Jonbig04's Log

[jonbig04 10]

It's been some time since the market spanked me like a little kid. Today was that day haha. So everyone knows I've been waiting for CL to breakout to the downside for the last few days. I have literally been dreaming about this trade. I've never traded crude, but I loved the setup so much that I decided to try for it full size and live.

 

Anyway the breakout happened, just like I wanted it to and it was just as potentially lucrative as I thought it would be (damn I love the BO setups). I tried 3 times (one more than I allow myself) to get in on it, but I couldn't.

 

Usually when I get in on a BO, I enter at market. Of course you are automatically behind by a few ticks when you do this, but thats ok because 1. you get to watch your position and if you aren't getting pushed into the green, price isn't really breaking out and you should exit, and 2. You get guaranteed fill which is good when price is really moving.

 

Well those market orders screwed me today, and for some reason I had my chart setup to not plot my executions so I couldn't see what horrible fill I was getting. I was getting fill like 8 ticks from current price. Price was moving, but not fast enough and I kept closing the position, not realizing that it was my crappy fill that made the trade look so bad, not that price wasn't moving. I should have slowed down and held on to the short and I would have been fine.

 

Gah. I'm a noob ass loser trader today lol. I ended up losing 15 ticks. It's not so bad considering my target was 100 ticks away and was easily reached by price, but it's annoying because I got burned simply because I was careless and wasn't familiar enough with the instrument I was trading.

 

Lesson learned, thank you Mr. Market.

 

What is encouraging is that the BO happened. It happened where I wanted it to, where I expected it to, and with all the fervor I expected. Just gotta work out my noob kinks haha.

 

Click for full size - Uploaded with plasq's Skitch

 

Kind of an annoying week. Got stopped just to BE on that ES short, stopped to the tick on that other short and owned myself in CL today. Haha, oh well all I can do is laugh.

 

Kill it next week

[brownsfan019 17]

JB - nice call on the trade though. Great analysis and the proper work done. I know that executing is sometimes easier said than done, so no worries.

 

Keep at it and welcome to the oil cartel here on TL.

 

[jonbig04 10]

JB - nice call on the trade though. Great analysis and the proper work done. I know that executing is sometimes easier said than done, so no worries.

 

Keep at it and welcome to the oil cartel here on TL.

 

 

Thanks BF. Feel kinda stupid screwing the executions up so badly. Better next time though. You've been telling us to look at crude for a while now! I'm glad I finally did.

[gooni 10]

I'm curious - since you're expecting a breakout to the downside, why not trade shorts at the top of the range with similarly limited risk but much greater potential of actually holding onto the trade (since you like tight stops and BE quickly)?

[thalestrader 14]

Well those market orders screwed me today, and for some reason I had my chart setup to not plot my executions so I couldn't see what horrible fill I was getting. I was getting fill like 8 ticks from current price. Price was moving, but not fast enough and I kept closing the position, not realizing that it was my crappy fill that made the trade look so bad, not that price wasn't moving.

 

Over the years, some of my best trades have been those witht he most slippage on entry.

I know traders who get very worried if they get a "good" fill on a stop or market order when they trade break outs.

 

Best Wishes,

 

Thales

[jonbig04 10]

Thanks for following along.

 

I'm curious - since you're expecting a breakout to the downside

 

I'm should clarify that I wasn't expecting it, I was preparing for it. I know that sounds like some cryptic splitting of hairs nonsense, but the reality is that I had no idea whether support was going to break down or not. I wanted it to because I figured if it did price would break out to the downside, but support is support. The only "call" I was trying to make was that IF support breaks, it may lead to a precipitous fall in price.

 

 

why not trade shorts at the top of the range

 

If this was ES, I would have. If you look at some of my shorts from last week, especially the one at 1099 (that got taken out BE), that's exactly what I do. The only reason I didn't is because I'm not familiar enough with CL and it's swings. The S/R fade setup is separate from the breakout setup, and for now I only fade s/r on ES.

 

...much greater potential of actually holding onto the trade

 

I'm not exactly sure what you mean here. If I shorted at the top of the range (around 73.5) my gain would be limited to the S below at 72.4. Granted that's plenty of gain, but not as much as the breakout. Hopefully I can take that trade in the near future.

