Chat Junkies

[Hlm 10]

For the time being if anyone wants to chat via an IRC Java client through freenode for FOMC:

 

http://java.freenode.net//index.php?channel=TL

[DbPhoenix 42]

Lots of interesting levels to look at today:

 

 

 

 

Edited January 29, 2009 by DbPhoenix

[DbPhoenix 42]

Why 1200 matters:

 

 

[DbPhoenix 42]

Here's what I was referring to in chat. If a particular level is tested repeatedly from both sides intraday, then that becomes important intraday S/R. Therefore, the volume spike which occurred just before the last test of 95 becomes something to pay attention to.

 

 

[jasont 10]

Is there a temporary chat we can use whilst this one gets itself sorted out? Unless of course I am the only one locked out right now?

[DaKine 10]

Jason some of us are here.

 

For the time being if anyone wants to chat via an IRC Java client through freenode for FOMC:

 

http://java.freenode.net//index.php?channel=TL

[firewalker 10]

Here's the chart we discussed in the chatroom today. I gave the rationale for entering the trade, including the entry in the chatroom. Now here's the visual representation where those who are interested can comment on it...

 

Basically the reason for discussing it was the problems I am having with the recent market "conditions"... basically getting lot of trades stopped out, lot of breakevens and despite I have (imo) valid reasons for entering the trade, almost all of those entries do lead to a directional move, albeit often only for very little points. And that's where I'm becoming increasingly frustrated at mister market.

 

Some have suggested taking profits quicker, some have suggested scalping but I don't think overhauling my methodology is the best way to solve the issues. Making small adjustments will probably be necessary because as jason pointed out volatility is no longer as high.

 

[Head2k 10]

I don't follow ES, but maybe this CVB chart can be of some help. The red circle is approximatly your entry. In fact ES forms a nice channel, though clearly aparent only in hindsight.

[DbPhoenix 42]

Here's the chart we discussed in the chatroom today. I gave the rationale for entering the trade, including the entry in the chatroom. Now here's the visual representation where those who are interested can comment on it...

 

Basically the reason for discussing it was the problems I am having with the recent market "conditions"... basically getting lot of trades stopped out, lot of breakevens and despite I have (imo) valid reasons for entering the trade, almost all of those entries do lead to a directional move, albeit often only for very little points. And that's where I'm becoming increasingly frustrated at mister market.

 

Some have suggested taking profits quicker, some have suggested scalping but I don't think overhauling my methodology is the best way to solve the issues. Making small adjustments will probably be necessary because as jason pointed out volatility is no longer as high.

 

 

Unfortunately, this should be done before you go to bed, and you're about ready to do so. By tomorrow, this will be nothing but hindsight and the usual intellectual exercise.

 

The principles are the same. The only difference is how you apply them.

 

Take the open, for example. The short was pretty clear, but what happens when the first target is reached? Do you scale out? SAR? How do you make the most of whatever reversal may occur? There are all kinds of ways to play that, and the choice depends on how well one reads the price movement, whether or how he scales out, what his risk tolerance is, and so on.

 

But as to your later entry, charted here, you entered at the right time for the right reasons. And while taking profits at 2 points is certainly an option and certainly okay, it also suggests that you have no interest in learning how to read traders' actions and would rather be airlifted out of the water than try to ride the wave.

 

In terms of PA, there's no particular reason to exit as long as you're making lower highs and lower lows. The first sign of trouble is the lack of a stairstep on the next swing high. It in fact creates almost a double "top". When the lower low is then so wimpy, you have to look for a reversal signal, even though you may not be at what you thought was S, knowing that price will often create its own intraday S. I believe you did all that, and you exited appropriately. If you had had an SAR setup ready to go at the swing low, sure, go ahead. If you didn't, then you didn't, and the next opportunity is either a long at a higher low or another short at a test of R. Your choice, all in the context of whether or not you want to be in all the time or close to it, how much profit you're willing to settle for, how tight you want your stops to be, how much you're willing to pay in commissions, and so on.

