Reading Charts in Real Time

[thalestrader 14]

If you are going to partial out I would still look at market structure to determine stops targets and RR and see if it is acceptable. So, if placing P1 at the nearest previous swing high and stop loss at the previous swing low, does not give you enough absolute tics profit and more importantly aceptable RR..... pass the trade.

 

Absolutley.

 

Best Wishes,

 

Thales

[Marko23 10]

Hi Marko,

 

...

Remember Plato's cave - the transition from the shadow world of the cave to the bright light of the sun is a painful one, and one that can cause a paralyzing fear and anxiety. Thus, exercise care and patience with those in the process of becoming free as they endeavor to be free. We wouldn't want to discourage someone from trying at all because he or she did not yet have the confidence to go it without an indicator or two.

 

Best Wishes,

 

Thales

 

Thanks for your answer. Certainly I didn't want to discourage anyone and I'm often impatient with others.

 

The indicator trap caught me several times and it took additional efforts to leave them alone (again). These mental efforts may be used for better purposes.

[Marko23 10]

After a trade is finished, I prefer to go back to the wider context view of the last three days, because the details of the last hour may have given me a wrong impression; even when the trade was a winner.

 

 

Here one can see that that upward channel has been left on the down side. So a coming up move will initially be a correction in the wider down move; one can simply watch it in this context.

 

An hour later

No signal and no trade; price below the resistance zone from Monday.

Edited December 19, 2009 by Marko23
Removed menu from chart picture

[Gabe2004 10]

Sure.

 

"Always make more money than your wife can spend!"

 

Best Wishes,

 

Thales

 

:rofl:

.....:rofl:

..........:rofl:

.....:rofl:

:rofl:

Gabe

[brownsfan019 17]

Thales or anyone else for that matter that might have an opinion on money management. This question is mainly about the volatility we see on say the NQ or ES.

 

I have been reading about the idea of liquidating a THIRD to HALF portion of your contracts to cover costs and fees, and then move remaining to BE after covering fees.

 

Then if trading in 2 lots, kill the other HALF as your discretionary runner.

 

If trading in 3 lots, kill 1/3 at about twice the fee cost, and the final 1/3 as your discretionary runner.

 

The idea was that you'd usually at least cover fees. Maybe 7 of 10 times you cover costs and take a BE stop. Then maybe once or twice you get an explosive move. Every once and a while hit your P2 which is small profits, and every once in a while you'd hit that big runner. Supposedly this is how your account has not choice but to grow.

 

Example using a round $5.00 all inclusive fee cost per contract:

3 Contracts x $5 = $15.00

P1 = +3 tics

P2 = +6 tics (stop @ BE once P1 is hit)

P3 = Discretionary exit (stop @ BE once P1 is hit)

 

My questions are essentially how would you manage your ISL and is this even feasible?

 

If your stop rests beyond a swing point, NQ for example, this is usually about 2-2.25 points. So if you're stopped out at a swing point for 2 points, that's a cumulative 24 tics on 3 contracts, get where I'm going with this?

 

So is this type of money management even feasible?

 

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.

[Kiwi 16]

Two subjects for Sunday morning: scaling out and indicators.

 

Scaling Out.

Virtually always done by discretionary traders and almost never by auto or semi-auto traders. Why? Because it makes you feel better and thus makes it easier to trade your strategy which is why Mark Douglas recommended 3 parts. But when you do the expectancies you rarely find it satisfactory. My own approach is to treat each part as a separate setup (trades 1, 2, and 3) and evaluate it W%, winloss ratio, Pf and expectancy.

 

If you find that first resistance is reached 80% of the time and has a 0.8 to 1 winloss ratio then the pf will be excellent at .64/.2 = 3.2 and the expectancy pretty nice at 1+(.64-.1)/1 = 1.44 so its worth taking 1 off at first resistance. If the win ratio was much lower or the trade returned a lot less then it wouldn't be worth doing.

 

So, 1. Know why you're doing it; and 2: get a positive expectancy.

 

 

Indicators

Lag price action if they summarize and smooth. But so what. And they don't if they don't smooth. So the CCI where the value is determined by the close of price doesn't lag at all!

 

Can be damnably useful if you're trying to make complex price action clear to your dumb computer. And I suspect that.s one of the reasons they're so popular with newbies and newbie trainers --- they clarify something important to (currently dumb) newbies.

 

However, I increasingly come to the view that the one advantage a person has over the computer and thus over the "big boys" is that they can train themselves to get the gestalt of the markets' price action. You can see support and resistance. You can see patterns of price action at support and resistance. This is damned hard to do with a computer and thus I suspect most computer types go another route to making money. Which leaves a niche for Thales, Brownsfan etc.

