The purpose of this is to serve as a closet, or attic, or self-storage facility. A place for me to store what I don't want to lose, all in one place, partly for me, but largely for those who may be interested in what I think about market stuff and trading stuff.
I've reserved the right to moderate comments. Assuming that this works, the point of it is to keep the blog on task as much as possible. Substantive questions will be answered, if I can, but good wishes and so forth will not be posted, not because I don't appreciate them, but because all of that is a lot for newcomers to wade through after a while, so please don't be insulted if you don't see your comment posted.
The first post is a link to a preview of my book. This may be of no interest to you whatsoever, but I do encourage those who are interested to at least look over it before plunking down any money for something that may be of little or no use to them.
Good trading.
I've reserved the right to moderate comments. Assuming that this works, the point of it is to keep the blog on task as much as possible. Substantive questions will be answered, if I can, but good wishes and so forth will not be posted, not because I don't appreciate them, but because all of that is a lot for newcomers to wade through after a while, so please don't be insulted if you don't see your comment posted.
The first post is a link to a preview of my book. This may be of no interest to you whatsoever, but I do encourage those who are interested to at least look over it before plunking down any money for something that may be of little or no use to them.
Good trading.
For Mar 19 post, sort of
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Pre-mkt A dip into yesterday’s range, but a bounce back to yesterday’s high and close. A setup for a trend day? Without news, breakouts are dicey, and price has already found resistance at 1780. And with the extent of the move yesterday, an equally significant move is not of the highest probability.
0950 Price continues to hover up here, which means that traders are accepting this level, at least for now. The TICKQ is, however, falling during this 8m pause, from 478 to 385, and this is an important resistance level.
1005 Retracement to 1772, which is the last swing low. Volume is unremarkable.
1015 Hesitating at the last swing low. There’s a TD between the last swing low and this one, but there’s no particular support here. On the other hand, there’s a lot of support in general on the way back down, so if this does decline, it’s going to take a while. So I’ll put this on the back burner for the time being. If I get stopped out, I get stopped out. It’s a beautiful day.
1030 New low. Since support is a little vague today, I’m going to draw a supply line and use a break of that as a signal to exit.
1035 Going back, one could now say Aha! Descending Triangle. But the probability on these is nothing to write home about. You just have to watch and wait. The key, of course, is shorting at or near resistance, not off the pattern. If one waits for the latter, he’s more likely to get screwed. If he’s already short, though, the people who are selling the pattern will propel him into further profit. It’s a form of “fronting the market”.
1040 We appear to be hesitating at the pre-mkt low, which coincides with the midpoint of the range on the 12th and the bottom of the range on the 13th, and here’s where pre-planning plays its most important role. What do we do in the event of a bounce here? Do we consider that to be a confirmation of support and a reversal signal? Or do we consider the pre-mkt low to be trivial and any test to be at best unimportant or at worst coincidental? Do we just wait for a break of the supply line and ignore all the points we “left on the table”? How badly will we feel if we exit and price suddenly resumes its descent? All of this constitutes a personal problem and all of it has to be addressed before the day ever begins. It should also be noted that we’ve dropped 30pts. Perhaps that’s enough for the trader, and he’d rather go do something else.
1105 Supply line is broken and last swing high is exceeded by at least a point.
1110 Now clearly back into the previous range. Also clearly the level of the pre-mkt low and the prior levels with which it coincided were in fact support. Rather than be depressed about not catching it in real time, one can include this bit of information in his “map” and develop a revised plan based on this new information. What may be most important is that traders are accepting these higher levels, at least for the time being.
1125 TICKQ reaches all the way to 861.
1135 Now all the way to 876. No divergence there. If resistance is found here again, and there’s no TD, there’s the option of shorting a lower high a la Wyckoff. I’m going to plot a demand line here.
1150 Demand line broken. And sorry to disappoint, but I have other things to do. I can come back later and review what happens from here on, but that will all be hindsight, and one should keep that in mind when reading it.
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1155 Carrying on, AND KEEPING CLEARLY IN MIND THAT THIS IS ALL HINDSIGHT, I must make an extra effort to stick to the rules, or at least my rules, in order to avoid the Yeah, Right. Here, there appears to be a lower high accompanied by a TD. Is the TD enough? Ordinarily not. But given where we are, at resistance, and given the small risk, and given that there’s money in the bank, why not?
1205 By now, there’s a lower low and a confirmed downtrend.
1210 A lower high, and I can now draw a supply line. If this trend reverses before support is reached, I can use this to exit. Otherwise, it will keep me in.
1245 We reach and reconfirm support at 1755, but there is no TD, so there’s no reason to run away.
1320 Price waffles around here for half an hour before finally breaking the supply line. However, since there was no TD, I wait for the last swing high to be broken. It isn’t, so I stay in the trade.
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1340 By now, price makes a new low, so I can draw a new supply line.