 

If you mean that I could have shorted at the top and held on for the breakout, I would have to disagree. For example, lets say I short the 73.50 area. Things are going good and we reach the support at 72.4, now what? That support has held multiple times, I certainly wouldn't risk my 100 ticks on the mere hope of a breakdown. If I made that trade I would exit a few ticks above S and then re-enter when it broke down. Trailing your stop wouldn't have worked (when does it ever? ha) as you can see from the chart. Just before S broke it bounced a good 60 ticks. I'm sure that would wipe out any trails.

 

 

...since you like tight stops and BE quickly

 

I move to BE at around +5ES. To some that's quick, to others it's not quick enough. I want to make it clear that I do this because I am a wuss and don't like to see me +9's etc turn into a full stop loss. For me, it is absolutely not more profitable. It's a psychological feel good. Look at my BE trade from last week. Since I don't scale or trail, that one move to BE cost me 11ES. with a 1.5 stop. moving to BE will have to save me over 7 full stops just for me to be even again. But I do it fr myself and my mind and it's my rule that I follow.

 

About moving to BE on the breakout trades, well I do that because as far as I'm concerned, price should be breaking out, not retesting your entry anyway.

 

Hope I answered your questions!

[gooni 10]

I obviously meant the move to BE quickly on the breakout trades. It's fine if you don't have a setup or confidence to play the short at top of range on CL (if 'preparing' for a downside breakout) - but there's no reason why, if you could play it, to not hold partial positions for a breakout and liquidate them only if it doesn't arrive (or at BE, whatever your system might be).

[jonbig04 10]

I obviously meant the move to BE quickly on the breakout trades. It's fine if you don't have a setup or confidence to play the short at top of range on CL (if 'preparing' for a downside breakout) - but there's no reason why, if you could play it, to not hold partial positions for a breakout and liquidate them only if it doesn't arrive (or at BE, whatever your system might be).

 

The reason why I would exit a short at support is simple: price usually doesn't break out. And when it does it rarely just punches through the S/R, it bounces. Just look at the chart. Hindsight what you're saying make sense, but if you're actually in the trade you have to decide whether to exit or not. Is it a small bounce before a breakout? Is a reversal that's going to take out all my profit? For me (maybe it's because I'm a novice) those things are very difficult to read and decided when you are already sitting on a large winner.

 

At what point do you say "OK this thing isn't going to break out."? Because I would be willing to bet that if you shorted the last high before the breakout (when price pierced 73.50 and wenr all the way near 74) and you decided to hold on to the short in case it did break out, that last 50 tick or so bounce would have definitely made you think that support had held again and price was on the way back up to your entry point, and you would have exited.

 

IMHO, unless some crazy rapid breakout happens, you should always exit a short at major S especially when its a large winner. I don't think betting against S/R is good policy. I think that most recent chart of crude is pretty good evidence of that.

 

Click for full size - Uploaded with plasq's Skitch

[gooni 10]

I get what you're saying, but you're looking at things a little 'holistically' at the moment (what is the overall best way to trade these price movements).

 

If you are anticipating (or preparing) for a short breakout, and you have a method for shorting the highs of the range, that's a much better position to short from. How you manage the trade afterwards is your own call - but you are much better prepared at the top of the range price ;-)

 

(My personal preference is to look at these all as their own system and to plan to trade a portion of contracts for each 'system', allocating less contracts to the less likely but higher payoff outcomes).

 

(Also, I'm pretty sure you're quite comfortable with letting large positions move back to breakeven - it's just that your usual target is 'other side of current range' as opposed to something quite a bit bigger)

 

Food for thought.

[jonbig04 10]

I get what you're saying, but you're looking at things a little 'holistically' at the moment (what is the overall best way to trade these price movements).

 

If you are anticipating (or preparing) for a short breakout, and you have a method for shorting the highs of the range, that's a much better position to short from. How you manage the trade afterwards is your own call - but you are much better prepared at the top of the range price ;-)

 

(My personal preference is to look at these all as their own system and to plan to trade a portion of contracts for each 'system', allocating less contracts to the less likely but higher payoff outcomes).

