Price action and momentum plays

mgergs

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I'm currently learning to use more price action than anything else in terms of my trading and have come a long way over the past few months.

A question i have concerns entering positions in high momentum moves - i never seem to know when to get in.
Generally i try waiting for a pullback but oftentimes i still dont get in, because i've waited too long for the consolidation to finish, and it just shoots off and i have this mindset of "oh it cant keep going parabolic like this" ... and i just continue to miss the action.

Last Dow session is an example, pic attached where there was quite a sharp move down, after missing the initial breakdown, when do i get on board ?
Do i just see the fact that they are all quite large red candles, and just get on ?
At times i've used various indicators but they can be conflicting and give false signals , so i'd love to get your ideas on how to get onto this momentum play.

Thanks
 

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The only potential for entering this that i can see is at the 8600 level where there is a support/resistance line. You could have entered short on the first wave down, exited towards the end of the first green candle, then entered again when resistance held and price started falling again in the second wave.

Oftentimes though, if you have missed a trade and price is running away, it's best not to chase it. Either you are in it or you are not- if you don't happen to catch it quick enough then there is no point kicking yourself over it... just move on to the next trade.
 
yes in retrospect it is easy to see. But it could easily have gone against you immediately had you entered also-- infact it's sods law that this will happen more often than not. It looks so incredibly easy after the event.
 
Hi there mgergs
I'm into swing trading, not on such a tight time-frame though.
Looking at this chart I would enter on the open of the 8:30 candle. It's broken the low of the 8:15 candle and continues in the direction of the main trend. Place a stop above the high of the 8:10 candle and aim for the previous low at 7:40. That would give approx a short entry at 8585, a stop at 8610 and a target of 8510. Giving a risk of 25 points for a target of 75 points.
All in all a good trade.
 
There's a bit of a head and shoulders formation. Once it breaks the neckline at about 8710 you could go short. Or maybe I'm just seeing things...I'm sure if I stare at it long enough I usually do!
 
...could just as easily go long there too!

.. but you are right there is a head and shoulders there.
 

I follow Bashirs thread with interest, but i'm trying to isolate price action from the indicators - the stochs can turn up giving u a feeling of the momentum pausing and then immediately turn back down and you have a big fat red candle on the end of it ...

I'm just looking to see price action and play that - like TD's legendary thread on entering trades with price action ... in this case i'm trying to enter a high-momentum move..
 
Retracements

I'm currently learning to use more price action than anything else in terms of my trading and have come a long way over the past few months.

A question i have concerns entering positions in high momentum moves - i never seem to know when to get in.
Generally i try waiting for a pullback but oftentimes i still dont get in, because i've waited too long for the consolidation to finish, and it just shoots off and i have this mindset of "oh it cant keep going parabolic like this" ... and i just continue to miss the action.

Last Dow session is an example, pic attached where there was quite a sharp move down, after missing the initial breakdown, when do i get on board ?
Do i just see the fact that they are all quite large red candles, and just get on ?
At times i've used various indicators but they can be conflicting and give false signals , so i'd love to get your ideas on how to get onto this momentum play.

Thanks

Hello there,
Even if you couldn't enter during breakdowns, you can always wait for pull backs. I see at least two trades on your chart one around 8760 and another one around 8600 where prices pulled back to your moving average or whatever(yellow line in the center). Of course you will have to have the patience to wait till prices retrace there. I see your time frame is a 5 minute chart? If I were you I would probably go for a slightly higher time frame particularly if I find myself falling behind. Of course you will have to manage your risk accordingly.

I will share with you something really nice and you might want to consider back testing it first for at least 60 to 100 trades(manually). One of the market Wizards Linda Raschke shares her patterns in her landmark book written in conjunction with Larry Connors titled Street Smarts. The pattern is called Holy Grail. Basically it's a very simple pattern entering on retracements and it works on any time frame. You plot a 20 period EMA on your chart and also plot a 14 period ADX(this goes below the chart) which must intially be 30 and rising(this identifies a strong trending market. Usually a price retracement will be accompanies b a turndown in ADX.
When the price reaches the 20 period EMA, but a buy stop(sells are reversed)above the high of the previous bar.
Once filled enter a protective sell stop at the newly formed swing low. Trail the stop as profits accrue and look to exit at the most recent swing high.
If stopped out reenter the trade by placing a buy stop at the original entry price.
After a successful trade the adx has to come back to 30 or above for you to consider the next trade.
A word of caution here - in any trend note the three pushes up or down because you don't want to take a retracement trade after a trend has matured and a trend reversal or congestion action is likely. You can always qualify new and old trends in your chosen time period by religiously plotting trend lines on at least three time frames(say a daily and a weekly to go with your intraday). One you are in if you think the trend might continue you might exit part of your position at the most recent swing high/low(for shorts) and tighten stops on the rest of your position.
For starters you may want to avoid counter trend trades when you are looking for retracements. Why scalp for afew ticks when you get better risk reward with Holy Grail.

