Real Time Price Action- Clue to Puzzle?

[DbPhoenix 42]

So if a trade goes wrong, this automatically means the trader that has read the market incorrectly?

 

Of course. It's hardly the market's fault if the trader can't hear. Today, for example, we have yet to meet the conditions for a reversal. To short without having those conditions met is gambling, not trading.

 

It sounds like you are advocating than you can get every trade right, if you are skillful enough to read the market

 

Closer than most traders would expect.

[BlowFish 10]

Now I see a lower high, but no lower low...

 

Yes indeed. One question to ask is 'what must happen next?' i.e. what must happen next to validate/invalidate what you anticipate might happen. For price to go lower it must start making lower lows at some point. I guess this is obvious. Price is still making higher highs and cant take out recent lows so the uptrend is still intact. Having said that it went 'sideways' for a bit if you allow sideways as direction.

 

To look at it another way the bulls could not take price higher however neither could the bears assert themselves. Of course when the old high/DT was taken out and price held above, it was clear who was in control again.

 

Perhaps I'm on a different page to others but this to me is what PA is all about? When you monitor it as it happens that is 'real time price action'.

[zeon 10]

Of course. It's hardly the market's fault if the trader can't hear. Today, for example, we have yet to meet the conditions for a reversal. To short without having those conditions met is gambling, not trading.

 

I agree, there's no reason to short, other than trying desperately to scalp some points. But can you really blame the trader if he's acting on a perfectly valid signal and suddenly some news is released and the market goes in the other direction?

 

Closer than most traders would expect.

 

I guess I know what to strive for then

It does seem like your ability to do so derives from a very fine understanding of where S/R can be found.

[DbPhoenix 42]

I agree, there's no reason to short, other than trying desperately to scalp some points. But can you really blame the trader if he's acting on a perfectly valid signal and suddenly some news is released and the market goes in the other direction?

 

You're regressing to the realm of the hypothetical again. We were talking about today. Real time, the subject of the thread, is today.

 

As to whether or not there's a reason to short, that depends on what your reasons are to short.

[DbPhoenix 42]

Yes indeed. One question to ask is 'what must happen next?' i.e. what must happen next to validate/invalidate what you anticipate might happen. For price to go lower it must start making lower lows at some point. I guess this is obvious. Price is still making higher highs and cant take out recent lows so the uptrend is still intact. Having said that it went 'sideways' for a bit if you allow sideways as direction.

 

To look at it another way the bulls could not take price higher however neither could the bears assert themselves. Of course when the old high/DT was taken out and price held above, it was clear who was in control again.

 

Perhaps I'm on a different page to others but this to me is what PA is all about? When you monitor it as it happens that is 'real time price action'.

 

All correct, as far as it goes. So why short at 47.75?

[zeon 10]

Another demandline is now broken...

 

Also, the reaction at resistance looks like price didn't want to see 1360. High volume and bar closes well off the highs...

[BlowFish 10]

Of course. It's hardly the market's fault if the trader can't hear. Today, for example, we have yet to meet the conditions for a reversal. To short without having those conditions met is gambling, not trading.

 

 

I wonder what those conditions might be, some sort of buying climax I would guess? At least a more fundamental shift in the force Obi Wan This is what I am trying to get at :- what the clue in the title might be.

 

As to gambling some might argue all trading is gambling. I guess thats not what you where alluding too. Short side trades might be 'gambling' in the context of how you trade. A scalper would certainly disagree. Personally when price started making lower highs on the time frame that was my 'focus' then I considered short side. Apart from a couple of places though the trend was firmly up (by my definition).

 

Of course some one with a weekly focus might see the last 3 weeks rise as a small correction in the weekly down trend for example. Having said that looks like the weekly is trying for a double bottom but below 1400 it is still making lower highs. Of course if the bears take out 1270 then the downtrend is intact.

[zeon 10]

Trying to be as "real-time" as possible, this is a 1-minute chart of the ES.

 

Isn't this supply coming into the market? Notice how all of the bars close well off the highs. I'm not thinking of putting a trade on, but in all honestly this would probably have been a short ...

[DbPhoenix 42]

I wonder what those conditions might be, some sort of buying climax I would guess? At least a more fundamental shift in the force Obi Wan This is what I am trying to get at :- what the clue in the title might be.

 

That's largely up to the trader, though it has nothing to do with The Force. At the very least, each trader should define for himself the difference between a retracement (or pullback or reaction or whatever) and a reversal.

 

As to gambling some might argue all trading is gambling. I guess thats not what you where alluding too. Short side trades might be 'gambling' in the context of how you trade. A scalper would certainly disagree. Personally when price started making lower highs on the time frame that was my 'focus' then I considered short side. Apart from a couple of places though the trend was firmly up (by my definition).

