Humbled Trading Log

[Enigmatics 10]

I would summarise DB's "plan" post like this:

 

1. Stop trading

2. Observe price

3. Notice repeatable behaviour

4. Write plan base on (3)

5. Test plan

6. Make adjustments

7. Trade plan

 

Is this what you have done?

 

Excellent synopsis. It's more than just drawing supply/demand zones and trendlines. It's about being able to mentally "frame" the marketplace's behavior and then only trade when that framework shows itself because you'll have confidence in the expected reaction. Plus you'll know how to manage the loss in case it moves against you.

 

I myself have spent quite a bit of time over the last month re-dedicating myself to trading only when my framework is there and get over some of the moves I'll miss in the process ....... it's irrelevant anyways because if I don't "understand" the move, I can't mentally manage it anyways.

[humbled 10]

My exit was based on a demand line break and a lower high but I am not sure on this management.

 

 

humbled

[humbled 10]

Enigmatics,

 

Please continue to post your volume reviews on the SPY as I still have volume on watch.

 

 

Humbled

[Enigmatics 10]

An example of my long trade today Humbled.

 

I waited for the market to open up. Saw it reject the early session highs. My mindset was that since we're been in an uptrend, I'm looking for a buy the dip opportunity. I simply wait the dip out, draw the trend line and wait to watch the reaction of supply/demand at that trendline.

 

Clearly Demand came back in a large way when you look at the volume bar leading up the trend line break. Whala, I got long. Targets as usual were VWAP and the intraday volume POC. Again, that is my frame of reference for every trade (as well as trend lines when applicable). I operate from the trading belief that once an extreme is reached (also known as value area low or value area high) and supply/demand have run out, we will revert back to known volume congestion points .... i.e. VWAP (volume weight average price) and the volume POC (volume where price most often occurs).

 

Also notice the 2nd 60min candle. It had a long lower wick on high volume aka "stop volume". This often is a sign professionals are absorbing the dip. The idea here is sort've like card counting in blackjack. If they absorbed almost 23 million shares on that dip, that means those have to get distributed to the upside for the professionals to make their money.

 

[thalestrader 14]

This is what I could see today on a LineOnClose Chart.

 

No magical experiences Just price moving to test levels. Chop and more chop.

 

Humbled

 

... I can tell you I never felt anything other than watching the reactions and praying once I entered they did not spike outside the range to take me out.

 

Humbled

 

I'm going to be logging out for a few months, as I've had about as much TL and TL email notifications as I can take over a short period of time. I do not know what to say to you, other than that based on those two posts, I think you do not have the initial sense of what it is you are looking at or for when you yourself are viewing a price chart.

 

I went looking and found that post of Db's which I referenced yesterday. It is in a post that I believe I referred you to read earlier in this thread, and it is entitled, simply, Trading By Price. It is a sticky post in the Wyckoff forum.

 

What he actually says there is that one way to develop the ability to judge whether buying or selling pressures are dominant is to watch the time and sales window with the bid/ask turned off. He goes on to say that this wouldn't do you any good unless you spent several hours at it, and no one is going to do that. But I will say this, I have often traded from the DOM alone without bothering to open my charts at all. And a few years ago, a trader who goes or went by the handle "Marko" took up this challenge here on TL in the Reading Charts thread, and he reported back that found it to be a helpful and worthwhile experience.

 

Perhaps, humbled, it has come to this. You have spent so much time developing poor habits and incorrect opinions, that you are now directed in your own behavior and views by such acquired misguiding prejudices with respect to price action, that you need to step away from charts entirely, at the very least for a week or two, but probably and better yet a month or two, and I mean away from the markets entirely - no CNBC or Bloomberg, no Wall Street Journal, Barron's or Investor's Business Daily, no TL, no books, no magazines, no websites, etc.

 

Then, and it will be possible only if you heed my advice and take a radical sabbatical from the markets, come back at this afresh. You need to undo and "forget" whatever it is you have accumulated in your mind about what the markets are and how they work. This time, let your "first" experience be the time and sales window, with the bid/ask turned off. Note those price ranges where trading gets slow and dull, and then watch and note what price does when the trades occur fast and furious. Watch the pauses, learn to recognize when these pauses are coming to an end and then watch how price again begins moving with direction and with a quickened pace.

 

It is up to you to take these initial steps. Without them, no one else can get you to where you need to be. The ability that you need to develop cannot be spelled out or spoken out loud in a set of instructions, and least not in a way that would be intelligible to you unless and until you develop the ability to feel the struggle for balance and power that is the market. Without that sense, there is nothing I can do to help you move any closer to your goal than you are now.

