Reading Charts in Real Time

[thalestrader 14]

I really like the simplicity of your method but sometimes I struggle to find the relevant swings. If you take a look at the attached chart, could you please let me know if you would consider the dotted lines to be valid breaks or if you wait for the "larger" swing area to break to place an order...

 

Hi Leandro,

 

Take a look at the chart Cory posted in the post below yours. That is close to what I would be watching, with this caveat - I would like to see price impulse, i.e. make a relatively large move quickly (relative to what its been doing over the last hours) before I decide to do anything.

 

I mentioned the Fed meeting last night. The New York traders seem already to have been flash frozen at their desks. Also, this is typically a low volume trading period between now and the end of the year (for example, I will not trade stocks again until after the New Year). What trades we are taking is limited to currency and index futures, and of course our little forex account. We are trading small, and we are in no hurry to make a trade. By the end of this week, I will likely be done until 2010.

 

So far we've taken no trades this morning. Right now, the GBPUSD looks as though it might have more life in it than the other pairs I watch (EURUSD/6E, USDJPY/inverse6J, EURJPY). That, of course, may and can change in a heart beat.

 

 

Best Wishes,

 

Thales

[traderbrazil 10]

Thanks once again, Thales!!!!

[Cory2679 11]

My next step will be to spend all of next week not trading, but instead just focusing on the price action of one pair (the EJ, since it appears to be pretty popular on this thread)...paying particular attention to H's and L's, as well as identifying S/R. I'm sure I'll be posting some charts on here...just not actually trading.

 

Even though I'm not trading this week, I may play around with an FXCM micro demo account. I've decided to open a UK account like Thales and his daughter did in order to get the simpler entry order screen. I actually just chatted with FXCM about the change for the US customers, and they said it was because of NFA regulations (I've attached our little conversation).

 

When I go back to trading live (it may not be until the beginning of January, just because of market conditions), I'm going to start with a $250 FXCM micro account. That way, I will have a huge burden lifted off my back when I go live. I figure if I were to completely wipe that account out, I could refill it over and over if I had to. If I lost $1,000's of dollars in my futures account, I'd have to sell things or get loans in order to get a new stake...

 

I kind of relate it loosely to when Livermore had to go bankrupt so he could have the burden lifted off his back so he could trade well. Well, the fact that the money in my futures account is all I have and if I loose it I'm screwed is MY burden right now because I'm still new with this approach...and trading the $250 micro account relieves me of that and allows me to focus on my trading without worrying so much.

 

-Cory

Edited December 14, 2009 by Cory2679
clarification

[Cory2679 11]

I'm watching the EJ this week...here's an annotated chart.

 

EDIT: The more I look at the PA for that first "setup" the more I think it may have been a break-even effort or just locking in some small profit. I doubt after that second attempt to touch profit I would have held on all the way back past BE. Also, on the short of the current PA, I may be inclined to take it with a tight stop...price would have to present a natural stop level that made the R:R more desirable.

 

We'll see what happens! I'm not trading this week...just watching...

 

EDIT2: I added a second chart with another possibility for a short...

 

-Cory

 

Moved stop and added what would be my second profit target if I had one. This isn't looking too good...

 

EDIT: I've added a chart of what I think may be a better, more conservative first profit target...off to get lunch...I'll see what has happened when I get back!

Edited December 14, 2009 by Cory2679

[forrestang 10]

Weekend Reading

 

.....I found another old chart of another trade of mine where I explicitly mention the Joe Ross by name. As I said, I am a terribly unoriginal trader. At any rate, I have his "Trading the Ross Hook," as a .pdf file, and having found the reference to him on my old chart, I figured I'd pop his book open and take a peek for old times sake.

 

I think it is worth a read, so I submit it as this week's edition of Weekend Reading.

 

Best Wishes,

 

Thales

 

At the risk of possibly opening up a can of worms, I am posting an intra day NQ chart based on some things I read in the Ross book. I started reading it, and found his money management techniques interesting, and couldn't put it down and read the entire book(it's a quick read).