 

 

It's all right, in other words, to wait for those opportunities which present the highest probability of a move that's worth your while, but may not be worth anybody else's, just as what is worth someone else's may not be worth yours. This means a lot more waiting, but at least you won't be talking yourself into trades that at bottom you believe just aren't worth the effort. When someone says you ought to do this or you ought to do that and none of it is right for you, just nod your head and go on about your business. The P&L isn't all there is to it. You also have to consider how much energy you have to expend to achieve a certain result, how much stress you have to endure, how enjoyable one course is over another, and how much time all of this takes.

 

You may also want to look over again that bit I posted from Innerworth on Possibility Mapping. It will make your day a lot easier.

[DbPhoenix 42]

Someone asked me today about what boxes I watch and I replied that I watch primarily the most recent, particularly if we happen to open on or inside it. However, as Hlm has pointed out repeatedly, price will also find its own S/R intraday, and one has to be sensitive to that. Being stubborn and taking trades only at what he has determined premkt to be the most important S/R is certainly one route to take, but being too stubborn has the effect of closing one's eyes to what traders are doing right in front of him, which defeats the purpose of learning this approach in the first place.

 

Today, for example, we found R at a just-premkt level and the short was on. But instead of travelling all the way into one of the larger, older ranges, we stopped at 80, at the other side of what had become a smaller range which began, more or less, on the 30th. We then reversed back to the upper level of this range at our old friend 1200.

 

We then broke out of this for a long. But how far could this be expected to go? There was no "range" per se. No "value area". Just a 100% retracement from 1240. But the midpoint of this /\ was 1220. And guess where we found R?

 

Therefore, regardless of how much preplanning and possibility mapping one has done premkt, he must always maintain a watchful eye and an open mind, like a hunter, and remain sensitive to what traders are doing at the moment. The chat room helps here as others who are watching the same thing may notice things that one doesn't. So don't be too quick to ignore. One never knows who's going to pick up on what.

[tune 10]

Picture by Harry Hindsight

 

[DbPhoenix 42]

Picture by Harry Hindsight

 

Any relation to Hairy Hindquarters?

[Gringo 10]

Someone asked me today about what boxes I watch and I replied that I watch primarily the most recent, particularly if we happen to open on or inside it. However, as Hlm has pointed out repeatedly, price will also find its own S/R intraday, and one has to be sensitive to that. Being stubborn and taking trades only at what he has determined premkt to be the most important S/R is certainly one route to take, but being too stubborn has the effect of closing one's eyes to what traders are doing right in front of him, which defeats the purpose of learning this approach in the first place.

 

Therefore, regardless of how much preplanning and possibility mapping one has done premkt, he must always maintain a watchful eye and an open mind, like a hunter, and remain sensitive to what traders are doing at the moment. The chat room helps here as others who are watching the same thing may notice things that one doesn't. So don't be too quick to ignore. One never knows who's going to pick up on what.

 

So intra-day tug of war between traders can create new S/R that may not necessarily match with previous or pre-maket S/R fom boxes.

 

1) Does this mean intraday price points may take precedence over other previous boxes including pre-market high/low points?

 

2) Does this also mean that boxes and their S/R are not oracles but mere guiding posts that float?

 

Every time I think I have it figured out another layer of the onion is revealed.

[DbPhoenix 42]

So intra-day tug of war between traders can create new S/R that may not necessarily match with previous or pre-maket S/R fom boxes.

 

1) Does this mean intraday price points may take precedence over other previous boxes including pre-market high/low points?

 

2) Does this also mean that boxes and their S/R are not oracles but mere guiding posts that float?

 

Every time I think I have it figured out another layer of the onion is revealed.

 

1. Of course. The boxes are not an indicator. They're just trading ranges, what MP calls "value areas". They exist because trades are forever looking for trades, like sharks are forever looking for the next meal (and I don't mean to imply that traders are sharks, only that they're always on the move, looking for a trade; that's what they/we do). Therefore, like a school of krill, they can change direction at any time at any place, for reasons that may not be apparent at the time but which are illustrated on the chart.

