firewalker

The blue lines you see were drawn from left to right, meaning they were there before the day opened. So yes, I had it highlighted premarket. Welcome smb

When I first started out, VSA got me going in directions I don't want to be going anymore. There's definitely some good stuff in there, but I think, in the end, it lacks context and focuses too much on individual bars. I just arrived here, and I certainly don't want to offend anyone. But it's very easy to misread the market while focusing on individual bars. Your chart is very illustrative of how I went my ways in the early days. If you look for it there's "no demand" or "no supply" all around the place. What's more important, imho, is where it takes place and under what circumstances (meaning the preceding price action). In this particular example, all the very high volume bars closed at the high, signaling strength. The following bars were on low volume and unable to push price lower. If you look at the second chart you'll see volume dropping off when price goes lower, and rising when price continues higher. All signs of strength imho.

Definitely, opportunities all day. But I just feel much more focused if I'm going for one or two decent trades instead of ten. Had enough days in the past where I started of nicely and ended up with a loss. Remember the c&t days

I still admire you for being able to sit through a whole day foale. These days I try to trade just the US session. The NQ is showing signs of rejection on the daily chart... See also here.

Interesting situation on the daily chart... speaking in VSA terms I believe this would be called an upthrust.

The rest of the trade was stopped out while I was having dinner at 12970. That's me done for the day. I realized if I try putting on more trades I probably give back so of the points won on the first one anyway. Hope you all enjoyed following it and I hope others will try and provide similar live comments.

There is some more reaction now. I'm going to take half out at 12985 for +55 and leave the other half on with a stop at 12970. I need to eat something anyway.

This is why observing in real time is much better than having predetermined targets. It's important to have levels in mind where price can potentially react to. Like 12970. Nothing happened, meanwhile we passed that and are at 12985. Still no reason to exit the trade. I'm moving my stop up to 12970.

Price at potential resistance (12970-80) right now, but not all that much reaction. I will observe and scale out here if we should fail to go higher.

Once again, trading is about sitting tight and doing nothing. Price is finally starting to move higher!

I realize that, but I just wanted to put together the series of posts I made elsewhere, so that the basics are there. I'll leave it like this for a while, it's definitely a lot of text.

Stop moved to breakeven.

I'll explain the reasoning behind me long trade posted live here http://www.traderslaboratory.com/forums/35841-post5.html The entry was long at 12930 on the DOW (all prices are quoted from the futures). First of all, it's important to have context. Yesterday's context made me look for the long side, instead of short side. First of all, going back a couple of days: +/- 12780 was an important level. On more than one occasion: - on May 7 and May 8 that was the low of the day, price finding support there - on May 9, it provided resistance and supply coming in there, effectively turning price around for that day - on May 12, it's where the market opened - yesterday, we had a selling climax and a re-test on that level This is a chart of yesterday. I went long on the re-test, but that doesn't matter very much, because I don't hold my positions overnight. As a result of that, I only stayed in the long trade till the end of the day and missed the run-up that happened on the open today. Better wishing you were in, than wishing you were out though. More importantly, with a selling climax and strength in the background, I was looking to take a long position today, preferably at the best price possible, near 840-850. Unfortunately, they didn't exactly make it easy for me, price opened with a very strong push upwards. Most people would then be looking for a short around 920-930 (resistance). I know it's exactly what I would have done in my early days. One reason is frustration of having missed the earlier entry, the other reason is wanting to take a trade. But I've learnt to control that - at least to some extent, still more learning to do! So I waited for a retracement where I could enter. There's less potential, but at least it is trading in the right direction. My entry was at 12930 when resistance turned into support. See chart. 13030 is the next resistance level, but 970 is another hurdle before we can think of that (look at May 4, 5 and 6). I'm not getting too optimistic, especially since we are - as I type this - not exactly moving higher much and volume is thin. But then again, it's lunchtime...

DOW long 12930, stop 915 Obviously a late entry, but the plan was to buy 840, but when the markets opened the train had already moved out of the station and there wasn't much to do but sit and wait imo...

This thread is for discussing charts and explaining trade entries/exits. People are free to post any kind of chart, with or without annotations and engage in rational discussion. I am hoping enough people will open up and show their entries/exits on a chart and explain the reasoning behind them. Feel free to ask questions.

All live calls should be posted here, preferably following this syntaxis: market position price [stop price] [target price] for example: DOW long 12800 stop 12780.