 

I personally did not trade any of these occurrences, but I was able to observe and mark them down real time. There are possible entries on the chart depending on how you may want to trade based on what I saw.

 

I also looked at this with a 4 range chart and found some interesting correlations.

 

I think this fits in well with this thread.

Edited December 14, 2009 by forrestang
Updated picture

[thalestrader 14]

I think this fits in well with this thread.

 

I think so too.

 

 

Best Wishes,

 

Thales

[Cory2679 11]

Moved stop and added what would be my second profit target if I had one. This isn't looking too good...

 

EDIT: I've added a chart of what I think may be a better, more conservative first profit target...off to get lunch...I'll see what has happened when I get back!

 

Last look at the EJ before I head out for the evening. I actually jumped in really late on my FXCM UK demo account and got stopped out at 129.774...just to try out the platform.

 

The platform is really simple, which is nice (the UK account is just as simple as Oanda). Of course, it'd be nice to have a DOM, but I'm only trading 15 minute charts so I have more than plenty of time to enter my orders by typing them in.

 

With Oanda, you can dial down lot size do the single unit, but why would anyone even need to be able to do that? With a micro account, you can dial down to 1,000 units and in my opinion that should be plenty.

 

The more I've thought about the NFA regulation, the more it puzzles me. I'm sure they have their reasons...I don't care though, as long as the UK account stays the way it is.

 

I'll be curious where the EJ is when I get home tonight. Right now, it's just not getting anywhere (obviously it's a poor time to trade, anyway).

 

-Cory

Edited December 14, 2009 by Cory2679
added additional comment

[thalestrader 14]

When I go back to trading live (it may not be until the beginning of January, just because of market conditions), I'm going to start with a $250 FXCM micro account. That way, I will have a huge burden lifted off my back when I go live. I figure if I were to completely wipe that account out, I could refill it over and over if I had to ... and trading the $250 micro account relieves me of that and allows me to focus on my trading without worrying so much.

 

Hi Cory,

 

I think an FXCM micro account is an excellent way to learn to trae an approach without risking much. I was a little surprised by the size of the spreads today. I didn't notice at first, but my currency trading friend IM'd me that the spreads were 2-3 times wider than normal, and he was right. I don't think I saw the spread on the EJ narrow to lees than 2.5 most of the day, when it is usually 1.2. We conjectured that it is due to low volume, and he and I are both likely to be finished trading for the year. I think demo trading until January is a good idea.

 

Also, notto add pressure to your $250 micro account trading, you might be surprised at how quickly your 3 figures can grow to four and five figures so long as you do not go insane on the leverage. You may not win king of the micro, but in the end you will still have a growing account long after the cowboys have gone form $500 to $5000 to $0.

 

Best Wishes,

 

Thales

[TradeRunner 10]

Here is a suggestion (and this isn't just for you, Dinero, but anyone who wants to learn to trade price without using indicators and opinions and conjectures and unsubstantiated and unnecessary theories): Why not take a week, and watch a 15 minute chart of the EURJPY or the EURUSD or the 6J or the 6E, and just focus on what happens if you bought the break up of every low-high-higher low-higher high pivot sequence and sold short every high-low-lower high-lower low pivot sequence.

 

Just mark off the high and low pivots, and make it mechanical if you'd like: Buy stop above a high, with an arbitrary 15 or 20 tick stop loss, and a 30 tick Profit target. Just go ahead and see how you do. Paper trade it - as I stated elsewhere, paper trading is marginally useful, and here is an example of where it can be useful.

 

If you do this for a week, you will learn to read price action in a way that will put you solidly on track to where you want to be. One week. You should mark each high (H) and each low (L) and when the market turns, you should have an (H) pivot, followed by an (L) pivot, followed by a Lower High pivot (LH) followed by a Lower low (LL). If price makes a high and pulls back to a low and then rallies to the exact high tick of the previous high and then begins to pull back, consider that a Lower High unless it is bettered (and vice versa for two equal lows).

 

OK: 6E, 30 tick TP and 15 tick SL.

 

 

 

I guess it is not a good time of year to do this excercise.

