On a day that's trending down, I scalp "wave 4"s, which can be either up or down sloping channels. I'll buy towards a MSH (usually the 2nd - can be a lower or higher swing high - the 3rd, if it's a lower swing high than the 2nd, would be a nice H&S for bears).
The mistakes I made yesterday are found in the following list (by no means an exhaustive one) :
1) Scalping during the globex session - price forms miniature legs during the quieter hours, and because of that, I tend to be unwilling to enter at 1 tick above signal, reason being that I don't want to be caught in buying the 2nd MSH (where bears sell, and I become the trapped bull). I tend to buy 1 tick above an outside bar (instead of the inside), which can be 3 or 4 ticks above my signal candle. In scalping, every tick counts. I enter at a lousy price, and that's fine as long as I'm realistic about my exit. Sometimes I get carried away and overstay.
2) Assuming that market's reversing after a significant move down - which causes me to overstay when I buy the 2nd MSH of a wave 4. I get into trouble when I target my exit at a point that's higher than the previous MSH (I don't do that if I assume that what I'm seeing is NOT a truncated wave 5 - but the risk-taker in me tend to see truncated wave 5s....and I had no basis to assume a truncated wave 5 yesterday since it really wasn't a day that bears were desperate to cover).
3) Stop loss was too LOOSE. Even a 6 tick stop is a loose one on a day that I fade a strong trend, let alone a 9 to 10 tick stop.
All in all, I should have stayed away on a down trending day. I could still scalp what I mentioned above, but if I choose to do that, I would do well to heed my inner voice that's always telling me to get out before the bears are done taking profit.
Interestingly, D had sold yesterday (well, he always sells anyway), but always got out too soon, taking barely 3 ticks each time.
When I asked about his setup, he said he would sell when price had touched the upper channel. I told him that's technically not a setup. A setup is one that gives him an edge. If he's selling, his best shots are those where price has broken out of a downward sloping channel - that's because on a day with strong downward momentum, the first 2 or even 3 breakouts are mostly fake breakouts, and bears would take over once bulls stop buying. That means that his best shorts are the ones where price has overshot a trendline (it's where lots of scalpers that buy a breakout find themselves in a market without a follow-through, which will send them covering immediately).
D's best entry yesterday was a few candles after I exited my long. It was the textbook "2nd-Entry" short that I've shown him before (and told him to just trade that setup until he can hold his trades for at least 6 to 8 ticks). The signal candle was beautifully small, so selling 1 tick below would still give him a nice scalp profit of at least 6 ticks.
D used to wonder why I don't sell when I recognize sell signals better than buy signals. I think he finally figured out that I'm playing defence here. Since I know the onset of a PLUNGE, I'm better off buying. I'm not good at reading WHEN selling stops - and since I have a tendency to get carried away, I get caught in selling at a point where market's stop plunging. I find buying better suited to my personality, coz the market's always making an effort to go up. My only problem with buying is that of overstaying, but I rarely get caught in a situation where I get in and the market immediately turns against me.
On the chart above, I have shown only my last 2 entries. The first 2 entries were based on similar premise, except that they were globex-hour trades. After those 2 trades, I had stopped buying once the time was up for a wave 5 down (I was buying a failed wave 5, yes, but wave 5 didn't fail, so I gladly took my loss). In hindsight, I should have just totally stayed away ie. give up all down trending days. But I have a more enterprising spirit than that ie. it will take me a LONG time to learn to be conservative. Only time will tell if insisting on being who I am will pay off.
6E
Used all my 6E gains for the day to make ONE statement.
