Reading Charts in Real Time

[Gabe2004 10]

Hi Cory,

 

This is a good example of impulsive price action (the rally) versus corrective price action (where you se a potential 123). A short as you suggest may, if triggered, decline for nice profits. However, I would consider this to be a low probability short. I would add that I have been wrong many, many times.

 

However, until I see a decline that moves in an impulsive manner, I am only interested in rising prices.

 

Here is my chart showing how I think this may play out over the coming hours. Though this is a 60 minute chart, I would be looking for a short indication at the upper resistance zone using the 15 minute for trade entry, should price follow this path.

 

Best Wishes,

 

Thales

 

Was shorting below 130.05 around 19:30 EST a resonable short?

(sorry , cannt post charts from this computer)

 

Gabe

Edited December 22, 2009 by Gabe2004

[Rustie 10]

So how bad does it have to get before you stop trading and try to figure out what you are doing wrong?

 

Best Wishes,

 

Thales

 

I stop after 3 consecutive losses. Sometimes 2.

[Rustie 10]

I mean that in a far more positive way than that original post sounds.

 

The point is this: When you are losing money by trading poorly, the first thing to do is stop the bleeding. You should have some sort of safety switch that shuts you down at some point, if for no other purpose than to prevent revenge trading and other self destrucitve tendencies.

 

Best Wishes,

 

Thales

 

I agree, if you cant trade hen dont go live or stop if your having a bad day. I didnt take it badly, im here for as much help as i can get. Any advise is very appreciated. I really am trying to work out what im doing wrong. These trades are demo only trades while i practice and learn.

 

Easier said than done working out what your doing wrong!

[ziebarf 10]

Short potential on the EU..

 

Loving the action on this market lately, who cares about the holidays!

 

EDIT: Similar outlook on the EJ

 

EDIT: Trade on the EU is a go go, connection is terrible at my hotel due to constant disconnects

Edited December 22, 2009 by ziebarf

[ziebarf 10]

PT2 hit, all out at +22 or so.

 

 

This was a very forgiving trade, with 3-4 possible entries (which can be seen in my second attachment). If adjusted accordingly to the prior swings and RR, they would have all been winners. I have to say, the entering on ABC's has really liberated my trading. Thanks Thales!

[thalestrader 14]

Was shorting below 130.05 around 19:30 EST a resonable short?

(sorry , cannt post charts from this computer)

 

Gabe

 

Hi Gabe,

 

I can see why you might have wanted to short there. I would say that it could be done but with a very aggressive stop management, e.g. at + 5 ticks go to break even. The reason is two fold:

 

1) Between the NY close and the Tokyo open, price action is typically uneventful, and of very little value. This is generaly true, though it is not without exception. In this case, price drifted sideways to lower, and thus, it would have been better to wait for volatility and better defined swings to return, and await a more clear indication of where price was going to head; and

 

2) Price had basically broken out above its prior range (base) and then immediately formed another base right on top of the prior base. So, a short where you suggested, while anything is possible, was facing tough sledding as the "break" you sold was really a test of the top of the prior range. In other words, the comments I made to Cory would apply here as well.

 

You can see in this look at the EJ that price is stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes. At some point, price will produce a tradable retracement of the rally, but it is best to wait for an initial impulse down that cracks a base, then a reaction high, followed by an impulsive break to a lower low. Ideally, for a short, price will break to a new high and extend for a bit before basing again. That way, once a base for distribution forms, there will be room for price to run after a short entry and prior to reaching first support. Right now, these bases are forming a thick zone of support. A decline of any consequece will likely need to break through at least two of these levels to gain traction.

 

Best Wishes,

 

Thales

[thalestrader 14]

Continuing to track the EJ ...

 

Best Wishes,

 

Thales

[SangreDeToro 10]

Few things regarding this:

 

1) Your wins will be small overall, even w/ that runner when it hits (often it won't).

2) When price immediately retraces on you (and it will) you will take a full stop out on a full amount of contracts; meanwhile your wins will be tiny in comparison.

 

For this to work, your win % must be very high and in theory, that is achievable with such small profit targets but I would not be doing this as a function to 'cover your costs'. That's silly as Thales pointed out with commissions so small in today's trading. You do this to create a scalping methodology b/c that's what it is - scalping at it's finest.

