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Market Wizard

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1

Reputation Activity

1. Soultrader got a reaction from nivana in How long does it take to become a successful trader?
It really depends on the persons passion for the markets. One year is definitely not the norm. Your friend has done an amazing job in just one year.

It took me 2 years of intense studying and trading to get to where I am. I was quite a journey.

I would say on average it takes 2-3 years before one can start trading for a living. This is just my opinion, I am sure some may find me a slow learner.
2. Soultrader got a reaction from paulTQ in IB Range Indicator for CQG
A simple study for CQG plotting the 60 minute (initial balance) high/low.

This works only on a day session chart. Once imported and applied to a chart, right click on the two lines > modify > and change the line to dash.

Screenshot is attached.

Enjoy!
IB Range.pac

3.
In this post, I explained to the OP that following your system when things are not looking good is easier said than done sometimes and thought I'd explain further.

Today (Dec 12) was one of those days where if I told you the end result of my P&L you might say, nice day.

Ending P&L: \$779.89/ct after commissions Not the greatest, but acceptable.

Now, allow me to take you through how this day progressed and you can see why it's easier said than done to follow your system 100% and not lose faith.

I am currently focusing on 3 markets to trade - ES, EC/6E and ZN. The main reason being that I am trying to be more particular in my setups and instead of forcing on the ES only, I find it easier to be patient using 3 markets.

+1.25, -2.25, -2, -2, -1.5, -1.75, -1.5, +5.75 = -4.00 on Day

-13, -12, +26, -9, -9, +6, +36 = +25 on Day

+21, -4, +19, +10 = +46 on Day
As you can see, not the easiest path to get from point A to point B. We know that the shortest distance between 2 points is a straight line and while it's much easier having a day where you start at 0.00 to +1,000 with no losses, that's not entirely realistic IMO.

But if you were to look at starting at 0.00 and ending at \$779.89, it'd be hard to argue that was a bad day.

I posted this b/c in the other thread the OP is showing some solid faith in his system and following it. Once you know that your system makes money, then it's a little easier to do this. Of course you need to get there, but once there, you can do it.

In the end this business is first about knowing that your system makes money over time and then doing it while minimizing emotional impact. I still get frustrated at times but days like today remind me of how important it is to keep doing it. I had no idea going into the day that the ES would be so rough today. I had no idea that the EC would make money, but only after a few losses. And I had no idea that the ZN would be like taking candy from a baby. And I have no idea what tomorrow will hold. I just have the faith that I can do the job and follow the plan. As soon as I stray from that, then I am subject to P&L fluctuations not planned for.
4. Soultrader reacted to DbPhoenix in Price Action Only
Trading by price -- and "volume" -- requires a perceptual and conceptual readjustment that many people just can't make, and many of those who can make it don't want to. But making that adjustment is somewhat like parting a veil in that doing so enables one to look at the market in a very different way, one might say on a different level.

One must first accept the continuous nature of the market, the continuity of price, of transactions, of the trading activity that results in those transactions. The market exists independently of you and of whatever you're using to impose a conceptual structure. It exists independently of your charts and your indicators and your bars. It couldn't care less if you use candles or bars or plot this or that line or select a 5m bar interval or 8 or 23 or weekly or monthly or even use charts at all.

Therefore, trading by price and volume, or at least doing it well, requires getting past all that and perceiving price movement and the balance between buying pressure and selling pressure independently of the medium used to manifest or illlustrate or reveal the activity.

For example, the volume bar is a record of transactions, nothing more. The volume bar does not "mean" anything. It does not predict. It is not an indicator. Arriving at this particular destination seems to require travelling a tortuous route since so few are able to do it. But it's a large part of the perceptual and conceptual readjustment that I referred to earlier, i.e., one must see differently and one must create a different sense of what he sees, he must perceive differently and create a different structure based on those perceptions. As long as one believes, for example, that "big" volume must or at least should accompany "breakouts" and clings to this belief as ardently as he clings to his rosary beads or rabbit's foot or whatever, he will be unable to make this perceptual and conceptual shift.

If you can work your imagination and use it to travel in time, you will have a far easier time of this than most. Imagine, for example, a brokerage office at the turn of the 20th century. All you have to go by is transaction results -- prices paid -- on a tape. No charts. No price bars. No volume bars. You are then in a position wherein you must decide whether to buy or sell based on price action and your judgment of whether buying or selling pressures are dominant. You have to judge this balance by what's happening with price, e.g., how long it stays at a particular level, how often price pokes higher, how long it stays there, the frequency of these pokes, at what point they take hold and signal a climb, the extent of the pokes, whether or not they fail and when and where, etc., all of which is the result of the balance between buying and selling pressures and the continuous changes in dominance and degree of dominance.

