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Looking for input: This really is about the psychology of a trade; I am bailing too early on a trade too often.
I have studied the videos, am becoming ‘good-ish’ at spotting possible reversal patterns and entry points. I struggle with the psychological aspect of holding a trade and identifying “valid: exit points. I recall the lessons, my notes, and am I looking for trading opportunity that will be two times your initial risk. Trading /es or even /mes if I feel the bars of the mini S&P futures are too big. Trade strategy is to look for reversals.
Problem 1: It seems that there are very little that offer a (2:1). Often it appears that there are resistance points that are well below that margin. In the first example (the yellow arrow represents a financial announcement), so I semi- discount it. However it sets up a ‘higher low’ and then another ‘higher low’ appears. The “next logical level” is the first gold line, but often as here, the risk/reward it no better than 1:1. Thoughts/Advice on this?
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Problem 2: I am in a ‘good’ trade (using the same diagram above I would enter around the green arrows) I take the 1:1 hoping that I can make (3 point before losing 3). However be I will often close the trade too early maybe for 1 or 2 points. I am aware it is for many reasons.
- Not wanting to lose my gains
- Thinking it may be a:
- false breakout
- it is hitting a previous level of resistance ( i.e. minor level)
- It is a hammer candle or small dojis.
- There are times for certain that my stop is too close- ( I am working on it)
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And then this Happens! (hindsight is 20-20). I spend the rest of the day chasing.
1: Is the first trade. I am kicking myself for being too weak to hold the trade longer as is would have meant a difference between 2 points and 8 points. I closed my position at this point (red arrow) with two dojis at a previous level of resistance it seems appropriate. With a couple points profit, I am expecting possibly a continuation to the down side.
I see the big inverted hammer and wait to see if the pullback would be at the 50% level.
2: I take the risk for the 50% pullback, go long, and get close to a breakeven trade, as I see a possible head and shoulders bear pattern forming and get out.
Again kicking myself for not holding the trade long enough as the inverted hammer at point two reverses and the up trend continues, I wait until to see if the there will be either a double top or a break through.
3: Seeing the strong break above the golden line, I bought (probably too early) seeing the long wick on the bull candle and the inverted hammer ( I am thinking false break out and possible tweezer top. Along with the hammer following which is lower than the previous two bars, I close the position for a loss.
Yet the trend holds!
4: I take the breakout, but the next candle is a yet another strong sell off, I am thinking after the last trade, I may be too late in the trend and again sell for a loss.
5: At this point I am very hesitant. I still take the breakout, but am wary of any major pull back and large wicks, as I am expecting profit taking or a flat trading range to occur. There have been 3 pushes up a couple of larger bear candles. And despite the bull trend of 25 points, I am at a loss.
6: By the time we have 7 bull candles I am either too hesitant to buy or again bailing too early, The candles are weaker and are overlapping, but it was 10 points of a strong bull trend lost. (Totally a weak bull at this point) By the final break out, I may have taken it and used it to break even or finish to the plus.
7: Finally seeing the weakness and possible trend reversal I have been expecting for past 10 bars! Wait for a possible good sell entry point (large inverted hammer followed by a strong bear bar and what appears to be a lower low and lower highs. However a reversal does not occur, and more than likely I have a couple of trades that breakeven in total.
At the end of the day, it has been a flagellation session, filled with doubt with maybe 3 points profit. Only with the cold comfort of hindsight that it could have been 40 point day! Please don’t get me wrong, I am not wanting to “swing for the fences” and expect a home run every time or to make thousands of dollar a day. It is not reasonable to assume that I would have held for the full 40 points. I am happy with modest gains. But this is what happens time after time for me. How have others overcome this challenge emotionally and how have others learned to differentiate between minor point of resistance vs major and hold their trades with confidence?
Hi Travis,
If we follow the market cycle, then after a strong bear selloff it was reasonable to expect this chart to become a bear spike+CH pattern, especially after a 2 legged PB under EMA. The bear channel didn't manifest, but you can glimpse an echo of where they tried to build it at (B) where the bull breakout tested down and bounced off where a TL would've been if the channel did materialize. So it's understandable that looking for longs would've been hard.