 

You can take all of this in one of two ways, I suppose. You could get angry, or depressed, or both, and say "screw you, Thales ... I'll do this without your help." And that is fine, so long as you realize that the result you get will not differ in kind from the result you have gotten from all your many different approaches to this task, and any hope you may have of progress is likely false and misplaced. Or, you could realize that "yes, this is it, this is exactly what I need! A fresh start, with fresh eyes, after a well-deserved rest." This second response should produce in you a renewed (and deserved) hope that your success is yet possible (though not assured) and that a new and better path toward that end awaits you.

 

I reiterate, again, that it is all, every bit of it, up to you and you alone. Your success is your responsibility. You asked me for my help. After this time with you, what I outline here in this post is what I recommend to you. It is truly the very best that I can do for you at this time.

Best Wishes,

 

Thales

[humbled 10]

It is not possible to have given any more effort than I gave so all I can do is consider my next options.

 

Thank you Thales for your time.

 

 

Humbled

[Cory2679 11]

I'm going to be logging out for a few months...

 

Just wanted to drop a line expressing how much I've appreciated and enjoyed following this thread!

 

Good luck, humbled!

 

-Cory

[humbled 10]

I want to say thank you to everyone who helped here. I started this thread to get help from Thales after reading about the training of his daughter starting at age 9.

 

I made an assumption that the method he taught her would be fairly simple to follow and would allow me to copy that consistency after years of complex methods and inconsistent results. Unfortunately, I did not consider that Thales taught his daughter (9 to 12yrs old) tape reading. I never envisioned a child sitting and and studying price at that level of depth. I did not think it was done with "feel" or with a "sense" of what price will do. I had assumed it was a reaction to a pattern or behavior to look for.

 

 

As many will see I followed the instructions in this thread regardless of preference. I would have been happy to build a consistent method that did not require micro precision on one minute charts.

 

 

I will consider the option Thales has laid out for me as I have no other option but success. I do question if everyone who becomes consistent can see behind the curtain.

 

 

I wish all of you good luck

 

 

Humbled

 

PS: Once again thank you to Thales for showing me all he could as I pressed very hard for clarity that I guess just can't be explained. The evasive nature of this one area of tape reading got in the way.

Edited July 9, 2013 by humbled

[40draws 10]

I debated whether to post this or not, but as you did reach out to me via PM, I thought I would not be out of line to give you a few thoughts based on what I have read from you here. I mean everything I say in a friendly way, but I know you might feel offended. I hope you can accept that I don't mean any offense. So, here it goes. You said that:

 

I did not think it was done with "feel" or with a "sense" of what price will do. I had assumed it was a reaction to a pattern or behavior to look for.

 

Interestingly, I posted my chart from today in DbPhoenix's thread over at ET today and I mentioned a "double top." He reminded me that it is not the pattern that is important, but the behavior of traders. It is their behavior that creates the pattern, and it is their behavior that provides the signal. You seem maybe too much to be hung up on the "feel" and the "sense" when what Thales is really talking about is a "skill."

 

As many will see I followed the instructions in this thread regardless of preference. I would have been happy to build a consistent method that did not require micro precision on one minute charts.

 

Again, in my discussion today with DbPhoenix, he pointed out that any of these patterns are dependent on a particular bar interval. What matters is simply to observe that sellers failed to push price below a certain level or that buyers failed to push price above a certain level. I watch a one minute chart during the day, and I do not consider myself a "micro-precision" trader.

 

I will consider the option Thales has laid out for me as I have no other option but success. I do question if everyone who becomes consistent can see behind the curtain.

 

You make much of the "effort" you have put forth. I may be wrong, but it seems as though you do not want to expend any effort learning what you call tape reading. Instead, your efforts are primarily concentrated on trying to find a pattern that you can react to without having to know why, i.e. without having to "see behind the curtain."

 

And for what its worth, I would bet that you severely overestimate how many people have become consistent. I would bet that the number who can "see behind the curtain" and the number who are consistently profitable are very nearly identical.

 

The evasive nature of this one area of tape reading got in the way.

 

Tape reading got in the way? This is like saying I could have been a successful doctor but I couldn't get into med school because organic chemistry got in the way. The subject matter is not in the way, what is in the way is your mastery, or lack of mastery over the subject matter.

 

Here is one of the first posts by DbPhoenix I read here. He was not addressing me directly, but if you go back to this thread you'll see that one of my posts had been, indirectly, part of the impetus behind this post:

 

losers make the same mistakes over and over again, and have for centuries. And they will likely continue to do so for centuries more. If we last that long.

 

I've encountered this problem repeatedly:

The typical trader will do most anything to avoid creating definition and rules because he does not want to take responsibility for the results of his trading. If he knows exactly what he is going to do and under what conditions, then he would have something by which to measure his performance, thus making himself accountable to himself. This is exactly what most traders don't want to do, preferring instead to keep their relationship with the market somewhat mysterious.

