Reading Charts in Real Time

[Gabe2004 10]

Does that help at all, Gabe?

 

Yes it does. Thank you.

 

I don't know why with regards to trading I lack the clarity that I want to achieve.

 

Years ago when I used to design electronic circuit it was as if I was given a canvas and the pictures just kept floowing from my brain to the canvas> I remember that I could come up with many different designs acomplishing the same task and it was fun. I was creating. It was not a struggle to create but a struggle to contain myself and the fsweet feeling when the circuit worked as planned and at the same time the sorrow that the project has ended.

 

With trading i feel that I am REALLY CLOSE yet not close enough and I draw nalnks like with the case of the biases of not understanding what is meant by them and asking for clarification.

 

Not that I am ashamed of asking questions. It's just that it is frustrating not to understand things that seem trivial to others.

 

I am still in a FOG but I hope that it will lift soon because I don't like the alternative.

 

Gabe

[Kiwi 16]

I see that you guys are letting down the Consumer Society and typing instead of spending at Boxing Day Sales.

 

Good choice.

 

 

My 2c.

 

1. Bias is bad when unconscious (although the dictionary version seems bad always). But I also had used it in the form "Price is above X so the bias for the day is UP" which I don't think is bad.

2. Paper trading is good because it lets you work on the mechanics, prove the strategy, find out what does or doesn't work with no cost except time. It enables you to deal with a bunch of things. What it can't do is confirm that you will get fills at those prices (if close) and it can't let you experience winning and losing real money. BUT, the difference between the two can give you something very solid to work on.

 

so

 

3. Paper trading excites fewer biases than Trading, lets you prove a large number of elements of your strategy, and gives you something to work with when your actual and paper trading results diverge.

Edited December 26, 2009 by Kiwi
added 2c

[thalestrader 14]

I don't know why with regards to trading I lack the clarity that I want to achieve.

 

Years ago when I used to design electronic circuit it was as if I was given a canvas and the pictures just kept flowing from my brain to the canvas> I remember that I could come up with many different designs accomplishing the same task and it was fun. I was creating. It was not a struggle to create but a struggle to contain myself and the fsweet feeling when the circuit worked as planned and at the same time the sorrow that the project has ended.

 

With trading i feel that I am REALLY CLOSE yet not close enough and I draw blanks like with the case of the biases of not understanding what is meant by them and asking for clarification.

 

Not that I am ashamed of asking questions. It's just that it is frustrating not to understand things that seem trivial to others.

 

I am still in a FOG but I hope that it will lift soon because I don't like the alternative.

 

Gabe

 

By "trivial," I presume you mean "easy." None of this is easy, though it is all simple. There is a tendency (bias) towards thinking that trading should be easy. It is not. We all know the old saying that if making money was this easy, everybody would be doing it.

 

That is likely true.

 

Witness the near mania of the internet bubble, when even my grandmother (My grandmother!) was day trading Yahoo and Qualcom! Jeesh! I'm not kidding. She was 74 years old and dieing of pancreatic cancer and managed to make more money the last three months of her life than she and my grandfather had made during any single decade of their working lives combined! I was with CIBC Oppenheimer at the time, and I have to laugh out loud when I recall my grandmother telling me how smart she thought I was to have picked such an "easy" way to make money for a living!

 

Now, let me ask you this, Gabe: How long did you study and what was your preparation prior to being hired to design electronic circuits? I'm sure it involved a non-trivial level of study.

 

Let me then ask you this: What was your risk in any given design task? Really? Perhaps you could really screw things up and get fired. But another job would likely have been waiting in the wings for you. But what was your real conscious risk? Was there any? Not likely.

 

You have settled on learning to do something that is not easy and carries with it a very real, very palpable financial risk every day.

 

So you are finding this difficult. Join the club, my friend. Why should what others have chased for years, often never achieving before failure set in, come easily to you?

 

Keep working, keep studying, keep practicing, and eventually, you will get it or you will give up.

 

I should have given up long before I finally got it. But I didn't. I risked everything I had before finding my way. Stupid? Yes. Reckless? Yes. Worth it? By the grace of God, and only by His grace, yes.

 

I'f you want to make it as a trader, be the frog ...

 

 

 

Best Wishes,

 

Thales

[Gabe2004 10]

By "trivial," I presume you mean "easy." None of this is easy, though it is all simple. There is a tendency (bias) towards thinking that trading should be easy. It is not. We all know the old saying that if making money was this easy, everybody would be doing it.

 

That is likely true.