 

(Also, I'm pretty sure you're quite comfortable with letting large positions move back to breakeven - it's just that your usual target is 'other side of current range' as opposed to something quite a bit bigger)

 

Food for thought.

 

I understand.

 

And it sure would be nice to be short from the top of the range and catch a breakout of the bottom. But I think the practical application of it would be tough, simply because you don't know if the BO is going to happen. You would have to be prepared to give up a large chunk of your profit (because you would have to make room for a bounce, just like the one I highlighted above) for a situation that didn't pan out very often (because price usually doesn't break out).

[Head2k 10]

Actually, in this concrete example with CL there is one thing to notice. It is of course hindsight, but perhaps you could examine such a phenomenon so you could be prepared for it.

You can see that price is range-bound between 72.5 and 73.5. Then it pokes up to 74, but it is rejected. Questions you could search answers for are:

Wasnt't the poke a retracement on a larger scale? It is not visible on the chart, but wasn't 74 a low of the previous stair-step within a larger trend? Wasn't it a larger supply line? And even if it wasn't anything, doesn't a sharp rejection above a range increase probablity of a BO in the opposite direction, particularly if this direction corresponds with the larger scale trend?

And if there was a higher probablity of a BO, wouldn't it be better to just scale out at S and give the trade some room? And what room?

 

(I must admit that I according to my current rules wouldn't carry anything through such a bounce either. But someone maybe would, particularly someone who scales out it in more steps.)

[jonbig04 10]

I don't have a large chart to look at, but it sounds like those would be good things to consider. I'm not so sure about the "sharp rejection", after all, price was rejected sharply many times. The one thing I would use to say that a BO was more likely is to see how many times S/R is tested. In my mind, the more tests, the more likely a break.

 

But even with those factors I personally wouldn't risk a chunk of my very large profit (keeping in mind that when we got to S, I would have already been at a 1:8 RR target) on the hopes of a breakout of what has been very strong support. Not when I can (or hopefully can haha) catch the breakout after it happens and have the best of both worlds, meaning the gain of of the S/R range and the breakout.

 

I can see the logic behind it, and I'm not saying other people can't/don't make it work, but it's definitely not something I personally would be inclined to try especially when I'm sitting on a 1:7-1:9 R/R target.

 

I'm not sure what would happen in the case of scaling. I would think that the vast majority of the time those scales would come back to BE. But maybe the couple times the BO did happen would make up for all the times it didn't.

[thalestrader 14]

Questions you could search answers for are:

Wasnt't the poke a retracement on a larger scale? It is not visible on the chart, but wasn't 74 a low of the previous stair-step within a larger trend? Wasn't it a larger supply line? And even if it wasn't anything, doesn't a sharp rejection above a range increase probablity of a BO in the opposite direction, particularly if this direction corresponds with the larger scale trend?

And if there was a higher probablity of a BO, wouldn't it be better to just scale out at S and give the trade some room? And what room?

 

(I must admit that I according to my current rules wouldn't carry anything through such a bounce either. But someone maybe would, particularly someone who scales out it in more steps.)

 

Good post Head2K ...

 

Perhaps because crude still has a real pit (though seemingly much diminished from just a few years ago), with a real influence, the highs/lows of recent pit sessions are very relevant. Crude, as a market, seems to have a much better institutional memory than the indices currently have. I'm sure there ar emany who simply fade these levels all day long, and if the level breaks and holds, the trader will stop and reverse. Old fashioned floor trader S/R type trading.

 

 

 

 

Best Wishes,

 

Thales

[Head2k 10]

IMHO it is essential to look also at a larger scale than the range which you want to trade or which you wait for a breakout of.

Take this picture. Would you say that waiting for an upside BO of the lower rectangle would be a good strategy? And would you say that after testing the upper rectange you just have to exit everything at the bottom of the lower one?

