Sledge

Excellent start to the thread. trader273: I know that the norm is to look for the S/R points, and I agree with you 1000% that it is imperative to locate them and utilize them in trading. BUT I would really like to discuss the candles in the thread individually if possible. This exercise may be harder than people think it will be. What I would like to get too is analyzing each candle and then taking a grouping of the individual candles to collectively see the bigger picture. So as an example say we just take 10 candles to start. We analyze the 10 candles 1-by-1, then at the end of analyzing all 10 candles individually- what do they tell us collectively? daedalus: Yes I actually trade hourly and Daily candles. I know the larger the timeframe- the better the signal. For our purposes though, this should be fine to use a 5 min, hour, 4 hr or Daily chart. Analyzing the meaning of each bar in context can be accomplished on any timeframe. Aaron

I would like to start a discussion if I may regarding Price Action at a SINGLE candle perspective. Dissecting the bars so to speak (I know Db does this with much skill) This will be very "Candlestick 101" but I would like to discuss this from a different perspective than what appears to be out there currently. Hopefully, after my post- you'll get the idea of what I'm trying to accomplish: I have searched and searched without any real fruit of trying to find a very basic discussion about reading single candles. There are a million sites dedicated to "candlestick patterns"-- but that isn't what I'm trying to accomplish. A better term would be "Candlesticks in Context" As an example: If you see a Dragonfly Doji form at a market top- it is a strong bearish signal. That exact same candle (size, spread etc) formed at a market bottom- is a very strong bullish signal. Obviously, this is the most elementary example I could use to make the point. My ultimate goal is to learn to read SINGLE bars price action as they develop and/or close for them to "speak to me." As another example a nice flat row of doji's and spinning tops at a market bottom- the "sum of all the bars" equals accumulation. Hopefully I am explaining myself appropriately. What I would like to get to with this thread is: 1. Looking at Single Bars and discussing individual bars and their psychology IN CONTEXT 2. BUT BUT BUT- keeping in mind of the greater "landscape" of the chart. I'm not looking to focus on one single bar necessarily to trigger trades in this thread (there is a lot of discussion about that on the web) I was even thinking of going so far as to make up some type of "flash cards" it sounds like "trading 101" type stuff, but I think it would be beneficial- Just to drill myself- staying with the Dragonfly Doji example. If someone popped me that card and said, "What's your next move" the correct answer to the "card" would be "Where on the chart did it form?" It is sort of taking the very basics of price action and going deeper into it at the same time. You see a Spinning top form very quickly off a recent top? That means profit taking is occurring etc. See a down candle with a long tail just one or two bars out of the trend pullback- most likely that is the professional $ moving in to "put on the brakes" - but the downward trend most likely will continue- it is a "warning bar" of sorts- it is this type of discussion I hope to spark. Just an intro Chart to show you what I mean: A: You see just prior to it being a Wide Spread Bar with Buying on the bar, this bar (Bar A) shows another attempt to reach lower and failure. After a few bars of wrangling- you see the up move. B. Now this isn't Identical but at bar "B" you have a very similar bar to Bar "A” But now at a Market Top- this bar has a completely different meaning and it is a "warning sign" of impending downward movement to come. We know this because of the preceding two bars show effort without results. C&D: These bars show the "brakes being applied” These are not bars to short without further confirmation- they are bars that if you are short- you would pay attention to as a warning to tighten up stops or be ready to close your position soon. Hope the text plus the chart assist in showing what I would like to try and discuss. Aaron

fs- If I get the chance to ask, I'll weave it in there- because I think it would benefit not only your mind but mine and others here as well. I didn't want to scare him off by having a laundry list of questions to pelt him with on our first call. I can only hope that this will pan out to be a nice, casual, working relationship- instead of a one-shot-deal "interview" type relationship. Aaron