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1440 Price reaches the support level I had anticipated in the first place. And there is a TD (more easily seen on the 5s chart). Therefore, I have three choices: (1) exit immediately, (2) exit at the breach of the supply line, which takes place 25m later, or (3) exit when the last swing high is breached, which, as it turns out, isn't. Given where we were, the TD, and the extent of the move, I would have chosen (1).
1535 A new low is made and price drops to the next level of support. However, I made – or would have made – the best decision I could based on the information I had at the time. Not getting the extra 10 or 15 points is – and would have been – of no importance to me.
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Pre-mkt A dip into yesterday’s range, but a bounce back to yesterday’s high and close. A setup for a trend day? Without news, breakouts are dicey, and price has already found resistance at 1780. And with the extent of the move yesterday, an equally significant move is not of the highest probability.
0950 Price continues to hover up here, which means that traders are accepting this level, at least for now. The TICKQ is, however, falling during this 8m pause, from 478 to 385, and this is an important resistance level.
1005 Retracement to 1772, which is the last swing low. Volume is unremarkable.
1015 Hesitating at the last swing low. There’s a TD between the last swing low and this one, but there’s no particular support here. On the other hand, there’s a lot of support in general on the way back down, so if this does decline, it’s going to take a while. So I’ll put this on the back burner for the time being. If I get stopped out, I get stopped out. It’s a beautiful day.
1030 New low. Since support is a little vague today, I’m going to draw a supply line and use a break of that as a signal to exit.
1035 Going back, one could now say Aha! Descending Triangle. But the probability on these is nothing to write home about. You just have to watch and wait. The key, of course, is shorting at or near resistance, not off the pattern. If one waits for the latter, he’s more likely to get screwed. If he’s already short, though, the people who are selling the pattern will propel him into further profit. It’s a form of “fronting the market”.
1040 We appear to be hesitating at the pre-mkt low, which coincides with the midpoint of the range on the 12th and the bottom of the range on the 13th, and here’s where pre-planning plays its most important role. What do we do in the event of a bounce here? Do we consider that to be a confirmation of support and a reversal signal? Or do we consider the pre-mkt low to be trivial and any test to be at best unimportant or at worst coincidental? Do we just wait for a break of the supply line and ignore all the points we “left on the table”? How badly will we feel if we exit and price suddenly resumes its descent? All of this constitutes a personal problem and all of it has to be addressed before the day ever begins. It should also be noted that we’ve dropped 30pts. Perhaps that’s enough for the trader, and he’d rather go do something else.
1105 Supply line is broken and last swing high is exceeded by at least a point.
1110 Now clearly back into the previous range. Also clearly the level of the pre-mkt low and the prior levels with which it coincided were in fact support. Rather than be depressed about not catching it in real time, one can include this bit of information in his “map” and develop a revised plan based on this new information. What may be most important is that traders are accepting these higher levels, at least for the time being.
1125 TICKQ reaches all the way to 861.
1135 Now all the way to 876. No divergence there. If resistance is found here again, and there’s no TD, there’s the option of shorting a lower high a la Wyckoff. I’m going to plot a demand line here.
1150 Demand line broken. And sorry to disappoint, but I have other things to do. I can come back later and review what happens from here on, but that will all be hindsight, and one should keep that in mind when reading it.
.
.
1155 Carrying on, AND KEEPING CLEARLY IN MIND THAT THIS IS ALL HINDSIGHT, I must make an extra effort to stick to the rules, or at least my rules, in order to avoid the Yeah, Right. Here, there appears to be a lower high accompanied by a TD. Is the TD enough? Ordinarily not. But given where we are, at resistance, and given the small risk, and given that there’s money in the bank, why not?
1205 By now, there’s a lower low and a confirmed downtrend.
1210 A lower high, and I can now draw a supply line. If this trend reverses before support is reached, I can use this to exit. Otherwise, it will keep me in.
1245 We reach and reconfirm support at 1755, but there is no TD, so there’s no reason to run away.
1320 Price waffles around here for half an hour before finally breaking the supply line. However, since there was no TD, I wait for the last swing high to be broken. It isn’t, so I stay in the trade.
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1340 By now, price makes a new low, so I can draw a new supply line.
.
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1440 Price reaches the support level I had anticipated in the first place. And there is a TD (more easily seen on the 5s chart). Therefore, I have three choices: (1) exit immediately, (2) exit at the breach of the supply line, which takes place 25m later, or (3) exit when the last swing high is breached, which, as it turns out, isn't. Given where we were, the TD, and the extent of the move, I would have chosen (1).
1535 A new low is made and price drops to the next level of support. However, I made – or would have made – the best decision I could based on the information I had at the time. Not getting the extra 10 or 15 points is – and would have been – of no importance to me.
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Total Comments 11
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trend dayYou mention set-up for a trend day. I need to look further into this as I could not find any evidence that it would be a trend day down from the morning's action , but I'm sure I'm missing something, other than a lower high occurring. Sometimes these things take time to sink in......
 erie |
 
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Thanks for the commentary, it really helps. I have been trying to follow on the QQQQ.
