Trend Lines: How to View Your Charts - Part 1

[Trend Lines: How to View Your Charts - Part 1]

Kudos to Richard Cox for his informative post on trend lines. I used trend lines way back when and found them useful, albeit somewhat subjective. I'd like to add my 2 cents to the topic in hopes some find the information useful.

 

I found using trend lines alone to be sort of like playing soccer on one leg. It was only when I began an extensive study of trend channels that things started coming together and subjectivity virtually vanished. There was one other missing piece of the puzzle that I'll cover in a minute. But first, let's look at Richard's two chart examples. In the downtrend chart (A), notice I have turned Richard's trend line into a trend channel by simply doing a parallel transport of the trend line to the intervening highs.

 

As Richard aptly pointed out, don't look for "to the tick" perfection. If Price goes to, through (a few ticks), or close to a trend channel line, call it good. No matter how many "connections" you get on the highs or on the lows, the trend channel does not confirm unless you get at least two highs and two lows...and they don't have to be a consecutive low, high, low, high sequence.

 

In Example (A), we see the two main things I look for...smooth volatility up and down with Price bouncing off the trend channel lines like a pin ball machine. Each bounce on an opposing color bar, can produce a new entry going counter-trend as well as with trend. The other thing I love to see is Price breaking a channel line...either top or bottom, it doesn't matter. In a down trend, if Price breaks the bottom (support) line, enter on the first bearish bar that forms completely outside the line. This means the trend is poised for a strong push to the downside and you'll often get a super entry price.

 

In Example (B), the uptrend, I have taken the liberty of constructing Richard's trend line into a trend channel...two of them actually as this is an example of a trend channel that jumped a level and then settled back down into the older channel's support line. The larger trend channel confirmed since it produced at least two tops and two bottoms that "kissed" the supply and support channel lines.

 

So, in addition to Richard's entry arrow examples, we now get a lot more trade entries when we use a channel instead of a single line to define our trend. Remember, you are looking for channel break outs in either direction and take the first correct color bar forming outside of the channel line.

 

One of the things that bugged he holy Hades out of me was the inherent massive noise that my time-based, tick, range, volume, etc. charts would produce...often causing misjudgments as to actual Price swing highs and lows. I looked at Linebreak charts and found them to be an improvement but still not what I wanted. I wanted a bar type that would naturally filter the majority of market noise and give me clear, clean Price movement and enable me to identify good strong trend channel formations.

 

About 3 years ago I began to study Renko bars. At that time they weren't all that I wanted but I could see the potential. After tweaking the code a bit, I got what I wanted and I had trend channels I could easily identify and trust. I had a dozen of my students independently draw the trend lines for an entire day on the same instrument and timeframe and they were all identical to each other and to mine. Subjectivity was toast. After doing hundreds of webinar presentations and free training sessions, I am now seeing more and more traders, platform providers, system and education providers making the switch to this amazing bar type. Don't buy it, they are now all over the Internet and free.

 

With this in mind, now take a look at Example © which is the bar type I now use exclusively and a perfect choice for drawing trend channels. This bar is a 14,7 Renko which means the colored portion of the bar is 14 ticks in size and the "step" size is 7 ticks. That means that the price difference between the close of one bar to the close of the next of the same color is 7 ticks. Any set of number choices can be used from a 2,1 to a 80,40 or more (imagine making 40 ticks and only in for one bar!). When choosing, I look for the best, smoothest cycling volatility and these settings usually hold for several days, weeks or even months.

 

Each time the market hits the support or supply lines of the channel, it presents a trade opportunity. It's beyond the scope of this post to try to teach how to filter trade opportunities, but it's a very worthwhile skill to learn especially when going counter trend. Notice there were two channel breakouts in this example and both worked quite well. Both occurred in the downtrend...one on the first down arrow and one on the final down arrow.

 

Here in Crude Oil (CL), each tick is worth $10 and there are 10 ticks to the point. So, trading just 2 contracts and taking just two bars here, you could bag $280 before comm. and often in just a few minutes since bounces off of channel lines are known for launching brisk market moves.

 

I personally trade futures exclusively since, for me, they offer the highest potential for profit, with the least amount of risk in the shortest period of time overall. However, if you find that you are meeting your goals consistently in other venues such as the Forex, then by all means stick with it. This technique works equally well.

 

Hope this was of benefit to some of you.

[Divergences and Hidden Divergences]

One of the things I learned many years ago is, if a trader is very successful trading one way and another trader is successful trading a totally different technique, then what's to disagree on? I stated that trading Divergences using volume to be "useless for me". Every trader must find their own path to a universal destination called Success.

