Reading Charts in Real Time

[Cory2679 11]

 

Multifunctional clock for the trader, all time zones, different design and sizes of hours, a lot of settings. If you are a trader, then this watch for you.

 

Download clock

 

I am a Russian trader

 

That's odd...this post seemed to just wedge itself into this thread with a timestamp much earlier than when it actually posted...

 

Great post, though.

[Marko23 10]

Could become a EUR/USD double bottom in 1H chart.

 

ADD: the fibs have it in 15m, but price decides everything.

[Marko23 10]

EUR/USD support broken, Short, Stop at break/even

Edited January 15, 2010 by Marko23

[BlowFish 10]

Hello,

 

As an aside I also look for these reversal patterns at HOD's and LOD's as that seems to be quite good context as well. Does anyone else find the same thing?

 

 

BrownsFan is another I think who would agree. I don't think he has written specifically about his approach here but last time (a while ago now admittedly) I chatted with him about it (in the TL chat room) he said that he looks for changes in sentiment (as evidenced by candle paterns) at the HoD or LoD.

[BlowFish 10]

That's too much back and forth now, and if it going lower, it will have either to go higher first, or go lower without me.

 

Best Wishes,

 

Thales

 

Intresting comparing how this 6b set up with the previous 6e trade that we discussed (that chart shows how the trade panned out). PA is similar with subtle differences. There is a lesson in there I suspect

[Marko23 10]

...

Here's the thing. The backtesting is actually right.

...

 

You may be right, but it is not for me. I have some limitations with non-technical English, so my comments may sometimes sound rude. This is not my intention.

 

I began trading to find out, whether more than 30 years of software development (quite successful) could give me an edge in trading. I still love programming! But to become a good trader, I had to brainwash myself completely. My experience in programming was more an obstacle than help.

 

Mark Douglas' Zone book has many good reasons, why a market cannot be controlled.

 

HFT is another matter, but I have no resources to do that.

[BlowFish 10]

For those that don't have Trader Vic and to save googling here is the setup.

 

Note: as is sometimes the case on the interwebz all the stuff seems to be based on one source (you can tell by the distinctive charts). My hunch is that it was Dave Shedd of Dacharts that originally posted it when he was working on the mechanical system 'retro trader' in the late 90's (from memory). Anyway I am always a little suspicious when people simply quote others as if there is an error in the original transcription it simply gets repeated and sometimes compounded (Chinese Wispers or telephone as I think it is known as in the US). Any way on to the definition.

 

Trader Vic 123

 

1. The trendline is penetrated

2. There is a lower high in an up trend, or a higher low in a down trend.

3. There is a break below the previous low in an up trend, or above the previous high in a down trend.

[Marko23 10]

EUR/USD Short stopped at break even.

[BlowFish 10]

I almost got completely carried away with the virtual crayons making up waves way into the future. If price made it to the magenta line you might anticipate a couple of outcomes small reaction and break down or bounce. I don't look for patterns beyond general swing types but this looks a bit head and shoulders like (H&S is bordering on 'esoteric' in my book). It looks 'toppy' in any case.

 

I seem to have sidesteped your question. While the second reaction has much more conviction than the first I would still label it a correction at this point in time. Thrust? (labeled on the chart) was a poorly chosen word (not something I have defined and not one that TT uses). Too lazy to re edit it. That particular bar does have more conviction by the bears.

 

As an aside these are exactly the sort of ABC corrections that I was referring to a few posts back that can be considered failed JR 123's.

 

Final thing I am not an elliotician so from that point of view my ABC's probably are in the wrong place. I do look at simple 3 legged swings with out the massive (quirky) Elliot framework.

[rigel 10]

thalestrader, received this from a colleague, any views on this pair EUR/AUD

 

"The EUR/AUD is an important forex cross in the realm of risk appetite/aversion. The Aussie's high yield and aggressively growing commodity-linked economy offers a nice play for emerging market risk chasers, while the Euro's liquidity make it a relative safe haven (though in the longer term, the irony is that global competitive debasement will lend commodity-linked currencies more bullish credence than the Euro's Eastern Europe-linked toilet paper).

 

During the liquidity crunch of fall 2008, the EUR/AUD surged from the 1.6000s to the 2.1000s and during the QE liquidity-fueled risk asset rally from March 2009, the cross tanked back.

