Trading Homework

This weekend I realized I need to do chart homework.  The measured moves are awesome and are a staple of my trading plan and setups but there is another one I had started doing but stopped due to my revelation with the 2 legged measured moves.  What I am bringing back in (Mack highly recommends this) to my primary trading setups is the small trend channel lines.  Time after time when you see price break out of the small trend channel line it will come back and make a new low (in a downtrend) before turning back up.  You draw the line from the majority of the closes in a downtrend.  Below are some charts where I just downloaded the whole day and put the entries based on Mack's trading criteria.  You will notice time and time again that price will break out of the small trend line and then will come down and make a new low before reversing up (when in a downtrend).  When price is in an uptrend you will see price break below the trend line and come back and test or make a new high before reversing.  If you incorporate the 2 legged measured moves with this then you are doing really well in setting yourself up for great success.

I also need to remember to enter in at key reversal points which are the extremes of the trend lines, the EMA and support/resistance areas.

Your best entries come off the trend lines.  Your second best entries come off the EMA.

This is going to take a lot more work and focus to get this down.

4-26-2013

My Notes:

2 legged measured moves will be pretty clear.  They will not be very hard to spot.  If you are having trouble spotting one then it is probably still the first leg of a 2 legged measured move that just happens to have a couple of really small retracements in it.

Wait for 2nd entries off of the lows when going long and off of the highs when going short when you are looking at getting in to the 2nd leg of a 2 legged measured move.  I find that when I go off the highs for longs I am getting in too early and could have gotten in better waiting for a 2nd entry off the lows for the 2nd leg of a measured move up.  It also gives my 2nd lot a better chance of catching the runner.

Today was a good old fashioned range day.  The 2 legged measured moves still proved to be the way to trade for me even though all of my runners ended up getting stopped out.  I made one bad trade.  I think I was not realizing how much of a range day it was and was looking for the 2nd leg of the measured move to be completed rather than realizing it was a fakeout breakout.

Still, much better job.  Slowly getting better.  In the past I would have been down today but I ended up +1.50 points.  Take out that bad trade and I am up +5.00.

After watching Mack's video I think I was off on counting the big measured move.  I labeled the "correct" measured moves in black that Mack said were the correct ones.

Mack's Notes:

A trap is a setup that fools people or surprises them in taking the wrong direction in their trade.
When prices are all over the EMA then that is how you know it is a trading range day.
Draw all of your short term trend lines.
Usually when price breaks the short term trend line in an uptrend it will go up and create a new high before selling off.

Draw your short term trend lines.


My Trades:

1.  2nd entry long and was looking for the 2nd leg to the measured move long.  I dropped my order in 3 ticks below where the original entry was b/c my stop would have been right on the low of the swing.  I got a scalp out of this before price came down and took out my BE stop on the 2nd lot.  Very good read on this trade!  Not sure if I could do anything about price coming and taking my BE stop out before it shot up.  Great job on recognizing this 2 legged move.  The only thing I could have done is take the entry I have circled b/c that is the 2nd entry off of the lows and then drop my entry order in 3 ticks from the entry.  That would have been the only way for my runner to work.

2.  2nd entry short off of the 45 EMA looking for the 2nd leg down of a big 2 legged measured move.  I got in 3 ticks better than where the entry signaled for an easy scalp.

3.  2nd entry short off of the 45EMA after a 2 legged measured move up had been completed and am still looking for the big 2 legged measured move down to complete.

4.  2nd entry short off of the high after a 2 legged measured move up had been completed.  I got in by getting my limit order filled 3 ticks better than where the entry bar signaled b/c the bars were too big for my stop w/any wiggle room.  I got my scalp filled but price just doesn't want to make it down to the 2nd leg of the big measured move.

5.  2nd entry short.  Was looking for the end of the measured move to get filled.

6.  2nd entry long looking for the 2nd leg of the measured move.  I actually got in one tick better than the signal bar but it cost me a runner.....lol.  If I had gotten in where the signal was then I probably wouldn't have had my scalp filled.  Then price would have retraced and I still would have been in the trade before moving back up to the previous resistance.  Good job in spotting the setup though.