Still, just because bears didn't succeed at making a CH, it doesn't mean bull trend, probably a TR first. The bear selloff had those huge bars towards the end suggesting exhaustion/vacuum effect into some HTF TR lows. It also looks like you have an HTF EMA below as well providing support. And the BDBU (big bear bars followed by big cc bulls) at the bottom suggested a TR more likely anyways (smaller yellow box). Even after breaking higher it's still likely to become just a bigger TR (bigger yellow box) and you can see bulls took profits at (A). So I think you were right to be hesitant at staying long.
It's hard to find a spot where a strong bull BO (bars increasing in size and going far above prior major LH) would make it clear that a bull trend begun. Everything here points to a developing TR.
The first time here that I would seriously become bullish is where you marked (2), as that was a double test of support (yellow line), test of EMA and test of top of lower TR after breaking above it. So it's an H2/DB. It also works well with Al's advice to buy PBs when trading in TRs instead of buying breakouts too high. With a stoploss below that bar you might just squeeze out a 1:2 near HOD?
But overall, I agree, it was hard to find 1:2 on this chart until much later in the day. It was a bear flag that failed to the upside as often happens at bottom of TRs. One suggestion is to maybe wait for a 2nd entry against you, so that you don't exit on the 1st bear bar i.e. wait for bulls to fail to go higher twice at about same level before giving up on your trade.
Another suggestion would be check your position size. I usually have trouble holding when my position is too big and even a small pullback causes too much pain.
Another suggestion would be compare the strength of the bulls vs the bears. If it's 3 cc bulls it's higher probability that a 2nd leg up attempt will be made even if there's a deep PB, so no need to bail on the first bear bar that shows up.
Another suggestion would be to stay in tune with grander goals for the bulls like measured move targets and testing tops of TRs after having tested bottoms. For example, if this chart was indeed a large developing TR and we just saw the bottom, then more likely the market will be headed to the top. Identify where that top could be and it should give confidence to hold trades until bulls satisfy their objective (or at least fail multiple times to reach them).
Then, after the top was passed and retested at (C), you can project an MMU the size of lower TR and that should give confidence to hold trades until bulls reach that objective as well.
Hope this helps,
Sorry for too many words 😩
CH
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Hi Travis,
a lot of good advice from Mr. Carpet. I just want to add one point:
try to use RTH chart. The globex price action may be important sometimes, but for me most of the times it is a distraction. So on Friday I thought: we have been above EMA for 31 bars on Thursday, now we open above EMA (RTH chart! not ETH Chart). So everything should be bullish until proven otherwise! Bears will need something really strong to reverse this or even transform market into a trading range.
Watching this video on profit taking again might help too: https://www.brookstradingcourse.com/price-action-fundamentals/video-36b-trade-management-taking-profits/
Wow ! Thanks for the really detailed and quick response! A lot to digest! I appreciate it!
Thank you!
Everyone gave good advice if I were you I would trade smaller so you can hold longer.. Remember to trade the "I dont care size". I would do it to stick to my strategy & consistency. I'm profitable for the month and it's due to trading the I don't care size. If you are in a TR dont look for the 2R scalp only until the chart is clear thats what I do. Especially on the open. If I take a trade I thought was a HL, LH, trapped traders etc and bars are overlapping I scalp and wait for a pattern and strong signal bar. It's so many setups that you can wait patiently for one to develop. Easier said than done but consistency is key. Also the daily setups archive is a GEM. If you draw the patterns you see then go to Al's slide after to see his explanation for what you miss you will start seeing these patterns in real time. That is my favorite thing to do everyday! That and buying a trading room video to understand what he's thinking. I watched him 1 time and it instantly connected the dots I was missing.
FYI. 23A and 23B are the lessons to learn about "Final Flag".
Thanks Again! Great feedback!