 

It is now sitting at summer 2007 levels, at multi-year support around 1.55, well below pre-Lehman levels. Meanwhile, the descending channel that has defined its descent since spring of last year is growing tired, and a reversal centered around 1.55 support may be at hand. Some consolidation around this area with an eventual breakout through the descending channel trendline may confirm a reversal at hand.

 

And such a reversal would indicate a return to a rush to liquidity, long overdue yet delayed by various black hole-engendering liquidity infusions from central banks.

 

This is an important cross to watch, especially in the context of the carry trade-fueled risk asset bubble that exists today, and a reversal could indicate a sharp mean reversion back to reality.

 

I personally was short the EUR/AUD from around 1.97 from the symmetrical triangle breakdown and had covered most of my position (admittedly prematurely) by around 1.87 when the cross hit its 200DMA. My entire position was fully covered at around 1.60 and I am looking to get long once the charts confirm a reversal at hand. This will also be an important indicator for my short triggers in other risk assets, including equities.

[MidKnight 12]

Every trend change starts with one.

 

I need to run out to do some errands, but later on, I will post several 'trend' changes that do not start with a 123 reversal, when measuring trend as per PA and comparing across the same degree.

 

Here are just a couple chosen at random. Now one might say but if one went down to a lower TF there was probably a 123. While that may be true on virtually any 123, even if one had to go down to the tick level, I don't see how that thinking is practical and could easily steer most traders to overly focusing on the micro 123s, which IMHO will lead to overtrading, frustration and probably net loser overall. It's not much different than me saying every reversal is proceeded by a bar break. It's true, but is it practical and easily applied profitably? (non-rhetorical). However, I do wish every reversal was a 123 that I could recognize as opportunity

 

With kind regards,

MK

[BlowFish 10]

You may be right, but it is not for me. I have some limitations with non-technical English, so my comments may sometimes sound rude. This is not my intention.

 

I began trading to find out, whether more than 30 years of software development (quite successful) could give me an edge in trading. I still love programming! But to become a good trader, I had to brainwash myself completely. My experience in programming was more an obstacle than help.

 

Mark Douglas' Zone book has many good reasons, why a market cannot be controlled.

 

HFT is another matter, but I have no resources to do that.

 

I sometimes discuss (ok argue) a bit aggressively and that might sound confrontational . Anyway I hope it came across that I was challenging your idea about back testing and not challenging you . I apologise if that was not clear.

 

BTW I too started professional life as a software engineer (after a brief dable in electronics). It is a curse for trading but at least there are a couple of skills that are useful.

 

When I need a programming fix I write something in easy language or for Ninja. Some would say that is not 'real' programming (I used to write PDP assembler) but it satisfies my craving.

[Marko23 10]

EUR/USD in 15m and 3m chart.

 

Short in 3m chart

[Marko23 10]

...

Anyway I hope it came across that I was challenging your idea about back testing and not challenging you . I apologise if that was not clear.

...

 

That was quite clear. Thanks for your clarification.

PDP-8e with DECtape&TTY was my first hw, when I was 14.

[Marko23 10]

EUR/USD in 15m and 3m chart.

 

Short in 3m chart

 

Another 3-day low, but the Short signal was only visible in the 3m chart and I decided to trade the 15m-chart for this training period.

[thalestrader 14]

Hi Folks,

 

here is an interesting (though Blowfish would likely say esoteric) little pattern that I see often in the currencies and also gold. Price makes a large move down, then a choppy little rally, followed by another leg down. At this point, it looks like a potential ABC. However, typically, one expects A=C, but in this case, C has extended further from the B top than A had from its top. What I have noticed is that if your draw a trendline beneath the B swing lows, and measure from the trendline break, a good measured move target can be found. In other words C as measured from the trendline break = A. This is not predictive, and it does not always hold (if this decline is the real deal, then a test of the nearly year old range may be in order, measured moves be darned) If I were still short, this would offer me a possible profit target. I would also be interested if a 123 develops near the level of the green horizontal line. The Blue lines are equal, and measure the extent of the first leg down (A swing). The back line is a simple trendline drawn along the bottom of the reaction rally (B swing). The second blue line is equal to the first, and measures downward from the black trendline break.