Missed Trades:

1.  (9:11) 2nd entry short and you are looking for price to go back and test the lows.

2.  (10:37) Failed 2nd entry long and am looking for the 2nd measured move to get filled.  Very had to get in b/c the entry bar never really came back and was too hard to get in.

3.  (11:51) 2nd entry long off of the swing high.  There were a bunch of doji's and overlapping bars.  I was in the short trade which was a bad trade so I wasn't looking for the long.  I think it's a good trade long b/c it looks like the 2nd measured leg has been close enough to being filled and price is eating up all the short orders and is getting ready to go long.

4-25-2013

My Notes:

The 2 legged measured moves are the basis for almost all of my trades.  I look for this first for almost all of my setups.  Then I look for a 2nd entry off of the 2 legged measured move whether it is the end of a measured move or the beginning of the 2nd leg.  The only time I take a 1st entry is if price is in a very steep trend and it is off the EMA and I doubt I will take that trade very often b/c I like the 2 legged measured moves w/2nd entries so much.

Today I am going to focus on dropping orders back inside the entry bar when the fill is almost my full 2 point stop.  I am going to drop the orders 2-3 ticks back from where my entry would have been depending on the size of the bar.  I may miss some trades this way but I think it is safer then utilizing the full 2 point stop loss too often.

Made one bad mistake today but saw very clearly what it was.  Trade #2.  Learn from it.  Always be aware of the 2 legged measured moves and if they have not completed yet.

Mack's Notes:

He just went over a live trade.  Didn't really say anything that stuck out to me.

My Trades:

1.  End of a 2 legged measured move down and am looking for the 2nd leg of a big measured move up.  This is where I dropped my entry 3 ticks from the signal spot since the fill would have taken up my full 2 point stop with no wiggle room.  I got the scalp at least.

2.  Was looking for the 2nd leg down of the 2 legged measured move.  Obviously that leg had completed even though it didn't reach the target.  I see why this was a bad trade now.  This was finally the 2nd leg to the big leg from early this morning.  Price had made a 2 legged measured move lower (even though it didn't complete by about 1 point) and was going up to it's measured move.  I missed seeing this until it was too late.

3.  End of a 2 legged measured move down and was looking for price to bounce back for at least a scalp.  I still could have gotten in better b/c where I got in was not a 2nd entry.  The 2nd entry was 4 bars to the right.  I'm not sure why I got in where I did b/c it wasn't a 2nd entry even though it was the end of the measured move.  Look how fast price shot up on the 2nd entry after it formed.  Once I saw this was at least a 2 legged measured move I got out 2 ticks below the top of the measured move.  If price goes up much further than the end of the measured move then this is the first leg and I'll look to go long on a pullback for the 2nd leg.

4.  2 legged measured move short with a 2nd entry off of the EMA.  This is a beautiful trade where I knew what to do and what I was looking for.  Once I saw the strong leg down I was pretty sure that was the 1st leg of a 2 legged measured move so I put my entry one tick below the previous close once price pulled back.  I counted the 2nd entry from the high at 1588.25.  My 2nd lot exit was 2 ticks above the low of the 2nd leg of the measured move.

Missed Trades:

1.  Failed 2nd entry long counting from the low and was the 2nd leg of a 2 legged measured move down.  I missed this b/c I got confused and was looking for the 2nd leg up of a 2 legged measured move that was incorrect.

2.  The end of a 2 legged measured move down and was a 2nd entry from the swing high.  This would have been a beautiful trade to take if price had moved down another 3-4 ticks.  Since it didn't get there I was not looking for the long yet AND I didn't realize this was the 2nd leg of a 2 legged measured move down.  I got confused and subsequently I made a losing trade just after this b/c I was off on my interpretation of price action and what it was doing.

4-24-2013

My Notes:

Focusing on 2 legged measured moves and only taking 2nd entries unless price is in a very steep move and it is a first entry off the EMA, then I'll take it.  Otherwise every other entry is a 2nd entry with the 2 legged measured moves being the basis of almost all trades.

Since I started doing this a little over 2 months ago I have improved.  On a range day like today I would normally be fortunate to break even but today I didn't have a a losing trade using the 2 legged measured moves.  I am still very far away from going live but I am much further ahead than I was 2 months ago.  I even took almost every trade Mack said was a good trade by focusing on these 2 legged measured moves.  I am becoming more and more convinced that these are the key for me to be a profitable trader.