 

I gave volume a good 3 year try. Divergence would work in extremely low volume but not high, Then it would mostly work in high volume and not in low the next day. Volume exhaustion yielded nothing I could use. Volume Profile gave nothing better than a 50/50 win/loss ratio...no better than flipping a quarter. Volume Spread Analysis would say price CANNOT go higher...and it would stay bullish all day long. I could never get any consistent dependable profitable info from anything associated with volume beyond 50/50. So, for me it didn't help. and I studied from the teachings of the top volume "experts" in the industry. So, I took another route and the results were far beyond my expectations.

 

You found your exceptional results using volume to enhance divergence signals and I couldn't be more pleased for you.

If they meet or exceed their goals consistently day after day, which one is wrong? Perhaps Enigmatics can provide the answer that has eluded me for so many years.

[Divergences and Hidden Divergences]

Now that's a very good basic explanation of Divergences as I've seen. Good stuff, Richard.

 

Divergence is a topic dear to my heart as I recognized it's potential power nearly 20 years ago. When a trend, up or down, reversed into an extended trend in the opposite direction, I could almost always trace the reversal to have "launched" on the trigger bar of a Basic or Extended Divergence signal.

 

But why did so many of the others that occurred prior to the reversal not work? Why did the trend ignore them like they were nerf balls? I studied Divergences for many years searching for the answer. In a nutshell, it comes down to Form and Market Condition. This will filter out about 85% of the divergence duds. The final element is found in filters.

 

Filtering divergences with Volume, Momentum, Market Profile, Elliott Wave, etc. I found to be useless. Hidden Divergence was fairly simple and straightfroward. But counter-trend divergences were a lot trickier and took several years of trial and error study to nail. In the end, I had to create two important filters that also work well with several of my other signals that are not divergence based.

 

One, for instance, monitors several key elements occurring on other bar types and timeframes and instantly places the "crunched" data on the chart I'm trading on so my eyes never have to leave my trading chart and I don't get brain strain trying to keep track of dozens of things are once.

 

So the point I make is that Divergences can be extremely powerful (and profitable) events. When a market takes off, by golly there it is! But, like everything else in trading, it has it's drawbacks and those divergence head fakes can kill ya.

 

Richard clearly showed the What and the Why of Divergence. Master the When and How and you have a powerful weapon in your trading arsenal that will serve you well.:missy:

[Crude Oil Futres]

Is anyone trading crude oil futures in TL? I would love to exchange signals and knowledge with any active traders and learn more about the instrument myself.

If interested respond here or PM me.

 

Signal chart http://content.screencast.com/users/slick60/folders/Jing/media/727c6b6d-c22c-472a-86af-3515212921f5/2013-02-07_1001.png

 

Thanks

 

slick60

 

Hello slick! The CL is one of my favorite markets to trade in addition to Gold and the Russell. You can see some of my CL signals from last Friday on my thread called, "What Works For You?"

 

You picked a great market discuss.

[Why Futures Are Better]

There is no doubt about Futures that they are better than forwards but most of the time Futures prices are also higher than forward prices. Don't you think that there is a trade off between price (high in futures) and risk (high in forwards) ?

 

I think it all depends on what you were raised on. Personally, I think the trader that begins their career on Futures will ultimately do better quicker but that's dependent on a number of factors. In other words, if they are trading by the phases of the moon and when Voyager 1 aligns with Pluto, they might find success a bit more elusive. Let's consider some other "vehicles":

 

Options - Learning how to trade is always more difficult when you have to learn a new language first. Puts and Calls and Naked Leaps and Covered Dishes and Vertical Spreads and Iron Condors and Cardboard Butterflies...geez. It goes on and on. Plus you have this ticking bomb in your hand the whole time. No thanks, too complicated and the deck is stacked against me.

 

Forex - If you had your choice of trading a regulated market where you could enter within one tick of where you wanted (on avg.) and be making money from the very first tick towards profit and you could move your stop and target(s) at will anywhere anytime OR start out deep in the hole (best I ever got in Forex was -8 pips to BE) and when you tried to move a stop or target you usually got an error message plus your broker could legally run a bucket shop on your trades if he chose to do so, which market would you choose?

 

Equities - Hey, is anybody making any money in stocks these days? This is a market that ties up a lot of capital (1 to 1 leverage), is basically one directional and so slow a snail could beat it to goal line and still have time to catch a movie. Companies cook their books and the big boys get the reports long before you do. Terrific game if you've got about 20+ years of experience, are already rich and have access to insider trading info (which is illegal, you know), but that's how they got rich. You might also appreciate the excitement of waiting years to get ahead on your portfolio and then have everything come crashing down on your head taking you under water for the next decade. What a rush.

 

Futures - You Buy and You Sell. That's about it. Small account required, no extensive special lingo to learn, great leverage, liquidity and smooth volatility in many markets to choose from. Is trading Futures easy? Heck no...but it's simple and that really helps. It's also offers the fairest, most level playing field. Learn a good system, stick to your rules, practice like a madman and never never give up.

