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Iīm starting to think that indicators (or at least those I use) arenīt reliable enough for my day trading. I trade with a 5 min chart. I use 3 sma (5, 8 and 20), Stochastics, MACDHist and MACD lines. I realize that maybe my trading style has more to do with momentum and price action, trying to take advantage of rallies and pullbacks, that is, more to do with price action. The question is, that trading price action to expect rallies or pullbacks as a counter-trend is risky.
From what I realize, my trading setup is not working as I would like, although I have just 18 months as a trader. I think that my setup is:
1 - Too risky;
2 - Badly conceived;
3 - Maybe both 1 and 2.
I try to go by the rules I create. Whenever I ignore them, tendency is to a losing trade. From the analysis I make (just seeing market behaviour), 6 of 10 situations, my trading entry strategy is right. Many times I do not enter because of insecurity. And some of the times I do enter, is on those 4 Iīm wrong.
The good news is that there are times/months I am profitable, so not everything is bad. What should I think? Am I missing something in my trading setup/style, or itīs plain luck the profits I have?
Can you help answer these questions from other members on NexusFi?
Indicators are the porn of trading. All show, but no real action.
I generally follow price action trading a la Al Brooks. After years of searching, programming, changing, and trading, I find his approach to be the best. Simple charts and robust thinking.
For an intro to his approach, you could check out the Nine Transitions blog... maybe one of the best educational blogs around.
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
Here are my strategic secrets:
Is the market trending or range?
If trending, trade pullbacks (1 leg pullbacks in fast moving trends, 2 leg pullbacks in slow moving trends).
If range, buy low sell high on the edges of the range.
That's it!
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.