johnjohn1hew

Took one trade at the breakout of 77.50 and was stopped out break even. This breakout was on little activity so i should have waited for a possible retest. When the retest came, i assumed it was short covering given the substantial increase in volume, so i shorted at 77.75 with my stop above the bar that broke resistance and continually set my stop above resistance points and was eventually stopped out at 75.00 after price had failed to successfully break below 74.00 support. Now price is just chopping around at the midpoint of the 77.5-74.00 zone. Most likely because it's lunchtime.

S/R levels for tomorrow.

Ya, i was reading something about that today. Easier to remember?

My levels for tomorrow. If price tests the highs (around 1780.00), i'll look for signs of strength or weakness and then go from there.

Took a short around 48.75. Demand did not appear to be sufficient to overcome the supply that was coming in right below a marked resistance level (a lot of activity, little progress). So i took the trade with a 3 tick stop. Stop was hit, position was closed.

Today I used the 30 second chart and Yesterday I used the 5 second chart. I do not have any other reason for using these intervals other than that they are what I chose to use - the 30 second shows more than the 1 minute and less than the 5 second... I don't know. Note that I am just starting out and I have a lot to correct and develop in my strategy. So far, I know to find S/R levels to have for the next trading day; to watch price movements and volume at these levels of S/R; to not over-analyze the market; and to let winners run and hopefully they will be larger than my losings that I cut short when trying to get a good entry.

The lines represent support and resistance.

Levels for Monday's trading:

Low volume test of 13.25 (top of S/R zone i had marked) had me take a long and i got 14 as my entry. My first stop was around 13.25 and then i progressively moved it up under supporting points. When i was in the long trade, my stops weren't hit, so i didn't exit....as simple as that. I ended up being stopped out at 25.00 The short trade thrusted upwards on low volume and appeared to be unable to hold, so i took a short and got in around 30.75. I had placed my stop just above the tail end of the thrust at 32.00. I then moved it down to break even and then to the top of the S/R zone i had marked at 29.75. My stop was then hit and price eventually made a test of the high. Edit: i did not get a chance to take a screenshot of the short trade when i got stopped out.

Levels for tomorrow:

At the 98 to 99 level that i had marked, price offered an opportunity to go long. At 96.25 price was being supported and went up from there. Supply drove it down a few times with each time on less volume. Then at 97.00 supply ran out and the buyers had a great opportunity. This is where i could have entered. But i didn't since my ninjatrader was not open and i was in a psych101 lecture. Price tested this point again, and was supported. This could have been another entry point if i had missed the first one. I might not even have noticed these points in real-time, so it is impossible to say what i would have done. That is why i need to develop a trading plan, so that i know exactly what to look for and what i am going to do. For one of my actual trades of the day i got in around the 1712.00 zone of resistance i had marked. Price hit the level, retraced to the previous swing high and was met with higher volume, so support came in. I took the long based on this action. I was stopped out around 1713.00. My reasoning for placing my stop here was because i thought it was a supporting point. But in hindsight it actually wasn't. Price just died off because of a lack of supply and not because of demand. After this happened, price took off, which leads me to my second trade of the day. For my second trade i got in around 1716.75, but it was not at any important level of S/R (that i had marked anyways) so i really should not have taken it. My reasoning was because of the pullback after the sharp rise was fueled by drying up supply and demand was starting to come in. So i took a long. I watched price go up to about 22.00 and then right back down to where it hit my stop at 18.75. In hindsight, at the 22.00 high, demand wasn't coming in on the test. This could have been a signal to exit. Also, i had not noticed a possible level of S/R in the 22.00 to 24.00 zone. This could have helped in my exit as price would have been just at the bottom of this zone and demand would not have appeared to be sufficient to push price farther. Do not be too critical of what i have laid out here. Most of this reasoning is in hindsight, so i need to work on applying it in real-time. I also need to start developing a trading plan.

My levels for tomorrow:

I don't know where to post this so i thought here would be fine. Price hit resistance at 77.5, is rejected and supply significantly overwhelms demand and drives price down to 81.25 (a short-term support level that i did not have marked). 81.25 is rejected and the test is unable to make it to the low on low volume, indicating the supply required is not coming in. I took this trade and was stopped out around 88. I did not have as sound a reason for taking this trade as i have outlined here, but i had an idea that price was rejected at 81.25 and the test was a weak one.

I think value is just a natural occurring phenomena inherent in all markets. It's not a method; it's not a setup. It's just a result of what is. It is extremely hard for me to put it into words. I don't think about value as being a mechanical 70% area - that is just too fixed and inflexible for me. Prices at which volume is most abundant are levels at which traders want to trade. This is where i would classify value taking place. I wouldn't say that traders seek value; it is something that they just run into. Something that is forever changing with the swings of their fear, greed, and need.