 

Now imagine that this would be an intraday chart and imagine a trend following daytrader. Classical system of 2 contracts: one scalp and one runner. Such a trader would enter on the PB to the upper rectange, scalped the first contract somewhere to the midpoint or bottom of the lower rectange, then moved stop to BE and waited for trend continuation.

 

And why couldn't this be applied on a larger scale (or TF, if you like) than daytrading?

 

Not forcing you anywhere, just food for thought.

 

EDIT: From the post which Thales posted I can see that the CL case didn't fit to what I describe in this post, but I guess it doesn't matter that much.

Edited February 7, 2010 by Head2k

[jonbig04 10]

IMHO it is essential to look also at a larger scale than the range which you want to trade or which you wait for a breakout of.

Take this picture. Would you say that waiting for an upside BO of the lower rectangle would be a good strategy? And would you say that after testing the upper rectange you just have to exit everything at the bottom of the lower one?

 

Now imagine that this would be an intraday chart and imagine a trend following daytrader. Classical system of 2 contracts: one scalp and one runner. Such a trader would enter on the PB to the upper rectange, scalped the first contract somewhere to the midpoint or bottom of the lower rectange, then moved stop to BE and waited for trend continuation.

 

And why couldn't this be applied on a larger scale (or TF, if you like) than daytrading?

 

Not forcing you anywhere, just food for thought.

 

EDIT: From the post which Thales posted I can see that the CL case didn't fit to what I describe in this post, but I guess it doesn't matter that much.

 

 

Good points Head.

 

IMO assuming that's a large time frame, the answer to both questions is yes. I would play that BO and I would exit at the bottom of the upper rectangle.

 

If it was a shorter time frame I would short at the same area you described and hold for a LL with both cars, but that's just me.

 

I guess you could go larger, but I only look at pretty large time frame breakouts already. The CL chart above is not what I used to determine the BO. It was the test of 72.4 a few days ago and back in December. If you scroll back a bit in this thread to 2/4 you will see a chart of CL posted by thales. That's what I was looking at, more than the more recent action.

 

Here's ES currently

 

Click for full size - Uploaded with plasq's Skitch

[jonbig04 10]

Grr Hate being up all night for a BE.

 

Click for full size - Uploaded with plasq's Skitch

[jonbig04 10]

Sorry that last trade was actually -1 tick, not BE.

[jonbig04 10]

Haven't taken a trade in a while. That weird day on ES messed with my S/R levels, trying to figure out where we are at again.

 

I have decided to start trading 6E and CL with the same setups I use on ES, namely the s/r fades. They of course react just as well to s/r as ES, and there really is no way for me to get a feel for the other instruments unless I'm watching them all the time a I do with ES. Plus I will be able to take more trades. I am trading them sim now and will continue to do so until I am comfortable enough to take them live.

 

This is a pretty big change as, unlike the breakout setup, my s/r fade setup occurs 4-7 times per week on each instrument. After I get used to these other instruments I will be taking a lot more trades (without sacrificing, and maybe improving, the quality of those trades).

[thalestrader 14]

I have decided to start trading 6E and CL with the same setups I use on ES, namely the s/r fades...This is a pretty big change as, unlike the breakout setup, my s/r fade setup occurs 4-7 times per week on each instrument. After I get used to these other instruments I will be taking a lot more trades (without sacrificing, and maybe improving, the quality of those trades).

 

I'm looking forward to watching your trades, Jon. I consider myself primarily a breakout rader, but in my sim CL trading, I've done a bit of S/R fading myself. The nice thing about CL is you usually get a decent enough reaction at S/R to let fade it and just exit gracefully at BE or better if there is no folow through to the reaction.

 

Best Wishes,

 

Thales

[jonbig04 10]

Thanks Thales.

 

Here's an example of my first S/R fade of CL from this am (in sim)

 

Click for full size - Uploaded with plasq's Skitch

 

 

The reason I didn't get in on the initial breakdown of the green line is bc I missed fill lol. I just let the limit sit there and hoped the price would flip and retest the level, which it did. Price eventually came back and rallied up, knocking me out BE.

 

I am seriously considering scaling. Haha as much as I've preached against it. I'll go into more detail later.

