Real Time Price Action- Clue to Puzzle?

[Sledge]

After seeing a post regarding "Interpreting Bid/ask Spread" on this section I thought I may ask/discuss price action:

Basically, if you watch a 1 Min Chart and activity is high you can see a bar bounce up, drop, rocket back up etc all within that one bar for simplicity sake lets say this bar closes DOWN but on the middle of the bar.

My opinion (based on VSA) is that if you see a bull trend and catch a slight downturn, you may see the price drop on the bar, at the bottom of the bar you see buying and the bar comes back up to middle, you see it drop again and rise before your eyes. This is obviously absorbtion of the orders and buying on the low.

My question is that this doesn't happen all the time, you can see a bull trend and some of this absorbtion, but then the bar closes in the middle, and the trend continues downward.

Can anyone offer any insight on this? I would like to think that if you are watching price action and the bar closes in the middle that it is a strong buy signal (as the selling is being absorbed to make way for higher prices)

As I study VSA I find that I can learn more by watching the bars on a fast timeframe. Since I have no trades in- I can just watch as if I were watching a TV show- but this one is stumping me at the moment.

Thoughts?
Sledge

[DbPhoenix]

Consider, Sledge, that price is continuous, as is volume (that is, trading activity). Therefore, there is no "close", at least until everybody goes home and turns out the lights. What we perceive as a close is merely a function of whatever bar interval (time, range, constant volume, etc) we choose to display the movement of price and is entirely irrelevant to that flow. What matters more are the ebb and flow and their character: pace, extent, range, etc.

To better see this ebb and flow, you may want to use an even smaller interval. A tick chart may look like flies circling over poop, but something like a 5-second chart will enable you to see this ebb and flow without being distracted by the OHLC. Once you become attuned to this, you'll detect the flow even in an hourly or daily or weekly chart.

Some will object, of course, that whatever goes on in these teeny tiny timeframes is "noise" and is irrelevant to the larger, more "important" moves, but this is akin to saying that ocean currents are noise and irrelevant to the larger, more important moves. It all starts somewhere, and the trader who is attuned to these seemingly insignificant changes in price movement is going to be virtually shockproof when price suddenly starts hellbent in some new direction.

Db

[MC]

I'm always looking for more tape reading guides. Could someone PM me DB's guide? Thanks.

Looks like DB is a great addition here! Whether called "VSA" or another style of tape reading we all are looking for similar things.

Welcome aboard DB...I've not used T2W but of all the other sites I've used this is the most mature and skilled of boards and I'm glad to have another great member on board. I'm sure you'll like the crowd here.

Have a good weekend guys.
MC

[DbPhoenix]

Thanks for the welcome. Here's the link to the preview of the "book". I suggest you look it over before making any commitments.

http://www.trade2win.com/boards/313957-post.html

[DbPhoenix]

	Quote:	DbPhoenix
	Thanks for the welcome. Here's the link to the preview of the "book". I suggest you look it over before making any commitments. http://www.trade2win.com/boards/313957-post.html

It appears my editing window has closed. In lieu of providing so many offsite links, I've elected to open a blog. If it works the way I hope it will, everything will be in one place. To begin, I've uploaded the preview of the book to the blog. This may save at least some time for those who are interested in it.

Enjoy.

[smwinc]

Price action is "it". Everything else is secondary. Sounds simple, but its ridiculous how often it's forgotten. PPM - Price Pays Me. A rally on weak volume with no interest from buyers that hits resistance left right and center is STILL a rally that pays you if you were long, and gives you a loss if you were short.

Studying anything - VSA, tape reading, etc. - needs to be referenced in context to which MARKET we are talking about.

When you read the tape, you are analysing what other traders have DONE.

When you study the depth of market, you are studying what you THINK traders are ABOUT to do.

These are two different things, and are specific to different markets. Example:

The SGX Nikkei futures are very technical, but in my opinion useless as far as reading price action. You are trying to read the price action of Spreaders and funds Arbing the OSE-Nikkei.

The DAX has every man and his dog trading it - retail guys across Europe and America, big funds, automatic trading, the lot. In my opinion, it is a very good candidate for reading price action. I like to know my S&R levels, and then "live in the depth" of that market, and glance at the chart occassionally.

In the prop firm I work at, we do 10-20% of the volume in a particular futures market. This is my bread & butter market - if I am reading the depth of the market as I trade, I'm trading the other guys in the same ROOM as me. Clearly this changes the way you would trade a market.

Price action is king across all markets, because it's the only thing that pays you. However, you can't take the same 'rules' you apply to one market, and apply it to others.