 

So if you want to scalp, this is exactly how you could do it. If your goal is to basically cover costs and not lose, then why bother putting the trade on to begin with? This feels very much like a strategy where the goal is to not lose; it also has a flaw of not winning very much at all.

 

Hey Forrest - my read on the ross hook was that this particular setup was about anticipating a breakout or stop run - where you'd enter on a stop with the goal of getting a free trade that may keep going but if it reverses you already have the trade paid for.

 

I don't think this is a generic money management approach more so an approach for this impulsive price action.

 

i thunk.

[Gabe2004 10]

You can see in this look at the EJ that price is stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes. At some point, price will produce a tradable retracement of the rally, but it is best to wait for an initial impulse down that cracks a base, then a reaction high, followed by an impulsive break to a lower low. Ideally, for a short, price will break to a new high and extend for a bit before basing again. That way, once a base for distribution forms, there will be room for price to run after a short entry and prior to reaching first support. Right now, these bases are forming a thick zone of support. A decline of any consequece will likely need to break through at least two of these levels to gain traction.

 

Best Wishes,

 

Thales

Wouldn't it make for a better trade to enter at point A long which is a return to the prior ceiling (now potentially a base)?

In case of a short, once the impulse move down breaks support, how about waiting for price to come back up to the now resistance level and enter on a STOP in the downward direction but not waiting to break the most recent trough?

 

Gabe

[ziebarf 10]

Wouldn't it make for a better trade to enter at point A long which is a return to the prior ceiling (now potentially a base)?

In case of a short, once the impulse move down breaks support, how about waiting for price to come back up to the now resistance level and enter on a STOP in the downward direction but not waiting to break the most recent trough?

 

Gabe

 

I believe it is just personal preference how you enter the market. If you have faith in the trend and the prior price ceiling being able to support price, then buy the pullback. If you choose to trade a confirmation of a price pattern (ABC, Double Top, etc..) then have at it. In the past I have had trouble flip flopping between entry styles and it only has had an negative effect on my account balance.

 

The only issue I take with buying pullbacks/dips are how do you confirm they are finished? For me it makes entry/stop placement loose. Do I place entry to the tic of the price ceiling or to maybe a level of 50% retracement. On the upside, when you nail the entry, you can get by with a tiny stop which is always nice.

 

But on the subject which is a better trade, I feel its subjective depending on your preferred method of entry.

[Cory2679 11]

Continuing to track the EJ ...

 

I would have my eye out for a short at this point...

 

I marked some (not all) S/R levels.

 

We are currently at resistance, and the steep decline caught my eye. The "pattern" is not fully formed yet, so we'll see.

 

The higher resistance, thales's "PT," is obviously much stronger a level than the lower R level, but nevertheless, I'd still have my eye out for a short.

 

I could be totally wrong.

 

NOTE: I welcome any criticisms of my analysis. I feel like I'm probably doing someting "wrong" if I'm looking for a position against thales. :o But, I guess what could happen is that the "pattern" never completes and we hit new highs. At that point, I'd really be focused on what price was doing around that higher resistance level.

Edited December 22, 2009 by Cory2679
"note"

[RichardTodd 10]

Easier said than done working out what your doing wrong!

 

It's hard but definitely worth your while. You've posted some difficult days looking for advice, and didn't assign blame for your trouble anywhere, and didn't make knee-jerk alterations to your approach. For that, you have my respect (whatever that's worth :o) and in my view that puts you well or your way to success, even if it seems far away.

[thalestrader 14]

Wouldn't it make for a better trade to enter at point A long which is a return to the prior ceiling (now potentially a base)?

In case of a short, once the impulse move down breaks support, how about waiting for price to come back up to the now resistance level and enter on a STOP in the downward direction but not waiting to break the most recent trough?

 

Gabe

 

The way I trade, I would already have been long on the initial break when price retraced back to my entry, which you label point A. If I had missed the break out, I would perhaps consider buying there with a limit order. But, if I were already long, I'm not going to "double up" at break even.