 

So I am a strong advocate that newbies should learn to read price action. They should learn to read it with nothing but horizontal lines on the chart. No diagonal lines ... because these, like mas, distract you from PA SR.

 

When one is trying to develop auto systems though, things are different. Hell I have never liked bollinger bands and I might just have fallen in love with them yesterday!

 

But for the newbie. The quickest way to really getting market action is PA SR.

[Tams 20]

.......... ..........

Edited December 20, 2009 by Tams

[MidKnight 12]

Two subjects for Sunday morning: scaling out and indicators.

 

Scaling Out.

.....My own approach is to treat each part as a separate setup (trades 1, 2, and 3) and evaluate it W%, winloss ratio, Pf and expectancy.

 

 

Hiya Forrest,

 

In my records, I have done the approach kiwi describes above for a couple years. The same is also done for my scale-ins. In general, I have found the move quickly to BE approach detrimental to the bottom line unless I am exiting the bulk at my first target. If I'm attempting to get many R multiples, unfortunately, this is a killer for me. I solve this now by scaling out and leaving my stop where it is until a successful test has been proven.

 

With kind regards,

MK

[Marko23 10]

...

Indicators

Lag price action if they summarize and smooth. But so what. And they don't if they don't smooth. So the CCI where the value is determined by the close of price doesn't lag at all!

....

 

Quote from stockcharts regarding CCI:

 

Calculation

 

There are 4 steps involved in the calculation of the CCI:

 

1.

Calculate the last period's Typical Price (TP) = (H+L+C)/3 where H = high, L = low, and C = close.

2.

Calculate the 20-period Simple Moving Average of the Typical Price (SMATP).

3.

Calculate the Mean Deviation. First, calculate the absolute value of the difference between the last period's SMATP and the typical price for each of the past 20 periods. Add all of these absolute values together and divide by 20 to find the Mean Deviation.

4.

The final step is to apply the Typical Price (TP), the Simple Moving Average of the Typical Price (SMATP), the Mean Deviation and a Constant (.015) to the following formula:

 

CCI = ( Typical Price - SMATP ) / ( .015 X Mean Deviation )

 

------------------

 

Step 1 smoothes

Step 2 smoothes the value from Step 2

Step 3 smoothes the deviation

Step 4 introdudes the constant 0.15 out of thin air

 

Just my four cents on CCI. I can see no difference to other dumb algorithms and will not bring up this topic again.

[Gabe2004 10]

I can see no difference to other dumb algorithms and will not bring up this topic again.

 

I was surprised that Thales brought up indicators when he advocates trading without them but this is his thread and there is no need to be upset.

 

Gabe

[thalestrader 14]

I was surprised that Thales brought up indicators when he advocates trading without them but this is his thread and there is no need to be upset.

 

Gabe

 

Well, I really didn't bring up indicators. I simply showed some charts that showed some of my trades that were several years in the past. The main point of those charts was not the indicators, but that the approach itself, trading the 123's, has endured through bull and bear, through extremes of both low volatility and high volatility.

 

Best Wishes,

 

Thales

[daedalus 10]

^^ I was gonna say I don't think thales ever brought up or advocated indicators... it was the others in this thread like myself that have the desire to lead everyone astray....

[Kiwi 16]

Marko, the Stockcharts info is misleading you. Typical price is not smoothed. In fact the way it works (doubling the effective move at bar extremes) is almost the opposite of smoothing.

 

Most of it (SMA and normalizing factor) is smoothed but that is just the background position vs SMA and normalization to the 200 to -200 range. It's smoothing is a "good" thing because it stops the average value (average price) and the current normalization from interfering with the output calculation - they become very near to constants for the calculation.

 

But the key output, Typical Price (H+L+C) isn't smoothed. It has a near constant subtracted from it (the current sma) and is divided by another near constant (the normalizing factor) but it isn't significantly smoothed by them.

 

If it was the ma of TP then it would be smoothed (as happens with most indicators). But as it is the impact is that if the close is not at the extreme then if it moves X% it moves CCI by X% over 3 and if its at the extreme it moves CCI by 2*X%/3. So at bar extremes CCI pushes twice as hard as it does "within" the bar. There is some small distortion of this because the normalization and average will "catch up" towards it but that effect is very small.

 

The lack of smoothing of TP and the multiplying factor at bar extremes is why CCI is jerky while stochs etc with the output price component smoothed are not. That's also why you see people putting up smoothed CCIs - they prefer the smoothed (summarized) version.