You can always add Fib lines from the most recent swing high to low for a clue as to where the market might stop. Of course it helps if you can be prepared with trend lines both on your focus time frame and also be aware of the higher time frames.

Also, if you feel you are falling behind on entries you might want to draw a Keltner or Bollinger band on your chosen time frame and when prices move back inside the envelope you can become alert to the point where market moves closer to the EMA.

Hope this helps and if you have more questions, let me know.
Warm Regards
R_T
 
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yes in retrospect it is easy to see. But it could easily have gone against you immediately had you entered also-- infact it's sods law that this will happen more often than not. It looks so incredibly easy after the event.



It's not a retrospect issue. Once the price dropped from 700 there was no buying interest, the rest is historical.
 
In that case,

thats what i'm after choc - thanks !
What i'm looking for is even missing all of the main move - the very last pattern you describe as bearish engulfing - even if you got in at the bottom of that candle, its enough to be able to get in and profit 50+ points - thats what i'm looking for ..

although having said that, is that a true bearish engulfing ?
 
And something more

I forgot to add something really important here. Whether you are swing trading or day trading, I would always be aware of those days where the market completes range contraction and breaks out. Most day traders scalps left to right day after day grinding out their profits only to give it all back on those one or two days a month where they get their head handed to them and the markets take them for a ride. So always be alert and switch to break out mode after you see range contraction. Typically you can detect this with two patterns(also in Street Smarts; these two patterns alone are worth taking Linda's seminar) ID/NR4 and NR7. Whenever its an inside day and also the today's range is the narrowest for the past 4 day and whenever its narrow range seven, you can expect market to break out the next day. This is very reliable and it helps you to be alert and aware. Even if it doesnt break out the next day you can be sure it does the next day. You can plot these on tradestation using Paint bars/show me's( and also on Aspen). Not sure of other programs. Hope this helps
Thanks
R_T
 
StreetSmarts

Dont know much about that book RelaxedT
Mgergs,
This book was released in 1998-1999. One of the author's is a market wizard. Until I read that book I really did not know how to be precise in my trading plan. Linda Raschke the market wizard talks about tests, retracements, breakouts, etc. For each mode of swing trading, there're precise patterns with entries and exits defined clearly and they still hold good today. You might have to back test them a bit to see how to adjust your stops for today's markets. The book is fairly expensive but most trading books are but hey even one pattern in that book could be enough to help you realize your dreams. Having said that no technical analysis book will work if you don't have clear trading plans with precise entries and exits, self discipline to follow them and the right psychology.
regards
R_T
 
Try this:

set up a keltner channel with ma of 8 and 1.3 displacement. If 3 bars/candles extend above the higher channel that is true momentum, you then have 2 choices depending on how aggressive you want to be:

1. buy/sell the close of the 3rd bar if agressive
2. buy/sell a shallow pull back to the mid keltner if less agressive

Stops based on your own money management - simple and effective
 
Good One

Try this:

set up a keltner channel with ma of 8 and 1.3 displacement. If 3 bars/candles extend above the higher channel that is true momentum, you then have 2 choices depending on how aggressive you want to be:

1. buy/sell the close of the 3rd bar if agressive
2. buy/sell a shallow pull back to the mid keltner if less agressive

Stops based on your own money management - simple and effective
Nice set up Jonny. Again most of it is being either aggressive or conservative. In choppy markets I tend to wait till the market gets inside the top band and gives at least bar close.
Regards
R_T
 
mgergs;597534i never seem to know when to get in. [/QUOTE said:
before a big Momentum move, you typically see consolidation, represented visually on a chart by a narrow(-ish) channel.
Why not place resting Buy Stops and Sell Stops at th extremes of the channel to enter on a breakout/breakdown ?
That way you'll be in the trade as soon as price explodes out of the channel and you won't need to hope for pull-backs etc .....
 
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