I spoke with him last night via phone. It was a very nice intro conversation. He spent the majority of the conversation asking ME questions. i.e. How do I trade, what timeframes, how is my mental discipline etc. We spoke about trading hours and how I tend to approach these markets, what currency pairs I favor. I balanced that with the part of the conversation that I am a retail trader and don't have to accumulate massive lots of position as he does, which I feel gives me an edge of my own. Granted the payout for him is much greater- but I don't have the capital behind me to aquire 500 lots of said instrument. To answer a question from above. He was a pit trader but has now moved to his home office to trade. I hope to speak with him again about how he transitioned.. although I think that IMO- if he has been a pit trader, their has to be a subconscious part of him that when he sees price action transpire either by bars or ECN "ladder" I'm sure that he can actually "hear" the pit roaring in his mind and can almost transcend back to the pit mentally-- something folks like us that have never been pit traders will not have the benefit of. He praised my ability to have a plan, sticking to the plan and also my statement of "I take what the market gives me" He noted that "I found personally that when I had an "opinion" of where price was to head next- I lost far more money, than just trading what is in front of me" Thus, this is a confirmation of the statement "Trade what you see- not what you think!" Overall, for me personally it was an outstanding hour spent. I didn't dig deep into his trading strategies, or get to the real nitty gritty of things. I hoped to accomplish in the conversation that what I have laid out as a trading base- is indeed a viable and suitable approach. He saw no holes in my approach to the market- which was a good feeling. He took my cell number and I'm sure he and I will be in touch again. He said that anytime I had questions- to give him a call. So this post may end with To be continued........ Aaron

johawk- I appreciate the insight. That helps calm my nerves a bit. I'm sure most people can understand why someone would be nervous. It is a big thing. I don't want to ask questions that may seem as if I'm trying to get the keys to unlock the market (as I know their aren't any) or act as if I am probing to "copy his work" in order to do the same. That would never be my intent. As I have learned in this business- one man's edge is another man's mystery. Depends on how the trader is wired, risk tolerance, confidence and to be blunt- balls! I do have an extreme passion for the business, I'm sure that he will hear it come across in my excitement and conversation. I'm sure my buddy has filled him in as well (my trading story that is) He'll already be aware of where I started, stories of my trials and tribulations, and my gumption to fight through the learning process to get to where I have landed to this point. But such a simple paragraph- helps a lot. The 3rd grade lesson of "Shut up and Listen" will hopefully serve me well. Thanks, Aaron

All wonderful ideas gents. If he is friends with my buddy, I think the conversation will go pretty smooth. I'm just a bit nervous to ask him something that may be out of line or inappropriate. Between him and I, our experience is vast. Not to say I'm any slouch- but this is big time. I have already toyed with the idea of talking with him about heading to Chicago for just one day to "experience it live" Especially, since currencies are traded there and their is no "pit feed" for it available. Bf: Well I got the balls to ask no doubt (born and raised New Yorker) so that isn't an issue. Keep em coming. I think the most logical approach is to write down some questions and ask them. Who knows, I may pull all of them together and he may be very forthcoming with how he trades, what he trades etc. I will not be surprised at all if this was the way he was as my buddy said he is pretty laid back and not arrogant about what he does and the success he has gained. Aaron

GJ- Thank you sir, so basically, since I'm not trying to hide a 5000 lot accumulation over time, I'm just trying to get my measly 2.00 lots filled and sold off when I'm happy with my take.. utilizing normal entry methods as I always have should suit me just fine. Your explaination helps me quite a bit. THANK YOU! Any tips on reading the "market depth" that they give? Personally, I'm not conerned with the fact that 10 ticks away their are a ton of folks are wanting to by (because 10 ticks the other direction folks are looking to sell too) Maybe being new and naive, this is an "ECN Rookie" oversight and the "ladder" as some call it, when lined up well- makes the trade much more attractive.. so feel free to "let me have it" if this bit of information is being paid "less mind" than it should be. Thanks for your insight! Aaron