 

2. What is intriguing about AMT is that it "works" as often as it does, which is nearly always. The midpoints and limits of each range are like the seasonal homes of migratory animals, and unless there is some important, intervening event, price works its way from one end to the other in an unusually predictable way, if one knows where to look. Even so, there are no block walls at each edge of the range, and the mix of participants changes before, during, and after each turn. But regardless of changes in the mix, the "instinct" is still there, and traders will work their way back and forth in a way that is predictable enough to enable the individual who's paying attention to profit.

[tune 10]

Any relation to Hairy Hindquarters?

 

That's the fella. Also known as Precarious Phil.

[Gringo 10]

Hey Head2K,

 

You were taking snapshots of important points early in the day.

 

It's about time you posted them. I eagerly await.

 

Thanks

[Head2k 10]

Hey Head2K,

 

You were taking snapshots of important points early in the day.

 

It's about time you posted them. I eagerly await.

 

Thanks

 

The morning springboard.

[DbPhoenix 42]

[DbPhoenix 42]

I made a "stealth" post to the Cajas thread regarding AMT. If anyone has any comments or suggestions or corrections to make, please make them here. Though it may seem otherwise, I tried to make the post as brief as possible, so I don't want to make it any longer than absolutely necessary.

 

--------------------------------------------------

 

I read somewhere recently -- and can't remember where -- having to do with Market Profile, I believe -- that most experienced traders will avoid trying to catch the tops and bottoms and focus on "the middle", waiting for confirmations to enter and confirmations to exit. However, since "the middle" is by definition where most of the trading is going on and is largely non-directional, there is also a lot of whipsawing in the middle, and that generates a lot of losing trades. One can sometimes avoid this by widening the stops, but, since the market always teaches us to do what will lose the most money, this will turn out to be an unproductive tactic.

 

The safest and generally most profitable trades are found at the extremes. Therefore, you wait for the extremes. Wyckoff used a combination of events to tell him when a wave was reaching its natural crest or trough: the selling/buying climaxes, the tests, higher lows/lower highs, and so on, all confirmed by what the volume was doing and by the effect the volume had on price (effort and result). As a result of this work and of his exploration of trading ranges, he developed the concepts of support and resistance along with their practical application. Auction Market Theory (AMT) takes these investigations into support and resistance further, an “organic” definition of support and resistance like Wyckoff’s, that is, determined by traders’ behavior, not by a calculation originating from one’s head or from a website somewhere. Determine whether you are trending or “balancing” (ranging, consolidating, seeking equilibrium, etc), determine the limits of the range (support and resistance), and you’re in business.

 

The notion of support and resistance has been and is the missing piece for many market practitioners. One can try to hit what appear at the time to be the important swings again and again and be stopped out again and again, hoping all the while that once one hits the true turning point, all the effort will turn out to have been worthwhile and the P&L will change from red to black. But by waiting for the extremes, one avoids most or all of those losing trades, and, even more important, avoids trading counter-trend. These boxes -- which are simply a graphic variation of the Market Profile distribution curve, whether skewed or not, or of the VAP (Volume At Price) pattern -- are nothing more than a means of locating those extremes. What I've found more useful about them is that they are encapsulated by time, i.e., the price and volume ranges have a beginning and an end. This enables me to see at a glance where the important S&R are, or at least are likely to be. Without them, one ends up with line after line after line until the S/R plots become a parody of themselves.

 

All of this can be very confusing to someone who’s learned to view the market in a different way, perhaps less so to someone who’s just starting since he has so much less to unlearn. But backing up to the basic tenets of AMT, as well as to the concepts developed by (and in some cases originated by) Wyckoff, one can perhaps find a solid footing and proceed from there.

 

To begin with, in the market, price is often not the same as “value”. In fact, one could say that since the process of “price discovery” is a search for value, they match only by accident, and then perhaps for only an instant. Blink and you missed it. Add to this the fact that for all intents and purposes there is no such thing as “value” but rather the perception of value. After all, what is the “value” of, say, Microsoft or GE or that little stock your stylist told you about? This state of affairs may seem like a recipe for chaos, but it is in fact the basis for making a market, that is, reconciling the differences – sometimes extraordinarily wide differences – in perceptions of value.