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Quick question, as I was watching the QQQQ today at 10:36, volume increased and price stopped going down. That seemed interesting and price went back up a bit from there. Now does that have any significance, in that one min timeframe alot of volume exchanged and price halted? It seems that there was more buying pressure.
~iso |
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Quote:
You mention set-up for a trend day. I need to look further into this as I could not find any evidence that it would be a trend day down from the morning's action , but I'm sure I'm missing something, other than a lower high occurring. Sometimes these things take time to sink in......
erie |
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Updated 03-22-2008 at 12:23 AM by DbPhoenix |
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Great Analysis, do post that of 20th March, always appreciate your insights and I am sure it will help many to understand price/vol relationship better than what they are led to believe via VSA.
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Quote:
Quick question, as I was watching the QQQQ today at 10:36, volume increased and price stopped going down. That seemed interesting and price went back up a bit from there. Now does that have any significance, in that one min timeframe alot of volume exchanged and price halted? It seems that there was more buying pressure.
~iso |
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Hi DB, thanks for insightful posts. I suspect, as with many worthwhile endeavors, that I will need to study the methods of generating S/R that you use. I have a firm grasp of using PDH and PDL , but haven't found PDC to be much of use as of yet.
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I don't know that one would elevate it to the level of "method". Eventually I got to the point where I understood that all of the various groups who were addressing trading by price were all talking about pretty much the same thing. The task then became to cut away all the vocabulary -- all that was being said and how it was being said -- and focus on what it was all being said about.
Though people don't generally think first of Wyckoff when the subject of "auction market theory" comes up, he was actually one of the originators of it, most of what he taught having arisen from his views on supply and demand, though rather than always meaning literal supply and demand, he just as often meant selling and buying, or support and resistance. So, to make a long story short, I stopped using candles (except to see -- literally -- the relationship between the open and close on larger bar intervals; after a certain age.....), I stopped focusing so much on points, and, to some degree, I stopped focusing so much on levels and began looking for where the greatest number of trades were taking place over time. This is in concept similar to what MP calls the "value area", but one can avoid all the MP "stuff" simply by plotting "volume at price" (one can do this at bigcharts to play with). I also understood that what we call "support" and "resistance" at points, such as the PDH and PDL, or any other swing point for that matter, is a different kind of support and resistance, i.e., a failure to find a trade, and that failure is what prompts the turning point. The support and resistance found at the "value areas" or volume ranges is a similar kind of S/R in that the trader can't find a trade (or at least the trade he wants), but his problem has to do with being overwhelmed by the pressure from the other side, e.g., buying pressure if he's a seller. Therefore, the boxes you see are those areas where the greatest number of trades have taken place. One will therefore find either support or resistance or both depending on where the market opens in relation to that range, or "box" (these are easier to see than stacks of lines). Your comment was posted to this particular chart, but you would have noticed by scrolling back to previous charts that price opened on this day at February's most important resistance level. Therefore, first choice until proven wrong would be to short. Those who don't understand the nature of support and resistance might interpret this as strength, but those who do would understand that it was business as usual, the greatest number of people being on the wrong side of the trade. This is not to say that points such as the PDH and PDL and levels that price has repeatedly tested are not important (new highs and new lows do attract attention). But they take their appropriate place in a more encompassing concept of just what constitutes support and resistance. Once one grasps that, all the fiddling with "what does this bar mean" and so forth comes to an end. |
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Hi there Db, I know its been several months since you wrote this VERY helpful "what goes on in the mind of db" post, but I was wondering if you could answer this question: at 13:20 you say, "Price waffles around here for half an hour before finally breaking the supply line. However, since there was no TD, I wait for the last swing high to be broken. It isn’t, so I stay in the trade." However, isn't the LSH broken right when price breaches the prior lower high made right before 13:10?
Also, I noticed that there is barely any direct mention of volume in this posting. It seems you pay more attention to what price and the TICKQ is doing at S/R points than volume? Could you comment on that? Thank you. |
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Oops, I retract my first question. I just realized the last swing high would have to be the one at 12:50 because price has not made a lower low until 13:15 or thereabouts.
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Given your retraction of the first question, I'll address the second.
Volume isn't mentioned directly partly because I hope that by now it's more or less self-evident. Also, volume matters primarily (one could say "only") at those points or levels where S or R are being tested, such as at 1775. Further, the trend takes precedence at some point, if there ever is a trend. Once that has been determined, volume is pretty much irrelevant. All sorts of strange things can happen with volume that can divert your attention and throw you off your game, but, as long as the trend is intact, who cares about volume? |
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Recent Blog Entries by DbPhoenix
- Seven Habits of Ineffective Traders (05-13-2008)
- The Trading Log: Appendix (04-29-2008)
- The Trading Journal: Appendix (04-29-2008)
- The Trading Journal: Appendix (04-29-2008)
- Wyckoff the Great (04-26-2008)
