Resolve is the enlargement of action based on clarity. It is where intention and attention are completely one. In opposition to this sensibility, asserting indirectness over directness fuel confusion and hesitation and keeps us from clarity, also from resolve.
--- Mark Nepo

Hi everyone,

I am an intraday DAX trader/scalper from the Netherlands. I have been trading full time for 9 months now. During this time, I have climbed a steep learning curve and started to show some consistency. Though I have shown to myself that my trading system has an edge in the market, I still struggle to execute my system to a high degree of efficiency to realize the full potential of the system and myself. Sometimes, I knew that there is a valid entry according to my trading plan, but I would be much too hesitating to pull the trigger until the entry timing is missed altogether.

I have slowly come to a conclusion that my subconscious mind still holds a deep suspicion to my trading system so much so that it clutters with my judgement. One of the most effective way to declutter my brain is to write journal/blog to someone who is not trading my system. That is why I have decided to write my trading journals to a forum in addition to my private trading journals.

Before starting trade journal entry, I would have to introduce briefly my trading methodology, which I call volatility pattern intraday trading. I don’t want to call it price action trading, because many people equate price action to candle stick pattern. But I do not use candle at all, though I pay attention to price actions in general. Firstly, I would have to lay down some premise of my mental framework on trading:
1) The market is a two-way auction process which auctions price higher to find buyer and auctions lower to find seller. Hence when price in a local equilibrium, the price rotates from high to low and then low to high to bridge buyers and sellers. The volatility that I am trading is a result of this natural rotation in price when it is in an equilibrium
2) Price is liquidity seeking. Price never moves randomly, it constantly searches for and tests liquidity
3) After one auction to one side ends, the auction to the other side of rotational area begins. And the auction usually ends in an auction failure. It is this auction failure opens a window of entry.

My B.R.A.V.E trading methodology is built upon the above three premises. The acronym B.R.A.V.E stands for
1) Bias: By looking at the longer time frame chart to see whether the price is in a state of dis-equilibrium (other people call it trending) or equilibrium. With a little bit of experience, you will be able to get a good sense about the directional bias by glancing over the longer-term chart. The bias is like a prior in the Bayesian framework;
2) Ratio: The harmonistic ratios, or Fibonacci ratios, of the prior swings are important. Here I pay a lot attention to the Fib extensions and projections, but to a lesser extent to the retracement;
3) Area: Basically, the trade location, where a large quantity of stop orders lie;
4) Volume transition: This concept is originally from Order Flow Analytics. It describes perfectly the process of auction failure. Volume transition is when a big bulk of volume was not able to push the current auction any further, and those bigger traders are turning from buyers to sellers, or vice versa;
5) Entry: Once the above 4 elements align, I would put down an order at the HVN of the volume transitional point.

Here I use the harmonic ratio to track the price formation and measure how success are the bulls and bears in achieving their objectives. I never trade those levels outright, but use those levels to form hypothesis. I would enter a position once the hypothesis being tested positive. I have a set of tools to help me to identify whether the volume transition has indeed occurred at the proposed level. One is a nonlinear transform of the cumulative volume at price, and the other one is the volume profile.

A typical trade for me would be like in the attached graph. Firstly, I am looking for a counter trend trade after three shortening thrust to the upside. By measuring the Fib extension from the one before the last swing, I have ended up with an objective of 12226.8 (78.6 extension) as the first proposed trade location for a counter trend scalp. After seeing a big bulk of volume moved in at the proposed level and a sell volume bar (the red bar is sell volume) appeared at the top of the swing, I have pulled the trigger for a short trade.

Here is a losing trade I had today. The mistake I have made is subtle and typical, thus has great replay value, which worth to revisit from time to time.

In this trade, the price has made a second leg to the down side and a clear divergence appeared at the low. Additionally, a buy volume bar (the blue bar) has appeared at the low of the second leg and a big bulk of volume has come in (check the bulging volume profile left to the swing). Everything seems to be aligning and I have pulled the trigger to enter a long trade at 12150. However, there is a untested swing point at 12145 to the left and that naked swing point is too close to my entry. As i have described in the first article of my blog that price is liquidity seeking, the stop orders hidden behind that naked swing point is going to attract the price like a magnet. 2 mins after my entry, the operator has down thrusted the market and tested that naked swing before lifting the price up very quickly stopping me out together with a boat load of other long traders.

