Learner Thread

[icecool 10]

Hi all,

 

This thread is mainly by a beginer in trading. My aim is to learn trading by keeping the charts as simple as possible. I have been told that simple things work beautifully. I have been told that I must learn to trade based on price, volume and time data alone. That is why as far as possible, I am traying to avoid indicators.

 

As I said I am a newbie, I definitely require your help. Your help to rectify my mistakes, your help and guidence to improve my thought process and learning process. I have heard that this forum contains many expert traders and that members here are extremely helpful to one another. I have also heard that there are many invaluable threads in this forum that an aspiring trader must read.

 

I shall post charts mainly from NSE and BSE (Indian Stock Exchanges) and ocassionally I shall try my hands at US traded charts. Those will be paper trades.

 

Thanks for reading my first post patiently.

icecool

 

Bump: Here is the first stock. ICICI Bank. For non Indian traders yahoo ticker code is ICICIBANK.NS

 

First long term picture. Monthly.

 

 

 

Stock is in clear downtrend eversince it hit its all time high slightly above Rs. 1400/-. What is surprising is that ever after correcting so much, i.e. from Rs. 1400/- to all the way to Rs. 400, the second boxed area did not offer any support. At least a short term counter trend bounce also did not happen. Price went straight down through that boxed area no. 2.

 

See volume at price on the leftside of the chart. Balanced trade did take place around this box no. 2 area. But this has not supported price this time.

 

But, notice that the highest volume is on that candle which pierced through box no. 2 area. It closed in the middle. Is it indication of strength? Next candle is also down but with lesser volume and it closed below box no. 2 area.

 

Now how do you interpret this chart? As strength creeping in or as further weakness ahead?

 

Bump: Now the weekly chart of the same stock (ICICI Bank)

 

 

Highest volume is on the inside candle (bar) which closed on the lows. See the first arrow candle.

 

See the second arrow candle. It seems like an upthrust. Don't they imply inability to rally? i.e. increasing supply? I mean dumping of stock irrespective of value? Also, see the distance from the trendline to these two arrow marked candles. Is it not significant that this sign of weakness is appearing when the stock has already moved far away from the trendline? I mean stock is not even making an attempt to reverse close to supply line (trendline)?

 

Bump: I donot know what does that bump in my post mean. I posted my first post about two hours ago and second post (monthly chart post) about 30 minutes ago and third post (weekly chart post) about 5 minutes ago. To my utter surprise, all these posts are now appearing together with the word "bump". I donot know whether this post is also going to "bump"

 

Bump: As expected the fourth post also "bumped". Now here is the daily chart of ICICI Bank

 

 

Are we seeing sign of strength in daily chart?

[phreddy 10]

I have had this 'bump' thing also. Don't know what it is. In my case it repeated what I had just posted. When I tried to edit I couldn't get into the post. When I apologised in a second post it placed the second post with the first and repeated the second post.

 

Strange

[icecool 10]

I have had this 'bump' thing also. Don't know what it is. In my case it repeated what I had just posted. When I tried to edit I couldn't get into the post. When I apologised in a second post it placed the second post with the first and repeated the second post.

 

Strange

 

I too have absolutely no clue about this bump thing. I have sent a message to forum moderators using contact us button on the top left. I am sure that they will look in to the matter and if something is wrong from our side, they will inform us. I am awaiting their reply. But it is highly irritating to see this bump stuff.

[icecool 10]

Just a followup on ICICI Bank chart. As noted in earlier post longer term trend (monthly chart) is indicating down. Weekly trend (medium term) down. Daily chart (short term) is a little bit iffy. I have seen a selling climax which is followed by a successful test and the second test is in progress. Best option is to wait until daily chart shows a clear picture. But see daily chart where today's candle is added.

 

 

Since last six candles, effort is being made to raise up. I Give attention to the sixth candle from the right edge. It has higher volume and its low is a pivot low, but it has closed in the middle with next candle down. Infact next two candles are inside candles. In the two subsequent candles eventhough volume is slightly higer than inside candles, virtually no headway is made in the upward direction. Last candle, i.e. today's candle is having wide range body and it almost qualified as an outside bar reversal candle. It missed this title by a whisker. Today volume is slightly higher than yesterday and today's close has been on the lows.

 

To sumup right edge on daily chart

 

1. Selling climax followed by a successful test. Thereafter a second test.

 

2. After the second test an attempt to move higher, which does not seem to be very convincing.

 

3. I am keeping in mind that longer term charts (monthly and weekly) are showing downtrend. So going long will be against longer term charts, i.e. against the predominent trend in longer term chart.