 

 

If nothing else, if gives me something to watch while waiting for an opportunity. An actual A=C measured move would have occurred had a sustained rally embarked from the penultimate low visible in this chart. Price does appear to be possibly etching out a small ending diagonal as well. Of course, small diagonals sometimes grow quite large. No need to jump the gun, as the next opportunity is never far away.

 

 

Best Wishes,

 

Thales

[thalestrader 14]

I added two sets of thin black trendlines to mark off the manner in which this decline, though of sizable extent, is not packing the same momentum as its sister did yesterday. The solid lines show a larger movement with declining momentum, and the dotted lines show further loss of momentum the further price travels. None of which is to say that it may not catch a second wind and collapse still further, but for now, this down leg has been less robust than the initial leg down, and a decent reaction rally or even outright reversal may be immanent.

 

 

Best Wishes,

 

Thales

[Marko23 10]

 

ADD: may become a 2b

 

ADD: 3m timescale

Edited January 15, 2010 by Marko23

[thalestrader 14]

Current view of the EURJPY ...

 

Best Wishes,

 

Thales

[thalestrader 14]

Pound hanging tough while the Euro is getting pounded ...

 

Best WIshes,

 

Thales

[Marko23 10]

EUR/USD waiting for 3

 

ADD: Reset

Edited January 15, 2010 by Marko23

[thalestrader 14]

This may be the most important post I have made in this thread from a technical perspective.

 

Here are just a couple chosen at random. Now one might say but if one went down to a lower TF there was probably a 123. While that may be true on virtually any 123, even if one had to go down to the tick level, I don't see how that thinking is practical and could easily steer most traders to overly focusing on the micro 123s, which IMHO will lead to overtrading, frustration and probably net loser overall. It's not much different than me saying every reversal is proceeded by a bar break. It's true, but is it practical and easily applied profitably? (non-rhetorical). However, I do wish every reversal was a 123 that I could recognize as opportunity

 

As you are disputing of my assertion that all trend changes start with a 123, let me repeat the entire context of that assertion before we proceed to examine it further:

 

I do not see how this approach cannot provide an edge. Certainly, context will sharpen the edge. But even on its own, so long as it is uniformly applied as respect to the degree of the swings, how can it not provide an edge? Every trend change starts with one.

 

Let us keep at the forefront of our minds the notion that like swings must be analyzed with like swings. The degree of swing must not be left out of the mix.

 

I am starting with your second chart (it just worked out that way).

 

Here is the second chart as you posted it:

 

 

And here is what I see:

 

 

In this chart, I see two clear 123 short entries. The first would have made it to both targets, while the second larger degree would have made 50% PT1 with a BE stop (actually a stop on reverse to long at about the level of the long dotted magenta line).

 

Blue line entry, red line stop loss, move to BE at the magenta lines (1.27 extension) and take profits at the green lines (1.618 and 2.618 for the first example and the 1.618 and a stop and reverse at approx. the 1.27 in the second).

 

Also, for what it is worth, you do not need a smaller time frame to see the initial 123 off of the top - Just use what you know about how candlesticks are constructed and you will find a 123 there. I do not mean to imply that I would have traded that little top, and I am certainly not going to recommend anyone else here tries it either, especially if he or she is new to this type of trading. But it is there, nonetheless.

 

Now, here is your first chart as you posted it:

 

 

And here is what I see:

 

 

I think you'd agree that without dropping to a lower time frame, there are two visible 123s of like degree shown at the double tops in this chart. The first would have resulted in a break even effort, the second would have traveled to both PT's. If you go back through this thread, I used to post trades like these often. I take them every day (well, every day that such an opportunity presents itself). I no longer post them as I do think that many folks here appreciate the necessity of uniformly applying this approach to swings of like degree. So I try to post only those opportunities that are at least a degree or more larger than these. For example, I also see on your first chart this larger short opportunity, which also traveled to both TP's:

 

 

Now, here is your final example:

 

 

And here is how I see it:

 

 

A break even effort, but an opportunity nonetheless. In this case, I miss out on PT1 and PT2 due to my MM guidelines. But, I also see this opportunity:

 

 

In this case, a larger degree long entry presented itself, and within that larger trend, a smaller degree 123 gave an early entry opportunity for the aggressive trader, and both of these degrees are larger than the degree shown at the very initial change from down to up.

