Trade Discussion and Analysis

[wasp 10]

FWIW, we recently completed a 150-post thread on the subject of S&R: http://www.traderslaboratory.com/forums/f34/support-and-resistance-4171.html

 

You may find it helpful.

 

Cheers db and I have been reading that one. This is not a re-hash in a different section, it will be more for ongoing / joint with live trades and analysis threads, not S and R from scratch.

[myrtleturtle 10]

very good luck with this one, wasp.

 

from the perspective of a S/R wannabee, the issue is always going to be defining whether the Sup or Res will hold or break.

deciding in hindsight that Support "held" at a Sup-point 3 weeks ago, but broke 2 other Sup-lines before getting there is analogous to saying "61.8% retrace held", and ignoring that 38% and 50% failed.

 

so far, I have conceptualised the "losing trades" into statistics and money management ( as soon as I get my trading nerve back).

 

the one advantage I can see is price congesting at Sup/Res, and forming small ranges, which may be the basis for low-risk breakouts into whatever direction it chooses. here I wouldnt care if Sup/Res held or not, as I would be playing the low-risk (ie, the "other side" of the small range is my exit point), probabilities.

 

all this is eyeballing the charts, and have no data to back this up.

 

once again, good luck.

[wasp 10]

very good luck with this one, wasp.

 

from the perspective of a S/R wannabee, the issue is always going to be defining whether the Sup or Res will hold or break.

deciding in hindsight that Support "held" at a Sup-point 3 weeks ago, but broke 2 other Sup-lines before getting there is analogous to saying "61.8% retrace held", and ignoring that 38% and 50% failed.

 

so far, I have conceptualised the "losing trades" into statistics and money management ( as soon as I get my trading nerve back).

 

the one advantage I can see is price congesting at Sup/Res, and forming small ranges, which may be the basis for low-risk breakouts into whatever direction it chooses. here I wouldnt care if Sup/Res held or not, as I would be playing the low-risk (ie, the "other side" of the small range is my exit point), probabilities.

 

all this is eyeballing the charts, and have no data to back this up.

 

once again, good luck.

 

This is of course, where it gets tricky! When does a certain level stop being important as, like you say, do you see a twice break of S/R only to hold a day later yet, the same level could stop working altogether? As yes, technically it is like saying Fib X worked but not Y.

 

Obviously, price action at each level, defining overall trend, and other small factors (time of day, news releases etc...) helps to decide what to do and losses are inevitable.

 

The key factor for me, is defining those levels and ensuring the essentials are there and not the others, bringing us back to point one.

 

GammaJammer once mentioned that for the bank boys, te more times it holds the stronger it will be but still, if you never ended a level, you wouldn't be able to see the chart.

 

One thing that does help, from a swing POV, is only using large time frames for these levels. Yet this doesn't solve the problem.

 

Unfortunately, I do not have the answers so any thoughts are good!

 

Personally, I am going to utilize trends on the shorter TF to help my decisions but back to those pesky levels....................

[brownsfan019 17]

GammaJammer once mentioned that for the bank boys, te more times it holds the stronger it will be but still, if you never ended a level, you wouldn't be able to see the chart.

 

I agree w/ that statement to a point. When I was swing trading stocks, the idea behind tests of S/R (and even true intraday as well) is that a level can be tested about 2-3 times and become stronger each time.

 

HOWEVER ... the likelihood the level will BREAK becomes very likely after 3 times. In other words, after testing a level for 4+ times, there's a good chance that level will break.

 

That's what I found at least when swing trading. You never hear of a quadruple bottom/top b/c more often than not, it fails IMO.

 

So just watch your markets and see how they react before making any conclusions as each market is different.

[cowpip 10]

What a slow day! I hate days like this, where the range contracts to half of normal. This is hardly worth my time!

[pipMonster 10]

I'm right with you cowpip. These are the days that test the wider time frame trader, because we never know when the move is going to start.

 

Wasp, are you now deriving your s/r levels from the hourly chart only or are you transferring from the 4-hr and using the hourly for entries?

 

Cowpip, you and I all trade a similar style. I find it interesting to suss out the differences.

[cowpip 10]

Don't worry, we all have shit weeks!

 

I really (honestly) appreciate this statement. I was beginning to think it was entirely just me.