 

4. A window of opportunity is opening up to go short in daily chart, i.e. to align myself with the trend shown in longer term charts.

 

5. Has to wait for my moment to short. I am in no hurry. Let us see.

[icecool 10]

Thanks for a friend of mine for pointing out my mistake about my inability to notice a small rally when the price hit box 2 area for the first time. I am referring to monthly chart posted in the first post.

 

I stand corrected. I notice that when the price hit box 2 area in July 2008, that indeed arrested the downtrend for the moment and price rallied on the next month candle up to around 800 area. This is apparent if I see the weekly chart.

 

This is why I said this forum is great. People help one another. I am constrained not to disclose the name of my friend as he wishes to remain anonymous. Thank you my dear friend.

[icecool 10]

Nothing much to write about today's action. Battle is going on between the bulls and bears. Today's battle resulted in narrow range bar closing on the high, nevertheless lower close if compared to yesterdays' close. Volume is less than yesterday. Today morning bears had perfect opportunity to take it down. They opened is low and with a gap. That gap itself was their undoing. There was attempt to close the gap and bears could not douse this battle fire with bombarded selling. Result, narrow range and the stock closed on the high. What does the slightly lesser volume very near to the support mean? The picture in daily chart is still inconclusive. Will the support hold or will it breakdown? Jumping before seeing the evidence of one side (bull or bear) winning the battle may prove costly and it may be a pure gamble.

 

 

 

I am posting chart of the same stock daily to note my feelings and my reaction to the chart as it unfolds. I am deliberately avoiding posting of many charts at this point of time. If that is done, I may not follow them up closely and carefully and most importantly, I may not realise my mistakes in analysing the charts unless I do it continuously.

[icecool 10]

First daily chart with today's candle as an addition

 

 

Another day of tight range and low volume passes away. Battle is still undecided. As and when chart develops it becomes clear that the candle which I have marked with arrow and labeled as “Key Candle?” in the chart is the important candle. There are seven candles subsequent to that arrow marked candle whose closed is either within the range of that key candle. All these seven candles have volume less than key candle volume. I have marked the upper and lower boundaries of the tight range that ensued subsequent to this key candle. I am noticing that price has not been able to break this range significantly and set a trend in the direction of break.

 

Now these are the thoughts that are passing on my mind.

 

1. Key candle had high volume but it has closed in the middle.

 

2. Key candle has appears to be a second test of the selling climax

 

3. After what appears to be a second test (key candle) price indeed tried to go up, but did not find any enthusiastic response from the bulls. That is why price came down again to see how much interest bears have. Low volume implies that bears are not interested at this moment. So another test drive to the upside since yesterday including today. Volume is even less.

 

4. So in nutshell coil is being wound close and tight. Breakout in either direction would give mouth watering profits. But I have to wait until a clear direction emerges.

 

As between yesterday and today, it was the bulls who had advantage today morning. Because, yesterday’s close was on the high. They used this advantage and opened the price with a gap on the high. Immediate response would be to close this gap, which indeed happened. But the price did not go above the high (which was established immediately after opening) after filling this gap. Lackluster trading ensued and ultimately price closed well above middle. Today’s candle has taken away the advantage of the bulls (which was there on the yesterday’s close) to a great extent. But since the price closed above the middle, I am expecting another test of the upper boundary of the range (drawn on horizontal lines) most probably in the early opening session and I am waiting to see the response at this upper boundary of the range.

 

So a test of patience is on the cards. But impatient trading would result in wrong entries and the consequent result would be either

 

1. a stop loss hit or

2. an inordinate wait when the market moves sideways before establishing trend and this sideways movement will result in anxiety and a heightened possibility of committing error out of emotional stress.

[icecool 10]

The anticipated move to the upper boundary of the trading range (please refer to yesterday’s post) did take place today. But this upper range test did not take place early morning session as I was expecting yesterday. When it came close to that upper level it necessitated a closer look in shorter timeframe chart. First see 5 minute chart.

 

 

The red horizontal line in the 5 minute chart is the upper trading range line from yesterday’s daily chart. The approach to this upper line was not at all inspiring. Low volume protracted affair. But since I have been itching to make a trade, I wanted to see the breakout of this upper line and then to see the pullback to this line. This indeed took place on the candle marked with second arrow from the left. Then a small trading range followed. I entered a long trade on the break of the high of fourth candle from this second arrow marked candle.