 

As Wyckoff put it, if a stock (or whatever) is thought to be below “value” and a trader or group of traders see a large potential for profit ahead, he/they will buy all they can at or near the current level, preferably on “reactions” (or pullbacks or retracements), so they don’t overpay. If the stock is above what they perceive to be value, they'll sell it (or short it), supporting the price on those pullbacks and unloading the stock on rallies until they are out (or as much out as they can be before the thing begins its downward slide). “This”, he writes, “is why these supporting levels and the levels of resistance (a phrase originated by me many years ago), are so important for you to watch.” When price then begins to lose momentum and move in a generally sideways direction, you’ve found “value” (if value hasn’t been found, then price won’t stop advancing or declining until it has). Value, then, becomes that area where most of the trades have been or are taking place, where most traders agree on price. Price shifts from a state of trending to a state of balancing (or consolidation or ranging), the only two states available to it.

 

The trading opportunities come (a) when price is away from value and (b) when price decides to shed its skin and move on to some other value level (that is, there’s a change in demand). This is also where it gets tricky, partly because demand is ever-changing, partly because you’ve got multiple levels of support and resistance to deal with and partly because we trade in so many different intervals, from monthly to one-tick. If we all used daily charts exclusively, it would all be much simpler, though not necessarily easier. But that’s not the case, so we must remember always that a trend in one interval – say hourly – may be a consolidation in another, such as daily. The hourly may be balancing, but there are trends galore in the 5m chart. Or the 5s chart. Or the tick chart. Regardless of how one chooses to display these intervals – line, bar, dot, candle, histogram, etc – there are multiple trends and consolidations going on simultaneously in all possible intervals, even if they’re in the same timeframe, even if that timeframe is only one day (to describe this ebb and flow, Wyckoff used an ocean analogy: currents, waves, eddies, flows, tides).

 

To sum up where we are so far, and keeping in mind that there is no universally-agreed-upon auction market theory, the following elements are, to me, basic, and are consistent with what I've learned from Wyckoff et al:

1) An auction market's structure is continuously evolving, being revalued; future price levels are not predictable

 

2) An auction market is in one of two conditions: balancing or trending.

 

3) Traders seek value; value is price over time; price is arrived at by negotiation between buyers and sellers.

 

4) Change in demand drives change in price.

 

5) One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred.

Now let’s translate all of this into a chart.

 

I'm sure everyone has noticed that swing highs and lows and the previous days’ highs and lows and other /\ and \/ formations can serve as turning points and appear to act as resistance. However, this type of resistance stems from an inability to find a trade and is accompanied by low volume*. Price then reverts to an area where the trader finds it easier to close that trade. That's what provides that ballooning look to the volume pattern “A” in the following chart. "Resistance" in this sense, then, refers to resistance to a continuation of the move, whether up or down.

*Volume may look “big” at the highs and lows, but the price points are vertical, not horizontal (as they would be in a consolidation), so the volume – or trading activity – at each price point is lessr than it would be if the same price were hit repeatedly (again, as it would be in a consolidation).

Note that you may have more than one "zone of concentration" (this is how jargon gets started), as in the first balloon. Nearly all the volume is encompassed by the pink lines, but there is a heavier concentration within the blue lines because of where price spends the greater part of its time. The volume in the balloon “B”, however, is more evenly distributed throughout the zone, partly because price spends so much time in it and partly because it ranges fairly steadily within it. Instead of rushing to the limits and bouncing back toward the center, they linger at those limits, the sellers trying to push price lower, the buyers trying to push price higher. Thus there is more volume at these edges than in balloon “A”, but buyers eventually fail in their task as sellers do in theirs, and trading drifts back toward the center, providing, again, a relatively even distribution of volume throughout the range.

 

Balloon “C” is similar to “A” but much thinner due to the fact that price has made only a single round trip to the bottom of the range. It lingered a bit in the middle, simultaneously creating that protrusion in the center of the volume pattern. But volume at each end is thinner than in “B”, thinnest at the bottom due to the \/ shape, giving the volume – if one is fanciful – something of a P shape.

