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Good observation. The next logical step is 'how do I make money out of it?'. For that, we need the numbers. This is where it gets complicated and, to be frank, disappointing.
The questions I would ask myself are
1. How often it has happened in the last month, last year or even longer? (I have data for 20 years).
2. If I'm long @ the bottom, how high does MES go? If my trade works, wher do I take profits? Do I take my profits before I go to work, leave it on or take partial profits and leave the rest with trailing stop?
3. When it doesn't work, how much risk I'm taking? Do I add to my loser before I go to work and hope for a turnaround or take my loss?
4. Finally, crucially, the ratio between point 2 and point 3.
That's the only way that worked for me to tear apart the illusions created by my eyes and frontal brain.
I would say I am working on question number 2 the most lately. I am pretty set on my ideas of your question 3. I am just going to take the manageable loss and walk away to survive another day. I always remember the day oil went negative and how a trader would have lost everything if adding to a loss that day. Not something I want to be part of.
With question 2, I want to let my profits run until either I have to leave my computer or the market closes. However, this will result in a stop out >90% of the time. The next question is, can the sum of those winning trades that happen less the 10% of the time be greater than the sum of the losing trades that get stopped out? This is something I have not tested with historical data and I should test my idea before I continue trading. Thank you for the time you spent writing your post.
It happened couple times yesterday around mid day. The MES made a new short term high (maybe a 30 minute high) and sold off to a short term low. Reminds me of when another trader said "the highs are usually close to the lows, like Mount Whitney is close to Death Valley". So interesting how the market often has to hit one extreme only to reverse in the opposite direction to hit another extreme.
I only had a few trades yesterday, 1 contract in the MES.
I’m on a tough losing streak right now and am going to take some time off from trading. Maybe two weeks. I need to get my head straight and some time off will do me good.
Yesterday I traded for the first time in several weeks. I had a long bias in a three day downtrend. I was looking for the bounce. I bought in the morning at 5594 in the MES with one contract. I held all the way until 4pm where I sold at about 5550. Needless to say I was wrong but I held firm in my stance and position.
Had a bunch of breakeven trades today. Probably 5 breakeven trades in the MES. I took one loss of 17 handles and had a 8 point winner at the end of day. I took one loss in the MCL market. Was actually surprised that the ES did not test lows at close and found support in the 5480s. I think the ES actually closed in the 5490s.
Oil was trading in the 76s and popped to 76.94 where I thought it would have been a good spot for a short. Oil rallied 45 ticks and I called it quits on that trade. Only for oil to trade back below 76.70 after3pm.
Kind of a sideways inside day for the MES. Today had its ups and downs. I kept risk in check all day and exited losses where I wanted to. Basically broke even in the MES. I have noticed that the MES is more volatile than it was just a couple of months ago. My drawdowns are larger for the one contract I trade and my winning trades are larger as well.
Oil I lost 45 ticks. Went long in the low 76s and watched as the market made a low in the mid 75s before rebounding somewhat at the end of the day. I don't see why oil can't hit the 72s in the next couple of weeks with this heavy selling.
Many trades in the MES today. I was very disciplined in keeping a preplanned stop loss order in the market for every trade I had entered. My risk:reward was very good on average at about 1:3 for every trade. The results were very good because I executed each trade well and had luck on my side. No oil trades.
