Reading Charts in Real Time

[thalestrader 14]

I think maybe he's confused because the 2b long trades are sort of in contradiction with most of the trade setups you post where you are generally shorting on a break of a previous low, whereas this setup almost 'fades' the break.

 

However, in the chart he posted I also noticed what you noticed in terms of the overall trend direction

 

There are instances where a short trade taken on a break to a new low reverses, and becomes instead a double bottom, in which case the double bottom's buy point is also the short trade's stop loss, and so becomes a stop and reverse situation. However, more often is the case where the first low of the double bottom represents a test of the upper boundary of a zone of support, and the second low is merely a probe or poke lower into that support, but not a break of support.

 

Also, these probes lower often come in threes, so if one sees a decline losing momentum, with each probe lower preceded by price action that seems more to drift sideways to lower, rather than impulsing lower, then shorting breaks would be lower probability trades.

 

Best Wishes,

 

Thales

[Gabe2004 10]

There are instances where a short trade taken on a break to a new low reverses, and becomes instead a double bottom, in which case the double bottom's buy point is also the short trade's stop loss, and so becomes a stop and reverse situation. However, more often is the case where the first low of the double bottom represents a test of the upper boundary of a zone of support, and the second low is merely a probe or poke lower into that support, but not a break of support.

 

Also, these probes lower often come in threes, so if one sees a decline losing momentum, with each probe lower preceded by price action that seems more to drift sideways to lower, rather than impulsing lower, then shorting breaks would be lower probability trades.

 

Best Wishes,

 

Thales

 

Confusion resolved

 

Gabe

[Gabe2004 10]

I think maybe he's confused because the 2b long trades are sort of in contradiction with most of the trade setups you post where you are generally shorting on a break of a previous low, whereas this setup almost 'fades' the break.

 

However, in the chart he posted I also noticed what you noticed in terms of the overall trend direction

 

This was my confusion but I should have explained it better, like you did.

 

Take care

 

Gabe

[thalestrader 14]

Confusion resolved

 

Gabe

 

Are you sure? You do realize that the double bottoms in the charts I posted represented long trade opportunities, and they are not "failed" short trades reversed to long trades.

 

Best Wishes,

 

Thales

[Gabe2004 10]

Additional 2 trades from last night.

Thanks to this thread i am noticing a slight change in my trading.

As noted in Thales' well taken comment about me taking profits at 7 ticks :crap: last night my average profit was closer to 20 pips and the time in a trade went up to over 1 hour compared with a few minutes in the recent past.:beer::applaud:

 

Gabe

[thalestrader 14]

Last night I made a quick note on the GBPUSD chart that implied a rally may have been imminent. The first chart is the market as it looked when I went to bed. The second chart is a shot from soon after I woke this morning. The third chart I just took now because I wanted to adjust the arrows drawn the night before and also label the Low, High, Higher Low that created the long entry opportunity. Price does indeed show you where it is going before it gets there.

 

Best Wishes,

 

Thales

 

Hi Folks,

 

Here is a screen capture updating the GBPUSD charts posted in post #374. Again, use price action around S/R levels to identify trade opportunities (in this case, highs, lows, higher highs, higher lows), and then use S/R as a map to guide your management of the trade. Price is its own leading indicator, and it is the only indicator that will reveal where it is likely heading.

 

Best Wishes,

 

Thales

[Gabe2004 10]

Are you sure? You do realize that the double bottoms in the charts I posted represented long trade opportunities, and they are not "failed" short trades reversed to long trades.

 

Best Wishes,

 

Thales

 

 

On second note, maybe not completely (confusion not completely resolved)

I will re-read the related post from your post #398.

In the context of the article from IBD I understood that you were showing LONG setups.

What I am not clear about is that at the time that LOWER HIGHs were forming and you showed us set ups where if a LOWER HIGH is formed. one would be advised to take a SHORT below the most recent LH.

So in your chart (that I circled 2 areas in it) I was wondering how would one know that those apparent SHORT setups are not to be taken.

 

I maybe slow this morning but I was up till almost 4AM :sleep:

 

Thanks again

 

Gabe

[thalestrader 14]

Hi Folks,

 

Yen futures 6J waiting for decision time ...

 

Best Wishes,

 

Thales

[taq 10]

got answer

 

Happy Trading

Regards,

TAQ

Edited September 30, 2009 by taq

[thalestrader 14]

Hi thales

 

EURCHF Daily

Can we consider it as a 2B long setup?

Posting my trade window also.

booked half at 1.5212 looking for probable tgt 1.5330.

