Reading Charts in Real Time

[thalestrader 14]

It seems you are using the 123 definition to encompass anything that gives a first HL or LH - I am not as it was my understanding that a 123 was in the following sequence of a HH-HL-LH or LL-LH-HL.

 

I am not sure how we differ other than that you seem to have some criteria as to what makes a trend change sequence that I do not hold.

 

The term "123" has become a sort of easy short hand as this thread has progressed. But early on I used 123 to refer specifically and only to a reversal of the Trader Vic variety. Later in the thread, when I first posted the chart where I spelled out the highs and lows, I referred to those price indications that I trade as "sequences." I would perhaps prefer that we use the phrase "short sequence" and long sequence" rather than 123, but that is not the root of the problem here.

 

What I am saying is that H-L-LH (short sequence) or a L-H-HL (long sequence) can manifest itself at varying degrees of trend. By degree of trend, I am referring to extent or magnitude of price movement when price is followed as a continuous flow of activity (time is also a factor, though on the degrees of trend that manifest themselves intraday, time is much less a factor than when considering larger trends). I think you are concentrating on price as blocks of activity that exists in discrete units known as bars. You see inside bars. I see chop zones (chop zones, like the trade sequences themselves, exist at all and varying degrees of trend).

 

I do not advocate trading all such sequences, especially those of small degree. But if price is at an anticipated level of S/R, I often take a shot. As I have said, folks should take a week or two to do nothing but paper trade these sequences, identifying H's and L's. Perhaps I was a ssuming that from such an exercise wone would come to distinuish how price acts when a move has exhausted itself and this when to act on thse sequences or not. I think it has worked for some. But it has not worked for others. I do not know what to sugest next. I suspect that if this approach is not working for you, then there ,may be something in your experience that is preventing you from making it work,.

 

Best Wishes,

 

Thales

[thalestrader 14]

Here is the current look at the EURJPY. What is clear to me is that price has made a low, price has rallied off that low in an impulsive manner, and price is now pulling back from the rally high. This, what is clear to me is that price has done everything it needs to do to present a possible long sequence.

 

It is not guaranteed to trigger before price prints a lower low.

 

It may test the session low and then trigger.

 

It may make a lower low and reset the game clock, so to speak as there would no longer be a long sequence, but a further downtrend confirmation.

 

If it triggers, it is not guaranteed to go to the first target.

 

If it triggers, it may immediately reverse and fall to new session lows.

 

But, it is nonetheless clear that at this moment in time, everything is in place to get me long if price makes a new session high. Price has tested last week's low and found immediate support at that low, and price has a L-H-HL sequence potential at this point in time. Nothing else is guaranteed.

 

Best Wishes,

 

Thales

[MidKnight 12]

What I am saying is that H-L-LH (short sequence) or a L-H-HL (long sequence) can manifest itself at varying degrees of trend. By degree of trend, I am referring to extent or magnitude of price movement when price is followed as a continuous flow of activity (time is also a factor, though on the degrees of trend that manifest themselves intraday, time is much less a factor than when considering larger trends).

 

I do not advocate trading all such sequences, especially those of small degree.

 

Hi Thales,

 

I think I am going to bow out of this discussion as I feel we haven't really made any progress on original discussion that all trend changes are preceded by a 123 and that 123s are an edge. To me, you seem to be mixing varying levels of degree to assert your statement, were as, I am saying that all trends do not reverse with a 123 of the same degree as the trend. I am also baffled how you can say 123s are an edge but you would not advocate trading all of them across their varying degrees. For if it was a true edge, one would want to be trading all of them unless one had extra filtering to enhance the edge.

 

I think you are concentrating on price as blocks of activity that exists in discrete units known as bars. You see inside bars. I see chop zones (chop zones, like the trade sequences themselves, exist at all and varying degrees of trend).

 

No I am not, but when a 15m chart is posted it sure makes it a lot easier to communicate the chart due to its static nature.

 

With kind regards,

MK

[patrader 10]

I find the success of a 123 to be confirmation of previous price behavior that signaled a possible trend change.The previous price behavior i look for is three pushes(or legs or drives).These pushes occur in a trend channel contained by a tl and a tcl(or ltl and rtl or whatever you want to call them).Thales calls this pattern a diagonal.I know them as wedges.Doesn't matter what you call them it's seeing them in real time that matters especially if at an important horizontal S/R price area.Once the third push touches or slightly overshoots the tcl and price reverses then i consider this a possible start of a trend change.For further confirmation of the trend change i need to see a strong counter trend response that pushes price out of the channel and clearly past the tl.Now i look for further confirmation of this possible trend change by how price reacts on the retest of the third push's extreme.I need a test that fails to exceed the extreme to again confirm a possible trend change.Next i need price to reverse and push back to the previous ct swing point.Finally all i need is for price to push past this swing point (trade entry one tick beyond swing point) and continue pushing in this direction for total confirmation that the trend has changed.Sometimes on the retest price pushes thru the extreme and the trend continues causing me to again look for three new pushes,a strong ct tl break out of the new channel,a failed retest of the new extreme and reversal push past the new swing point(triggering entry).Other times price slightly exceeds the extreme and reverses again setting up the need for more confirmation via another 123 for total confirmation of trend change.Hope that helps