 

 

Note: despite debating the construction of an indicator I stand by my original recommendation for new traders in this post. FWIW ... anyone who wants to use an indicator should do the work required to really, deeply, understand how they work. The work will probably put you back to PASR with horizontal lines only.

[Marko23 10]

Marko, the Stockcharts info is misleading you. Typical price is not smoothed... Typical Price (H+L+C) ....

 

Typical Price is not (H+L+C) as you quote.

 

Typical Price is (H+L+C)/3 . That is an arithmetic mean value from usual understanding.

 

Its maximum value is H - (H-L)/3, if C == H .

Its minimum value is L + (H-L)/3, if C == L .

[BlowFish 10]

Not all indicators are based solely on price data. The ones that tend to still tempt me towards the dark side are ones that are not. For example market delta type indicators or breadth and depth indicators (tick adv/decl etc.) or even statistical type indicators (like VWAP & its standard deviations or volume profiles).

 

Of course as Tams points out if your are aiming towards automation, data pre processing might well make the task simpler.

 

As an aside anyone who is interested in automation (or a purely mechanical approach) based entirely on price action should consider a good look at Dunigans' "New Blueprints for Gains in Stocks & Grains" and the "One-Way Formula for Trading in Stocks & Commodities" (available fairly inexpensively as a single publication). Actually it's worthwhile even if simply interested in price action, I particularly like the rigour with which he describes PA. His objective in the second publication is to define a completely mechanical method to trade any instrument simply based on price action as depicted by a chart. You get a good idea of his thought processes and how the method evolved too.

[Kiwi 16]

With 2 n's Blowfish

 

Thanks for the reference; its time I looked at it again.

[RichardTodd 10]

- an indicator merely transforms price action into another picture. This vital information is within the price action, no need to move to another representation

 

I have never understood why so many people at TL care so much about how I represent my data. Maybe you should also be picking out what clothes I wear, too! :haha:

 

Anyone with significant mathematical experience knows that equivalent representations aren't all computationally equal for a given purpose. Discounting the possibility that human brains have magical powers, I see no reason why this would apply less to human cognition than it does to turing machines. It's easier for me to read clear text than distorted text, for example, even if the pictures are equivalent via an isomorphism. Some representations are just... better for me than others.

 

Happy holidays.

[Rustie 10]

I hated yesterday, the worst trading ever. Faked out so many times. I get very confused during these sessions.

Short now at 1.6033

[thalestrader 14]

Hi Folks,

 

I'll not be trading again until 2010, but I still like to watch my charts.

 

Here is the current hourly look of the eurjpy. A little short, probably best managed on the 15 minute, should take price down into the lower support zone represented by the large blue rectangle. Should price indeed find support there, a decent target for a continuation of the rally would be the small rectangle in the vicinity of the 12/11/2009 high.

 

Please note, this is neither prediction nor anticipation. I am simply having fun.

 

Best Wishes,

 

Thales

[Rustie 10]

Short short lived.. Stopped -15

[thalestrader 14]

I hated yesterday, the worst trading ever. Faked out so many times. I get very confused during these sessions.

Short now at 1.6033

 

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

[thalestrader 14]

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

 

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

[thalestrader 14]

Here is the current hourly look of the eurjpy. A little short, probably best managed on the 15 minute, should take price down into the lower support zone represented by the large blue rectangle. Should price indeed find support there, a decent target for a continuation of the rally would be the small rectangle in the vicinity of the 12/11/2009 high.

 

Hi Folks,

 

Price did decline to the noted support zone, and has rallied to session highs.

 

Best Wishes,

 

Thales

[Cory2679 11]

Hi Folks,

 

...Here is the current hourly look of the eurjpy...

 

Thales

 

I know you had a PT for the long much higher,..but would you consider a short now?...at the session highs?

 

EDIT: I say "PT" loosely...I realize you're not trading...

 

I've attached 2 charts...(FXCM marketscope....I don't have ninja on this computer...I need to get it)...

 

The first charts shows that price is indeed at resistance, and the second chart shows the HLH pattern...

 

(Obviously price would have to break the low)

 

-Cory

Edited December 22, 2009 by Cory2679
"edit"

[thalestrader 14]

Thales

 

I know you had a PT for the long much higher,..but would you consider a short now?...at the session highs?...The first charts shows that price is indeed at resistance, and the second chart shows the HLH pattern...

 

(Obviously price would have to break the low)

 

-Cory

 

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