 

 

 

 

If price drops through one of these zones, those who bought within that zone are going to be miffed. Some of these people are going to try to sell if and when price re-approaches that zone. This is the basis of resistance. There's just too much old trading activity to work through in order for price to progress unless there is enough buying pressure to take care of all those people who want to sell what they have, then push price even higher (in which case those who sold may think they screwed up yet again and buy back what they just sold). However, those who bought or sold at the outer reaches of these zones will also be disappointed if they can't find buyers for whatever it is they just bought, not because there's too much volume but because there isn't enough.

 

So how does one trade all this? First, you will have to monitor several intervals at the same time in order to (a) find out what interval you want to trade and (b) where price is within whatever range or ranges is/are in that interval. For example, if you’re most comfortable with a 5m interval, you’ll want to check a smaller interval or two to see what price is up to down there, but you’ll also want to look at larger intervals, such as the 15m or 60m or even the daily (I’m using time intervals here in order to keep this from becoming even longer than it will be, but the same approach applies whether you’re using range bars, volume bars, tick bars, candles, lines, etc).

 

Second, locate the ranges. Box them or circle them or color them or in some other way highlight them. If you find a range that is wide enough for you to trade (that is, there are enough points from top to bottom to make a trade worthwhile), get “into” the range via a smaller interval in order to find a trend. Perhaps at some smaller interval, price is at the bottom of that range. That gives you a good possibility for a long (or it may be at the top of the range, giving you a good possibility for a short).

 

At this point, you have three options: a reversal, a breakout, or a retracement. If, for example, price bounces off or launches itself off the bottom of the range (support), trade the reversal and go long. If instead it falls through support, short the breakout (or breakdown, if you prefer). If you don’t catch the breakout, or you prefer to wait in order to determine whether or not the breakout was “real”, prepare yourself to short whatever retracement there may be to what had been support and may now be resistance.

 

A more boring alternative is that price is nowhere near the top or bottom of any range that you can find but rather drifting up and down, aimlessly. No change is occurring; therefore, there is no trade, or at least no compelling trade. Finding the midpoint of the range may be useful since price sometimes ricochets off the midpoint, or launches itself off the midpoint if it has settled there. Such actions represent change since price may be looking for a different value level. It may come to a screeching halt and reverse when it gets to one side or the other of the range and return to the midpoint, or it may launch itself through in breakout form and extend itself into the next range, if there is one, or create a new range above or below the previous range (in determining which, back off into larger intervals in order to determine whether or not price is in a range in one of those larger intervals).

 

This isn’t all there is to it, of course, but there are more charts posted in this thread than in any other, and I hope that enough information and examples are provided in these posts to enable you to develop a consistently profitable strategy based on these principles.

[DbPhoenix 42]

Lewtz: Given our discussion of whether or not to take the following trade, you should probably think about it now or this evening, while it's still fresh in your mind.

 

 

 

[DbPhoenix 42]

In re the conversation in the chatroom yesterday re where the market is likely to go...

 

Geithner's first test is a disaster

 

In his initial public pronouncement on the government's financial bailout plans, the best the new Treasury secretary can offer is an uninspiring rehash.

 

By Jon Markman MSN Money

 

You know that awful feeling when you're the new guy and you've been working on a project for three months, and you've made no progress, and then the boss gives you a deadline? First you ask for one more day, but when the time finally comes that you've got to deliver, you've still got nothin', so you talk fast, use a lot of jargon, promise more details soon and hope no one notices you've got squat.

 

It's happened to all of us, but few have failed their first assignment on such an epic scale as Tim Geithner, the new Treasury secretary.

 

On Tuesday afternoon, he delivered the most remarkable "dog ate my homework" excuse in the history of the U.S. financial markets, making it more plain than ever that the government simply has no idea how to end the financial crisis or how to reassure the world that everything will be all right anyway.

 

The big idea was a vaguely described public-private partnership to acquire soured loans from banks that real-money investors have already said they would buy only if offered full guarantees against loss -- and even then only with a gun at their heads.

 

"His speech was totally uninspiring. There was nothing new, no change," said Stan Shipley, a senior analyst at ISI Group in New York. Said David Kotok of Cumberland Advisors: "The proposal was nothing more than a promise to deliver a proposal. People are getting tired of this."