[Problem with the 4 Cardinal Rules of Trading?]

Mits, you wrote this to me: You'd like to write a book about doing something which is so beneficial (according to some other guy) that you are unable to do it yourself? I just wonder what the rest of this book would be about.How to ignore good advice? And you want us to PM you for some further insight that you couldn't just discuss here?.... Why?

 

First of all, id think after 1200 posts here youd just stick to building people up or not say anything....just like our mothers taught us. We have enough people who are ex-perts on trading on this and every trading board already, no?

 

#2-I said I couldnt keep a journal anymore but you dont bother to ask why. Let me tell you..........I DID IT FOR YEARS! When you take karate for example and you watch a guy walk into the dojo and not warm up, you know either he is cutting corners....or he has sooooo much experience he understand his mind and body well enough that it is not mandatory for him anymore.

 

#3-Yes, Id like to write a book. The fact that I havent should count as a plus, because most guys who write books cannot trade profitably for long periods....or they wouldnt write books. Warren Buffett waited 50 yrs to write a book. I wonder why?

 

#4-Yes according to "some other guy"? Do you know who this other guy is, before you berate him? This "other" guy has called more daily tops and bottoms in the equity market in front of me by 10:30 than all the trade room callers in the country combined. He prefers to enjoy his money and stay anonymous.

 

#5-Often the best teachers to learn from, are those who make a lot of mistakes....and admit them. I still am happy to PM with those who can see I did not start trading last year. -( You already have gone beyond us all here so you wouldn't PM anyone for advice anyway. I would not be on ANY thread where I could not respect what at least one person wrote enough to seek them out privately. Some of the best things here Im sure have been said

 

 

#6-WHY DID YOU PICK ME OUT OF THE CROWD TO BUST MY CHOPS? AM I SPECIAL? Or do you just do it to everyone you dont agree with or newbies you can bully. I can see you'd be the kind of teacher that would take the wind out of his students sails as soon as the kid started becoming a little too pleased with himself. I dont have the time nor the "self importance" to post 1200 times here as you do or to put anyone else down who admits they cant always do what they preach. I am in that catagory. It is called being human.I am too busy learning from others and managing my spot currency and equities accounts. Please do not comment to me again, and I will show you the same respect. The only post of yours I would like to see, is just your last year of trading statements of live accounts.Surely you make a very handsome living to be able to put "me" down. I am really very offended by you saying all this, and not even knowing me if I am profitable or not, my age, my yrs trading and who my mentors were. I think you were very out of line. Let us shake hands and go our separate ways, please.

 

Vince, I empathize with ya, my friend. You spoke your piece and you did it very well. This guy will never stop with the intimidation and bullying as long as you respond back to his vile posts. They just get worse and worse. I can tell you're understandably a bit frustrated and perhaps angry but that's what he wants. It's just what he does...attack people he doesn't know and pick a fight. Be prepared. He will respond back to your post telling you what a whiner you are. DO NOT RESPOND BACK. Just move on and your life will be infinitely better off. Do as I say, not how I stupidly did...LOL

[Would You Share?]

Regarding the turtles, I watched a youtube video on one of them giving a lecture. No offence meant to the guy but while he was giving the lecture and talking to the audience (who were all there to learn how to trade from one of the 'legendary turtles'), he didn't strike me as all that bright. Certainly nothing special.

 

It got me thinking that perhaps the reason for his making money using the strategy, was that he has more of a 'follower' type personality (if there is such a thing). He was able to take the information given to him from his superiors and do it, and keep doing it, and didn't question authority even when things went wrong (like in the Milgram experiment). Maybe that's why 'average' people are supposed to do ok at trading – they keep doing something that works.

 

Although... if they're average, how would they go about figuring out what works in the first place? You have to be a bit different, otherwise you'll be the same as everyone else – which would mean you're in the majority. Which is the right place to be at some times, and is disastrous at other times.

 

Also, if they're average, what happens when the markets change, how do they figure out that the markets are different and that it may be time to adapt their strategy? Maybe that's why he's now giving lectures. Who knows.

 

I think you need intelligence to figure out what works for you, you need to be able to admit when you're wrong (be humble), while being able to carry on in the face of adversity, having confidence in yourself (or system) that if things go wrong you can always change or adapt. Perhaps you need to be a follower, but a follower of yourself.

 

Perhaps he was intelligent enough to faithfully follow the TT system but not smart enough to figure out what to do when it bombed.

[Why Futures Are Better]

Gekko, I am not arguing with you that your system does not work, or that your system and method does not work well for you.....I am merely pointing out that its wrong to assume its the only way, the best way or that you know what everyone else is doing and thinking in the markets. That using a chart requires using an indicator etc; etc;

(Its a trap to think there is only one way of doing something in trading)

 

I might have missread your post/intention initially when you started saying you know what professionals are doing, that it you dont use volume you are behind the eight ball.