I don't know. Based on the volume of the e-mini contracts traded daily a large trader that could gain a following would have to be absorbing a hell of a lot of activity in-order to manipulate price and gain a following. I know there are large traders present in the market, but if you look at the tape, exactly when are they buying or selling? I never see any huge orders going through that would need to in-order to cause any significant movement. I think thinking about who is trading is irrelevant and that either way price (+volume) will show strength or weakness on its own, no matter who is or isn't driving it. All we need to do is measure the movements and act on our judgements.

Thanks, i have the book. I got it months back.

Ya, we aren't contradicting each other. You have described the laws of supply and demand. It is very basic stuff and I don't mean to make it sound complicated, because it isn't. Supply and demand make price. Effort (makes up supply and demand) drives price (the result). Individual methods make up volume, and thus price movements. That is, the traders behind price are driving the market to move and the majority of them are basing their actions on a method of analysis. If the majority of these methods are telling the traders there is strength in the market, then there will be strength in the market and someone who is looking at price and volume can usually determine the presence of strength. They can determine the balance of supply and demand and trade accordingly. This could be called cause and effect. In order for a movement to take place, then there has to be a reason for the other side to not take the other side. Thus, if strength has presented itself, then the supply side will be light and the demand side will accumulate and overcome the supply to drive prices upwards until supply comes in again (there are a lot of things unaccounted for in this statement, so do not be too critical). All judgements using volume and price need to be flexible because who really knows what the hell is happening? We can only observe and form an opinion on what we see and believe, and then trade accordingly if we feel confident in our analysis. All definitions and theories need also be flexible to be in-sync with the flexibility of markets. I am not trying to change opinions nor to make myself look like someone who knows anything. I am trying to learn what the hell there really is to all of this and try to really learn it. I learn best by explaining everything i believe in because it helps me understand it more thoroughly. I applaud you for showing some courage in stating your opinion and for not being one of those people who hide behind their method and contribute to a discussion nothing but "my opinion differs from yours" - LETS DICUSS WHY THEY ARE DIFFERENT AND MAYBE, JUST MAYBE, WE WILL BOTH LEARN SOMETHING NEW! If there is a flaw in my understanding of the dire basics, then i can't go on until that flaw is worked out and corrected. If there is a flaw in my understanding of what there really is, then I am wrong, and i need to become correct or else i am doing nothing but hiding behind my method. I also realize that all of this theory means nothing until applied in real-time and in foresight. I liked this statement the most:

You asked me to define market action and not specifically price action, so I defined market action. Price action (effort, effect) is a part of market action. There can't be much less to what I stated. If I have missed something then please point it out so that it can be better understood. I know that everyone's trading methods are all subjective and based on personal opinions, but i still like to believe that their is value in discussing all the various definitions and perspectives. Also, I find the Wyckoff section to be very useful in understanding market action, but market action has been around since the beginning of the financial markets So, the principles apply to all methods based on market action (but not so well to methods that are not based on market action).

The action of the market. The character of price movements revealed through price spread and volume. Price and volume are the result of: supply and demand, effort and result, cause and effect. Effort is to result is as volume is to price. Effort is supply and demand and price reflects the imbalance/balance. The cause drives volume (effort) to produce an effect on price. The cause is what causes trades to be submitted, which causes the supply and demand to imbalance (effect). People base their trading on a lot of different methods, and their action makes up the cause. You weigh and measure these through price and volume to form a judgement. A few quotes from Wyckoff: “Tape reading and chart reading enable one to judge the future course of stocks, by weighing the relation of supply and demand. This can sometimes be done from price movement alone, but if you consider also the volume of the transactions you gain an additional and vitally important helpful factor.” “When you study charts, look for the motive behind the action which the chart portrays. Aim to interpret the behaviour of the market and of stocks – not the fanciful patterns (“gaps,” horns,” “flags,” “pennants,” etc.) which the charts may accidentally form.” “From the volume and price movement we find the greatest aid: (a) in determining the direction of the coming moves; (b) deciding wen to buy or sell, when to go long or short; © when a stock is on the springboard, and (d) when a move is culminating.”

Yes, i did see that it was asked a year ago... Does that have any reflection on the validity of the question? I found this question when searching the TL forum. It popped up, no one had answered it, so anyone who can use this information is free to do so. What is your view on market action (since this is that type of thread)? Thanks.

Price moves are caused by an imbalance between supply and demand. Volume is the quantity of contracts that have been traded and volume is what supply and demand are made up of. Every trader bases their opinion on something. There are a lot of methods out there. You cannot just say that a move is the result of professionals because you most likely have no way of knowing that. A lot of people just want to put a name or a face to action that they cannot make any sense of. When you strip the market down to nothing and you start to examine it for what it really is, then you will start to see truth. You know, there is a lot of bullshit on top of everything, but if you just keep digging you will eventually find what was buried there long ago.

I see volume and i see price. Both of these elements are plotted at the same time. People base their actions on the movements of price (+volume). Price and volume lead price and volume. This is what makes sense. This is not some random theory based on nothing, this is what happens. If you watch a real-time, 1 volume bar chart you will see that for every one unit of volume a price is plotted.