 

Best and brightest come up empty

 

The lack of a detailed plan is important not just for investors but also for the average worker, mom and student because it means there really is no easy way out of the global economic crisis. It means we have assigned the job of fixing the banking system to the smartest guy the government could find and surrounded him with every possible resource, and given him plenty of time to think, and still he came up with bupkis.

 

That is scary to people, as well it should be. No one is going to cry crocodile tears for 30-year-old investment bankers who have lost their million-dollar jobs, but the impact on all Americans will be harsh and long-lasting.

 

Once the government truly socializes the banking system's losses by taking on the ruined loans, there will be little credit left for all the things that were so much fun in the past two decades. It will be hard to persuade banks to lend their precious money to dads for unproductive assets like leisure boats or even to real-estate investors for new apartment buildings, or to farmers for new tractors.

 

Salaries and living standards will come down, as instead of borrowing and spending we will have to develop a culture of saving and waiting.

 

Eventually, we will innovate and grow our way out of this hole, but it will take patience and time. Politicians don't want to tell us this, so they have planned a final $800 billion-plus party paid for with taxpayer appropriation and borrowing.

 

But eventually, when that money is spent, there will be no other choice but to admit our mistakes and buckle down for a world with less credit and lower asset values. Call it a depression, a prolonged recession or a flat spot in the road, but it will likely lead to a string of one-term presidencies and the relegation of the name Tim Geithner to trivia contests.

 

Created from, and vanished into, thin air

 

That's part of the reason investors, who had shown remarkable restraint and hope in recent days as they awaited Geithner's plan, responded in the only way they knew how, which was with a giant raspberry: Shares of big companies were flung to their biggest losses in three months as a shiver of despair ripped through trading floors. There was a slight lag of disbelief that the Treasury secretary had offered nothing but a rehash, a repackaging and renaming of old ideas, before markets tumbled with a great collective sigh in the afternoon, wiping out 10% of the total market value of major banks in four hours.

 

Though it may have seemed to casual observers that Geithner had offered a set of decisive options with a $1 trillion price tag, people in the investment industry realized all his ideas have already been tried and failed or have little support outside Washington intellectual circles.

 

"Geithner showed that not only does the emperor have no clothes, but he has nothing else either," said Satyajit Das, a global banking expert working in Australia. "He showed that the government has exhausted its ability to use monetary policy and has no new ideas to use alternative strategies, so-called quantitative easing, to relieve credit stresses either."

 

The problem, of course, is that there really is no neat, easy way to clean up the mess left behind by a multidecade orgy of credit. Investors have suspected that, but now it's finally sinking in as true. Starting in the mid-1990s, mathematicians came up with incredible new ways to create money from thin air. Banks turned the theories into loans, dupes at ratings agencies blessed them as risk-free, and salesmen chopped them up and sold them to gullible investors.

 

These cheap, easy-to-get loans allowed people around the United States to buy much more home than they could really afford, as well as second homes, furniture, snowmobiles and the like, allowed businesses to expand much more than they could really afford and allowed governments to extend a lot more benefits to citizens than they could really afford. In essence, the new loan theory financed a false prosperity that went on for so long that people came to think of it as normal.

 

The underlying engine for all this credit growth was escalating home prices, and when that stopped, the tower of credit came crashing down, leaving homeowners without the ability to pay their loans and banks holding the bag. The roughly $5 trillion in losses that financial institutions have on their books now are directly a result of this incredible error of judgment made when government regulators failed to rein in investment banks who competed with each other to make those loans and reward themselves richly in the process.

 

Realistic experts -- at least the ones without political agendas -- all agree that the only way to seriously deal with this colossal blunder is for the government to force banks to admit they screwed up and write the value of these loans down to zero. That would wipe out the assets of most major banks, making their equity worth nothing and their bonds worth little. They would be forced into bankruptcy, a process that would allow them to be recapitalized over time and then, later, re-privatized.

