Here's what an actual scalp looks like.

I normally don't include scalps on this blog because I'm in and out before there's any time to post. While swing trades last days and you can see I'm blogging about an ongoing actual trade. But this was a beauty and I really wanted to share it.

The chart above is the 3 minute PNW stock chart I used to trade it. To the bottom left you'll notice a triple bottom. Then a nice leg up followed by consolidation. 

The angled thick white line segments is the AB=CD price projection. The D point is about 74.

I drew Fibs to cover the 1st leg up. You can see the 61.8% Fib Extension at 73.95.

Price broke out of the consolidation from about 11:00 - 13:00. That's when I entered the trade. This stock has terrible Options. Low volume and wide Bid/Ask spreads. So I needed to use the stock. Since we're trading over a small price range on the 3 minute chart, we'll need a decent amount of stock, but its a Friday afternoon and I didn't want to risk too much, especially with all the headline risk these days.

I bought 200 shares at 13:37 for 73.20 each. I put my stop under the 20sma and under the top of the consolidation area. Subsequently, a beautiful Cup and Handle pattern was formed. I drew the the thick white, mostly horizontal brim line, which eventually intersected the Handle. You estimate the measured move by drawing a vertical line from the brim line to the bottom of the cup, then copy that line and place it on the breakout level of the handle (see the little vertical thick white lines). This projected a move to about 73.90.

Notice the beautiful confluence of 3 different methodologies:

AB/CD: 74

Fib 61.8% Extension: 73.95

C&H: 73.90

The target was the 61.8% Fib (73.95) Ext but I faded it by 5 ticks (73.90) to line up with the C&H projection and allow room for slippage and Bid/Ask spread. Also it was getting pretty late on a Friday and I was suspecting price would fall a little short due to low liquidity and general market shenanigans.

Well, I was treated to rare perfect price action. It reached a high of exactly 73.90 at 15:18 and my Limit Order was filled. Then it tanked. Thank goodness I faded the 61.8% Fib!

In summary:

Entry 13:37 200 shares @$73.20

Stop 73.12

Target 73.90

Exit 15:18 200 shares @$73.90

Profit 73.90 - 73.20 = .70 * 200 shares = $140

Time 15:18 - 13:37 = 2 hrs 19 minutes.

I was also doing other trading related tasks while monitoring this trade. And lunch :)

This fill was the last trade of the day and the week, and it was such a pleasure. If only all our trades went like this one.

Dec Wheat Descending - Update 1

Yesterday was a Doji candle, closing under the 8ema. A Doji connotes indecision. Today a decision was made. More downside.

Today's candle makes another Bearish Engulfing pattern. This is the third in a row. Don't know the statistics on this but I'd guess its pretty uncommon. Certainly adds credibility to our bearish thesis.

However, we are now sitting right on the 200sma, as well as the bottom of the purple range and the top of the yellow range, and the 34ema. This area could definitely provide some support. So we may see a bounce Sunday night and Monday. If so, I'd expect a 50% pull back of the range from the recent swing high (578 1/4) and yesterday's low (541). That would be (578 1/4 + 541)/2 = 559.63. We have to allow the occasional and normal pullbacks. We have our Stop working, and if its hit, the amount is within an allowable risk. If we get a pullback and a reversal back to our downward trend, we'll continue towards our target.

So all in all, our trade is progressing nicely. Its an easy decision to remain in this trade.

YM Dec Dow Jones Futures Near Term Target - Exit

3 minute

Daily

First target (26500) was hit 8:37am ET. Then I zoomed into the 3 minute chart to micro-manage since its quite possible we don't go any lower for days. I trailed a stop behind the top of the second candle behind the current candle. The stop was hit at 8:46am ET on the other 2 positions at 26516.

Since this was a trade on the Daily and covering a wide price range on a volatile chart, we used the MYM mini contract ($0.50/point) instead of the full YM ($5/point) contract.

So, the happy summary is:

27001 Entry - 26500 Exit = 501 x $0.50/point = $250.50

27250 Entry - 26516 Exit = 734 x $0.50/point = $367.00

27364 Entry - 26516 Exit = 848 x $0.50/point = $424.00

Total win $1,041.50

YM Dec Dow Jones Futures Near Term Target - Update 1

How beautiful is that?! Price action went in our favor big time. But wait it gets better.

