[Marko23]

Originally Posted by Marko23 »

EUR/USD in 15m and 3m chart.

Short in 3m chart

Another 3-day low, but the Short signal was only visible in the 3m chart and I decided to trade the 15m-chart for this training period.

[thalestrader]

Hi Folks,

here is an interesting (though Blowfish would likely say esoteric) little pattern that I see often in the currencies and also gold. Price makes a large move down, then a choppy little rally, followed by another leg down. At this point, it looks like a potential ABC. However, typically, one expects A=C, but in this case, C has extended further from the B top than A had from its top. What I have noticed is that if your draw a trendline beneath the B swing lows, and measure from the trendline break, a good measured move target can be found. In other words C as measured from the trendline break = A. This is not predictive, and it does not always hold (if this decline is the real deal, then a test of the nearly year old range may be in order, measured moves be darned) If I were still short, this would offer me a possible profit target. I would also be interested if a 123 develops near the level of the green horizontal line. The Blue lines are equal, and measure the extent of the first leg down (A swing). The back line is a simple trendline drawn along the bottom of the reaction rally (B swing). The second blue line is equal to the first, and measures downward from the black trendline break.



If nothing else, if gives me something to watch while waiting for an opportunity. An actual A=C measured move would have occurred had a sustained rally embarked from the penultimate low visible in this chart. Price does appear to be possibly etching out a small ending diagonal as well. Of course, small diagonals sometimes grow quite large. No need to jump the gun, as the next opportunity is never far away.


Best Wishes,

Thales

[thalestrader]

I added two sets of thin black trendlines to mark off the manner in which this decline, though of sizable extent, is not packing the same momentum as its sister did yesterday. The solid lines show a larger movement with declining momentum, and the dotted lines show further loss of momentum the further price travels. None of which is to say that it may not catch a second wind and collapse still further, but for now, this down leg has been less robust than the initial leg down, and a decent reaction rally or even outright reversal may be immanent.



Best Wishes,

Thales

[Marko23]

ADD: may become a 2b

ADD: 3m timescale

[thalestrader]

Current view of the EURJPY ...

Best Wishes,

Thales

[thalestrader]

Pound hanging tough while the Euro is getting pounded ...

Best WIshes,

Thales

[Marko23]

EUR/USD waiting for 3

ADD: Reset

[thalestrader]

This may be the most important post I have made in this thread from a technical perspective.

Originally Posted by MidKnight »

Here are just a couple chosen at random. Now one might say but if one went down to a lower TF there was probably a 123. While that may be true on virtually any 123, even if one had to go down to the tick level, I don't see how that thinking is practical and could easily steer most traders to overly focusing on the micro 123s, which IMHO will lead to overtrading, frustration and probably net loser overall. It's not much different than me saying every reversal is proceeded by a bar break. It's true, but is it practical and easily applied profitably? (non-rhetorical). However, I do wish every reversal was a 123 that I could recognize as opportunity

As you are disputing of my assertion that all trend changes start with a 123, let me repeat the entire context of that assertion before we proceed to examine it further:

Originally Posted by thalestrader »

I do not see how this approach cannot provide an edge. Certainly, context will sharpen the edge. But even on its own, so long as it is uniformly applied as respect to the degree of the swings, how can it not provide an edge? Every trend change starts with one.

Let us keep at the forefront of our minds the notion that like swings must be analyzed with like swings. The degree of swing must not be left out of the mix.

I am starting with your second chart (it just worked out that way).

Here is the second chart as you posted it:



And here is what I see:



In this chart, I see two clear 123 short entries. The first would have made it to both targets, while the second larger degree would have made 50% PT1 with a BE stop (actually a stop on reverse to long at about the level of the long dotted magenta line).

Blue line entry, red line stop loss, move to BE at the magenta lines (1.27 extension) and take profits at the green lines (1.618 and 2.618 for the first example and the 1.618 and a stop and reverse at approx. the 1.27 in the second).

Also, for what it is worth, you do not need a smaller time frame to see the initial 123 off of the top - Just use what you know about how candlesticks are constructed and you will find a 123 there. I do not mean to imply that I would have traded that little top, and I am certainly not going to recommend anyone else here tries it either, especially if he or she is new to this type of trading. But it is there, nonetheless.

