thalestrader

My concern was where you added blue lines above each high and wrote that "by the same logic each of these is a long entry." 1) That is not the case. Each new high is not necessarily a good entry point, e.g. some highs occur at prior brak down point, and I wouldn't want to initiate a new long at a prior break down point; 2) your note distracts from the logic that daedalus's version shows. If you just want to line up thearrows along the swing lows, that is fine, but you added additional annotations that were not correct and did not accurately convey the same logic that daedalus's post did. I did not give an explanation because I wanted to hurry up and ask you to delete your chart before it would have been too late to do so. I think I have shown that I am not a thread dictator and I am not a censor (other than I ask for no profanity as my daughter does read this thread). I didn't mean any offense. I just think daedalus's chart is an excellent tool for folks learning this approach, and I wouldn't want folks to be confused by your additions. Sort of like I wouldn't want someone to draw a moustache on the Mona Lisa. Best Wishes, Thales

Gabe, Really focus on this thought from daedalus's post - everything follows from this concept: Simple yet profound in its implications. Get this, and you will be more likely to get "it" as the saying goes. Best Wishes, Thales

Gabe, Go back to daedalus's post, and read it a few more times. Best Wishes, Thales

SRLS If this thing weren't basically a LEAP with no expiration other than bankruptcy, I'd have cut this thing loose today if this were a live trade. As it is a paper trade, I'll hold it for its inital stop loss or a trip to its recent highs at $4.20, and if it breaks abve there, I'd hold for a trip to $5.20. Sure seems like a tough way to make a measley 60 - 140 pennies/share. You know what? I'll close this tomorrow on paper. I will call it a sell limit at $3.84 or market on close if price doesn't get there. Of course, having said this, tomorrow will be the day this thing either opens below my stop or gaps open 20 pennies higher, limits me out, and doubles. Best Wishes, Thales

AIXG This was an end of year paper trade. So this is a paper update. Nothing has changed other than that the stock has moved up $3.59 from the buy point. I'd still hold this with the initial stop of $31.25. I'd wait for price to test its highs at 38.34, and then decide whether to adjust the stop, buy more on a break up, or take profits and wait. Best Wishes, Thales

I wish I had thought to express that idea in those terms myself. That is an excellent, excellent post, daedalus - one of the best here in a while (and that's including anything I have had to say, that's for sure. This is one of those posts that ought to create a few "a ha" moments out there. If we still had the Post of the Month system here, I'd have nominated this post of yours. Thank you for your effort. This thread will stand or fall based upon the efforts of good folks like you stepping forward and offering your thoughts and insights. Best Wishes, Thales

1) The rationale is simply that if price breaks down through a support level, I do not wanto to be a buyer at the first test of that level. I want a high above that level, then a pullback, and then I'll buy the next higher high. That is why I thought your first trade would be not trade for eme, though I'd likely have tried the second ling entry myself. 2) Yes, you have ahigh and a higher low, but this is in the middle of an uptrend. As I said in my chart notes to you, you could buy there, but you must use a natural stop (i.e.an actual pivot level) and not a mechanical fixed tick stop (fixed amount puts your stop below that pivot low). A 123 as I understand it and trade it is the first sequence off of a support or resistance level or after a significant base within an ongoing rally or decline. This was not the first High-higher low in this rally. As I see this it was simply a shallow pullback in a rally, and you bought the new high. I do the same thing, all the time. I just consider this a different entry from what I call a 123. I have no problem with the trade there, other than that it does not meet the criteria of the exercise, which, as I understood it, was to buy/sell 123 sequences. You are free to disagree with me, however. I may have misunderstood. Best Wishes, Thales

Absolutely. I was making my point in relation to your mechanical exercise. Best Wishes, Thales

By the way, what happened to Cory today? Best Wishes, Thales

me too Win. lose, or draw - the only thing guaranteed is that every trade will result on only one of those three outcomes. But, you go to be in it to win it. Best Wishes, Thales

