I spent hours last night thinking about yesterday's bad entry in TNA. What I remember of the moments after I pulled the trigger is that I expected to see a drop in TNA but the stock hung there for quite some time (moments seem like hours when a trade is first put on). Wrong choice, as history proved, but my ruminating since has not been about why I did not exit with a stop loss. Rather, it was why I felt in those few minutes after the trade that I had chosen badly. Something was there that I did not see... I know this because I, in fact, am not clairvoyant.
Early this morning I decided to dig for the answers in the charts. In addition to seeing a near-doji on the five-minute of the SPY which should have been a tip-off, I went to the one-minute chart of TNA and there was a more detailed answer!
I have posted the one-minute on the left and the five-minute chart on the right, then highlighted the area in question with an orange box. Also there are the horizontal green lines indicating price and the slanted green line indicating the direction of the trade (green for "GO," indicating entry). -
My entry was just after the candle shifted to 10:31 am. On the five minute chart, there is nothing that would pass for a normal indicator of reversal, so I went short. The truth, however, is revealed in the one-minute chart- price reversed quickly for two minutes then started to drop in the next minute (10:33am) after the moving averages acted as resistance. I felt here that my trade idea was working because the 10:34 candle showed a continued drop of price, but only for a matter of seconds. The answer, the truth is in the 10:34 candle and the 10:35 candle which came next. TWO DOJIS !!!! There was my reversal indicator that I sensed but did not heed. Like I said, I am not clairvoyant- I foolishly relied only on the visual cue provided by the five-minute chart and did not rely on what really happened; what I REALLY saw as I watched the price move. I felt it, I saw it happen, but I didn't trust my judgement because I did not see the "picture" of it in a five-minute chart.
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Trading using multiple time-frames is a well-known tactic among successful traders. When I first started practice trading, I loved the three-minute chart while watching the five-minute primarily. I would see dojis on the three that were not on the five, much as the one-minute revealed what I noted above. I dropped the three-minute after 4 months or so because I was focusing on it too much and I knew that most day-traders used the five primarily. About two months ago, I felt comfortable again putting up a small three-minute chart and have been glancing at it every once in a while.
Early this morning I decided to dig for the answers in the charts. In addition to seeing a near-doji on the five-minute of the SPY which should have been a tip-off, I went to the one-minute chart of TNA and there was a more detailed answer!
I have posted the one-minute on the left and the five-minute chart on the right, then highlighted the area in question with an orange box. Also there are the horizontal green lines indicating price and the slanted green line indicating the direction of the trade (green for "GO," indicating entry). -
My entry was just after the candle shifted to 10:31 am. On the five minute chart, there is nothing that would pass for a normal indicator of reversal, so I went short. The truth, however, is revealed in the one-minute chart- price reversed quickly for two minutes then started to drop in the next minute (10:33am) after the moving averages acted as resistance. I felt here that my trade idea was working because the 10:34 candle showed a continued drop of price, but only for a matter of seconds. The answer, the truth is in the 10:34 candle and the 10:35 candle which came next. TWO DOJIS !!!! There was my reversal indicator that I sensed but did not heed. Like I said, I am not clairvoyant- I foolishly relied only on the visual cue provided by the five-minute chart and did not rely on what really happened; what I REALLY saw as I watched the price move. I felt it, I saw it happen, but I didn't trust my judgement because I did not see the "picture" of it in a five-minute chart.
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Trading using multiple time-frames is a well-known tactic among successful traders. When I first started practice trading, I loved the three-minute chart while watching the five-minute primarily. I would see dojis on the three that were not on the five, much as the one-minute revealed what I noted above. I dropped the three-minute after 4 months or so because I was focusing on it too much and I knew that most day-traders used the five primarily. About two months ago, I felt comfortable again putting up a small three-minute chart and have been glancing at it every once in a while.
(FYI:It did not reveal the doji's that the one-minute chart research showed in this case)
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As I mentioned in the paragraph above, successful traders use multiple timeframes, though they often are longer timeframes... 15 minute (as Scott Farnham uses) and beyond; sixty-minute, daily, monthly, yearly, etc.
They use them at SMB Trading and they certainly put forth a top-notch training program. Brian Shannon wrote a highly-regarded book a couple years ago entitled, "Technical Analysis Using Multiple Timeframes." I was a devout reader of his blog for a long time before he converted it to a subscription site.
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To finish my post, I believe that one of the biggest reasons Scott Franham and those like him have the success they do is because they focus in on price and see exactly what is going on in timeframes shorter than the charts they use. I truly think that Scott is "charting" in his mind the stock he is trading. He is seeing those doji's and the shift in momentum without having to rely on a chart. He certainly advocates focus as a "truth" in day-trading. He has written that he doesn't know why he is able to do what he does, calling it "tacit knowledge." I postulate that among other advantages, he charts price in his mind by paying careful attention on a second by second time scale. And then uses charts to see doji's, etc., over longer timeframes like the 15 minute.
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Perfection in trading is not possible, in my opinion. But i continue to believe that the best risk management is a timely entry. My research will help in this regard. Onward and upward...
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As I mentioned in the paragraph above, successful traders use multiple timeframes, though they often are longer timeframes... 15 minute (as Scott Farnham uses) and beyond; sixty-minute, daily, monthly, yearly, etc.
They use them at SMB Trading and they certainly put forth a top-notch training program. Brian Shannon wrote a highly-regarded book a couple years ago entitled, "Technical Analysis Using Multiple Timeframes." I was a devout reader of his blog for a long time before he converted it to a subscription site.
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To finish my post, I believe that one of the biggest reasons Scott Franham and those like him have the success they do is because they focus in on price and see exactly what is going on in timeframes shorter than the charts they use. I truly think that Scott is "charting" in his mind the stock he is trading. He is seeing those doji's and the shift in momentum without having to rely on a chart. He certainly advocates focus as a "truth" in day-trading. He has written that he doesn't know why he is able to do what he does, calling it "tacit knowledge." I postulate that among other advantages, he charts price in his mind by paying careful attention on a second by second time scale. And then uses charts to see doji's, etc., over longer timeframes like the 15 minute.
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Perfection in trading is not possible, in my opinion. But i continue to believe that the best risk management is a timely entry. My research will help in this regard. Onward and upward...