You can't see it on the chart because I don't include after-market data on the YM Daily chart so I can see the overnight gaps, but last night I added a Sell-Stop at 27250 and 27364. 27250 corresponds to the H&S Neckline, which might get hit on the way to the 8ema. 27364 corresponds to the top of the gap, made by the low of 3 trading days ago. 27250 was hit at 20:01 ET last night and 27364 was hit 04:39 ET. The original 27001 entry was yesterday 06:13am ET. 

Then, after the 2 additional scale-in orders were hit, look out below. We closed today at 26685. How beautiful is that?!

On the way down we have 3 scale-out orders to cover at 

26500 - Bottom of AB=CD projection.

26386 - Half the H&S projection.

26250 - The 61.8% Fib Ext.

If we get another candle tomorrow like we had today, which would be asking a lot, we're likely to hit all 3 targets and be out before the weekend. But we'll probably get a partial retracement or a Doji candle tomorrow. 

Dec Wheat Descending

This is a very busy chart. The trick is to focus on just the indications you're interested in and filter out the rest. Then do it again for the next indicator. This is also a bearish chart, although we entered without confirmation of the next candle continuing downward. So we did enter a little early. But look at the multiple indications of a more downside:

Let's start with the Negative Stochastics Divergence. Notice the 2 orange angled line segments. One connects the tops of the 2 most recent swing highs. Notice that line is angled upward. The other line is in the Stochastics window on the bottom of the chart. It connects the tops  of the 2 most recent swing highs for Stochastics. Notice that line is angled downward. That is a Negative Stochastics Divergence. It portends a short term down trend.

Today's candle and the candle before it form a Bearish Engulfing candle pattern. That is a bearish indication. In addition, the 2 candles before those 2 also form a Bearish Engulfing candle pattern. That adds to the bearishness.

We closed today below the 8ema. That is a bearish indication. However, we should confirm this with the next candle continuing lower than today's low. I expect that will be the case tomorrow. Until then we are early. Entering early adds risk that the trade will go against us and fail. We entered early on purpose, knowing the risk, because we could get a big candle, like 2 days ago, or gap down, and hit our target before we get a chance to enter. Also, I could be unavailable tomorrow morning and miss the opportunity to enter. To help mitigate the added risk we used the mini contract ($10/point) instead of the full contract ($50/point). We can scale in with more contracts after we get confirmation, if there's enough room left between the new entry and the target.

The 20sma often provides a headwind. So closing below the 20sma is a good sign.

We bounced off the 27.2% Fibonacci Extension on the green range 2 days ago. The green range is shown by a large green vertical down arrow around July 21st.

We also bounced off the Inverted Head & Shoulders Neckline (thick light blue line). 

If you look at the most recent swing high at 578 1/4, which is also the top of the blue Fib range, and look left you'll notice this price range was rejected on approximately 3/31/20 and 2/21/20. So twice before this price level provided resistance, and it happened again today. This is a bearish indication.

So, given all these bearish indications, it seemed like a good trade would be to enter short today rather than to wait for confirmation, as explained above. Here's the trade plan:

Use Dec YW mini contract ($10/pt).

Entered 548 1/4.

Target 61.8% Retracement of the blue range at 528. Actual target is 528 1/2 for slippage.

Stop 578 1/2 (just over the recent swing high 578 1/4).

Risk: 548 1/4 - 578 1/2 = -30.25 * $10/pt = $302.50

Reward: 548 1/4 - 528 1/2 = 19.75 * $10/pt = $197.50

Well, that R:R stinks. I believe this is high probability trade, so I'm going to tolerate the bad R:R. We already used the mini sized contract which cuts our loss potential by 80% compared to the full contract, but is there something else we can do?

Sure, we can tighten our stop to break even when we get to the 50% Fib retracement, which is very close to the 50sma, both of which can provide significant support, and might be all the downward price action we get on this trade.

YM Dec Dow Jones Futures Near Term Target

YM Dec Dow Jones Futures daily chart above shows a Head & Shoulders pattern (yellow). We broke and closed under the neckline. I have found price often goes to 50% of the Head & Shoulders projection. In this case that is about 26386.