[BlowFish 10]

 

I kind of relate it loosely to when Livermore had to go bankrupt so he could have the burden lifted off his back so he could trade well.

 

-Cory

 

Interestingly he went back to the bucket shops a couple of times too

[BlowFish 10]

....... That is close to what I would be watching, with this caveat - I would like to see price impulse, i.e. make a relatively large move quickly (relative to what its been doing over the last hours) before I decide to do anything.

 

 

Often times the 'thrust' is what actually breaks out. In this case would you tend to wait for a correction or rest after there has been this price impulse?

[Cory2679 11]

I'll be curious where the EJ is when I get home tonight. Right now, it's just not getting anywhere (obviously it's a poor time to trade, anyway).

 

Well, here's how the EJ looked when I opened it up this morning. Looks like the trade yesterday would have been profitable, had I not squeezed my stops too tight.

 

Also, I marked what I saw would be two trades since the last time I looked at it. (Hindsight, of course). Even though I can't guarantee how I would handle them in real time, I feel certain I would have at least taken the trades because they're pretty obvious. Although, the first one looks like the R:R isn't quite 1:1, so I don't know about that one.

 

Right now I'd just be playing the waiting game...

 

BTW, the spreads are small again this morning. Current EJ is 1.2 and I've even seen 0.5!

 

-Cory

Edited December 15, 2009 by Cory2679
typo

[forrestang 10]

Here is some more stuff based on Thales' weekend reading.

 

We somewhat based off of support shown on the 60 min, even though we did take it out by a bit. But we did put in a 1-2-3 low(albeit this 1-2-3 was a bit unsymmetrical, in that the '2' point was waaay away from the 1.. And are now headed right into resistance so it should be interesting to see what happens up here, whether we develop a 1-2-3 high or not?

 

But at any rate, here are some observations. Will update this post as things develop.

 

Also, notice how many more hooks or swings that get put in place on the range chart on the right, some of which could easily have been traded. I am mainly using the 5min as depicted, but still I am observing the 1 point range chart.

 

-----UPDATE (11:08est)------

See the 2nd picture.

 

We are in an uptrend after putting in that 1-2-3(HL) bottom. But the 1-2-3 is a bit skewed and is a possibility of filtering trades. We put in a hook which could lead to entry, and there is a 'S' for an early entry before the BO. Note that we are at a potential resistance area and it might be good to see what develops up here.

 

-----UPDATE (11:26est)------

See the 3rd picture.

 

Comments are on chart and should make sense with current action. It's possible nothing develops all day, so this exercise of mine might just be purely academic.

 

-----UPDATE (11:46est)------

See 4th picture.

 

To avoid creating another useless post, this will be last update unless something happens. Here is the latest in what price has done.

Edited December 15, 2009 by forrestang
Update with new picture

[Cory2679 11]

Potential EJ short...

[forrestang 10]

Here is some more stuff based on Thales' weekend reading.

 

We somewhat based off of support shown on the 60 min, even though we did take it out by a bit. But we did put in a 1-2-3 low(albeit this 1-2-3 was a bit unsymmetrical, in that the '2' point was waaay away from the 1.. And are now headed right into resistance so it should be interesting to see what happens up here, whether we develop a 1-2-3 high or not?

 

But at any rate, here are some observations. Will update this post as things develop.

 

Also, notice how many more hooks or swings that get put in place on the range chart on the right, some of which could easily have been traded. I am mainly using the 5min as depicted, but still I am observing the 1 point range chart.

 

-----UPDATE (11:08est)------

See the 2nd picture.

 

We are in an uptrend after putting in that 1-2-3(HL) bottom. But the 1-2-3 is a bit skewed and is a possibility of filtering trades. We put in a hook which could lead to entry, and there is a 'S' for an early entry before the BO. Note that we are at a potential resistance area and it might be good to see what develops up here.

 

-----UPDATE (11:26est)------

See the 3rd picture.

 

Comments are on chart and should make sense with current action. It's possible nothing develops all day, so this exercise of mine might just be purely academic.

 

-----UPDATE (11:46est)------

See 4th picture.