A trader is not a dedicated bear or bull. A trader is a person who goes with his/her opinion of the movements of price (+volume). If the traders who believe price to be unacceptable overcome the traders who believe price to be acceptable, price would not stay in a range, price would vacate this range and start trending. In a range, traders find the top to be expensive and they express this belief by selling; and at the bottom they believe these prices to be cheap, so they express their belief by buying. They believe the top to be expensive because of a lack of buyers, or because of previous levels, or because of whatever. They believe the bottom to be cheap because of a lack of sellers, or because of previous levels, or because of whatever. They are selling at the top because they find price to be acceptable and they are buying at the bottom because they find price to be acceptable. If this continually happens, then a range of acceptable prices is the result. When the levels inside the range are no longer acceptable, price may move in the direction in which acceptable prices reside. By saying that "price may move in the direction in which acceptable prices reside" i mean that in order for prices to move, a force has to be driving them. If traders are unwilling to exert a force, then price will not move. On the way to the top, buying is taking place because of short-covering and/or because of new longs. The short-covering traders have found price to be unacceptable, so they take their profits. The new longs have found prices to be acceptable so they establish their long positions. Eventually both types of buying will cease. The short-covering will cease when their are no more traders their/willing to cover. The long buying will cease when prices are at a level that is unacceptable. When the long traders decide to sell, it will be at a level of unacceptable prices, as they no longer want to hold their positions. At this level, new shorts will also enter as they find price to be at an acceptable level. This action will take price down to a level of unacceptable/acceptable prices. Value is an occurrence of an acceptable/unacceptable range in price. The buyers, at the bottom, believe price to be more inclined to go up and the sellers, at the top, believe price more inclined to go down. This type of analysis is not a methodology built on top of what occurs in the markets, it is what occurs in the markets. Value is just what happens as a result of traders trading. I stated that i do not believe this idea to be accurate. Here was my post on the subject. Also, i focus on the relationship between volume and price. I can make no deductions based on volume alone. Deductions can be made on price alone, but i choose to use both, as i believe volume to enable me to more accurately guess the reasons why price is moving the way it is.

My statements were ignored in the Hinges thread, so i decided to move over here. Here is my definition of a hinge: It is an occurrence where neither side has an inclination to see price head anywhere (due to the testing of their patience), represented by the traders' lack of participation. What ever buyers are willing to take price up, realize that they will most likely just be overcome and price will go back down and the sellers do the same thing when they are getting closer to the support. These movements become smaller and smaller until price is practically a straight horizontal line. When price becomes nothing, i conclude that the previous directional disposition is eliminated and a new movement (whether it is in the same direction as the prior movement or not) is it come. What is your opinion?

Traders enter the market to make profit. This search for profit causes trends and congestions. The trend is the path and the congestion is the destination, from which a new/old path will eventually be followed. Price moves in a trend-like fashion as the sellers are in a disagreement about value. When one side find prices to be unacceptable, they will hold off until price is at a acceptable level. This is the basic idea of a trend. When both sides find price to be at a acceptable level/zone traders will trade and price will remain at/inside this level/zone. When a balance occurs, traders believe value to be (relatively) at the same level. Price is being supported at this level and (ideally) many trades should be taking place. Price remains in a zone because at the top price is being resisted and at the bottom price is being supported. I.e. at the top sellers are finding prices to be high enough and acceptable, so they sell; and at the bottom buyers buyers are finding price to be low enough and acceptable, so they buy. Normally at these extremes the force driving price towards it will be overcome easily. Generally, at the top and bottom of a value zone, volume should be the lowest and it should be the highest in the middle. When volume is highest in the middle, the majority of the trades are taking place as a result of a compromise by both the buyers and the sellers. Price is not too high and it is not too low. When a zone is no longer acceptable, price will move. But in order for price to move, one side has to find it unacceptable and the other has to be in agreement, or price will go nowhere. Example: Sellers no longer find the range to be acceptable, so they ease off and now the buyers are able to take price higher if they so desire to. If they believe price to be cheap, they will easily drive price upwards. If they believe price to be expensive they will hold off, thus both sides are holding off and the result is little to no trades and price goes nowhere. "Generally, at the top and bottom of a value zone, volume should be the lowest and it should be the highest in the middle." This statement may seem to be contradictory to some, but i believe that a true value area should be confirmed by high volume as then traders are actually expressing their agreement. When volume is low at this point the traders are just lacking - not indicating value, but a withdrawal.I believe value should be a clear indication by the traders and not just a result of a lack of trades. I think i can understand why some believe a balance should be on light volume: It is because the majority have traded and expressed their opinion in the market and the result is an interesting meeting in price of the buyers and sellers. A price at which their remains few traders, because the majority who wanted to express their opinion have and the others are waiting for a sign of a new trend. What's your opinion?