Only trade in direction of the day?

[foredog]

Keeps you out of trouble or out of trades?

If somethings been up 6% then pulled back to only 3% and then traded in a narrow range then:

would this be a selling opportunity becasue the last significant move was trading down 3%?

or

buying opportunity because it's up on the day and there's been a pullback from the highs?

Just wondering what your views are....will post a chart if i find one that shows what i mean.

 

[foredog]

An example from yesterday

 

[One Eyed Shark]

Hope my comments dont complicate the issue for you, but the chart and the things you point out create a few issues.

1. You should always know where the 50% ret lies for every swing you are looking at, so if we are up 6% and back down 3% you are sitting on a 50, you could base a trading system soley on the 50's.

2. To complicate further you have an unfilled gap.

If the market wants to go up it needs to find a foothold somewehere, so looking at your chart if support is spot on the 50, traders will look at it as a buying opportunity.

However others will see the unfilled gap and see more downside potential.

One side is going to win and our job as traders is to take advantage of these decision points.

If I was trading that chart I would be buying off the 50 ( if that is what it was ) with a stop and reverse just below with a target just above yesterdays close.

In a strong trend up a 50% retreace is not bad news.

 

[Rossini]

I would wait and see if it goes up or down from htis point. If it is strong enough I will hop on. If im up on the day and if I get into profit I will move my stop to B.E. and let it run, if Im not up on the day I will try to get as many points as I can then hop off.

 

[foredog]

Good points.

I just meant do people have rules like only sell if down on the day or if they'd happily go short something thats up on the day but is reversing.

 

[Rossini]

Have you looked at the three ducks, thats similar to what your suggesting??

 

[foredog]

i know what you mean with the three ducks.

I was just throwing a thought out into the crowd.

Personally i trade in the direction of the day unless it's at extremes (pin bars etc) although once in a while i might trade against the direction. Just do seem to miss some good trades, but guess i miss some bad ones as well.

Just really wondered what everyone else thought/did

thanks for your thoughts

 

[Hoggums]

There's not enough information in the chart you've supplied - I'd want to know where previous support resistance levels were and it helps to know a bit about the history of the instrument you are showing there. You also should be aware of charts this instrument is correllated to - is that chart signalling a changing in trend or has it burst through resistance.


It's rarely just a case of looking at just one chart and a few bars - you will never get the full picture.

 

[foredog]

I only posted that chart as a visual of what i meant.
think i was a bit vague in my question, sorry.

Do you only trade in the direction of the day, (or week/month etc if on longer TF)?

Just wondered what the general opinion was.

 

[luckyd1976]

Good points.

I just meant do people have rules like only sell if down on the day

I personally dont trade like this but know of traders who have. Their opinion on it was, barring some Fed News, major event, etc... The normal day trends are determined and they would just give back some of their profits on the shorter time frame whipsaw(s). So they would only look to place trades in that one direction. Countertrends were smaller moves than the overall trending strategy.

Has anyone in here been working the back test on something like this???

 

[luckyd1976]

Today is the classic Gap and fade with no real follow through yet so if the trader (Up day only trade long side) played it today. It wouldnt have worked...

 

[One Eyed Shark]

Impossible to come up with a simple set of rules regarding positioning.

I will often take lots of short trades in a strong up trend and vice versa.

It depends on your timescales, and whether you have the mentality of a trader or an investor.

For many traders time is irrelevant, so if you have an up/down day what context is it in. You should never approach any trading day without knowing the context of minutes, hours, days, weeks and months, and where the s/r levels are for for each.

So maybe you have a up day that is moving into a resistance area that has held for months, if you dont know this in advance you are going to get hammered.

Many people come to the markets trying to anticipate price on a vertical scale and whether it is going to go up or down, trading is simple once you understand that price simple moves from support to resistance and back again, day in day out.

Once you have the skill to be able to mark a chart on a horizontal scale and know where the s/r levels are for all degrees of swing and be able to trade off them, then you can call yourself a trader.