Reading Charts in Real Time

[thalestrader]

Originally Posted by Gabe2004 Was shorting below 130.05 around 19:30 EST a resonable short? (sorry , cannt post charts from this computer) Gabe

Hi Gabe,

I can see why you might have wanted to short there. I would say that it could be done but with a very aggressive stop management, e.g. at + 5 ticks go to break even. The reason is two fold:

1) Between the NY close and the Tokyo open, price action is typically uneventful, and of very little value. This is generaly true, though it is not without exception. In this case, price drifted sideways to lower, and thus, it would have been better to wait for volatility and better defined swings to return, and await a more clear indication of where price was going to head; and

2) Price had basically broken out above its prior range (base) and then immediately formed another base right on top of the prior base. So, a short where you suggested, while anything is possible, was facing tough sledding as the "break" you sold was really a test of the top of the prior range. In other words, the comments I made to Cory would apply here as well.

You can see in this look at the EJ that price is stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes. At some point, price will produce a tradable retracement of the rally, but it is best to wait for an initial impulse down that cracks a base, then a reaction high, followed by an impulsive break to a lower low. Ideally, for a short, price will break to a new high and extend for a bit before basing again. That way, once a base for distribution forms, there will be room for price to run after a short entry and prior to reaching first support. Right now, these bases are forming a thick zone of support. A decline of any consequece will likely need to break through at least two of these levels to gain traction.

Best Wishes,

Thales

[thalestrader]

Continuing to track the EJ ...

Best Wishes,

Thales

[SangreDeToro]

Originally Posted by brownsfan019 Few things regarding this: 1) Your wins will be small overall, even w/ that runner when it hits (often it won't). 2) When price immediately retraces on you (and it will) you will take a full stop out on a full amount of contracts; meanwhile your wins will be tiny in comparison. For this to work, your win % must be very high and in theory, that is achievable with such small profit targets but I would not be doing this as a function to 'cover your costs'. That's silly as Thales pointed out with commissions so small in today's trading. You do this to create a scalping methodology b/c that's what it is - scalping at it's finest. So if you want to scalp, this is exactly how you could do it. If your goal is to basically cover costs and not lose, then why bother putting the trade on to begin with? This feels very much like a strategy where the goal is to not lose; it also has a flaw of not winning very much at all.

Hey Forrest - my read on the ross hook was that this particular setup was about anticipating a breakout or stop run - where you'd enter on a stop with the goal of getting a free trade that may keep going but if it reverses you already have the trade paid for.

I don't think this is a generic money management approach more so an approach for this impulsive price action.

i thunk.

[Gabe2004]

Originally Posted by thalestrader You can see in this look at the EJ that price is stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes. At some point, price will produce a tradable retracement of the rally, but it is best to wait for an initial impulse down that cracks a base, then a reaction high, followed by an impulsive break to a lower low. Ideally, for a short, price will break to a new high and extend for a bit before basing again. That way, once a base for distribution forms, there will be room for price to run after a short entry and prior to reaching first support. Right now, these bases are forming a thick zone of support. A decline of any consequece will likely need to break through at least two of these levels to gain traction. Best Wishes, Thales

Wouldn't it make for a better trade to enter at point A long which is a return to the prior ceiling (now potentially a base)?
In case of a short, once the impulse move down breaks support, how about waiting for price to come back up to the now resistance level and enter on a STOP in the downward direction but not waiting to break the most recent trough?

Gabe

[ziebarf]

Originally Posted by Gabe2004 Wouldn't it make for a better trade to enter at point A long which is a return to the prior ceiling (now potentially a base)? In case of a short, once the impulse move down breaks support, how about waiting for price to come back up to the now resistance level and enter on a STOP in the downward direction but not waiting to break the most recent trough? Gabe

I believe it is just personal preference how you enter the market. If you have faith in the trend and the prior price ceiling being able to support price, then buy the pullback. If you choose to trade a confirmation of a price pattern (ABC, Double Top, etc..) then have at it. In the past I have had trouble flip flopping between entry styles and it only has had an negative effect on my account balance.

The only issue I take with buying pullbacks/dips are how do you confirm they are finished? For me it makes entry/stop placement loose. Do I place entry to the tic of the price ceiling or to maybe a level of 50% retracement. On the upside, when you nail the entry, you can get by with a tiny stop which is always nice.

But on the subject which is a better trade, I feel its subjective depending on your preferred method of entry.

[Cory2679]

Originally Posted by thalestrader Continuing to track the EJ ...

I would have my eye out for a short at this point...

I marked some (not all) S/R levels.

We are currently at resistance, and the steep decline caught my eye. The "pattern" is not fully formed yet, so we'll see.