 

This creates a real psychological paradox for traders, because the only way to learn how to trade effectively is to make oneself accountable by creating structure: but, with accountability comes responsibility. (Mark Douglas)

Db

 

Your resistance to "tape reading" is allowing you to keep your relationship to the market "somewhat mysterious." I would not want to remain on the wrong side of the curtain if I were selecting a job or business that I hoped was going to provide an income for myself. I can't remember if you mentioned your circumstances, so I don't know if you have a family or not, but I do have one, and I would not want them to be dependent upon my maintaining a mysterious relationship with something that could take my money if I let it.

 

Good Luck, humbled, but you should try not to need it.

[madspeculator 10]

Humbled:

 

I rarely post on TL but wanted to share a few of my thoughts in the hope that it might be of help to you as you decide your next steps.

 

Your effort is applaudable; however, you have expended all your effort in what is the most difficult methodology in trading -- trade based on price patterns. I know of no [yes, I said no] CTA or traders, who make a living, that trade based on “pure” price patters. Unfortunately, most of the debutant self-teaching traders trade price patters and they fail.

 

Why is trading price patters difficult? In my opinion, there are two reasons for it:

1. Financial markets are complex systems. The characteristics of a complex system are:
   

   
   

   1. 
      
   2. the behavior of any individual market participant is independent of the aggregate behavior of the system;
      
      
   3. they consistently produce classes of patterns, but it is impossible to predict when an instance of a patterns belonging to a class might occur, or the exact pattern of that instance. For example, during the tech bubble everyone knew there will be an impending correction (a class of pattern), but predicting when that correction would start (instance of a class of pattern) or how the pattern would look (exact pattern of the instance) was not possible;
      
      
   4. Given that instances of a class of pattern are dissimilar, it is impossible to describe them algorithmically. This has a huge implication on using statistical methods on price and volume; The statistical methods should be used only on classes of patterns generated by the system; but I digress.
      
      
   5. Patterns occur at different scales: micro, macro, and everywhere in between.
      
      

   [*]Price pattern is a first order abstraction of order flow. I define order flow as the result of the effort made by “buyers” and “sellers”, each trading to fulfill their objective (whatever that objective might be).

    

   A Price patterns is a visual instance of a class of pattern. It is impossible to predict when they might occur; and no two price patterns belonging to the same class of pattern are similar. Since price pattern is a first order abstraction, a price pattern can be “confirmed” only ex-post.

    

   Based on my reasons listed above, the only way to trade “pure” price patterns is (a) mechanically; and (b) relying solely on probability and money management to extract profits from the market. However, because of 1.b and 1.c, this methodology of trading is very difficult and traders who follow it usually fail or alter the methodology.

    

   Fortunately, modifying a methodology based on “pure” price patters is relatively simple: Filter your trades based on trend. However, trend should not be based on price action as is always suggested in books [if you do this, you end up introducing a second order abstraction]. Trend should be defined as the direction of price movement conditioned on the price action around the last identified target [e.g. support or resistance level].

    

   The above definition of trend introduces a very important class of pattern: Price action around key support or resistance levels. These patterns occur often, are very tradable, and provide a good reward-to-risk ratio. Furthermore, we are not interested in the exact pattern of the instance of this class of pattern, but the outcome: are the support or resistance levels accepted or rejected; and we update our strategy based on that outcome. Almost all CTAs and traders who make a living trading trade based on these class of patterns [examples include scalping for a few ticks based on “reading the tape”, intra-day position trading using order flow (this, by the way, is my style), trend-following, or swing-trading].

    

   Identifying trend as defined above will give you the “feel” for the market other traders are taking about.

    

   Although Thales has done a fantastic job of guiding you, I have to disagree with his latest suggestion that you take a sabbatical from the market. When DbPhoenix talks about observing price, and noting repeated behavior, he is not taking about price patterns -- He is a wyckoffian, and Wyckoff warned his students against trading price patterns; I am sure DbPhoenix heeds to his teacher’s advice.

    

   So what does all the above mean to you? Here is a plan of action (given that you are an intra-day trader):

    

   1. Do not turn-off the chart and look at T&S as you are being advised. You will go crazy. There is a easier transition;
      
   2. Set your chart to 30-min bars.
      
   3. An obvious pattern you will notice is that price goes above the high of the previous 30-min bar or below the low of the previous 30-min bar. Lets exploit this pattern and try to define the trend based on what happens around those points.
      
   4. Look at T&S as price approaches/penetrates the previous 30-min bar extremes. You are looking for patterns that signals acceptance [which means price will continue in that direction;] or rejection [which means price will reverse AND head towards the other extreme of the 30-min bar].
      