Edited January 17, 2010 by patrader

[MidKnight 12]

I was thinking more of a business objective statement rather than a book. Assuming your goal is indeed to profit from your operations - what sort of profit do you expect and how would you like to acquire it? At the very least you might consider pondering those for a while, even if you think initially you already know the answers. There is something beyond mere technical considerations that is causing your difficulty, MK. I truly do believe the answer to your quandary is within you, and not ina anything I can do or say technically about the maner in which I trade.

 

You have to be willing to work on yourself.

 

There are other points in you post to which I will have to respond later.

 

Best Wishes,

 

Thales

 

Before I quit my job as a programmer to trade full-time I purchased Van Tharps Peak Performance home study course and over the last 5 years I have worked through the entire course 3 times. Shortly after trading full-time there was some areas in Tharps course that didn't make sense to me (the parts integration stuff) so I contacted a local NLP consultant to guide me through the process. We did a few sessions together before I started doing it on my own. The huge majority of 'trading' books are psychology / motivational books. I own very little technical literature.

 

Is there more work I can do on myself? Absolutely! But that is true for anyone. I also feel that blaming ones psychology for lack of trading success is often an unfair scapegoat. If you read any of Steenbarger's stuff on traderfeed, he has written several times that all the proper psychology in the world won't matter if one is trading without an edge. It really is that simple. No edge, and it won't matter at all. If have an edge, then the psychology comes into play.

 

Yeah, I can do more work on myself, and maybe surprisingly to some, that is a part of why I trade - continuous self-improvement.

 

With kind regards,

MK

[thalestrader 14]

I think I am going to bow out of this discussion ...

 

Ok.

 

Best Wishes,

 

Thales

[thalestrader 14]

Here is the current look at the EURJPY...

 

As the pullback deepens, the sequence still lives, but I adjust my stop and targets based on the swing size and pullback depth.

 

By the way, I am long Jets.

 

Best Wishes,

 

Thales

[thalestrader 14]

It's almost as though your mind wants to fill in the rest of a decline that's yet to come, isn't it?

 

Best Wishes,

 

Thales

[jonbig04 10]

It's almost as though your mind wants to fill in the rest of a decline that's yet to come, isn't it?

 

Best Wishes,

 

Thales

 

Sure looks like it. I don't follow that pair, so I don't know is thats a major R level from before or not. But the double top, followed by a LL and a LH and another LL, to me indicates trend reversal.

 

Or of course the whole thing could end up being a PB of the larger trend haha

[daedalus 10]

So you boys trading CME futures tomorrow or scraping the day due to the holiday?

[jonbig04 10]

I was under the impression CME closes at 10:30CT?

[Gabe2004 10]

CME Group Holiday Calendar

[thalestrader 14]

So you boys trading CME futures tomorrow or scraping the day due to the holiday?

 

I wasn't planning on any trading until Tuesday. The girls have no school, so we were going to going to go to a science museum. I could tell by the look on my oldest daughter's face that she was not entirely thrilled with the idea. I asked her what she would like to do. Immediately she had a big smile and said, "I want to trade!"

 

So who knows. I won't be trading futures, but I may be sitting here watching her trade.

 

Anyway ... the GBPUSD sure looks like fun!

 

Best Wishes,

 

Thales

[jonbig04 10]

CME Group Holiday Calendar

 

So doesn't thats say the futures will halt at 10:30CT? Or am I being an idiot (strong possibility)?

[Gabe2004 10]

So doesn't thats say the futures will halt at 10:30CT?

 

http://www.cmegroup.com/tools-information/holiday-calendar/files/2010-martin-luther-king.pdf

 

Maybe this will be clearer.

 

Some will. Some will not open until Tuesday and some will be open later.

 

Gabe

[thalestrader 14]

Anyway ... the GBPUSD sure looks like fun!

 

Great fun, indeed!

 

Best Wishes,

 

Thales

[MightyMouse 12]

So doesn't thats say the futures will halt at 10:30CT? Or am I being an idiot (strong possibility)?