I have a wonderful opportunity that has been presented to me. I have a great friend of mine who went to college with a buddy of his that holds a seat on the CME. My friend spoke with him and his connection is expecting a call from me to chat. The problem.. I'm not sure what to ask. I'm not sure how to approach this opportunity. This is about the same as if someone got to meet a rock legend or their favortie artist. What would you say to someone who you feel has such skill and talent? Someone who is wildy successful in a field that you hope to attain the same level of skill and talent one day. I know my way around the market, but I'm not some trading god, by any strech. I still have things to learn, I still have things to understand.You wouldn't want to act like a tool- asking stupid questions, acting like a silly star-struck school girl. So my question to the masses here is this- how would you approach it? How would you utilize the opportunity to the fullest? It is a good problem to have. But I feel I have been presented with a wonderful opportunity and I don't want to blow it. Aaron

That is very true. Being in control of all your emotions is key in trading the market. Perfect Example. You perform your technical analysis and you have your "trigger" that you have waited to see for hours (patience) You are now in the trade and are Long at say 1.5000. Your analysis forecasts you to look for exhaustion and possible closing out at 1.5100 for simplicity sake. So the trade begins, it immediately goes up 10 pips, you are thinking "good" no problem, then you get 20 pips.. good good, but then it drops back to 10 (Fear of + trade turning negative) you start to panic a bit. You open your manual close and are finger on the mouse. It heads back to 20 pips up "Whew" you think. Then it goes to 30 and you think "Good" We then get to it being up 75 pips and a stall. You are +75 Pips but are shooting for a hundred. Greed is present in the mind for the 100 pips, and fear is there for 0 pips. And the battle begins hard. Do you close out? Do you band money and be happy? Do you let it go and have faith in your analysis? Or are you so blind that you SWEAR you'll get the 100 pips, but the market is telling you "Hey buddy.. 75 is all we got right now- take it or lose it!" These are the things that matter most- these emotions to learn to "keep in check" Aaron

GJ- One thing I have learned is not to pigeonhole brokers without the "retail" tag (Thanks Andre) There are reputable brokers out there, and their are houses that my account balance doesn't let me play in. Thus far the ECN's that look promising are: HotspotFx IB MBT/EFX Those I can enter with my account size. But I know we are getting off point, My real question is if I can get the basic differences in trading itself between the "bucket shop" world and the ECN world. Maybe if someone here has traded with a bucket shop and has graduated to an ECN, that would be helpful in giving me insight between the two. One of my good friends and fellow traders- is assisting me online, but he said he has always traded an ECN platform- so he has no idea about the way an MT4 platform runs or how to place bids etc on it. Do you have any links of the places you mentioned for me to scope out? Thanks, Aaron

fs- Thanks mate. I actually have gone to the CME site and tried in vein to figure out that mess. Everytime I think I have someplace I can DL and trade a demo ON the CME, you get sent to one of their preferred "brokers" which is fine, but I'm thinking- can't I just trade electronically on the CME? I remember probably a year ago I posted the phrase "I KNOW how to trade, I know how to make money in the markets.. but trying to de-tangle the broker web in Forex or Futures or whatever is a nightmare!" You have Market Makers, you have ECN's, you have Tier 1 and Tier 2 houses, you have the Globex.. no wonder noob traders want to kill themselves. Trying to not get taken to the cleaners by a sleazy operation and finding a good solid home to trade- is HARDER than actually learning how to frickin trade! :crap:

Flojomojo- Thanks for your reply. I have to tell you though that "Figure" in the screenshot I snagged off the web- it isn't mine (I'm just demo'ing it and I think they started me out with $75K) As far as the quoted part above. This is exactly what I plan to do, but I am having issues with trying to get the order entry down. As an example- I closed or "flattened my positions" on Monday. Monday night I get a pop-up telling me that all my postion "winnings" were deposited into my account and they were wiped from my "active" screen ( this is weird to me, I got freaked out that I liquidated them at profit and they still sat there in my "active" screen) See MT4- when its closed, it disappears from your active screen directly into your history. Just a slight change to get used to, but its cool. My reasoning for going ECN is that Market Maker broker games are crap and I've had enough. I had a nearly $900 position I wanted to bank money- and they wouldn't let me out. I left the "close order" up and "processing" overnight- when I got up- still not closed out. It was down a few hundred bucks though, and when it popped above to + $250, I bagged it (they were willing to let me close out the $250) and then called to raise holy hell about it. Platform was live and connection status was up and functioning. The chart showed them gapping up (possible S/L hunting) and I caught them in the act. Anyways, that is another topic for another day. Thanks for your insight. All others please feel free to chime in and lend your opinion as well. Thanks, Aaron