   5. Also take note of conditions [T&S patterns] when price is rejected at an extreme but cannot make it to the other extreme of that 30-min bar.
      
   6. Sometimes, the current 30-min bar becomes an “inside bar” relative to the previous 30-min bar, in which case, you don’t do anything.
      

    

   Do this for couple of weeks, and you will get a “feel” for the market. Build on what I have outlined above. You will also notice that you will find entries that are different from the price pattern based entries you currently use. When you reach this stage, you have all the tools you need to reach the elusive “consistency” you are seeking. And you will never question “if everyone who becomes consistent can see behind the curtain” for you, my fellow trader, will be “seeing behind the curtain” too.

    

   All the best!

    

   -MadSpeculator.

Edited July 10, 2013 by madspeculator

[humbled 10]

Humbled:

 

I rarely post on TL but wanted to share a few of my thoughts in the hope that it might be of help to you as you decide your next steps.

 

Your effort is applaudable; however, you have expended all your effort in what is the most difficult methodology in trading -- trade based on price patterns. I know of no [yes, I said no] CTA or traders, who make a living, that trade based on “pure” price patters. Unfortunately, most of the debutant self-teaching traders trade price patters and they fail.

 

Why is trading price patters difficult? In my opinion, there are two reasons for it:

1. Financial markets are complex systems. The characteristics of a complex system are:
   

   
   

   1. 
      
   2. the behavior of any individual market participant is independent of the aggregate behavior of the system;
      
      
   3. they consistently produce classes of patterns, but it is impossible to predict when an instance of a patterns belonging to a class might occur, or the exact pattern of that instance. For example, during the tech bubble everyone knew there will be an impending correction (a class of pattern), but predicting when that correction would start (instance of a class of pattern) or how the pattern would look (exact pattern of the instance) was not possible;
      
      
   4. Given that instances of a class of pattern are dissimilar, it is impossible to describe them algorithmically. This has a huge implication on using statistical methods on price and volume; The statistical methods should be used only on classes of patterns generated by the system; but I digress.
      
      
   5. Patterns occur at different scales: micro, macro, and everywhere in between.
      
      

   [*]Price pattern is a first order approximation of order flow. I define order flow as the result of the effort made by “buyers” and “sellers”, each trading to fulfill their objective (whatever that objective might be).

    

   A Price patterns is a visual instance of a class of pattern. It is impossible to predict when they might occur; and no two price patterns belonging to the same class of pattern are similar. Since price pattern is a first order approximation, a price pattern can be “confirmed” only ex-post.

    

   Based on my reasons listed above, the only way to trade “pure” price patterns is (a) mechanically; and (b) relying solely on probability and money management to extract profits from the market. However, because of 1.b and 1.c, this methodology of trading is very difficult and traders who follow it usually fail or alter the methodology.

    

   Fortunately, modifying a methodology based on “pure” price patters is relatively simple: Filter your trades based on trend. However, trend should not be based on price action as is always suggested in books [if you do this, you end up introducing a second order approximation]. Trend should be defined as the direction of price movement conditioned on the price action around the last identified target [e.g. support or resistance level].

    

   The above definition of trend introduces a very important class of pattern: Price action around key support or resistance levels. These patterns occur often, are very tradable, and provide a good reward-to-risk ratio. Furthermore, we are not interested in the exact pattern of the instance of this class of pattern, but the outcome: are the support or resistance levels accepted or rejected; and we update our strategy based on that outcome. Almost all CTAs and traders who make a living trading trade based on these class of patterns [examples include scalping for a few ticks based on “reading the tape”, intra-day position trading using order flow (this, by the way, is my style), trend-following, or swing-trading].

    

   Identifying trend as defined above will give you the “feel” for the market other traders are taking about.

    

   Although Thales has done a fantastic job of guiding you, I have to disagree with his latest suggestion that you take a sabbatical from the market. When DbPhoenix talks about observing price, and noting repeated behavior, he is not taking about price patterns -- He is a wyckoffian, and Wyckoff warned his students against trading price patterns; I am sure DbPhoenix heeds to his teacher’s advice.

    

   So what does all the above mean to you? Here is a plan of action (given that you are an intra-day trader):

    

   1. Do not turn-off the chart and look at T&S as you are being advised. You will go crazy. There is a easier transition;
      
   2. Set your chart to 30-min bars.
      
   3. An obvious pattern you will notice is that price goes above the high of the previous 30-min bar or below the low of the previous 30-min bar. Lets exploit this pattern and try to define the trend based on what happens around those points.
      
   4. Look at T&S as price approaches/penetrates the previous 30-min bar extremes. You are looking for patterns that signals acceptance [which means price will continue in that direction;] or rejection [which means price will reverse AND head towards the other extreme of the 30-min bar].
      