 

Every single trend change of every degree exhibits this pattern. It does so by the very definition of a "trend." An up trend is a series of higher highs and higher lows. There cannot be a series without a first instance. A down trend is a series of lower lows and lower highs. There cannot be a series without a first instance. Unlike others who assert that volume, rate of change, venus, mars, or mercury leads price, I have always here looked to nothing other than that which is contained within itself: Price itself.

 

I read an article in SFO this month where the author uses, of all things, the example of Plato's Cave, and he asks if price is not the shadowy false images on the walls and reality is some larger thing called trend? He asks "[c]ould price be the illusion and some force of nature we call "trend" be reality?" He misses the point that price and trend are inseparable! He commits the same error most, perhaps, 95% of all folks commit who attempt to trade: He tries to reduce price further than it can be reduced. And price, like people, cannot be reduced without distortion and damage. Trend and price are one. You cannot cleave the body from the soul and still have a living, breathing human being. You would be left with nothing other than a dead shell. And what can that dead shell tell you of the loves and hates and dreams of the man or woman who had animated it? Nothing at all.

 

Likewise, you cannot cleave trend from price. And if you cannot cleave trend from price, you cannot disregard that trend exists at all levels, diffuse through price action. When I hear someone say "I could have seen it if I had dropped down to a lower time frame, I know that that person has not yet grasped price movement. He is watching bars or candles, not price. I have said many times that I do not need a 1 minute chart to see a small degree 123 so long as I am watching price live. I do not even need a chart. I just need the DOM. If you remove considerations of trend, which by necessity includes considerations of the degree of trend from price itself, what can price tell you of what it is doing and where it is going? Nothing at all.

 

Price is its own leading indicator. It is so because it is inseparable from trend itself. And it is by anticipating trend correctly that we profit, (and by cutting our losses short and quick when we do not anticipate it correctly).

 

Every trend change if accompanied by a 123. The problem for the trader is to choose the degree(s) of trend he or she is comfortable trading, and to learn to recognize and distinguish these degrees from one another. This is a process that is necessarily coincident, as in order to decide the first, one must first learn the second, and by learning the second, one will come to know the first.

 

A good example here among thread participants would be to compare daedalus and myself. Daedalus obviously likes to trade a degree of trend that is consistently smaller than my favorite. He knows how to recognize changes in his degree of trend. He is taking trades at levels that do not even register many times on my radar as anything more than perhaps a possible first swing off a low. He is taking profits, and I am waiting for a pullback to a possible higher low that will get me long on a subsequent break to new highs. Two different traders trading the same approach but at different degrees of trend.

 

Every change of trend has a 123. In order to capitalize on what I do beleive is an inherent edge to trading these 123's, it is imperative that one learns to distinguish degrees of trend from one another. Along with that, as Marko has warned several times, you must not only learn to distinguish degrees of trend from one another, but you must not mix swings of different degrees when planning your trades.

 

It is one thing to trade a 123.

 

It is quite appropriate to trade a 123 within a larger degree 123.

 

But you want to avoid at all costs trading a 123.

 

Best Wishes,

 

Thales

[Cory2679 11]

Thales,

 

It may just be me but I can't view one of your images...

 

(This is the first one of your charts, the one below MK's "second" chart.)

[thalestrader 14]

Thales,

 

It may just be me but I can't view one of your images...

 

I see them all. Is it one of the images in the thumb nail? Or is it embedded in the post?

 

If it is a thumbnail, but you se all the embedded images, then you are not missing anything.

 

Best Wishes,

 

Thales

[Cory2679 11]

I see them all. Is it one of the images in the thumb nail? Or is it embedded in the post?

 

If it is a thumbnail, but you se all the embedded images, then you are not missing anything.

 

No, it's embedded but there's not a thumbnail for it. I see that MK's charts are only embedded, but your charts are embedded and thumb nails...I see four of your embedded charts, and I see four thumbnails, but it looks like there are supposed to be 5 of your charts.

 

I've attached another image to make it clear which one is missing for me.

 

Don't worry about it, though, especially if it's just me. I can definitely get the point of the post from the other pictures.

 

Thanks,

 

Cory