Good trend line drawing today and S/R lines.  Getting better at this as well.  They are easier for me to see now.  They are not perfect but are way better than where I was 2 months ago.

Mack's measured move arrows are in black.  I could not see this which is why I did not label it.  I just couldn't make it out no matter how hard I tried.

Mack's Notes:

You want to buy at support and sell at resistance.  If you try to trade breakouts you will go broke.

Buying at support and selling at resistance goes against common sense b/c you are trading against the way price had been moving.

If you are sim trading just follow the rules the best you know them and take all of the good trades you see.  At the end of the day review your charts and see what you did right and do more of that. See what you did wrong and correct that thought process.  That is how you become a better trader.

Do not try to learn with a live account.  If you haven't proven that you can make money on the simulator then you will not make money trading live.

When you 1st go live you will struggle with your emotions but you will be light years ahead if you have proven to yourself that you are consistently profitable in sim.

My Trades:

1.  2nd entry and was looking for the 2nd leg of the measured move up.

2.  Thought it was a 2nd entry short off of a double top but as soon as it didn't go down to start what I thought was the 2nd leg of a big measured move down I got out at BE.  I have no idea where price is going right now.  (AS SOON as I get out price moved down to take out my scalp.  Oh well at least my reasoning for taking the trade was correct)

3.  2nd leg of a 2 legged measured move.  2nd entry counting from the lows off the EMA.  I got in one tick too high b/c I didn't have my entry correctly placed.  At least I got the scalp.

4.  2nd leg of a two legged move.  Entry bar had a great short trap.  2nd entry long counting off of the lows.  Should have taken my 2nd contract out at the 1 point scalp b/c that is where the end of the measured move was.  I had it 2 ticks below the resistance level.

5.  End of a 2 legged measured move up and was a 2nd entry short.  Obviously I was a little early but it still worked out.  I was also looking for the 2nd leg of the bigger measured move down.  I thought it was a great setup since the 2 legged measured move pullback had been hit and formed a beautiful 2nd entry where I was looking for the bigger 2nd leg of the measured move down.  I had my 2nd contract 1 tick above the low of the measured move.

6.  End of the bigger 2 legged measured move down and of the smaller 2 legged move which was withing the bigger 2nd leg down.  Price was coming off support and was a 2nd (maybe 3rd entry).  I took my 2nd lot out at the end of what I thought was the 2 legged measured move up.  Obviously I wish I had put it at the resistance level.

Missed Trades:

1.  2nd entry long off of a double bottom.  I thought about taking this and if I did I would have dropped my order 2-3 ticks into the entry candle since my stop would have been too big where the entry bar gave me the entry.  I also didn't take it because I had no idea about the measured move since there was not one.  But I did see this trade and marked it before I watched Mack's review video.

2.  He said this was a 2nd entry long but I just do not see it from counting from the lows or the highs.  He also said this was a failed break lower but this is an advanced trade that I am not taking because I would just be guessing if I took this trade.

3.  2nd entry short off of the highs and off resistance.  I didn't take this trade b/c I was unsure if price was going to go back up and reach the measured move long.  I should have taken this short since this was obviously a range day and price had made a higher high.  The only thing was that what I thought was the 2nd leg of the measured move down where the 2nd entry short was too close to the end of the measured move down.  Obviously it wasn't close to the end of the 2 legged measured move since it went all the way down to support.  I was confused so I didn't take the trade which is fine for now.

4-23-2013

My Notes:

Still focusing and identifying the 2 legged measured moves.  That has been the breakthrough for me so far.  Today I am going to take every trade based off of those 2 legged measured moves that I think is a good trade.  I am not going to tighten up after I have a couple of winning trades.  I am going to continue to look for good setups and take the trades.  This is all in sim so take every good trade you see.

Mack's Notes:

When there is a trend line break in an uptrend then price will usually create two more legs to a new high before going into a range or reversing.

Usually when price moves big from a news reaction then price will usually come back and fill it during the day.

You never trade w/o safety stops.