   5. Also take note of conditions [T&S patterns] when price is rejected at an extreme but cannot make it to the other extreme of that 30-min bar.
      
   6. Sometimes, the current 30-min bar becomes an “inside bar” relative to the previous 30-min bar, in which case, you don’t do anything.
      

    

   Do this for couple of weeks, and you will get a “feel” for the market. Build on what I have outlined above. You will also notice that you will find entries that are different from the price pattern based entries you currently use. When you reach this stage, you have all the tools you need to reach the elusive “consistency” you are seeking. And you will never question “if everyone who becomes consistent can see behind the curtain” for you, my fellow trader, will be “seeing behind the curtain” too.

    

   All the best!

    

   -MadSpeculator.

    

   MadSpeculator,

    

    

   In reading your post, I see this as being a viable option. You have shared a way that could work well for me so I am considering it right now. In fact, I see no reason why I should not. I think this framework could at least direct me to the spot that shows the signs I am looking for as my last experiencing at just staring was met with frustration.

    

   I want to thank you for stepping in to help. I really can't express how valuable this assistance is to someone like me who wants this more than almost anything in the world but finds consistency just out of reach. I have spent years on the roller coaster and it is time to turn this into a business.

    

    

   Once again, thank you for sharing and assisting me.

    

    

   Humbled

Edited July 10, 2013 by humbled

[DbPhoenix 42]

[humbled 10]

 

 

DbPhoenix,

 

For someone who has done this before and did not see it, is there a way to validate if I do find something. Maybe if I start a thread of occurrences that I see, could that be discussed?

 

Humbled

[humbled 10]

Here is an image of the window I created for this.

Do you gain the same feeling from watching the DOM as price moves up and down the ladder or only via the scrolling green and red price and volume size?

 

Humbled

[Enigmatics 10]

Here is an image of the window I created for this.

Do you gain the same feeling from watching the DOM as price moves up and down the ladder or only via the scrolling green and red price and volume size?

 

Humbled

 

I have Tradestation and I only use The Matrix (volume by price bars).

[DbPhoenix 42]

DbPhoenix,

 

For someone who has done this before and did not see it, is there a way to validate if I do find something. Maybe if I start a thread of occurrences that I see, could that be discussed?

 

Humbled

 

If you don't see the relationship between the one and the other, you should stop trading until you do. If you refuse to stop, remember that you have others' needs to consider besides your own. If you never see the relationship, you should quit. If the cheerleaders persuade you to Never Give Up and to Stay With It, keep in mind that they are not paying your bills, nor are they contributing to the support of your family.

 

The solution to your problems does not lie in My Bars Are Better Than His Bars or Draw Your Lines My Way Not His Way or Don't Look For Your Zones There Look For Them Here. Nor does it lie "an assumption in that [a] method [will] be fairly simple to follow and would allow [you] to copy that consistency."

 

The solution does not lie in bars. Or candles. Or candlestick analysis.

 

The solution does not lie in lines. Or indicators.

 

The solution does not lie in levels. Or anything having to do with Market Profile. Or VSA. Or "the Book".

 

The solution does not lie in copying somebody else's method or system or approach or whatever the hell one wants to call it. Or in taking a course. Or in buying books or DVDs. Or in subscribing to newsletters or advisory services. Or in joining trading rooms. Or in taking somebody else's "signals". Or in following anybody at all.

 

The solution to your problems lies in learning and understanding how the market works, in understanding how and why and where and when the forces of supply and demand move price. If you never achieve that understanding, and you never will if you don't even begin to try, then you will never succeed, at least to the point where you do much better than cover expenses, and even that is a crap shoot.

 

If you haven't the least idea how supply and demand work, then open up the book you bought four years ago and never read. Or read Wyckoff's course. Or read Neill. Or O'Neil. Or Magee. Do something other than try to find somebody to copy. And please stop using all the "work" you've done as a rationalization for not getting anywhere. All that work is of no value if it hasn't moved you forward. But rather than move forward, you've done little more than move sideways from one guru to another, trying to find somebody to follow, some system to copy. Clearly that hasn't worked, and the method or system or approach that's just over the hill or just around the bend isn't going to do anything more for you than anything else you've tried.

 

Study the market. Use The Trading Journal stickie in the Wycoff Forum as a guide, if you like. Or not. But study the market, not some message board bullshit. Take responsibility for your trading and its successes and failures. Develop your own method, your own system, your own approach. Move ahead and stop running in place. Otherwise you will go broke before you are able to reach any of your goals.

 

The market is not complex. The market is extremely simple. As simple as a produce stand. And once you stop looking for somebody to tell you what to do, you'll be far more likely to figure that out. All by yourself. Then you might start achieving those consistent results.

