thalestrader

I don't know about a million, but $500 looks doable by the end of the summer. Her original goal was $250. At $250 she earned the right to trade a small futures account next summer day trading one lots. That idea seemed a lot more exciting to here a month ago. Right now, she seems like she really wants to stick with forex (who could blame her). You told me about the micro contest, and I told her. I may have to physically "push the button" on the trades she comes up with, though, because I'm sure she is too young to be considered for the contest. So if she makes it to $500, it will have to be a "collaborative" effort. I wouldn't want them to cheat her out of a prize if were to win something. Also, I too found that after a series of losing days its good for me to step back for a few days. As for myself, I know that I am susceptible to the "I got to get it all back on this next trade" metality to which if one succumbs only leads to more heartbreak. Enjoy the time off and clear your head. You'll know when your ready to get back on the screen. Best Wishes, Thales

Hi folks, I think for the rest of the summer I may cut my pnl posts back to a weekly summary. Anyhow, I'm not trading this week at all. My daughter, on the other hand, is still going strong. She did three trades today, three microlots each, and each for 100+ ticks. In other words, she had a very, very good day. Best Wishes, Thales

Hi imorgan, I didn't want to say much more yesterday, as I did not know whether youwere in a live trade or a demo trade, and I always like to avoid voicing an opinion contrary to another trader's current position while he is still in that position. As I said yesterday with respect to your short entry, I thought you did do the right thing there. That certainly constituted for me a break down of what should have been support. That is why I asked you where your stop was and how you decided to get long. It looked to me like a panic move, i.e. "Oh my goodness I sold it short and its not going down so its going to go up so let me stop and reverse." If you are going to trade S/R, you can do it one of two ways: 1) You can buy support and sell resistance, looking for price to reverse at these levels, or 2) You can sell breaks of support and buy breaks of resistance, lookng for price to continue beyond these former stopping points. You can, of course, trade both ways, which I imagine would make ofr a third way. My own preference, of course, is to trade S/R breaks for immediate trend continuations. Others prefer to trade S/R holds for immediate trend reversals (this means the trend that brought price to the S/R level, not the larger trend, of which, in this case, the "immediate trend" being reversed is but a pullback or reaction against a larger trend). If you are going to trade breaks, then you need to determine how you are going to place your bet, and then you need to place your stop loss where, if price reaches it, the probabilities will have turned against price moving in your favor. Yesterday, your stop loss was placed smack dab in the middle of nowhere. If you sell a break of support, your stop loss must be placed above resistance, and vice versa for longs. What you experienced yesterday is one of the two reasons that people sometimes say such silly things as "most breakouts are fakeouts." Untrue. Most breaks of support lead to a retest of a lower support level, and most breaks of resistance lead to a retest of higher levels of resistance. The problem is that sometimes a break up or a break down will do some further chipping away at S/R and add a bit more fuel before the move to the next level gets underway. When you exited the short and reversed to long, you became fuel for the move down. It is always nice when a break results in a real smash or lift off and price moves like lightening to the next anticipated level. But you need to be aware that sometimes price has a different itinerary than your desires. It will get to where it is going when it is ready, not when you are. The good news is that you can identify these levels on your chart ahead of time. Once that level broke at which you sold short, then price was almost determined to head down to 1.3347-3350. It was just a matter of you having the patience to set your stop and sit on your hands. (Again, I would highly recomend anyone interested in learning S/R read over DbPhonix's posts, especially his recent posts in his "Trading with Forsight" thread). The other reason people say that "most breakouts are fakeouts" is, of course, that they have mistakenly identified a minor wiggle in the middle of nowhere for a break of support or resistance. I think you identified a real support level, and you did the right thing by selling it. Next you need to work on letting the market develop as it will to deliver either your profit or your loss, and then move on to the next opportunity. This takes times, but you have made an excellent start. Best Wishes, Thales

Hi Forrest, I'll be posting more once we get out of July. This is typically a month where my trading activity is greatly curtailed as I have family come in from out of state. I hope you and imorgan (and hopefully others as well) will continue to contribute. Also, as I am primarily a stock trader who trades stocks that have gapped open, I do not know the night before which stocks I will be trading the next day. So, while I scroll through the charts of the SP500 each night, I am not really doing the analysis such as you are doing with the NQ. What I ave been doing lately is going over forex charts with my dauhter at night. These lend themselves much more to the type of analysis you are interested in, so I will try to post a forex chart here and there when something of interest presents itself. Otherwise, once I am back "full throttle," which will be after Labor Day, I will again post real time intraday charts/trades. Best Wishes, Thales