 

I must note that I was itching to trade, not the best frame of mind advisable to trade. The long wait had that much effect upon me. I was a bit hesitant to take long trade seeing the nature of approach to the upper boundary line and subsequent development. That was not a confident trade. Bit iffy minded trade. At the end of the day, when I reflect back, I must admit, that trade was taken more on impulse rather than on cool reflection. So here is a weak point about my trading mind.

 

Anyway, trade was taken with a stop just below fifth candle from the first arrow marked candle. As I said, I was hesitant at the time of entering the trade, I had decided at the time of entering the trade itself that I shall exit the trade if the price hits 363 (highest price for 01/12/2008), which is slightly above the upper boundary of the trading range and which is also the highest price in that trading range. That was promptly hit and I was out with profit. I should also mention that as and when higher pivot low was formed stop was moved upward.

 

But when I reflect back, I notice that there was no definite trade plan in my mind at the time of entering the trade. I tried to develop one as and when the chart developed. There was no definite holding period (i.e. whether to take intraday trade or delivery trade) nor the exit method was fully satisfactory. Now I am asking myself why did not I wait for the break of the trendline or for the formation of lower high pivot?

 

Anyway, some lessons are noted. If I have missed any (there will be many) please tell me. As I have to leave for the time being, I shall examine the daily chart later.

 

Bump: A quick note before going to bed. See updated daily chart.

 

 

Price indeed broke out of the range created by “key candle” narrated in my yesterday’s post. What is the quality of this breakout? Volume is slightly better than yesterday and day before yesterday, but by no means a high volume. In a breakout candle I would like to see much more volume than the volume on present volume. Today’s range is slightly wider than last two days range. Today’s close was on the high and above the upper boundary of the range created by key candle. I am expecting a higher open tomorrow morning. Whether the bulls will be able to sustain is to be seen. A higher opening will suck in many novices and if it tumbles down thereafter swiftly, that will lock in many novices into a position where they will definitely hope and pray. That is the perfect time to bring it down further.

 

It is the volume on today’s candle that is striking a discordant note in my mind. Lower volume on a breakout means, professionals are not enthusiastic at the moment. That does not mean that they will not change their mind in future. I will have to see the quality of pullback. Let us see how tomorrow unfolds.

 

Bump: I hate this "bump" stuff. It irritates me very much. I donot know how other readers of this thread are feeling about this bump stuff. So far no reply from moderators of this forum for my queries on bump stuff. I know this post too will "bump" to the end portion of my earlier posts made today. As there is no other alternative and as no one is guiding as to why this is happening and how to avoid it, I have to tolerate it. Please bear with it and with me as well :doh:

[icecool 10]

Today morning for all practical purpose, we had a gap down opening. Do not bother about the first candle which is right there on the opening bell. None of us could see that freak trade around 364 on the open. We could see only around 355 around the opening bell. This gap down opening itself charged up the bulls. They made and attempt to close this gap, which was successful. Not only that, look at the volume when yesterday’s high was breached to the upside! There was an opportunity to make some quick bucks, which was promptly made. Then came that wide range candle with extremely high volume and it closed in the middle. It came after a substantial upmove. It was clear that it was a buying climax. I have marked this candle with arrow (third arrow marked candle from the left). Further confirmation of this buying climax came when price could not take out the high of this wide range candle. The moment low of this buying climax candle was breached I got out of my longs and created a short simultaneously. Initial target was day’s low and if it also breached, the next target was the red upper range trend line from the range generated by key candle in the daily chart referred in my earlier posts. Why? Because any pullback after breakout will test the area of breakout. Resistance becoming support. Frankly, I was expecting strong support at the day’s low. Ultimately, that held out to be the support, albeit at slightly lower level, enough to clear all sell stops below the day’s low. I closed my short position when the price came close to day’s low made on the early morning. I felt bit tired and hence moved away from my screen. To be honest thereafter I did not look at the market until they were closed for the day.

 

 

I shall update daily chart and weekly chart tomorrow, if time permits.

[jonbig04 10]

Have you tried looking at larger time frame charts, find your S/R levels there and then watching to see how price reacts to them during a smaller daily chart? You should be able to see some very obvious and fascinating S/R action if you do.

[icecool 10]

Now the updated daily chart. See chart first.

