[Higher Lows and Lower Highs] by Traders Laboratory

[Soultrader 12]

A simple but yet a powerful trading strategy based on higher lows and lower highs. This is a live recording from my last trade I took on Oct. 26, 2006.

 

Part 1

 

Part 2

 

 

Charts created by Tradestation

Presented by Traders Laboratory

[Bfbusa 10]

Hi Soul,

 

In your second video...when the Ym was between the VAL and the PP cluster is where I went short and got slapped. If you weren't in a long position, your have shorted here too?

[Soultrader 12]

No I would not. Here is why. Any entry inside value is an automatic rangebound strategy. In this type of strategy you want to fade the upper and lower ranges. This is where the most opportunity exists with low risk. Entering at the middle of a range offers risk with no reward.

 

Although the YM did eventually break above value, there is no way of knowing besides hindsight. So try not to enter a trade in the middle of the range. Timing is key. Also, if you studied the market internals the TICK went from flat => negative => positive. There was a clear shift in market sentiment so a short would of been risky. The tape finally showed some buying interest so this is usually a good confirmation that price might lift.

 

If I was flat, I would of been worried about shorting and perhaps would of waited. Markets than broke above VAH and then pulled back to the VAH and daily pivot. This would be an ideal entry.

[ant 10]

Soultrader, do you find that using Volume on a tick chart is helpful? Thanks.

[Soultrader 12]

From a scale of 1 to 10.. I would say around 3.

 

I read most of the volume through tape. I think volume works better when plotted on a minute chart and not a tick chart.

[torero 10]

I think volume on tick chart is non-existent since ticks pretty much replaces volume (not saying it's a better or worse replacement because the chart counts the tick movements not volume traded per se). I measure the time of completion of each bar to see the pace of trading activity there. So instead of measuring volume on a time interval, it's measuring time on a "volume" interval.

[Soultrader 12]

Yes that is totally right. I due tend to watch for the of completion of each bar especially the first 3 opening bars. I find that in the opening, the faster the completion the more likely we will have a market with opportunities.

 

For example. I like to see the first opening bar completed in 1 minute. At times it will take 3 minutes which indicates a lack of participation.