Master one market to trade, but in doing so, study the price action of all the markets that are relevant to it. Nothing moves in a vacuum, and often whichever market was leading yesterday, might not be leading today. You can do it with charts or Price Ladders, but you want to see the flow of money across interrelated markets.

It's like driving a car - when you are accelerating to take over someone on the highway, you have a smooth action - indicate, pull into the other lane, hit the accelerator to raise revolutions as you move your hand to the stick-shift, hit the clutch as you change gears and continue accelerating.

You might be sitting there trading Singapore, not much is going on. Hang Seng starts to lift bids with size, Jap Gov Bonds are coming off which sends the Nikkei up. The Aussie SPI & Taiwan are taking notice - that might happen in less than 10 seconds. You want to be hitting bids pronto.

At the end of the day, trading is a career, a business, a sport to some. It's not a simple activity. To consistently profit day in day out, you need to learn how to learn. Be dynamic. You don't want to be a jack of all markets, but you don't want to be a master with one tool either.

DBPhoenix, I enjoyed your preface - Nice clean charts.

SMW

[Sledge]

db-
Thank you for your post, I recently signed up over at the T2W board and spent a good part of Friday reading your work on this topic. Very impressed and very appreciative of your posts there and here.

Anyone who has not been over there- you want an answer on Price Action- LISTEN TO THIS MAN.. he knows his "schtuff"
Sledge

[Sledge]

	Quote:	DbPhoenix
	What matters more are the ebb and flow and their character: pace, extent, range, etc. Once you become attuned to this, you'll detect the flow even in an hourly or daily or weekly chart. Db

DB-
Ok- see if I have this- If I watch a 1 min chart and try to ignore the Open and Close hash marks on a bar chart but try to be in tune with the "momentum" of the rally so to speak- is a better strategy?!

Let me try to explain myself- Ok a rally starts and I see a quick and fast movement upwards, about half way up I see it start to sputter or pause for a minute, towards the top- do I see MORE action on that bar or less when the rally is coming to an end?
(i.e. do I see more activity because the herd is snapping it up at the wrong time, or do I see less activity because it is stalling because it will go no further?)

Sort of like a model rocket, it shoots off its launching pad with vigor, and once it reaches its apex, the fuel has run out, the nose-cone turns over and down it comes? Or is it dependant upon other market factors?

I'm very intrigued by this concept and would like to hear some more!
Sledge

[DbPhoenix]

Well, the short answer is that you don't know. Aren't you glad you asked?

It depends on what you're trading and how vulnerable it is to support and resistance issues. You can't know it's the "top" until afterwards, which isn't going to do you any good. But if price reaches resistance of some sort and this stalling goes on, you're in a better position to understand what professional money -- or even other retail traders -- is up to (note I call it professional rather than "smart", because it isn't always).

It also depends on where the rally starts and what it starts from. If you're talking about a big-time accumulative base, then you've probably got legs. But if it's just a fart of some sort or other, then you very likely don't. What Wyckoff referred to as effort and result. Not much effort, not much result. Lots of effort, you ought to get lots of result. And if you don't, then something's up.

But if you know where R is and price is fast approaching and volume suddenly increases, then you're getting a lot of selling going on. If demand is able to absorb all this and push price higher anyway, fine. But if buyers are struggling under the weight, best know where the exits are.

So if you want to know what buyers and sellers are doing within that 1m bar, you're going to have to look inside it. If you can do that by watching price bob up and down along that 1m pole while also watching volume inch up, or not, that's fine. But I suggest you plot a 5s chart underneath so that you're not quite so separated from their activity.

I transferred the Springboard information from t2w to my blog here. It's not quite what you're referring to, but it does take a scalpel to the bar and opens up its insides for all to see. It may help you understand what I'm talking about, even though it may not specifically address your particular question.

Db

[DbPhoenix]

This doesn't specifically address your particular question either, but it does illustrate what I mean by "opening up the bar".

R here was at 1820 (still is, as far as that goes). Price hit that pre-market and slid down to this level from there. It ran into some trouble at 1814, then again at 1812. After the open, you got this big honking marubozu heading back to 1812 again, but that got reversed real quick (in a longer timeframe, those two bars would be "blended" to give you the inset result, a shooting star or gravestone or whatever you want to call it).

Now how would you know this was coming? And would you short? "Volume", after all, was less on the downbar than the upbar. And if you did short anyway, where? 1807?





Now let's pop the hood and see what's inside. Note that the big volume on the way up to 1812 results in bupkus. No progress at all. This is heavy selling (within context). And what happens to volume as price stretches toward R? And if you follow the TICKQ, you'd also note that it's been falling from 0930 all the way down to 0935.





So now where would you short?





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