Trade Notes: July 19, 2024

Trade Execution

1. First Trade:

   • Outcome: Solid winner.
   • Setup: Based on the 30D low to high Fibonacci (61.8% level), entry was supported by the lower DOL (Daily Open Low) and demand entries on the M1 chart.

2. Second Trade:

   • Outcome: Loss.
   • Mistake: Entered after observing large buy orders, which led to a sudden market drop. The decision to size in more aggressively and the resulting market movement caused a loss.
   • Issue: The trade could have been more profitable if the exit had been executed at the top, instead of getting faked out by the tape.

Setup Analysis

• Initial Entry:

  • Reasoning: Entry was based on a significant imbalance and the next draw on liquidity being the prior month's low. The setup aimed to capitalize on a potential “monthly turtle soup” scenario, where early longs were swept out.
  • Outcome: First trade was successful, validating the use of the setup.

• Subsequent Entry:

  • Reasoning: Aimed for a continuation based on the earlier setup, but market dynamics changed with a massive buyer’s presence and subsequent market tanking.
  • Issue: Lack of exit strategy led to unnecessary losses.

Key Insights

• Tape Reading: Relying solely on the tape can be misleading. It’s essential to align entries with broader market context and confirmation from other indicators.
• Setup Testing: Testing new setups like the monthly turtle soup provides valuable data for refining future entries.
• Fibonacci Levels: The 30D low to high Fibonacci levels have shifted. The 61.8% bounce is no longer relevant, but marking previous levels can aid in tracking future reversals.

Future Considerations

• Liquidity Zones: Continue to monitor significant liquidity zones and Fibonacci confluence areas (e.g., 90D 38.2% and 30D 78.6% Fibonacci levels) for potential bounces.
• Exit Strategy: Develop a clearer exit strategy to avoid losses due to market volatility or misleading tape signals.
• Refinement: Adjust trading strategies based on ongoing analysis of setups, particularly in identifying and managing risk more effectively.

Action Items

1. Track Setups: Continue to track and refine the use of Fibonacci levels and liquidity zones based on historical performance.
2. Monitor Tape: Use tape reading as a supplementary tool rather than the primary basis for trade decisions. Validate tape signals with other indicators.
3. Refine Strategy: Incorporate the lessons learned about entry and exit strategies into the trading plan.

Updated Checklist for Trade Entries

1. Setup Confirmation:

   • Validate with multi-timeframe analysis.
   • Check Fibonacci levels and liquidity zones.

2. Execution:

   • Prefer high probability setups with clear entry and exit criteria.
   • Avoid sizing in aggressively based on tape reading alone.

3. Exit Strategy:

   • Define exit points before entering trades.
   • Use trailing stops or predefined targets to lock in profits and minimize losses.

4. Post-Trade Analysis:

   • Review trades for compliance with strategy.
   • Adjust tactics based on market behavior and performance data.

I took 2 trades, the first was a solid winner, the second one could have been avoided, by taking the profit at the top, rather than sizing in & getting faked out by the tape. I seen massive buy orders coming in, and the moment I pressed the buy button, the market tanked. It was likely a big buyer that was building a position that could potentially take off next week.

The entry I decided to take was based on a massive imbalance for the next draw on liquidity lower, which is the prior month low, which is very far away. And the break of a prior month low, with a 20-30D fibonacci long entry. My thought process was that there is alot of potential for the early longs to have been swept out of the marketplace with stops below the prior month low, and we could have seen a monthly turtle soup entry. This was my first time testing the entry, and after the move chooses a direction, I will have more data on more confirmation for the setup. 

The 30D low the high has changed with a slightly higher low now after the following day, so the 61.8% bounce is no longer in play. But i marked the prior 30D low to high, so that if the market does happen to reverse in the future, I can track the timeframe in which the entry occured to avoid senseless losses in the future.

For now, we have confluence between the 90D 38.2% fibonacci & the 30D 78.6% fibonacci, so with liquidity drawing lower, I think it is likely that this confluence area will be the next potential bounce play. 

I guess the takeaway will be for the loss of profits on this trading day. DONT SOLELY TRUST THE TAPE.