 

I am glad you have found someone doing something successful and it works for you. That is not a trap, that is an achievement. The trap is thinking its the only way, the right way, the truth, and that everyone else is wrong. If you dont understand this then you never will.

 

As for posts - Everyone will disagree, so long as its civil, otherwise imagine how simple a forum would be. One post and 50,000 thanks. .....

I like it when I can be shown to be wrong, or am convinced to change my mind.

..............................

 

Some of us dont use volume and can also be successful and trade differently, and we dont try and second guess individual orders flashing in and out, we watch collective market movements, waves, cycles, context, support and resistance, watching for the false breaks you talk about and using what if scenarios (whatever works --- If you are using MAs to scalp then you probably are going to be struggling).

..........much the same as you except without second guessing if volume is real or fake

 

.....my opinion on this is simple.

 

To me there is nothing conclusive about flashes of volume that tells me anything. To me it adds to confusion, adding another subjective measure as opposed to simplifying things. But that is just my way of seeing it.

 

 

 

(I used to be an option market maker, and if you think watching a DOM is hard, try watching 4 screens of numbers with 50 different strikes, series and constantly changing numbers over multiple instruments, or being on a floor with 50 a4 sheets of theoretical prices searching for the right one - Let me tell you, your memory and ability to guess improves immensely and you learn to eliminate superfluous info - thank god for computers )

 

 

..........

as to your question about floor traders.....some of us used to work on floors.....and then as much as now many people trade differently.

Some of us used to fill in charts throughout the day when we could. Some remembered levels, some front ran incoming orders, others just listened (a lost sense unfortunately) and felt the vibe of the market.

This is where i learnt to ignore volume as I saw too much spoofing, too much irrelevant information. I can relate plenty of stories of this were people got sucked in, scared, or greedy due to volume. While I still know other good traders who like to use volume....each to their own.

 

Plus, dont think that floor traders all made money - the edge of the floor kept many in business but that did not mean they could trade, nor did it ensure you made money. Plenty came, lost and disappeared. They still do in many of the big rooms you see today.

 

...................

Using a tick chart - a 1 tick chart that registers every move in a tick (not just registering each tick, but the move) is satisfactory IMHO......why --- because you then integrate it in your overall context you might have, and scenario analysis......exactly the same as what you are doing except without worrying about volume.

 

As for the demon --- well if you look around the room and you dont know who the sucker is.....LOL

Personally IMHO - there is no Demon, there is just the market and sometimes people wanting to feel like they are competing against someone, as opposed to themselves. If that helps them so be it.....though I think it hinders more than it helps many

 

.............

now as to how or why futures are better, then its simple if you require volume, futures are probably better.

If you dont then there are other pros and cons that might sway you in an other direction assuming you are talking mainly about FX.

 

That, my friends, is one of the best, clearest, most well thought out responses I've seen in a while. Learned some things about SIUYA I didn't know as well. Very good job and spot on.

[Why Futures Are Better]

I totally agree that the Dom might be of great help when scalping. Just need some couple of basic rules but all I hear is spend time watching. What do I look for? How long does it take to know if the thong is for me?

 

I think the thong might be for you if it doesn't bind or chafe. I usually wear jeans this chilly time of the year...:haha:

 

As for the DOM, piece of cake. If you can pull the lever on a slot machine and count the cherries, oranges, 7's and JACKPOT symbols and the number of times each spins around before finally stopping, you'll do well with the DOM...except it never stops.

 

Seeing the figures change takes about a second. Learning what they mean might take you a couple of years, maybe. Applying that to trying to figure out what's going on in the brains of several "professionals" simultaneously will take longer...a lot longer.

 

Some people like to make trading into a complicated psychological "chess game" while others just look for strong and weak times to enter the market.

 

There are hundreds of ways to trade...and a thousand ways to lose.

[Why Futures Are Better]

Not upset...just tired of trying explain. Do not want you to change. Wanted you to understand.

 

Watch a real DOM , not Ninja Trader crap . A real one and you will see what I am talking about.

 

Thanks Gekko. You're a good knowledgable trader and friend and I appreciate you taking the time to explain the DOM and how it works for you. Every trader has to find their own path to success and I am very pleased at your accomplishment.

 

No trader should ever change what's working well for them.

[Why Futures Are Better]

I am a scalper , why would I care about 2 years ago???? 2 hrs ...thats easy I see where the market was ALL DAY . My platform calculates contracts all day at every price.

 

Its fine ....you obviously do not get it. Your argument is flawed but I am done talking about it. If you actually take the time to learn it ....you would understand.

 

Good day to you sir.