By TRIVIAL I was not refering to trading as easy but to some ideas like the BIAS idea that I had a difficulty understanding.

 

Now, let me ask you this, Gabe: How long did you study and what was your preparation prior to being hired to design electronic circuits? I'm sure it involved a non-trivial level of study.

 

I went to technical school for 2 years and became an electronic technologist after working for a little less than a year I entered university and got my EEng degree in 3&1/2 years.

 

Let me then ask you this: What was your risk in any given design task? Really? Perhaps you could really screw things up and get fired. But another job would likely have been waiting in the wings for you. But what was your real conscious risk? Was there any? Not likely.

 

Sure there was. My honor. If the circuit did not work and if I could not find why, management would have called upon another engineer to solve the problem and I never let that happen.

 

You have settled on learning to do something that is not easy and carries with it a very real, very palpable financial risk every day.

 

So you are finding this difficult. Join the club, my friend. Why should what others have chased for years, often never achieving before failure set in, come easily to you?

 

Keep working, keep studying, keep practicing, and eventually, you will get it or you will give up.

 

I should have given up long before I finally got it. But I didn't. I risked everything I had before finding my way. Stupid? Yes. Reckless? Yes. Worth it? By the grace of God, and only by His grace, yes.

 

I'f you want to make it as a trader, be the frog ...

 

I think my point on the BIAS issue and my subsequant response was misinterpreted.

 

I am fully aware that to master trading will take time and I am not upset that it takes me as long as it takes because to be realistic if i add up all the time that I have spent on this in a deliberate way I don't think that I have more than 4,000 (4K) hours under my belt. Give or take.

To become an engineer took me about 5,600 hours and another 4,000 to have a project fully on my own.

I have discussed the timing issue with some people and everyone confirmed the 10,000(10K) hour theory (it takes about 10,000 hours to become a master of most any profession)

So I am less than half way there.

That was not the issue. Again. My frustration was about understanding some terminology. In this case - the word BIAS - and its application to trading.

 

Gabe

 

PS just as a reminder relating to the caption in the frog and the stork pic, please look what is written under my name next to my avatar. .

[patrader 10]

"The mistake is not being wrong,the mistake is staying wrong" from first page of chapter 6 in the john hill pdf.The longer a trader stays wrong the bigger the bias.When trading with little or no bias a trader quickly learns to stay on the correct side of the market in order to stay profitable.

Edited December 27, 2009 by patrader

[Cory2679 11]

.........Our little account now has almost 1000 times the capital she had in the beginning.........

 

Thanks for the info. Wow, that's unbelievable! About a 100,000% return in approx. 7 months!! :shocked:

 

And that would just be "cash-on-cash" basis. I just wonder what the return would be, normalized for withdrawals! ...it appears that you guys withdrew about 80% of the $1K (and of course possibly more later on that I don't know about):

 

If I were to train a new trader, I would do it very much as I taught my daughter.........

 

.........She managed to run her first live account from $25 to just under $1K in about three months. She and I are trading a second live account together. We started it with less that $200 about a month ago, and as of today we are sitting on $1210 closed trade equity.........

 

Your daughter's story is honestly a large part of why I took this thread/concept so seriously once introduced to it...and why I've tried my best to do it "right."

 

Hopefully my story will eventually have such a glorious outcome as well. :o We'll begin to find out fairly soon...

 

-Cory

[Cory2679 11]

This is really my last post this week! You won't here from me again 'til Monday!

 

Woops....I lied....

[Tonkadad 10]

I think bias in and of itself is not a bad thing. A bias (IMO) can be a tendency, expectation, assumption for a particular outcome or event to happen based on a triggering thought, idea or event.

 

I think a bias in regards to the trading can be a problem if it filters out information that would otherwise be available to us to effectively execute our trading plan.

 

A thought just came to me regarding bias, imagine it like this, an oscillating study with a zero line, when our thoughts/expectations (which would be the actual study line) are close to the zero line (neutral), we are in the best state of mind to respond/react/interpret market data as it comes in.

 

When we have strong biases i.e. thoughts/expectations (study line farther away from zero) than we distort/eliminate/ignore data that is conflicting with our bias.

 

The goal is to keep our biases as close to the zero line as possible, which allows us to react in our best interest.

 

The above is my interpretation of some of Mark Douglas's idea's from his book "Trading in the Zone"

[thalestrader 14]

You might the attached article to be of some interest when considering this subject. I wouldn't let myself get caught up in calculations of % returns, roi, etc.