One way of doing this using modern toys and tricks is to watch a Time and Sales window and nothing else after having turned off the bid and ask and volume. But this wouldn't do you any good unless you spent several hours at it and no one is going to do that. Another would be to plot a single bar for the day and watch it go up and down, but nobody's going to do that, either. Perhaps the least onerous exercise would be to follow a tick chart, set at one tick. Then follow it in real time. Not later, but real time. Granted this means a lot of screen time and only a handful of people are going to do it. But those few people are going to part that veil and understand the machinery at a very different level than most traders.

Once this is understood, the idea of wondering -- much less worrying -- about what a particular volume bar "means" is clearly ludicrous, as is the "meaning" of a particular price bar or "candle". If it is not understood, then the trader spends and wastes a great deal of time over "okay so this volume bar is higher than that volume bar but lower than this other volume bar, and price is going up (or down or nowhere), so...".
In the Hinges thread, I posted a live trade and elaborated on my exit methodology. To keep that topic on topic and to allow us to continue investigating exits and scale-outs, I thought it would be a good idea to start a new thread. I'll cover my personal exit methodology seen though Wyckoff ideas, as well as the logical rationale behind it. That said, I welcome all feedback and supporting/opposing opinions.

My current trading methodology involves position adds and scale-outs. My reasoning has roots in wagering ideologies such as the Kelly criterion. The idea is simple: Bet more when you have greater odds. Relating to trading, you want the most exposure when your edge is greatest; similarly, you want less exposure when your edge is least (and ideally, no exposure when you have no edge). This makes logical sense, but many traders (myself included for a while) failed to see this.

Trading is a game of making money, not proving yourself correct. I disagree with the "A good exit is another entry" camp, because I can't say that my edge is always the same. Yes, if you're able to nail moves completely, then keep your all-in / all-out approach. I personally can't, and don't currently know of any trader who can.

Let's examine when a trading edge changes. Let's say you enter with a long setup (and many are discussed in this forum), and price moves in your direction but fails to break through a possible resistance area. Couldn't we argue that the new sellers, by confirming resistance, have taken (at least some of) your bullish edge away? This would be a good area to take some position off, because buying pressure is (momentarily) outmatched by selling pressure. I find volume especially important in these areas, because it can help you gauge the interest of the bulls and bears. Price stalled; did: a) sellers sweep in, or b) buyers simply take a break? If you see a rise of volume on the rejection, start looking for the door.

What if price did not stall at possible resistance? Then I see no reason to lighten the position. The buyers have been winning, and sellers didn't step in as they did before. In fact, I have position adding setups based on moves like this. Remember, price moves in waves (not bars) and is fractal. The setup you took on a 1m chart could parlay into a 5m setup. Always pay attention to the market on a greater scale.

My most reliable and accurate way to exit are climaxes. Here's how I define a climax:
A rise in momentium (volatility), along with:
A rise in volume
Then, a contraction of momentum / volatility (or, a rejection of price)
High volume does not mean there's a climax. In fact, some of the biggest moves are on high volume. It's the rejection / stall you're looking for. High volume gives you a head's up that there's a lot of interest. Once you spend screen time watching climaxes, you can catch them pretty quickly. Frequently, you'll see a quick decay of volume. This generally means that buying pressure has lessened, but sellers have not taken over. Many times, this is the making of a pullback before a continuation. If, however, you see volume gaining on the pullback, you might be looking at a reversal (or a pullback on a larger scale). It's not volume you're interested in directly, but volume's effect on price.

You'll also see times when volume does not spike before the exhaustion, but price fails to break through a support/resistance level. Many times, price will try more than once, but new buyers/sellers are simply not interested. This is another good scale out opportunity, because the lack of buying pressure is important. Price could likely continue, but our edge not as much as it was when we had buying pressure on our side.

So far, I've talked about exits that are pretty close to the extremes. Unfortunately, not ever price action move ends so cleanly with a climax or S/R confirmation. This is where stop management comes into play. To begin with, I use very small stops initially (so importantly, am willing to re-enter if my entry was not clean). Additionally, there's no reason to take a full stop if price is not confirming your entry premise. This is important. I am not saying to wait for the trade to be proven wrong. Rather, get out if you're not proven right. The Phantom of the Pits has some wise words on this topic.

So, we're in a profitable trade, and need to manage stops. My first goal is to make the trade riskless (move the stop to break even). This has many psychological and \$ implications. Yes, at times, you can get shaken out for break even, and zoom!.. price shoots off. You must be willing for this to happen, and often, re-enter quickly without chasing a trade. I make the trade riskless as soon as price confirms my entry premise. This often involves a x point move, or a breaking of previous S/R. From there, I manually trail stops as price keeps breaking past S/R levels, or establishes new ones. Example: a bull run, and then congestion. I will set stops under the congestion. The more contracts you trade, the more scale-outs you can have, making your trade longer and longer (if this is wanted).

As a rule of thumb, the longer term the trade is, the less tight you need to keep your stops. On trend days, to catch the entire move, you will need to allow for pullbacks. In action, I'm frequently scaling out on pullbacks, and then adding to my position as the trend resumes.