 

You should not get upset just because what you do doesn't appeal to someone else. How I trade works better for me than I ever thought possible when I first began trading. I don't have to watch a bunch of constantly changing numbers on the ladder and try to figure out what the big boys are up to...all that subjective analysis stuff. I just find strong market entry points, get in, take my profit and go on to to the next trade. Why would I want to change that?

 

What you do works terrific for you and you'd be nuts to go do something else. So let's just congratulate each other, keep making money and stay friends, ok.

[Why Futures Are Better]

Maybe this will help you :

 

The DOM can show you something that no chart on earth will show you. See, with the DOM, you can actually view what just didn't happen. With the tape running unfiltered tick data, you see raw executions, or in other words, you see what just happened a millisecond ago. When you know how to use the DOM, you also see the large scalpers at work as they go about their job of suckering you and everyone else into taking the other side of their position. They want to short 20k lots, they need to find some buyers. And they're going to rely on those buyers placing stop orders - that's how they're going to profitably close their positions.

 

But here's the rub: you want to build a 20k lot position, you don't just kick a market order in there. You have to manipulate and finesse your way into the position. That manipulation is not visible on the chart - all you see on the chart are the normal fluctuations in the market. However, the manipulation is clearly visible on the DOM - if you know what to look for.

 

That sounds great but just too complicated for me. This is assuming that there are a bunch of ignorant traders trying to make a buck and there is this one nasty demon dude out to snooker them. It just doesn't happen that way...at least not in the markets I trade. I can trade 5 to 10 contracts and take 10 to 30 ticks (avg) per trade and, even with the occasional loser, I can make all the profit I want and my exposure in the market is minimal. I'm done trading usually before breakfast.

 

You have a terrific system for you just as I do for me. Keep up the great trading my friend.

[Why Futures Are Better]

I thought you were some kind of teacher? If you really have to ask this question I suggest you Google it.

 

Here :......A tick is a single trade irrespective of size. A tick chart builds each bar based on a certain number of ticks per bar. A 233 tick chart will create a new bar after every 233 trades have gone through. BOTTOM LINE IS NOTHING PRINTS ON A CHART UNTIL AFTER IT HAPPENS......Do you know of a chart the shows orders being placed 10 deep?? I thought not. Do you know of a chart the tells you how many contracts went through on that 1 trade? Not the tick , the trade. Dont you think it might be just a little bit helpful to know whether price ticked up because of a 20 lot order or a 200 lot order?? I sure would like to know....... Don't you think it would be just a little bit helpful to know how many contracts traded at the price 10 ticks above you entry if you have a 15 tick target?? I sure would like to know.........

 

Allow your mind to accept this ...... it is not rocket science. It is hard to learn but once you learn it you will never trade the same again.

 

Thanks Gekko but that didn't help any. I don't trade tick or time based charts but even if I did, I could still tell exactly where any markets current price was at any moment in time...and where it was in the past, as well. How do you backtest on a DOM? How do you see how volatile a market has been for the last two hours or last two years for that matter on a DOM?

 

How many contracts have traded from any point in my trade doesn't help me one bit. I might be 8 ticks into profit and 150 contracts are traded and I go to 10 ticks above BE. Another 150 contracts are traded and price goes to 3 ticks below BE. To me, monitoring that is just a silly exercise that does nothing to help me stay in a trade or know to get out.

 

Yes, I am a teacher but I wanted to give you the benefit of a doubt as to whether a DOM would help me. Maybe I missed something. I have studied them in great depth and, to me, they are just a distraction. But, for you they help you make the big bucks and reach your goals ( I assume). That's great. Volume, T&S, DOM's, etc. just do nothing for me but I appreciate the info.

[Why Futures Are Better]

Roger ,

 

You are missing my point here. You are in a losing trade because what you thought was going to happen , according to your rules , did not and you are in a loss. A S/L order should only be used for emergencies like 10 ticks or something just in case the market shoots through you quickly and you had no time to get out. Having the 10 tick stop and 15-20 tick target is useless( for me) why do I have to get out @15 ticks? What if the order flow is telling me there might be another 5 if I see the set up on the DOM happening? So because it hit 15 I have to get out?? Why should I let price get ALL the way down to my stop loss before I get out? What if I thought price was going up ....and it start to go down and I see sellers coming into the market on the offers selling into the bids?? Should I wait and let everything get all the way down to my S/L?? No way ....I would rather take a 2-3 tick loss than a 10 tick loss. If you are reading order low correctly you should never have a 10 tick loss.

 

The number of contracts is irrelevant I just picked 200 out of thin air ....make it whatever number you wish.

 

You are correct though in saying trading is not you against the pros........The pros are not against you either but they know when people are going to make stupid mistakes like cross overs , breakouts of trendlines etc....so will they take advantage of that if they see it ? Of course. they will , why wouldn't they? That is why they are pros. The point is to "recognize" what the big guys are doing and go with them......If you do not see big orders coming through on what should be a breakout then why would you go long and trade it? Because some line went through another line marked 0? Or because a candle formed above where price stopped before?? Because the amount of ticks that I have programmed on my chart ended above it? I want to see big orders coming through and the bids going up , I want to see the offers hammering the bids and the bids sticking. then I know its real .....not because a candle closed at some random point that wouldn't have happened had I set the tick count another 10 higher or lower.

