(binned per thread starter's request) Market bottom rotation trad

Hi, Janpec, just found this gem of your thread. Thanks for it!

in some ways, your setup is similar to what I look at.

i haven't been able to finish reading all your posts. but would like to confirm that your stats is about 1:1 R/R, with 75% winning rate? I ask this question purely as a valuable reference to the setups' edge as I trade similar patterns. but I have some confidence issue... therefore......

enjoy your weekend!

Make sure to go trough whole thread, RR per trade and winning percentage varies a lot depending on the setup. If micro shelf is tight RR is going to be stronger usually, or depending on the setup traded or the depth of structure that is what will guide what RR will be. So RR could be between 1:1 - 1:10 on a trade. Win rate will depend highly on the each pattern traded, for example massive short squeezes have very high win rate, while continuation patterns have win rate bellow 50%.

Mind that setups traded are split in different areas. Some are liquidation patterns, some are continuation patterns based on accumulation / absorption. Those two processes have different behaviour and also statistical "success rate". I will be posting in future more detailed journals and trade reports to point towards those areas, it just takes some toll of active time for me to post all content on thread so it will take some time to get all points across. For anyone learning and willing to make it with the strategy / patterns thought here it is essential not just to re-read the whole thread many times over, but also to put spare time into studying historical markets over and over again, there is absolutely no way to succeed at it without that. Gaining discipline on strategy execution and pattern recognition takes many repetitions. Confidence in markets comes only from heavy research, a gambler in casino is always unsure and scared, becouse most people have no statistical data on how games and house edges their play agains them, if they knew it they wouldnt step into casino in first place, same goes for trading, if one has no large detailed research on informational pattern traded its likely there will be no confidence, and the confidence is no per-single pattern factor (as any single pattern can fail) but its about having confidence in strategy over long term, which comes from the consistency of behaviour of that traded pattern that has been researched over 1000s of examples.

In trading there are three type of strategies and if you want to succeed at those, for the 2 of them you dont need to do any research, and for the third one, you absolutely have to do extensive research.

First category are promotion / manipulation based strategies where actual trader has edge on market by sharing view publicly where masses will follow that opinion and therefore have impact on price. One doesnt need to do any research to have edge on that strategy, simply having many twetter / youtube / social media followers is often all its needed with some agenda attitude that is hidden from them.

Second category are market overfitting strategies, strategies that only work under specific market conditions. For example long only strategy on equity index using some MA and Stocastic indie, since 70% or more stock index trends on upside over long period, that strategy will usually work with little time or effort put in at and some semi decent money managment over all. Not much research needed to gain confidence on such strategy.

The third type are the hardest strategies and the most under-used strategies, those are robust strategies that work in any market condition, and deliver very consistent execution opportunity. Those are usually process behaviour based and require huge amount of research in order to work , mainly becouse its not easy to find such process or its becouse their edge is very thin and there are many factors to be properly fit in order for strategy to respond well.

So all that said to tie to your mention about confidence. You need to 100% first establish under which of 3 types your strategy fits, if you think you have robust strategy based on process you need to really make sure you study and research that , that is only way confidence in such strategy will be found.

Clearout, more examples

Pullback leg rotation, more examples

More overall examples, clearouts, takeouts, bounces

Practices on how to handle trading of all explained setups to increase efficiency, decrease time of watching charts and improve overall performance by not getting too "trigger happy".

Generally trading performance , especially bad performance on single executed trade is going to be a cascade event of bad or poor decisions. Often it will start at decision that seems unimportant but will give a weight on next decision, and the next decision which will likely be poor due to previous will also leave reflection on the next decision and so on. Mostly those are going to be micro decisions, as any trader that journals or reviews trades will be able to remove most of strongest mistakes pretty quickly.

Here are some sets of real examples that i have repeated many times in past and have also seen many other traders execute them as well.

-Bad price fill relative to key risk level.
Entering trade in FOMO mode and entering at price quite far away from key watched price level that is used for risk control.
It might seem initially harmless decision, becouse trader has setup in sight and now that price move "confirms" the setup, but price has moved already quite far that trader doesnt want to miss out on that setup so he rushes to get filled at market order just to be in the play. Decision like that will often have a negative consequences as if in such case price moves against trader quickly, over thousand cases recorded what happens is that trader is not willing to cut the loss, becouse he rationalizes "if i have to close trade in loss now, its going to be quite larger loss than i planned or expected, so i will just let the price ride into my favour". Or the other type of thinking is "well price went into the favour of setup initially thus i must be right on this play, so ill just stick trough that draw down on position".
Being patient and disciplined on limit order fills (or market order fills right on risk control level) is going to help trader perform better by decreasing chance of cascading event of bad decisions.

