Reading Charts in Real Time

[patrader 10]

15m 6B

 

15m 6B

[MidKnight 12]

Here is what my EURUSD/6E short looks like - short at 1.3646, stop loss is 1.3652, and I have a profit target at 1.3428. If I am not stopped out, this will be closed by end of day whether the target is reached or not. I had an initial stop at 17 ticks on the 6E short, and lowered it to the prsent -6 ticks, which makes the open risk on the trade -.35R ...

 

 

I like doing these types of trades (no idea why I like them so much), but my problem is that there is usually very little clear market structures to lean on. I suspect you are leaning on the TTT to call this as HOD and maybe that is why your stop is 1 tick past it. How did you decide on an initial stop when you entered though?

 

Cheers,

MK

[thalestrader 14]

I like doing these types of trades (no idea why I like them so much), but my problem is that there is usually very little clear market structures to lean on. I suspect you are leaning on the TTT to call this as HOD and maybe that is why your stop is 1 tick past it. How did you decide on an initial stop when you entered though?

 

Hi MidK,

 

Here is a chart with some notes, and some explanations below:

 

 

First and foremost is always "where is resistance?" and "where is support?" We want to sell resistance and buy breaks of resistance, we want to buy support and sell breaks of support. In this case, I used two recent pivots to define a potenital zone of resistance. Similar to your daily prep on the GBPUSD, I look for zones where I might expect sellers to get more active and zones where I might expect buyers to get more active.

 

In addition to this reisitance zone, we had price at the mid-figure (00's are the figure and 50's the mid-figure). For whatever reason, Probably the same reason me and some of my trading friends like to use 50 and 100 ticks for profit targets) these areas tend to be S/R, when first approached during the day, e.g. see yesterday's low on the EURUSD/6E.

 

In addition to that, I did, as you noted, have a statistical possible high based upon TTT at 1.3652.

 

I also noted that the rally was quite choppy, with price moving in overlapping waves. Overlapping waves often, though not always, indicate that a rally (or decline) is geting a bit "long in the tooth," and is perhaps due for a pause, if not a reversal.

 

So, I was looking for price to hit that zone, and then watched to see what happened. Once it broke 1.3651 and stuttered, fell back a few ticks, tried to push higher again and failed, I went in at the market.

 

As for my initial stop, I use 10-20 ticks. It might be 13, sometimes 17, sometimes 15 - it depends upon where price is and how it is acting. It is usually a level set for the day and I set it in my trading platform so that if enter - whether it is a market, limit, or stop entry, I have that stop loss go in. Obviously, on the 123 entries, the initial stop is set by the higher low or lower high of the sequence. When I am selling resistance or buying support, I use a preset based upon current volatility as measured by my eye. This way I can set my number of contracts in my trading DOM and be ready to just buy/sell market if the opportunity presents itself.

 

Once price fell from where I entered, I wait for its first minor reaction against me, and then move the stop to one tick above the high. This occurs very quickly - I'm watching the DOM. When I say the first reaction against me, it may be as little as this: I sell at market and I'm filled at 46. price drops to 43, scurries up to 47, and then falls back to 43. At that point lower my stop - often my full R risk is cut to tenths of an R within seconds of entry for these trades. It is that fast - my good friend, professional pilot, and serial lurker jands saw me do a CL trade yesterday where I sold on a limit order at 77.98 - my fill was at what was then the top tick of the swing, and within seconds I moved my stop to one tick above entry. I was up about 12 ticks on that trade when price quickly reversed and I was stopped (my PT was 30 ticks if I recall correctly). Had I not lowered my stop, my loss would have been -1R as price blasted higher, but instead, my loss was only -.12R including commision.

 

I always am looking to cut risk to a point where if I'm stopped, I'm probably glad of it. I try to make -1R losses rare. You see, I can always sell it again if price probes resistance further and gets pushed back down. I did this yesterday with the 6E in the afternoon. I think I may have posted those trades here as well.