 

Whether one is a scalper or swing trader or position trader or whatever has nothing to do with whether he's trading or gambling. If he's trading randomly, he's gambling.

 

At the very least, one must have made a clear distinction between reversal and retracement (above). He must also have a clear definition of exactly what will invalidate whatever setup he's implementing.

 

Of course, it also helps to be able to make a clear distinction between "up" and "down". A surprising number of traders have trouble with this (witness the popularity of moving averages).

[DbPhoenix 42]

Trying to be as "real-time" as possible, this is a 1-minute chart of the ES.

 

Isn't this supply coming into the market? Notice how all of the bars close well off the highs. I'm not thinking of putting a trade on, but in all honestly this would probably have been a short ...

 

Zeon, what you're doing is not real-time analysis. Instead you're asking, in so many words, can I short now? can I short now?

 

You have yet to break the trendline. If you have some sort of well-defined and thoroughly-tested setup that allows you to short with confidence here, then explain in detail what it is. Otherwise, you're just guessing.

[zeon 10]

Zeon, what you're doing is not real-time analysis. Instead you're asking, in so many words, can I short now? can I short now?

 

You have yet to break the trendline. If you have some sort of well-defined and thoroughly-tested setup that allows you to short with confidence here, then explain in detail what it is. Otherwise, you're just guessing.

 

Ok, I'll try to steer away from comments like going short or long then. But what about the supply then? And I had drawn two trendlines that were broken (see my previous charts), are you looking at something on another timeframe perhaps?

 

The "setup" for shorting was like I said before a shooting star like formation (or by blending candles) into resistance, in this case 1360. Something like this ocurred at 1718 PM on the chart I posted, but on the next bar price went up so no short signal triggered.

 

Note: price has just gone below 1360 again hmm...

 

PS: Something you wrote recently just came to mind. You said you didn't take trend into consideration "per se" when buying S and selling R. This seems a bit contradictory to your above post...?

Edited April 1, 2008 by zeon

[DbPhoenix 42]

 

The "setup" for shorting was like I said before a shooting star like formation (or by blending candles) into resistance, in this case 1360. Something like this ocurred at 1718 PM on the chart I posted, but on the next bar price went up so no short signal triggered.

 

And you consider this to be well defined, thoroughly tested, and consistently profitable?

[zeon 10]

And you consider this to be well defined, thoroughly tested, and consistently profitable?

 

I forgot to say that volume is the confirmation of my trade. There needs to be a peak in the volume in order for the signal to be valid.

 

And ehm, yes, that was basically how I traded for several months last year and managed to actually make a profit. Ofcourse at that time I had no idea what the future profitability of the setup would be, but by the looks of it is has had it's time

 

Ofcourse this is just the signal, the complete setup includes where to place the stop, how to determine the target, position sizing, position management, etc...

 

And I also didn't mention that there has to be a sustained directional movement before. So if price is just drifting or ranging, shorts aren't in place.

Edited April 1, 2008 by zeon

[zeon 10]

You have yet to break the trendline. If you have some sort of well-defined and thoroughly-tested setup that allows you to short with confidence here, then explain in detail what it is. Otherwise, you're just guessing.

 

 

I've tried drawing a trendline from the beginning of the day, but even that is breached.

[DbPhoenix 42]

I've tried drawing a trendline from the beginning of the day, but even that is breached.

 

Which signifies what?

[zeon 10]

Which signifies what?

 

Strictly speaking that momentum is changing... slowing down, which was visible on the chart by the sideways movement. And, if I understand the posts in your blog correctly, it signifies a reason to exit longs.

 

Nonetheless, momentum has just picked up again and we jumped higher 5 points.

[DbPhoenix 42]

Strictly speaking that momentum is changing... slowing down, which was visible on the chart by the sideways movement. And, if I understand the posts in your blog correctly, it signifies a reason to exit longs.

 

In and of itself, no, it doesn't. You may want to review them. Or become acquainted with Sperandeo.

Edited April 1, 2008 by DbPhoenix

[zeon 10]

In and of itself, no, it doesn't. You may want to review them. Or become acquainted with Sperandeo.

 

 

I vividly recall you saying something along the lines of "the trader has several ways of determining to exit: a breach of the trendline or wait for a break of the last swing low; there just aren't that many possibilities".

 

I also remember you saying "I’m going to draw a supply line and use a break of that as a signal to exit."

 

As for Sperandeo, I know the 2B rule and his definition of trend reversal... and I take it that's what you are refering to. Sorry if I wasn't entirely clear, I didn't mean to say a reversal was taking place.

[DbPhoenix 42]

I vividly recall you saying something along the lines of "the trader has several ways of determining to exit: a breach of the trendline or wait for a break of the last swing low; there just aren't that many possibilities".

 

True. There aren't all that many possibilities.