 

What about the guy who pops a 500 lot buy order 30 seconds later?

What about him?? If the offers are heavier then his order does not matter. If the offers keep coming in they will eat his 500 buy for breakfast and the offer will keep refreshing........if the 500 lot cannot make the market go bid then that is a sure sign of weakness..... and I would be shorting.....YET AGAIN something you will not see on a chart.

 

 

Tick charts , candles , lines bars and all that stuff show the PAST ...it is always the PAST even a 1tick chart is the past ....it does not form until it already happened.

 

We can either keep going on and on about this if you want to but I see no point in it. I am not going to change anyones mind and no one is going to change mine.

 

Well I've sure been known to miss the point from time to time. I probably did again upon reading your take on charts producing data that is older than that on a DOM. Really? I've watched them side by side for years and never noticed any difference whatsoever.

 

What causes the chart data to be "in the past" versus DOM data? This is not to argue the point, but to understand it. Much of what I learned about trading was from asking questions.

 

Thanks

[Why Futures Are Better]

What about the guy who displays the 200 order just to lure you into the trade and then pulls his order before hitting you and go beyond? Or the robot that splits a 1000 order in 100 parts, that go unnoticed to many? This is real world DOM.

 

Anyone who can profitably trade by watching the order flow on a DOM is a better trader than I'll ever be. All those flashing numbers changing 15 times a nanosecond would give me the DT's by the end of the day.

[Why Futures Are Better]

DB,

 

Yes I stated earlier in this post that scalping is not the only way .....there are MANY different ways.

 

One thing I have trouble with then it comes to tick charts( or any chart setting for that matter ) is this:

 

Lets say that you are trading the ES and you have it set to a 200 tick chart.....you are watching the candles, lines , bars whatever , form and you see that right as the tick count hits 200 that the entry has met all of your criteria and you enter the trade long .....now as soon as the first tick hits on the candle , line, bar , a 200 lot sells into the bid dropping the price back down below your entry ....you are now immediately in a losing trade. Had you been watching the DOM you probably would have seen that coming before that .....maybe maybe not ........the point is you DEFINITELY would have not seen that coming simply from a tick chart.....there is no way you could.

 

 

Do I think that a DOM , time and sales are the be all end all of trading ? Nope...not even close.

 

Do I think it gives me odds over guys who just look at charts:? Yep without a doubt,

 

Remember in Vegas the house only has a 1-2% edge over you the customer but that is all they need to make a killing.

 

I am saying that these tools that I use give me an edge ......thats all I need .....even if it is a slight edge it does not matter , an edge is an edge.

 

 

Since we're talking about the ES, I suppose we're still on topic....

 

Questions on your hypothetical trade: You're long and someone drops a 200 lot sell order...price drops below your BE and it's now considered a losing trade? Why would that be? Did price hit your stop? The rest of the world stopped trading until the high roller takes you out? What about the guy who pops a 500 lot buy order 30 seconds later?

 

200 contracts in the ES would do fantastic if it was able to move a multi-billion dollar index like the ES two ticks. Remember, it's being instantly offset by all the other trading activity going on. It's not one guy controlling the market, ever.

 

Trading isn't you against the "professionals". There isn't some group of boogeymen sitting around waiting for you to place your 2, 5 or 10 contract orders so they can clobber you.

 

Trading is nothing more than you against you. The biggest heavy hitters in the financial industry are powerless to stop a guy who knows what to do and does it without hesitation, confusion, frustration, anger or fear.

 

I'm talking Futures here and not other vehicles where the cards are stacked way against you before you ever pour your first cup of coffee.

[Why Futures Are Better]

I am not going to continue to debate this as I know what happens here when people disagree.

 

Many will see the value in what I am saying , many will not. Does not really matter to me. You are making my point about the hedge fund guy ...... I would follow him and do what he is doing but a CHART will not show you what he is doing. You cannot see his Offers @ 13 so how would I know that unless using a DOM?>

 

I have not fallen into any trap. I learned a long time ago that if you want to be successful then find someone who is successful in what you want and do what they did.

 

Thats what I am doing. That is what works for me .

 

Again I am only speaking from a day trading standpoint.....if you trade off daily's then my information is useless. I am speaking to the people who want the higher probability intraday set ups.

 

Let me ask you a question: do you think that traders on the floors of the exchanges who are trading right there care about chart patterns? What do you think they are watching? Some arbitrary trend line or what the buyers and sellers are actually doing?