[jonbig04 10]

Sorry for the lak of updates. I haven't been in any trades! Well I've entered a few stop limit orders, but none of them have filled.

 

Here's what I'm looking for now on ES, in foresight:

 

 

Click for full size - Uploaded with plasq's Skitch

 

We are nearing major R, or may have already gotten there. I have it marked at 1101.75-1103.75. Notice the two circles. Price found R at 1103.25 and 1103.75, but the next time price only made it to 1101.75. That's a 2 point range I'm comfortable playing, but I didn't want to take any shorts until we were at least at 1101.75, and price only made it to 1100 earlier.

 

That being said I'm looking for shorts just above there, ideally near 1103. Whether the uptrend resumes or not, I'm banking on a strong reaction to that area (again maybe 1100 is all the R we will see, but I doubt it). Notice the red line, that's what I would like to see price do.

 

Now assuming we do get to 1103, I would like to see climactic volume on a faster chart, follows by a LH and a LL.

 

That's what I'm waiting for, in foresight.

 

There is also the possibility of a breakout above 1103.75. If price takes that area with momentum I would try to jump on the bandwagon. Ideally though, we get a nice rejection before that happens. That way I can hopefully catch and profit from such a rejection and it will give us a better idea of where the BO may take place, if it happens.

[jonbig04 10]

Just something interesting I'm watching between trades. As you can see from this chart of the S&P and US Dollar index (blue), there's been something of an inverse correlation.

 

Click for full size - Uploaded with plasq's Skitch

 

Here's a chart of the 6E/ EUR/USD, which to me suggest the possibility of a breakout further down, eg a strengthening US dollar ( at least against the Euro). Namely I'm looking for the failure of the double bottom. If the correlation continues, that wouldn't bode well for the S&P right?

 

Click for full size - Uploaded with plasq's Skitch

 

Here's a current look at ES. As you can see, it's at major R.

 

Click for full size - Uploaded with plasq's Skitch

 

So I'm wondering if the inverse correlation will continue and we see a breakdown in the EUR/USD (6E) and rejection of ES at this major level.

 

I'm a PA only guy, but I think it's interesting to watch this kinda stuff for the heck of it. Can't hurt.

[jonbig04 10]

-.75ES today, thought maybe the upmove would continue, stupid Fed.

[forrestang 10]

Didn't that 6E pan out the way you wanted?

[jonbig04 10]

Didn't that 6E pan out the way you wanted?

 

That sim trade? It got owned.

 

I got a short in ES today. I actually missed fill on the initial lower low, but I simply left the limit there hoping price would flip that area, which it did (getting my order in). It's funny because the reason I missed fill originally was because price was at my limit of 1009, but never traded through to 1009.25. I find that most of the time price does have to trade through my limit in order to fill, but not always. When I got fill, I actually got it when price was at 1109 exactly and hadn't yet traded to 1009.25. Kind of interesting I thought.

 

Click for full size - Uploaded with plasq's Skitch

 

Notice how price bounced up and tried to take me out BE! Which it would have, but instead of moving to BE I moved my stop to just a tick above that little swing. I think it left me with a 0.75 stop and it held. Ha! How do you like that ES? Stop hunters go home empty handed this time.

 

I'm not crazy enough to hold over the weekend, I closed just before 4:15EST. Now what the heck do I do? I guess I will wait and if the market opens at the same price Sunday night. I'll simply enter back in my short with my stop in the same place it was. So it will actually be a 3.25 point stop.

 

Onto CL and 6E. I'm still trading these sim. Trying to nail down the swings and stops and targets. They are so much different than ES, it's going to take some getting used to. But as you can see from these charts, the same rules apply (and no I didn't mark these hindsight):

 

Click for full size - Uploaded with plasq's Skitch

 

Awesome CL flip, just the kind of trade I take on ES. I'm thinking my stop's on CL will be around 15-20 ticks give or take. With targets around 100-150 ticks. Just a rough guess, that's why I'm trading it sim for now.

 

Click for full size - Uploaded with plasq's Skitch

 

6E had a nice flip too, but it would have been tough to catch on the smaller TF and it wouldn't have panned out anyway.