ES 5min
As I mentioned, I was looking to buy after ES hit its high of the day at 823.5, and has done a 38.2% throwback. The basis was that it's better to to assume that the uptrend is intact until newer data says otherwise.
When price made a lower low and a lower high after coming down from 823.5, followed by a retest of 823.5 - which failed, indicating at the same time the failure of an Inverted Scallop - and when my indicators started to give a SELL signal, my thinking was that the odds of ES breaking its high on an Inverted Scallop pattern has just gone down. That, plus ES' hitting 211.8% and stalling there (138.2 and 211.8 have been the levels that stopped ES - something I observed since I started trading the ES in early Feb this year) made me decide that it'd be worth taking the signal to sell.
ES ended up pulling back by 2 bullish candles. On other occasions, I would have waited to see if the candle that followed would be a bearish one that would take price back down, resuming the downtrend. But ES had opened within the bollinger band on the 2nd pullback candle. If I'm selling at a point that's beneath the lower BB, I don't want to see a candle open and close anywhere within the BB. I covered my short.
When price made a lower low and a lower high after coming down from 823.5, followed by a retest of 823.5 - which failed, indicating at the same time the failure of an Inverted Scallop - and when my indicators started to give a SELL signal, my thinking was that the odds of ES breaking its high on an Inverted Scallop pattern has just gone down. That, plus ES' hitting 211.8% and stalling there (138.2 and 211.8 have been the levels that stopped ES - something I observed since I started trading the ES in early Feb this year) made me decide that it'd be worth taking the signal to sell.
ES ended up pulling back by 2 bullish candles. On other occasions, I would have waited to see if the candle that followed would be a bearish one that would take price back down, resuming the downtrend. But ES had opened within the bollinger band on the 2nd pullback candle. If I'm selling at a point that's beneath the lower BB, I don't want to see a candle open and close anywhere within the BB. I covered my short.
What I Think I Had Done Right
1) Looking at only the most recent price action, and focusing on what price IS doing.
2) Looking at price pattern - a 2nd leg up was expected after wave A-B-C-D-E, and when the supposed 2nd leg failed to break the high at 823.5, I switched my focus to look for a confirmation of a FAILED pattern. That confirmation came when ES punched through support at 815, followed by 3 consecutive closes. The signal from my indicators to sell came after the 4th close. I sold on the candle after the trigger candle.
3) Sticking to bailing rule - Given that one of the basis that I've entered was price falling out of a BB that's turned south, my reason to get out of trade would be if a candle were to open and close within the BB. I exited my trade when ES gapped up and candle opened within the BB.
2) Looking at price pattern - a 2nd leg up was expected after wave A-B-C-D-E, and when the supposed 2nd leg failed to break the high at 823.5, I switched my focus to look for a confirmation of a FAILED pattern. That confirmation came when ES punched through support at 815, followed by 3 consecutive closes. The signal from my indicators to sell came after the 4th close. I sold on the candle after the trigger candle.
3) Sticking to bailing rule - Given that one of the basis that I've entered was price falling out of a BB that's turned south, my reason to get out of trade would be if a candle were to open and close within the BB. I exited my trade when ES gapped up and candle opened within the BB.
What I could have done better
I should have waited for the 2nd pull back candle to close completely before bailing. I had covered near the top of the candle and taken more loss than I would have had I covered at the close of the candle. But this is more about following my rule of covering at closing of candles than about the difference in the dollar amount lost.
TF 5min
The rationale to sell TF was much simpler - I simply took the signal from ES, since TF has not been diverging from the former. TF has a tendency to follow the ES, except that its move is usually more exaggerated when it's REALLY moving. I have both charts on because I know I can always take a trade on the TF if I were to have missed one on the ES.
On the TF, I didn't get a signal to sell at all until after I've closed out my ES position. Which was a good thing actually. Getting in on a fresh signal gives me the best risk to reward ratio.
I had gotten out on the 3rd bearish candle on a smooth ride down - which took price down to 161.8 without retracing at 138.2 (characteristic of TF to do that anyway). The candle that followed was a tiny bullish one - expected, once TF hits 161.8. I would have gotten out at this point whether or not I was looking to cover my loss in the ES trade. My plan was to get back in after a slight retracement to 138.2 (for TF, that would usually be in 2 small bodied bullish candles).
On the TF, I didn't get a signal to sell at all until after I've closed out my ES position. Which was a good thing actually. Getting in on a fresh signal gives me the best risk to reward ratio.
I had gotten out on the 3rd bearish candle on a smooth ride down - which took price down to 161.8 without retracing at 138.2 (characteristic of TF to do that anyway). The candle that followed was a tiny bullish one - expected, once TF hits 161.8. I would have gotten out at this point whether or not I was looking to cover my loss in the ES trade. My plan was to get back in after a slight retracement to 138.2 (for TF, that would usually be in 2 small bodied bullish candles).
What I could have done better
I should have stayed put at my screen during the anticipated pullback at 161.8, instead of going out to get my nicotine fix! When I came back 5 MINUTES LATER, TF had gone back down in a long bearish candle. Following it was a doji. I hesitated at the sight of a doji, only to see the next bearish candle bringing price down to support at 419. That was the move I had wanted to catch before I called it a day. Missed it, and was too tired to trade the after 2pm session, and had to wrap up for the day.
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