I've gotten some more projects done, and should be mostly free to work on my forward testing over the next several days. Tonight, I just want to pick up where I left off, which was analyzing my results from 4/11/06. I said in my initial review:
Even with perfect hindsight, I cannot see how setting S/R levels differently (and on what basis?) would have resulted in a substantially better outcome.
It's been kindly pointed out that paying attention to the actual price action, and where S/R show up, would produce better results than just drawing some lines on the chart and waiting for them to be hit. After playing back the price action that day a couple of times again, I can appreciate this a bit better. Naturally, this is all hindsight, but certainly there are reasonable things that I could have noticed and done that would have improved my performance that day. So, I'm going over the day again in the hope that next time, I'll be more alert to these things.
First, in my prep for the day, I said that my system was trading long. I think the price action leading up to 2:00 a.m., my starting time, supports that (although not for the original reason I stated it). Since about 9:00 p.m. the previous evening, price had been gradually moving upward in an ascending triangle. Between midnight and 1:00 a.m., price was butting up against R at 1.2165/1.2166. Bars were getting shorter, and it looked as if price would have to BO up or down. At around 1:00, price BO through R, RET to 1.2166, and then continued upward about 15 pips through R from the previous day to around 1.2180. Note that the angle of the ascent also increases at this point. So, from the standpoint of price action, it made more sense to be looking long than short at that point.
On the way up to 1.2180, price hesitates at 1.2175, rises to 1.2179, and then falls back again to 1.2175, before heading up to a BO high of 1.2181 and then retracing back to 1.2175. 1.2175, then, seemed to be the level to watch, but I wasn't really watching any of this, and missed it all, waiting instead for my signal at 1.2177 or 1.2183, where I'd drawn my lines.
For the next 3 hours or so, price moves in a range between 1.2175 and 1.2193 or so. Had I been trading from 1.2175, C1 would have been profitable three times, C2 would have seen one loss and two profits, and C3 would have lost each time. Within that range, two other levels cause price to pause repeatedly, and variously act as S and R -- 1.2180 and 1.2187.
Shortly before 5:00 a.m. price comes crashing down from R at 1.2193, and BO down through R at 1.2175 to 1.2169. (On the 75-tick chart, there's been a LrH on the way down, and the movement below 1.2175 guarantees a LrL, defining the DT. Price then re-enters the range, reaching as high as 1.2180 (that level again), before continuing down again, retracing to 1.2175, and then falling a further 21 pips. This RET to 1.2175 and continuation did not meet my entry criteria (not a swing high), but this would have been the time to make a justified exception.
At this point, price creates a hinge (the apex of which is the S/R level of 1.2166), breaks down out of the hinge and falls to a daily low of 1.2148. In the process, price makes two SL's below 1.2156, the level from which attempts to reach even lower are launched. Sellers can't push price lower, however, and price BO above 1.2156 to 1.2160, RET to 1.2157 (another entry opportunity), before continuing upward in a series of HrH's and HrL's to 1.2192. At this point price falls back to 1.2170, rises above, and then finds S at 1.2175 (another possible entry opportunity), and seems to have trouble getting by 1.2187 (another level from the early morning range).
In summary, this could have been a perfectly fine trading day, had I remained focused on what price was doing rather than simply trying to apply rules to lines that I had drawn prior to the day's action. Hopefully, by continuing to assess how I did compared to how I might have done, I'll move closer to being able to do this in real time.