 

Gekko out -

 

 

Interesting topic and might be terrific to start another thread with it.

 

Floor traders probably weren't the best example to use, however, since they've been dying off in massive numbers every year for over a decade to the electronic traders...most of whom are chartists.

 

But always stick with what works for you and don't get swayed by anyone.

[Why Futures Are Better]

You might be interested in this:

 

Options Trading With The Iron Condor

 

In the context of trading Futures, which is my area of expertise, if GC, for example, sat at 1580.00 and didn't budge one tick, how could anyone make a profit? That's all I was saying so you and I will just have to differ in our understanding of how futures trading works.

 

I would personally, for a number of reasons, never trade options...especially Iron Condors where the potential for loss is much greater than the potential for profit. That's not a formula most traders would get excited about but I appreciate the interesting link.

[Why Futures Are Better]

Hi Roger, Cheers for the post . Wondering if you can elaborate a wee bit on your preferred futures markets . I started with Emini S&P then moved on to 6A / 6E etc currency futures. Not enough funds or experience to tackle Oil /Gold . Have lately been " following " FX pairs but not yet gone live. Any suggestions or comments you have will be much appreciated. Thanks;)

 

Hello binnie...so sorry for the slow response. Musta gotten sidetracked...lol

 

Each day, I look at a number of futures markets including commodities like corn (ZC) and soybeans (ZS). Those aren't my primary markets but they can spring some great signals with fairly smooth follow thru. Good for 3 or 4 each on a given day.

 

But the main ones I look at are 6J (Yen), FGBL (Euro Bund), Russell (TF) and my personal favorites Gold (GC) and Crude Oil (CL). Now that's a lot for many traders to keep up with especially when each is popping a signal every 5 to 15 minutes or so. So, take the best of the best. So what does that mean? Allow me to deviate from the initial question because this is important....

 

How you look at the markets is a big part of your trading success. Most traders use time-based charts such as a 1, 3, 5, 15 minute or more. These are very confusing bars as you usually can't get more than 2 to 4 bars of one color before an opposing appears. They zig and zag all over the place all day long. Tick charts are not much better. Range charts are an improvement but still pick up a lot of noise. Then you get the Heiken Ashi but they lie to you if you want the true OHLC.

 

So what do I use? It's a derivative of a Renko bar. The one I use allows me to create any Renko type bar I want in seconds just by changing a few inputs. The best settings are an 8 or 10 Renko with a 1 tick step for quick 10 to 20 tick scalps. Or try a 16 to 22 Renko with a 1 step for bigger hauls. To identify those big massive runs, build a 30 Renko with a 15 tick step and a 50 Renko with a 25 step. You're also going to need to build skeleton bars that tell you exactly what the market did inside each bar (for as far back as you have data if you are going to backtest signals).

 

So why these? Imagine how much easier trading would be if, when the market reversed direction, the bars never changed color until the market was ready to reverse again. This means you would get market runners that go for 30, 50 and 100 or more bars and all would be the same color! You could know where the market direction was really headed from 50 feet away before you ever applied your first indicator. Find the ones that have the movement and calmness that suits your style of trading.

 

Another reason is how amazingly smoother your indicators behave. Some you might not recognize at first. It's like steering a boat on a calm lake versus an ocean storm.

 

A good programmer can build these with the skeleton bars in a few weeks. I can provide some advice and guidance although I'm not a coder. I knew what I wanted and paid someone to build it. They aren't too difficult depending on how sophisticated you want them to be. Some platforms such as TradeStation aren't conducive to building new bar types as far as I know. So you'll need to find a charting platform that has some latitude. I use NinjaTrader and am very pleased with what it let's me do.

 

To demonstrate how these bars perform and what they enable you to do can't effectively be described in text. I've included a screen shot that will help visualize and perhaps reproduce. The beauty is in watching these charts move and fire signals. You will discover many you could never see on any other chart. One of my favorites is the TrendLine BreakOut. Simple and old school but you should see how amazingly well they work...like no other chart type I know of.

 

Now that you get an idea of what the charts look like, you just look for the timeframe that offers the most bars with the fewest "turns". Take the best two and go have fun!

 

If you are interested, I can explain the big advantages of including the LineBreak bars in your trading arsenal, too.

[Why Futures Are Better]

Thanks Roger.

Now, what is the main advantage you find in tick charts over time charts?

 

I haven't traded straight generic tick charts in years but, when I did, I found them to help eliminate some of the noise that time based charts are famous for. They're far from perfect but seem to be more in tune with the market by measuring transactions rather than some arbitrary length of time.

 

But the difference isn't all that dramatic. I ended up having to create my own bar type. The goal was to have the bars themselves filter the vast majority of market noise before a single indicator is ever applied. I'm very pleased with how it turned out.

[Why Futures Are Better]

Roger, what is the optimal nomber of ticks for intraday charts? or does it depend on what object you are trading ?

