Reading Charts in Real Time

[thalestrader 14]

Reminds me of a very good post that Kiwi made here some time ago...

 

I see that you found it ...

 

That would look good on a post-it note or an index card taped to the side of your monitor or beside your laptop on your desk.

 

Best Wishes,

 

Thales

[mblack246 10]

Short GU following failure to break higher (LH/double top).

 

Pulled the ripchord on this one for -0.3R.

[thalestrader 14]

Not your fault, perhaps my weird thinking and/or English. The modified setup has been tested with Bund (FGBL) with good results. It may not perform with EUR/USD because it needs a pullback to trigger.

 

I don't think there is anything wrong with your English. I just was not able to get my imagination to conjure up the proper visual image for me to understand what you were describing.

 

The best trades in the currencies tend to work right away, with very little pullback, which is why I am so quick to go to break even typically. So waiting for a pullback may be something that happens more when the trae is destined to be a loss. I do think it is worth testing out, however.

 

Best Wishes,

 

Thales

[thalestrader 14]

Current look at Crude shows it to be again at what should be a critical juncture, as it vacillates on either side ot the 72.4x level...could go either way, but whichever way it decides, it should trend away from that level ...

 

Most likely, any trending will require crude to break through the gravitaional pull of the crrent range identified by the dotted blue lines.

 

Best Wishes,

 

Thales

[Mr_black 10]

I am short on 6e

[Marko23 10]

EUR/USD may trigger on pullback (or not)

This is an experimental setup.

 

No trigger.

 

Original Thales setup triggered.

Edited February 9, 2010 by Marko23

[Marko23 10]

I am short on 6e

 

You did better than I!

Your trade on the R scale.

Edited February 9, 2010 by Marko23

[Mr_black 10]

I am short on 6e

trade closed +27

[Cory2679 11]

:shocked:Good grief! Didn't see that coming!

 

(I got PT1 on the first half, at least...BE on the second...)

[Cory2679 11]

Since the EU is resuming the uptrend, I'd really have my eye on this level...

[patrader 10]

15m ES chart

[patrader 10]

15m 6E chart

[thalestrader 14]

What a day! Here's word of advice I've not had occasion to recall since starting this thread: When an unusual move starts at a time of day when such moves are typically the last thing that happens, go with it.

 

 

 

Best Wishes,

 

Thales

[mblack246 10]

:shocked:Good grief! Didn't see that coming!

 

(I got PT1 on the first half, at least...BE on the second...)

 

Cory i took this trade too and was tempted to set PT1 at a similar level to yours but it was worse than 1:1 RR including spread. What are your thoughts on risking more than you stand to gain?

 

The more i trade with this style the more inclined I am to shoot for more 'realistic' targets even if they aren't at a favourable RR. The reason being that full losses (i.e. -1R losses) should be fairly rare, and that most losses will be much smaller than this. Therefore although a full 'R' is being risked, the expectation over a long period, in the case of a loss, is -0.4R or something similar.

 

Thales I know you only take a trade if the RR is <=1, do you have any thoughts on the above?

 

Edit: Luckily your pt1 was my 'move stop to BE' level, so i avoided a loss!

[Cory2679 11]

Cory i took this trade too and was tempted to set PT1 at a similar level to yours but it was worse than 1:1 RR including spread. What are your thoughts on risking more than you stand to gain?

 

First, take what I say and do with a grain of salt...

 

I usually do prefer at least 1:1 R:R for the first profit target, but in this case, I felt PA was pretty compelling...

 

Also, if my PT1 is less than 1:1, that means my BE level is probably fairly close to the entry, so since I'm getting to BE fairly quickly, I figure the risk is low...probably more likely to get BE, but still worth a shot at pulling a little profit out.

 

...although a full 'R' is being risked, the expectation over a long period, in the case of a loss, is -0.4R or something similar.

 

I definitely see what you're saying, and that probably also has something to do with why I'll sometimes choose to take a trade with less than 1:1 R:R for the first PT...

Edited February 9, 2010 by Cory2679

[Cory2679 11]

I'd be considering this GBP/USD short if it weren't so late in the day...

[thalestrader 14]

... i took this trade too and was tempted to set PT1 at a similar level to yours but it was worse than 1:1 RR including spread. What are your thoughts on risking more than you stand to gain? ... Thales I know you only take a trade if the RR is <=1, do you have any thoughts on the above?

 

Whatever you decide as far as your approach to planning and managing your trades, the most important thing is going to be to do it consistently. I typically will not take a trade if PT1 is not 1:1 with my initial risk. If it is close, I may still take the trade, but it has to be real close, within a tick or two. There are too many opportunities to take inferior trades.

 

I would say this about that particular trade - you have to let the chart, and not your desired R/R dictate your profit targets and stops. It happened that the 1.618 corresponded to a reasonable chart point at which one might have expected support. Actual S/R, i.e. actual chart points where price stopped and reversed at some time in the past, always, always, always, trumps fibs, floor pivots, TTT (Taylor Trading Technique) levels, Elliot Wave counts, etc. and so on. It certainly trumps whatever you or I want as far as a profit on a trade. I think that if you did not take some profit at that level, then at the very least you were justified in moving your stop loss to break even as you did.

 

In the end, each of us has to determine for him or herself what our risk profile will look like. But you must trade the chart, not your desired R/R. If you want 2R, but between your entry and a 2R profit is stif resistance at a .9-1.3R level, trade accordingly. That des not mean you have to settle for .9R or 1R or 1.3R on that trade. But you should take measures to reduce your risk in the trade once price trades to and meets with resistance. But, then again, that is me. There are others who will stand their ground come what may.

