Orderflow Trader's Scalp Trading Diary on 27.12.18

Orderflow Trader's Scalp Trading Diary on 28.12.19

Stop loss hunting on Indian MCX Market

Stop loss hunting, usually happened @ market, It must be big prints.

Types of Prints

1.Small Prints - Single, and Double digits prints (from 0 upto 99)
2.Big Prints - More then double prints, happens @ Buying or Selling Imbalance time, And @Stop loss hunting

Imbalance to Balance

Perfect Scalping Example :
There is some Imbalance activities @ 4946 @ 29.10.18 MCX Crude.,
Price went 10+ Ticks upside @ 4956 and again hits this level from upside..it went upto 4938 levels.

Daily Pivot level @ 4934 range to be, current low

Random levels to trade on MCX Crude on 10.09.18

Gap up open

Post entry….. Part 1

The real game starts post entry when you are staring at the price ticking up and down and your brain freaks you out with it’s talking. A majority of traders end up exiting good trades early and exiting bad trades late causing a lot of financial and psychological damage because of the mind’s chatter post entry.

There are so many psychological evidences to prove that the unorganized mind always tries to make you a loser, especially in  performance based professions like sports and trading. I’m not going into details of that as that is out of scope of this article. If you have a few months of trading experience, you understand what I’m saying.

• If you are good with the analysis part before the entry, managing the trade post entry is fun and exciting provided you have the right set of expectations towards the market. Let me phrase some of them here.

• No matter how good the setup looks, it always has the potential to fail when candles start printing at the hard right edge of the chart post entry. So make sure you protect your downside both financially and psychologically.

• Every single tick post entry will not move in your favor. Don’t expect that to happen as it totally screws up your mind when market moves against you which in turn effects every  decision you take there after.  Deal with candles, not with ticks. I would like to talk a bit more detail about this point later. This is one of the reasons why I fell in love with 5min. for day trading(leaving 3min.) , Hourly charts for swing trading.

• If you watch every single tick, you trade like a dick. This is again in tune with the previous point. Stop dealing with ticks. Deal with candles. Once you decide on that, you don’t have any business with the charts until the candle closes.

• You can’t trade the range bound markets like that of the trends and vice versa. Ranging markets are there to rip of trend following approaches.Trends are there to rip of those traders who always like to fade the breaks outs and weak swings at new highs in uptrends or new lows in downtrends (very common habit). Where you look for trades, what kind of setups, the trade management  and even setting the targets differ in both these environments. If you are finding it hard to trade one of them, then don’t trade.

• You don’t need to pick tops and bottoms. In fact, you cannot consistently pick them. That happens once in a while and consider that as an accidental event rather than your skill so that you will have right expectations towards the next trade. If you make that as the primary objective of the trade plan, you are doomed. Trust me, I was there and I really had very very bad experiences with that. In stead, focus on identifying the right setups at the right areas in the right environment, accept that there will always be some risk associated with every single trade and then give yourself permission to lose in few trades. Contain those risks by proper position sizing and that opens the doors for your further development. Once all these things are settled, then start working on better entries with limit orders into your setups for reduced risk.

• Be conservative with the targets. When I say conservative, I don’t mean placing targets at 1R, 2R or some crappy tick based targets. Leave that kind of target to scalpers. Know the potential of the trade and place the target at proper levels from the left of the chart. At least take 3/4 th of the position with a limit exit and ride the remaining 1/4 th with a trailing stop.  Some say half and half position management. It’s totally subjective and you have to choose which one keeps your mind at peace.

• Make survival as your primary objective of risk and money management. If you survive, you can take the next trade. But if you don’t, I don’t need to say the rest.

I want to give two more bullet points that talks about my approach to two different environments. I actually realized recently that I made those mental models unconsciously while talking to one of my friends. Here they are…

• In a trending market, I trade the impulsive swings of the short term trend which starts at the end of the corrective pullbacks and complex pullbacks, targeting the immediate minor supply/demand level or HTF S/R level. ie. I don’t want to hold positions during deep pullbacks in a trending market.... PB and CPB

• In a ranging market, I predominantly look for BOFs  of the range boundaries targeting the other boundary with conservative trade management (ie. with a loose trailing stop), and BPBs when the breakout is strong and price got accepted after the breakout beyond the boundary.  I manage TST setups aggressively (with aggressive stop trailing) targeting the immediate swing highs and lows to the left of the trade entry....BOF and BPB.

So every trading decision that I take post entry will be in tune with one of the above two points depending on the environment that the market is in.

The signal candle and the trigger candle

LWP :-

LWP is the price level in our setup location where you expect the stop losses of those traders who are fighting the high probability direction we have predicted are going to trigger.

The definition here is a bit subjective and is a bit hard to understand and apply by a trader who is new to PA trading.  So I would like to elaborate a bit about this.

I have been repeatedly saying like a humming bird that there are four important things to evaluate the odds in the favor of a swing trade.

1. Short term Bias. This is a must. If the bias is not clear, there is no point in looking for a trade.

2. Corrective move against the bias to fade. I have already explained how we can identify whether the swing is corrective or impulsive on the right side of the chart using the bar by bar candlestick analysis. This corrective move confirms that the market is weak against the bias and gives enough confidence to take a trade in the direction of the bias. It doesn’t mean that the pullbacks cannot be impulsive. They can be, but that rarely happens. It often gives a CPB or some sort of a trap type entry if the first leg is impulsive in the move against the short term bias. It just means that the odds are in the favor of the trade when the move against the bias is corrective.

3. Price level. The supply/demand level which can provide some orderflow in the direction of the bias to stop and reverse the corrective move.

If you are clear with the things so far, congratulations. You have done a great job and are few steps away from placing the entry order.

Now lets move on to the next step of the above procedure, Price level. When market corrects to the price level, the first candle that shows strength in the direction of the bias or/and weakness against the bias is known as the signal candle.

Signal Candle:-

The candle that closes strongly in the direction of the bias or weakly against the bias, at the price level is a signal candle. Like a pin bar, candles that close near high/low, inside bars etc. etc.

LWP:-

If the bias is up, the high of the signal bar is the LWP. If the bias is down, the low of the signal bar is the LWP.

Trigger Candle :-

The candle that triggers the stop entry order that is placed just above/below the LWP is known as the trigger candle. Once that entry is triggered, the low/high of the signal candle becomes the stop. In stead of triggering the entry order, if the market breaks the other extreme of the signal candle, better to cancel the order and wait for another signal candle.

So in short, Signal candle is the one that forms the LWP. Trigger candle is the one that breaks the LWP.