This is a work in progress, so please feel free to add to my thoughts. My other posts on exits: Live trade exit discussion, the benefits of scaling out. A couple of you have mentioned to me that you like examples (helps solidify the concept). Please understand that this is simply one example, and does not represent the concept in entirety.

6. Soultrader reacted to james_gsx in Candlesticks and Volume
Glad to see this finally come up. I've been very interested in combining other types of analysis along with candlesticks such as volume and MP.

Heres one quick trend play that you could do using WRBs. As we know, typically a WRB is followed by an easy short to scalp, but if you use volume with the WRB then you could probably get some nice setups.

1 - As you can see we start off with a WRB, and lets say you want to go for a quick short at the exit OR wait for a candle to go short. For textbook style play let's just say we went short at the close of the spinning top that immediatelly followed. This is an ideal setup because the volume of the spinning top is nearly identical to that of the WRB. This will make it easier for some of the newbies.

2 - Two candles later we have a test of the WRB open or low. You can exit here for a quick profit or you could see that volume has been declining. We have smaller bodies and taller wicks, but the lack of volume would tell me theres no interest in demand as it is quickly shoved back down. So we could move our stop just above these wicks to protect our profits. Then we get a rise in volume, and a candle that breaks through those lows this would be our confirmation of a new trend.

3 - Now we get a hammer and volume as been slightly rising. Since there is a nearby support level we may be tempted to exit this trade and take the hammer. If we did that, we still have a nice profit and obviously the hammer would have failed. No big deal, thats life. OR we could have waited until something more meaningful to a trend appeared like a MA crossover, oscillator, or a hammer with STRONG volume. For the sake of hindsight and textbook style play let's say we waited. A few candles later we get a hammer with STRONG volume (similar or more to the WRB). That obvsiously screms that buyers are present. We happily exit the trade and go the other way for our hammer setup, and walk away with a new sum in our bank account.

Now to be fair this isn't a setup where you see a spinning top after a WRB and assume you can nail near 20pt ES trade. BUT if you started with a simple 2pt play and closesly followed volume you could have turned that into a nice trade.

For the sake of argument and realism, here are a few losers in the same day.

Heres another play we could have used.

1 - Clearly defined hammer after a WRB and volume is very similar.

2 -Next we get a follow through WRB with strong volume. Typically I think we would have taken the hammer and a quick profit with the WRB and been happy. Or we could let volume tell us that buyers are still heavily present in the market and hold onto the trade from here.

3 - Our trade continues to move higher and we eventually test the long term MA. Knowing this is a counter trend play I think most would be disciplined to take their profits here. Just in case this doesn't happen the high volume inverted hammer would tell us the bears quickly counter attacked with equal force keeping price down. So you could take your profits at the close of this inverted hammer and still had a healthy trade. Or else you would have waited for the spinning top with low volume to tell you the move was over.

So overall I'm starting to see a pattern of nice candlestick patterns following WRB with EQUAL OR MORE volume.

How a trade could possibly setup.
1 - Reveral candle after WRB witih equal or more volume. If I'm not alread scalping for a quick reversal of the WRB then enter on the close of the reversal candle.
2 - Wait for a signal such as an oscillator, moving average, or another candle (with strong volume like the WRB) to exit my trade.

I think this would be a trade that would have to materialize, I don't think you could just see it happen in real time and take it. But I do think it would go along with what you said earlier about taking a typical setup, and using volume expand on it and capturing a bigger move.

I think this is a good start though. Once I feel more comfortable with my knowledge of MP I would love to start a thread combing candlesticks, volume, and market profile into one setup. I believe if we could blend a lot of these great analysis together we could have an extremely efficient trading plan and one that we could use to expand our careers. I also don't think volume is something that would complicate our plan, just compliment it

In 2002, Paul Desmond won the 2002 Charles H. Dow Award for his work in identifying market bottoms and new bull markets. Since this work nicely supports Wyckoff's hypotheses regarding selling climaxes, technical rallies, and "secondary reactions", or tests, I've posted Desmond's study below in pdf form. I've also excerpted several points which are particularly pertinent to Wyckoff's aforementioned hypotheses and which will act as an introduction to the study. Please note that all bolding is mine.

To spot an important market bottom, almost as it is happening, requires a close examination of the forces of supply and demand – the buying and selling that takes place during the decline to the market low - as well as during the subsequent reversal point. Important market bottoms are preceded by, and result from, important market declines. And, important market declines are, for the most part, a study in the extremes of human emotion . The intensity of their emotions can be statistically measured through their purchases and sales.

[P]anic selling must be measured in terms of intensity , rather than just activity.