[steve46 12]

A little voice tells me "don't bother" but what the hell

 

Look, the market IS simple.....it is just like the supermarket or a produce stand....you buy what you need to buy, what you can afford to buy, and what you think is reasonably priced....that's how you act when you are a consumer of the product....IF you are going to turn around and sell it, it becomes a bit more complex (because time becomes significant), BUT the general concept of fair value still applies...

 

Next, each person takes in the world in a specific way...some rely on what they see, some on what they hear, some folks rely on touch, people in the food/wine industry may rely on taste...whatever it is that YOU rely on, that is the way you need to take in the data....unfortunately for those in this business the data is mostly charts (unless you are a long time frame participant)

 

This is part of the reason why a skilled teacher can help, while the typical vendor isn't worth a dime....someone who has thought about this and has sufficient experience can look at how you respond to the chart and suggest a way that might work for you....The attached chart works for ME....for others I look at how they take in the information and I try to suggest a display that they can use...the attached chart shows an aggregate display of volume....the display is a sawtooth wave....this makes it easier to see how volume is trending in each time period (each time a new "sawtooth" is created)....personally I couldn't care less about reading the tape....learned it long ago.....but not everyone can do it....what I notice is that most everyone can see trend if it is shown as a line or a wave.....the fad is for folks to look at "footprint" charts...or to read a volume at price...if it works for you fine...but if not, just look around for the kind of display that YOU can read......and react to....its not rocket science...

 

Good luck folks

[DbPhoenix 42]

While I agree with much of what Steve says, here and elsewhere, particularly with regard to looking for opportunities as opposed to getting tangled up in lines and other assorted crap, this isn't even about charts. It's about (a) the ability to tell up from down and (b) why price is moving up, or down. If one doesn't know that, then he isn't even ready to begin. And few gurus/vendors/mentors are going to know how to fall back that far. Particularly all the non-traders who write all these stupid articles.

 

Much has been said about Thales' daughter. He didn't teach her to read the tape. All he asked her to do was determine whether price was going up or down. This was such a simple task that she must have looked at him as though he were trying to trick her. But once an opinion was offered, the next question becomes whether the "up angle" -- i.e., the momentum -- is increasing or decreasing. And if one posits this in terms of buyers and sellers, many things become clear, assuming that the child has ever been to a store or even run a lemonade stand. A child can even then formulate some hypotheses -- make some guesses -- as to why price is moving up or down. Or why price was moving up rapidly but now isn't so much. Or why it's now falling.

 

One can do this with a T&S display* (not the DOM, just price and volume) or with a 1t chart or with a line chart or whatever the hell else. IT DOESN'T MAKE ANY DIFFERENCE. Is price going up or down? How fast? Where did it start going up? Why? What were the conditions? What was the context? What were buyers and sellers doing? What did they want? If the trader has no idea, then why the hell is he trading? Why doesn't he just pay online poker?

 

*a simple T&S display:

 

 

Incidentally, there is a story here of wants and desires and thwarted efforts and disappointments. The wannabe who wants to understand this would be better off trying to understand that story than focus his attention entirely on where to enter and where to exit.

Edited July 10, 2013 by DbPhoenix

[madspeculator 10]

DBPhoenix:

 

I know you are a revered member of the TL community and a lot of struggling traders value what you have to say. So, when you say

The market is not complex. The market is extremely simple. As simple as a produce stand.

I feel you are doing a disservice to all those traders. Not knowing how you define “complex”, I can’t comment on it; but all financial markets are complex systems (see the characteristics I have outlined in my earlier post in this thread; also refer to Hayek’s essay on complexity).

 

However, saying that a market is “extremely simple” is misguided. The right analogy is not of a simple produce stand, but one of multiple produce stands in close quarters all vending the same products competing for customers and making inventory decisions. There is nothing simple in the dynamic of each produce stand. But, the aggregate patterns that emerge out of that “system” is indeed simple.

 

The above might seem like nitpicking on detail, but the implication of this differentiation is very important when one is trying to “observe price with intent” as you have said elsewhere before.

 

Not everything said in a messaging board is bullshit, although for both the ignorant and arrogant it might seem so!

 

Humble: I am sorry to have hijacked your thread. I will refrain from commenting on other people's post henceforth.

 

-MadSpeculator.

Edited July 10, 2013 by madspeculator

[DbPhoenix 42]

. . . saying that a market is “extremely simple” is misguided. The right analogy is not of a simple produce stand, but one of multiple produce stands in close quarters all vending the same products competing for customers and making inventory decisions. There is nothing simple in the dynamic of each produce stand. But, the aggregate patterns that emerge out of that “system” is indeed simple.

 

Which is another way of saying that one needn't know how sausage is made in order to trade it.

