thalestrader

Good. I do not have time to check right now, but I am curious - did you get stopped out at +9 on a trailing stop? Would you have made your +30 if you had not changed your stop management? Or would this have been a -15 trade? Best Wishes, Thales

Weekend Reading Hi folks, This week another Van Tharp article which is an excellent companion piece to last week's Van Tharp Article that I posted here: http://www.traderslaboratory.com/forums/208/reading-charts-real-time-6151-308.html#post85930 I know I have taken some enemy fire on this point, but I really do believe that understanding your emotions and your biases, and subsequently being able to control those emotions and keep the effects of your biases in check the basis upon which success in trading is built. You can have the best method, system, approach in the world, but if you cannot control you emotions and your prejudices, you are doomed. I have a technical article or two I'd like to share this week also, but I am having some difficulty finding them. If I cannot find the electronic copies, I will have to scan my hard copies and post them later. Best Wishes, Thales Doomed - Van K. Tharp.pdf

Well, there are two different customs going on here concerning the 123. As you noted, there is Trader Vic's 123. Another writer by the name Joe Ross uses the 123 as you note also - high, low, lower high. Thus, there may be some confusion. Joe Ross's nomenclature makes for easy labeling and communication on a forum, but Trader Vic's understanding really is the controlling logic to the approach I use. I had an "aha" moment recently where I realized that these two were being presented by me as identical, when in fact they are not. As a result, I fear that many here perhaps fell into the trap common to those who attempt to follow Joe Ross of seeing these little 123's everywhere without every learning to distinguish those that are indicating a tradable trend change from those which are merely a continuation of the immediate trend. Trader Vic gets you in on the change (and to be fair, I do believe, as Blowfish has stated, that that is Joe Ross's intention as well). Again, sorry for the confusion. Best Wishes, Thales

"Great kid, now don't get cocky!" Congrats Cory! That is excellent. But you are right, it is just one week, and in order to get those results week after week you need the discipline to do the same thing over and over and over again, without getting tempted or distracted. Excellent trading! Best Wishes, Thales

Here is what I am looking at - I'll get stopped for +9 on the last four if no slippage on the way out if price comes much closer. Best Wishes, Thales

Hi rigel, After that you lose me. I mean, I read your post, and I understand what you're saying (or what your colleague is saying, I should say). But I truly do not consider such fundamental considerations in my day to day trading. For example, I was long oil for the longest time. I had no idea whether it was going up because of demand for the oil or demand for the futures contracts, but it was going up, so I stayed long of it. I managed to get short of oil soon after closing my longs, and stayed short of it for a long ways down. I had no idea if I was witnessing the collapse of demand for the real stuff or fear of being long the futures contracts (I suspect fear). But it was going down, and so I stayed short of it. I did not sell the top nor buy the bottom, but I managed to get a fair chunk of the in-between, all the while blissfully ignorant of the macroeconomics and political economy of oil. As far as what any currency is going to do, where the mean is or ought to be or where it is coming from or reverting to matters not to me. I am quite comfortable knowing that I do not know, and that I can profit nonetheless. The key is in knowing that I am ignorant. Nothing wrong with ignorance, so long as one is a ware of it. I do not mean to sound disrespectful of you or your colleague. Far from it, I just saw your post now, I wanted to be sure to respond to it. I simply do not have an opinion of the sort proffered by you friend as to where the EURAUD is heading. On a long term view, if I were short of it (and I am not - never traded it myself), I'd probably still be short, though I would have booked some profits here if not long before. I'd look at the first 123 on a daily chart as a chance close remaining shorts and possibly to initiate a long position. I think 1.5900-1.6300 offers a potential zone of stiff resistance (not that a panic couldn't send price through there in a few seconds). We'll have such a buy point (daily) at 1.5800 or so. Then, manage it according to natural stops if and when such stop s develop (or the trade gets stopped out). If I were looking to build a position, I'd add at new highs after pullbacks, and also watch for subsequent 123's as they become visible on first the weekly, and then the monthly charts. Best Wishes, Thales