Never a good reason to commit to risk, but I've been there, done that, and will do it again unless I have truly and finally wised up. Ok, good, so it was based upon your interpretation of what you saw price doing, and not simply "panic" that you thought your short wasn't working and you didn't want to miss a chance to get your money back. I trade, and I have my daughter trade based on a one tick buy/sell stop. As she is trading forex through a dealer, she needs to account for the spread, so she usually will place stop entry at +/- 2x(Spread). I would likely not have thought to trade that short trade, as price had just moved through a sizable rally. After such a rally, unless there is an immediate and sharp sell off, I would anticipate another period of consolidation, not unlike what we saw at the end of last week. Price could certainly be rolling over and reversing here, but I'm not smart enough to tell that just by looking at what is there right now. That being said, had I thought to take that short entry, I think I'd have entered it exactly like you did, and I would likely still be short from approx 133.84, with a stop loss up around 134.5x, and a profit target around 133.5x. Of course, this would be another caution against the short trade, as the R/R quite frankly sucks as I'd be risking 65 ticks for a profit of 35 ticks. Perhaps a secondary target would be down in the vicinity of 133.00, but I always tell my daughter that the R/R should be close to 1:1 or better in favor of the trade at the closest high probability target. If I had wanted to be a seller, I'd have felt better about either selling at the high today (take a look at a four hour chart and you'll see why) or else I would have wanted to sell the break of 134.27, with a stop loss at 134.67 and a first profit target at 133.85. My secondary target would be a bit above 133.50. By the way, based on the chart, I do think that EURJPY will see 133.5x before it revisits the 134.7x high, so if I were to be in either of your two trades, I'd rather be in the short than the long. But who knows? Best Wishes, Thales

Hi Forrest, Thank you for sharing your work with us. I see that the NQ today found support at Friday's day session high. Do you figure these session highs/lows into your trading plan at all or do you find the globex highs/lows sufficient? Just curious, is all. Best Wishes, Thales

Hi imorgan, What made you decide to choose to take a long position there? Best Wishes, Thales

Hi imorgan, I have a couple of questions: 1) Where was your initial stop loss? 2) What makes you think your support level "appears to have been too high"? Are you meaning that the spread took you in before a break of support? Or do you mean that you don't feel that you correctly identified a support level? Thank you for sharing your work with us! Best Wishes, Thales

Hi folks, I have family visitng and so I'm on a kind of vacation this week. My daughter also is on vacation, but hers apparently includes her showing her Pop Pop how its done (Pop Pop is equity and options trader from way back). Anyhow, she did well. Again, she traded the EURJPY only, and she entered the trade last night, and her profit limit was filled before she awoke. I attached two charts: The first was her four hour chart from last week, and the second is the same time frame as updated by her at the end of last week, and showing price action up to a few minute ago. You should be able to see where she took a long last night and why, as well as her profit objective. I don't have the exact entry and exit, she entered right around 1.3350 (I think it was 1.334x's) and her profit limit was around 1.3475, her actual profit was 124 +/- ticks on 3 microlots. She is on her way. Best Wishes, Thales

Hi Hal, I see two things you did right: 1) Your winning trade was 1.5x's your losing trade. If you can find a way to average that R/R you should be able to lose 2/3's of your trades or so and still breakeven. 2) You could have exited your losing trade at breakeven, and you chose not to exit it early. So long as the opportunity was taken in accordance with your rules, then you were right to let the trade ride. I have had some very nice winning trades that chopped back and forth across my entry point. If I had exited all of them at breakeven when I had the chance, I'd not have done nearly as well. You sem to be doing fine. Just keep doing what you are doing - work hard, trade your plan, and study those charts! Best Wishes, Thales

I'd second that, excellent work indeed. And not only does trading S/R become much easier once you learn to identify it, but trading in general becomes more enjoyable and relaxed. What a difference it makes when you know in advance at which levels you will trade, and what price has to do once it reaches those levels to induce you to trade. It sure beats hanging on the close of each bar waiting to guess in which direction the next 1-4 ticks will be found. You have done a wonderful job this week, Forrest, and I hope you continue to share your work with us. Best Wishes, Thales