 

All the trader need concern himself with is the aggregate. Or what Wyckoff called "the Composite Operator", i.e., everyone who is a market participant, including the shoeshine boy. To concern oneself with all the components leads to overanalysis, second-guessing, hesitation, self-doubt, and a lot of missed trades.

 

The central question remains, again, whether price is going up or down. And only a tiny percentage of traders at any given time can answer that question. Which is why so many people fail.

 

The market is as complex as one wants it to be. Or as simple as one needs it to be.

[steve46 12]

I have to agree with this last statement

 

Once I saw how I could simplify my own approach I asked myself, "will I still make money"?

 

It didn't change a thing....I do use "aids" but only to help me see where things are headed in a general sense...after that you use your common sense....participants act like a school of fish, price moves and the school moves with it....if there is sufficient interest, it becomes momentum and that school of fish just keeps on moving forward...if not then they change direction...you watch long enough and you can see WHERE they are going and WHY they turned at this place (price) or that place (price)....

 

I don't like the idea of watching short time frame charts but here is one idea that appeals to me....put a short time frame chart in place and a longer time frame chart next to it....watch that and see how price swims along from place to place....referring to the longer time frame to pinpoint the price "reference points". On the short time frame you can see how multiple tests of a price create S/R and on the longer time frame how this activity creates key reference points that are often in play the next day....

 

Good luck

 

 

I guess one more thought....again I generally agree with DB but with respect to price movement it ISN"T black or white....up or down....actually what works is to notice that price trends (up or down) then pauses (and moves sideways)....this run/pause model is how our markets work.....people get an idea (I'm going to buy or sell) then they stand aside and wait (for news or whatever)....the real question is .......once the market has paused "is it going to resume the previous trend, or is it going to reverse......when you get to that point in your development, (and you can answer that question) which is similar to DB's comment, THEN you have something...

[humbled 10]

DBPhoenix:

 

I know you are a revered member of the TL community and a lot of struggling traders value what you have to say. So, when you say

 

I feel you are doing a disservice to all those traders. Not knowing how you define “complex”, I can’t comment on it; but all financial markets are complex systems (see the characteristics I have outlined in my earlier post in this thread; also refer to Hayek’s essay on complexity).

 

However, saying that a market is “extremely simple” is misguided. The right analogy is not of a simple produce stand, but one of multiple produce stands in close quarters all vending the same products competing for customers and making inventory decisions. There is nothing simple in the dynamic of each produce stand. But, the aggregate patterns that emerge out of that “system” is indeed simple.

 

The above might seem like nitpicking on detail, but the implication of this differentiation is very important when one is trying to “observe price with intent” as you have said elsewhere before.

 

Not everything said in a messaging board is bullshit, although for both the ignorant and arrogant it might seem so!

 

Humble: I am sorry to have hijacked your thread. I will refrain from commenting on other people's post henceforth.

 

-MadSpeculator.

 

 

 

MadSpeculator,

 

 

Your posts are excellent and received as a voice of reason in an area where people have very strong opinions. I am the student so I am listening and appreciate your input.

 

I chose this. This is all on me. I could have studied my Peter Brandt book and looked to build consistency on weekly and monthly charts but I wanted to learn to extract consistent profits on a weekly basis.

 

I have actually used your post as an outline of how I will replay and work to learn this.

 

Thank you so much for being here and sharing.

 

Humbled

[DbPhoenix 42]

I have to agree with this last statement

 

Once I saw how I could simplify my own approach I asked myself, "will I still make money"?

 

It didn't change a thing....I do use "aids" but only to help me see where things are headed in a general sense...after that you use your common sense....participants act like a school of fish, price moves and the school moves with it....if there is sufficient interest, it becomes momentum and that school of fish just keeps on moving forward...if not then they change direction...you watch long enough and you can see WHERE they are going and WHY they turned at this place (price) or that place (price)....

 

I don't like the idea of watching short time frame charts but here is one idea that appeals to me....put a short time frame chart in place and a longer time frame chart next to it....watch that and see how price swims along from place to place....referring to the longer time frame to pinpoint the price "reference points". On the short time frame you can see how multiple tests of a price create S/R and on the longer time frame how this activity creates key reference points that are often in play the next day....

 

Good luck

 

 

I guess one more thought....again I generally agree with DB but with respect to price movement it ISN"T black or white....up or down....actually what works is to notice that price trends (up or down) then pauses (and moves sideways)....this run/pause model is how our markets work.....people get an idea (I'm going to buy or sell) then they stand aside and wait (for news or whatever)....the real question is .......once the market has paused "is it going to resume the previous trend, or is it going to reverse......when you get to that point in your development, (and you can answer that question) which is similar to DB's comment, THEN you have something...