 

Depends. Equity closes at 10:30.

Interest Rates and FX close at noon.

[jonbig04 10]

http://www.cmegroup.com/tools-information/holiday-calendar/files/2010-martin-luther-king.pdf

 

Maybe this will be clearer.

 

Some will. Some will not open until Tuesday and some will be open later.

 

Gabe

 

Thanks, I only had the first page.

[patrader 10]

Moment of truth for retest on 6B.Will it be double top and reverse? or slightly higher high and reverse? or push thru and continue up??

[thalestrader 14]

Moment of truth for retest on 6B.Will it be double top and reverse? or slightly higher high and reverse? or push thru and continue up??

 

If I were the kind of guy who bet on such things, I'd be inclined to bet up.

 

Best Wishes,

 

Thales

Edited January 18, 2010 by thalestrader
typo

[thalestrader 14]

GBPUSD ... keeping an open mind ...

 

 

 

 

 

 

 

 

Best Wishes,

 

Thales

[Cory2679 11]

Hey guys,

 

I was reading through the whole MK/Thales discussion just now, and had a thought.

 

When I first became interested in trading, before I had actually ever traded or studied a chart, I went around seeking out people to talk with about it.

 

I had the privilege of meeting in person with a guy in his office who started and runs what is now a $5+ billion CTA. Yes, billion with a "b."

 

Our conversation was really brief...I mostly met with the guy in charge of "marketing"...the fund manager had been hit in the face with a tennis racket and was doped out on pain medication. :o

 

I probably made a fool of myself in that office...during that time, I was in the middle of reading my very first book about trading..."Trading for Dummies"---yes, that's right.

 

He later sent me an e-mail that I'll quote:

 

(talking about me wanting to be a trader...)

 

"The single thing that I recommend is to get a freaking clue about statistical learning, ie, quantitative prediction with data, data mining."

 

I asked for some recommended readings...

 

"I'd recommend these two books, with the first one being a much easier read:"

 

Amazon.com: Data Mining: Practical Machine Learning Tools and Techniques, Second Edition (Morgan Kaufmann Series in Data Management Systems) (9780120884070): Ian H. Witten, Eibe Frank: Books

 

Amazon.com: The Elements of Statistical Learning (9780387952840): T. Hastie, R. Tibshirani, J. H. Friedman: Books

 

I went through those books back then, and it seems it's basically a mix of the fields of computer science and statistics. I'm not sure of MK's background completely, but the computer programming reminded me of this.

 

All this to say...there's more than one route to huge success in this game. I think this approach isn't really fitting with MK, and that he seems to have some issues/disagreements with the concept and the logic behind it...which is totally fine..."different strokes for different folks."

 

Maybe this would be something he (or anyone else) would be interested in.

 

I dunno, just thought I'd throw that out there.

 

-Cory

[patrader 10]

240m 6b chart

[MidKnight 12]

I went through those books back then, and it seems it's basically a mix of the fields of computer science and statistics. I'm not sure of MK's background completely, but the computer programming reminded me of this.

 

All this to say...there's more than one route to huge success in this game. I think this approach isn't really fitting with MK, and that he seems to have some issues/disagreements with the concept and the logic behind it...which is totally fine..."different strokes for different folks."

 

Maybe this would be something he (or anyone else) would be interested in.

 

I dunno, just thought I'd throw that out there.

 

-Cory

 

Hi Cory,

 

Another book on the subject that I would wholeheartedly recommend is Evidence Based Technical Analysis by Dave Aronson. The stats approach is the only way to truly say there is an edge, otherwise any claims of edge are virtually assured to be distorted by discretion in real-time and under hindsight by various biases.

 

I've said in here many a time that I am all for discretion and I in fact embrace it my own trading. Your post here makes it seem as if my 'discussions' with Thales might be viewed as confrontational, but from my point of view, they are not. The questions are meant to try and dig a bit deeper into his thinking because I am sure his trading is as automatic as waking up in the morning and quite possibly what he thinks is so obvious it isn't worth explaining, well...it might be. Yeah, I do not agree with some of Thales assertions about 123s, but I don't think I have any issues with the concept or logic behind them - do I?

 

With regards to the approach fitting me or not, I'll let you know when I am through exploring.

 

All my best,

MK

[Cory2679 11]

Yeah, I do not agree with some of Thales assertions about 123s, but I don't think I have any issues with the concept or logic behind them - do I?

 

I didn't mean specifically "123s"...I just meant with Thales's trading approach as a whole.

 

With regards to the approach fitting me or not, I'll let you know when I am through exploring.

 

All right!

 

-Cory