BlowFish

I sometimes discuss (ok argue) a bit aggressively and that might sound confrontational . Anyway I hope it came across that I was challenging your idea about back testing and not challenging you . I apologise if that was not clear. BTW I too started professional life as a software engineer (after a brief dable in electronics). It is a curse for trading but at least there are a couple of skills that are useful. When I need a programming fix I write something in easy language or for Ninja. Some would say that is not 'real' programming (I used to write PDP assembler) but it satisfies my craving.

I have to say I would have probably anchored it there too. Indeed the time to draw is after point 4 and before point 5. In fact the way I understand it once you have 234 you place 1 and then wait for your trade. Of course if price is at 5 and showing exhaustion (through vol climax or whatever) then you could draw a quicky around entry time but having the lines in place after 4 is formed seems more relaxed. Anyway enjoy your new board!!!

I understand that this is for you however I infrequently look at blogs. From my point of view (which I understand is irrelevant:)) I like to see it here where things show up in 'new posts'. Actually I do have a renewed interest in following along now you have clarified a couple of things.

I certainly wont disagree with that . I wonder how you might manage this type of trade? (Actually or hypothetically). personally I would be uncomfortable with a trade that has been +7.5 getting stopped at -3. BUT as we are saying the S&P tends to move in 10 points a swing it seems to get the best out of this we need to do just that , give it a lot of breathing space?

I almost got completely carried away with the virtual crayons making up waves way into the future. If price made it to the magenta line you might anticipate a couple of outcomes small reaction and break down or bounce. I don't look for patterns beyond general swing types but this looks a bit head and shoulders like (H&S is bordering on 'esoteric' in my book). It looks 'toppy' in any case. I seem to have sidesteped your question. While the second reaction has much more conviction than the first I would still label it a correction at this point in time. Thrust? (labeled on the chart) was a poorly chosen word (not something I have defined and not one that TT uses). Too lazy to re edit it. That particular bar does have more conviction by the bears. As an aside these are exactly the sort of ABC corrections that I was referring to a few posts back that can be considered failed JR 123's. Final thing I am not an elliotician so from that point of view my ABC's probably are in the wrong place. I do look at simple 3 legged swings with out the massive (quirky) Elliot framework.

For those that don't have Trader Vic and to save googling here is the setup. Note: as is sometimes the case on the interwebz all the stuff seems to be based on one source (you can tell by the distinctive charts). My hunch is that it was Dave Shedd of Dacharts that originally posted it when he was working on the mechanical system 'retro trader' in the late 90's (from memory). Anyway I am always a little suspicious when people simply quote others as if there is an error in the original transcription it simply gets repeated and sometimes compounded (Chinese Wispers or telephone as I think it is known as in the US). Any way on to the definition. Trader Vic 123 1. The trendline is penetrated 2. There is a lower high in an up trend, or a higher low in a down trend. 3. There is a break below the previous low in an up trend, or above the previous high in a down trend.

Intresting comparing how this 6b set up with the previous 6e trade that we discussed (that chart shows how the trade panned out). PA is similar with subtle differences. There is a lesson in there I suspect

BrownsFan is another I think who would agree. I don't think he has written specifically about his approach here but last time (a while ago now admittedly) I chatted with him about it (in the TL chat room) he said that he looks for changes in sentiment (as evidenced by candle paterns) at the HoD or LoD.

This is probably not the thread to get into a drawn out discussion on this. Im happy to leave the clever stuff to Kiwi I will make a couple of 'PA' type comments, If you 'hand test' by marking all the 123's one of the issues sis that you will often get '3 legged' (ABC) corrections in a trend ,these will result in a 123 that will likely fail ( a JR one will though a Vic one migh not 'triigger'). You also often get them in congestions and they tend not to work out so well. Again I should be clear I was talking about 'JR' 123's. Trader Vics have a trend line break as an intrinsic part of the pattern if my memory serves me correctly? This makes them much harder to test automatically but arguably makes them more 'robust'. Mind you JR cautions traders about looking for them everywhere. Actually most of his material is aimed toward trading the first pullback after a 123 (the infamous hook). So the 123 is simply the precursor to the hook. Really should go to bed now.

Thank you for taking the time for such a detailed and well thought out reply. One of your most lucid to date (imho)! Getting late here (a wee bit past midnight) so I will read it again more carefully in the sober light of day (with a 240min chart alongside too). You really have a good eye for PA and pulling apart some of the trades I hope will reveal some of the nuances. In some ways it is academic....a long would not have triggered and if one had passed on the short....well another willl be along before long. This one had me chuckling though, good trade. Incidentally whenever I use a word stronger than 'anticipate' (like think) ....'anticipate it might' is what I mean. I don't slip up too often but now and then:)

Sure this is the chart you posted for illustration....I think I am right in saying there would be a short off that swing low?.....I have marked it with a magenta line.

Exactly the greater context was a break out to new highs or bullish. Or was there a more significant higher resistance not shown on the chart?