 

Yes, it would depend on the instrument you trade. Intraday, the ES might move in a range of 80 ticks and, if you looked at Crude Oil or Gold futures (CL or GC), you could very well see a daily range of 300 ticks. While the ES tick value is $12.50, there are only 4 ticks to the point. CL and GC have a tick value of $10 but there are 10 ticks to the point.

 

If we agree that a market that doesn't move cannot make money for anyone then isn't it logical that the more a market moves intraday the more opportunity there is for taking profit? There are lots of futures markets that offer this...good consistent smooth up and down volatility every day...but the ES isn't one of them.

 

Hope this helps....

[Why Futures Are Better]

a lot of the complaints about the FX market should in fact be leveled at the type of bucket shop broker who plies their customer with promises of riches, excess leverage, low or zero commissions and or spreads - and then trades against them with unfair rules.

Often retail customers cant make the minimum account holdings for a good broker.

Additionally, it has taken longer than is required for many FX spreads to collapse, brokers to become more transparent and electronic.....those who dont usually get left behind or prey on the low hanging fruit.

 

A good FX broker generally does not trade against you, the spreads are smaller, the margins better and the liquidity deeper than in the futures.......either market is fine - the broker is probably the major determining factor.

 

eg: I use Interactive brokers - today i saw (yes with my own two eyes) at least three times in the EURUSD a similar spread in the futures of 1.3107 - 09 in the FX 1.3055-06 --- with more size in the FX

 

I direct attention to this FWIW......http://www.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2Fpdfhighlights%2FPDF-Forex.php

 

I have no affiliation with them but would recommend them as a broker.

 

As long as there can be bucket shops in the Forex, there WILL be bucket shops in the Forex. Not every broker will trade against you, but good luck taking a broker's word for it.

 

Every trader has their favorite broker and I'm not going to promote mine here, but I used Interactive Broker for a while back when they were promoting $4.80 RT commissions. Every time I needed to speak to them, I got a recording. They never called me back until the next day...and then billed me $30 for the phone call!!! No thanks.

 

Tick charts are an important fundamental chart type that millions of traders use. IB does not provide tick data, period. I would never consider any broker that is stuck in the 1990's. Good accurate unfiltered tick data is essential to me and many others. So, IB will ne technology They'll never see my business again....but that's just my opinion, of course.

[Why Futures Are Better]

Or the NQ. 5 bucks. And it moves much better than the ES.

 

Gekko is right...it is all about what's happening between the ears. If you can't win at $12.50 per tick, you can't win at $10, $5, $2 or a nickel for that matter. You just die slower.

 

With Futures, my commission and Exc. fees are paid and I can be making money from the very first tick. All things considered, Futures offer the most level playing field...certainly for the small trader.

 

You know your ES, DbP. It's the only market I know of that you have to pack a lunch and a sleeping bag to trade... all while holding your nose.

[Why Futures Are Better]

I wouldn't use gold "for clues" to the indices at all. I follow economic indicators like the consumer sentiment reports, the BLS's Employment Situation, and the PPI/CPI.

 

Use what works for you. I formerly traded the Beige Book but stopped when it became the Rainbow Book. Now I just listen to Obama. When he says everything is peachy, I short everything. When Warren Buffet says he pays a lower tax rate than his secretary, I buy Puts in prisons. Elementary dear Watson...

[Why Futures Are Better]

Yes, pit trading with hand signals has phased out but everybody's still there. It's just now they have trade screens strapped to their bodies. They're still standing up, they're still wearing headphones, they're still in jackets with all manner of garbage hanging out of their pockets. There are just as many people on the trading floors of the Board as ever. They're just not yelling anymore. The older guys still trade one to one. I used to trade with an ICE local who would still walk around and find out what everybody was doing in cocoa, coffee, and cotton.

 

And buddy, you don't have to tell me what electronic trading or mini contracts are, thanks.

 

Everybody's still there? You're joking, right? I was visiting some of my floor trading friends at the NYMEX over 3 years ago and, at the peak trading time, it was a relative ghost town even back then. I've been to the CME numerous times and it's nothing like it was in the 90's and early turn of the century. Most former floor traders just never could make the transition to electronic trading...not at the CME, CBOT, NYMEX or anywhere else that I know of. The number of former open outcry traders who now walk around with a laptop looking like peanut vendors at a baseball game are relatively few compared to their hayday.

 

...and just so nobody gets mislead, the ES is a terrific market if you are an institution, big hedge fund, or high-roller slinging 100 contracts or more at a pop. It's one of the worst choices however if you are a small trader. The consistently lower range, slower movement and the quarter-point ticks are all big negatives for the little guy. It is infested with the HFT's making it much more difficult to trade. There are tons of much better futures choices available that offer more profit potential, less risk and all in a much shorter period of time on average.