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"Many times unexpected news may come out that is the opposite of what the market has been doing. Initially the response is rapid, hard move the other way, but once traders take a deep breath and reevaluate, the market normally will continue in its set trend. I can't count how many times a downtrending stock reports better than expected earnings, has a quick bounce, and then spirals back downward. The news isn't important here; it is more important to see how the market reacts to it after the initial move. Fundamentals should be believed only as long as the technical signals agree. Too many times a trader will stick with a news story and not let go no matter what the market ends up doing. Opinions mean nothing to the market; the market goes where it wants to, not where you think it should go. If the market shakes off news and continues its trend, a trader should ignore the news and follow the market." - Marcel Link

The problem with news-related trading is that most traders focus on picking trades around these releases because they believe the sudden increase in volatility gives them a better chance of making a quick buck. Unfortunately, they often fail to realize the risk that goes along with it. Too many traders see a sudden burst in price and think "this is it", and they jump in. The patient trader waits and watches how price reacts, and looks to fade the news. This is not to say that fading the news is a profitable strategy in each occasion. One must look to what price is doing with regard to important technical levels, like support and resistance. Most of the news has already been factored into the current price of the market. This means that once the news confirms what the market was expecting, the whole anticipation is gone and people take their profits and walk away, thus sending the market lower. There's one very important observation to be made here. f the market should go lower (very bad news), but it doesn't, it signals important strength. The news in itself doesn't matter, but it's the aggregate position of traders before the news. Experienced traders wait to see what the news tells them before acting. Often a market will run up minutes or hours before a report, if they are expecting good news. That's why by the time the report is released, price can often fall out of nowhere. This is especially the case when the news confirms what is expected or the numbers are the same as forecasted. (main sources: Marcel Link, Justin Mamis, John Magee, and my own personal experiences)

"It is practically impossible for any man or organization to absorb, analyze and digest the many so-called fundamental factors which influence the course of the stock market, and deduce therefrom a conclusion from which the course of prices may be predicted with any fair percentage of success; what is more, it is a fallacy to believe this can be done on that basis. All the elements which have gone to produce the lines on the fundamental charts have already been discounted in the market. "- R.W.

... regardless of the news. People often look for the news to tell them what the market is going to do. Good earnings? Ah, market should go up, we buy! Bad news? Damn, let's dump this stock. Although we can never tell with 100% certainty what the initial reaction to the news will be, we can analyze the reaction of price towards technical levels, with complete disregard to what created or caused the move in the first place. Those who follow stocks, will know that Cisco released it's Q3 report on May 6, around the close of the markets. Let's have a look at what affect it had on the Nasdaq. Price went straight up from 1995 to 2002.50 and went on to touch 2005, the upper line of a resistance zone from the 2nd of May. Price then reversed and came back to the level it was trading at before. So, what good does it by knowing the news? If anything, the public is sucked into longs but doesn't realize 'the technical picture' on the chart. There are plenty of these examples each day. I'm not saying there is a news reversal all of the time. On the contrary, price often breaks through S/R on news, because that's the easiest way for the smart money to position themselves. The take advantage of what the public is doing and use the volume provided by weak hands to their advantage. The news is nothing more than an excuse.

"Most people look at the state of the economy and believe that the stock market should mirror the current situation. They believe that a strong economy should correspond with rising stock prices. Unfortunately, the relationship is not that simple. The stock market discounts the future, not the present. It discounted the present 6-12 months ago. [...] In fact, the stock market is one component of the Index of Leading Economic Indicators, the government's main economic forecasting gauge. In other words, the stock market leads the economy, not the other way around." - Jack Schwager in a book called 'Fundamental Analysis'...

A comment I received (dcraig1): "The fact is that mutual funds, unit trusts, investment trusts and pension funds are primarily managed by fundamentalists. Those who will tell you that for example fibs work because "lots of traders look at them", will then say fundamentals don't count ignoring the fact that fund managers swinging a bigger stick primarily make their decisions on based fundamentals. A lot of big fund managers trade based on fundamentals. After all, it's big money that creates a pattern on the chart in the first place. This is why a fundamental shift in the economy comes out in the stock market (a chart) first, before it's translated into an economic indicator or a company report. Technicians look for these signals, perhaps through indicators or through price/volume movement, but they aren't responsible for initiating the moves themselves. This doesn't change the fact that fundamentals come out in the chart first." Below is my view on fundamentals. I'd love to hear what others think obviously. Feel free to disagree! Those who look for 'fundamentals' are usually looking at either - depending on whether they trade an ETF/index or a stock - statistics about the economy as a whole (GDP, CPI, interest rate, trade balance,...) or statistics about the company (P/E, dividends, earnings, projections,...). They forget that these numbers are nothing but translations of something which has happened before, these are by definition lagging indicators. Therefore, by following the fundamentals you are always two steps behind. The market turns upwards or downwards because those with the big bucks have determined that the current prices are not correctly related to, what they perceive to be as, their fundamental value. But 'fundamental value' isn't translated into an indicator that comes out two or three months later. Which is why all those who think they study fundamentals, are only studying the effects of a fundamental shift that already took place. A stock that is basing, is exhibiting patterns of accumulation because a select number of people (with "a bigger stick") perceive it to be lower then the real value. They believe the 'fundamentals' of that corporation are fine. But at this moment, the news is usually bad, earnings are worse than expected and jobs are being cut. The accumulation pattern however, comes out in the chart before - usually couple of months later - a rise in earnings or a increase in sales becomes public knowledge. Yes, fundamentals have a casual relationship with price, technical analysts don't move price. It's not because a trendline breaks or an MA crosses over (or a Fib line is drawn somewhere on a chart) that price will move lower. Fundamentals are the driver behind the markets, but technicals are what helps you determine in which direction the market is moving, before the fundamentals become common knowledge. Whether or not mutual/pension funds are managed by fundamentalists or technicians, I couldn't care. Fact is that a lot of hedge funds lost loads of money in the last year, pension funds continue to stumble and 'the professional money' has to fight with other professional money as well. It's not because it's big or professional money, that's it's per definition smart money all of the time.