It is essential to recognize that days of panic selling [in which Downside Volume equaled 90.0% or more of the total of Upside Volume plus Downside Volume, and Points Lost equaled 90.0% or more of the total of Points Gained plus Points Lost] cannot, by themselves, produce a market reversal, any more than simply lowering the sale price on a house will suddenly produce an enthusiastic buyer. As the Law of Supply and Demand would emphasize, it takes strong Demand, not just a reduction in Supply, to cause prices to rise substantially ....These two events – panic selling (one or more 90% Downside Days) and panic buying (a 90% Upside Day...) – produce very powerful probabilities that a major trend reversal has begun….

Not all of these combination patterns – 90% Down and 90% Up – have occurred at major market bottoms. But, by observing the occurrence of 90% Days, investors have (1) been able to avoid buying too soon in a rapidly declining market, and (2) been able to identify many major turning points in their very early stages – usually far faster than with other forms of fundamental or technical trend analysis .

Impressive, big-volume “snap-back” [technical] rallies lasting from two to seven days commonly follow quickly after 90% Downside Days, and can be very advantageous for nimble traders. But, as a general rule, longerterm investors should not be in a hurry to buy back into a market containing multiple 90% Downside Days, and should probably view snapback rallies as opportunities to move to a more defensive position .

The following is of course a chart of the Nasdaq over the past few months up through yesterday and is intended as an example. The calculations are not guaranteed to be accurate. Anyone caring to verify them and point out any errors is welcome to do so. Readers are encouraged to read the study in its entirety.

2002DowAward.pdf
8. Soultrader reacted to Kiwi in Woodies CCI technique.
Lets get real. The CCI does provide the basis for working trading if its used properly.

First: what is required?

People trade with the trend or countertrend. Lets say that trading with the trend is easier (longer moves, and more forgiving because if you get your exit timing wrong the retracement frequently won't reach your stop before the move continues, although obviously a trend will finish or do a larger timescale retracement at some time).

When you trade with the trend you either hang on trailing stops or you exit at targets that (for most people and strategies) should be at least twice as big as your planned losses.

So, can Woodies' use of the CCI help with this?

Yes.

Its a trend following indicator (its just the current price minus a CCI length simple moving average divided by a normalizing factor (so that reaching 200 is similar to reaching the 2sd bollinger band ... similar)).

If you wait until its above zero for a while then the chance is you have an up trend. If you wait for a pullback to zero or a little below you have a pullback of sufficient magnitude to feed liquidity into continuation. So you buy. Then you have to exit. How? When it hits the 2sd bollinger (200cci) or when it pulls back from that perhaps?

etc etc

So basically Woodie has taken standard reasons for entering and exiting a trade and framed them around a 14sma and 6sma based indicator. They can work. Do most people succeed with them? No. Do most people succeed with any trading method? No. Is it the best method? No. Most would do far better understanding trend, support and resistance, and price action (and where it and volume action are relevant) than messing with the cci. But is it that wcci doesn't work? No.

So what has to change? Study price based methods and yourself. In simplicity and understanding lies the holy grail.
9. Soultrader reacted to DbPhoenix in Edge VS Mentality

If you do not have evidence of a consistently profitable trading strategy, then your problem is not "psychology". It is not "discipline". It is not ego or greed or fear. Your problem is that you don't have a consistently profitable trading strategy. Until you do, you can be mental health poster child with the strictest discipline on the planet and you won't be profitable. You have to have a consistently profitable trading strategy.

Cranking up your software and logging in to your data feed, then waiting for the open to "see if something is going to happen" is not a trading strategy (or at least not one which is likely to be consistently profitable). Going short because "buying seems exhausted", then going long because "selling seems exhausted" or because the "big boys" seem to be "stepping up to the plate" is not a trading strategy.

If you're trading and you don't know exactly what it is that you're looking for, then stop trading until you do. If you know exactly what it is that you're looking for but you don't what exactly what it is that you're going to do if and when you see it, then stop trading until you do.

If you elect to view trading as a game, then don't be surprised at how much money you can lose and at how fast you can lose it. If instead you view trading as a business, then don't be surprised at the amount of time and effort required to make it a profitable one.
10. Soultrader reacted to Sledge in Edge VS Mentality
Do you know why their is a 95% fail rate in this business? I do. And the reasons are simple:

1. New traders are lured by this idea that "this is an easy way to riches." The Market Makers have brilliant Marketing departments and they do a stellar job- believe me I have a B.S. in Marketing and over a decade in the field- I know good marketing. They shoot fish in a barrel.

They tout short term trades. They WANT you to scalp for two reasons. One is the more trades you take, the more commissions they make. Secondly, Marketers are trained with psychology- they know what makes you tick- they know people and how they work. They know that even if the long term trend is bull, human nature to a "get rich quick" minded person will take tiny profits out of fear.

2. After they have baited you into doing something as silly as opening an account with \$250 being as green as an Irish countryside- letting you overleverage the crap out of yourself- they part you of your \$250 and hundreds of others. Knowing psychology again, they know that most people with be revengelful- they will fund the account with another \$250 and take another crack at it- this time, they have you even MORE by the short and twisty's because you are pissed and want to get your first \$250 back. They take you to the cleaners again! The cycle repeats over and over with millions of "get rich quick" greenhorns.