I've thought a good deal about this this weekend. If you remember, I kept saying that #2 just didn't look right, and that I would probably not even have thought to trade it. I asked my daughter what she thought, and she traced out the swings on the screen with her finger and said that it wasn't "a whole move." It then dawned on me that the best way to try to explain would be to show how price divides into swings of varying sizes. For the sake of this chart, I used the terms Major to denote the largest swings, intemediate to denote swings of a somewhat smaller dimension, and minor to denote the smallest swings. Also, I did not outline each and every minor swing (the green lines) because it would take too much time. The first chart is probably my preferred swing "count," though I provided an alternate that I feel is also justified. You see, one of the first things I had her do when she first started this project was to highlight the swings that represented H-HL-HH or L-LH-LL when taking a trade. She had to learn the difference between an intermediate high and low and minor highs and lows. I've outlined the swings in the attached chart. Rather than sitting here typing out a detailed explanation, I'll let the chart speak for itself. As I was putting this chart together, I kept "hearing" Db's posts where he cautions that many see S/R where it isn't and fail to see it where it is. I also recalled his comment that he had been involved in a Ross Hook thread where participants where seeing these 1-2-3 hooks all over the place, even in the middle of nowhere. I would suggest that not only were they seeing them in the middle of nowhere, but they were likely mistakenly indentifying minor swings as being of intermediate importance, and thus mistaking a mere correction against the intermediate trend for a change in that trend. I hope that helps. Someone else, no doubt, may identify these swings somewhat differently, but the principle is sound, both in theory and in practice. See you next week. Best Wishes, Thales EDIT: PS The final Blue swing is still potentially in progress. Price as long as price makes a higher high before taking out the low at the last blue "pivot" then the current major swing is intact.

She's not going to be happy. The first time she didn't mind because I made that one up and she didn't like it. This one she came up with, and she thinks its very cool. Oh well. That'll teach me not to post from her computer. Anyhow, two other things I wanted to point out: 1) Support and resistance are not necessarily precise price points, but often are more like "zones" or "areas" of S/R. These areas are often bounded by precise price points (but not always). Do not mistake a point within a zone of resistance for "Resistance Itself", nor a point within a zone of support as "Support Itself". For example, suppose a stock declines from a high of 100 to a low of 80, and then rallies to 90. At 90, the decline resumes, but this time the decline is checked at 81. Price again rallies, this time halting at 89. The decline again resumes. Price declines down and through 81. I would not be looking to short a break of 81 just because that was the most recent swing low, because 80 is stilla potential and proabable support. The area between 80-8 is a zone of support. 2) Always be aware of the bigger picture. If you look at that chart, you can see a big rally that pushed through what should have been some serious resistance. Price twice tested that broken resistance as support. You do not want to be shorting right into that new found support. Also, since the rally high the market has been consolidating in a range at the high end of the rally's range. While identifying the extremes of of a line or range or consolidation is relaticely easy, it is much more difficult to identify tradable S/R within that range. As price crosses back and forth between S/R, it is likely to move all the way from one to the other. If price most recently tested support, then it is best not to short within the range until price has travelled back to test resistance (or fails to test resistance and instead breaks below the recently tested support. Likewise, after a test of resistance at the upper end of the range, it is best not to go long until price has again traveled to support (or fails to reach support before turning and breaking above recently tested resistance. In example #1, that would be a buy point as price had tested support, rallied, made a higher low, and then continued on its way to test resistance. In example #2, although some may make the case that price had declined from its test of resistance and tested support, but it does not lok that way to me. Your #2 looks to be a simle ABC type reaction against the decline on its way to support. In example #3, that seems to me to be the test of the top of the zone of support. I wouldn't want to short into that zone, but rather I'd wait for a break belwo that entire zone. In example, #4, price has tested support and it on its way back to resistance. So the test was your low, then a rally to a high, a decline to a higher low, and then a rally to a higher high. I'd prefer to wait for price to break above the high established at your example #2, but, as I said earlier, a case could be made for buying the break above your #4 (though I would say your at higher risk that the "breakout" reverses immediately. I hope that makes sense. Have a wonderful weekend and remember to enjoy your family. Best Wishes, Thales