My Trades:

1.  The 2 legged measured move was 1-2 ticks from completing and this was a 2 legged move down.  I expected price to go to the big overall 2 legged measured move.  The was also a 2nd entry from the previous swing high.  (I took my 2nd lot out when price stalled)

2.  2 legged measured move down that had completed and was a 2nd entry off of the low which was also off the EMA.  This might not have been a good trade but I at least got a scalp.

3.  Was the end of a 2 legged measured move down but the long trap got me on the first entry.  Should have waited for the 2nd entry which I got in below.  2nd entries + 2 legged measured moves are the key to success.  The 1st entries are tempting but I think they lead to more losses than the 2nd entries do.  You cannot get impatient.

4.  The 2 legged measured move down had been overdone and this was the 2nd entry from the previous swing high.  I took my 2nd contract out when a down trend line developed and a 2nd entry short formed with a double top.  I wouldn't even be trading this late anyways if I was live.

Missed Trades:

1.  Pullback in a strong trend to the EMA.  I am not really taking this trade.  I saw it but was waiting for a 2nd leg down that was a measured move for me to take the trade.

2.  2nd entry short off of the previous high.  It was also off the EMA.  I suppose I could have looked for the 2nd leg of a measured move down.  I was actually looking for a 2nd entry short off of the lows but I see why I missed this.  I should have been going off the highs when looking for a 2nd entry short on a 2nd leg to a measured move.

4-22-2013

My Notes:

The 2 legged measured move has been my bread and butter since my breakthrough a couple of days ago so lets keep on hammering it home.

If I don't understand and/or do not have an expectation about where price is heading then do not trade.  This is in reference to not being able to identify the correct leg in a 2 legged move.

I got too complacent after I made 2 good trades from the start.  I have to utilize and trust the 2 legged measured moves b/c they work.  I noticed after I was  up 6.5 points I tightened up and ignored trades I should have taken b/c I didn't want to give any of it back even though I am in sim. This is something I need to change b/c I need to be taking all of the trades I can that I think are good trades so I can note the ones that work and correct my thinking to the ones that do not.

Decent job drawing your trend lines.

The good news is that I was able to correctly label all of the good trades I missed after watching Mack's video review.  This is basically from just focusing on the 2 legged measured moves.

Mack's Notes:

When you break a trend line in an uptrend price will usually will make 2 legs to a new high before deciding what to do.  When you break a trend line in a down trend price will usually make 2 legs to a new low before deciding what to do.

You are not trading based off the EMA.  You are trading based on what price is doing in relation to where it is to the EMA.

If you ever start to pray for a trade to turn around then GET OUT IMMEDIATELY!  If you feel that urge to hang on and HOPE then get out immediately.


My Trades:

1.  2 legged measured move down and a bigger two legged measured move down.  Was also a 2nd entry and am looking for the 2nd leg to the move up from early this morning.  Got a scalp.  Not sure now if price is going to go any higher.  We might be in a range or will go back and test the lows.  Not much strength to the upside even if this 2nd leg long that is forming at 8:31 that took out my BE stop reaches it's full potential.

2.  This was the end of a 2 legged measured move up and was also a 2nd entry off of the top of the trend channel.  I got the trend channel by connecting the two swing lows and it fit perfectly up top. Price looks like it is making lower lows and lower highs so I thing we might be in a downtrend channel.  My 2nd lot is at the bottom of the trend channel.

Missed Trades:

1.  2nd entry short from the previous high and the beginning of a 2nd measured leg move.

2.  Interesting trade.  It wasn't a 2 legged measured move up that had ended or even a 2nd entry.  It was a first entry off of the EMA but you are looking for the 2nd leg down and since it is off the EMA it is probably a wise move to take this.  Only b/c you are looking for the 2nd leg of the measured move down.

3.  2nd entry short off of the EMA.

4.  2nd entry short off of the top of the trend channel.  I was hesitant b/c I was looking for a 2nd leg of the measured move up (which eventually did happen).  This was good enough for a scalp.

5.  2nd entry long off of the lows with the support of the EMA.  Mack said it also had a short trap. This was the 2nd leg I was looking for of the measured move.  It was also off of the bottom of the trend channel but I had not drawn that yet.