3. If after you have blown two accounts, and still want some more- you then set out on your search for the "Holy Grail." You start picking from the list of the 1000 indicators that your broker who just cleaned your clock TWICE gives you. "Must be a gift from the trading gods" you say- "all the answers are right here" you think- so you apply them, try them and eventually get parted from even more money.

4. If you are now beaten down for the third time- you can either
A. Keep fighting the good fight and demo trade until you finally get it right
or
B. Give up on the markets all together.

5. If you choose A, you will study and learn what the markets are really all about, you will search not for "The Grail" but for the reasons the markets do what they do. You will search to find out how to read a chart instead of trying to take trades when one line crosses another or some Indicator tells you it is time to pull the trigger. You will take the hard road and work long hours to get to an edge. You will make money with your edge, and sometimes you will want to tweak the edge or realize that you can have multiple "edges" to draw money from the market. You will look at the market from a completely different perspective than you did when you started. You know that the market is not "out to get you." The market is there to do what it does- and either you are in harmony with the movements- or you are a dead man walking.

The lesson:
This is a hard road, this takes time, this takes patience to learn, this takes dicipline, it takes blood, sweat and tears. During your learning phase you will either crumble and give up, or you will have the heart to plow on ahead. 95%of people fail in this business because they don't have the balls to do what it takes to succeed. They don't have the gumption to fight through the learning stage to make it. PERIOD!
Aaron
11. Soultrader reacted to smwinc in Edge VS Mentality
Interesting discussion this.

I have seen and spent time with a very diverse group of traders. From very successful independent & prop traders, traders at firms, traders at banks, average traders, losing traders, losing traders who think they are good traders, etc. The three things that really stand out separating the traders comes down to: 1) Discipline 2) Conviction 3) Guts.

In my experience, having an edge to pull an income from the markets is actually not that hard at all. I would go so far as to say it is easy. Some of the most consistent traders I know have particular setups, and they just don't really question it. They don't make a killing, they just grind it out, working their small edge.

Mentality is too general a word. The more specific problem: The majority of people have no discipline. It takes a huge amount of discipline to know what your specific edge is, sit infront of a screen and only take those setups. To only trade your edge, entires & exits.

I do NOT think the problem is exactly about having a profitable strategy. It's about having a profitable strategy, and trading that and only that.

The average person simply can't sit infront of a screen all day, every day, to only take one very specific setup. Even if it were to make them more than their current income.

If you can't follow an exercise plan, can't follow a diet, can't follow a study plan, etc - It is unlikely you will succeed at trading until you can address those issues.

This is one of the key reasons why there is a correlation between successful athletes following on to become successful traders - it is the discipline aspect.

Subsequently, it is also a key factor in why there is very little correlation between being successful in a white-collar job, to becoming a successful trader. Most 'real jobs' (as I call them :-) ) do not require and test your discipline on a daily basis.
12.
Here is something that should get pretty lively..

Since everyone keeps telling you that screen time is important, there has to be something to it. But nobody is telling you what you should be looking for. What is it going to teach you? There has to be something that those who do this for a living see that you don’t.

Well there is. And just like the magician that exposed the secrets to magic tricks on national TV, I am going to tell you what we see.

But before I do remember one thing. Take everything you read in a forum or book, or hear from a guru or in a seminar with a grain of salt. Question everything. Only when you prove it to yourself, does it become the rule.

What I am about to share can be found on thousands of sites and in countless books. If you have done any research at all, you have come across Dr. Elder’s triple screen, or some permutation of it. You understand the principles behind using multiple frames of reference. What has most likely not been explained to you is why it works or how to apply it correctly. In most cases you are only given a single example.

Single example you say? Yes, when most first stumble across using multiple time frames, they follow the rules of:

Use the upper time frame to identify the trend, the middle time frame for the set-up, and the lowest time frame to enter.

If by chance you are not familiar with the triple screen just goggle “triple screen +elder”.

Trading instruments exhibt three different types of market action in any given frame of reference. You use multiple frames of reference (i.e. Time or ticks) to identify the current market environment. These markets are: Trending, Trading, and Volatile.

Why screen time is so important is that all instruments do not exhibit the characteristics of Trending in the upper time frame, Trading in the middle, and Volatile in the lower at all times. They can be in any one of the following combinations at any given time:

Or any one of 84 possible market combinations if you consider Volatile/Volatile/Volatile.

Like the major pairs in Forex, the combinations I listed are what I consider the major market combinations.

The elusive secret that you are looking for, and what screen time teaches you, is to identify which market combination you are in and then how to trade what you see. Or better yet, when to stay on the sidelines. Each combination requires a different strategy, and some may not be tradeable at all. If you are trading across a broad range of instruments, you only need to master one. The fewer instruments you trade, the more market combinations you may have to learn. But you have to learn them one at a time and only add the next one once the first is mastered.

