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Here is my chart with some notes. Today the trend stayed UP although i tried an attempt to go down after a wide range bar to the downside. I was expecting price to break out of the range that started during the night for me (EST). It did not take long to see i was wrong. Price made another wide range bar, that was a sign of strength. The arrows mark my bias.
I downloaded your chart in order to point out something to you which i consider important. You remember when i mentionned that price makes expansion and balance and repeat that sequence in a continuous discovery process looking for a fair value. Each balance area is separated from the next by one or more wide range bar. A balance area contains three areas of interest; the fattest part roughly around the middle of the zone, the top and bottom. If price breaks above the fattest point of such an area of balance with conviction (wide range bar) then don't try to fade this move as the fattest area of a zone of balance will most certainly bring opposing order flow. You can consider it as a level of S/R. A Market Profiler would look at this level as a point of control (POC) and a volume profiler as a High Volume Node. No matter how you want to call it, it certainly will act as a barrier. These high volume nodes are often tested and serve as base for price for the next run. Not always but often enough to take note of it.
p.s. I do not use Market Profile anymore as i can visually guess-estimate the same info using a bar chart.
Thank you for your help. How do you know where the area of balance ends? There was a wide range bar down at the end of the balance are you show. I was also thinking earlier, would this not have been a trend change to down? Is that why you considered going short a few bars later?
Technically an area of balance contains overlapping bars although a trending bias may be present within the formation. Here is a new chart i have commented in order to objectively define the zone i would consider as sideways price action. Remember, in my mind such a zone can show mini trend sequence. The idea is to get a coherent structure to gauge strength and weakness when price approaches the limits of these zones. Within a zone if you get wide range bars or some mini trending sequences then look at it as strength or lack of it. I don't want to make it look more complex than it is. In many cases i do not draw these zones as i can visualise them. (see picture)
This really clarified what you refer to as gaps. You have also presented this in a very understandable way for me to see the "coherent structure". Now it's practice on my part to become proficient at drawing/observing the structure in hindsight, then come to the point where I can visualize this as it is occurring. Anything you can suggest to help speed up this process? I truly appreciate the time you are giving to me.
Trade ONE: SHORT
Entry:1.30625
STOP: 1.30725
T1: 1.30525
T2: 1.30055
Trend was DOWN and price started pulling back. I moved to LTF and saw what I thought to be the end of the PB and entered with a spike ledge entry trigger. Price continued to move sideways with strength toward the upside. Was stopped out after 39 minutes -20 pips. This was an invalid setup. On TTF there was no clear price action indication of a PB, I was guessing.
RESULTS= -20 pips
Trend changed to UP as price showed acceptance above the downtrend line and the 50% fib level. Entered BPB setup with an engulfing candle trigger. Was a little hesitant/fearful as I would have previously considered this a BOF and trend still DOWN until the help and teaching of trendisyourfriend (thank you). Achieved T1 for +7 and then exited part two because I felt trend changed to DOWN +13. Still unsure how best to have exited this trade. Should I have had my second target at mid to upper area of previous sideways/balance area above my entry? Still learning this part but appears to have been a good choice.
RESULTS= +20
Again just offering my opinion. I know it is much easier to comment with the benefit of hindsight but nevertheless here i go...
About your first trade, you got an opportunity to close the trade at break even i think. One thing you can do also is to incorporate in your plan the 75% recovery rule. Can be any % though. If price does not hit your catastrophic stop loss but allows you to recover 75% of your highest lost in this trade then scratch the trade with a small loss. The idea is to minimize your risk and allow you to regroup as it can be tough mentally to assess the situation while losing. Ex. your stop loss is at 20 ticks from your entry, price goes against you for -12 ticks (highest peak to date). Price resumes in your direction and since 75% of 12 gives 9 then you would scratch the trade as soon as you recover 9 ticks. You would make a small loss but a controled loss of -3 ticks.
About the second trade...
When you are in a winning trade and an out of ordinary event occurs by all means try too profit from it. Always try to profit from a wide range bar. In itself, these bars are exceptional or rare so my suggestion is to close a unit or the trade at the close of a wide range bar. You can't lose if you do this and you have just profited from an exceptional event. Don't be too greedy as price as a tendency to retrace these WRB's. I like to think that price likes to close the GAP formed by these bars.
Your opinions are very welcome, thank you. you have been a great help to me!
The recovery rule makes a lot of sense to me. This is an area I struggle with, something I will implement.
That is me, I find it really difficult to assess the situation while losing, it starts to come back and I think now it will go in my direction, then goes and takes out my STOP. By being out of the trade, I should be able to look it over more objectively.
Good to know, I never really considered that a WRB should be considered an out of the ordinary event. Looking at them as GAPs as you explained prior, I have also felt price tends to close them, thanks again.
These GAPs left behind by WRBs that are slack in demand or supply have a tendency to act as a magnet for price. That's why we constantly see price going up and down for no apparent reasons in relatively short periods of time. That is how a fair value level is found. Price test an extreme point leaving behind slack demand or supply, you can be sure these almost empty areas of supply/demand will be revisited.
This is also called pocket of low usage from a Market Profile perspective. To this end, i encourage you to view the following webinar and more particularly the section named Market movement > Putting bell curve into context and Recognizing low usage at this URL . The same phenomena described with Market Profile can also be used on a minor scale by identifying WRBs on a chart. This is the same thing but different words and means to describe it.
