[Tradewinds]

I would like to dedicate this thread to the topic of why price sometimes continues moving hard in one direction. Here is an example: Price breaks over a high, and has a larger than normal move up. The close is at or near the high, then the price continues to go up even more, with no pull back or retracement.

Sometimes price pauses, giving you an opportunity to exit, and get back into a trade in the same direction. With a price surge, there is no opportunity to get out, and get back in at a better price.

Here are possible scenarios: You could take long profit as you normally would, which would be to early, and you will miss out on some profit. If you enter a short trade, then the order immediately goes to a loss that just keeps getting bigger.

I'd like to know people's opinions. Is there a way to predict an extended price surge? How do you deal with this? Is it better to take profit at every opportunity, and not worry about the profit you didn't make? Is it better to wait, and see if you can make more profit, risking that price will retrace or reverse on you?

Does your trading style take this price behavior into account, or not?

Do you use volume as an indication of price heading into an longer than usual price move? Do you have an indicator that you think can predict a runaway price or a longer than usual price move? Do these extended price moves happen when price starts moving back to a former level, and that's why there is no hesitation until that former level is hit? Does this happen after a scheduled news event? Are there market internals that can help predict this? Are there momentum indicators that can predict this? Is there nothing that can predict a long price surge?

[MightyMouse]

Originally Posted by Tradewinds »

I would like to dedicate this thread to the topic of why price sometimes continues moving hard in one direction. Here is an example: Price breaks over a high, and has a larger than normal move up. The close is at or near the high, then the price continues to go up even more, with no pull back or retracement.

Sometimes price pauses, giving you an opportunity to exit, and get back into a trade in the same direction. With a price surge, there is no opportunity to get out, and get back in at a better price.

Here are possible scenarios: You could take long profit as you normally would, which would be to early, and you will miss out on some profit. If you enter a short trade, then the order immediately goes to a loss that just keeps getting bigger.

I'd like to know people's opinions. Is there a way to predict an extended price surge? How do you deal with this? Is it better to take profit at every opportunity, and not worry about the profit you didn't make? Is it better to wait, and see if you can make more profit, risking that price will retrace or reverse on you?

Does your trading style take this price behavior into account, or not?

Do you use volume as an indication of price heading into an longer than usual price move? Do you have an indicator that you think can predict a runaway price or a longer than usual price move? Do these extended price moves happen when price starts moving back to a former level, and that's why there is no hesitation until that former level is hit? Does this happen after a scheduled news event? Are there market internals that can help predict this? Are there momentum indicators that can predict this? Is there nothing that can predict a long price surge?

Tradewinds,

If price is surging, why do you want to get out, and worse, why do you want to take a short?

[Tradewinds]

Originally Posted by MightyMouse »

Tradewinds,
If price is surging, why do you want to get out, and worse, why do you want to take a short?

After re-reading my post, I can see that I worded that part in a way that is confusing. I would not want to exit a long position if price is surging, . . . or go short. I was trying to give examples of things I'm trying to avoid.

[$5DAW]

IMO there's no magic bullet when it comes to indicators, I also believe if you add enough lines on a chart something is going to line up. The trick is to test the indicator/indicators again and again and again and only when it proves itself within your comfort/risk level, trade it. I like Bollinger Bands, I use them in conjunction with other indicators to enter and exit most all my trades. I find them very useful for identifying the continuation of a move, and maybe more importantly alerts me when (more times than not) the move is over. My tests, on my time frame, with my parameters, in my market, prove to me these signals are valid. Of course there are exceptions and continuations do occur, but I have no problem taking profits when the buy/sell signal is generated and leaving the MAYBE wildly profitable continuation alone. I don't need to buy the low or sell the top on each move to be profitable at the end of the week.

[Tradewinds]

Originally Posted by $5DAW »

I also believe if you add enough lines on a chart something is going to line up.

You got that right! I've been through that scenario hundreds of times. I start comparing an indicator to the price chart, and think I see a pattern. Then I check it out, and find out that it really doesn't tell me anything. That's one reason I've stopped using indicators based on price.

[Tradewinds]

Originally Posted by $5DAW »

Of course there are exceptions and continuations do occur, but I have no problem taking profits when the buy/sell signal is generated and leaving the MAYBE wildly profitable continuation alone. I don't need to buy the low or sell the top on each move to be profitable at the end of the week.

Sounds like you are disciplined to take your profit, then wait it out for the next good entry signal.

Unfortunately, I'm not like that. I'm trying to trade every price move, almost constantly being in the market. It's not something I recommend. Don't do as I do, do as I say.

[SIUYA]

regardless of what you do...... either take profits, short into rallies, let it ride.....
consistency is the key. It is when you start changing and picking and choosing, missing trades that it starts to cost you.
Ideally - take your money and split it between two systems - let it ride, and take profits, OR work out a system that lets you take profits on 2/3rds (for example) and let the rest ride.....
regardless - consistency is crucial.
This also applies in terms of making sure your take profits, entries and take losses actually make sense in a system together as well.
(I started another thread asking similar questions earlier.....about the trade off between taking profits and letting it ride.)

[Tradewinds]

So far, the posts have been how to deal with the uncertainty of not knowing whether price is going to continue or pause. But no-one has suggested how to predict when price is going to continue or pause. One thing I look for is a strong move up in the market internals right after a reversal. That often predicts a price surge that has no pause to it.