Today I shorted 11 times and lost on nearly all of them after being up a decent amount. This is what happens when your strategy is somewhat "greedy" in nature. I couldve scalped these shorts over and over and over again to be decently green on the day but I wanted that clean 20 point drop that I could add 4 or more contracts into that would net me around $300 in gains but it simply did not happen, well it did happen but I missed the first opportunity and decided to go for the next one which was very very very significantly worse than the first drop.
Instead of making a full playbook post on all of these trades I am going to group them into 1 since the thesis was the same for the entire session and I failed to recognize the opportunities. I also stopped out 1 tick below the top of a move where we dropped 25 points right after. Simply put, I missed that trade then revenged my way into a decent red day just because I wanted that first trade to happen again. It didnt happen again.
Why am I trying to short?
Huge moves on daily means we could pullback but firstly I need a 30m structural confirmation before deciding if its worth it to go short.
We are in 30m uptrending channel and in premarket we were sitting at the bottom of that channel. There have been many 100 point moves up on this zone so it was scary to short into because the bottomside of uptrending channel usually results in huge buyers stepping in. I think maybe that fear of a huge buyer jumping in held me back a lot today from making a good trade. I was too caught up in the idea and not paying attention to what was right infront of me.
This is such a clean structural breakdown after the fact. We have the previous day low which is the large oval resistance line. This was somewhat neglected by me because yesterday was only a half day so I didnt think that zone would matter much. God damn was I so wrong with that thought process. The previous day high and low are the 2 most important key levels when we are trending in any direction. The market usually builds up below PDL if we are going to actually trend down lower and that is exactly what happened today but instead of me using the PDL as a resistance level I basically just completely forgot it was there. This was my #1 mistake of the day. I should have been more aware of this level. If you see the smaller white circle on the right we build up a wedge below that level which is also below the 30m uptrending channel which is also somewhat below vwap and nearly all moving averages were showing moves lower being likely. Okay so I shouldve shorted on the white circle and added into teh moves lower for a big drop to happen later. Why did I not trust this move? (other than me failing to identify structure first)
ADD was a massive bait machine today. Firstly I failed to identify structure but secondly, the internals were not even close to looking like a red trending day. Firstly, the ADD moved up through HOD at the open pretty damn fast which is already a huge hit to the trending red day thesis. Secondly, ADD was lagging behind SPY by a very very large margin. If you look at the white circle on ADD that was the HOD which eventually became a huge bull trap but that exact zone on ADD correlated to the zone on the ES where we had already dropped way below the LOD. Usually you want the ADD to lead the spy not the other way around. This (other than the failure to ID price action) was my biggest contributer to me not catching that first huge trade. I really got faked out like im sure nearly all other traders who watch ADD have.
VOLD was not too bad for a trending red day but not good either. ES vold was quite red at the open but started to trend back up until finally breaking back through the LOD into the -5s but that again did not happen until the ES had already broken down through the LOD. The ES did have 1 pullup opportunity though where I basically covered at the very top right before the 25 point drop. I really fucked that up so badly.
TICK was pretty bearish at open but TICK doesnt mean shit to me unless ADD and VOLD are lined up.
The sectors were green at the open which fueled my thought process of us NOT breaking down strongly.
Lets go over a list of what was right and what was wrong, what I failed to ID and what I properly ID'd
(In order of importance)
1. Structure: We built up a wedge below the previous day low. This means we should make lower highs and lower lows. (ID= Failed) (Used as fuel for my thesis? = Failed)
- ADD: Very fakeout heavy today, was following ES instead of other way around. (ID= Success) (Used as fuel for my thesis? = Failed)
a. I should have used this as fuel to avoid the short but the short was a good trade. Not sure what to do there. If you only looked at structure then this couldve been an A+ setup. If you add in the internals it is not anything close to an A+ setup. That is what makes trading so hard. The good trades are the ones that most people will not catch and that is just the reality of trading. These trades today were very hard to catch and it wouldve been even harder to add into them when you have this much conflicting signals.
- VOLD: ES was red at open and moving lower but NQ was not and Qs themselves were ripping through HOD very fast into the open. This was not good for my short thesis but the VOLD being red was definitely good. (ID=Success) (Used as fuel for my thesis? = Failed) Its not really enough of a reason to use as a short for VOLD when its not in confluence with ADD.
- Sectors: They were mostly green at open until the big drop. I was not using them as a way to make sure my thesis was correct or not because again the ADD was just not doing what it should be doing for the move to be a legit trend. Once the move happened the sectors turned red but its too late at that point. (ID=eh) (used as fuel for thesis? =eh)
How do I catch this short in the future?
1. Always identify key structural levels before creating any type of thesis whatsoever.
- Hold below PDL
- Break below 30m uptrending channel
- Break wedge to downside
- Pullup into mid/lower end of wedge for the continuation of breakdown
- 9 + 21 ema both fanning out lower as we pullup into mid wedge
2. Aways give most credence to price action and price action alone. If you always wait for the internals to confirm your thesis you will miss out on the trade. Structure offers the entry, internals offer the confirmation of thesis and whether its a good idea to add or cut the trade when structure is broken.
What was the best and cleanest opportunity of the day?
30m break of uptrend. this is the candle where we find out if we hold or break this uptrend
- We have a wedge formation BELOW the 30m uptrending channel line. Once we break that wedge formation to the downside we have a pullup back into the midzone of the wedge, this is where size needs to be put on for a bigger breakdown through the LOD
- The best way to trade this was to get short on the pullup, add once we broke 9ema back to downside, add again 2 times when we attempt to break the LOD, sell 3/4 around 10 points in profit, sell the last one for 15+ points when we hit a new LOD then rip back up. This would have been a 1 and done trade where I could have made over $200 but instead I missed it from being faked out by ADD. I wont let this happen again.
How do I avoid all of the shorts I took after the best opportunity of the day was missed?
1. Firstly, when there is a big drop like the one that happened that I completely missed, there is a much lower likelihood of another big drop occurring. The market does not just divy out constant 10 point moves over and over and over again unless the internals are also screaming with the price action. I know this. Price action and structure are important but without internals they fall on flat feet.
2. The M2M trade was the first one, after that you scalp. There is always 1 good M2M trade and after that opportunity there is much more likely going to be good scalp opps but not another T2H or M2M. Again this is not the case if internals are agreeing with structure. When internals agree with structure then you can have anything from 1-20 M2M trades in a single day. Today we had only about 2 to the short side.
3. reiteration of last point. Know when to scalp, know when to hold, know when to Move 2 Move. They are all very very different styles and strategies