 

So much of these sorts of debates amount to whether or not the wedding dress will incorporate bugle beads or sequins, i.e., who the hell cares? What matters is that it's a wedding dress.

 

This post, then, without nattering about the details, should be read daily, before the trading session begins. If the wannabe doesn't understand why, then there's not much more to say.

 

Edit: I should also point out that this sort of post helps to distinguish between those who trade and those who just talk about it, e.g., those who keep stuffing the Articles section with nonsense.

Edited July 10, 2013 by DbPhoenix

[40draws 10]

....participants act like a school of fish, price moves and the school moves with it....if there is sufficient interest, it becomes momentum and that school of fish just keeps on moving forward...if not then they change direction...you watch long enough and you can see WHERE they are going and WHY they turned at this place (price) or that place (price)....

 

That is a great image! I had two trades today where the fish were clearly swimming, en masse one way and I was trying to convince them to go the other way.

 

Guess who won?

[madspeculator 10]

Humbled:

 

A few more thoughts for you to consider (in general on trading):

 

DbPhoenix is response to my post said

The central question remains, again, whether price is going up or down.

 

Although valid in principle, this statement is loosely formed [and when it comes to trading, as in any other profession, loosely formed sentences creates more confusion than clarifications they provide]. For example, a scalper might see the prices moving UP, whereas, as a intra-day position trader, I might see prices as moving DOWN; and both of us could be right! So, what is missing in the above statement? A point of reference.

 

So, the above statement should have read:

 

The central question remains, again, whether price is going up or down

with reference to a trader’s point of reference

.

 

So, the question arises as to what this “point of reference” is? A point of reference is that price from which you determine the trend (see the definition of trend in my first post on this thread). Some call this reference point as support or resistance, and some as Point of Control, etc.

 

As a trader trying to understand market action, you need to do the following:

1. Wait for price to reach a point of reference. Observer if price is accepted or rejected there. That gives you the trend for now;
   
2. Once you determine the trend, determine the next target (a future point of reference). This is the target you expect the price to reach.
   
3. If the price reaches that target, observe if that target accepted or rejected; this will determine if the trend persists or changes;
   
4. Always monitor for trend change before the target is reached (i.e., price fail to reach the target).
   

As you can see, the process is simple: you determine the trend, next you determine a target, observer what happens at the target (or if price fails to reach the target), and the cycle continues. Trading from this stand point is very simple; however with a big qualifier: you need to know how to (a) pick points of references; (b) monitor price to determine acceptance and or rejection at the point of reference; and © determine when a price failing to reach a target is really that as opposed to a temporary reaction. As a debutant trader, (a), (b) and © are what you are trying to observe. This is the “feel” for the market.

 

In suggesting to use the 30-min bar, I have removed (a) from the list of things you have to do -- you have points of reference easily identifiable. You will have to concentrate on (b) and ©. Once you develop the ability to perform (b) and ©, then you can come up with your own (a) using whatever logic that appeals to you.

 

I have studied Wyckoff including taking courses offered by SMI. I have studied John Durrand whose series of articles in the “ticker tape” and “the magazine of wall street” is the bedrock of Wyckoff’s ideas. I have studied VSA, a derivative of Wyckoff. However, I found Wyckoff very subjective for my taste. I have studied Market Profile with Steidlmayer in person; again the same problem. Whereas with Wyckoff I was, in principle, in agreement with Wyckoff’s theory, I cannot say the same about Steidlmayer’s. I have studied an underground classic: a series of newletters published by a price action trader, Joseph Hart, between early 90 and early 2000s. However, I found objectivity in Hayek’s work on complexity and in Brian Arthur’s work -- not the route you would expect a intra-day trader to take; but to each his own! I combined their work with the ideas of George Douglas Taylor (not his methodology but his ideas) to develop, what I consider, an objective trading system. My in depth analysis of Fisher’s ACD methodology might have also played a role in developing my trading system. The reason I am telling you all this is because before you go ahead and try to develop a trading plan you need to subscribe to a theory that justifies your trading plan -- for me it was the class of patterns I was looking for based on what complexity theory had to say. Please don’t try to shoot from your hip here; take your time.

 

You are most likely to become consistent when you can objectively pick (a). However don’t stop there. Once you are comfortable in determining (a), you will notice something very odd -- the market does have a pattern! Remember (a) are the trees in the forest, and your ultimate goal is to map the forest (determine the pattern). This will definitely be a “zen” moment! You will never look at trading the same way you look at it now. Trading is really boring and unexciting when you reach this place and I can vouch for that!

 

And remember, please don’t waste your money trading before you have a solid trading plan.

 

“There are numerous under-currents in the market; they will confuse a trader”

George Douglas Taylor

All the best!

 

-MadSpeculator.

Edited July 10, 2013 by madspeculator