I believe you can indeed know that you possess an edge. Casinos know they have an edge and as you said mathmatically, they have their edge- but psychology wise- traders can have their edge. As Casinos know their are only 52 cards in the deck, good traders know that fear and greed of other traders will come into play. If a trader learns to read the other players moves- it most certainly gives you an edge. Knowing how the masses move, how they tend to think and the overriding emotions of fear and greed in the marketplace- they are a distinct advantage over someone who is unaware of what really drives the markets. My .02 Aaron

Alright Ladies and Gents. I have been an MT4 (Metatrader) trained trader my entire trading career. With some prodding and suggestion.. it is time for me to graduate from the Bucketshop to the ECN world. For reasons of a more level playing field, better commissions, better- well pretty much better everything! I have done demo's on various ECN's over the years, and each and every time- I got overwhelmed and went running back to what was "familiar" and "safe" But with severe issues with my Market Maker broker, now cropping up. I must make the leap from the bucketshop to the ECN world. I am currently testing a HotspotFx Demo platform. Layout looks nice and I can always get my charting elsewhere- so that is no longer a concern as it once was. See picture below that seems to help also. My questions are fairly simple. Coming from a Market Maker "world" where my broker is on the other side of my trade and has to be, to a world where the rules are a bit different.. I'm a tad out of place here. Things like "flattening my position" or reading a screen with order flow on it (instead of a bar chart on a platform with no indication of how many lots are being desired in any direction) will take some getting used to. Can anyone out there give me the very basics of this new world for me? Anything is appreciated- something you may think is extremely basic- may turn a light on for me- it is like someone asking in forex "What is a pip" the pip is the basis for everything you do- don't know what a pip is- you'll be a short lived trader. I know when people step into the forex world- it feels the same if they come from futures or equities, they get into this "pip-spread-how the heck did I open a position and be in the hole instantly-shock" I would like to look at this screen (posted above) and fully comprehend what I am looking at. Thanks! Aaron

I had not heard of this. Thanks for the link, I signed up to see what it is made of Aaron

Very well put definition of "Edge!"

They also do their clearing through FXCM- which was a double whammy. I demo'd their platform and when they proudly sent me an email that they were now clearing through FXCM- I said "Thanks but no Thanks" Ended my demo. Could we see them go the way of the bucket shop? My Brother in Law has an account with them (reason for doing the demo) Not my cup of tea with these two issues popping up.

Focus a lot of your Optional requirements on classes in Psychology and Economics and you should have a good basis for trading. I have a B.S. in Marketing and was required to take Psychology and a lot of Economics- I have to say those classes have served me in greater benefit than my Marketing Degree in life thus far!

Hanz- If you are highly skilled with your Risk Reward Ratio/money management/discipline you would be able to start with less. If you are not, I would start with more capital. Example you say: Sure- If you enter a trade, set your S/L upon entering at a determined percentage of your account size or dollar amount, and then you have the ability not to move it or tweak it- then you can start with less- if not, I'd start with more. Aaron