Ok Folks, I'm quitting 'til Tokyo. I'll maybe pop back in off and on between now and then, but maybe not. I had the sudden realization over Christmas that my son will be starting kindergarten in September, so I am making a concerted effort to spend more afternoons with him between now and then. Also, a reminder, any trade questions, chart questions, etc. should be addressed here in the thread, and not by PM. If you have a question, then someone else probably has the same question as well; and if I am not here to answer it, there are a bunch of good folks who hang out here or should be able to take a crack at it for you. I do try to go back through the thread and addres any posts that have accrued while I am out. If you ask something and you feel I have missed it, just repost it again. Best Wishes, Thales

If you can't risk being wrong on an anonymous internet forum, how can you expect to be comfortable risking money in live trades, right? You have to be in it to win it, and I agree with you that there is a nice 123 presenting itself right now that may indicate a short opportunity is at hand. My main point to you above was that you do not need to think about whether or not to take a trade if you have defined your trading rules and price action sets itself according to your rules. There is no think, only do, as Yoda would say (ok, he'd say "there is no try, only do," but you get the idea. Best Wishes, Thales

I was watchng the EURJPY closely to see if I should get short of it as I stood down on the initial leg of the decline. If you look closely, you can see that price made three little pushes down, with the final push making a new low by just a tick or two, and then price rallied strongly nearly 15 ticks in a few minutes. This is basically the same trade as the 6B trade I posted, but the timing is compressed. I do not drop down to minute bars or five minute bars on the currencies (unless I am away from my desk I want to see the "order of events" if they are not immediately clear to me). Otherwise, bars are irrelevant. You could do this just watching the DOM, but it is much easier with a chart. At any rate, think about the 6B trade, and also thing about the George Lane post I just made in connection with that trade - three drives to a bottom, buy after the first HL after a potential double bottom. You may not have seen this now, but if you are trying to trade the approach I have presented here, eventually, you will see these. This reminds me of the pin bar post I made back in October or November. Use the search thread function and search for pin bar. I made a post about a specific pin bar, and Kiwi and Blowfish both discussed it as well. Best Wishes, Thales

Well, the way I trade, if I get a good 123, I trade it, especially if it occurs in the vicinity of anticipated suport/resistance. I do not just go short at resistance or long at support without some sort of indication that that is more than likely the right action to take. Hence the reason I look for clear H-L-LH, etc. I would not be in a hurry to initiate a new long here on the USDJPY either, not without a pulback, a 123 with the 3 eing a HL, etc. Yesterday it did decline into an area I had anticipated to be support (see blue rectangle on 4 hour chart below). So yesterday, I was looking for longs on the 15 minute. On the monthly, I am watching for a possible break out above an ending diagonal that for what might be a decent rally (chart attached). Overall, if push came to shove and someone put a gun to my head and said I had to take a position in the dollaryen, short or long - I'd rather be long of it here than short. But, since there is no gun to my head, I'll wait for a 123 indicating it is time to try a short, or a break above December's highs to go long. As for thinking, I really try to do as little as possible. I have lost more money over the years thinking than I care to admit. Have rules for when you enter, and rules for when you stand down, and you will protect yourself from your thinking. Best Wishes, Thales

I gave a rather facetious answer to this question when it was asked. My response was that George Lane taught me that a trader must make it his job to make more money than his wife could spend. My 6B post above reminded me of Lane and reminded me that I never came back to answer this question properly. From a seminar that George Lane conducted nearly 14 years ago I learned a few tools that I use all the time: 1) Three drives to a top/bottom 2) Elliot wave is a viable theory, so long as you use it for distinguishing tradable moves from corrective moves 3) Always look for a HL after a double bottom or a Lower High after a double top. So while he may be known for his development of stochastics, he was nonethless a consummate price action trader. Best Wishes, Thales

Current EURJPY starting wedge at the highs in the vicinity of PT2. A break below indicates a pause in the uptrend (not necessarily a reversal). A break above this type of action often is accompanied by a sharp impulsive thrust. Best Wishes, Thales