 

To avoid creating another useless post, this will be last update unless something happens. Here is the latest in what price has done.

 

We are currently in the middle of the price bracket from about 1810 ~1800. And it is lunch. But here are some more observations of what is happening RIGHT now.

 

I took the entry on the first hook(First Blue Line), but after taking a few tics for my fees on on part, small profits on my next third, was stopped BE on the 'runner' portion of the trade.

 

We've gotten that bounce off Resistance above, heading lower. We've hooked twice, this 2nd hook is in play. Potential entries shown on chart.

[Cory2679 11]

Potential EJ short...

 

Here's an updated chart. It's dragging its feet, but the spreads are still low...

 

This will probably be my last post today. I doubt there will be anything worth posting later judging by how it's coiling up and dying...plus I'm probably leaving my house in an hour or two. I have an order in on my FXCM UK demo account, but like Thales said yesterday, with this coiling action I'd really like to see an impluse move to make me confident in the trade.

 

-Cory

[TradeRunner 10]

I look at 6J with envy:

 

 

[Cory2679 11]

Here's an updated chart. It's dragging its feet, but the spreads are still low...

 

...I have an order in on my FXCM UK demo account...

 

Very last update on the EJ today...got PT1...stop at BE waiting for profit target 2...

[thalestrader 14]

Often times the 'thrust' is what actually breaks out. In this case would you tend to wait for a correction or rest after there has been this price impulse?

 

I was hanging out with my currency trading friend today, and I'm just now checking in here at the thread.

 

I guess what I was trying to say is that once price goes flat and trendless, I will often jst wait for price to start "swinging," as my friend would say. In other words, I am no longer looking for price to break out so much as I am wating for volatility to return, and then I will start looking for a breakout. That means price might impulse quickly and "break out" of a flat ranging period to the upside. But I am not looking to trade that breakout. I want to see whether that breakout becomes a high, followed by a higher low, in which case I will buy a new high; or will that high be followed by a low, and then a lower high, in which case I sell a lower low.

 

Does that make sense? I had quite a day of trader talking and chart walking with my friend, and for some reason I feel all "thinked" out.

 

Best Wishes,

 

Thales

[thalestrader 14]

Here is some more stuff based on Thales' weekend reading.

 

I am follwoing your contributions with great interest, and I hope you continue with them Forrest. I'm looking at Ross with fresh eyes myself because of your work.

 

Keep it coming!

 

Best Wishes,

 

Thales

[forrestang 10]

I am follwoing your contributions with great interest, and I hope you continue with them Forrest. I'm looking at Ross with fresh eyes myself because of your work.

 

Good deal. I am glad you're enjoying reading them!

 

Something I am hoping to get a feel for is when to pull the 'rip cord' as you often say. Since I am mainly interested in trading the BO of something, I would like to see a strong move in my favor immediately.

 

I'm not sure if this is just a sense you would develop over time, or if it something that can be taught?

 

There was a period in this thread where it was discussed to not let price run your ISL.......

 

Anyways, when you post some trades again, commentary based on this topic again would be much appreciated.

 

---- Addendum -----

For intraday trading futures for example, would it make things more obvious looking at a smaller interval chart, like a sub minute chart to make it obvious that price is not breaking out meaningfully? I.e. entering the trade, and exiting w/o movement with volume on a small interval chart?

Edited December 15, 2009 by forrestang

[thalestrader 14]

OK: 6E, 30 tick TP and 15 tick SL.

 

 

I guess it is not a good time of year to do this excercise.

 

 

Are the swing lines drawn by you or are you using an auto-drawing tool?

 

Here is my take on the 6E from yesterday, albeit from the comfort of my armchair and the calmness, coolness, and collectedness of hindsight.

 

 

Best Wishes,

[Kiwi 16]

I was hanging out with my currency trading friend today, and I'm just now checking in here at the thread.