 

Now, I do not have my charts open yet to show, but at point A on the 60 minute chart, if you were to change that to a 15 minute view, you will see, I beleieve, a 123 in the direction of the rally. Not as low an entry as buying at the previous BO loevel, but a more certain trade in that you should have a chance either to get out with a profit or at break even if price does not continue the rally. Buying right at a prior pullback level does not guarantee that you are indeed buying a pullback rather than getting suckered into buying into a new bear trend.

 

In the ned, Gabe, you can chose to trade anyway you wish. The way I do it works for me, and it may or may not work for you. As far as which is better, I prefer breakouts, whereas Wyckoff would think me foolish for trading them.

 

Best Wishes,

 

Thales

[thalestrader 14]

I really am trying to work out what im doing wrong. These trades are demo only trades while i practice and learn.

 

Easier said than done working out what your doing wrong!

 

It's hard but definitely worth your while. You've posted some difficult days looking for advice, and didn't assign blame for your trouble anywhere, and didn't make knee-jerk alterations to your approach. For that, you have my respect (whatever that's worth :o) and in my view that puts you well or your way to success, even if it seems far away.

 

 

I agree. Before participating here in the thread, Rustie had sent me several PM's, all of which show that he has both the confidence that he can do this but also the requisite self-acknowledged humility only the market can hand us.

 

I hope you continue to share with us Rustie. Even if you do not choose to trade the approach I have presented here, it likely will still prove helpful to you to put into words and communicate to others what your are thinking and how you are making your trading decisions. I know I have been helped immeasurably by the exercise of putting into words a (hopefully) clear account of how I read price action as I make my way through this thread.

 

And at least here, the only cost is your time and your trading losses (which youwould have anyway), rather than wasting more money paying for a mentor.

 

Best Wishes,

 

Thales

[Cory2679 11]

This is a good example of impulsive price action (the rally) versus corrective price action (where you se a potential 123). A short as you suggest may, if triggered, decline for nice profits. However, I would consider this to be a low probability short. I would add that I have been wrong many, many times..

 

You can see in this look at the EJ that price is stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes. At some point, price will produce a tradable retracement of the rally, but it is best to wait for an initial impulse down that cracks a base, then a reaction high, followed by an impulsive break to a lower low. Ideally, for a short, price will break to a new high and extend for a bit before basing again. That way, once a base for distribution forms, there will be room for price to run after a short entry and prior to reaching first support. Right now, these bases are forming a thick zone of support. A decline of any consequece will likely need to break through at least two of these levels to gain traction.

 

The first quote here is something that has been discussed more than once in the history of this thread. The second quote is something that is relatively fresh in my mind from reading Darvas and O'Neil a week or two ago.

 

However, when I made the post yesterday that resulted in the top quote, that concept had basically slipped my mind.

 

Also, as far as price "stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes"...this had also somewhat slipped my mind when I was looking at the chart.

 

I just had the realization that I can focus on a specific concept/pattern/whatever so narrowly, that other concepts I have learned slip my mind. I was so focused on what I saw as S/R or a H&L "pattern" that everything else had left my mind...I guess this is an example of the trees/forrest expression.

 

Anyways, I just had that realization so I thought I'd share it...hopefully now that I've come to realize it, I can work on preventing that sort of thing from happening again. I may even write it down.

 

-Cory

[thalestrader 14]

Hi Folks,

 

Current look at the EURUSD.

 

Best Wishes,

 

Thales

[Kiwi 16]

The first quote here is something that has been discussed more than once in the history of this thread. The second quote is something that is relatively fresh in my mind from reading Darvas and O'Neil a week or two ago.

 

However, when I made the post yesterday that resulted in the top quote, that concept had basically slipped my mind.

 

Also, as far as price "stair stepping high forming a succession of higher bases on bases (William O'Neil's term) or a series of Darvas Boxes"...this had also somewhat slipped my mind when I was looking at the chart.

 

I just had the realization that I can focus on a specific concept/pattern/whatever so narrowly, that other concepts I have learned slip my mind. I was so focused on what I saw as S/R or a H&L "pattern" that everything else had left my mind...I guess this is an example of the trees/forrest expression.

 

Anyways, I just had that realization so I thought I'd share it...hopefully now that I've come to realize it, I can work on preventing that sort of thing from happening again. I may even write it down.

 

-Cory

 

I'm not sure if you have run across this or not in the past.

