Last week, we discussed the trading buckets – and how to assess trades relative to time frames but since I am having trouble actually finding buckets – we will call them funnels that move us to trading boxes.
Let’s take a look at the first chart for the longer time frame to see how we did in this trade.
We are going to step through the OODA loop with our executions.
We have four time frames and separated them into 2 longer time frames and two shorter time frames. Note the longer time frames are showing us bullish (upside) pressure in the chart that has turned sideways. This always means, RELATIVE to the LONGER time frames – PULLBACKS WILL BE INTO SUPPORT – this will be where buyers try to meaningfully engage to push the chart up. But the pulling back into support would give us short trades that we could take in the cycle.
NOTE _The faster the time frames you use, the shorter the time of the trade will be.
This is how the chart unfolded – Our red vertical line notes the night I put the trade out. Using our trade funnels into the long or short boxes, we estimated a short trade was on the horizon. Note this is the longer time frame that is bullish but showing pullbacks are buying zones due to technical divergence but strong price support
This was our setup – “Because we are close to a key level of support – note the daily time frame and all the congestion. So the trade setup using these two time frames says to wait for the test of resistance near 1563 for the best short with a 2-3 point stop with two potential targets – one at 1553 and one at 1532 – this is likely to be a swing trade setup. “
The trade worked very well intraday – it was not a swing at all – but it did pop right into 1563 and came right into 1553 – but it did not get to 1532.
Here was the original smaller time frame setup – also telling us we had a short in progress – telling us we had a definitive short on the bounce into resistance –
Here was what was said about the trade – “So on our shorter cycle, we can engage at the failed test of 1558-1560 with a two-point stop and targets at 1556 first and then 1552 with potential continuation into support of 1541 and then some. ” If we had kept the tight stops and taken the trade on the way up to 1563, we would have stopped out. This is often an execution problem many of us have. The better thing to do when the bigger time frame assessment is positive is to wait for it to bounce above our level and then lose it to enter – this will increase the probability of the chart not stopping us out.
Here’s what happened –
The larger time frame more properly defined the entries and the flat moving averages on the 30min chart told us that the chart was just as likely to bounce off support as it was to reject resistance.
Essentially, the trade setups worked quite well for the intraday trader who played the trade from support to resistance and obeyed the range that was defined in the initial daily chart formation.
Trust the chart – and pay attention to the levels of support and resistance within the relative trend