Live Trade Examples
I wanted to highlight some live trade examples from this week. Examples are both good and bad, but fortunately more are good than are bad. But I feel it’s very important to do this type of review to both learn from your mistakes and learn from your successes.
The first trades we will review our from Tuesday, January 9 at the open. I initially entered a short exhaustion trade shortly after the open at a price of 2751.50 with a five tick stop. In looking at the bid ask power indicator the line was light green but basically flat. After approximately two minutes price spiked very rapidly and I was using a NinjaTrader simulated stop. That simulated stop was not filled in time and I lost an extra tick.
This highlights a decision that you need to make ahead of time and it is unique to the exhaustion trade. The exhaustion trade is a reversal trade pattern that begins as either a test of a top or bottom. In this case there was six ticks between my entry and the bottom of the blue countertrend zone. By taking the trade at this position I was accepting additional risk and I initially chose not to place the stop above the blue countertrend zone because I was trading the open.
I still wanted to get short. I was watching both the tick and the bid ask power indicator all dropping in real time. In addition, a significant amount of volume was being absorbed by the sellers at the blue countertrend zone. Approximately 10,000 contracts were absorbed by sellers at the blue countertrend zone. Because of this I reentered the short trade from a price of 2752.75. The biggest cause for concern in this trade was when price reached the dark green intermediate supports zone. And immediately you see a five tick response when price traded at that zone. However the bid ask power indicator was dark red and moving sideways as prices rising. I attempted to short an additional contract that was not filled at the same price of 2752.75. Unfortunately this wasn’t filled. I had a target of 2747.75 based on prior support.
As price fell the sellers begin hammering the trade and this is reflected on the power indicator. This is a reason that I did not use the zone as an exit as I normally would. The power indicator gave me confidence in my original target. As price traded down towards my target a deep V can be seen in the power indicator. Because of this deep V pattern I reset my target to 2748.25, which essentially called the bottom of the move.
This deep V pattern is an extreme signal that I use to exit a trade. Notice how the power indicator was rising sharply as price was falling. This is super important to note this divergence. This V pattern will be coded into a future version of the power indicator.
I entered a second short trade at 2750.25, again a target of 2747.75, which was based on previous support. I made three critical errors in the placement of this target. The previous low of 2748.00 was traded to and touched and the market bounced. The first error was not respecting the previous low. The second error was not paying more attention to the power indicator which again was divergent and rising as price was falling.
In fact the ratios had already turned positive as price touched 2748.00. Another chart marker that I missed was the deep V pattern in the accumulation distribution indicator, which is the third pane in the chart. The deep V spike here indicates buyers placing limit orders and coming into the market. The third, and probably worse mistake was to lose four ticks having not moved my stop, even after the power indicator had gone dark green.
The point of showing this is to show mistakes and really bad mistakes. This unfortunately fell into the second category of a really bad mistake thanks to taking a loss on the trade.
I entered another short trade at 2752.75 after the marketed traded through the blue countertrend zone and the power indicator was dark green and falling. The mistake I made here was that there was not a significant V-shape to justify the trade. The reason I wanted to take the trade was that there had been significant resistance at the open at this price level, and price had again traded at that level and been rejected. I gave it a very small three tick stop, which was hit on the stop run 10 minutes later. As you can see from the chart, I ended up buying the high when the sim stop was triggered. I did not attempt to reenter because there was no V pattern in the power indicator. But notice the spike in the accumulation distribution indicator which was higher than previous spikes.
The next trade is probably the worst example of an entry that I’ve made in some time. I was probably feeling very frustrated at having the direction correct and having been stopped out on a stop run. There would’ve been a legitimate short entry at 2752.00 when the power indicator turned dark red. Unfortunately I tried to get short several times on a limit order and wasn’t successful. I finally entered at 2749.25 with a target only six ticks away.(Hello, risk-reward?) Again, I missed the deep V pattern that was in the process of forming. Because the market had traded through the intermediate support zone, this sets up a reversal trade.
Due to the order flow that I saw at the time I entered a second contract short at 2750.50. As price fell very sharply and very rapidly the power indicator again made the deep V pattern as price was trading at the low one tick from my target. I again made the same mistake and did not place the target at 2748.00, although I probably would not have been filled as only 307 contracts traded at that price. Although you cannot see it in the picture, a long exhaustion trading pattern had formed.
Fortunately by this time I had recovered from the previous frustration, read the situation properly and exited the trade at 2749.00 for a small profit. When the power indicator turned green I entered a long trade at 2749.75. I set a target of four points at 2753.75 which was the previous high that had been tested twice since the open. I realized and considered that there could’ve been buy stops above this price. As price traded to the target the consideration was that the power indicator was only light green almost the entire way to the target. When price traded through the target buy stops were in fact hit and the market traded almost 5 points higher. But at this point I was up 6.75 points (after making a couple of mistakes) and called it a day.
One thing that also affected me was Remy. This is Remy.
When he wants something he is very loud and he keeps jumping on the desk and trying to sit in front of the monitors. As if trading wasn’t hard enough.
I had a good day on Wednesday, but neglected to take pictures of the charts and could not make them show up on replay.
1/11/18 Live Trade Examples
The following trades are from Thursday, January 11. The first trade was shortly after the open going long from 2753.25. There was support from the blue countertrend zone and again significant volume had traded at 2753.25 and 2753.50. The power indicator and accumulation distribution indicator both had deep V patterns. This trade was fairly easy and I used the blue countertrend zone at 2755.50 as my target.
The next couple of trades were not as easy but there was no significant mistakes made. The market had made a strong trend and traded to 2759.50. I had seen support in the order flow and entered long at 2756.75 with a three tick stop. The power indicator had turned light red and the accumulation distribution was spiking and showing accumulation. The market traded down and the simulated stop was hit at 2755.75.
I reentered long at 2755.25. I had a target of the intermediate resistance zone of 2757.50. There was additionally strong buying however we are trading into a short reversal pattern, because of the adverse excursion of the green intermediate supports zone. I took this into consideration when I made the trade and why I was using the intermediate resistance zone for an exit. Because I was aware that there was a very high likelihood of a short trade pattern I did not like seeing the V pattern in the power indicator and exited the trade with a three tick profit. This was the correct read of the chart as the market sold into a tick divergence exhaustion trade.
After price had traded 2753.50 the market responded with buying, and I got long at 2754.25. Almost immediately price traded down and stopped me out at 2753.25, again on a stop run, resulting in a little frustration. I looked at the power indicator and decided to reenter the long trade at 2754.00. The three-point target of 2757.00 was hit and filled. Price would trade one point higher before retracement. I did not see strong enough buying in the power indicator to justify raising my target to 2758.00.
That is 4 points on the day. I also made a ZN trade based on order flow that was a 7 tick winner. Note how I respected the prior low for the exit.