Price Surge/Continuation with No Pause

[Tradewinds 12]

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 12]

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 12]

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 10]

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 12]

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 12]

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. :rofl:

[SIUYA 11]

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 12]

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.

[SIUYA 11]

I dont believe in prediction.....but I do believe in anticipation.

 

However, context is king, and this is key if you want to make a prediction. eg; trade with the trend, look for moves that seem to break the current trend and THEN reverse....these usually go the hardest in my book as they catch people.

[Tradewinds 12]

if you want to make a prediction. eg; trade with the trend, look for moves that seem to break the current trend and THEN reverse....these usually go the hardest in my book as they catch people.

 

I know the price pattern that you are talking about. I would call this a retracement. It originally looks like a reversal, but it isn't. But I am looking for something more in depth than what you are telling me. At the very least, I'm looking for price levels that break or fail to break. Even on a retracement, there are price levels and price behavior that succeed or fail, are weak or strong.

 

If I try to catch a reversal, right at it's extreme, I'm immediately looking for a stronger move in the reversal direction. If that doesn't happen on the very first close in the reversal direction, then I just exit, or reverse back.

[ilazarte 10]

Prediction? Forget it.

Should you take profit? Wrong question.

 

It sounds like you are in serious need of a trading plan.

1. Prediction is basically impossible - even trading systems that focus on prediction alter them after them after the fact because its so frequently wrong - looking at you Eliott Wave... Anyone that deals in predictions is going to get destroyed in the stock market - the most damaging form of this would be intraday trading. In general, your predictions will be low accuracy, and executing more trades regularly will compound those mistakes and blow out the account.

 

2. The question of whether or not you should take profit depends on your money management strategy/trading strategy. Are you high accuracy low gain per trade kinda guy, or a low accuracy high gain once in a while? There's no way you will be high accuracy / high gain per trade or else you would be a zillionaire already and this thread would be irrelevant. You have to figure out which type of money manager you are, and then work from there as to the how much profit is enough to take it from.

[Tradewinds 12]

Are you high accuracy low gain per trade kinda guy, or a low accuracy high gain once in a while?

 

I would never trade a low accuracy strategy. And my gains are low. My strategy accuracy is good. It is getting better all the time.

[Tradewinds 12]

Prediction? Forget it.

 

I think that it is possible to predict price action. If traders are not predicting price action, then what are they doing? Just entering orders at random? No. Unless a trader is truly entering an order absolutely, totally randomly, then they are making a prediction. There isn't any real difference between prediction and anticipation.

[Tradewinds 12]

Should you take profit? Wrong question.

 

. . . . . .

 

2. The question of whether or not you should take profit depends on your money management strategy/trading strategy. Are you high accuracy low gain per trade kinda guy, or a low accuracy high gain once in a while? There's no way you will be high accuracy / high gain per trade or else you would be a zillionaire already and this thread would be irrelevant. You have to figure out which type of money manager you are, and then work from there as to the how much profit is enough to take it from.

 

I take profit when the market decides to stop moving in my favor. It has nothing to do with whether I'm trying to make low gain or high gain. The market decides what to give me. The market decides when I'm going to take profit or not. I take what the market gives me. I don't try to tell the market how much profit I want, or where I think it should go.

[phantom 16]

RE: signs of impending price surge

 

I trade consolidation breakouts in trending markets. The best breakouts occur after the market has broken out against the trend and then reversed through the consolidation range and broken out in the direction of the trend. (False breakout > reversal).

 

Lots of players get trapped in these situations and must liquidate their positions when the market reverses. This oftentimes leads to price surges/no pause continuation moves.

 

Furthermore, the JY contract is prone to 2-3 day channels that, upon breaking out, lead to amazing moves. The longer the channel, the bigger the follow-through after the breakout.

 

See for yourself if what I am saying is true.

 

 

Luv,

Phantom