Having been up 56 ticks on this, and it being Friday, you all will forgive me for having taken 1/3 of my contracts off for a +50 tick profit while sliding my stop loss to break even, right? And if I get nervous should price get back close to 1.6250 and I close the whole position out with the click of a flatten button, you'll understand that as well, right? At any rate, price has yet to put in a decent natural stop of like proportion to the trade, but since it is this late in the week, price can get a bit unruly heading into the absolute illiquidity of the weekend. Best Wishes, Thales

Cory gets it. I suspected that he had it yesterday when he posted about getting ready to look for a long on the EURJPY. But now I know he does. You're going to do fine, Cory. There will be disappointments along the way to be sure. But do not allow yourself to get distracted from this approach to something else, because you have the basics down, and it is a matter of time and experience to sharpen your focus and attack. As Indiana Jones would say, "Great Kid! Now don't get cocky," because the market is a very effective at humbling you when you need it. Best Wishes, Thales

Digging in or chipping away? (showing spot GBPUSD here) Time will tell ... Best Wishes, Thales

Short 1.6261, with targets ... I wish this were any day but Friday to be playing a swing this large. If I am not stopped out by the close, I will exit by the close. Best Wishes, Thales

Here is the 6B showing a potential short opportunity a somewhat larger degree of trend than many of my posted trades. Best Wishes, Thales

Best Wishes, Thales EDIT: Take your pick ...

I see them all. Is it one of the images in the thumb nail? Or is it embedded in the post? If it is a thumbnail, but you se all the embedded images, then you are not missing anything. Best Wishes, Thales

