Pullback/Retracement Trade

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Two types on this chart:

Type A VWAP : action just passed placed order to sell at the Vwap , filled with minimal heat, then PT of 1.5 pts (or the equivalent of futures contract, i.e. $150.00 for 1000 shares of this instrument) hit in a couple of minutes, which is the expected outcome of a pullback trade like this, i.e. it's a quick hit and PT (usually PT is 1 pt or less but using previous bars, expected probe to recent bar lows).

(Note, I use 3 minute for trade and analysis but to publish ideas the minimal timeframe is 15 mins).

Type B: Pullback to the lower Collective MA band (pullback to upper band line for buys/longs). Two of these occurred nicely yesterday at 14.00 and this morning at 10.45. Enter short (in this case) when it penetrates the lower band line with a stop of about 2.5 points, and then PT of 1-2 points. Of course you can put on multiple contracts and exit in stages etc.

The one this morning was a no brainer in that the market rallied to close opening gap, failed to get all the way up there and sold off, so you could have entered this pullback trade after first waiting to see how high it would go and then going short on a stop after it took out the yellow candle low formed by the probe to the previous close. In any case, it's a good setup and the reason for which the bands are drawn (along with being good trend-following entries, i.e. buy long when crosses and closes over upper band, and sell when crosses and closes below lower band).

I also pay attention to the clouds: if below the clouds, favour bearish , if above, favour bullish . Not in all cases all the time, but generally it's a good guideline especially when it's a clear situation, like now. Somtimes the clouds are sort of thin and sideways, meaning good to look for strong volume breakouts either way but maybe not so good to jump on every signal if it's waffling around. THat said, after consolidation/sideways action for a while, if market breaks up or down and gives both Cloud and Collective Band signals, chances are (probably 75%) that a new trend has just formed.

And if that happens and it fails and reverses, chances are even higher that the next move is now going to be a strong one.
Bình luận:

Just running through some weekly charts. Using a basic Collective setup, which is the band (without lines) and a trend-related inner fill, and paintbars which have very slightly different rules to the inner band. This chart shows just how good the pullback approach is. Look how many times the long-term bear market corrected back to the Collective MA resistance area and then continued. 7 times, all were great setups.
Then yellow (up) bars kicked in before a higher high had been made and we were off to the races to the upside (well, sort of). And of course it is not always such a pretty picture as this.

In any case, though, a great illustration of the Pullback (or retracement) approach. Of course one doesn't need this indicator to do it, albeit the indicator does a very good job of illustrating the concept graphically.

What is bad about the pullback/retracement setup? Sometimes you miss monster moves if that is your only way of entering (though there would have been many pullbacks for entry into these longer-term trades on the shorter-term charts, i.e. 30 mins, which one can use for actual entries).

What is good: once a bear market has made a new low and pulls back, there is a high probability that the market, after the pullback, will go back down to at least retest that new low, if not continue the trend by exceeding it to the downside. Therefore, the retracement trade is high probability. Not foolproof, but more often than not it will work. And if you have a modest profit target, you are often out quick with that profit, but if the market does not do as desired and go back down to your PT level and keeps retracing up, then you can sell some more since the higher it goes without correcting, the higher the probability that it will at some point go back down again. Yes, the new low might be 'it' and will never be retested, but at some point this new powerful upmove will pause and retrace, so if you keep selling (every two PT levels for example, i.e. if your usual PT is 1 pt, then sell another unit every 2 points, or go 2, 4, 8, 16 if you have the funds and the stomach for it. What this does is ensure that when the market does finally come back down that it doesn't have to come down too far for you to be able to get out at break-even (since every time you add to the position your average entry price goes up). You have to keep up with selling so that when it turns back down it doesn't have to go too far back down, i.e. all the way to the first pullback entry, ideally only about a third of the way back down.

The other approach, of course, is simply to place a stop above the upper band (with short pullbacks), preferably on a closing basis.

If the market is fast and volatile, then don't do naked pullbacks (i.e. placed before the market gets to the entry price) rather wait for a pattern entry (once the market has retraced to the lower band level, wait for a lower low, and even better wait for a lower low after an up bar.

Thursday Mar 9:

This is an example of using the Volume Profile in the Pro Package to adjust entries made using other approaches. The example here is a basic Pullback trade to the Collective Band. However, if you look to the left, you see a wide bar in the VP, one that is not the current POC but is still the leader of a definite bulge, above which there is almost nothing. Chances are any rally will stall here. Noticing lower volumes and a stall, I entered short and the trade made .13 (equivalent of 1.3 mini contract pts = $65.00 per contract) in less than a minute.
Phản hồi

March 7 IWM at the open:
A wide range bar pops up to the pullback and cloud area and old POC, also filling a pop-down gap opening (to the closing POC of the previous session AND the previous close VWAP).
So I took the pullback both because of the confluence of resistances at the old close (again, old close, clouds, pullback to the bands, and very wide range bar indicating a rubber-band snap-back likely):
and gave it a larger than usual target (usual is 5-10 depending on volatility), 15. This equates to 1.5 emini points which have recently found out have been adjusted (in the Russell) to be $50 a point vs the previous $100. So that is $75.00 per contract.

Assuming $10,000 per contract, $100 = 1%. That is the daily target. 20% per month is not shabby.
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