 

I guess what I was trying to say is that once price goes flat and trendless, I will often jst wait for price to start "swinging," as my friend would say. In other words, I am no longer looking for price to break out so much as I am wating for volatility to return, and then I will start looking for a breakout. That means price might impulse quickly and "break out" of a flat ranging period to the upside. But I am not looking to trade that breakout. I want to see whether that breakout becomes a high, followed by a higher low, in which case I will buy a new high; or will that high be followed by a low, and then a lower high, in which case I sell a lower low.

 

Does that make sense? I had quite a day of trader talking and chart walking with my friend, and for some reason I feel all "thinked" out.

 

Best Wishes,

 

Thales

 

 

That is interesting Thales. That impulse is the Thales MA.

 

Now before you get all offended (:haha:) let me explain. I've been looking at various strategies as my automation efforts progress and there are some common factors to the entry for the type of trade I'd call "trend, flow or momentum" non-breakout trade. Basically in this trade you enter with what you hope to be the (pick your timeframe) trend/flow and then either take profits or trails stops.

 

There are a number of ways to get the "Get ready" signal. Then there are a number of ways to get the "Go" now signal. Because its the non-breakout variant you don't take a simple break unless you already have the trend.

 

Get Ready Signals:

- RSI reaches a certain level (impulse measure)

- Stoch reaches a certain level (highs vs prior highs, like a donchian channel break)

. Donchian break (which is actually just like the stoch)

- S&R break (the channel length is decided by prior price action)

- Keltner or Bollinger reached

- Price crosses mas and/or mas turn and/or cross

- Price moves xx points or xx ATRs away from some starting point (volatility breakout)

 

Go Signals:

- some strategies go on the get ready ... which means that you catch every move but at the expense of larger stops, more failures.

- pullback to a fib number or 50% or something that you take as support

- pullback and break of pullback bar to signal go

- your style of 123break

 

All the go signals provide continuation. And each trades some element of certainty that the continuation will happen with some cost in terms of stops.

 

After that you have to manage the trade of course

 

My little bit of thinking for anyone who's trying to understand what might or might not work for them.

[forrestang 10]

I guess what I was trying to say is that once price goes flat and trendless, I will often jst wait for price to start "swinging," as my friend would say. In other words, I am no longer looking for price to break out so much as I am wating for volatility to return, and then I will start looking for a breakout. That means price might impulse quickly and "break out" of a flat ranging period to the upside. But I am not looking to trade that breakout. I want to see whether that breakout becomes a high, followed by a higher low, in which case I will buy a new high; or will that high be followed by a low, and then a lower high, in which case I sell a lower low.

Thales

 

Interesting. I was just reading about this and clearing this concept up in my head. I read your post but didn't get what you where saying, until a few hours later I realized I was reading about this same behavior you describe and then it kind of clicked. This very behavior you describe is in "The Law of Charts" on pages 8-10.

 

The main point was when either Congestion, a Trading Range or a Ledge forms. The idea was to take the break of 1-2-3 (HL/LH) patterns, and the subsequent breaks out of correction points (ross hooks).

 

The text mentions to be careful when you don't get a correction, and an immediate break of the correction, to be careful of either a Ledge forming(4-10 bars), which may then lead to Congestion(10-20) bars, and finally a trading range which is greater than 20.

 

The idea was to not take the very first break of the range, as that is usually just potentially a fake BO, or even if not just wait till the first correction (minor pullback), with an almost immediate move out... then trade the BO.

 

By doing it this way, the range is usually formed of opposing 1-2-3 patterns, i.e. opposing LHs or HLs..... so when we finally get a BO of the range we will have likely put in that 1-2-3 formation.

 

Attaching a cliff note version with some additions to the chart from the book.

 

The text probably does a better job of describing this than I did.

[TradeRunner 10]

Are the swing lines drawn by you or are you using an auto-drawing tool?

 

Here is my take on the 6E from yesterday, albeit from the comfort of my armchair and the calmness, coolness, and collectedness of hindsight.

 

 

Best Wishes,

 

Thanks Thales.

 

I'm drawing them by hand. Is my approach too mechanical? I find it easier to draw the lines than mess with text - I add the text in later.

 

Would you have stopped trading because of the two losses in a row or because you recognised the overlapping swings?

 

I have a question about the first red arrow...