 

Thanks for the info. Wow, that's unbelievable! About a 100,000% return in approx. 7 months!!

 

I posted abut this subject elsewhere at TL in the past:

 

I think the best way to organize your thoughts so that this question no longer affects you is to understand the difference between trading profits and ROI, between trading capital with leverage and investments made using savings deposited into a brokerage account. Don Bright of Bright Trading explained it this way:

 

"We don't really think of trading profits as "ROI." Or even in terms of return at all.

 

For example, our people might put up $20K, and make $5k per week...but they are using our capital to trade with. We consider the money that is being used as simply another tool, just like a computer or trading method. An investor looks for ROI.

 

FWIW,

 

Don"

 

Traders trade for profits, while investors seek ROI. I have a colleague who starts each month with a balance in his futures account that most would find a ridiculously small capital with which to trade, let alone to trade for all of one's livlihood. He trades only the TF (formerly the ER2) He routinely nets two - three times his starting capital in the form of profits month after month. He never thinks in terms of having made a 200-300% return in a month. He simply knows he needs X thousand dollars in order to trade his way, and that is what he does. On the last day of the month, he draws out his profits for the month, and leaves his small starting capital to do it all over again.

 

Now, as to the question as to when a new trader can expect to be breakeven or profitable, well, that depends entirely on that trader's psyche. In the end, the only thing standing between any trader and either incredible income and wealth generation or terrible financial ruin is whether he or she is able to cut losers quickly while not cutting profits short too. If you can master your emotions, the rest if a piece of cake. Some may be successful right away. Others may forever be net losers. Near the beginning of Wyckoff's Studies in Tape Reading, he compares two traders, both of whom started out together in the same brokerage office watching the same ticker machine trading 10 share lots. Years later, one of these traders was still trading 10 lots while the other, in addition to having amassed a great fortune, was now trading an account equity of 100K. Some have it, and others never will.

 

So, in regard to the first question, think profits not ROI. You are a trader, not a money manager. If you understand yourself as seeking "a reasonable return on investment," you will never achieve what it is possible to achieve as a trader. Such thinking will limit you. It will leave you susceptible to others limiting you.

 

The answer to the second question is going to be unique to each individual, and can range on a scale of immediately profitable to perpetually unprofitable.

 

 

 

Best Wishes,

 

Thales

Trading for Infinite Yield.pdf

[thalestrader 14]

Hi Folks,

 

We'll not be trading 'til after the New Year, but someone is out there trading.

 

Here is the current EURJPY. If I were a betting man, and I were inclined to bet, I'd be looking for the EJ to continue toward 132.50 and possibly higher. But for now, I'm content to watch football and plan for next year.

 

The more I look at this, the more it looks to me as though EURJPY should breakout to that 132.50 level, at which point I would not be surprised to see price retrace 1/3-2/3 of last week's rally. That is just the way it looks to me, and I have been wrong a bunch of times, and I am not trying to predict, nor even anticipate that any of this will happen. I'm just looking at it and writing out what I see at the moment.

 

Best Wishes,

 

Thales

[Cory2679 11]

The more I look at this, the more it looks to me as though EURJPY should breakout to that 132.50 level, at which point I would not be surprised to see price retrace 1/3-2/3 of last week's rally.

 

Hi Thales,

 

If you aren't too busy , would you mind elaborating on why you think this?

 

I'm not disagreeing by any means. I realize these are just your thoughts, that you could be wrong, and that you would wait to see what price indicated before you'd enter a short position, but I was just curious about your thought process and how you arrived at that conclusion.

 

I see why you've chosen the "green line" levels. But honestly, at this point in my development, I would simply have to wait until price got there and see what it did...I couldn't say that I thought it would trade to 132.50, then retrace 1/3-2/3...

 

Thanks,

 

Cory

[thalestrader 14]

If you aren't too busy , would you mind elaborating on why you think this?

 

I'm gnawing my fingers off watching the Eagles try to cough up this game to the Broncos. Why don't you take a crack at it, and then I'll give yo my answer a little later.

 

Best Wishes,

 

Thales

 

EDIT: Eagles won ... take a look at the chart now that I have taken some of the lines off.

[thalestrader 14]

If you aren't too busy , would you mind elaborating on why you think this?

 

 

Why don't you take a crack at it, and then I'll give you my answer a little later.

 

Well, I'll see if anyone wants to take a crack at it overnight and I'll answer in the orning.

 

Here is how it loks to me. Again, this is all "thought experiments" at this point and these charts do not represent actual trades/orders on our part.