 

Neither is right or wrong. I suspect that those who hold their ground will realize a higher profit over time than someone like me who is quick to move a stop and trail it tight. The trade off is that the former will have a lower win/loss percentage, greater draw downs, and a less smooth equity curve. None of which is bad in and of itself. Jonbig who needs a legitimate 6R target before he even entertains the a trade opportunity will not need a 60%+ win rate. He would likely blow me out of the water even he only achieves a 33% win rate given the size of his targets relative to his risk.

 

Take this month to date, for example. These are my actual numbers for my futures trading through today (seven trade days): my futures trades have exactly a 60% win rate, and my average win is 1.44R. My average loss is .73R, and I am up 12.26R for the month. I am pleased with my MTD. Now, if someone were trading with a 33% win rate, with a 1.44R average win, there would be no joy in Mudville, as such a trader would be just under break even if losses were cut at .73R. If all losses were held to full stop, with a 33% win rate, you'd be broke within a year or less.

 

The important thing is to decide which way you are going to plan and manage your trades, and then do it consistently. You cannot be Thales one day and Jonbig the next and expect to do well. You must be one or the other or something in between or something completely different, but whatever you choose, you must be it consistently. And having decided, you must exercise your plan according to the market, and not expect the market to trade according to your plan.

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Most likely, any trending will require crude to break through the gravitational pull of the crrent range identified by the dotted blue lines.

 

And here is how Crude played out - quite a bit more sloppy than I would have anticipated, but once it broke the upper dotted line, it was a (mostly) rally day for Crude.

 

Best Wishes,

 

Thales

[MidKnight 12]

Strong move into the near term R. Watching this area closely to see if the near-term R will hold. If it does not, then the immediate trend will shift to up but I feel there may be solid R above as the immediate trend resets the strong move down since the middle of last week. I'm still happy to short below this spike high on clear signs of R being respected. I will scale out in 1/4ths should that happen. Above this spike high there will only be longs until we get up to the next area of R. I don't really have a good area to get long unless it goes back down some to test some S, so any longs that do happen are likely to be played as all in/out on deeper complex pullbacks should todays late day momentum continue.

[thalestrader 14]

Looking at the Dow daily, I was somewhat surprised to find a pattern not unlike what is commonly referred to as a bull flag ...

 

 

It's not a perfect bull flag. Certainly not text book - for one thing, I'd have liked to have seen fewer days with rising volume on falling prices. I'd have preferred to have seen "tighter closes" and more range contraction during the decline. But, nonetheless, it looks more like a bullish pause than a bearish reversal.

 

For those who like to refer to volume (while I have not found volume to be helpful to me intraday, I do find it useful on daily time frames and higher), we can see that Friday price rose on volume higher than the preceding session, Monday's decline came on shrinking volume, and today's rally came on higher volume than that which accompanied Monday's decline.

 

 

I'm almost ready to believe that the correction, such as it has been, may be very close to "such as it was ..."

 

It almost looks like this thing is, at the very least, contemplating a resumption of its uptrend. Of course, it can only be said that it is contemplating such a move. The real test is this - does it break out and hold above the descending channel, aka bull flag, or does it drop out of the bottom of it?

 

 

We'll just have to wait and see. I'm not making a call, just noting possibilities that exist based upon current price action. And while I know the economic fundamentals are terrible, I am, thankfully, a trader, and not an economist. So, while dismal prognosticators basing their opinions upon fundamentals from the dismal science seem everywhere, I have to say that the possibility exists for a more bullish immediate future. It's possible. However improbable it seems, it is possible.

 

Best Wishes,

 

Thales

Edited February 10, 2010 by thalestrader
typos

[thalestrader 14]

Rather than continue a correction against the current uptrend, the buck consolidated its gains at/near the higs of this rally off the November low. Should the dollar make a higher high (EURUSD lower low) I'd expect the dollar index to make a play for the next target, which is in the vicinity of 82.00. With respect to the 6e, I will be looking for potential shorts, with possible trend down day implications over the coming day(s).

 

The dollar did not make new uptrend highs, nor did the Euro make new downtrend lows. It looks, at the very least, that the correction of the prevailing trends that was suspected a few days ago is indeed occurring. 78.45 to 76.60 remains the targeted support zone for the dollar index if this pullback continues, and if this is merely a pullback.

 

 

However, another possibility is that the rally off the November 2009 low was itself a correction against the larger down trend off the March 2009 high, and that the down trend is ready to resume. Supporting this possibility is that the rally has retraced just over 50% of the downtrend, and the rally can be counted as three waves (an ABC correction) and A=C more or less (C fell short of A by a mere 14 ticks).

 

I would expect Euro strength, dollar weakness over the coming days/weeks. Should 76.60 break and hold to the downside, I would anticipate that the odds increase that the entire November-February rally is retraced, and perhaps a new down leg targeting lower downtrend lows is underway.

 

Certainly an interesting time to be trading currencies!

 

 

Best Wishes,

 

Thales

Edited February 10, 2010 by thalestrader
typos

[MidKnight 12]

Two sides to every coin - well presented IMHO!

[thalestrader 14]

Two sides to every coin ...

 

And this is one of those times where the coin seems balanced on its edge and we have to wait to see which side is facing us when it falls.

 

Best Wishes,

 

Thales

[Gabe2004 10]

GJ bounce?

If yes, there is a good chance that index futures will bounce too.

 

Gabe

Edited February 10, 2010 by Gabe2004

[thalestrader 14]

Current look at the EURUSD/6E on the 60 minute, with a trendline whioch could make this a tricky entry in need of quick fingers on the rip cord. Stop loss as shown would be lowered immediately to one tick above the current little bounce from the entry point upon entry. Position size will be set to a smaller number of ticks risk than shown...

 

Best Wishes,

 

Thales