This may be the most important post I have made in this thread from a technical perspective. As you are disputing of my assertion that all trend changes start with a 123, let me repeat the entire context of that assertion before we proceed to examine it further: Let us keep at the forefront of our minds the notion that like swings must be analyzed with like swings. The degree of swing must not be left out of the mix. I am starting with your second chart (it just worked out that way). Here is the second chart as you posted it: And here is what I see: In this chart, I see two clear 123 short entries. The first would have made it to both targets, while the second larger degree would have made 50% PT1 with a BE stop (actually a stop on reverse to long at about the level of the long dotted magenta line). Blue line entry, red line stop loss, move to BE at the magenta lines (1.27 extension) and take profits at the green lines (1.618 and 2.618 for the first example and the 1.618 and a stop and reverse at approx. the 1.27 in the second). Also, for what it is worth, you do not need a smaller time frame to see the initial 123 off of the top - Just use what you know about how candlesticks are constructed and you will find a 123 there. I do not mean to imply that I would have traded that little top, and I am certainly not going to recommend anyone else here tries it either, especially if he or she is new to this type of trading. But it is there, nonetheless. Now, here is your first chart as you posted it: And here is what I see: I think you'd agree that without dropping to a lower time frame, there are two visible 123s of like degree shown at the double tops in this chart. The first would have resulted in a break even effort, the second would have traveled to both PT's. If you go back through this thread, I used to post trades like these often. I take them every day (well, every day that such an opportunity presents itself). I no longer post them as I do think that many folks here appreciate the necessity of uniformly applying this approach to swings of like degree. So I try to post only those opportunities that are at least a degree or more larger than these. For example, I also see on your first chart this larger short opportunity, which also traveled to both TP's: Now, here is your final example: And here is how I see it: A break even effort, but an opportunity nonetheless. In this case, I miss out on PT1 and PT2 due to my MM guidelines. But, I also see this opportunity: In this case, a larger degree long entry presented itself, and within that larger trend, a smaller degree 123 gave an early entry opportunity for the aggressive trader, and both of these degrees are larger than the degree shown at the very initial change from down to up. Every single trend change of every degree exhibits this pattern. It does so by the very definition of a "trend." An up trend is a series of higher highs and higher lows. There cannot be a series without a first instance. A down trend is a series of lower lows and lower highs. There cannot be a series without a first instance. Unlike others who assert that volume, rate of change, venus, mars, or mercury leads price, I have always here looked to nothing other than that which is contained within itself: Price itself. I read an article in SFO this month where the author uses, of all things, the example of Plato's Cave, and he asks if price is not the shadowy false images on the walls and reality is some larger thing called trend? He asks "[c]ould price be the illusion and some force of nature we call "trend" be reality?" He misses the point that price and trend are inseparable! He commits the same error most, perhaps, 95% of all folks commit who attempt to trade: He tries to reduce price further than it can be reduced. And price, like people, cannot be reduced without distortion and damage. Trend and price are one. You cannot cleave the body from the soul and still have a living, breathing human being. You would be left with nothing other than a dead shell. And what can that dead shell tell you of the loves and hates and dreams of the man or woman who had animated it? Nothing at all. Likewise, you cannot cleave trend from price. And if you cannot cleave trend from price, you cannot disregard that trend exists at all levels, diffuse through price action. When I hear someone say "I could have seen it if I had dropped down to a lower time frame, I know that that person has not yet grasped price movement. He is watching bars or candles, not price. I have said many times that I do not need a 1 minute chart to see a small degree 123 so long as I am watching price live. I do not even need a chart. I just need the DOM. If you remove considerations of trend, which by necessity includes considerations of the degree of trend from price itself, what can price tell you of what it is doing and where it is going? Nothing at all. Price is its own leading indicator. It is so because it is inseparable from trend itself. And it is by anticipating trend correctly that we profit, (and by cutting our losses short and quick when we do not anticipate it correctly). Every trend change if accompanied by a 123. The problem for the trader is to choose the degree(s) of trend he or she is comfortable trading, and to learn to recognize and distinguish these degrees from one another. This is a process that is necessarily coincident, as in order to decide the first, one must first learn the second, and by learning the second, one will come to know the first. A good example here among thread participants would be to compare daedalus and myself. Daedalus obviously likes to trade a degree of trend that is consistently smaller than my favorite. He knows how to recognize changes in his degree of trend. He is taking trades at levels that do not even register many times on my radar as anything more than perhaps a possible first swing off a low. He is taking profits, and I am waiting for a pullback to a possible higher low that will get me long on a subsequent break to new highs. Two different traders trading the same approach but at different degrees of trend. Every change of trend has a 123. In order to capitalize on what I do beleive is an inherent edge to trading these 123's, it is imperative that one learns to distinguish degrees of trend from one another. Along with that, as Marko has warned several times, you must not only learn to distinguish degrees of trend from one another, but you must not mix swings of different degrees when planning your trades. It is one thing to trade a 123. It is quite appropriate to trade a 123 within a larger degree 123. But you want to avoid at all costs trading a 123. Best Wishes, Thales

Pound hanging tough while the Euro is getting pounded ... Best WIshes, Thales

Current view of the EURJPY ... Best Wishes, Thales

I added two sets of thin black trendlines to mark off the manner in which this decline, though of sizable extent, is not packing the same momentum as its sister did yesterday. The solid lines show a larger movement with declining momentum, and the dotted lines show further loss of momentum the further price travels. None of which is to say that it may not catch a second wind and collapse still further, but for now, this down leg has been less robust than the initial leg down, and a decent reaction rally or even outright reversal may be immanent. Best Wishes, Thales

Hi Folks, here is an interesting (though Blowfish would likely say esoteric) little pattern that I see often in the currencies and also gold. Price makes a large move down, then a choppy little rally, followed by another leg down. At this point, it looks like a potential ABC. However, typically, one expects A=C, but in this case, C has extended further from the B top than A had from its top. What I have noticed is that if your draw a trendline beneath the B swing lows, and measure from the trendline break, a good measured move target can be found. In other words C as measured from the trendline break = A. This is not predictive, and it does not always hold (if this decline is the real deal, then a test of the nearly year old range may be in order, measured moves be darned) If I were still short, this would offer me a possible profit target. I would also be interested if a 123 develops near the level of the green horizontal line. The Blue lines are equal, and measure the extent of the first leg down (A swing). The back line is a simple trendline drawn along the bottom of the reaction rally (B swing). The second blue line is equal to the first, and measures downward from the black trendline break. If nothing else, if gives me something to watch while waiting for an opportunity. An actual A=C measured move would have occurred had a sustained rally embarked from the penultimate low visible in this chart. Price does appear to be possibly etching out a small ending diagonal as well. Of course, small diagonals sometimes grow quite large. No need to jump the gun, as the next opportunity is never far away. Best Wishes, Thales