 

To be honest, Wasp, this really hasn't been that bad of a testing period for me. I'm down about 150 pips since 18 August - and given my newness to this strat and my attempts to try and figure out a few of the nuances (and thus far, not succeeding consistently), I figure that really isn't bad at all. And in $ terms, I'm not really that far below b/e during this period, as I've still been playing some other pairs and making up some of the lost cash here. But THIS strat of yours is really the type I want to master. I know I can do it - I just need more time (or better market conditions) to do it.

 

One thing I am doing is trading too much. I'm putting in on average about 5 to 6 trades per day, and that's too much - as any glance at your chart illustrates.

 

Your last chart has been a huge help. But I need your help to understand one trade (the rest, I get - and I'm ticked that I saw the same thing but traded it differently). The trade I've highlighted in the chart below has me wondering why you would have taken this one. Price challenged support and the 4-hour closed above support. You then say you would have shorted at that level (which of course was the right thing to do), but why would you have done that? What was the signal in that case?

 

I can see the signals in all of the other instances.

 

I think part of my problem has been the fact that I've been looking at the 30-min and hourly charts way too much and the behavior I've seen there has caused me to take pre-emptive entries prior to the close of the 4-hour bars. I guess that's just par for the course, but I do need to be more diligent about sticking to the 4-hour charts.

 

So anyway, if you could shed some light on why you took the trade I've highlighted in the attachment, I'd greatly appreciate it. I've seen you take this type of trade before, and have tried to duplicate it myself, but thus far have failed.

 

Thanks a bunch.

[wasp 10]

I close all Friday afternoon so as not suffer Monday gaps. It opened below Support and had the weekend not been there, I would have taken the long on the prior candle, got stopped out, the SAR when it printed below instead.

 

It sounds to me like you have no faith in your convictions and need to pick a trade and stick with it. Easier said than done I know.

 

As for adding of my trendlines, I will run it till the end of week and if no better, I'm going back to knife juggling!

Edited August 27, 2008 by wasp

[cowpip 10]

It sounds to me like you have no faith in your convictions and need to pick a trade and stick with it. Easier said than done I know.

 

Yes, that is a problem - and it bothers me. But it's improving. A bigger issue for me is knowing where and when to SAR.

 

Thanks again. I appreciate you taking the time to reply.

[cowpip 10]

I would have taken the long on the prior candle, got stopped out, the SAR when it printed below instead.

 

Do you SAR on the 4-hour charts, or do you prefer to SAR on the hourly or sub-hourly charts? I've seen you SAR long before a 4-hour chart ends, so there must be some discretion involved (of course).

[wasp 10]

Do you SAR on the 4-hour charts, or do you prefer to SAR on the hourly or sub-hourly charts? I've seen you SAR long before a 4-hour chart ends, so there must be some discretion involved (of course).

 

Primarily, only on the 4hour. Only atm am I looking at hourlies but yes, discretion through experience too. That's kinda why I have trouble putting my 'plan' in words sometimes!

[cowpip 10]

Primarily, only on the 4hour. Only atm am I looking at hourlies but yes, discretion through experience too. That's kinda why I have trouble putting my 'plan' in words sometimes!

 

Got it. Thanks again.

[cowpip 10]

For the record, people reading this should know that part of my difficulties this week in not being successful is because I now realize that I had too many S&R lines marked on my charts and several were causing me to take reversals when I shouldn't have. Don't get too picky when plotting S&R. But pick the major levels where price dominantly reacts through history. I compared Wasp's chart with my own and noticed several lines that shouldn't have been there and a couple that were misplaced.

 

It really is critical that these lines be as accurate as possible. I thought I had double-checked the lines, but when I revisted them, I indeed saw that several were off. This is, perhaps, one of the most important aspects of this strat: Getting the S&R lines marked CORRECTLY.

 

That's an issue I'm going to have to be far more careful about. It can be a costly mistake.

[wasp 10]

Damn you insomnia!

 

(it will probably break support now but..............!)

[cowpip 10]

Damn you insomnia!

 

(it will probably break support now but..............!)

 

Yeah... it probably will. The hourly looks like it's ready to peek below. But this line of defense is proving a wee bit tougher than the last line of defense, it seems. That's maybe a tad bit of comfort.

[wasp 10]

Yeah... it probably will. The hourly looks like it's ready to peek below. But this line of defense is proving a wee bit tougher than the last line of defense, it seems. That's maybe a tad bit of comfort.

 

It bounced along the previous one for 11 hours before breaking though... Not overtly confident this one will hold... we'll see. It would be nice to have a trend with some vengeance mind, none of this bouncing about for a brief 100 pip pop then bounce all day again.............