The higher resistance, thales's "PT," is obviously much stronger a level than the lower R level, but nevertheless, I'd still have my eye out for a short.

I could be totally wrong.

NOTE: I welcome any criticisms of my analysis. I feel like I'm probably doing someting "wrong" if I'm looking for a position against thales. But, I guess what could happen is that the "pattern" never completes and we hit new highs. At that point, I'd really be focused on what price was doing around that higher resistance level.

[RichardTodd]

Originally Posted by Rustie Easier said than done working out what your doing wrong!

It's hard but definitely worth your while. You've posted some difficult days looking for advice, and didn't assign blame for your trouble anywhere, and didn't make knee-jerk alterations to your approach. For that, you have my respect (whatever that's worth ) and in my view that puts you well or your way to success, even if it seems far away.

[thalestrader]

Originally Posted by Gabe2004 Wouldn't it make for a better trade to enter at point A long which is a return to the prior ceiling (now potentially a base)? In case of a short, once the impulse move down breaks support, how about waiting for price to come back up to the now resistance level and enter on a STOP in the downward direction but not waiting to break the most recent trough? Gabe

The way I trade, I would already have been long on the initial break when price retraced back to my entry, which you label point A. If I had missed the break out, I would perhaps consider buying there with a limit order. But, if I were already long, I'm not going to "double up" at break even.

Now, I do not have my charts open yet to show, but at point A on the 60 minute chart, if you were to change that to a 15 minute view, you will see, I beleieve, a 123 in the direction of the rally. Not as low an entry as buying at the previous BO loevel, but a more certain trade in that you should have a chance either to get out with a profit or at break even if price does not continue the rally. Buying right at a prior pullback level does not guarantee that you are indeed buying a pullback rather than getting suckered into buying into a new bear trend.

In the ned, Gabe, you can chose to trade anyway you wish. The way I do it works for me, and it may or may not work for you. As far as which is better, I prefer breakouts, whereas Wyckoff would think me foolish for trading them.

Best Wishes,

Thales

[thalestrader]

Originally Posted by Rustie I really am trying to work out what im doing wrong. These trades are demo only trades while i practice and learn. Easier said than done working out what your doing wrong!

Originally Posted by RichardTodd It's hard but definitely worth your while. You've posted some difficult days looking for advice, and didn't assign blame for your trouble anywhere, and didn't make knee-jerk alterations to your approach. For that, you have my respect (whatever that's worth ) and in my view that puts you well or your way to success, even if it seems far away.

I agree. Before participating here in the thread, Rustie had sent me several PM's, all of which show that he has both the confidence that he can do this but also the requisite self-acknowledged humility only the market can hand us.

I hope you continue to share with us Rustie. Even if you do not choose to trade the approach I have presented here, it likely will still prove helpful to you to put into words and communicate to others what your are thinking and how you are making your trading decisions. I know I have been helped immeasurably by the exercise of putting into words a (hopefully) clear account of how I read price action as I make my way through this thread.

And at least here, the only cost is your time and your trading losses (which youwould have anyway), rather than wasting more money paying for a mentor.

Best Wishes,

Thales

[Cory2679]

Originally Posted by thalestrader This is a good example of impulsive price action (the rally) versus corrective price action (where you se a potential 123). A short as you suggest may, if triggered, decline for nice profits. However, I would consider this to be a low probability short. I would add that I have been wrong many, many times..

Originally Posted by thalestrader You can see in this look at the EJ that price is stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes. At some point, price will produce a tradable retracement of the rally, but it is best to wait for an initial impulse down that cracks a base, then a reaction high, followed by an impulsive break to a lower low. Ideally, for a short, price will break to a new high and extend for a bit before basing again. That way, once a base for distribution forms, there will be room for price to run after a short entry and prior to reaching first support. Right now, these bases are forming a thick zone of support. A decline of any consequece will likely need to break through at least two of these levels to gain traction.

The first quote here is something that has been discussed more than once in the history of this thread. The second quote is something that is relatively fresh in my mind from reading Darvas and O'Neil a week or two ago.

However, when I made the post yesterday that resulted in the top quote, that concept had basically slipped my mind.

Also, as far as price "stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes"...this had also somewhat slipped my mind when I was looking at the chart.

I just had the realization that I can focus on a specific concept/pattern/whatever so narrowly, that other concepts I have learned slip my mind. I was so focused on what I saw as S/R or a H&L "pattern" that everything else had left my mind...I guess this is an example of the trees/forrest expression.

Anyways, I just had that realization so I thought I'd share it...hopefully now that I've come to realize it, I can work on preventing that sort of thing from happening again. I may even write it down.

-Cory