 

Best Wishes,

 

Thales

[Cory2679 11]

Well, I'll see if anyone wants to take a crack at it overnight and I'll answer in the orning.

Sorry Thales, after I posted my post, I got off the computer and am just getting back on now...I wasn't ignoring you.

 

I'll take a crack at it and post something tonight...but let me make clear...

 

I understand this:

Here is the current EURJPY. If I were a betting man, and I were inclined to bet, I'd be looking for the EJ to continue toward 132.50 and possibly higher. But for now, I'm content to watch football and plan for next year.

What I didn't understand was this:

The more I look at this, the more it looks to me as though EURJPY should breakout to that 132.50 level, at which point I would not be surprised to see price retrace 1/3-2/3 of last week's rally. That is just the way it looks to me, and I have been wrong a bunch of times, and I am not trying to predict, nor even anticipate that any of this will happen. I'm just looking at it and writing out what I see at the moment.

I can definitley see why someone would anticipate price climbing to at least 132.50, and possibly higher (the 134.50-60 range).

 

What I was curious about is why you thought at 132.50, price would likely retrace 1/3 to 2/3 of the prior upmove...rather than continue to climb to 134.50-60 uninterrupted (EDIT: which on your charts appears to be the "plan")

 

I have a few initial thoughts...the only thing that comes to mind right now is that IF price did reverse at the 132.50 level, price would likely find support at such and such levels of support (which might happen to be at 1/3 or 2/3 of the prior upmove). But that's IF...why do you think that price will reverse at 132.50 rather than continue to 134.50? Do you believe that resistance is particularly strong? Maybe you believe that it is "due" for a pullback, and you believe that's a good area of resistance for one to occur (I don't think this sounds like you, but I could be wrong)? And IF it reverses, what makes you think it won't retrace 100% of the upmove?

 

For me, it seems, I basically can't see/think that far ahead....I just have to wait to see what price does at those levels.

 

If I think of something in addition to what I've said, I'll post it a little later tonight.

 

-Cory

 

EDIT2: OR...possibly I read too much into it...you said you "wouldn't be surprised" if it did that...maybe just a general statement because the market had climbed so far fairly sharply...maybe 1/3-2/3 wasn't based on S/R at all....it is probably worth noting that the prior sharp downtrend did indeed retrace about 1/3 or so...(or maybe a little bit more)

 

EDIT3: Another thing I've noticed...the swings have gotten wider really recently...possibly weakness in the trend?...possibly indicating that price may reverse...at the next closest level of resistance (132.50)??

Edited December 28, 2009 by Cory2679
EDIT & grammer

[daedalus 10]

Well, I'll see if anyone wants to take a crack at it overnight and I'll answer in the orning.

 

I think you are on the right track Cory.

 

My interpretation is this.

 

Prior S/R acts not only as an area on the chart where price can reverse, but more importantly it acts as an area on the chart where price is drawn to. Prior S/R is nothing more than a magnet, i.e. the reason when it continuing up to the first real zone is expected - price is drawn to it fundamentally.

 

As far as the retracement comment, I can only surmise this: As we know yes price can be attracted to Prior S/R area, but the other part of that statement was that those areas are typically where price can reverse. When I look at that chart I see a MASSIVE sustained upmove with minimal retracements at best.

 

To me, the most PROBABLE thing would be to expect a reaction at the first S/R area and due to the underlying nature of the move (hugely overextended and straight line) that a heavy retracement would be probable before seeking out those even further Prior S/R areas.

 

However, i'm just little ole' me, and this is just my opinion.

 

Cheers!

[Marko23 10]

...

What I was curious about is why you thought at 132.50, price would likely retrace 1/3 to 2/3 of the prior upmove...rather than continue to climb to 134.50-60 uninterrupted (EDIT: which on your charts appears to be the "plan")...

 

If a climb to 134.50-60 is the "plan" then this move will probably not be a straight line. Price moves are normally "broken" into fractals, so one can assume a movement in three or five segments.

 

The second of these segments will retrace the first. The "plan" remains valid as long as the retracement is smaller than about 2/3 of the first segment. The "2/3" is a common guess: fibs guess 61.8%, Gann guesses 62.5%, speedlines guess 66% and you can find additional theories for this situation.

Edited December 28, 2009 by Marko23

[ziebarf 10]

Little trade on the EJ. Hoping for a break on EJ and EU

[thalestrader 14]

If a climb to 134.50-60 is the "plan" then this move will probably not be a straight line. Price moves are normally "broken" into fractals, so one can assume a movement in three or five segments.

