Didn't get an answer in Mack's forum - 10/26/23 - 2000 tick

[ahwilliams30]

I posted this trade in Mack's forum but didn't get an answer on why it failed. I'd have a really hard time skipping this one...

[eric-pal]

Contextually there are a few things that need to be addressed.

1. First is that a very very strong selloff has occurred, and the trade is happening after 2 very large unidirectional selloffs. While the Always in direction is down, there will be short covering that occurs and that can be a very decisive move. Please note that the market is > 1% selloff when you are taking the trade. This alone should provide some "wary" signs of taking a trade late in a trend.

Note the measured move markings, on the size of the 1st selloff is where they are taking profits.

2. You will note that Mack's graphic in the area is completely different. The trade would be directly into the trendline.

3. On your graphic there is potentially a little space? How did that bar move? Was it decisive or did it meander a little?

If there was sufficient room, then a reasonable loss, although it appears to be there may have been enough room for 1 point. If wrong, the loss would have been minimal and one waits for the next opportunity.

Hopefully helpful and good trades to you!

[ahwilliams30]

Thanks for your input Eric. I have a few questions off of your responses:

1. You're definitely right that there appears to be 2 legs down. I noticed that, but there's still some room to the measured move. Why wouldn't I say "we're making the second leg down and will probably reach the measured move so I'm going to take this trade in anticipation of it"? How could I know that prices were going to turn up beforehand? Also along those lines I feel like its worth noting that prices just went a bit higher then did actually complete the measured move, as seen in Mack's graphic. That makes me think that its not the 2 legs down/measured move but rather that momentum hasn't sufficiently dissipated to take a second entry.

2. I did look at Mack's graphic and note that it was into his short term trendline, but the problem for me is that you could easily draw this with a break already (attached graphic) and if you're going to draw it wide like that with that being a reason not to take the trade then there are SOOOO many more trades that Mack marks that we can't take. Maybe this just comes down to experience and my trend drawing abilities aren't there yet but I don't see how you'd know that the trendline is going to be wide vs tighter like the picture attached. I really do think the tighter trendline looks more valid on my chart (as my bars are slightly different than Mack's)

3. I didn't watch this trade live so I do not know how it moved but with it ending basically as a doji I would bet that it was pretty range-like as it formed. You are correct though that there is just enough room for a 1 pt scalp so maybe a reasonable trade after all?

Thank you for your help as I try to get to the bottom of this trade!

[eric-pal]

Searching for perfection in an imperfect profession.

First there are several tests that must happen. Please note the higher white line. That is the 1st objective of the bulls and we expect rejection from there and a retest lower.

Relevant questions:

If you took the trade, how much room did it have? If you watched it and it appeared that bearish activity had entered, you would expect continuance (and fairly quickly). 1 pt should be a no-brainer but you have to "see the movement".

How much strength did the bull bar before it have? (how large is it). This strength helps to determine if another attempt (3rd) should be used instead.

How did it move? [we are not pattern traders and specific movements within the bar provide good feedback]

Please note how much the market has moved at this point? These says 2 things - 1 excessive (but excess can last) 2 the correction may be excessive too. Until approx 1/2 of the down pattern has been accumulated, retracement is still expected (also using the ema). 1% isn't something to miss. It becomes part of the calculations.

Also note the size of the bull bars vs the bear bars in this area - are they imbalanced and in which direction? . Small bear bars vs bull bars. What does this say?

The question isn't - how can I avoid this trade? The question is are there a set of rules based on how to take or not take trades? Then if it fits your rules, you HAVE TO TAKE! Through experience there may be subtleties which you observe to help update your rules.

While the bar may appear reasonable, I would recommend you watch in replay. However, because Mack's chart is very different in this area, that means that trading volume is lower. Lower trading volume accounts for differences in chart appearance and increases the volatility of the pattern (higher degree of failure).

Need to visually see these and not simply rule on take/not take based on a chart. There is an accumulation of experience which happens moving from chart to witnessing how the markets flow.

Hopefully helpful and good trades to you!

[_strange_]

Macks chart review at the end of the day has the channel much wider, which I believe is due to the benefit of hindsight. I think at the time of your marked trade, there was a break and new low already. At that time its gone really far. It could keep going but its a breakout and the ES is most likely going to retrace and recover at least some of that move. Its not a straight-up downtrend selloff day, it started as a pretty clear range which changes the dynamic I think. At least for me, anytime the market sells off from a breakout like that, its reasonable to assume that if the breakout gets signifigant follow through, you would get a second leg down which I think you had already by the time you saw that trade, and at that point it would be better to wait to see what gaps are going to get filled because there are several. I have become very aware of these gaps and long distances of price movement without a significant correction on any day outside of a strong trend day (but still observant)

Its just a guess but when prices sold off again after that correction that would have stopped you out, its likely that the trendline was moved to the location its in on Macks chart review in order to keep up with the movement. Its just an assumption because I do that sometimes too.

Im not an expert and I dont want to sound like I know what mack is thinking or doing at the time, but I recognize it as something I do.

I struggled greatly with entries like the one youre asking about, where you enter and the market reverses and had to figure out rules and observations to stop that as its extremely frustrating and disheartening lol

Screenshot 2023-11-08 212252.png (80.61 KiB) Viewed 3088 times

Screenshot 2023-11-08 213031.png (346.92 KiB) Viewed 3088 times

[ahwilliams30]

Eric, thanks for the second set of feedback. I'll go watch this one in market replay.

[ahwilliams30]

Good point Strange, I didn't think about the down trend potentially being played out.

Definitely not disheartened by a trade like this though - if I take a trade, look back, and think "damn I have no idea what went wrong there" then that was a great trade. A worthwhile loss. Shows me the holes in my analysis to learn from and that's why I'm here asking about it! Otherwise just sweep it under the rug.