 

Happy Trading

Regards,

TAQ

 

I do not know if that is a 2B or not, Taq. Part of the problem is I do not know the time frame and I am not seeing as much of the preceding price action as I would like. Also, the 2B was brought up by Forrest, and while I am familar with the term, I do not profess to be expert in either identifying or trading 2B's. Yesterday, Forrest asked if the patten I was pointing to was a 2B, and I simply acknowledged that strictly speaking, the double bottom pattern would indeed be an instance of the 2B. Here is a passage taken directly from Victor Sperandeo, and I'd suggest that if you are interested, you read the relevant chapters from his two books. I am not comfortable pretending to know any more about his 2B approach than I have already stated (I would not want to lead anyone astray from a correct understanding). From Trader Vic 1: Principles of Professional Speculation:

 

2B, OR NOT 2B? THAT'S WORTH SOME MONEY!

As mentioned in number 2 of the principles of a change of trend, sometimes the test of the previous high (or low) may actually break the previous high (or low) and then fail. Although this is really a special case of a test, when it occurs it usually signals a change of trend. In other words, this one observation, considered alone, has the greatest potential for catching the exact highs or lows; it carries more weight in terms of probability than any single one of the other three criteria for a change of trend. It has so much weight that it almost merits being called a rule:

 

The 213 Rule

In an uptrend, if a higher high is made but fails to carry through, and then prices drop below the previous high, then the trend is apt to reverse. The converse is true for downtrends. This observation applies in any of the three trends; short-term. intermediateterm, or long-term (see Figures 7.11. 7.12, and 7.13).

 

A 213 on a minor high or low will usually occur within one day or less of the time the high or low is made. For 2B's on intermediate highs or lows preceding a correction, the new high or low point will usually break within three to five days. At major market turning points, long-term 2B's, the new high or low will usually break within seven to ten days. In the stock market, after the new high is made, the failure to carry forward usually occurs on low to normal volume, and the confirmation of reversal occurs on higher volume.

When trading on the 2B criterion, it is essential that you admit defeat quickly if the trade moves against you. For example, if you are day-trading and you short the market on a 2B and then the market rallies to new highs again, you should immediately close your position when prices break past the new 2B high.

 

If they fail again, then you can short again, but you must limit your losses and let yourself get whipped out. As long as you take only small losses, you'll "stay at the table" and be able to keep trying. When day-trading, the 2B criterion may be right only 50°70 of the time, but if you limit losses when you're wrong and let your profits run when you're right, you'll make a lot of money trading on this basis. The probabilities of success using the 2B in the intermediate term are much higher.

[thalestrader 14]

Hi Folks,

 

Yen futures 6J waiting for decision time ...

 

Best Wishes,

 

Thales

 

Yen futures have made a decision - bouncing from a support zone here.

 

It's almost opening bell ... I'll be busy the next 30-60 minutes.

 

Best Wishes,

 

Thales

[subterfuge 10]

thales type trade?

.

.

[forrestang 10]

Hi Folks,

 

I meant to post this GBPUSD last night, but after I snapped the first picture I got involved in putting together the "double bottom" posts and forgot about the GBPUSD.

 

At any rate, last night GBPUSD buy point was 1.5990, targeting 1.6133 or so.

 

I took this trade also, my targets weren't as ambitious as yours. I also snagged a quickie on the G/J in the pic, but it was also a smaller target.

 

I have a question. You'll notice the price action I'm highlighting on the charts. And this occurred more or less on the 4 pairs on my screen. The time to enter was shown via the green arrow. This action I have pretty much committed to memory and is usually 'money in the bank.'

 

Probably goes by many names, but the point is that it occurs as price runs towards resistance, with a continuing series of HLs prior to the B.O.

 

You'll notice the two pairs at the top broke out of this price action, but then more or less immediately failed.

 

The two pairs on the bottom broke out and broke out well.

 

So here is a question for Thales, OR ANYONE ELSE THAT MAY HAVE AN IDEA. This is of course in hindsight, so go crazy with ideas.

 

My question is, does anyone spy a reason that might preclude one from taking the trades at the top, but being interested in the ones at the bottom?

[Gabe2004 10]

thales type trade?

.

.

 

 

It is interesting that the candles look different at different brokers in the same timefarem.

I assume your chart was 15min.

 

Gabe

[Gabe2004 10]

I took this trade also, my targets weren't as ambitious as yours. I also snagged a quickie on the G/J in the pic, but it was also a smaller target.

 

I have a question. You'll notice the price action I'm highlighting on the charts. And this occurred more or less on the 4 pairs on my screen. The time to enter was shown via the green arrow. This action I have pretty much committed to memory and is usually 'money in the bank.'