 

The second of these segments will retrace the first. The "plan" remains valid as long as the retracement is smaller than about 2/3 of the first segment. The "2/3" is a common guess: fibs guess 61.8%, Gann guesses 62.5%, speedlines guess 66% and you can find additional theories for this situation.

 

I'd only add that 132.35-132.85 was the breakdown zone off of the last important high, and therefore, as Cory noted, I wouldn't be "surprised" should price find resistance enough there to cause a tradable decline against this rally. Would I be surprised if price blew through those levels and challenged the 134.50 level? No. In this age of endless rallies, shallow pullbacks, etc., nothing surprises me. I also would not be surprised to see the currencies trade in a very, very narrow range between now and sometime next week. For example, it would not surprise me if the EURJPY makes no further headway toward the 132.50 level while managing to hold above recent near term support levels.

 

This is not a week to put much faith in your technical trading. Technical analysis requires liquid markets, and this is not a week known for great participation. In other words, do not be surprised if breakouts fizzle, continuation patterns reverse, etc. This is a good week to take off. If you are like me and you just can't pull yourself away completely, then at least hide the keys to your trading platform. If you have a paper trading or demo account, this would be an excellent time to play in it.

 

Best Wishes,

 

Thales

Edited December 28, 2009 by thalestrader

[ziebarf 10]

I guess I will keep playing

 

EU potential short. +5 on the last trade. We are around short term resistance. Although this wasn't the best test of that R (a few ticks off)... If price breaks it would also be a TL break, which maybe would add some umph to the breakout? Or is that logic completely ridiculous?

[Marko23 10]

Another small move up to resistance is more probable in my opinion.

[Cory2679 11]

I guess I will keep playing

 

EU potential short. +5 on the last trade. We are around short term resistance. Although this wasn't the best test of that R (a few ticks off)... If price breaks it would also be a TL break, which maybe would add some umph to the breakout? Or is that logic completely ridiculous?

 

Makes sense to me. I would add that it's not just short term resistance, I'd say it's a longer term resistance "zone"...check out my charts...BUT, I "wouldn't be surprised ;)" if price blasts through that level of resistance....price could be basing and climbing higher.

 

On the 4 hour chart, you can see where the level of resistance has been significant before, and you can also see that there's a strong downtrend.

 

-Cory

Edited December 28, 2009 by Cory2679
Added Chart #3

[ziebarf 10]

Another small move up to resistance is more probable in my opinion.

 

I would tend to agree. If price makes another Higher low, I will cut the order.

 

Good eye Cory, perhaps the trend will continue. In my case, I hope so.

[thalestrader 14]

I guess I will keep playing

 

EU potential short. +5 on the last trade. We are around short term resistance. Although this wasn't the best test of that R (a few ticks off)... If price breaks it would also be a TL break, which maybe would add some umph to the breakout? Or is that logic completely ridiculous?

 

I think a case could be made for this (paper)trade. I would caution against putting too much stock in TL breaks of the type you have drawn. If you were to start tracking such things, I think you will find that breaks of prior swing points preceded by the proper sequence (H-L-LH) will be more reliable. In the absence of the proper sequence, a TL break is nothing more than a warning shot of a potential for trend change, but is itself not a change of trend. Often, the sequence completes after the trend line break with a test of the trendline as S/R followed by a Lower Low or a Higher High.

 

Best Wishes,

 

Thales

[thalestrader 14]

On the 4 hour chart, you can see where the level of resistance has been significant before, and you can also see that there's a strong downtrend.

 

You can see how price is trading between the resistance level you note at the highs, and the break down point for the short entry, which near term as been acting as S/R.

 

Best Wishes,

 

Thales

[Cory2679 11]

IIn the absence of the proper sequence, a TL break is nothing more than a warning shot of a potential for trend change, but is itself not a change of trend. Often, the sequence completes after the trend line break with a test of the trendline as S/R followed by a Lower Low or a Higher High.

 

I think the trendline "fan" would be a good example of this. I've attached a picture found online, but just imagine it long if you want.

 

I think the "rule" is that price usually reverses on the break of the 3rd trendline, but that's not what I think is relevant to this discussion.

 

EDIT: I don't think that is a very good picture because it does appear that price reversed at the break of the first TL, which doesn't make my point. Imagine price went further down the trendlines and continued to make LL's and LH's...just less and less steep as brice breaks the trendlines.

 

EDIT2: I found a better chart...

Edited December 28, 2009 by Cory2679
EDIT's + chart #2