The angled white line segments show an AB=CD price projection, which is about 26500.

There's a gap from 26326 - 26233. So the gap fill would go down to about 26233.

A 61.8% Fibonacci extension of the Head - Neckline range (green) is 26247.

On the scope of this chart, these 4 levels are relatively close to each other, so a price target in the range of 26500 - 26233 is indicated. I think the best target is the 26247 61.8% Fibonacci extension. But what I'd like to do is scale out a quarter position at each level. 

We could leave a small position on as a runner for a bigger move, but I expect the 4 possible support levels mentioned above, plus a previous consolidation area in this same range around July 15th - August 4th, will cause price action to reverse, at least temporarily. Then when that reversal tops, we can re-short. If we do get a reversal then a runner will just give us a loss, so I'd rather not put it on.

Oct Natural Gas Deflating - Exit

 

How to risk $12,000 for 9 days, do everything right, and make $25.00! That should be the title of this trade. Well, I must of done something I thought was right, but maybe it wasn't. Of course, traders can do everything right and still lose money due to the randomness in the market. So I should be happy I ended positive, right? Let's take a look at it and see if there's something to learn for the future.

First, let's discuss the exit. Yesterday I said I'd micromanage the exit in the morning. I woke up to find a consolidation channel. I waited until a likely breakout showed up around 8:30am ET. Here it is on a 10 minute chart:

You can see 2.320 would be a good Stop. Its just over the top of the consolidation. So when we got the breakout I lowered the Stop to 2.320. Well, you can probably guess what happened next:

Stop was hit 9:05:45 am ET. We covered at 2.325. I really didn't mind that much. I was glad to be out with what felt like a nice profit. We could have easily been hit at 2.410 instead, or something worse earlier in the trade.

But look at the Daily chart above. It was captured after the close. The low of the day was 2.246, landing right on the 50sma. You might remember yesterday I raised the target to 2.250. If I didn't try to optimize the exit, the exit would have optimized itself. Would have been perfect! Would have made an additional 2.325 - 2.250 = .075 x 2500/pt = $187.50.

The final net on this trade without commissions:

2.475 - 2.325 = .150 * 2500/pt = $375 core position

2.485 - 2.580 = -.095 * 2500/pt = $-237.50 second position

2.425 - 2.410 = .015 * 2500/pt = $37.50 trying to add back 2nd position but hit stop

2.365 - 2.425 = -.060 * 2500/pt = $-150 trying to add back 2nd position but hit stop

375 - 237.50 + 37.50 - 150 = $25

I went back and read all my posts in this thread looking for something to improve. Don't see anything wrong with the entry. The fact we came so close to the target supports the validity of trade setup. 

One improvement I see is to check other time frames before entering the trade. I only noticed the Head & Shoulders pattern on the 4 hour chart after we had already entered the trade based on other indications. What if there was a counter-indication? Don't want to find that after entering the trade.

When price went against us in update #3, I think taking off half our position was the perfect move. In fact, price came right back down the next day, so good thing we still had our core position. We definitely would have lost ground trying to get back in. Don't see an improvement here.

Another improvement is where I put the Stop when adding back in the supplementary position. I was using the 10 minute chart to enter, so I used the 10 minute chart to set the Stop. That seemed prudent and cautious but now I think it was a mistake. I should have used the Daily chart to set a Stop like I did when we first added a supplementary position after seeing the Head & Shoulders. It means much more of a loss if its hit, but if I had done that we would have made an extra 2.425 - 2.325 = .1 * 2500/pt = $250 instead of losing $112.50.

Is micromanaging the exit on a 10 minute chart when we're close to our target a mistake? Sometimes price pulls back just shy of a target, and doesn't come back. I usually shade my targets by a couple/few points to handle a near miss as well as bid/ask spreads. I suppose there are some trades that are better left alone, but this wasn't one of them. There were many possible reversal points and an observant trader could manage that situation to a better outcome than just letting things play out on their own.

Not seeing anything else at the moment. If you see something in the managing of this trade that could be improved upon, please let me know. Meanwhile, guess this counts as a win.