Peterthemonkey

SunTrader my prior post wasn't directed at you, we agree, sorry I didn't make it clear. To all, succinctly stated a major issue with EW theory is that proponents do not appear to accept the concept of failure. edited quote from tradingwizzard: This recognizes that a potential pattern failed to form in a certain timeframe, but since pattern never materialized it is not pattern failure, something else went wrong, caused its misinterpretation. And since we can find a valid pattern, potentially in a future larger timeframe into eternity, pattern concept is valid. According to this concept 20ma's or double bottoms, for example, are infallible. A counterproductive trading concept. Do I understand this right? The emphasize placed on EW infallibility just leads people astray. A trader must recognize a "potential pattern" or whatever "view" of the market they choose to employ failing to materialized in expected scenario, as others have noted, which is recognized in quote above. I think a lot of the fuzz about EW boils down to a matter of approach. EW proposes its validity based on the possibility of an event, presumably into infinity. Where others approach patterns, etc, as the probability of an event within defined confines.

Hi tradingwizzard, Definitely no expert here on EW. I have looked into it in the past, as objectively as I could, and never found objective repetitive 5 wave counts - without exceptions. What your post describes is form fitting. Take a stock that starts trading one day and ends trading another day, can you always validate a valid wave count for its trading life - without exception? Projecting that a hypothetical future development will validate the wave count requires a leap of faith into the realm of probability and possibilities, facts from which a strategy can be devised. This is not proof of an inviolable 5 wave concept. Again, I have no issues with how you trade, however that does not validate EW. The claim is made that markets always move in 5 wave patterns - but evidence to substantiate that claim under peer review scrutiny is never made available.

Quote: Originally Posted by SunTrader » Markets (in the form of price waves however they are defined and labeled) are sometimes known to not follow the rules, What then? By that as an example an impulsive wave 3 (in a picture perfect five wave move) turns out to be the shortest wave - start the count all over? Its no good even though price turns and reacts as it should to a 5 wave completion Don't tell me bring out the X's and Y's or alternative mangled labeling re-labeling sheeesh. Price marches on. Here's the issue as i see it, you have qualified waves 1, 2 and 3, then you have potentially qualifying waves 4 and 5, which may or may not develop. If waves 4 and 5 do not develop does that mean you had the "wrong count" for waves 1, 2 and 3? I am not saying you can't trade whatever way you trade, just that there are many claims made in this business without definitive supporting evidence, such as the market always moves in 5 waves. Unfortunately this is always supported by after the fact examples, which ignore or violate prior examples and/or wave moves in order to fit the mold.

Without definitions arguments are useless. To me, and I believe most, TA is the study of trading instruments price behavior through the use of price and/or volume and/or time, with many sub-disciplines: tape reading, chart analysis, cycles ..................... FA analysis is done through the use of market economic conditions as they apply to markets, companies, persons and such, again with it's many sub-disciplines characterized by individual field of specialization. If we accept the general definition used by most, fine ........... if not, fine. Argue a specific point for validity, without wandering all over the place. To my understanding, random is anything that exists without a cause, there is no causal factor that made it be. Thus, any effect that is a product of a cause is not random, but it could easily be beyond the ability of anyone to predict it with 100 % certainty, as is the case with price behavior.

Hope the following clears things up a bit. I enter the trade when instrument price is at 100. I am willing to accept a price drop to 95, to give the trade a chance to perform based on my research. However, now it is 5 minutes after I initiated the trade. Price stands at 99, based on current conditions and developments since trade entry, I move my stop to 97. This is now the point at which my trade is no longer valid. It is the limit it needs to perform based on current conditions, which have changed since entry. Strictly a figurative example, initial stop at entry could remain valid, it all depends on your research assessment and the trading plan you developed from it. As to the best stop right after entry or subsequently to deal with "noise", 1 ATR, 2 ATR, price channel, or other, this can only be determined by research to guide you as to where and when to exit. What if I use 1 ATR, or 2 ATR or other, over a period of time, number of trades, considering market conditions, etc., which provides the most profit with acceptable risk. There will always be losses, noise that just touches your stop and then reverses fabulously into a great missed profit. Moves where you only breakeven or get a tiny portion of the potential profit, if only............. These are the expenses of doing business, necessary to garner long term cumulative profits. The sooner you get used to it, adapt to accept it, the faster you will be on your way to success. I would suggest you use others research and advice as a source of ideas for your "own" research. (period) Excuse me if I sound too preachy, and don't worry about asking questions, that's what this forum is for: questions, answers and discussion.