-Missing a winning setup, and going "all in on next one".

This is very often the case with traders trading low frequency patterns, they will watch pattern for long time, miss on entry and then as setup plays in their direction they will be hit by dose of "i was right" medicine. This will then cause that on next play trader will either rush into trade, or oversize becouse now he is angry at the market for missing him out on a trade. It might seem like a very conceptual thing to happen, but actually it is very frequent behaviour especially for beginning traders.
Trader should be like an athlete or any other game player, you should focus on overall long term performance, and not focusing strongly on every single play. Single plays will distort perception, leave traders often with bad assumptions. Executing every next play as if there are 1000s of plays more ahead of you, and the result of that single play does not matter to the way you execute the market.

-Having a set of loosing trades and starting to quickly judge or question the edge of strategy

Every beginner trader goes trough phases of testing 1000s of strategies. Moving from indicator to indicator, strategy to strategy, mainly becouse as long performance is green trader will stick to it, but as soon as few red prints are in between they will move to try another thing.
It is important first to establish if strategy has edge, this means extensive research of exact strategy replication and then doing backtest, stress test. After that is done, thats when forward test comes, however one critical thing to always keep in mind is that in trading performance of patterns or trades is never equally distributed, that means losing trades or failed patterns could be set in batches rather than being back to back distributed to winning trades.
Understanding this completly could be a difference between making it or not making it in markets, since trader that does not fully rationalize on this, could potentially start heavily under performing strategy execution once batch of losing trades or winning trades come in row. For example a trader with 10 winning trades in row might get too confident and oversizing the position on 11th play, or trader who had many losing trades back to back could potentially give up or also size too large.
If strategy is well researched and positive edge is confirmed then trader should be only focused on finding quallity patterns, executing strategy as good as possible and focusing on overall performance over 100 plays, and not think about every few plays what happened.

-Self sabotage

Self sabotage is process that will usually come from trader with lack of knowledge on complex subject. This is a massive scale problem, if one takes whole internet as a while there are massive amounts of miss-information and self sabotaged approaches in circulation. The whole process looks like that:
-trader gets some small sized information about subject
-that information makes logical sense to trader (that will depend on each persons thinking style)
-if its logical it must also be true, thus that is from now on my belief
The result of such approach and thinking ,is often going to lead from trader excluding himself from participantion due to the way that subject was researched. This will exclude potential (but in some cases it might also prevent loss, that can only be confirmed if that person actually has not been a subject of self sabotatge after
participating in subject).
To pick a real life example:
-Trader checks some news site with article "algos manipulating the market and why they will always stop you out", usually article that is touching on very complex subject but is explained in few hundred words only. (That should almost always be a red flag, when complex subject and opinion is explained in such short manner its very likely a misleading info).
-That trader will very quickly also start forming same opinion as article makes logical sense (but has no real empirical data to confirm that over 1000s of examples).
-Result will be self sabotage and trader excluding himself from trading high frequency charts, even though that his research and authors research is very poor.
I could name here literally whole book of real examples, but one should be enough to explain how the process goes.
Trader should always be open minded, always doubting his decisions and seek weak points in arguments (of others or his own mind), and never form any opinions of complex subjects without gaining lots of knowledge or doing research. History and real time examples will prove case by case at massive scale that that is a very under-performing type of thinking if one jumps on forming quick opinions on poor research.


-Picture perfect informational pattern, and being in a 100% right mindset

This one could be very tough. I struggle with it still after years and many traders do as well. Once a very clean informational pattern is printed that fits very well in line with traders strategy this will lead to pre-set mindset that could lead to cascading event of bad decisions. There is usually very sublime thinking process that trader will not notice where he positions himself into thinking and confirming that this pattern will surely work. One of best way to prevent damage on that kind of situation is to force yourself to always use SL on every position, there is very little else that can be done. Patterns like that will test the flexibility of a trader at the strongest possible scale, a really strong flexible trader will execute such trade just as good as any other (if its a loss), while the rest will under perform.


