[DbPhoenix]

Originally Posted by wjrusnak »

Zooming back in, we find that price has done some strange things overnight. Again... 25 seems to be important. Also, we have a sort of cluster f%$# of levels. I suppose the trick here is to watch price like a hawk and figure out which area buyers or sellers like the most. Hopefully we can expect tomorrow will be another session of movement.

What makes this continually interesting as well as frustrating is that the market morphs, and one has to be willing to adapt. Yesterday, for example, waiting for a test of 30 was a losing proposition. The market instead found R at the premkt swing high of 25. Why? Who the hell knows? But premkt highs, lows, and congestion levels have been becoming more and more important for some time now, and if one sloughs that off, or ignores it entirely, he will likely be ill-prepared for the coming session's trading.

[Gringo]

I have noticed tests are done more and more frequently on shorter intervals than 1min. This is making it tougher to get in as those who are waiting for confirmation seem not to be getting it before price goes the other way.

Either one's got to make a decision on the first touch of s/r or it's too late. It's here that TickQ and other volume based secondary support can give some advantage. The s/r is still working quite reliably but the setups that used to work aren't becoming available frequently (1min in my case). In a way it taxes one's patience to wait for that setup or to adapt and get a plan to deal with this touch and go price action which is prevalent now.

[DbPhoenix]

Originally Posted by Gringo »

I have noticed tests are done more and more frequently on shorter intervals than 1min. This is making it tougher to get in as those who are waiting for confirmation seem not to be getting it before price goes the other way.

Either one's got to make a decision on the first touch of s/r or it's too late. It's here that TickQ and other volume based secondary support can give some advantage. The s/r is still working quite reliably but the setups that used to work aren't becoming available frequently (1min in my case). In a way it taxes one's patience to wait for that setup or to adapt and get a plan to deal with this touch and go price action which is prevalent now.

It helps to acknowledge that reversals take place at the tick level. What looks like a V reversal using 15m bars or equivalent may be a double top or bottom using a 1m bar. What looks like a V reversal with a 1m bar may be a double or triple top or bottom on a tick chart. This is not to suggest that one must abandon everything but the tick chart, but it is clearly difficult to see what one isn't looking at.

[MidKnight]

Originally Posted by DbPhoenix »

Beyond that, one can look at how he traded at the levels he anticipated. Even if he nailed the levels, there remain the strategies and tactics to be employed to take advantage of the preliminary work he's done. In other words, one can be dead accurate on the levels but remain flat if he doesn't know what to do with them. If you're happy with the trades you're taking at the levels you've anticipated, there's no need to go further. If you aren't, then this thread may be a resource.

For some time now, I have been generally content with my S/R areas but I think I'm lacking in the strategies to take advantage of them properly. I may have mentioned prior that I was hoping to gain more accuracy in my S/R areas, but perhaps it is more as you said, I need to learn more about devising strategies of how traders are trading when in the determined S/R areas.

Originally Posted by DbPhoenix »

If you're interested in trading price action rather than bars, then it will become necessary to follow price action rather than a summary of it, akin to watching an event take place in real time as opposed to reading a report of it in the daily paper the following day (or in a weekly newsmagazine the following week). If you want to understand the behavior of traders as they approach important levels, then you'll have to observe that behavior. One can watch the little right-hand notch on a bar of one sort or another move up and down in real time until a new bar forms, but this is no substitute for watching price move laterally, transaction by transaction, printing the little hesitations, the thrusts and shakeouts, the feints and fake-outs.

One chart is of course insufficient. You'll need something that shows the forest since all of this is based on accurately locating support and resistance. CVB charts and range charts are both good for providing that context. But trading this broad context will lead to a lot of false starts and missed opportunities. When it gets down to actual trading, you'll need something that has a much narrower focus, preferably with separate volume bars (since these show activity). I suggest a time bar of some sort along with a 1-tick chart. The time-bar chart will keep you focused on important swings and pullbacks and congestions as well as the overall trend and prevent you from getting distracted by what can be unimportant activity on the tick chart (unimportant being anything that isn't taking place at an important level or that isn't interfering with the trend). Whether this is 5m, 3m, 1m, or 30s is entirely up to you. The tick chart will show you, trade by trade, what traders are doing, especially and most importantly as and when they approach the levels you've anticipated.

