Reading Charts in Real Time

[Cory2679 11]

[Kiwi 16]

Gabe, you got it right on trend degree.

 

Gabe, confrontations, handled well are important on the net because with the poor interpersonal feedback, without confrontations, we can go on in the wrong direction for ages. I think some clarity came from this one that will be helpful.

 

Thales, I may well have expressed that view. I struggle to understand and reunderstand the markets and swing a little with the breeze in my views of certain things. Its interesting that I have recently discovered new understandings while trying to systematize things.

 

Talking about Peewee again (note: this will never be for sale so I'm not advertising) and stage of the trend. It has a simple main entry pattern that corresponds to an L2 pattern in the FTM. It also has a second abc/double like pattern that might be called an L3 pattern in FTM. L1, L2, and L3 are patterns applied later and later in a trend and each requires greater return to value before risking an entry with the trend.

 

So, I built a basic Peewee forex - getting a couple of mas that seemed to represent trend well in USDJPY. Then I added my two entries from HSI Peewee. And got quite reasonable results despite not having yet applied any measure of "how far has this trend progressed?" And to my pleasant surprise they were pretty robust for longer periods. Then I realised my error and removed the L3 pattern. And the results improved.

 

So I messed with stop processes a bit (profit capture) using just the L2 entry.

Then I checked GJ and EJ. GJ fairly rocked and EJ was ok too.

 

Then after a few days getting the software right I stopped the L2 pattern being applied too late in the trends (I just cut it off after 20 bars). The profit factor rose (quality) and number of trades fell. Good.

 

Then I added the old L3 trade from hsi back in, expecting to have to modify it to suit forex (different tradable and 15x different timeframe so abit of tuning could be expected). But, without modification the number of trades rose and the profit factor rose.

 

So, what's the point? First, a robust trend aware method can work in radically different tradables on radically different timeframes. Second, simple trend age (how many bars since it turned) plus trades suited to that trend age are a winning formula. Its over to the reader how and if they can use this

 

 

Edit: Trader Vic's first book discussed dow theory, trend age etc at length. A useful read if one has nothing much else to do at the time.

Edited November 29, 2009 by Kiwi

[Marko23 10]

...

If price stalls out ...we will have Thales setup, just on a massive time frame.

...

Yes, this phenomenon is called "scale invariance" by physicists. It happens on any time scale. A computer, properly programmed, can trade that on any scale, a human being not.

 

Earlier in this thread, Don asked Thales, where he would have "got out" in an ambivalent situation. When one looks into Thales' answer, one can see that he replicates his standard setup on a smaler time scale to end the trade before the stop is called.

[Marko23 10]

Would anyone have taken a short at the blue line?

 

Gabe

Too early in my opinion. My entry would have been at the area, where "Stop Loss" is written.

[am5001520887468 10]

In fact, it was my first reading of Aritotle's Politics as an undergrad that led me to open my first commodities account.

 

Thales,

 

Could you expand on this?

 

Thanks.

[Marko23 10]

There may be a clash of education:

 

Thales, from his education, trades like a philosopher; he trades "naked" .

 

Gabe, from his education, wants to trade like an engineer; he trades with a recipe and exact formulas, exact within a certain range.

[Marko23 10]

I can't tell you how much that last sentence made me laugh!

 

I've said ever since landing here at TL that there are no secrets, nothing to buy, no magic; and yet I get PM's demanding to know what I am "holding back," how someone can "buy my course," and a few who come very close to accusing me of witchcraft.

 

I have given everything in this thread. I can lead a trader to Plato, but I can't make him see its relevance. That you have to do for yourself.

 

Thank you for the excellent post, Richard.

 

Best Wishes,

 

Thales

 

Did you "land at TL" to learn more about your trading method by conveying it to others?

 

>> there are no secrets, nothing to buy, no magic

Could have been my words in a German trading thread. I've been thru this several times.

 

I also liked Richard's post very much.