 

Best Wishes,

 

Thales

[MidKnight 12]

First and foremost is always "where is resistance?" and "where is support?"

Check that.

 

In addition to this reisitance zone, we had price at the mid-figure (00's are the figure and 50's the mid-figure).

Check.

 

In addition to that, I did, as you noted, have a statistical possible high based upon TTT at 1.3652.

Check.

 

I also noted that the rally was quite choppy, with price moving in overlapping waves. Overlapping waves often, though not always, indicate that a rally (or decline) is geting a bit "long in the tooth," and is perhaps due for a pause, if not a reversal.

Check that too.

 

As for my initial stop, I use 10-20 ticks. It might be 13, sometimes 17, sometimes 15 - it depends upon where price is and how it is acting. It is usually a level set for the day and I set it in my trading platform so that if enter - whether it is a market, limit, or stop entry, I have that stop loss go in. Obviously, on the 123 entries, the initial stop is set by the higher low or lower high of the sequence. When I am selling resistance or buying support, I use a preset based upon current volatility as measured by my eye. This way I can set my number of contracts in my trading DOM and be ready to just buy/sell market if the opportunity presents itself.

This is quite a skill, one I must certainly spend some time developing the sensitivity towards! This part here is the essence of what I was getting at.

 

Once price fell from where I entered, I wait for its first minor reaction against me, and then move the stop to one tick above the high. This occurs very quickly - I'm watching the DOM. When I say the first reaction against me, it may be as little as this: I sell at market and I'm filled at 46. price drops to 43, scurries up to 47, and then falls back to 43. At that point lower my stop - often my full R risk is cut to tenths of an R within seconds of entry for these trades.

A new question, you brought up your buddy doing the CL method with you and how you two ended up taking the same trades on the day but managed them differently. I was curious if he is so quick to cut his risk like this?

 

I always am looking to cut risk to a point where if I'm stopped, I'm probably glad of it. I try to make -1R losses rare. You see, I can always sell it again if price probes resistance further and gets pushed back down. I did this yesterday with the 6E in the afternoon. I think I may have posted those trades here as well.

Indeed, that is true. In the heat of the moment though if I find that I am taking a tiny tiny loss but the market isn't really moving against the initial position much and then I keep re-entering. In my end of day review, I may end up viewing that action as overtrading and if the original idea works out without the need for my micro-managing, then in all honesty, I'm pretty sure I would be chastising myself....

 

Awesome post - thank you. Label that post one for the book you may end up writing one day

 

With kind regards,

MK

[thalestrader 14]

A new question, you brought up your buddy doing the CL method with you and how you two ended up taking the same trades on the day but managed them differently. I was curious if he is so quick to cut his risk like this?

 

We cut our initial risk identically. The difference in results was in managing stops to capture profit. He was not as aggressive as I, and it paid off in his favor.

 

Best Wishes,

 

Thales

[MidKnight 12]

We cut our initial risk identically. The difference in results was in managing stops to capture profit. He was not as aggressive as I, and it paid off in his favor.

 

Best Wishes,

 

Thales

Gotcha - thanks for the reply

[Marko23 10]

...

Once price fell from where I entered, I wait for its first minor reaction against me, and then move the stop to one tick above the high. This occurs very quickly - I'm watching the DOM. When I say the first reaction against me, it may be as little as this: I sell at market and I'm filled at 46. price drops to 43, scurries up to 47, and then falls back to 43. At that point lower my stop -

....

 

Thanks for this excellent post; the better a post the more questions follow.

 

Does your DOM monitor local highs and lows or you monitor them while you watch the DOM? My DOM is rather dumb and shows daily high and low only.

 

If you monitor them, what is your internal timeframe for that?

I know that I asked this question some time ago, perhaps we can try an answer now.

Personally I find it hard work to remember local h/l while watching a dancing price. Training can help when I know that it is possible.

[thalestrader 14]

Thanks for this excellent post; the better a post the more questions follow.