Now, here is your first chart as you posted it:



And here is what I see:



I think you'd agree that without dropping to a lower time frame, there are two visible 123s of like degree shown at the double tops in this chart. The first would have resulted in a break even effort, the second would have traveled to both PT's. If you go back through this thread, I used to post trades like these often. I take them every day (well, every day that such an opportunity presents itself). I no longer post them as I do think that many folks here appreciate the necessity of uniformly applying this approach to swings of like degree. So I try to post only those opportunities that are at least a degree or more larger than these. For example, I also see on your first chart this larger short opportunity, which also traveled to both TP's:



Now, here is your final example:



And here is how I see it:



A break even effort, but an opportunity nonetheless. In this case, I miss out on PT1 and PT2 due to my MM guidelines. But, I also see this opportunity:



In this case, a larger degree long entry presented itself, and within that larger trend, a smaller degree 123 gave an early entry opportunity for the aggressive trader, and both of these degrees are larger than the degree shown at the very initial change from down to up.

Every single trend change of every degree exhibits this pattern. It does so by the very definition of a "trend." An up trend is a series of higher highs and higher lows. There cannot be a series without a first instance. A down trend is a series of lower lows and lower highs. There cannot be a series without a first instance. Unlike others who assert that volume, rate of change, venus, mars, or mercury leads price, I have always here looked to nothing other than that which is contained within itself: Price itself.

I read an article in SFO this month where the author uses, of all things, the example of Plato's Cave, and he asks if price is not the shadowy false images on the walls and reality is some larger thing called trend? He asks "[c]ould price be the illusion and some force of nature we call "trend" be reality?" He misses the point that price and trend are inseparable! He commits the same error most, perhaps, 95% of all folks commit who attempt to trade: He tries to reduce price further than it can be reduced. And price, like people, cannot be reduced without distortion and damage. Trend and price are one. You cannot cleave the body from the soul and still have a living, breathing human being. You would be left with nothing other than a dead shell. And what can that dead shell tell you of the loves and hates and dreams of the man or woman who had animated it? Nothing at all.

Likewise, you cannot cleave trend from price. And if you cannot cleave trend from price, you cannot disregard that trend exists at all levels, diffuse through price action. When I hear someone say "I could have seen it if I had dropped down to a lower time frame, I know that that person has not yet grasped price movement. He is watching bars or candles, not price. I have said many times that I do not need a 1 minute chart to see a small degree 123 so long as I am watching price live. I do not even need a chart. I just need the DOM. If you remove considerations of trend, which by necessity includes considerations of the degree of trend from price itself, what can price tell you of what it is doing and where it is going? Nothing at all.

Price is its own leading indicator. It is so because it is inseparable from trend itself. And it is by anticipating trend correctly that we profit, (and by cutting our losses short and quick when we do not anticipate it correctly).

Every trend change if accompanied by a 123. The problem for the trader is to choose the degree(s) of trend he or she is comfortable trading, and to learn to recognize and distinguish these degrees from one another. This is a process that is necessarily coincident, as in order to decide the first, one must first learn the second, and by learning the second, one will come to know the first.

A good example here among thread participants would be to compare daedalus and myself. Daedalus obviously likes to trade a degree of trend that is consistently smaller than my favorite. He knows how to recognize changes in his degree of trend. He is taking trades at levels that do not even register many times on my radar as anything more than perhaps a possible first swing off a low. He is taking profits, and I am waiting for a pullback to a possible higher low that will get me long on a subsequent break to new highs. Two different traders trading the same approach but at different degrees of trend.

Every change of trend has a 123. In order to capitalize on what I do beleive is an inherent edge to trading these 123's, it is imperative that one learns to distinguish degrees of trend from one another. Along with that, as Marko has warned several times, you must not only learn to distinguish degrees of trend from one another, but you must not mix swings of different degrees when planning your trades.

It is one thing to trade a 123.

It is quite appropriate to trade a 123 within a larger degree 123.

But you want to avoid at all costs trading a 123.

Best Wishes,

Thales