One step at a time grasshopper. One step at a time. As I mentioned there are 84 possible combinations. Multiply this across thousands of instruments and countless frames of reference, and I hope you get the picture. You do not have to learn them all.

You only have to learn the few that fit you, your chosen instrument and frames of reference. Find the market combinations that are most prevalent and learn to trade only those. This is why it takes screen time to learn to do this, and why each trader is different. It is also why three traders in the same instrument will be doing something different. Trader A will scalp, trader B will be a buyer, and trader C will be seller, and they all make money.

They are using different frames of reference and therefore see a different market
Put simply, support is the price at which those who have enough money to make a difference are willing to show their support by retarding, halting, and reversing the decline by buying. Resistance is the price at which those who have enough money to make a difference attempt to retard, halt, and reverse a rise by selling. Whether one calls this money professional or big or smart or institutional or crooked or manipulative or (fill in the blank) is irrelevant. If repeated attempts to sell below this support level are met by buying which is sufficient to turn price back, these little reversals will eventually form a line, or zone. Ditto with resistance.

A swing high or low represents a point at which traders are no longer able to find trades. Whether that point represents important support or resistance will be seen the next time traders push price in that direction. But everyone knows this point, even if they aren't following a chart. It exists independently of the trader and his lines and charts and indicators and displays. It is the point beyond which price could not go. Hence its importance, both to those who want to see price move higher and those who don't.

The first two posts to this thread address these matters, as do others here and there. However, finding S&R in real charts in real time takes more than just a couple of posts. But one must understand the nature of support -- and resistance -- itself before he begins to look for it. Otherwise, he will find what he thinks are S&R in some very peculiar places.

Before coming to any conclusions about what “works” or “doesn’t work”, and thus does or does not provide an edge, one ought to keep in mind that a given event -- such as price seemingly finding support or resistance at a trendline (or moving average, candlestick, Pivot Point, Fib level or whatever) -- may be only incidental to what is truly providing that support or resistance.

A fundamental misunderstanding of how "indicators" are calculated and what they're supposed to do can lead to all sorts of off-task behavior. We think we see the indicators indicating something, or not, and believe we have made an important discovery. We then devote our efforts to improving the hit rate and the probability of whatever it is we think the indicator is indicating when our efforts ought to be focused on determining whether or not the indicator is actually indicating what we think it's indicating. In most if not all cases, it isn't.

Consider the virgin being tossed into the volcano: sometimes it results in a great crop, sometimes it doesn't. Maybe tossing her in earlier or later will change the probability of a healthy crop. Maybe two virgins are better than one. Maybe six. Maybe tall virgins are more effective than short ones. And surely age is important. But does the robustness of the crop really have anything to do with tossing the virgin into the volcano in the first place?

The money under the pillow is not evidence of the existence of the tooth fairy, and spring will arrive regardless of whether the virgin is tossed into the volcano or not. (Db)
14.
I wasn't sure where to put this, so the powers that be can move it if they see fit. I put it here for anyone who is just starting out and wondering what it really takes to become part of that elite club of profitable traders.

I lurk on several trading forums. I join a few and make a few posts. One thing that I rarely see is the painful path one took to becoming successful. So for all you beginners here is what becoming successful took. For my fellow brethren that are already in the club have a good laugh.

The markets had always lured me as a kid. I would read the paper and make predictions. Sometimes they were right; sometimes not. Then one day I got that famous commodity-trading flyer, sent my money off and took the plunge.

My first stab at trading was commodities and I started with \$5k in 1991. I was using the strategy as outlined by the guru. The account was gone within a few months. Well that didn’t work. I thought, people do this everyday and make money why not me.

So off to the library. I read every book the Memphis library had on trading and investing. I paper traded the strategies I found while I built my bankroll back up. I learned exits, set-ups, position, expectancy, market psychology, and portfolio management. I soon realized that I was reading the same thing over and over no matter which book I checked out.

Time to build my strategy. I am ready to do this. I bought a new computer, Metastock Pro 6.0, and opened an account with \$30k. Its 1995, and this is my shot. By 1997 I was toast again. The family life went to hell in a hand basket, and I thought I could trade through the difficult times. The result was an account with a balance of \$2500.

Back to the drawing board. Took care of the personal stuff. Lived like a monk raising capital. Worked nights and watched the market during the day. Took a second job on the weekends to raise more money.

Then one day out of the blue, the little red and green candles started to make sense. I saw patterns develop over and over in the same spots. I placed a trade and made a profit. But I had done this before. I removed the MACD from my charts. Placed another trade and made a profit. Maybe I am on to something. Removed the channel indicator that I stumbled across. I could still see the action and new what the MACD was doing and where the action was in the channel without them even being on the chart. I even stopped drawing trend lines.