How would you go about "optimizing" anything? As others have mentioned "experts' advice is full of platitudes, generalization, comments devoid of proper context, and worse. It is a mistake to view these "pronouncements" as being rules applicable without exceptions. There are too many diverse trading systems and methods. There is no fundamental contradiction here, only miscommunication and misunderstandings. If I may approach this in very simple but perhaps useful terms: When we enter a trade we place capital at risk of loss in exchange for the potential to profit. How much risk are we willing to accept to put on a trade? Trade management, which is designed to address the development of various scenarios, once we enter a trade, is designed to reduce the initial risk while maximizing profits. It is a balance where varying one affects the other. Disregard the concept of a hard stop, moving stop, multiple stops........... Stop trade, means exit trade. As we enter a trade we also need a predetermined exit point for maximum acceptable losses. As time and prices move forth our exit point may also change in consideration of current developments, which may now be significantly different then at entry point. As to where these exit points are best set at, is a question that only the development of your trading system can answer. Don't trade someone else system or method without first making it your own. So depending on your system the "hard stop" may be the one and only used to exit at a loss, with perhaps multiple exit profit targets possible, or vice versa, or other combinations. And the stop may be here or there. Consider the probabilities.

Based on the videos I've seen, Sam approaches this issue from the perspective of having worked on the pits handling order flow. As an example: When there is a large, possibly institutional order to buy at a certain price level, prices will eventually rally up from this level due to orders imbalance, provided they overwhelm opposing orders. When prices subsequently retrace back to the level where the large order is sitting, the remaining number of unfilled orders will be less than before. On a subsequent cycle, even fewer. Of course, this doesn't account for the "then and now" evolving circumstances as you noted. My take on this is that we can't possibly account for every price move, but we can specialize in a few.

I understand the multiple time frames and different degrees of strength at demand levels, although not necessarily by Sam's definitions. Regarding the level in question that is marked as "no demand" in that particular chart. In that particular chart - is it a demand level or not? Why? What about the lower "demand" level at the bottom of that chart. Why? Just want to learn.

Gabe2004, Thank you for replying. I agree, an explanation from him would be nice. Maybe someone in this thread can elicit one from him.

I have watched some of Sam's videos, they appear consistent to me. Obviously I am not an expert of his precise methods. I'll take a go at it based on the charts provided, hopefully others here can chime in with a more definitive response. The level in question here arises out of a Rally - Base - Rally. He considers these to be weak demand zones that occur in the middle of rallies, not at turning points, which are stronger demand levels. There are several pullbacks to level in question that do qualify as Drop - Base - Rally. However, since these reversed at the prior Rally - Base - Rally weak level, and not a fresh unencumbered price level, he probably passes on them. The issues of sufficient profit margin and multiple touches make taking any of these pullbacks even more unlikely. Out of curiosity, does the lower demand level at the bottom of the chart occur after a price drop? Are you with one of Sam's paid services?

Think of it as cause and effect. The specific circumstances affecting a single trader lead to his response, as you noted, This is also true of all traders in the available pool (ie. currently at work) at any given time. All of these individually specific determinants, intertwine to become the determinant for the price action at any given time. Simply because we can not know with certainty all the factors that will affect any one individual at any point in time and the response it will generate, much less a group, does not infer that the result generated is random. If you replicate the cause you replicate the effect. The observable price action in a chart refutes randomness. Random price action would look like this: 101, 102, 500, 0.25, 50........... It wouldn't be confined by the succession of factors affecting current events into the future. These factors impose order to price movements. The fact we can not predict it with certainty signifies we don't fully understand how it functions, are unable to analyze all the variables, or ignore some of the factors which determine the effects manifested at any given time, giving the appearance of a random outcome. Thus, there is a lack of certainly, of an always inconclusive analysis, and a reliance on a degree of luck in trading. Yet, just as the price action demonstrates a certain orderliness, we can reduce the degree of luck in any trade by carefully choosing our trades through analysis, as opposed to trading at random, at any time without a reason.

I think a definition of random is in order. Is it the occurrence of an event without cause? Devoid of any causal factor. All we can do here is guess. Is it the occurrence of an event whose causal factors we ignore completely or partially? Here we may start assigning degrees of probabilities based on our understanding of cause and effect.

Hi Phantom, Thank you for sharing your well thought out TA in a rational and clear way. This is a discussion forum, hence ............ You are doing great keeping things on topic and under control. It does get frustrating at times. In my opinion, as long as the discussion stays civil and about the merits, the back and forth is more enlightening than writing an article or blog. As you probably know, the annals of T/A are full of "perfect setups". Respectfully, it seems rather naive to believe that any one of these setups, regardless of how technically sound and well articulated, will lead aspiring traders to consistent profitability, as you surmise. "I'll leave trade management for another discussion." Along these lines, perhaps you can take your desire to help to the next level. A threshold seldom if ever crossed in these discussions. Provide examples and explanations of less perfect (precise), yet tradeable setups, setups which result in a loss, whipsaws, targets, entry and exit considerations, unanticipated price developments after entry ..................... The market has no shortage of challenges. In my opinion this is one of the areas were most traders fail. An oh so simple setup constantly morphing into a riddle - in real time. I realize that to solve this riddle takes great effort and expense. Maybe you can find a way to shed light in this area without giving away key proprietary information.