[Marko23 10]

Weekend Reading

 

Hi Folks,

 

Here is an excerpt form Plato's Republic known commonly as the "Allegory of the Cave." I'd have preferred the Allan Bloom translation, but I was unable to find a decent electronic copy, and I do not have the time to scan it from my own copy of the book, so the Jowett translation will have to do.

 

I have been planning this reading for a while, and it just so happens that the course of recent discussions here in the thread lead nicely into the themes of this reading.

 

Best Wishes,

 

Thales

 

 

Ancient illustration

 

Who can spot Thales?

[Marko23 10]

DAX Future for the second half of the week

[Don4 10]

Helllo Marko! Glad you joined this discussion. I have a few questions for you. Where were your stops are they here or are they in your head. Do you move stops as the trade progresses or again are they in your head? As you can tell I really have not had much luck of using stops. And a few times not using stops has killed me. (But I believe with proper money management that can be stopped) Could you post some losing trades?

 

 

Thanks,

Don

[thalestrader 14]

simple trend age (how many bars since it turned) plus trades suited to that trend age are a winning formula. Its over to the reader how and if they can use this

 

 

Edit: Trader Vic's first book discussed dow theory, trend age etc at length. A useful read if one has nothing much else to do at the time.

 

I would add that in addition to trend age, Trader Vic discussed trend extent as well, i.e. how far price has moved. Simply looking at trend age/length in terms of bars will not tell you the whole story. For example, if you look at the GU sell-off this week, and Cory's post of an anticipated support level well below where the market was at the time of his post, you find price ultimately rallied strongly from that level. Regardless of how many bars it took the GU to get there, given the extent of the decline and the manner in which price reacted to Cory's level in the past, a rally from that level was not surprising. Which is to say, price itself, and its behavior at the levels at which it has found overwhelming buying interest and overwhelming selling interest in the past is most significant, and not the discreet units into which one chooses to chop it and view it.

 

As further evidence of this, the Yen pairs (EJ,GJ) both bottomed at levels which anyone should be able to see as having been levels of anticipated support. Each bottomed well before the USD pairs (EU, GU). The time of each pairs respective declines was trumped by the levels to which price declined.

 

Support and resistance matters.

 

Best Wishes,

 

Thales

[thalestrader 14]

Earlier in this thread, Don asked Thales, where he would have "got out" in an ambivalent situation. When one looks into Thales' answer, one can see that he replicates his standard setup on a smaller time scale to end the trade before the stop is called.

 

I would just like to make the following clarifications/observations/points to Markos's excellent observation:

 

1) You do not need to drop down to a one minute chart to see the exits I posted in response to Don's question.

 

In fact, you do not need a chart at all. You can watch what price is doing in your DOM, your broker;s trading station, etc. You do not need a chart. A chart is a tool whose value is modtly the recording of unobserved history. If you are observing price, you do not need a chart to see price drop to a low point, rally, pullback but hold above its most recent low point, and then rally to a higher high than the first rally from the initial low. Compare what we are doing here to the Livermore's and the Wyckoff's et. al. They did not have streaming bars and candles. They had a ticker. They used their memory to record their observations, and acted upon that information accordingly. We simply use our charts as our memory.

 

2) Don asked about two examples where a trader would have been stopped into trades that moved very little and only briefly in the trader's favor. My answers were based upon what is visible in hindsight on a one minute chart. In real time, you could see thatr it was time to "pull the rip cord" on the fiftenn minute chart or from the trading DOM. You do not need to look at a one minute chart. As I have said elsewhere in this thread, I fully expect price to move quickly in my favor. If price does not do so, I want to be out at the first indication that price is even flirting with the other side of the trade.

 

3) Resist the temptation to manage a trade from entry to profit targets based solely on these 1-2-3's as they become visible on a one minute chart or as you start to identify them by simply watching the fifteen minute or your trading Dom.

