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Old 05-14-2011, 02:05 PM   #1

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Wink What Really Works for Technical Traders

I read somewhere on this site that technical analysis doesn't work for day traders. It sounds like most traders are having a hard time discerning what's important and what's fruitless with regards to intraday signals. I am starting this thread to cut through the clutter and tell you how the markets can be traded in ANY time frame.

In this lesson I will explain the two most elementary technical signals on the chart: price rejection and price acceptance. I'll bet that most traders have a hard time determining the general intraday trend and I believe this is due to your dependence on ultra short term charts, such as 1,2,3 or 5 minute charts. Moving out to 15 minute and 30 minute charts one can see things that are basically invisible on 1-5 minute charts. What I like to see on a 15 or 30 minute chart is a hammer or doji candlestick following a consolidation or range breakout.

What is the psychology behind the hammer? Price moved from the breakout zone to some new level. Then price then retraced towards the consolidation zone and was rejected (hammered) back into the direction of the new trend. The breakout of that hammer bar IS THE ABSOLUTE SAFEST BET YOU CAN MAKE!!! Why? Because if the market just got hammered away from a price level, what do you think the odds are that price will immediately return to that level? Not very good odds at all.

The doji is similar in nature because it still shows price rejection on a lesser scale, but also vividly displays the mini-consolidation which leads to a continuation move. And both breakouts CLEARLY DISPLAY WHERE TO PLACE YOUR PROTECTIVE STOP, at the other end of the hammer or doji bar following the breakout of that bar! Since the number one rule of trading is to always know your risk BEFORE you enter a trade, this is the best indicator in trading. (It doesn't hurt to have MACD confirming your trade direction, but it is not imperative). Just use the 20 period moving average as your trend filter and NEVER trade against the trend on the 15 minute chart.

Price acceptance is when the market moves to a price level that previously turned the market around but this time doesn't, thus indicating that the market may still go further in its present direction. This is most useful when the market is searching for support or resistance after a prolonged move and you are trying to decide whether to exit or add to your position. I'll leave trade management for another discussion.

Hope this helps!


Luv,
Phantom
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Old 05-14-2011, 07:52 PM   #2

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Re: What Really Works for Technical Traders

  • How many trades are you making?
  • Can you post a couple of charts?
  • Are you exclusively trading just this pattern?
  • Are you exclusively trading candlestick patterns?
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Old 05-14-2011, 11:52 PM   #3

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Re: What Really Works for Technical Traders

Hi,

I am a newbie. Please post a chart. This will help me immensely.

Thanks,
Prem
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Old 05-15-2011, 01:32 PM   #4

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Re: What Really Works for Technical Traders

Quote:
Originally Posted by sspremj »
Hi,

I am a newbie. Please post a chart. This will help me immensely.

Thanks,
Prem



This is the July Beans showing a perfect consolidation breakout followed by a hammer. Notice the "rattail" that helps identify the hammer. See if you can identify the other two hammers in this down move (both excellent places to pyramid your position).

This is only one of several breakout systems I developed and trade but I'm able to get in on several sustained breakouts each week with this method in just the currency futures alone.

Hope this helps.


Luv,
Phantom
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Old 05-15-2011, 08:23 PM   #5

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Re: What Really Works for Technical Traders

Quote:
Originally Posted by Tradewinds »
  • How many trades are you making?
  • Can you post a couple of charts?
  • Are you exclusively trading just this pattern?
  • Are you exclusively trading candlestick patterns?
I promise to provide enough fodder to get you profitable if you aren't brain-dead, but I refuse to spoon feed you. Fair enough?
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Old 05-15-2011, 09:27 PM   #6

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Re: What Really Works for Technical Traders

Quote:
Originally Posted by Tradewinds »

How many trades are you making?
Can you post a couple of charts?
Are you exclusively trading just this pattern?
Are you exclusively trading candlestick patterns?
Quote:
Originally Posted by phantom »
I promise to provide enough fodder to get you profitable if you aren't brain-dead, but I refuse to spoon feed you. Fair enough?
It's a deal. Thank you.
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Old 05-15-2011, 10:01 PM   #7

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Re: What Really Works for Technical Traders

Promising to "make" a person profitable is my opinion, a reliable sign of a scam...

I will leave the legal issues aside (there a couple that pertain but then it all depends on how much some poor person loses before they talk to an attorney).

Best of luck to all

Steve
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Old 05-16-2011, 02:23 AM   #8

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Re: What Really Works for Technical Traders

Well you can lead a horse to water but you can't make them drink. Of course it's not surprising horses are wary if 99% of pools are contaminated.

Having said that trading the first pull back after price has tipped it's hand and then 'confirms' through subsequent price rejection is a pretty firm strategy. Arguable you need to assume a bit more risk depending if you place the stop under the area that gave birth to the move or under the area that price was rejected (the hammer), I guess the latter keeps things tight.

It will be interesting to see where you go with this. There have been a couple of threads here that have shown a very similar approach in reasonable detail. The big thing they had going for them was that they showed trades before they trigger rather than in hindsight thus giving people confidence that the approach works in 'real time'. Still it's early days yet, so good luck with your thread

One thing you said Then price then retraced towards the consolidation zone and was rejected this is the key imho, leaning too heavily on specific patterns or candles ultimately will inhibit ones understanding of price action and the underlying supply and demand equation that causes the pattern/candle to manifest itself in the first place
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