 

 

All that action that has taken place throughout the day has resulted in an upthrust. High volume, wide range with large wick candle and closing on the lows. By any means, it is a picture of bear.

 

Now the context. As such I see a selling climax followed by two tests. Second test candle has been named by me as “key candle”. That candle appears to be having a lot of gravitational force. It does not allow the price to moveup. Initially, it resulted in a range. I have drawn two lines denoting the top and bottom of this range. Yesterday, i.e. last candle on this daily chart, was an attempt to break out of this range to the upside. Actually that attempt began on 04/12/2008 afternoon itself. But was there enough strength? On 04/12/2008 itself, I was smelling the discordant note struck by the volume. In that post, I was analyzing the possibilities how a novice trader could be lured to go long and they how he could be sucked in. But the possibility thought by me did not materialize. Instead even a better approach was taken. Price was opened on the low in the morning, then it moved up implying continuation of rally that began on the afternoon of 04/12/2008 and thereafter it was slammed back. But the moot question is whether the upthrust candle is in perfect place? Has it occurred after a rally? Was there any weakness in the background?

 

In this context it is important to analyse where the trading range (that has been produced by the key candle) has occurred. It has occurred almost on the spot of second test of the selling climax. So a tricky question. How to interpret this trading range? As a sign of strength, or as a sign of weakness? Is it a distribution before going down or is it an accumulation before going up? Now I look at the volume on each and every candle in this trading range. Usually, trading range should be having low volume. But this is not the case here. Again why this is occurring? Selling climax is a sign of strength, first test is a sign of strength. Naturally second test should have resulted in further more elimination of sellers and if a trading range that has resulted after second test should have less sellers and more buyers. If the professionals are eager to accumulate, then they will do so without much fanfare. That would have resulted in lower volume on downdays and higher volume on updays. Not vice versa. Not almost equal volume on all days in trading range. Less volume in trading range when compared to the volume of candles that led the last downleg. If these things are not there, then I become suspicious of the trading range. What does the trading range as a whole say? What was the behaviour when the price moved out of the trading range? Trading range as a whole says, activity has not died down yet. When the price moved out of the trading range, it met with selling. Both these imply that sellers have not yet finished their stock. If that is the point, will the professional side make an attempt to accumulate? Will they make an attempt to mark it up? So in nutshell I am expecting some more tests of selling power and I am interested to see the results of those tests.

 

If I am not sure about the movement, the best thing I can do is to sit on the sideline and watch. If I am in doubt, I can consult the higher timeframe chart and see what is happening there. That brings me to the weekly chart, which I shall analyse tomorrow.

 

Bump:

Have you tried looking at larger time frame charts, find your S/R levels there and then watching to see how price reacts to them during a smaller daily chart? You should be able to see some very obvious and fascinating S/R action if you do.

 

Jonbig,

 

Thanks for the help. Kindly see first post of this thread. That contains weekly and monthly charts. Weekly chart starts from 2006 and monthly chart begins from 1998. My comments about them are also there. Do you find anything in them that I am missing out?

[icecool 10]

Now the weekly chart. See chart first

 

 

I see a well defined Lower High – Lower Low pattern. Price is below the down sloping supply line. Volume on last downleg (i.e. from the first arrow marked candle to the candle having lowest low in the chart) was higher than its prior downleg. I donot see any selling climax in the weekly chart. Both these imply selling is not yet over. However, since last several weeks price has been moving in a range. I have marked the upper and lower boundary of this trading range. Last weekly candle has closed in the middle and volume was higher than previous week. Last candle on the weekly chart is a Doji implying indecision. Unless one side wins, it is difficult to take position. Best is to sit out and watch. There are two overhead resistances. One from the low of the last pivot point, which incidentally is the upper boundary of the trading range and another is from the downsloping trend line (supply line). Overcoming twin challenges is not very easy. On the whole, bears seem to have an upperhand.

[Bearbull 10]

Look into the Wyckoff forum espcially in Dbphoenix's blog on how to correctly use trendlines, support/resistance zones to gain entry and establish exit points in a logical manner, also study the pdf file there on Wyckoff analysis of 1930-31 market, as I have shown in the thread "Trading The Wyckoff Way", all the principles explained in that pdf document are as relevant now on any time frame as they were nearly 100yrs back.

