Monday, August 22, 2011

Charts: I'm Simon Cowell, and the fish that got away

On the first day of following my strict "diet" of only taking the very best setups, I found myself feeling a little like Simon Cowell during the golden days when he was on American Idol.  One after another, as the setups approached, I found myself telling them, "Go away", "You're terrible", and "Stop! Stop! Stop! Thank you, good bye."  And when something halfway decent appeared, the very best I could say was, "Not bad."

Bottom line, I took ZERO trades today.

It's not to say there weren't any interesting setups -- there were many that I would have taken in the past, and many would have been quite profitable.  However, I had my plan to follow, and for whatever reason, "missing" those trades did not bother me.  I've heard enough people say that's just the way it'll be and you just have to suck it up and deal.  So I'm adjusting, and surprisingly, I feel fine.  My mission is to follow my plan, I did, and there's a sense of accomplishment to it. 

Although I didn't take any of these below, here are a few charts of interest and some that "got away":

$GG - 5min

GG is not likely a chart I would trade since it's a bit choppy, but this chart stood out for a few reasons.
  • The trendline on the chart below the two swing lows of the morning was extended upwards.  And as you can see, it helped to predict timing of when the consolidation broke out (first blue up arrow).  
  • I also realized that the R3 pivot levels were off by default, so when I turned them on, it was nice to see that the consolidation took place between the R3 and the 161.8% Fib Extension.
  • Ignore the 2nd blue up arrow, since that was just something I wanted to track (I had a feeling it would fail)
  • But look at the consolidation in the light blue box.  It faked out on the downside, then ended up making a double top.  Once price returns back to the consolidation range, this is usually a sign of a reversal pattern.  It worked in this case, and the vwap was a good target.

$PANL 5min

PANL had a relatively wide bid/ask spread around $0.05 to $0.15 or more, so it had choppy price action.  However, the first blue up arrow was maybe what I would consider a B grade "pullback to the retracement zone" trade.  It looked pretty good, but it just didn't have a nice green hammer bar -- I'm looking for near perfect setups.  And I'd say this was a pretty big fish that got away.

The second blue up arrow indicates a "tell" that prices are about to go higher.  Multiple bullish candlesticks supported by a rising 5ema was a good sign of potentially more bullish action.  I'm not sure if I would have taken this trade, since the price action was still choppy, but this is a chart I will study further.

 $NEM - 5min

When NEM setup on the 4th bar with that green hammer (first blue arrow), my gut was telling me to take it, it's going higher.  However, I couldn't justify taking the setup since it wasn't a setup in my trading plan.  Sure, I could have fudged and called it a Beyond the Opening Range High setup or something else, but I'm going to be honest with myself.

The 2nd trade was also something that nearly screaming to buy.  It was essentially 2 different setups, the vlb (vwap line bounce), as well as a not as well ranked "pullback to the opening range high."   The vlb setup provided an excellent entry on the 2min chart, provided little heat, and the risk reward was great.  But again, the setups were not a part of my plan, so they were not taken. 

As mentioned earlier, zero trades today but I feel like I accomplished a lot.  I wonder if that's how Simon feels after rejecting and demoralizing so many people and crushing their dreams?  Well, at least the markets don't even know or care what I say about it.


Klaorman said...

Have you thought about tracking the trades that you passed up to see how well they would've done? I chart my Missed Trades so that I can see what could've been. I don't track stats on them, though.

Grove Under said...

Good point, I've been thinking a bit about that, so good timing.

Right now, the good missed trades are just a bunch of screen captures. But I'm thinking of setting up another account in Tradervue, and adding them there. That way, they will be segregated from my actual trades.

That might then become my database of how well certain setups are theoretically performing, compared to my actual results. Lots of administrative work, but I think it will be well worth it the effort. Thanks for bringing it up!

Greg Reinacker said...

IMHO that will be tough. You're essentially saying you'll paper trade the setups you choose not to take. But as we all know, paper trading is nothing like trading with real money on the's easy to be clinical and follow a plan to a "T" on paper. In real life, not so easy, as I know all too well!

Grove Under said...

Totally agree with you regarding paper trading vs. real money. No comparison.

And the last thing I want is more administrative work of tracking trades that weren't real.

But I still think -- would tracking those trades that I passed, as well as those that I didn't even see until the post-market review, be worth doing in greater detail?

Would it really give me additional insights beyond my data of actual trades? Would it help me to better refine and grade setups and possibly learn new variations? Maybe understand when certain setups are no longer working as effectively, or vice versa? But yes, the results will all be theoritical.

Perhaps I'll need to think about this more when my mind is not so tired and exhausted!

Greg said...

Good points all...if you do decide to do it, be sure to post about how you're doing it and whether it's working for you!