Reading Charts in Real Time

[Cory2679 11]

...I'm going to just take the whole position out at my new, slightly more conservative PT1 or at my current SL.

 

Well, stopped out of that one.

 

I am SOOO frustrated with myself so far this week. I am currently slightly DOWN for the week.

 

I'm not sure what my problem is. Maybe it's just simply the fact that it's only two days and isn't significant. I'm pretty close to BE for the week, anyway.

 

I honestly don't feel like my lack of success this week has anything to do with trading real money vs. demo money. I'm not sure what it is.

 

But yesterday, during the time I watch, even in hindsight I don't really have any "regrets." There just weren't any really good moves during that time.

 

I guess I could have done a little better today, though.

 

:crap::crap:

 

Oh well, I guess I'll just move on to tomorrow...I just hate this knot in my chest that I'm going to have for the rest of the day. I don't really feel like there's anything I need to do as a result of these couple of days to improve myself, other than come back tomorrow ready to go. If there was something, I'd do it...it'd make me feel better at least...it'd make me feel like I was being productive with my trading.

 

I don't know how in the world I could do as well as Thales's daughter when she started. That was amazing. I mean, I didn't expect to, but I couldn't help but hope to!!

 

-Cory

[thalestrader 14]

I'm finding PT1's are being reached consistently.

Managing the trade in terms of PT2 and PT3 is an issue for me.

At these times they often conflict with seeing contrary trades...

Is it more a matter of determining what's been referred to as the "degree" of a move?

ie: the contrary trade we see may be a retrace trade within the larger move we are in.

 

PT1's are frequently hit, and PT2's far less often, and when I do use a PT3, it is nonetheless rarely achieved during the lifetime of the swings I tend to trade.

 

Let's take a look at scale of swings and degree of trend. Consider this week+ long rally in the Pound:

 

 

As I say in the chart text, depending upon the size of swings you wish to trade, there are many, many sequences, long and short, presented by price during the course of this overall uptrend.

 

You need to select the scale of swing you wish to trade, and then stick to it. I tend to trade what I think of as three different scales of swing. You do not want to mix them. If you look at the two long entries I had earlier, each was managed according to the swing that created the opportunity. If you are going to mix degrees, you want to use the larger to govern the smaller, rather than what many traders do - which is manage the larger using the smaller. That usually leads to unsatisfactory results. Let me use a friend of mine as an example.

 

My friend Mark is a generation older than I, and he therefore has lived long enough to have sense enough to value his time more than I value mine; or perhaps I need a level of activity that he finds ridiculous. At any rate, he trades far less often than I.

 

He trades the 6B, 6E, 6J, and as well as Notes and Bonds. He trades identically to me - S/R, watching for long and short sequences, etc. The only difference is that he trades for much larger swings than I. He does not trade with fixed targets. He uses a trailing stop that he keeps 10 ticks below the 61.8% retracement of the last swing low to current rally high for longs, and vice versa for shorts. Last week, he was stopped out of a short 6B for a profit. I do not know what his profit was but I think it was between 100-150 ticks and he was in it for a couple of days or so.

 

A day or so later, he initiated a long right around (probably just below) 1.6100. He has been trailing his stop ever since. So while I have had many trades on the 6B over the last 7-10 days, mostly longs, but some shorts as well, he has simply been moving his stop every 12-24 hours. Where I see a short, he doesn't see anything about which to get alarmed. Here is what his trailing stops look like (I am somewhat guessing here, but I think I am pretty close to how he manages his positions).

 

 

You see, if Mark calls me when he is in a long trade and I say I'm short, he wishes me well and hopes I get to my target. Why? Because he knows he is trading a degree of movement so much larger than I, that I can make an 80 tick profit on a short without the stop on his long ever getting threatened. If he were to adjust his stop based upon my short opportunity, he's have been stopped out of his trade less than a day after entry. However, if I were to get long now based upon my own scale of swing/degree if trend, I might be well served to take heed of his stop in planning my trade.

 

Once you decide what scale you are trading,then you need to become proficient at identifying changes in the trend related to that scale. This seems to be the most difficult aspect of this approach. I would suggest that you use fib's to help you initially. If a swing up off a low retraces 1/3-2/3 and then resumes the rally, those two swings are of like scale, and can be counted as two separate swings. If, on the other hand, a swing up off a low retraces less than a third, then that retracement should be considered part of the swing off the low, and not a separate swing. This is so even if the swing up is one "bar" and the retracement a new "bar" Price moves as a flow, and not as discreet packages called bars.