 

One solution to this problem is to attempt to take the other side. If looking for a short attempt to build the case for a long. Because your mind is designed with a bias to confirm your current idea this is a useful step.

[thalestrader 14]

I'm not sure if you have run across this or not in the past.

 

One solution to this problem is to attempt to take the other side. If looking for a short attempt to build the case for a long. Because your mind is designed with a bias to confirm your current idea this is a useful step.

 

Great advice, Kiwi! I do this every day. I have found it especially valuable when I start to see and hear a lot of folks talking bullish and I am bullish too, or conversely everyone is talking bearish and I'm bearish as well. We are all probably wrong.

 

I think it was Bruce Kovner who said that his success in large measure is due to his ability to imagine configurations of the world vastly different than the current one. This is sort of like that, but on a very, very very .... very small scale.

[thalestrader 14]

Nothing to see here, folks, move along now, nothing to see ...

 

Best Wishes,

 

Thales

[DaKine 10]

Hi Thales,

 

Been lurking around this thread for awhile always good stuff. Thanks.

 

I simmed a short this morning morning based off the 123 pattern w/ targets near the LOD. Obviously this trade is going the other way now per your above post... Was this a valid short trade and if you were short the b/o to the upside I would assume would be a SAR trade...

 

Thanks

 

[thalestrader 14]

Nothing to see here, folks, move along now, nothing to see ...

 

And here I thought there wasn't anyone left to buy the darn thing ...

 

Best Wishes,

 

Thales

[thalestrader 14]

I simmed a short this morning morning based off the 123 pattern w/ targets near the LOD. Obviously this trade is going the other way now per your above post... Was this a valid short trade and if you were short the b/o to the upside I would assume would be a SAR trade...

 

Hi DaKine,

 

Nice to have you here!

 

I think your short was fine. The only difficulty would be that it triggered around 2:45 PM EST, and the US markets closed a little over an hour later. I do not like openeing new currency trades that late in the day, and usually by 4 PM EST, win or lose, I usually close the trade. Your target was fine. Price just didn't get there.

 

I would draw your attention to that large bar from the low reached during your short. I do not mean to emphasize a "bar." What I do wish to point out is that the decline was slow, choppy, overlapping, and uninspired. Then price jumped, quickly retracing from the low back to and above the short entry BO point. That is the move to look for after the NY close. Wait for price to start swinging, and then wait some more to see which way the swings will carry.

 

Thank you for sharing your trade. I hope you continue to share with us here.

 

Best Wishes,

 

Thales

[DaKine 10]

I would draw your attention to that large bar from the low reached during your short. I do not mean to emphasize a "bar." What I do wish to point out is that the decline was slow, choppy, overlapping, and uninspired. Then price jumped, quickly retracing from the low back to and above the short entry BO point. That is the move to look for after the NY close. Wait for price to start swinging, and then wait some more to see which way the swings will carry.

 

Thanks Thales for your input...

 

The 6e didnt follow the EURUSD move down just stayed in a congestion area, do you often notice that disconnect? The b/o of the congestion area on the 6e without price coming alive as the EURUSD did is still valid to you?

 

Are there any other times you do not like to initiate trades? I have been staying up and trading the London open I am assuming London open to NY close would be ok?

 

Thanks.

 

[thalestrader 14]

Thanks Thales for your input...

 

The 6e didnt follow the EURUSD move down just stayed in a congestion area, do you often notice that disconnect? The b/o of the congestion area on the 6e without price coming alive as the EURUSD did is still valid to you?

 

Are there any other times you do not like to initiate trades? I have been staying up and trading the London open I am assuming London open to NY close would be ok?

 

Thanks.

 

The 6E was not trading during the hour that the EURUSD moved down. I always watch the spot when trading the futures, and I think it is very important to see what the spot does while the futures are closed.

 

I do not like trading between the NY close and the Tokyo open. The other 20-21 hours are fair game if I am awake and watching.

 

Best Wishes,

 

Thales

[Cory2679 11]

I'm not sure if you have run across this or not in the past.

 

One solution to this problem is to attempt to take the other side. If looking for a short attempt to build the case for a long. Because your mind is designed with a bias to confirm your current idea this is a useful step.

 

Thanks, Kiwi! I like that a lot! Very helpful.

 

-Cory