thalestrader

Price broke 1.6393, and quickly popped back above that level, but not by much. Price will need to break and hold below the shaded rectangular area to keep pressure on the downside and press toward a retest of the dashed green support zone around Friday's low. The chart shows how the rectangular box is calculated using a fib extension tool - as you can see, as I was taking this screen shot, price has started to get in gear to the downside.

And at this point the stop would be more or less at breakeven (+/- a few ticks). I'd be looking for a retest of the 1.6393 low, and if that breaks and price holds below it, then the green dashed lines would be the next target.

If I were short from the initial post, and I had I stayed short this far into the rally off the low, I'd right now have my stop fixed at a tick or so above that last reaction high.

Price did decline into the next area of anticipated support. A nimble scalper should have been able to come away with a respectable amount of ticks even as buyers stepped in at the anticipated support level surrounding Friday's reversal higher. Natural stops are indicated by the dashed red lines. Any trade above there would certainly be enough to have me out of the market if I hadn't already taken myself out. Best Wishes, Thales

Hi Folks, I thought it would be interesting if we had a thread where we could all post charts of potential price moves in real time. These do not have to be actual trades you are taking. The purpose would be for us to learn from one another how to recognize these opportunities in real time. Therefore, when you post a chart, be sure to clearly state the direction in which you anticipate price to move, and the reason you are interpreting price action in that manner. This is not a thread for secrets, show-offs, or salespeople selling systems. I'll start off with the GBPUSD here soon after the markets have reopened for trading this Sunday evening. Looks like a potential short trade if there is a break of 1.6421 (For the record, I am not trading this). The first red arrow would have been a nice short entry as the Cable put in a 1-2-3 top per Trader Vic (easy to see after the fact). The second red arrow swas a second chance short entry on the retest of the break of the "2" point on that 1-2-3 top (also easy to see in hindsight). The third red arrow is the current market as price is trying to find support. If that support does not hold, a test of 1.6389 - 1.6406 would be next. I have some family time now, so I'll check in later and update the chart. Best Wishes, Thales

Hi there, I don't know if you really wanted anyone to answer your therapeutic questions, but I thought I'd share a few observations. 1) Your first long trade, presuming it was in accordance with your established trading plan, was fine. You had a long entry signal, you entered and placed a stop loss, and your stop loss was hit, taking you out of your position with a very small loss. Excellent trade! 2) Your second question as to why you did not take the second signal is, as you note, a more important question, and one that is easily answered. I am again presuming that this was a signal for you to take a position in accordance with your established trading plan. Presuming such, then the reason you did not take the trade was that you feared taking a second loss. 3) Had you not feared the second loss, and had you taken the position, and assuming you would have managed the trade with some sort of trailing stop, you would have made a net profit on the two trades. Success at trading is not about eliminating losing trades and only making winning trades. Trading is about managing risk by keeping your losing bets small in extent compared to the size of your winning bets. Success in trading is the cumulative effect of all of your bets (winners + losers) and not your winners alone. In other words, a focus on a high winning % almost always leads to a trader who is in the end a net loser. I know more than a few traders who brag about winning 70%, 80%, even 90% of their trades. Yet the average losing trade is 8 times larger than the average winning trade. I'd rather be a trader who only wins 40% of his bets, but whose average winning trade is 2 or more times larger than my my average loser. You obviously have the discipline to enter a trade and place a stop loss. That means you are ahead of 95% of the folks who trade. Yes, 95% - and the percent who trade without an active stop loss is probably closer to 99%. On Friday I watched as a trader with my firm took a position in a stock with no stop loss, cursed as the stock moved against his position, and then doubled down by adding 1000 shares to his initial 1000. I then watched as he cursed the market for being wrong as the stock decined another 1.50 from his second entry. He does not like taking losses. He regularly averages his losers, only to suffer a greater loss. On Friday that one trade wiped out his profits from the last two weeks. You are miles ahead of this guy, and he's a pro (being a professional in this sense has everything to do with employment status and nothing to do with soundness of one's approach). Now, you need to stop letting losses rattle you and knock you off your game. In Market WIzards, Larry Hite has a wonderful line where he says that being a trader, he is amazed at how much you can make from being wrong. What he meant, of course, is that losses do not matter. They are part of the game. The winners will more than reward you for the losses you experience. Best Wishes, Thales