 

Does your DOM monitor local highs and lows or you monitor them while you watch the DOM? My DOM is rather dumb and shows daily high and low only.

 

If you monitor them, what is your internal timeframe for that?

I know that I asked this question some time ago, perhaps we can try an answer now.

Personally I find it hard work to remember local h/l while watching a dancing price. Training can help when I know that it is possible.

 

My DOM does not moark off the "local" or "recent" highs/low. I just watch the dancing price. You could do this watching a chart as well (I can do it whether I'm watching a daily bar chart at the time of entry or a single tick chart).The reason I like to watch the DOM at these moments is I can get a sense from the "dance" of whether I am on the right side or not. That "sense" comes from a lot of watching. It is difficult for me to find words to explain what I'm looking for other than to say that just as charts show patterns that repeat over time across markets and timeframes, so does the manner of price movement on a dancing DOM.

 

My "internal timeframe" for this is best described as "the moment at hand." If I am selling against resistance, I am looking for the first, most minute 123 - yesterday, for example, on the 6E, price traded to 1.3651 (anticipated resistance) dropped back to 1.3647 or so, scurried up to 1.3650, failed to even print at 1.3651, and then dropped below 1.3647 - a 123 of very small degree, but a 123 nonetheless.

 

Sometimes I will actually have a limit order resting in the market, and in those cases, once filled, I'll be waiting for the first pause at a high (if I am short), and then I watch to see whether price is going to put in a 123 in my favor, or if price is going to pull back a few ticks and then move higher, in which case I will usually go flat and sell higher.

 

Best Wishes,

 

Thales

[jands 10]

Once price fell from where I entered, I wait for its first minor reaction against me, and then move the stop to one tick above the high. This occurs very quickly :yes sir: - I'm watching the DOM. When I say the first reaction against me, it may be as little as this: I sell at market and I'm filled at 46. price drops to 43, scurries up to 47, and then falls back to 43. At that point lower my stop - often my full R risk is cut to tenths of an R within seconds of entry for these trades. It is that fast - my good friend, professional pilot, and serial lurker jands :evil tongue: saw me do a CL trade yesterday where I sold on a limit order at 77.98 - my fill was at what was then the top tick of the swing, and within seconds I moved my stop to one tick above entry. I was up about 12 ticks on that trade when price quickly reversed and I was stopped (my PT was 30 ticks if I recall correctly). Had I not lowered my stop, my loss would have been -1R as price blasted higher, but instead, my loss was only -.12R including commision.

 

 

Yes, I was shocked, this all happened in what seemed like a few seconds. A lot shorter time period than I thought he meant. It's nice to take a swing and not hurt!

 

Good trading,

 

Jim

[Marko23 10]

My DOM does not moark off the "local" or "recent" highs/low. I just watch the dancing price. You could do this watching a chart as well (I can do it whether I'm watching a daily bar chart at the time of entry or a single tick chart).The reason I like to watch the DOM at these moments is I can get a sense from the "dance" of whether I am on the right side or not. That "sense" comes from a lot of watching. It is difficult for me to find words to explain what I'm looking for other than to say that just as charts show patterns that repeat over time across markets and timeframes, so does the manner of price movement on a dancing DOM.

...

 

Thanks Thales, from your words I see "it can be learned" though it may take a lot of training.

Makes make perfect and there is a similar saying here: "Übung macht den Meister."

Perhaps a good trader trades from price action like a well trained musician plays at sight.

This helps and I like such a training much more than programming backtests...

 

...

My "internal timeframe" for this is best described as "the moment at hand." If I am selling against resistance, I am looking for the first, most minute 123 - yesterday, for example, on the 6E, price traded to 1.3651 (anticipated resistance) dropped back to 1.3647 or so, scurried up to 1.3650, failed to even print at 1.3651, and then dropped below 1.3647 - a 123 of very small degree, but a 123 nonetheless...

 

This is confirmed by scale invariance and self-simlarity of price action.