[BlowFish 10]

IC good thread. I haven't said too much as you seem to have a pretty good grasp of 'market dynamics' (for want of a better term). Seems to me that the biggest issue you face is utilising this knowledge to enter and exit trades? I might be totally wrong here, I often am I get the impression that you are stalking a trade here, without being sure what that trade is? This is not about not knowing which way price will break but having a plan in place whatever it might do. I wonder where your 'focus' is. Are you looking to catch a swing on the daily?

[icecool 10]

Look into the Wyckoff forum espcially in Dbphoenix's blog on how to correctly use trendlines, support/resistance zones to gain entry and establish exit points in a logical manner, also study the pdf file there on Wyckoff analysis of 1930-31 market, as I have shown in the thread "Trading The Wyckoff Way", all the principles explained in that pdf document are as relevant now on any time frame as they were nearly 100yrs back.

 

Bearbull,

 

Thanks for the guidence. I shall definitely look into them. I think you are referring to DB's blog in this forum. If he has any other blog, can you give me the link?

Thanks in advance

 

Bump:

IC good thread. I haven't said too much as you seem to have a pretty good grasp of 'market dynamics' (for want of a better term). Seems to me that the biggest issue you face is utilising this knowledge to enter and exit trades? I might be totally wrong here, I often am I get the impression that you are stalking a trade here, without being sure what that trade is? This is not about not knowing which way price will break but having a plan in place whatever it might do. I wonder where your 'focus' is. Are you looking to catch a swing on the daily?

 

Blowfish,

 

You are spot on. My perpetual problem seems to be hesitation in entries and jumping out of the trade at the slightest hint of doubt. This has resulted in missing good moves (in case of hesitated entries) and early exit (incase where position has been built up). Can you help me out?

 

I am not eager to put a trade in this moment. Because both in weekly and daily charts price is wandering in a tight range. I would like to see a direction in place and then movein. As it is my focus is on the direction of breakout (either up or down). Logic on the basis of available evidence tells me that next possible direction is downside breakout. I am intending to put on the trade either on the breakout or on the retracement back to the base after breakout. As it is there is one attempt to move to the upside (in daily chart) out of the trading range. Often I have seen on the move in opposite direction, a similar extended move on the downside and then pull back in to the range and thereafter breakout (which again can be in any direction). That sort of movement sucks in perfectly. I will have to watchout volume carefully at the time of and subsequent to breakout.

 

 

Yes. I am trying to catch a swing on the daily chart. Thanks for the guidence. I think I got the clue in your post. I should be focussing on what I should do incase price breaks out in either direction. In otherwords, I must have two plans in place, one for the upside and one for the downside. Have I understood hint given by you correctly?

[Bearbull 10]

There is enough material in the wyckoff forum (numerous threads and posts) and in the blog to enable you to arrive at some form of understanding of price action via price volume relationships.

[BlowFish 10]

There is enough material in the wyckoff forum (numerous threads and posts) and in the blog to enable you to arrive at some form of understanding of price action via price volume relationships.

 

Dunno I may be wrong but IC seems to have a pretty reasonable understanding already. I am sure that could be improved by a perusal of the resources you mention. However, a good understanding is only part of the equation, a solid plan is required too. That's the thing people seem to struggle with. And then of course there is experience too, one can have understand the principles while still lacking experience.

 

IC no hidden messages really, just thinking that if you had a clearer idea what you would do you in various circumstances you would find it easier to do

[HAKUNA 10]

Before a solid plan isn't it necessary to understand the price action

[BlowFish 10]

Indeed!! or at the very least recognise. IC seems to be able to recognise important elements but appears vague in how he plans to exploit that.

[DbPhoenix 42]

On the other hand, the OP may have decided that he does not yet sufficiently understand and appreciate how this market moves and would like to become more familiar and comfortable with it and with the traders who trade it before determining how to profit from it. This can take a considerable amount of time, and there's no hurry.

[icecool 10]

05/12/2008 (I refer it as yesterday – trading day wise) was an upthrust day. Today is an inside day. Volume is less than yesterday. Today’s close is on the lows, but nevertheless higher close if compared to yesterday’s close. Range is narrow. See daily chart

 

 

But a few words will be necessary with respect of today’s intraday chart. See 5 minute intraday chart.