 

The key value to fibs is not that they are some "magical" or "mystical" system of numbers that price "obeys." What they do do is that they provide you with a sense of proportion with respect to price movements, and how the various wiggles of all sizes fit in with one another. And that really is all. S/R is still the paramount consideration. But S/R is rarely so nice as to "pick a tick" for us to key off of, but instead presents us with zones. Fibs help us to choose a proportionately appropriate level within that zone for us to watch. After a while, you will not need a fib tool at all. I rarely use it myself except to annotate charts to illustrate what I am doing for others. Otherwise, I can basically look at a swing, and by free hand draw in the 1/3, 1/2, ans 2/3's retracement levels and the 1, 1.27, 1.618. 2.618, and 4.23 expansion levels. Now, I am not always right to the tick, but I very often am. That comes from watching a lot of charts over a long period of time. I think the main source of confusion here with this approach is that it really does come down to being able to recognize degrees of price movement while not confusing or, as our thread friend Marko says, "mixing" them. As Blowfish said, it would have been nice if this discussion had been introduced earlier in the thread. My assumption was that this is the easy part. Apparently I was wrong.

 

I hope that helps.

 

Best Wishes,

 

Thales

Edited January 19, 2010 by thalestrader

[TradeRunner 10]

Monday: No trades taken

Tuesday: 1 trade (+32)

[thalestrader 14]

Monday: No trades taken

Tuesday: 1 trade (+32)

 

Excellent! Too bad we don't know ahead of time which trades are going to be runners and which trades are just range travels, right?

 

Great job, TradeRunner!

 

Best Wishes,

 

Thales

[Kiwi 16]

Looking at the EURUSD, you can see the change in character of the swings from choppy uptrend to sideways chop zone. A break either way out of the zone would have been a reasonable entry, i.e. long above or short below. Someone should have been able to make 100 ticks last night without too much emotional effort as the decline looks to have been very easy to sit through.

 

Best Wishes,

 

Thales

 

 

What percentage of breaks out of the chop zone are this strongly directional?

If the answer was high I suspect you'd want to drop down a to 5m or 1m to find a 123 to anchor your trade after the breakout??

[jonbig04 10]

I guarantee you are not the only one reading this thread who trades the ES, and I would encourage whatever contributions you wish to share here with respect to your ES trades.

 

Besides, its all charts ... if this S/R stuff works, it had better work regardless of the market so long as that market is liquid and freely traded, right?

 

 

Best Wishes,

 

Thales

 

That's true! I always tell people if the whole world collapsed into anarchy I could still trade various goods as long as I had access to recent prices, some graph paper, and a pencil. Of course I'm not sure if that would actually work haha, but that is how fundamental I believe S/R to be.

[Kiwi 16]

Just to show what I meant ... the joy of multiple timeframes.

 

Once upon a time I traded euro on globex ... in my experience you needed to drop to 1m to catch the strong breaks.

 

 

 

[thalestrader 14]

What percentage of breaks out of the chop zone are this strongly directional?If the answer was high I suspect you'd want to drop down a to 5m or 1m to find a 123 to anchor your trade after the breakout??

 

High percentage profitable, but I have never tracked how often it produces a runner. Good question, though.

 

Just to show what I meant ... the joy of multiple timeframes.

 

Once upon a time I traded euro on globex ... in my experience you needed to drop to 1m to catch the strong breaks.

 

I agree. You certainly can see the tradable break lows more easily on the 1 minute. You can usually see them on the 15 minute, however, if you catch these little interbar retracements during news breakouts. It may be the one time that I find "bars" seem almost to take on a life of their own.

 

Best Wishes,

 

Thales

[Cory2679 11]

Good grief...

 

I hope some of you guys caught this move!!

 

I can't trade where I am unless I downloaded FXCM onto a computer at my girlfriend's house (or brought my laptop, I guess)...I'm watching charts with an old Oanda demo accout while the others watch American Idol. :o

 

I should probably trade Tokyo...I'm missing out!

Edited January 20, 2010 by Cory2679

[Beachtrader 10]

I hope some of you guys caught this move!!

 

I think my week may have been going a bit like yours until this move came along and has allowed me to see the wood from the trees!

 

Current position: half off, stop at b/e and now hoping to trail this behind swings

 

 

 

Kind regards

BT

[Cory2679 11]

I think my week may have been going a bit like yours until this move came along and has allowed me to see the wood from the trees!

 

Current position: half off, stop at b/e and now hoping to trail this behind swings

 

Nice, BT! I'm jealous!

 

-Cory

Edited January 20, 2010 by Cory2679

[Beachtrader 10]

Nice, BT! I'm jealous!

 

Like I said, I need to start trading Tokyo, too!

 

EDIT: Although now I see your entry was actually a bit before the Tokyo open...