Stage Six: Mastery (also from Vad Graifer) At this level, the trader achieves an almost Zen-like trading state. Planning, analysis, research are the focus of his time and his effort. When the trading day opens, he's ready for it. He's calm, he's relaxed, he's centered. Trading becomes effortless. He is thoroughly familiar with his plan. He knows exactly what he will do in any given situation, even if the doing means exiting immediately upon a completely unexpected development. He understands the inevitability of loss and accepts it as a natural part of the business of trading. No one can hurt him because he's protected by his rules and his discipline. He is sensitive to and in tune with the ebb and flow of market behavior and the natural actions and reactions to it that his research has taught him will optimize his edge*. He is "available". He doesn't have to know what the market will do next because he knows how he will react to anything the market does and is confident in his ability to react correctly. He understands and practices "active inaction", knowing exactly what it is he wants, exactly what it is he's looking for, and waiting, patiently, for exactly the right opportunity. If and when that opportunity presents itself, he acts decisively and without hesitation, then waits, patiently, again, for the next opportunity. He does not convince himself that he is right. He watches price movement and draws his conclusions. When market behavior changes, so do his tactics. He acknowledges that market movement is the ultimate truth. He doesn't try to outsmart or outguess it. He is, in a sense, outside himself, acting as his own coach, asking himself questions and explaining to himself without rationalization what he's waiting for, what he's doing, reminding himself of this or that, keeping himself centered and focused, taking distractions in stride. He doesn't get overexcited about winning trades; he doesn't get depressed about losing trades. He accepts that price does what it does and the market is what it is. His performance has nothing to do with his self-worth. It is during this stage that the "intuitive" sense begins to manifest itself. As infrequent as it may be, he learns to experiment with it and to build trust in it. And at the end of the day, he reviews his work, makes whatever adjustments are necessary, if any, and begins his preparation for the following day, satisfied with himself for having traded well. The knowledge proved through research that a particular price pattern or market behavior offers an acceptable level of predictability and risk to reward to provide a consistently profitable outcome over time.

Stage Five: The Inwardly-Bound Stage The trader who is able to pry himself out of Stage Four uses his experiences there productively. The trader learns, as stated earlier, what styles, techniques, tactics are popular. But instead of focusing entirely on what's "out there", he begins to ask himself some questions: What exactly does he want? What is he trying to accomplish? What sort of trading makes the most sense to him? Long or intermediate-term trading? Short-term trading? Day-trading? Trend-trading? Scalping? Which is most comfortable? What instrument -- futures, stocks, ETFs, bonds, options -- provides the range and volatility he requires but is not outside his risk tolerance? Did he learn anything at all about indicators in Stage Four that he might be able to use? And so he "auditions" all of this in order to determine what suits him, taking all that he has learned so far and experimenting with it. He begins to incorporate the "scientific method" into his efforts in order to develop a trading plan, including risk management and trade management. He learns the value of curiosity, of detached interest, of persistence and perseverance, of taking bits and pieces from here and there in order to fashion a trading plan and strategy that are uniquely his, one in which he has complete confidence because he has tested it thoroughly and knows from his own experience that it is consistently profitable. He accepts fully the responsibility for his trades, including the losses, which is to say that he understands that losses are inevitable and unavoidable. Rather than be thrown by them, he accepts them for what they are, a part of the natural course of business. He examines them, of course, in order to determine whether or not some error was made, particularly one that can be corrected, though true trading errors are rare. But, if not, he simply shrugs off the loss and goes on about his business. He understands, after all, that he is in control of his risk in the market. He doesn't rant about his broker or the specialist or the market maker or that vast conspiracy of everyone who's trying to cheat him out of his money. He doesn't attempt revenge against the market. He doesn't fret. He doesn't fume. He doesn't succumb to hope, fear, greed. Impulsive, emotional trades are gone. Instead, he just trades.