Hi Twoscomplement, If I may, I believe that the response your original post has elicited from our friends has to do with the fact that such recommendations, in a forum of this sort, absent any accompanying thought, reason, or rational behind them smacks of mercenary motives. In other words, your post immediately begs the question, "what's he selling?" You see, your original post contains no thought that might provoke further thought in the minds of your readers, there is no spark that may kindle the imagination of the student of trading. This is not to say that a great deal of thought may not have gone into your discovery of these opportunities. It is just to say that any evidence of such thought has been intentionally withheld by you from pupils such as I. And apart from your opinion that these trades will prove profitable, there are no other stated opinions from you concerning these recommendations for us to discuss and debate. I agree with your admonishment that we all ought to respect the other forum participants. We human beings are thoughtful, interesting, and wonderful creatures. And the least among us deserves the maximum respect for his or her humanity as humanity may muster. However, do you not allow that you yourself have perhaps shown a grave lack of respect toward your would-be readers by failing to provide anything thoughtful, interesting, and wonderful in your original post? Can you not see that rather than inciting your reader's intelligence to thought, you ignore the reader's intelligence completely? If I have mistaken your motives, then I apologize in advance. If I have mistaken your motives, then please continue your thread by sharing with us the bases of the above referenced trade recommendations. If I am not mistaken in your motives, then it is you who owe apologies. Whichever the case, I wish you well. Best Wishes, Thales

Ok, ok ... now you're just showing off!

I should say so! Congratulations on some fine trading, BR!

Most of my trades are for small lossess and small gains. Inital stop on that trade was less than 25 cents, if I recall correctly. Few of my trades are stopped out at that inital stop loss, but I always have the stop go into the market with the entry order in case of an emergency. Yes, the few runers more than take care of the small wins and losses. Best Wishes, Thales

I beg to differ, my Good Tams. I may not use indicators any longer but I studied and tried most of the common ones and a good number of the more obscure ones. In fact, I could fund several decent small starter accounts with the money I have spent on various software add ons etc. as I made my way through the 38 steps that DbPhoenix has posted here at TL. MACD is certainly presented by Gerry Appel, its developer, as a trend indicator. In fact, chapter 8 of his Technical Analysis is entitled, "Advanced Moving Average Convergence-Divergence(MACD): The Ultimate market Timing Indicator." He argues that across multiple time frames, from monthly to intraday, MACD can be applied in the analysis of market trends, "frequently capable of producing precise entry and exit signals" (Appel, p. 165). He also suggests that while MACD "oscillates" above and below a zero line, that it is not best to utilize it as an overbought/oversold indicator, but that its real value is in its ability to "use divergence to recognize the most reliable signals" (Appel, p. 171). Since divergence accompanies the most reliable signals, then that in and of itself would bring into question the indicators use as an overbought/oversold indicator. Think of it this way: the signal would occur when the indicator is less, rather than more overbought/oversold, but at a price level higher/lower than the most extreme reading. In other words, using MACD as an ob/os oscillator could prove hazardous to you equity. Furthermore, MACD is constructed of moving averages. Moving averages are themselves trend indicators and not indicators of overbought or oversold conditions. Also, the origin of this part of the discussion in this thread was a claim that trend trading "doesn't work," i.e. it is not profitable, and the example used was a system based upon trading MACD signals. So, while I have the greatest respect for you, Good Tams, I must nonetheless respectfuly disagree with your characterization of MACD as an oscilator and not a trend indicator, as well as your suggestion that MACD needs yest another iindicator to, I imagine you would say, "filter" the signals. Best Wishes, Thales

Here is one of my trades from yesterday, long SWN. I put MACD on the chart. MACD would have had you in then out then in then out, rather than rising the trend until the market reversed. Profitable for brokers, not so much for traders. Best Wishes, Thales