 

You must learn to manage your trades based upon the size of the initial swing that provided you with the indication that an opportunity existed. If you are trading a small swing and you had an initial profit target of 20 ticks and a stop loss of 15 ticks, then the first 1-2-3 that price etches out against your position may be the indication you need to quit the trade, and possibly even reverse your position. However, if your are trading off a swing that gives you a 40 tick stop loss with an initial profit target of 130 ticks, there will likely be visible multiple 123's etched out at the smallest degrees of price movement.

 

This is why I have repeatedly cautioned that you must be aware of each opportunity you trade and the degree or size of the swing which prompted the trade.

 

Best Wishes,

 

Thales

[thalestrader 14]

Did you "land at TL" to learn more about your trading method by conveying it to others?

 

>> there are no secrets, nothing to buy, no magic

Could have been my words in a German trading thread. I've been thru this several times.

 

I also liked Richard's post very much.

 

I'll share how and why I landed here at some point.

 

I briefly pursued a career in teaching and took a position at a small liberal arts college. I knew form my experience teaching that in the process of presenting material to others you yourself gain as well. But I have indeed learned more about myself and my trading from what I have shared here and with my daughter than I would thought possible.

 

This has been a far more positive experience for me than I had anticipated. And I would add that I do not think it could have been nearly so positive had I been silly enough to to try it at ET, FF, or T2W. James has truly created a serious Trader's Community here in the middle of the uck and muck of the internet (Thanks, James).

 

Best Wishes,

 

Thales

[thalestrader 14]

OK now I understand the connection.

 

A bear market ralley is a temporray change in trend (upwards) in an overall downtrending market.

So if I understand you correctly, the bear trend is one degree and the lower degree is the bear ralley.

 

Right?

 

Gabe

 

Right, within an overall bear market, there will be multiple 123's as price seeks its ultimate support level. There will also be multiple 123's that lead to tradable, profitable rallies. So, there are two trends going on at the same time - a large bear trend, and within that overall trend, price may be in the middle of a short term rally. This approach works in both trends. But you must be aware of which trend you are trading with at the time.

 

Best Wishes,

 

Thales

[thalestrader 14]

In fact, it was my first reading of Aristotle's Politics as an undergrad that led me to open my first commodities account.

 

Thales,

 

Could you expand on this?

 

Thanks.

 

"There is, for example, the way of Thales of Miletus. This is a business scheme which is attributed to him on account of his wisdom, yet it happens to be general in its application. For they say that when some, on account of Thales poverty reproached him with the uselessness of philosophy, Thales, observing through his knowledge of astronomy that there would be a good harvest of olives, was able, during the winter, to raise a small sum of money to place in deposit on all the olive presses in both Miletus and Chios, which he would hire at a low rate because no one was competing with him; then, when the season came, and many of them were suddenly in demand at the same time, he hired them out on what terms he pleased and collected a great deal of money, thus showing how easy it is for philosophers to become wealthy if they wish, but it is not this that they are serious about. Thales, then, is said to have made a display of his business expertise in this manner, though, as we said, this piece of business expertise is universal, if someone is able to establish a monopoly for himself.( Aristotle, Politics, 1259a5-21).

 

 

Best Wishes,

 

Thales

[Don4 10]

"You must learn to manage your trades based upon the size of the initial swing that provided you with the indication that an opportunity existed. If you are trading a small swing and you had an initial profit target of 20 ticks and a stop loss of 15 ticks, then the first 1-2-3 that price etches out against your position may be the indication you need to quit the trade, and possibly even reverse your position. However, if your are trading off a swing that gives you a 40 tick stop loss with an initial profit target of 130 ticks, there will likely be visible multiple 123's etched out at the smallest degrees of price movement."

 

This is why I dont believe your system or any body else's system can be taught, even though you might on a very rare occosion have a few people that truly understand, I dont believe most will. Not that you are not explaining everything, you do! But most of us will not be able to grasp it. I believe your GU trade explains how I feel because if you would have been there you would have exited at best with a breakeven or who knows 40 pips but you wasnt. It seems as that trade was a gift from God.

 

Thanks,

Don

[Marko23 10]

...

Where were your stops are they here or are they in your head. Do you move stops as the trade progresses or again are they in your head?