 

-Cory

 

Yes - it was about 11pm UK time. Not a good time to be trading but the price action off the level above (1.4306) was compelling. It was a long and painful wait for things to get moving though. Now I am resigned to no sleep!

Edited January 20, 2010 by Beachtrader
Spelling mistake

[thalestrader 14]

Not a good time to be trading but the price action off the level above

 

Anytime within an hour of the Tokyo open coupled with a good indication from price has always been a go in my book. I just know I'll often take a 2-3 tick slip on the way in (Globex fututes, especially the 6J).

 

I missed this move. Nice trade, BT! I'm very happy for you!

 

Best Wishes,

 

Thales

Edited January 20, 2010 by thalestrader
added comment about globex

[thalestrader 14]

In spite of that drop by the EUR, it looks like the EUR is starting to show a bit of strength as compared to the GBP. May just be a temporary shift, but something to keep our eyes on over the coming hours.

 

Best Wishes,

 

Thales

[Beachtrader 10]

Thank you Thales! Not sure why but the last couple of days have been a bit of a struggle for me so am very pleased to have caught this one. I think I am finding it hard to get used to the difference in rhythm between M15 and my usual stomping ground which is M5.

 

Update on trade: Taken just over 1/4 more off the table on a retest of 1.42 and stop placed just above yesterday's LOD to protect remaining profits. As yet unable to find a sensible place to put my stop lower down but will move it to above last M15 swing if price breaks and holds below 1.42.

 

[thalestrader 14]

Current view of the USDJPY ...

 

Best Wishes,

 

Thales

[thalestrader 14]

Current look at the ES ...

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Not a terribly attractive R/R profile, but a long sequence on the GBPUSD nonetheless.

 

Best Wishes,

 

Thales

[Beachtrader 10]

USDJPY triggered long.

 

 

Kind regards

BT

[zt379 10]

PT1's are frequently hit, and PT2's far less often, and when I do use a PT3, it is nonetheless rarely achieved during the lifetime of the swings I tend to trade.......

 

You need to select the scale of swing you wish to trade, and then stick to it..... You do not want to mix them. If you look at the two long entries I had earlier, each was managed according to the swing that created the opportunity. If you are going to mix degrees, you want to use the larger to govern the smaller, rather than... manage the larger using the smaller.......

 

Once you decide what scale you are trading,then you need to become proficient at identifying changes in the trend related to that scale. This seems to be the most difficult aspect of this approach....use fib's to help you initially.

If a swing up off a low retraces 1/3-2/3 and then resumes the rally, those two swings are of like scale, and can be counted as two separate swings.

If, on the other hand, a swing up off a low retraces less than a third, then that retracement should be considered part of the swing off the low, and not a separate swing. This is so even if the swing up is one "bar" and the retracement a new "bar". Price moves as a flow, and not as discreet packages called bars.

 

The key value to fibs is.....that they provide a sense of proportion with respect to price movements, and how the various wiggles of all sizes fit in with one another. And that really is all. S/R is still the paramount consideration. But S/R... instead presents us with zones. Fibs help us to choose a proportionately appropriate level within that zone for us to watch...... I think the main source of confusion here with this approach is that it really does come down to being able to recognize degrees of price movement while not confusing or...."mixing" them. ..

Thales

Thales.

Thank you for your detailed reply.

Your thoughts and experience are much appreciated.

You've mentioned some interesting things whilst keeping to a core simplicity.

My thinking is that if I (anyone) can maintain the PT1 being reached consistently, then it would imply

[Edit] that the 123 was being seen/taken in the right context "degree" which is good.

It's easy to overlook what we do do well.

Perhaps managing the trade without bias and enough flexibility to not be fixated by our expectation. Not losing sight of what we're within, the larger picture.

To build upon that, I shall think hard on your suggestions.

Many thanks..and kind regards to you.

Edited January 20, 2010 by zt379

[jonbig04 10]

Some S/R action and the larger picture of the S&P.

 

 

 

Click for full size - Uploaded with plasq's Skitch

[Beachtrader 10]

USDJPY triggered long.

 

Stopped out for a shade over 1/2 times risk. I can't help thinking that I should have closed this way sooner, especially given the strength of the yen against GBP and EUR.

 

[Cory2679 11]

Stopped out for a shade over 1/2 times risk. I can't help thinking that I should have closed this way sooner, especially given the strength of the yen against GBP and EUR.

 

I'm not trading, but I'd be tempted to short the USDJPY with a break of the other side of the range...

[Marko23 10]

EUR/USD now below December low

[Marko23 10]

First Long chance with EUR/USD

 

ADD: Only a measured move up.

Edited January 20, 2010 by Marko23