Stage Four: The Squiggle Trader Stage If you don't quit, you'll move into the "squiggle trader" phase. Since you failed with patterns and so on, you figure there's some "secret weapon", a "holy grail" that's known to the select few, something that will help you filter out all those bad trades. Once you find this magical key, your profits will explode and you'll achieve every dream you ever had. You begin an obsessive study of every method and every indicator that is new to you. You buy every book, attend every course, sign up for every newsletter and advisory service, register for every trading website and every chat room. You buy more elaborate software. You buy off-the-shelf systems. You spend whatever it takes to buy success. Unfortunately, you stack so much onto your charts that you become paralyzed. With so many inputs, you can't make a decision, particularly since they rarely agree. So you focus on those which agree with the direction of the trade you've taken (or, if you're the fearful sort, you look only for those which will prove to you how much of a loser you think you are). This is all characteristic of scared money. Without a genuine acceptance of the fact of loss and of the risks involved in trading, you flit around like a butterfly in search of anything or anybody who will tell you that you know what you're doing. This serves two purposes: (1) it transfers to others the responsibility for the trade and (2) it shakes you out of trades as your indicators begin to conflict. The MACD says buy, the sto says sell. The ADX says the market is trending, the OBV says it's overbought. By the end of the day, your brain is jelly. This process can be useful if the trader learns from it what is popular, i.e., what other traders are doing, and, if he lasts, how to trade traps and panic/euphoria. And even though he may decide that much of it is crap, he will, if he doesn't slip back into the Cynical Skepticism Stage, have a more profound appreciation -- achieved through personal experience -- of what is sensible and logical and what is nonsense. He might also learn something more about the kind of trader he is, what "style" suits him best, learn to distinguish between what is desirable and what is practical. But the vast majority of traders never leave this stage. They spend their "careers" searching for the answer, and even though they may eventually achieve piddling profits (if they don't, they will of course eventually no longer be trading), they never become truly successful, and this has its own insidious consequences.

Stage Three: The Cynical Skepticism Stage You've studied so hard and put so much effort into your trading and this universal failure in the patterns only when you take them causes you to feel betrayed by the market, the books and materials and gurus you tried to learn from. Everybody claims their ideas lead to profitability, but every time you take a trade, it's a loser, even though the setups all worked perfectly before you played them. And since one of the most painful experiences is to fail when success looks easy, this embarrassment is transformed into anger: anger at the gurus, anger at the vendors, anger at the writers, the seminars, the courses, the brokers, the market makers, the specialists, the "manipulators". What's the point in trying to analyze and improve your own trading when there are so many dark forces out to get you? This excuse-driven blame game is a dead-end viewpoint, and explains a lot of what you find on message boards. Those who can't pull themselves out of it will quit.

Stage Two: The Hot Pot Stage You scan the markets every day. After a while (sometimes a good long while), you notice a particular phenomenon which pops up regularly and seems to "work" pretty well. You focus on this pattern. You begin to find more and more instances of it and all of them work! Your confidence in the pattern grows and you decide to take it the very next time it appears. You take it, and almost immediately your stop is hit, and you're underwater for the total amount of your stoploss. So you back off and study this pattern further. And the very next time it appears, it works. And again. And yet again. So you decide to try again. And you take the full hit on your stoploss. Practically everyone goes through this, but few understand that this is all part of the win-lose cycle. They do not yet understand that loss is an inevitable part of any system/strategy/method/whathaveyou, that is, there is no such thing as a 100% win approach. When they gauge the success of a particular pattern or setup, they get caught up in the win cycle. They don't wait for the "lose" cycle to see how long it lasts or what the win/lose pattern is. Instead, they keep touching the pot and getting burned, never understanding that it's not the pot (pattern/setup) that's the problem, but a failure on their part to understand that it's the heat from the stove (the market) that they're paying no attention to whatsoever. So instead of trying to understand the nature of thermal transfer (the market), they avoid the pot (the pattern), moving on to another pattern/setup without bothering to find out whether or not the stove is on.

Sreeja- Similar but a bit better register in my brain was Bo Yoders Take on the same subject. Maybe you can find a few nuggets in it to help you along as well: Stages of a Trader (from Bo Yoder) -------------------------------------------------------------------------- Stage One: The Mystification Stage This is where the neophyte trader begins. He has little or no understanding of market structure. He has no concept of the interrelationship among markets, much less between markets and the economy. Price charts are a meaningless mish-mash of colored lines and squiggles that look more like a painting from the MOMA than anything that contains information. Anyone who can make even a guess about price direction based on this tangle must be using black magic, or voodoo. However, as one begins to observe, read, study, the mess may begin to resolve itself into something that may make sense. Sort of.