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All time favourite is Reminiscences (of a stock operator). After that it get's a bit more tricky. I started re-reading Market Wizard over Xmas, and am enjoying that for odd bit's of 'wisdom'. I always like stuff on price action Dunnigan is a favourite though Gann wrote good stuff on PA too. Studies in Tape reading ....I could start going on and on here so should stop. Looking at the title of the thread I see it is 'interesting' rather than 'useful' I go through phases of reading quite a lot that is 'interesting' but perhaps of limited (if any) use I am inclined to agree with you, there is much that is good here on TL. Thales Real time thread, DBPhoenix's burrow spring to mind. Jperls market stats threads which opened my eyes to a whole other set of statistical principles.

If taken in context. 123 is a smal part of the equation, context is just as important. My testing of taking all 123's (many years ago) on a variety of bars and time frames with differing MM regimes (equally important as the trigger) showed it was marginal at best (that is being charitable). It did convince me however that it was a useful trigger condition and had merit taken in the context of where support and resistance are. Every now and then someone runs the figures in an open forum, I can't recall any that have demonstrated an edge with 123's taken alone. I wonder what you are basing your it "provides a good statistical edge" argument on I would be very interested in the other money management parameters you used to reach this conclusion? I would absolutely re run the tests if you could give some clues . You can reach a profitable completely systematic approach but it requires other criteria too. I wonder what the context for a short was there. The longer term trend was up resistance had just broken and was potential support, the previous impulse was strongly bullish, the most recent action was a sideways 'corrective' one it might be reasonable to anticipate more upside (yes of course we don't know what will happen next but we can anticipate what might be more likely). Mostly I can see TT's rationale at a glance....this one caught me by surprise not least by the fact that the ones that surprise me usually turn out to be winners!

Thanks for the link Kiwi. To be honest most of those things don't bother me. The client-id has potential for abuse. The only way that they can link my online persona with my physical persona is if they go through my email. I kinda trust them, naive maybe. Of course if other corporations or even governments could access that info easily I'd be more concerned.

Thanks for the link Kiwi. To be honest most of those things don't bother me. The client-id has potential for abuse. The only way that they can link my online persona with my physical persona is if they go through my email. I kinda trust them, naive maybe. Of course if other corporations or even governments could access that info easily I'd be more concerned.

I guess the thing to do then is to read books that deal with 'principles' or 'fundamental truths' about markets. There are some books that do contain a bit of 'wisdom' too.

Arguably the VWAP or Volume 'POC' are but that's a discussion for another place and another time.

We have a different definition of consistent, to me 4 or more completely different ways of doing things is not my definition of 'consistent'. Particularly when the last one is some 'imaginary place'. For example the chart I posted why use that point 1 rather than one of the alternate methods? The sceptics would say is because it's easy to pick point 1 once you are at the target!! I have spoken to a couple of guys that have the course and the problem is that the examples (including the faxes) are pretty much always hindsight with little 'hard right edge' informaion of how and why to place point 1's Enjoy your break Tresor, look forward to seeing some charts when you return. It will be good to discuss the hows and whys of point 1 placement (preferably before we are at point 5!!!) There where some at the start of the thread I am sure

I have quoted this with charts to save flicking back. I wonder what made you think the break out above longer term resistance at (about 14540-50) would fail? To be perfectly honest I might have seen the bar that got you long as a test of that resistance that might now be expected to be support. Was there some longer term context or perhaps the PA after the break suggested that the bulls had lost it. I guess the lower high a couple of bars before entry was a clue? Even with the benefit of hind sight I would have been wary of that one shorting into longer term support (which obviously wasn't!!)

I guess the question then becomes is there an effective way to manage all these eventualities to eek out a profit? In the interest of simplicity maybe a fixed x point stop and y point target would do the job? (you use 3 for x and I guess 9 for y?) There are also the times when it will only go 8 7 6 5 4 or 3 points does one lock in profits or leave the stop? One needs to be very careful of perceptional biases here. You need to also look at all the moves that came after 9-10 point moves that fizzled out. On your example chart there is a losing short before the example you show. Some statistical analysis would no doubt help. The idea is simple but requires more meat to turn it into something tradeable. I guess that why some people are a little confused. (Though I think you are going 9 points or bust (-3))?

Waveslider pointed something out to me that I am inclined to agree with. There is a real issue with point 1. Even Wolfes charts have inconsistencies. Well perhaps not inconsistencies but enough alternate ways of placing them to make consistency in application difficult. I loked for an example and here is the first chart that I came across on Wolfes site, I can see how he has constructed it but there appear to be 3 or 4 (or even more) methods that he uses that result in different 1 points with quite different 1-4 projections. I guess the thing is to always use the most conservative (which is recommended anyway).

Never mind I think this link has been posted previously.

Looks like a gartley...or maybe a crab (they all look quite similar to me to be honest). Harmonictrader.com has a bunch of these patterns (as I am sure lonew0lf knows).