It is a greater likelihood of an event happening over an event not happening.
Here's the set setup from this morning. I traded TNA long from right before it went to new highs. It stalled out so I took profits and shorted it. Some good momo for a few candles then it stalled again. I didn't go long but only waited because the short momo seemed strong.
Lo and behold I saw a doji appear on the QQQQ at the 11:15 candle. That said the probability of it dropping more was greater than not. So I took TNA short, FAZ VXX long resulting in profitable trades. No other reasons. NO thinking.
First chart is QQQQ. Screen capture is a few candles late. Red lines are support/resistance lines I draw on when I start which not coincidentally is right where the doji appeared.
Second chart is TNA short
Third chart is TNA cover
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4 comments:
How did you decide to stay in this trade after that 1st big red candle? I got wiggled out on the two green reversal bars, before it made the 2nd impulse move.
This happens often and I'm conflicted about:
a) staying in the trade and probably being stopped out break even
b) exit with profits then re-enter after the retrace.
Thoughts?
GTM- It just seemed to be the right thing to do. The thing that kept me in the trade was that the volume on those green candles were not greater than the big red drop candle.
I felt that the market wanted to go lower instead of higher and it was only a small bounce on it's way to lower levels. Turns out I read the market sentiments correctly.
A good trade would also have been to take profits at the end of that red candle, play the usual bounce, wait for exhaustion, short it again.
There are a couple ways to skin a cat.
@GTM: ditto. Would love to hear what goes thru that marvelous brain of yours as this plays out Scott.
And as usual man - thanks for this post.
What I've noticed is when we don't have much of a market direction that these ETF's just bang out prior prices. TNA ran up to within .03 of a prior support line I had drawn and reversed today (I haven't been able to short TNA for over a yr. *sad face*) but it's all one big trade. Take FAZ long or IWM short or even crappy TZA instead. What is amazing to me is how cleanly prices will bounce off prior support/resistance, sometimes TO THE PENNY. Price has memory! It's one of those "too good to be true" moments, but I'm the one who drew the lines in the first place! The hard part is having the guts to take the counter trade, trusting that the probability is there for prices to stall and reverse and not getting ticked out of an early entry if they probe that price point by a few pennies first.
My problem is the same as prior comments. Taken the hit the 10% of the time it doesn't work (trend day) and got discouraged to trade it 90% of the time it does work. I just don't place enough trades for the system to start panning out. Way too few trades which limits my success rate. Hopping in the sim. and having the trades instantly work without a penny loss added to my frustration and laughable irony of the market last year. I stopped sim trading and realized if I just take the trade I have just as good odds of it working 90% of the time. I just have to take trade over and over and over again, like a machine, and that's been hard to do. To become thoughtless and machine-like and not worry about losing money.
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