You've mentioned this twice now, Gabe, but each time you snipped this phrase but leave out the context. Perhaps I should have said "if you get a choppy pullback, wait for a push to a new high that stalls and presents a clear 123 going the other way." Here is the chart price action in question. The area in the first rectangle appeared very choppy, sloppy, and overlapping. When I see that after a move with obvious momentum begind it, then unless I have a real big picture S/R level right there, I am inclined to wait for another push higher (or lower, in the case of a short) and wait for a more clear 123, which I think the price action in the second rectangle represents. The reason for waiting is that if I can count three swings, and price does not seem to commence a sharp swing reversal, then price is likely to push for one more swing, making the entire move a five wave affair. I do not make much of Elliot Wave theory here, but as I have said, I make use of it myself. This is one of those places where I find it helpful. Best Wishes, Thales

Excellent! Best Wishes, Thales

Thales's Secret? Not secret, but probably neglected. Blowfish, you have been very helpful to me today, as you have provided me again with a perfect opportunity to make a point that I want to make, this time in response to Traderunner's charts of the last three day's of his trades. (Please don't think I'm picking on you, Traderunner as I do truly admire your efforts). In fact, it is a point that is too often overlooked here, and perhaps so obvious to me I fail to mention it as often as I should. I think both you and kiwi are both very clever, and I am feeling the heat of being on the other side of the trade from both of you on this one, so I am doing some thinking and rethinking - in addition to being terribly unoriginal, I do think I have a fair degree of open mindedness. I am very happy that you both have been willing to share your insights here - I for one have learned new things from each of you. Yes, Vic insists on trend line breaks. In fact, the "1" is not strictly speaking the high, but the break of the trendline itself if I recall. But you do not sell the break, you wait for the retest of the high, then sell a lower low. And this is precisely the point I wanted to make in response to Traderunner's trades. On any given day, there may be 1-3 good solid opportunities on the 6E, the 6B, and usually only 1-2 on the 6J. From what I have seen of the EURJPY, I would say 2-3 good opportunities there as well during a 24 hour period. So when I see someone posting charts with 5-7 trades in one day, I would say that there is some over trading taking place. I think your point concerning Joe Ross's caution is extremely important. Back in November I posted the following: If you look at the trades I post here, I am always (at least, almost always) looking short after a rally or long after a decline. I will add to a short in the middle of a decline if I am already short and price indicates it has not spent its energy. I will add to longs in the middle of a rally if already long. But you do not see me looking to buy the second 123 or sell the third 123 as we sometimes see posted here. In my mind, I got one shot to get into a move. If I miss it, I miss it. I'll catch the return trip. I would only add that for every rule or guideline I post here, I have a bushel basket of trades in which I broke with one or more. But I rarely break with this one. Best Wishes, Thales

I'm kicking myself for not having snapped a pic of this ending diagonal on the GBPJPY before it broke loose, but if you have bar replat mode, you should be able to see it well before the fact. Best Wishes, Thales

You'd be off and running and close to PT1 if you had traded this... Best Wishes, Thales

Depending upon your market maker, price either tagged or stopped just above the 423 expansion of the first leg down off the high, i.e. 423% of 1-2 as measured from the high of 3 using JR's terminology. So, this would be as good a place as any for the bears to take a nap and the bulls to try and push back. 131.25-131.50 looks to be a level at which something important could take place. Best Wishes, Thales

That's too much back and forth now, and if it going lower, it will have either to go higher first, or go lower without me. Best Wishes, Thales