Other than these three basic charts, you can add additional broad context charts. You can also add charts of other indexes. You can also add charts of various breadth measures, if you have them. But the more you have to look at, the more difficulty you'll have in reaching a decision and the more likely you'll miss the trade. Therefore, I suggest that you keep it as simple as possible.

Good post that makes a lot of sense. I'll do some study on the 1 tick chart over the next couple weeks. My initial fear with viewing the raw T&S stream in a non-summarized form is that I will over trade and envision too many scenarios happening. Know what I mean? Summarized data (some type of bar) helps minimize this. I do make my trade decisions intra-bar though. Maybe, after 5 years of this game I have matured and somewhat contained the overtrading beast that used to dominate me on small time frames. I'll keep you posted of this over the next couple weeks if that is true

With thanks,
MK

[DbPhoenix]

Originally Posted by MidKnight »

Good post that makes a lot of sense. I'll do some study on the 1 tick chart over the next couple weeks. My initial fear with viewing the raw T&S stream in a non-summarized form is that I will over trade and envision too many scenarios happening. Know what I mean? Summarized data (some type of bar) helps minimize this. I do make my trade decisions intra-bar though. Maybe, after 5 years of this game I have matured and somewhat contained the overtrading beast that used to dominate me on small time frames. I'll keep you posted of this over the next couple weeks if that is true

With thanks,
MK

One of the chief reasons for trading S/R that are determined by AMT is to eliminate -- or at least severely curtail -- overtrading. If you know, for example, that you're going to look for shorts at or near R, then you have no reason to jump into what appear to be good shorts (no pun intended) that show up ahead of R.

Similarly, using a tick chart can also help eliminate or curtail overtrading, assuming that you're very clear on what you're looking for and that you have the discipline to wait for it. You don't have to guess as to what traders are doing as you might with, say, a 5m bar. Nor do you have to wait for anything to "close".

For something more concrete, you may want to look at, read, study Wyckoff's Studies in Tape Reading, attached to the Introduction. Though many interpret it as a scalper's manual, it isn't. Either way, it will provide specifics of what to look for with regard to congestions, probes, breakouts, rejections, etc. (just don't get too distracted by the details of the stocks being traded -- since most no longer exist -- or how prices are being manipulated or the comments regarding bar charts vs figure charts; focus on the principles of price movement being addressed).

[MidKnight]

Cheers DB. I understand what you are saying with how S/R can help curtail overtrading, but when I have a zone that is say 80+ ticks wide and we end up spending a lot of time in that area (say 30-60 min), then I end up taking many shots at the decent reaction I am anticipating. In my past, small detailed summaries have led me to overtrade. This 1 tick chart will be the smallest I have tried, so I am curious to see if I am still affected by this.

As you say, if you have something very clear to act upon then it less of a concern. I've failed at this so far to date. Five years ago my daytrading started out exploring objective and systematic means to consistently make money from. I struggled along this objective path for several years. It wasn't until I let go of trying to be so exacting and objective that profitability started to turn around for me. So while I have failed to define clearly what I need to see to act upon, I do have loose general guidelines....I would love to get more objective because that is sort of built-in to my nature, but also appreciate that it didn't work so well for me in the past. I'm always open to re-exploring things that didn't work in the past though.

HSI trading today. Because you guys had a large move down today, we will probably do a large gap lower. I'm expecting that to be somewhere around the weak support zone on the chart.

[wjrusnak]

Good thing we prepared for the lower levels yesterday It seems like the new range would be 1690 to 1665, although 1680 seems to be providing some decent R. A long off 65 could be very possible, but who knows where we will be at open. I would assume that we should be seeing some buyers coming in soon, but they already failed miserably at 1730, so who knows...

[MidKnight]

I was wrong about the magnitude of yesterdays gap down open. It ended up being a massive 650 pts lower, making new lows for the decline since mid SEPT. The move up going into the SEPT high does have small congestions (not shown on my chart), but it was such a fierce up move, that nothing obvious really stands out to me. Because of that, I haven't been using any of those areas during this decline. On this attached chart, I have labeled a 'weak zone' more of as a lower value area type of thing. I don't see anything extremely obvious other than what is marked on the chart....

On a side note. I have been studying the 1 tick chart and was able to study it in real-time yesterday. Good news is that I didn't over trade I also found it added a new 'feel' component because the pace and the spread could be felt better.

Have a good weekend guys. Here's my chart going into Monday.