the better.
Would you say that trader should exit above the DD at EMA at the red arrow?
Nop, a doji is not a reason to exit.
Or definitely should get out when see the next outside up big bull bar closing on its high and above the high of many bars just before that?
Yes, a bull bar closing on the high is a buy so bears have to exit.