If 1-2-3 is real than it must be observable on any time scale.

I did such a test after my first reads in this thread und I repeated it today on my Bund charts, which I know inside out.

You can find 1-2-3 patterns intertwined from a daily pattern down to 1m patterns.

What you do is much more clear for me now.

 

...

Sometimes I will actually have a limit order resting in the market, and in those cases, once filled, I'll be waiting for the first pause at a high (if I am short), and then I watch to see whether price is going to put in a 123 in my favor, or if price is going to pull back a few ticks and then move higher, in which case I will usually go flat and sell higher.

 

Good example and many thanks again for taking time to answer my question.

 

 

Kind regards, Marko

Edited February 27, 2010 by Marko23

[Marko23 10]

Makes make perfect and there is a similar saying here: "Übung macht den Meister."

 

Should read

 

Practice makes perfect and there is a similar saying here: "Übung macht den Meister."

[Marko23 10]

This image from Wikipedia shows an example for self-similarity

 

 

A Koch curve has an infinitely repeating self-similarity when it is magnified.

 

The Mandelbrot set is another example

 

Edited February 28, 2010 by Marko23

[MidKnight 12]

Last week put in a decent down week. This trend is clearly evident on the high time frame charts and I don't see any reason for it to stop yet. 1.50 is likely to be a big number and from eyeballing the weekly chart it is possible to see some sort of S there. On a short-term basis I have 4 theories:

 

1. The market makes another new marginal low for a 3 thrusts pattern bringing in at the least a couple days of rally/chop.
   
2. The market squirts higher right now for at least a couple of days of rally chop.
   
3. The market continues to make lower boxes as per the 60m chart.
   
4. Capitulation is always an option and I must remain open minded for that possibility.
   

 

All longs must be clearly obvious as they are against the man momentum that many various time frames can clearly see as down. Aside from obvious scalps, the only longs will be on a clear marginal new low or from a capitulation. I will aim to be out of 1/2 by the time we close today's gap open and attempt to trail the rest and scaling out the remaining 1/2 into 2 separate exits.

 

Waiting for shorts in the 1.5260-1.5300 area with exits planned to be out of 1/2 before hitting new lows and trailing the other 1/2 on the 15m chart after breaking to new lows. Above there we have the obvious shorts in the large zone of 1.5360 - 1.5460 area (I prefer 1.5400/60) where I will work shorts for a while. I don't think we'll see that today, but it is still part of what I am watching and starting to plan for.

[thalestrader 14]

Hi Folks,

 

Current look at CL in the Ninjademo with a long at the break above Friday's high ... we'll see what Crude is capable of on a sleepy Sunday evening.

 

Best Wishes,

 

Thales

[thalestrader 14]

I had a sell limit on the 6E at 1.3645, high tick was 1.3646, but I did not get filled either in the demo account or in real life. I thought I was in there early enough, but I couldn't even get a partial. Frustrating, but it does happen occasionally, especially early hours of the new week ...

 

 

 

Best Wishes,

 

Thales

[MidKnight 12]

Hi Thales,

 

That is unfortunate about missing a fill on that superb location. From the chart posted, I can't really see why you would have put a limit order at that price - care to elaborate? Something I notice with IB Idealpro exchange as that the spreads on EU are very often down to 1/2 pip with several million in either side at the inside bid/ask. You can trade between any spreads with idealpro just like you would expect from an exchange. Having said that, have you considered using the spot market in an exchange like this, especially since it is possible to get an even better spread than is possible on the futures.

 

All my best,

MK

[thalestrader 14]

Current look at CL in the Ninjademo with a long at the break above Friday's high ... we'll see what Crude is capable of on a sleepy Sunday evening.

 

In real life I bought CL at 80.01, and my real life stop loss is currently 79.99. For the purpose of this demo and for my own inquiring mind, I am going to trail this with what I consider natural stops, should any develop between now and the time I shut down for the night. Profit target is 81.24 in real life and for the sake of this demo trade.