Stops are in my head before I enter the trade. After the order is filled, I put the stop immediately in place, just click the Transmit button on a prepared Stop order. For the DAX trades, the stops were in the area you indicated.

 

When reward/risc gets larger than 1, I usually move the stop to a break even point.

 

...

As you can tell I really have not had much luck of using stops. And a few times not using stops has killed me. (But I believe with proper money management that can be stopped)

Probably your stops have been too tight. A stop, as I see it, should be a kind of emergency exit. It is triggered, when for some reason you are unable to handle the exit yourself.

 

...

Could you post some losing trades?

 

Sure, please wait for the next week...

[Marko23 10]

...

You must learn to manage your trades based upon the size of the initial swing that provided you with the indication that an opportunity existed.

...

 

Yes, and a simple trick made learning this much easier for me: I never, never change the vertical price scale of the chart. After while, I could just ignore the small swings and concentrate on the bigger ones.

[Marko23 10]

....

This is why I dont believe your system or any body else's system can be taught,

....

I beg to differ. If you can get rid of that belief, you will be able to learn Thales' system. There are no secrets...

 

Please excuse, if the above sentence sounds harsh to you. I do not want to offend in any way, but have some difficulties with the proper tone in a foreign language.

[Don4 10]

I beg to differ. If you can get rid of that belief, you will be able to learn Thales' system. There are no secrets...

 

Please excuse, if the above sentence sounds harsh to you. I do not want to offend in any way, but have some difficulties with the proper tone in a foreign language.

 

If I could get rid of that belief I would. But until then I cant. You say that my stops are too tight and I truly dont believe that they are since the are basically at the same place as Thales and you but on a different timeframe.My goal here is not to learn Thales system I find it very informative though. I dont see how anybody can place stops (in forex) and become profitable. I do understand what you and Thales is trying to show here and I am here wanting to learn. So I will continue to be here asking questions and posting pictures.

Sorry, Thales but here is a example.

 

 

 

Thanks,

Don

[jonbig04 10]

If I could get rid of that belief I would. But until then I cant. You say that my stops are too tight and I truly dont believe that they are since the are basically at the same place as Thales and you but on a different timeframe.My goal here is not to learn Thales system I find it very informative though. I dont see how anybody can place stops (in forex) and become profitable. I do understand what you and Thales is trying to show here and I am here wanting to learn. So I will continue to be here asking questions and posting pictures.

Sorry, Thales but here is a example.

 

 

 

Thanks,

Don

 

Have you ever considered the possibility that you are over-thinking this? IMO a lot of you are making this much harder than it has to be.

[RichardTodd 10]

This is why I dont believe your system or any body else's system can be taught, even though you might on a very rare occosion have a few people that truly understand, I dont believe most will. Not that you are not explaining everything, you do! But most of us will not be able to grasp it.

 

I don't know you, Don4, so understand that I'm talking in generalizations and not about you personally. Like my last post, I hope this is helpful to at least somebody, and not taken the wrong way.

 

The analogy I use when I'm teaching people goes like this: I can tell you all about how I drive a car. I can show you videos of me driving a car, and talking about what I'm doing/thinking/feeling. But, no matter how much or how often I do this, you are going to feel awkward the first time you try it. The first several times, even. You are going to make plenty of mistakes, even though driving will eventually be so easy for you that you can do it automatically while daydreaming about something else.

 

Ultimately, you have to bridge the gap between the world of concepts and the world of experience yourself. That's true for trading, dating, golf, juggling, tight-rope walking, you name it.

 

But, I think most people would agree with me that this universal fact does not make instruction pointless. It does not mean that driving cannot be taught, as you seem to have concluded with respect to trading. It just means that your concept of education sets your expectations too high. People cannot be fully spoon-fed skills. Can't be jacked-in and receive skills, matrix-style.