Hi EmNQ, You don't need me or anyone else to tell you whether to take a trade before you take. Here is my 6B trade. Again, I'm sorry for not posting the chart before hand but I was swamped and had no time for annotating a screen shot. Here is how it looks to me, and though it is after the fact, the fact that you saw it and posted it before the fact shows that hindsight wasn't necessary. Best Wishes, Thales

You have me confused. You say end of wave C rally, and yet you mark on your chart end of wave C at a low. Also, I see the 5 waves down, but why are you labeling wave 2 as A and wave 4 as B and wave 5 as C? Maybe Marko can help me here. Marko, do you understand what his count is showing? Best Wishes, Thales

Nothing aggressive about buying a 123 at support, right? I can't tell you now if it will be a winner or not (you can check with me later), but I'm in it myself. Sorry for no chart, but I have my hands full here. Best Wishes, Thales

One thing that I have not mentioned, but that you might want to stick in your notes along with distinguishing impulses from corrections, is the factor of time. Take a look at the EURJPY since last night's Tokyo low. See how much territory it covered on its rallies, and how quickly it did so. Look at how quickly it rallied from its low at the Frankfurt open to its high a little over two hours later. Then look at this morning's decline. Nearly 5 hours from top to bottom and it managed to retrace only a little more than a third of its last rally (a rally that took about 1/3 the time of the decline). And now look how quickly it recovered the entire 5 hour decline, making new highs in the process. When price moves quickly, that tells you something. When price chops slowly, that tells you something as well. It is on its own nothing to trade on, but it does offer valuable information that can help you make decisions when added to other information. Best Wishes, Thales

Now I got you. Best Wishes, Thales

No problem, I could always tell what you were doing from you chart and your text. Keeping the colors standard does two things though: At a glance, anyone here knows exactly what opportunity is being communicated by the chart, and 2) I have a group of friends and we share our charts amongst us. I do not have to redo my charts for them (One of them participates in an FF thread, and he uses the same convention). Eventually, perhaps, it will be an international custom! Best Wishes, Thales

I do not see anything in your chart that would tell anyone why they should be interested in your chart, let alone how one might view a trade opportunity on your chart. I do not do much with the 6A/AUDUSD, but here is how I would present the chart currently. The blue line is a short entry, the red line is the intial stop loss, the magenta line is the point at which I would move my stop loss to break even, and the green lines are where I would scale out with profits. These are the conventions of the this thread, and I would ask that everyone follow them in future contributions. If that is too much, then as I said, you are free to start your own thread. Best Wishes, Thales

I usually go to break even once price reaches a point that is equal to my initial risk, or between 1.27 up to 1.618 of the initial impulse leg (points 1-2) of the trade. In the case you mention, I was shorting just 15 ticks or so above support, and price had etched out a potential ending diagonal pattern, and so I go to break even very quickly, once price moves 5-7 ticks in my favor, in such cases. If you go to breakeven at +5 ticks all the time, you may as well stop trading, because you will have too many stop outs at break even. It is not uncommon for a trade to go +10-15 and then retrace to +/- 2 or so before heading on its way. You will need to come up with your own rules and guidelines over time. Best Wishes, Thales

No problem. Just remember, a chart tells very little about what you are seeing, and therefore nothing as to what you want us to see. As I recommended in my PM to you, you should spend some time reading the thread before posting so that you get an idea of what we are trying to accomplish here. If what we are doing here is not what you are looking for, then you are free to start your own thread. When we post a chart, we expect to see a trading plan that telss us your prosoed entry point, your stop loss, and your profit targets (or if your are trailing a stop, just tell us so). Read the some more of the thread, and look at our charts and how we post our perceived opportunities. I am certainly open to EW traders, and I have no problem with swing traders, but simply posting a chart without any explanation or indication of how one would trade based upon your analysis is without much value. There are more than enough thread like that on the internet. This thread is for posting real time opportunities and showing other traders how to spot those opportunities and manage those trades for themselves. Read the thread, then post. Best Wishes, Thales