It was just me and the screen. I planned every trade. I knew exactly when, where, and why I entered and exited. I was patient. I became a predator. Lurking and waiting. I took every shot the market gave me. If it started to go wrong, I got out quick and waited. If the market did not give me an opening, oh well. There is always tomorrow.

By the fall of 1999, I was consistently profitable and have been ever since. For those that are waiting for the sales pitch, there isn’t one. For those that are waiting for me to expose some great secret, well there isn’t one of those either.

What I will give you are a few simple pointers that I learned the hard way. And the sad part is, most will stilll learn these the hardway.

1)Take everything you read with a grain of salt. That includes this post.

2)Never pay for a system. It is just not that easy.

3)If something comes up in your life that is distracting, stop trading.

4)Plan every aspect of your trade down to the smallest detail, and plan for every possible outcome.

5)Develop your own strategy. Don’t let someone tell you that you can’t trade a simple moving average if you truly believe you can.

6)Test the strategy in the market that you will be trading. If you like the results, trade it in another totally unrelated market and see if it still holds up.

7)Paper trading is ok, but there is nothing that truly tests the strategy like hard earned cash.

8)You will have to make sacrifices in order to make it. I still do. In the middle of my learning period I was working 18 hours a day during the week and 12 on the weekend.

9)You are responsible for everything when it comes to trading. That includes stop running, bad fills, limit moves, your PC crashing. I mean everything. See #4

10)And last but probably most important, don’t be afraid of failure. Just do like Edison and go, “Well that didn’t work”.

15.
Here is something that should get pretty lively..

Since everyone keeps telling you that screen time is important, there has to be something to it. But nobody is telling you what you should be looking for. What is it going to teach you? There has to be something that those who do this for a living see that you don’t.

Well there is. And just like the magician that exposed the secrets to magic tricks on national TV, I am going to tell you what we see.

But before I do remember one thing. Take everything you read in a forum or book, or hear from a guru or in a seminar with a grain of salt. Question everything. Only when you prove it to yourself, does it become the rule.

What I am about to share can be found on thousands of sites and in countless books. If you have done any research at all, you have come across Dr. Elder’s triple screen, or some permutation of it. You understand the principles behind using multiple frames of reference. What has most likely not been explained to you is why it works or how to apply it correctly. In most cases you are only given a single example.

Single example you say? Yes, when most first stumble across using multiple time frames, they follow the rules of:

Use the upper time frame to identify the trend, the middle time frame for the set-up, and the lowest time frame to enter.

If by chance you are not familiar with the triple screen just goggle “triple screen +elder”.

Trading instruments exhibt three different types of market action in any given frame of reference. You use multiple frames of reference (i.e. Time or ticks) to identify the current market environment. These markets are: Trending, Trading, and Volatile.

Why screen time is so important is that all instruments do not exhibit the characteristics of Trending in the upper time frame, Trading in the middle, and Volatile in the lower at all times. They can be in any one of the following combinations at any given time:

Or any one of 84 possible market combinations if you consider Volatile/Volatile/Volatile.

Like the major pairs in Forex, the combinations I listed are what I consider the major market combinations.

The elusive secret that you are looking for, and what screen time teaches you, is to identify which market combination you are in and then how to trade what you see. Or better yet, when to stay on the sidelines. Each combination requires a different strategy, and some may not be tradeable at all. If you are trading across a broad range of instruments, you only need to master one. The fewer instruments you trade, the more market combinations you may have to learn. But you have to learn them one at a time and only add the next one once the first is mastered.

One step at a time grasshopper. One step at a time. As I mentioned there are 84 possible combinations. Multiply this across thousands of instruments and countless frames of reference, and I hope you get the picture. You do not have to learn them all.

You only have to learn the few that fit you, your chosen instrument and frames of reference. Find the market combinations that are most prevalent and learn to trade only those. This is why it takes screen time to learn to do this, and why each trader is different. It is also why three traders in the same instrument will be doing something different. Trader A will scalp, trader B will be a buyer, and trader C will be seller, and they all make money.

They are using different frames of reference and therefore see a different market
Put simply, support is the price at which those who have enough money to make a difference are willing to show their support by retarding, halting, and reversing the decline by buying. Resistance is the price at which those who have enough money to make a difference attempt to retard, halt, and reverse a rise by selling. Whether one calls this money professional or big or smart or institutional or crooked or manipulative or (fill in the blank) is irrelevant. If repeated attempts to sell below this support level are met by buying which is sufficient to turn price back, these little reversals will eventually form a line, or zone. Ditto with resistance.

A swing high or low represents a point at which traders are no longer able to find trades. Whether that point represents important support or resistance will be seen the next time traders push price in that direction. But everyone knows this point, even if they aren't following a chart. It exists independently of the trader and his lines and charts and indicators and displays. It is the point beyond which price could not go. Hence its importance, both to those who want to see price move higher and those who don't.