 

 

Today price opened way above yesterday’s close, but within the range of yesterday’s daily candle. That huge gap was further pushed up in the opening minutes close to yesterday’s high and as buying climax was in the background, it was expected that today price will not overshoot yesterday’s high and even if there were to be any stop clearing exercise, the extent of move further up from yesterday’s high will be very limited to the extent of one or two rupees. (rupee is Indian currency). But once that opening candle closed, it was pretty clear that even taking out that opening candle (on the higher side) will be a tough task. I observed that it closed way of its high. This weakness was confirmed by subsequent candles. But it is interesting to note that a huge gap is still left open in intraday chart between 366 and 360. Will this gap act as support arresting further fall? If it does, then we have an interesting situation developing here. Up thrust candle (reference is to daily candle dated 05/12/2008) high around 390 as resistance and “key candle” (remember it?) resistance at around 350 which now acts as support. Next few days will provide important clues. What clue? i.e. whether the key candle will succeed in pulling the price down to the range created by it (i.e. range marked in the daily chart) or whether the upthrust candle will create another range by its high and low. In the second case there will be shifting of trading range (i.e. support and resistance levels) to a higher level. Battle is still going on between the bulls and bears. Lawn tennis lovers will remember the intense fight between the players close to the point. Deuce – advantage – deuce……. Fight goes on.

[Eiger 10]

Nice analysis, IC. You've got a very good handle on market movements. I especially like the lawn tennis analogy. I think trading in many ways is analogous to sport, especially tennis - at least the psychological aspects are quite similar.

 

Since you asked for assistance in your intial post, you might check out the VSA forum. It seems quite consistent with your style and how you analyze the markets. VSA is a practical and user-friendly method of assessing the structure or the market via the background, and a bar-by-bar analysis of the unfolding market. Many traders do quite well with it. It was developed by an individual who actively traded for a large trading house by accumulating and marking up stocks. There is a pretty good group of traders on the forum who post fairly often, including live trades.

 

Eiger

[icecool 10]

Hello friends,

 

I am truly overwhelmed by your response. I thank you all once again for helping me.

 

Bearbull,

 

Thanks for drawing my attention to valuable resources. There is lot of valuable information out there. I shall go through all of them as slowly as possible and as carefully as possible. I shall try to grasp as much as possible.

 

Blowfish,

 

You have drawn my attention to a very important aspect which I have been missing until now. I have been thinking and rethinking on your post. I shall definitely need your help. What I am thinking right now is to read tons of very important materials available in this forum, reshape my knowledge and then work out a method how to translate it in to a trading plan. A may continue with posting chart with very brief comments for sometime. But somewhere in future once I begin making trading plan, definitely I shall post them also along with the chart. I request you all my friends here to go through them and correct the flaws there (which shall invariably be there since I am new to trading).

 

Db,

As always your message is to the point and clear. I have to learn a lot. I am in no hurry. I shall try my level best.

 

Eiger,

Thanks for mentioning VSA threads. My friend who asked me to join this forum had asked me to join it for VSA and Wyckoff forums. Tons and tons of important lessons are there. I shall go through them slowly and carefully and try to grasp as much as possible.

 

Truly a great forum. Friends, keep helping one another. If you find that I am committing any mistake, please do not hesitate to point it out. I shall always try to learn from my mistakes and rectify them in future.

 

Thanks to all once again

[BlowFish 10]

On the other hand, the OP may have decided that he does not yet sufficiently understand and appreciate how this market moves and would like to become more familiar and comfortable with it and with the traders who trade it before determining how to profit from it. This can take a considerable amount of time, and there's no hurry.

 

Also very true.

 

Is it possible to truly know if you understand until you try and quantify things in a plan? I'm not sure of the answer to that. Is trying to quantify and test a thesis a good way of testing ones understanding? At some stage one needs to know when to take the next step. If there is any doubt its wise not to take it.

 

As the OP was talking about problems they have with trades they have probably gone a step too far already. I was suggesting they take a step back to examine their plan. Perhaps you are correct though, and they should back off further.

[DbPhoenix 42]

 

Is it possible to truly know if you understand until you try and quantify things in a plan?

 

Of course, at least in terms of price movement. One can know, for example, that price rose on low volume because there was little selling pressure, but deciding how to profit from that knowledge and that movement is a separate issue, often centering around risk tolerance.

 

There are also the modifications that must be made to knowledge as a result of experience, but having to make those modifications doesn't mean that one had no understanding to begin with. Understanding is ever-evolving, and is rarely (never?) complete.

 

Observation may not be absolutely prerequisite to generating hypotheses, but if one jumps to the hypothesizing stage without it, he is likely to spend far longer there. On the other hand, if he relaxes back into observation mode, he may find that his hypotheses are better, tighter, fewer, and more productive in general.