6.  2nd entry long off of the EMA.  I was looking for a 2nd measured move down before going long.  If I had seen or known that this was the 2nd leg of a measured move then obviously I would have taken it.  Hard trade to take but if I had drawn that measured move then I would have taken it.

4-18-2013

My Notes:

Still focusing big time on the 2 legged measured moves.

From 7 - 8:15 I had no idea what was going on so I hung tight.  I was expecting price to make a measured move up but the high it created was really weird and once the 2 legged measured move down was obliterated then I knew that price wasn't making a 2nd measured move up.  I thought price might be in a range but when price made that beautiful 2 legged perfectly measured move up to the 45 EMA and was a 2nd entry short, I had to take it.  Especially since I expected price to make a 2nd measured move leg down which it did!  This is why these 2 legged measured moves are amazing!

I got sloppy after about 9:30 when I started pressing too hard for measured moves and trades.  The good news is that the 2 trades that were losers is that they eventually went where I thought they would go.  I was too early and not patient. That is good to know that my expectation was correct but I was just too early.  Have to be more patient.  I am afraid of missing a winning trade.

Mack's lines are in the dotted black lines.  They make more sense since when I was trying to draw the blue trend lines the upper line would not fit.  That is a good sign that you need to use the other side's trend line.

Mack's Notes:

Stay with the rules and with the system.  You have to trust it b/c it works.

If you are struggling keep with it b/c eventually you will get it.

My Trades:

1.  2 legged pullback, 2nd entry off of 45 EMA and 2nd leg of the measured move.  I used the measured move for my 2nd lot exit.  When it got within 2 points of the lows I didn't want to give a bunch up so I had my exit 2 ticks above the previous bar's high.  Since I was doing this as my trailing stop with over 6 points for my runner I moved my profit target one tick above the measured move and it worked out beautifully.

2.  Failed 2nd entry long off of the 45 EMA.  Had enough of a 2nd measured move down leg to at least get the scalp.  I wanted in b/c since the market was so weak I was looking for another move down past the lows.

3.  2nd entry long off of the EMA.  It also had a funky measured move down that just about reached it's lows but didn't.  I wanted in on this trade b/c of the expectation of it being the 2nd leg of the measured move (which it turned out to be).  My 2nd lot was 3 ticks below where I took the other short for a big move down.  It was about a point or a little bit over from the measured move but I figured this spot is fine for a 4+ point gain on the 2nd lot.

4.  Was looking for the 2nd leg of a measured move down.  Obviously I was off and did not recognize the situation correctly.

5.  2nd entry short off of the high and looking for the 2nd leg of the measured move down.  Price came out and took out my 2nd lot before reaching the end of the measured move.

6.  2nd entry long.  Price had gone wayyy past the 2 legged measured move and was at least a point away from the EMA so I expected price to bounce back up.  The problem here is that I do not know where to get out with my 2nd contract since there isn't a measured move?????  I guess I'll just use a trailing stop 2 ticks below the swing low.  (Nevermind, price came back and took out my BE stop w/one bar)

7.  I thought it was failed 2nd entry short but I had even marked it as being a good 2nd entry short so this is a trade I should have just avoided since there wasn't any measured moves.  This confused me and I took the wrong side.  This is a good trade to stay away from.

Missed Trades:

1.  2 legged measured move that had completed and overshot the trend line and the move.  The signal was the 2nd entry short.  It was also off the 45EMA that had been the resistance earlier.  I saw this and should have taken it.  It would have been good for a scalp.

2.  2nd entry long.  This is the trade he took live.  It was good for a scalp.

3.  2nd entry short off of the 45 EMA after a completed measured move.  It would have been good for a scalp.

4.  2nd entry long off of the low looking for the 2nd leg to the measured move.  Price had already overshot the big measured move down so I was looking for a pop up.

5.  2nd entry short and 2 legged move off of the 21 EMA looking for the 2nd leg to the measured move.  This would have been another great trade to take but I was tired and was running the replayer at 500 just to close out the day.  My 2nd lot probably would have only gotten a point or two since I would have been looking for price to go to the end of the 2nd measured move which it never came close to but it did go 5 points in the direction.