 

I think everyone here knows this, but some would rather tell themselves it's hopeless. Another universal fact is that most people are desperate to protect their ego (or to be more precise, their ego is desperate to protect itself). This leads people to externalize their problems rather than face reality. "If I had a better teacher, then I would understand." "Sure so-and-so can do that stuff... he is a genius/went to a better college/has more experience/had more help/has better tools/is luckier." "Those evil cheating market makers know where my stops are." "This stuff can't really be taught, anyway." etc.

 

I don't mean to say that all excuses are invalid, but not one of them gets you any closer to success until you identify a positive response to it. Never forget that your ultimate goal is not to feel better about failure. Your ultimate goal is to successfully acquire a skill.

Edited November 29, 2009 by RichardTodd
Moved a sentence to try to make this rambling mess flow better.

[BlowFish 10]

People keep attributing Thales' success to years and years of experience, and an almost subconcious way that he must filter his trades because of those years and years of experience.

 

BUT...did he not teach his daughter to trade in a MONTH?...and then she subsequently went to trade for the 3 month summer, turning $25 into nearly $1,000...after just a month of pre-trading training?

 

I don't know THE answer as to why some people seem to pick this up and some people seem to struggle a lot, but based on the example set by his daughter, I don't think the answer is simply that he has years and years experience, and someone without the experience won't succeed.

 

I don't know the answer, but I don't think the answer is lots and lots of time and experience. It must be something else...

 

Just my

 

-Cory

 

Indeed, but 'hands on' training of what is actually something that is dynamic is probably a lot to do with it. Maybe also not having picked up any bad habits or mis conceptions. Finally (and related) my 'best' (most effortless, un emotional, 'in the zone') trading was before my first major draw down (wasn't quite a wipe but was pretty major). Big draw downs and wipes are hugely damaging imho avoid at all costs.

[thalestrader 14]

Sorry, Thales but here is a example. Thanks, Don

 

The EU short was based off the break low of a very small swing. In hindsight, it was an excellent entry. But I do not have the benefit of trading in hindsight, so I have to trade based upon what I see. In this case, given the relatively small size of the swing that indicated the short entry, I would have exited at breakeven, maybe even a few ticks better than breakeven.

 

I believe your GU trade explains how I feel because if you would have been there you would have exited at best with a breakeven or who knows 40 pips but you wasnt.

 

 

 

Now, for the GU, you are correct, in that if I were running that trade off of the swings you are focused upon, I'd have been at PT1 and PT2, and thus flat for the larger break (or having to enter a new short position on the break). However, as I said when I posted that trade, I was using that small swing to get me into a larger anticipated break based upon the swing sequence of which the swings you are looking at were but a small part.

 

I have attached another look at the GU. The small annotations are where you are looking, but I was trading an anticipated break based upon the LARGE annotations. Two different degrees of price action, two different sets of PT's, Two different Stop progressions.

 

Chart 1 Shows the two swings together.

 

Chart 2 Shows the Trade as I planned it, but my actual entry was higher than the heavy blue line.

 

Chart 3 Shows the trade as Don is viewing it. I did enter at that entry point (thin blue line), but as I said when I posted the trade, my intention was to hold for the lower targets. I also show my BE stop move line (dotted magenta) and my PT's. Both PT's would have been filled on that trade before the bounce back to BE.

 

I cannot make it any paliner than that, Don. I was certainly clear as to where my PT's were at the time I was posting the trade, as is evident form the chart posted here:

 

-40 initial stop for a +130 PT1 ... I wasn't going to trade, and the market will probably punish me for this, but I'm in at 1.6688 short for a 1.6558 PT1 and 1.6458 PT2.

 

Look at the size of those PT's! There is no way I'd expect that kind of reward from the swing you are fixed upon. I simply used a smaller degree short to cut my risk to -40 from the -90 I'd have run if I had waited for the proper entry.

 

You are missing the forest for the trees, as they say.

 

Speaking of Forrest, where has Forrest been?

 

Best Wishes,

 

Thales

[thalestrader 14]

It seems as that trade was a gift from God.

 

As is every blessing I have been fortunate to receive in this life.

 

Best Wishes,

 

Thales