 

Probably goes by many names, but the point is that it occurs as price runs towards resistance, with a continuing series of HLs prior to the B.O.

 

You'll notice the two pairs at the top broke out of this price action, but then more or less immediately failed.

 

The two pairs on the bottom broke out and broke out well.

 

So here is a question for Thales, OR ANYONE ELSE THAT MAY HAVE AN IDEA. This is of course in hindsight, so go crazy with ideas.

 

My question is, does anyone spy a reason that might preclude one from taking the trades at the top, but being interested in the ones at the bottom?

 

As I took the same trade in GJ as you did I can tell you that eventhough I saw the setup in GU I did not take and i don't have a good reason. GU looked CLEANER but I just did not trust it.

Maybe the solution for the future would be to split your position in 2 and alocate 1/2 to one of the upper chart instruments and 1/2 to one of the lower chart instruments and ride out the more profitable one.

 

Gabe

[thalestrader 14]

Hi Folks,

 

Quick look at the ES ... decision time here as well.

 

Best Wishes,

 

Thales

[subterfuge 10]

It is interesting that the candles look different at different brokers in the same timefarem.

I assume your chart was 15min.

 

Gabe

 

in fact, it was a 10 minute chart.

[thalestrader 14]

Hi Folks,

 

Quick look at the ES ... decision time here as well.

 

Best Wishes,

 

Thales

 

No need for you to make a decision ... just place your orders and let the market decide ...

 

I'm looking for 49 and 53quarter from 44.75 entry

 

Best Wishes,

 

Thales

[thalestrader 14]

No need for you to make a decision ... just place your orders and let the market decide ...

 

I'm looking for 49 and 53quarter from 44.75 entry

 

Best Wishes,

 

Thales

 

There's 49 ... and now looking 53.25

 

Best Wishes,

 

Thales

[thalestrader 14]

There's 49 ... and now looking 53.25

 

Best Wishes,

 

Thales

 

Does this represent a 2B short opportunity? I don't know, but I suspect that Sperandeo would say yes. I am long, with profit on 1/2 filled at 49, stop on remaining position is 46. I do not trade this type of 2B, if this is such a situation.

 

Best Wishes,

 

Thales

[subterfuge 10]

you're annoyingly good thales.

Maybe I can come to where you live and teach your daughter to play the piano or the guitar, and you can teach me how to trade better!?

 

p.s - Did you see my last post with the chart? Would that constitute a 'thales' trade? It worked out nicely anaway.

 

pps - would your ES trade just a break out of the triangle trade. A pattern you've not yet mentioned before? thanks

[thalestrader 14]

p.s - Did you see my last post with the chart? Would that constitute a 'thales' trade? It worked out nicely anaway.

 

pps - would your ES trade just a break out of the triangle trade. A pattern you've not yet mentioned before? thanks

 

I had not seen your post, but yes, I took that trade as well (6B not the GBPUSD spot). Short entry was 1.6005 and I was stopped out at 1.5956.

 

As far as the ES, price was coiling at a prior low after the large range impulse decline from the open. I had an order to go short and an order to go long. I entered a bit earlier than I would normally enter because I could do so with an extremely tight stop (we had a potential higher low, so my stop was a tick below there and gave the trade a better R/R profile that had I waited for the break of the dotted blue line.

 

Best Wishes,

 

Thales

Edited September 30, 2009 by thalestrader

[forrestang 10]

you're annoyingly good thales.

Maybe I can come to where you live and teach your daughter to play the piano or the guitar, and you can teach me how to trade better!?

 

I am being captain obvious here, but make sure you post questions you have relevant to this thread often. This thread gets hundreds upon hundreds of views per day, but fewer posts and questions. I think your questions that gets answers help us all.

 

This thread is one of the few gems out there, maybe one day it will die as they all eventually do, and then people will be thinking they either wished they were around when it was live, or wished they had taken more advantage of it.

 

[thalestrader 14]

No need for you to make a decision ... just place your orders and let the market decide ...

 

I'm looking for 49 and 53quarter from 44.75 entry

 

Best Wishes,

 

Thales

 

 

If it weren't so obvious, it would seem like magic.

 

 

Best Wishes,

 

Thales

[thalestrader 14]

As far as the ES, price was coiling at a prior low after the large range impulse decline from the open...

 

What I left unsaid was this: When price coils into a tight range after a substantial move, it is either preparing to continue the move or reverse it. Price will not sit still for long, as someone is right and someone else is trapped. Do not be distracted by the triangle as it is mere coincidence. The proximity of S/R and the behavior of price at that level is what crates the opportunity.

 

Best Wishes,

 

Thales