[cowpip 10]

It bounced along the previous one for 11 hours before breaking though... Not overtly confident this one will hold... we'll see. It would be nice to have a trend with some vengeance mind, none of this bouncing about for a brief 100 pip pop then bounce all day again.............

 

Agreed... and true. It's anyone's guess what they'll do.

 

PS: Really good sex cures my insomnia....

[cowpip 10]

Here's a chart of how I SHOULD have performed last week. I made some discoveries in my analysis.

 

First, I significantly over-traded last week. Seriously overtraded. By almost a factor of 3! Tsk tsk....

 

Second, I'm paying WAY too much time looking at the 30-min charts and (worse still) reacting to what I see there.

 

Third, I will do better if I just wait until the next 4-hour candle closes if my stop is hit, rather than SARing. I haven't figured out how to SAR and still retain a good decent entry level.

 

That means I won't have alarms set when my stops are hit. Only when my targets are reached (which are usually two S/R levels below my entry - or the S/R level that is closest to the daily range) and a few minutes before the start of each 4-hour period. If my stops are hit, so be it. I'll reassess at a later time.

 

As the chart attached shows, if I would have played things according to how I saw them on the 4-hour charts (and only the 4-hour charts), life would have been very very sweet last week.

 

Checks are good trades, X's are stop-loss trades. Arrows are entries. For long trades, the head of the arrow marks the entry location. For short trades, the butt of the arrow marks the entry location.

 

Knowing this, it's time to reload and start demonstrating the true power behind this strat next week.

 

It's all about discipline and finding the right groove. That's what this discovery process is all about.

[cowpip 10]

I should note that had I followed the strat as shown in the chart above, the total pippage earned would have been over 600 pips.

 

Yes, I know that hindsight is 20-20, and it's hard to produce a chart of what you think you would have done based on what you already know - but I honestly tried to construct the chart above based on what I would have seen at the end of each 4-hour candle, rather than what I know happened.

 

I believe an earnings of more than 600 pips really was possible last week. And that's why I'm still working this strat hard.

 

The strat isn't at fault here. It's my own failure to remain disciplined - or rather, my own failure to accept the strat as reliable. That's changing.

 

EDIT: PS: Disregard the 14-ema, the bollinger bands and the RSI indicator above. I'm not using them at all with this strat. My own personal strat uses them, but not the one I'm trying to master here.

[wasp 10]

IMO, dump all but the 4hour, if you want confirmation, use the 1hr and no smaller. Bank boys NEVER look under 1 hour. Dump the indicators, remember supply and demand is what the smart money watches and the hardest thing of all, is when you place a trade, if you are trading the 4hr only, WALK AWAY for 4 hours.... For over trading, this will eliminate your excess trades.

 

Of course, you have to prove this to yourself, don't just listen to me!

[cowpip 10]

IMO, dump all but the 4hour, if you want confirmation, use the 1hr and no smaller. Bank boys NEVER look under 1 hour. Dump the indicators, remember supply and demand is what the smart money watches and the hardest thing of all, is when you place a trade, if you are trading the 4hr only, WALK AWAY for 4 hours.... For over trading, this will eliminate your excess trades.

 

Of course, you have to prove this to yourself, don't just listen to me!

 

Yip... you are, of course, absolutely correct. And yes, my wife is going to keep me busy for 3 hours and 55 minutes of each 4-hour block, commencing this next week (how she's going to do this, I have no clue - but my imagination is already in overdrive ).

 

All that's really (I think) all that is needed is about 5 minutes to examine the situation and then pull the trigger (or not) at the 4-hour mark.

 

Excellent advice, Wasp. Thanks again.

[wasp 10]

....... my wife is going to keep me busy for 3 hours and 55 minutes of each 4-hour block, commencing this next week (how she's going to do this, I have no clue - but my imagination is already in overdrive ).

 

....

 

I fear you may be sorely disappointed! :rofl:

[cowpip 10]

I fear you may be sorely disappointed! :rofl:

 

You're probably right. I'll be hauling furniture around most likely, huh? :doh:

[cowpip 10]

Wasp, do you handle large gaps (such as today's almost 200 pip gap on GJ) any differently than normal price action would dictate on the 4-hour charts?

[wasp 10]

Wasp, do you handle large gaps (such as today's almost 200 pip gap on GJ) any differently than normal price action would dictate on the 4-hour charts?

 

No not really, just waiting for a solid entry wit the rejection of support circa 195.75 and looking to go long. Basically just login when the market re opens and await the first setup, be it at the open or (hopefully) in an hours time.