 

Waiting is hardest -- and best

 

Nationalization would not be the end of the world, but it is a concept that is so anathema to Americans that it seemingly cannot be said in polite company. So instead we have this long, dragged-out Kabuki theater in which the banks have essentially been nationalized in everything but name, and yet no one will admit it to the American people. And the cost of this denial is another trillion-dollar program that will do nothing, most experts agree, except buy time until nationalization must be done later. Government officials and economists hold up the example of the "lost decade" in Japan -- a post-credit bubble era in which banks were allowed to cling to life but never regained enough strength to lend and help grow the economy -- as an example of what they wish to avoid. The mantra in Washington is that policymakers won't make that mistake again.

 

Yet New York private fund manager Craig Drill, who has studied the lost decade for years, says the situation we face today is really no different.

"Three years from now, people will decide that Japanese policymakers weren't so stupid after all," he said. "We're going to discover that there really was no solution, no way to snap your fingers and make it all better. The only solution is time."

[cowseathay 10]

Lewtz: Given our discussion of whether or not to take the following trade, you should probably think about it now or this evening, while it's still fresh in your mind.

 

Hi Db,

 

I was also looking at this level (1230) for a potential long. However, I passed on the trade because I had expected there to be more volume (climactic) coming in at 1230 holding the price up because I had identified 1230 as significant support. Instead it kind of resulted in a dull back and forth movement until price started grinding higher, and the volume, at least to me, did not signify a big shift in supply/demand. However, I'm still not very good at reading volume, so most likely I have misread what actually happened. I would greatly appreciate any feedback.

 

I've attached the 5 second chart of what I was looking at. The line is a 1SMA as you recommended in chat.

 

 

Thanks.

[DbPhoenix 42]

Hi Db,

 

I was also looking at this level (1230) for a potential long. However, I passed on the trade because I had expected there to be more volume (climactic) coming in at 1230 holding the price up because I had identified 1230 as significant support. Instead it kind of resulted in a dull back and forth movement until price started grinding higher, and the volume, at least to me, did not signify a big shift in supply/demand. However, I'm still not very good at reading volume, so most likely I have misread what actually happened. I would greatly appreciate any feedback.

 

I've attached the 5 second chart of what I was looking at. The line is a 1SMA as you recommended in chat.

 

Thanks.

 

The discussion had mostly to do with the emotional components of a trade. The setup itself is a no-brainer, and it has a high probability of success. But whether or not one takes it, where he places his stop, how quickly he moves to BE, whether or not he tries again after a stopout and where and how and so forth all have largely to do with issues that are emotional, not technical (see Stage Two).

 

But discussing all of this in hindsight is pretty much useless, unless it is done immediately after the event or unless one selects a day in the past at random and simtrades it via replay.

 

It's common for traders to test setups by testing only the setup and not considering pace and activity. When they then take the setup for real and it just sits, they begin to get real nervous, even to the point of exiting what turns out to be a perfectly good trade.

[wjrusnak 10]

My 2 trades today. They were the right trades, I just want to make sure I placed them for the right reason.

 

(1st red dot): sold 1200 since we couldn't break that last swing high at 1201.50 and volume was much lower. Closing that position was done by trailing it a point, but I closed 1194.50 when I noticed we were starting to get shaky around the swing long.

 

(2nd red dot): sold 1200 again since we have another test of the 1201.50 and again lower volume. It almost hit my stop at 1201.75 (missed by one tick! lucky...) then I again trailed by about a point and a half. Wasn't hard to do the entire way down and then I closed 1180.50 at the sign of strength.

 

Thoughts? Suggestions?

 

-- Bill

 

[firewalker 10]

(2nd red dot): sold 1200 again since we have another test of the 1201.50 and again lower volume. It almost hit my stop at 1201.75 (missed by one tick! lucky...) then I again trailed by about a point and a half. Wasn't hard to do the entire way down and then I closed 1180.50 at the sign of strength.

 

When you sold for the second time, how did you know we were not going to break R? Unless I'm mistaken, you shorted on the way up right? But how did you know, at that time, price was not going to break higher but fail instead?

 

Apart from that, what can I say... beautiful trade, nice and early, quick points in little time... the 'trade of the day'