-Having strong optimistic or pessimistic mindest

This one might seem like something that trader cannot address, becouse "you are just born with it", but actually that is not true at all. Process repetition like trading markets and some other frequent reality check mechanisms will actually push trader naturally towards being more neutral realistic thinker rather than being on the sides of extremes. That will however depend on each person and how honest one is by admitting mistake or error on each trade, some guys can have strong egos preventing them from admitting mistake which means that such person will never have a chance of eliminating optimism or pessimism, but as long as one admits that reality developed different to ones initial thinking then one learns from mistakes.
Having optimistic or pessimistic mindset has drastic impact on not just trading / investing performance but also impacts self sabotage and triggers many other cascading events. Usually such people will drastically under perform market.
For example there is a trader / investor who is optimistic in general and has a quick view that Bitcoin will go to 50.000 USD within next year, on oposite scale of that person there is a guy who thinks cryptocurrencies are a fraud and it will all go to 0. None of those persons actually did extensive research on technology nor the market behaviour (for example optimist could have way too high estimates compared to potential market order flow expansion). Therefore people who are very optimistic or pessimistic will often approach situation by quickly judging information ahead and their nature of thinking is actually going to prevent them from doing further research (for example pessimist will naturally force him/herself to not further research topic due to negative thinking has impacted).
I used Bitcoin as example as that is real life example backed by 1000s of people i noticed how they approach this new technology, and there is very few people with level headed approach in the space. When market is condensed with frequent use of words like FUD, FRAUD, MOON it easily points towards most people not having enough research on topic as their terminology points towards that.


-Staring at the chart too much, while the pattern develops

Trader should operate with using alerts, or using some other methods that do not focus him on single play too much. For beginner trader on strategy that might be a difficult task, but it should be a praticice that is using more and more to get used to it, simply because the performance of such trader will increase if developing setup is not tracked too closely. Now there is a big difference between tracking potential developing pattern and tracking the pattern after trader is actually in position. First one is not recommended, but second one is prefered or needed.
Tracking developing price too closely will often lead to cascade event of bad decisions or poorer performance, as trader will get more excited once the price actually is at the "entry area", or the trader will get psychologically drained from tracking price too closely and executing the entry or exit poorly, or most common result is that trader will get frustrated for spending so much time watching the chart that he will fight the market to "pay up for it". All those micro decisions often lead to bad cascade event .
A good practice is that trader thinks 2 steps ahead, which structure has potential to develop into structure that i am interested in? Ok, lets plot alerts on price areas where that play would potentially be confirmed, that way this asset steals no attention from trader if price is going in completly oposite direction to prefered pattern bake direction. It is something that takes practice of many executions to get used to, but the point is trader should be practicing it from the start as much as possible.

-Not understanding difference between good and bad trade

A losing trade is not a bad trade and winning trade is not a good trade. Actual bad trade is trade where trader breaks many rules of strategy and loses or gains on that trade (being punished or rewarded by market for bad behaviour), and actual good trade is one that is executed well along the rules of strategy (that means a losing trade could be good trade if trader has executed it well along the rules of strategy).
Usually being rewarded on bad trades is what is going to lead to cascading event where trader will start to think that actually changing rules of strategy is good becouse on that last play he was rewarded. That means such trader will actually go against the consistency of empirical research that backs the positive edge of strategy and increase long term chances of failure. Very common behaviour of many traders who jump around strategies and throw out ideas on how to change a bit that strategy based on the last play that played out. This is not how positive edge is obtained. Research on strategy adoption over 100s of plays is always wellcome if there is gain to be found in slight changes, however single play ideas are only ideas, and there is no edge in single plays.


Each of those examples are real troubles existing in trading world, and to correct the errors on them trader needs to find a method solution that is implemented into trading execution or thinking overall to address it, you need to micro strategize on what to implement in strategy to avoid problem happening in future as much as possible .

Hi Jan,

Thank you for starting this thread with so much information. I have read through the entire thread and am swamped with lots of information. But this is one thread that I feel will really have an edge. I no longer trust any indicators. I have been through that road and understand price action is the only way to go. You have shown how to read price action properly, which I've not seen elsewhere. Thus, I'm very interested to learn more from you. I have some questions as well as some concerns.

Concerns:
I am working full time and as such, might not be able to contribute as much as I want to the thread. Furthermore, it seems like almost all of your setups are on the low timeframes, which needs pretty significant time to monitor and locate. I'm very interested to automate or semi-automate the trading if possible so that I am able to trade while I work/sleep/live my life. However, based on what I read of your strategy right now, I feel it's not possible to be automated. Nevertheless, I'm still keen because as long as the strategy is sound and I'm able to make at least 2R each day with not so much screen time, I believe that is sufficient to grow the account over a long period.