Basically, the key take away is always to be mindful about the naked swing point and HVN before entering the market. If the entry is too close those levels, it is better to wait on the sideline until those levels being successfully tested and enter after a test bar (a buy volume bar at that level).

A perfect entry by a Gartley pattern with the impeccable Fib measurement. The white bar after the red selling volume at the top (the highlighted area) is clearly an upthrust. A firm short.

It is a tough trade to sit through. DAX, together with other equity indice, suddenly sparks momentum to the upside breaking the previous swing high. The price has paused just in front of the the 127.2 extension of the last down swing. With three sell volume bars at the top and volume building, it seems that the down fall in price is imminent. However, the operator has performed another upthrust for 7 ticks hitting the 261.8 extension of the small prior down swing before finally letting the price to go to the downside.

This type of probe and rotation price behavior is very typical to DAX. Hence worth to log an journal to record this "volatility pattern" play.

This is once again a tough trade in DAX. Well, there are very few trades in DAX is easy. This one worth a special mention because the maneuveur is so typical to DAX that you don't often see it anywhere else.

Firstly this trade occured during lunch time, which is a tough trading period as the liquidity is thin and the move could be quite erratic. The down move started from 12220 handle has sustained for more half an hour already. When it hits the 12192 level, a big volume has hit the market. Looks like the market is ready to and the volume transition is starting. However, after volume accumulated for more than 15 mins, there is no development to the upside. It has subsequently made two additional weak sell bars to the down side with no follow through. Finally a big buy order hit at the 127.2 projection of previous down leg. But that was still not the end, the operator down thrust the market exceeding prior swing low before lifting the market quickly up to finally start a new auction to the upside.

The valid entry for this trade is at the 127.2 extension, or just 1 pt beyond prior swing low to antcipate the down thrust that liquidity area.

Here is an easy trade in DAX.
Volume built after exceeding prior swing low. The liquidty hidden behind that level has been released and absorbed by the operator (see the volume profile).
Here, there is no Fib measurement in play, but the Dow has hit the 127.2 downside extension and find support there. The sell volume in Dow is transitioning to buy volume. During NY session, the Dow could be used as leading indicator for DAX. An entry 1 pt beyond prior swing low is a valid entry.

shrekchenbin 

This is once again a tough trade in DAX. Well, there are very few trades in DAX is easy. This one worth a special mention because the manoeuvre so typical to DAX that you don't often see it anywhere else.

Great posts, Dax rarely gives easy trades, especially on a Friday, but in my EW land I think that also shows a clear 5 wave impulse to end the whole corrective range to the left (or what we have so far.)

Most experienced EW users forget that 5w ends as well as starts.., although not often that cleanly, worth remembering also for non-users.

Thanks for the journal, really good stuff.

Cheers

Ratfink,
Thanks for mentioning that.
To be honest, I didn't notice the formation to be a clean 5 wave structure at that time.
Like you said, DAX rarely poses itself in a clean structure. It never runs out idea to confuse people.

Cheers

ratfink 

Great posts, Dax rarely gives easy trades, especially on a Friday, but in my EW land I think that also shows a clear 5 wave impulse to end the whole corrective range to the left (or what we have so far.) Most experienced EW users forget that 5w ends as well as starts.., although not often that cleanly, worth remembering also for non-users. Thanks for the journal, really good stuff. Cheers

A slow day, but I never run out of trades in DAX as it is such a gold mine for those who know how to trade DAX.

Price has paused just above the prior swing high and the weakness seems to come in. But the market is not yet ready to fall because the operator has the Fib extension of the last down leg in its cross hair. After an upthrust, the price touched 12249 target and slowly grinded lower.

In normal market, a trade like this would work out in no time, but it took more than 8 mins to move decisively to my downside target.