 

I also remember you saying "I’m going to draw a supply line and use a break of that as a signal to exit."

 

Every day? All the time? Under all circumstances?

 

As for Sperandeo, I know the 2B rule and his definition of trend reversal... and I take it that's what you are refering to. Sorry if I wasn't entirely clear, I didn't mean to say a reversal was taking place.

 

So you haven't seen any shorting opportunities today after all?

[zeon 10]

True. There aren't all that many possibilities.

 

Every day? All the time? Under all circumstances?

 

No, not every day. But it was either a warning signal in anticipation of exiting the trade when the last swing was breached.

 

So you haven't seen any shorting opportunities today after all?

 

 

I'd probably should have said this, but when price breaks through an important area of resistance (or support if it's on the downside) I tend to look to entries with the trend. Otherwise I just short resistance or buy support. For example, if the day opened around 1325, I would have been on the lookout to short 1330. We opened way higher, so the odds were that this "gap" was going to be a continuation higher.

Edited April 1, 2008 by zeon

[zeon 10]

Es

 

1349

1357

1362

1367

[DbPhoenix 42]

I'd probably should have said this, but when price breaks through an important area of resistance (or support if it's on the downside) I tend to look to entries with the trend. Otherwise I just short resistance or buy support. For example, if the day opened around 1325, I would have been on the lookout to short 1330. We opened way higher, so the odds were that this "gap" was going to be a continuation higher.

 

I don't recall you mentioning any of this earlier. You appeared to be looking for shorting opportunities all day.

[zeon 10]

I don't recall you mentioning any of this earlier. You appeared to be looking for shorting opportunities all day.

 

 

I'm sorry if that was the impression you got. I did focus on finding the elements that are components of the setup I earlier described. As I don't have a real strategy to handle trending days, I try to steer clear from them. I'm either 'in early' or out for the whole day.

 

Perhaps I should illustrate this by a short signal yesterday (just an observation, I didn't act on it) at 1330 resistance. Price was making higher highs and higher lows (annotated x'es on the chart) along the way but there was no break. Are you saying 'xxx' would not constitute as a short entry then, because the demand line is not broken?

[DbPhoenix 42]

I'm sorry if that was the impression you got. I did focus on finding the elements that are components of the setup I earlier described. As I don't have a real strategy to handle trending days, I try to steer clear from them. I'm either 'in early' or out for the whole day.

 

However, you didn't mention any of this at or before or after the open. Since you could not have known in advance that this was going to be a trend day, that's not a factor.

 

The point of a RT thread is to discuss what you're doing and plan to do in RT. To go back and say that the probabilities were for a "continuation higher", particularly when you never went long, doesn't count.

 

Perhaps I should illustrate this by a short signal yesterday (just an observation, I didn't act on it) at 1330 resistance. Price was making higher highs and higher lows (annotated x'es on the chart) along the way but there was no break. Are you saying 'xxx' would not constitute as a short entry then, because the demand line is not broken?

 

Yesterday doesn't count either. If you're unable to act in RT, that's fine. But that's what you need to work on. You can't trade hindsight.

[zeon 10]

However, you didn't mention any of this at or before or after the open. Since you could not have known in advance that this was going to be a trend day, that's not a factor.

 

That's why, if I am trading, I'll usually get in a couple of losing trades before I realize it's a trend day. When I finally do, I quit because I can't find an entry in the direction of the trend or - by the time I do - the trend is exhausted.

 

The point of a RT thread is to discuss what you're doing and plan to do in RT. To go back and say that the probabilities were for a "continuation higher", particularly when you never went long, doesn't count.

 

I wasn't trying to fabricate anything to make it look like I would have taken a long, when I wouldn't have. I was merely pointing out that based on my observations, there's usually a high probability for price to continue in one and the same direction after a significant breakout has taken place.

 

 

Yesterday doesn't count either. If you're unable to act in RT, that's fine. But that's what you need to work on. You can't trade hindsight.

 

What I meant to say is that yesterday was a short signal according to my "plan". I didn't act because I am trying to observe price from a neutral point of view, without trading or papertrading. But the setup still was there and I noted it during the day. This seems in conflict with the higher highs and higher lows that the trend showed yesterday. Or at least up till the point of my short...

 

To summarize things, I see little difference between the first half of yesterday and today. So, assuming there was that short signal yesterday at 1330 and today at 1360, and in both cases the trendline wasn't broken, how could I have know that yesterday's trade would've been a profitable one and today's not? This is why I find it hard to come up with a system that has anything more than a 50% win rate :\

 

Ofcourse I could pre-empt my plan by saying shorting is only allowed after the TL breaks or after price failed to make a higher high, but by then I'll most likely be shorting when price has already moved a significant part lower. I hope all of this makes sense somehow...