I am mainly doing only FX as I would like to try this with smaller capital as equities would require higher capital. Also, I am situated in the Asia region, which means I am sleeping during at least half of the US trading time.

Questions:
For most of your trades, I did not see SLs in place. So I would like to check how you size your lot sizes for a constant R if you do not have an initial SL? Many of your trades also do not have a micro shelf at the point of entry. Therefore, I'm curious how you set your SL and lot size. Somewhere in your thread, you mentioned that you let your trades go up to 1.5R loss and if the structure invalidates your trade, you wait for price to retrace to 1R loss and you cut it there.

Another question I have is how long do you wait for your limit orders for entry? Do you remove the limit orders when the price has moved to the desired TP price?

That's all I have right now. Thanks for reading.


Just browsed some pairs and thought I can try posting some charts to get some comments to know if I'm understanding things correctly. The first two might have been losses, depending on the SL position. The entry would have been pending orders at the supply takeout area. The last one EURCHF is still developing.

Hi Janpec

Here are my trades so far for today:






Things I am struggling with:

1. After I enter, where to put a SL when there is no microshelf in place?
2. Is there a quick way or an indicator you use to calculate the same position size for each trade?
3. When to decide a BE and when to let it run to a SL.

Thank you for the all the time and effort in posting all your graphs and explanations!

Good morning! What a great start of thge week!

Does this look like a valid setup?

opportunities i missed. Somebody caught?

Took this on a demo for TP of 1R:


Also got this closed at TP:


Is this a wrong trade?


Missed this, was away from PC:

Watching this pair for demand takeout:


It shot down without any entry opportunity

Watching UCH

UC, AN...

Hey, technically capital size is not a problem that would force you to trade FX. 2k should be decent enough to get you started on equities, 1k on FX, so that one 1k difference really should not be problem.
Mind that if you would want to trade higher TFs if you are very busy then your best option will be equities simply becouse equities have much higher amount of trading instruments which increases chances that you will get every day one M15 or H1 setup. In either case if you decide to spend 30-60 minutes a day trading M1 chart or spending same amount of time to trade higher TFs, equities are going to be always a better option to go. I would suggest actually trading both FX and equities but if you are very limited on capital then you need to pick one for a start.
Making 1 trade per day is not an obstracle but mind that you should still practice and do historical research in your weekends becouse a trader only gets better trough repetition, execution and observing.
However since you noted that you are situated in Asian session zone, well that could be a difficult way to trade equities then , so maybe FX is better pick there.

Good question: "how long do you keep limit order active". In most cases i will leave limit order open only if price has moved less than 1R in desired TP direction. Usually that means small move and as soon as price forms decent move i will remove order and just consider being missed out on that setup, the reason for that is like i mentioned few times, you want to have process wind behind your back, so price should be in a squeeze mode , if it retraces strongly back after already making decent move then that could point to potential problem. The only exception where i will leave limit sit for longer is very strong supply or demand (condensed) was taken so i am still counting on bounce of liquidity gap zone.

Position is always scaled "by eye" if there is no micro shelf. That means somewhat basing a decent distance that would be counted as counter move. Usually that will somewhat be a expectation of depth of potential formed shelf that would be formed and basing that as whole distance.

In either case i would suggest using position sizing indicator to help trader quickly input pips of SL distance to project how many lots one needs to use. There are some free such indies and some paid, technically you can also do it by paper specifing volatility ratios for each pair and use that. For M1 trading its important to have a quick method to figure that out otherwise you might miss the entry. In equities this is generally not a big problem since volatility in equities a lot more consistent, and also you can scale out position quickly (if using per share commissions).

EURCHF is B quality setup, mind that focus should be on clean symmetrical supply or demand where there are no overshoots of prices on extremes and supply/demand is aligned nicely.
AUDCHF is solid setup.

Yep NZDCAD is decent setup. EURJPY is a valid trade but you should scale your risk a lot more tighter. Using that micro rejections is pretty much where your exit should be.

EURGBP on watch.

EURGBP 8763 is where the takeout will be launched if bulls step on.

Thanks for your advice, Jan. Will learn to get the setups right first before anything else. Cadchf looks like a potential short coming up