The first two posts to this thread address these matters, as do others here and there. However, finding S&R in real charts in real time takes more than just a couple of posts. But one must understand the nature of support -- and resistance -- itself before he begins to look for it. Otherwise, he will find what he thinks are S&R in some very peculiar places.

Before coming to any conclusions about what “works” or “doesn’t work”, and thus does or does not provide an edge, one ought to keep in mind that a given event -- such as price seemingly finding support or resistance at a trendline (or moving average, candlestick, Pivot Point, Fib level or whatever) -- may be only incidental to what is truly providing that support or resistance.

A fundamental misunderstanding of how "indicators" are calculated and what they're supposed to do can lead to all sorts of off-task behavior. We think we see the indicators indicating something, or not, and believe we have made an important discovery. We then devote our efforts to improving the hit rate and the probability of whatever it is we think the indicator is indicating when our efforts ought to be focused on determining whether or not the indicator is actually indicating what we think it's indicating. In most if not all cases, it isn't.

Consider the virgin being tossed into the volcano: sometimes it results in a great crop, sometimes it doesn't. Maybe tossing her in earlier or later will change the probability of a healthy crop. Maybe two virgins are better than one. Maybe six. Maybe tall virgins are more effective than short ones. And surely age is important. But does the robustness of the crop really have anything to do with tossing the virgin into the volcano in the first place?

The money under the pillow is not evidence of the existence of the tooth fairy, and spring will arrive regardless of whether the virgin is tossed into the volcano or not. (Db)
17.
I wasn't sure where to put this, so the powers that be can move it if they see fit. I put it here for anyone who is just starting out and wondering what it really takes to become part of that elite club of profitable traders.

I lurk on several trading forums. I join a few and make a few posts. One thing that I rarely see is the painful path one took to becoming successful. So for all you beginners here is what becoming successful took. For my fellow brethren that are already in the club have a good laugh.

The markets had always lured me as a kid. I would read the paper and make predictions. Sometimes they were right; sometimes not. Then one day I got that famous commodity-trading flyer, sent my money off and took the plunge.

My first stab at trading was commodities and I started with \$5k in 1991. I was using the strategy as outlined by the guru. The account was gone within a few months. Well that didn’t work. I thought, people do this everyday and make money why not me.

So off to the library. I read every book the Memphis library had on trading and investing. I paper traded the strategies I found while I built my bankroll back up. I learned exits, set-ups, position, expectancy, market psychology, and portfolio management. I soon realized that I was reading the same thing over and over no matter which book I checked out.

Time to build my strategy. I am ready to do this. I bought a new computer, Metastock Pro 6.0, and opened an account with \$30k. Its 1995, and this is my shot. By 1997 I was toast again. The family life went to hell in a hand basket, and I thought I could trade through the difficult times. The result was an account with a balance of \$2500.

Back to the drawing board. Took care of the personal stuff. Lived like a monk raising capital. Worked nights and watched the market during the day. Took a second job on the weekends to raise more money.

Then one day out of the blue, the little red and green candles started to make sense. I saw patterns develop over and over in the same spots. I placed a trade and made a profit. But I had done this before. I removed the MACD from my charts. Placed another trade and made a profit. Maybe I am on to something. Removed the channel indicator that I stumbled across. I could still see the action and new what the MACD was doing and where the action was in the channel without them even being on the chart. I even stopped drawing trend lines.

It was just me and the screen. I planned every trade. I knew exactly when, where, and why I entered and exited. I was patient. I became a predator. Lurking and waiting. I took every shot the market gave me. If it started to go wrong, I got out quick and waited. If the market did not give me an opening, oh well. There is always tomorrow.

By the fall of 1999, I was consistently profitable and have been ever since. For those that are waiting for the sales pitch, there isn’t one. For those that are waiting for me to expose some great secret, well there isn’t one of those either.

What I will give you are a few simple pointers that I learned the hard way. And the sad part is, most will stilll learn these the hardway.

1)Take everything you read with a grain of salt. That includes this post.

2)Never pay for a system. It is just not that easy.

3)If something comes up in your life that is distracting, stop trading.

4)Plan every aspect of your trade down to the smallest detail, and plan for every possible outcome.

5)Develop your own strategy. Don’t let someone tell you that you can’t trade a simple moving average if you truly believe you can.

6)Test the strategy in the market that you will be trading. If you like the results, trade it in another totally unrelated market and see if it still holds up.

7)Paper trading is ok, but there is nothing that truly tests the strategy like hard earned cash.

8)You will have to make sacrifices in order to make it. I still do. In the middle of my learning period I was working 18 hours a day during the week and 12 on the weekend.

9)You are responsible for everything when it comes to trading. That includes stop running, bad fills, limit moves, your PC crashing. I mean everything. See #4

10)And last but probably most important, don’t be afraid of failure. Just do like Edison and go, “Well that didn’t work”.