Hi Folks, I was going to post the first chart this morning in the real time thread, but by the time I reproduced it on my machine it had already triggered. Here is my daughter's trade today - Long EURJPY with her anticipated profit targets. She finishes today up $36.25 and closes the week at $268.03. I have included the daily run as well as the run for the week 7/13-17. If she keeps this up, she will have found a nice little part-time job for herself. Well, we have a house full of kids right now and it looks like rain, so we are on our way out to take over a local bowling alley. Have a great weekend! Best Wishes, Thales

Hi folks, My daughter's new favorite game is trading the EURJPY pair. There are certain things about trading foreign exchange rates that elude her in spite of my efforts to explain and her efforts to understand. I gather that she vaguely grasps the idea that she is buying one country's money. She is paying for that money with another country's money. She does wonder how it is that she has the Yen to buy Euros or the Euros to buy Yen when I assure her that the account she is trading is populated with US Dollars. She does not know about reserve currencies, interest rate risk, political risk, terrorism risk, risk premiums, carry trades, exchange differentials, etc. In other words, she could be said to have very little understanding of the "fundamentals" of currency exchange and the markets she is trading. But, she has been doing a very nice, nonetheless, of making good bets on when to buy and when to sell, and somehow the EURJPY has become her "preferred" pair to trade. Tonight, I was on her computer, and she was explaining to me what she did this morning and why, and I happened to see the attached chart. This is a four hour EURJPY chart. I have not used this time frame with her. In teaching her, I started her out on a 13 range chart, and then moved her to the 15 minute time frame. I asked her how she came up with it, and she said she thought it would help her see better what was going to happen. Imagine that! Out of the mouths of babes, as the saying goes. Anyway, I'll say nothing more, but I'll let the chart speak for itself. I think she did a pretty decent job "mapping" out the EURJPY. As an aside, here is how she tells me she chose her colors: RED she tells me, is for Resistance, Steel blue is for Support. Best Wishes, Thales

Hi Forrest, So ... how did you do today? Best Wishes, Thales

Not for nothing, but I still have no idea what it is you are trying to accomplish. Good luck, though. Best Wishes, Thales

Hi Folks, I was out today, and no trades for me. My daughter bought the EURJPY this morning after it tested its overnight low. She used an autotrailing stop so she could play (it is summer vacation, after all). She managed to grab a chunk out of the middle of the EURJPY's subsequent rally, with a profit of $13.69, closing the day at $231.78 I'm considering adding to the account so she can trade a bit more size. Best Wishes, Thales

Hi jonbig, I think this is subject for a thread. I'll be happy to contribute charts as they develop. Thank you for sharing this with us, it certainly was prescient! Best Wishes, Thales

Hi Forrest, I was out most of today and will be gone tomorrow as well, so not much from me by way of contributions this week. Please keep up what you are doing, as you are doing very well. Mistakes will no doubt be made along the way, but, as your aproach is solid and also you're a smart fellow, any mistakes will not prove fatal. Great job today, and thank you for sharing your efforts with us. Best Wishes, Thales

Hi Folks, I was out today, but bought 6B (see chart) last nighton a stop while I slept and awoke with a 100 tick profit limit that was hit by morning for +100 ticks. That was some rally all the way around today! My daughter bought the EURJPY at some point on a break higher, but watched about 1/2 evaporate late in the day. Not a bad day for her though, as she was out most of the day herself. She's geting a bit cocky, as she waited till she was +20 ticks, and then moved her stop to breakeven, and then went out to play with her friends (who can blame her). She ended up +30 tor so ticks on two microlots. Best Wishes, Thales

Thanks Hal, I was just pointing out to the OP that it is rude to come asking folks for help, and then ignore them when they request additional information. Best Wishes, Thales

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A plan ... ... well executed ... ...is anything but luck. Well done! Congratulations, you should be proud. Best Wishes, Thales

Many are misled both by those who have something to sell, as well as by others who merely have an ego that they wish to have stoked and stroked. Many are led to believe that learning to trade is a long drawn out process, full of pain and peril, not unlike that endured by the Sorceror's apprentice. When I finally had the epiphany that the question for the speculator is simply "is price rising, falling, or holding steady?" consistency and profitability quickly followed. Children are perhaps the best candidates to learn to trade ... Goldman Sachs ought to start now training their next generation of traders by starting a charter school. Best Wishes, Thales