I agree (with some reservation) and thank you for putting this so succinctly. What I would like to see is the case laid bare showing that trend trading is indeed profitable so ong as one is trading based upon what price is doing, and not on the results of an arbitrarily selected arithmetically derived value(s) from price. My reservation is simply this: While I do not use and would not use such a system to make trading decisions, I would hesitate to argue that all such systems are unprofitable. With a money management system based upon position sizing based upon predetermined inital hard stop points, I believe that even a random entry method could be profitable over the long term. Best Wishes, Thales

Hi Windsurfer, Thank you for clarifying your meaning. That moves us in the direction of what might prove to be a fruitful discussion, and I hope you will humor me as I do find this to be an interesting topic, and I myself am not at all clear on how I'd respond the facts stated in your report. For the purposes of our discussion, you are of the opinion that trend trading does not work, by which you mean to say that trend trading is unprofitable. Furthermore, for our purposes here, you define a trend in terms of the relationship of two moving averages to one another. Would you agree, however, that such a definition of a trend, and thus what it means, strictly speaking, to be a "trend trader," may not be a universally accepted means of defining a price trend? Would you be willing to accept that, strictly speaking, there exist, in any particular time frame, three possible trends in which price can move: 1) an uptrend, characterized by a series of higher price highs and higher price lows, 2) a down trend, characterized by a series of lower price lows and lower price highs, and 3) a sideways trend, characterized by a series of overlapping price movements resulting in no measurable net movement up or down? In other words, would you be able to agree with me, that a trend is primarily determined by the movement of price itself, and only derivitively and thus, arbitrarily defined by, say, a moving average, which is an average of price movement over a period of time selected by the technician, and not dictated by the observable movement of price itself? I think that is enough for now, as in order for us test your opinion on the workability of trend trading, we must make sure that we are in agreement as to the basic terms of the discussion. I appreciate your patience with me. Thank you, Thales

Hi there, No need take a bow, friend. What we have here, no doubt, is failure to communicate. I think that while you understand what you intended to communicate in your first post, it was not presented in such a way as to allow those of us who are not as wise as you to comprehend. For example, the phrase "trend trading does not work" seems just a bit vague. What do you mean by "doesn't work?" Do you mean that it is unprofitable to trade with the trend? Or do you mean that trend following produces a small percentage of profitable trades relative to losing trades? Or do you mean something else altogether? In my experience, I have found that it is best to define one's terms as accurately and comprehesibly as possible, for we cannot assume that one's interlocutors possess the same understanding as does oneself. Best Wishes, Thales

Slippage has not been a problem. If negative slip occurs, it is usually not more than a penny or two, though on some of the higher price stocks with less volume, e.g. MA, CME, I may at times get clipped for as much as quarter. For example, I did trade MA today and while my stop would have allowed for a 30 penny profit, my actual profit given my fill was only 17 pennies. Those small scalps do add up quickly. For the week, I am up over $2/share traded. If you are a 1500 lot trader, that's 3k. If you are a 200 lot trader that's $400. The trades I have posted here are actual trades, with actual entry stops and stop losses. Most of the time I am filled at my price. I trade the ES infrequently and I do trade it differently than I trade stocks.

How about a sell stop 934, with a buy limit at 926?

Anyone have any thoughts on where the ES closes? 924.75 - 926 looks like a good target to me.

And here is the WU chart identifying entry, initial stop, trailing stops, and exit

WU stopped at 17.81 +.16

raising stop to 17.81

raising stop to 17.73

Long 17.65, stop 17.66

Every night I 1) I scroll through the S & P 500 5 minute and daily charts using freestockcharts.com and Telechart (Worden Bros) software. 2) I scroll through the IBD 100 stock list using Telechart 3) I print out the 5 minute chart of each stock traded that day, and put the chart in a 3 ring binder (I have quite a few binders filled with charts). 4) I flip through the pages of one of the binders just to keep familiarizing myself with the patterns. I am not concerned with my win/loss ratio. I focus on R/R ratio (my average profitable trade/average losing trade). I scroll and flip through the charts to sharpen my pattern recognition skills. Best Wishes, Thales

Long WU @ 17.65, initial stop 17.41