This happened only a week ago, and at the time - rather than at the end of the day - I described what I would do, depending on the market action. It underlines the importance of having predetermined scenarios, so that you'll know what to do, when you see it. Anyone reading this, should position themselves "in the flow" of the moment. Within a couple of minutes we have the 'ISM Non-Manufacturing Composite' number which will have a definite affect on the markets. By determining beforehand what action is possible and where this action takes place, we can position ourselves better. Now, there's not much time left (7 minutes) but I'm typing this as we go along. Attached is a DOW futures chart, with important support and resistance levels drawn on the chart. I have 13030 and 12930 as resistance and support, the midpoint is 12980, which is often an important area where price returns to, when trying to find value. Notice how on Friday price went slightly below 12970 but kept very much around the 80 level. Also today, since the open we moved lower and touched 12977 before going up again slightly. A long entry would be fairly aggressive there, but it's possible... Now, what do we look for? (a) if the news is bad, we'd expect price to go lower, but we'd like to see buying come in around the potential support at 12970. Going long immediately would therefore be risky, but if we get confirmation that price is holding support (for example by first spiking through it but then closing all the way up again above support), this could trigger a buy signal. (b) if the news is bad and 12970 is broken straight away, we stand aside and wait for price to find support lower (preferably around 12920-12930) © if we move up on the news than we missed our entry, but too bad. Then we wait and see how price reacts to resistance at 13030 and see if we get a short signal. ============== And this was posted immediately after the news, after I made an entry: The ISM number was 52, better than forecast. So we spike up... but, this is a spike into resistance. Now, like I said we wait to see what the reaction to 13030 is. However, by waiting I don't mean minutes, because by then the chance to get in early will have passed. That's why I attached a blow-up of the action, a 15-second chart. Notice how the bar closes at 13029. Coincidence? Of course not. This is where selling pressure comes in. If you look at this from a 1-minute bar or 5-minute it's still easy to see that price fails at this level. Although, the longer you wait the less obvious it's going to be that a nice short entry presented itself, with a stop around 13040 or so. Now, forget about the news for a minute and just observe. How does it help you knowing that there was news and what the figure was? It doesn't. The fourth rule therefore is that you don't need to know what moves the markets, you only need to see the resulting action. Whatever the cause, price is being pushed down because there's a lot of supply at that level. The volume is huge, price fails, what more do you need to know? This doesn't automatically mean price will plunge, but at least you have a trade that you can ride back to the opening low, where you should expect price to find support again. This example is meant to illustrate that the cause of what happens is irrelevant. Even if this would turn out to be a losing trade, it doesn't change the fact that you can see everything you need from the chart, without looking at the news. ======== Anyone looking back at this day, without knowing when the ISM report was released can still see the high volume and the rejection of resistance. What matters is what you see in front of you, which is the effect - the net result - of the sum of all buyers and sellers. Knowing who is moving price or why price is moving in a certain direction, should not be our concern, unless we want to become financial analysts, instead of traders. Note: below is a chart of the whole day so put things in perspective.

"I would like to know if it's possible to predict the direction before a news-event?" If you're talking about news reports or sentiment in general, I believe yes. For example, price was distributing on the major US Indices near the end of last year and made a lower high before the whole subprime crises became in the popular media and before all the financial institutions were screaming for more liquidity from the FED. As for singular news-events, it's not always that clear. I believe this is in part because of the manipulation that it possible on smaller timeframes, and in part because so many people focus on trading around these reports. This can create some whippy action that catches both sides out. Attached is a chart of an important news report (FOMC if I remember correctly). Notice how 'technical' price reacts. Yes, anyone trading this would need very wide stops, but in the first spike price bounces back higher off the lower support area. And in the 30 minutes after the initial release, all price bars (5-min chart) continue to close above support, indicating where the buying pressure is to be found.