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Here is a 5 minute CL just to show that price pulled back to the 2/24 high, and bounced, and I have moved my stop to 80.44, which will be +38 demo, +43 in real life ...

 

 

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Stopped out of CL, now short 6E at 1.3649 and stop loss is -3 ticks or -1/5R ...

 

 

Best Wishes,

 

Thales

[jonbig04 10]

Here is a 5 minute CL just to show that price pulled back to the 2/24 high, and bounced, and I have moved my stop to 80.44, which will be +38 demo, +43 in real life ...

 

 

 

 

Best Wishes,

 

Thales

 

Interesting to see how you played that Thales. I'm in a sim short on CL right now.

 

Click for full size - Uploaded with plasq's Skitch

[thalestrader 14]

Hi Thales,

 

That is unfortunate about missing a fill on that superb location. From the chart posted, I can't really see why you would have put a limit order at that price - care to elaborate? Something I notice with IB Idealpro exchange as that the spreads on EU are very often down to 1/2 pip with several million in either side at the inside bid/ask. You can trade between any spreads with idealpro just like you would expect from an exchange. Having said that, have you considered using the spot market in an exchange like this, especially since it is possible to get an even better spread than is possible on the futures.

 

All my best,

MK

 

Hi MidK,

 

I'll be leaving the spot to my daughter. I do still watch the cash charts, same as I watch the SPX when trading the ES. But I have a feel for the futures, and my philosophy has always been of the old "if it ain't broke, don't fix it."

 

As to why I wanted to sell there, I see an impulsive move down off of Friday's high, and a choppy rally attempt that looks to me like a good old fashioned bear flag. There is no magic to the number, it was one tick below the resistance zone I outlined for you on this chart here, which is, of course, within the resistance zone that we played with on Friday. I expect at least a measured move off the high, and that may offer a good place to buy. As to why I then sold at 1.3649 - well, if they didn't want to let me sell it at to them at 45, they can now pay me premium!

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Interesting to see how you played that Thales. I'm in a sim short on CL right now.

 

Price nearly always tells you what the path of lest resistance is ... our job is not to fight it as it makes its way along that path.

 

Here is what my 6E short ... stop loss is at 1.3641, which will be +1/2R (just a reminder that I do not trade using Ninja - so while I do have this position in my trading account, the position represented by Ninja's chart trader is a sim position - I am using Ninjasim for the edification of those who think the trades shown in this thread are hindsight - at the very least they cannot say I'm calling anything after the fact that letme get a fill in Ninja).

 

 

 

Best Wishes,

 

Thales

Edited March 1, 2010 by thalestrader

[thalestrader 14]

Here is what my 6E short ... stop loss is at 1.3641, which will be +1/2R

 

Stop loss is now 1.3630, or +1.25R...

 

 

Best Wishes,

 

Thales

[MidKnight 12]

Hi MidK,

 

I'll be leaving the spot to my daughter. I do still watch the cash charts, same as I watch the SPX when trading the ES. But I have a feel for the futures, and my philosophy has always been of the old "if it ain't broke, don't fix it."

 

As to why I wanted to sell there, I see an impulsive move down off of Friday's high, and a choppy rally attempt that looks to me like a good old fashioned bear flag. There is no magic to the number, it was one tick below the resistance zone I outlined for you on this chart here, which is, of course, within the resistance zone that we played with on Friday. I expect at least a measured move off the high, and that may offer a good place to buy. As to why I then sold at 1.3649 - well, if they didn't want to let me sell it at to them at 45, they can now pay me premium!

 

Gotcha mate, I guess it was just that you used a limit order rather than what has been the normal 123 type thing. As I have said prior, I am drawn to this, but struggle to get precision when I have done this in the past. I had to laugh at your comment about them paying you a premium lol - nice work

[jonbig04 10]

Price nearly always tells you what the path of lest resistance is ... our job is not to fight it as it makes its way along that path.

 

I'm going to try to keep that in mind.