Using Daily Charts to Trade W/ Thales H,L,HL Method

brownsfan019 · #1 11-03-2009, 03:26 PM

It's not too often that something grabs my attention on forums, but I've always enjoyed Thales' posts and once he dissected his trading with pictures I wanted to see how it looks on daily charts.

I started the thread here b/c I plan to look at candles and might end up w/ my own spin on it so I didn't want to take his thread off track.

Idea here is that I'll use freestockcharts.com and look at some daily charts as time permits and see what I can find. My interest in this would be for swing trading as my daytrading style doesn't really mesh with swing trading that well. I'm very much an intraday trader and it's been awhile since I've looked at daily charts.

If you're not sure what analysis will be used, go to this thread and start reading. If you want the shortcut, read this post.

Feel free to join along if you are using the same analysis as Thales has presented. The only difference I am adding (at this point) is seeing how the candles look as well on the daily.

brownsfan019 · #2 11-03-2009, 03:36 PM

IWM - Russell ETF

Gabe2004 · #3 11-03-2009, 05:39 PM

Originally Posted by brownsfan019

IWM - Russell ETF

Hello BF

Why not go short at the pink line?

Gabe

brownsfan019 · #4 11-03-2009, 09:31 PM

I agree - good catch!

brownsfan019 · #5 11-03-2009, 09:37 PM

IWM revised:

brownsfan019 · #6 11-03-2009, 10:00 PM

AAPL JUN09-JUL09

I wanted to try out a stock and found AAPL. I'm not sure how smooth this will work on daily charts with stocks due to the gaps. This particular timeframe on AAPL provided 3 trades - 2 winners, 1 loser. But with minimal gaps, it was doable. Some other stocks, even AAPL later, have such big gaps that if you do trade them you could get massive slippage on the entry or get skipped over on your entry price.

I might just put together a collection of liquid ETFs and see how that looks for now. That will also help me focus on a small group b/c where do you even start w/ stocks? That's always been my issue w/ stock trading. We'll see.

brownsfan019 · #7 11-03-2009, 10:26 PM

Here's a few forward looking charts. Let's see what we can find in real-time. All daily charts.

GLD - TRIGGERED TODAY

SPY - LOOKING FOR A LH TO BE PUT IN AND THEN WILL PUT BUY STOP ABOVE H

brownsfan019 · #8 11-03-2009, 10:49 PM

Now here's why I didn't want to post in the other thread b/c I could take things in a different direction...

Personally, there's something that just gets under my skin about buying above a big high or selling below a big low. That's just not in my blood. So here's a spin on the idea - plot your H and L then look for a candle pattern with the HL or LH "Zone" and take the trade. Examples:

And if you want to refine that zone even more, you could use basic fibs to give your possible trade zones. Basically the key is entering between the H & L.

This is also where I think a background in candlesticks is very useful. In the examples, highlighted candles are bullish in nature to get long and bearish in nature to get short. Keep in mind my version of bullish or bearish may not be exactly what you've read in books, but basically I want to see some bullish activity to get long and bearish to get short. If it doesn't match a shape on a book or website, I could care less.

Entry method is also key here, which I discuss here. At this point, I would feel comfortable entering on a buy stop above a high or sell stop below a low.

The observant guys will say - isn't that just pullbacks? And I guess it is but it's a filtered pullback system. If you've traded or tried pullbacks before, the decision is always defining whether or not it's pulled back to your entry area or not. And how long is the pullback valid for? This at least gives you some general rules to use in that regard.

JEHs · #9 11-04-2009, 07:29 AM

Here is a trade I happen to be in that fits, (sort of) with this type of thinking.
That highest high candle and the one after that was a 2B signal. One could get short right there as price breaks the low of that HH candle, but I waited till the next failed HH candle, which ended up being a bearish reversal bar.
I watched the market that following morning and when price started out above the low of the RB, I hit transmit on my orders and walked away.

The tricky part is now where to go with the stop. I took first profits as it neared the last low and got stop to BE as quick as possible after that, but now, things are looking real good and I hate to give any back, but I want to be there if things develop into an extended run. If I had enough, I would buy some more back now, but I only traded 200 and the first 100 was first profit, and, apparently IB wont work with odd lots on SMH, so here I am.

Now we have an RB on the bottom side, so, I should be thinking of just getting out, but we have taken out a few lows and a fairly significant one a couple days ago, so I will move my stop over that last 2 bar DT and hope for the best. That's just a hair more than 50% of my potential profits gone if I get hit, but ya gotta give it some chance, (at least that is what my plan tells me).

JH

I came back and added a weekly chart for SMH. Everything works the same on the weeklys, a chart is a chart after all...

And then a couple other charts I am watching.

Dinerotrader · #10 11-04-2009, 02:45 PM

Originally Posted by brownsfan019

Keep in mind my version of bullish or bearish may not be exactly what you've read in books, but basically I want to see some bullish activity to get long and bearish to get short. If it doesn't match a shape on a book or website, I could care less.

I'm intrigued. I have watched Nison's candle stuff and read some books. What formations do you consider bullish/bearish that aren't what you would call the "regular" formations? I would think the whole point of books and formations is to pick out anything that would hint at bullish/bearish activity so it can be identified. Maybe you just mean you interpret the actual candles more liberally than the books do. Give me an example if possible.
Thanks.