Reading Charts in Real Time

[MidKnight 12]

Price put in a marginal new high into the immediate R zone and sold off pausing at the key S zones. Currently price is nearly at the pivotal minor S and it is possible that we get some reaction here, maybe even to put in a right shoulder around the 1.5120/40 area. Should there end up being no long opportunity down in the PDH area then I will be looking to short the flip of the pivotal minor S.

 

Attention Points

1.5240/80 refined zone within upper R just prior to exhaust low

1.5170/200 PDH minor R zone

<------ 1.5066 --------

1.4980/520 pivotal minor S

1.4850/900 last S before capitulation low

 

Look for longs in and near this minor pivotal S in the 1.4980/520 area, in fact even up to the 1.5040 area. Any longs taken here should be out of 1/2 before 1.5120 trades and at least another 1/4 before 1.5160 trades. Trail the rest for a move into the 1.5240/80 area.

 

In general I am favouring shorts in the short-term because of how little we have dug into that first immediate R before the theorized exhaustion low and because the movement off the low is sloppy, especially in light of yesterdays trade. I'll take very obvious shorts in the 1.5120/80 area aiming to be out of 1/2 before 1.5060 trades, out of 1/4 before 1.5020 trades and try to ride the rest for a move into 1.4900. Should the market break below the pivotal minor S during Asia I'll be looking to short a flip on that pivotal minor S as it becomes R. I'll be fairly aggressive on that with a target of 1/2 before 1.4900 trades and 1/4 before 1.4860 trades and trail the rest down for the possibility of a new low and my exhaust theory is all wrong.

[MCM 10]

And this is how a short sequence looks on the USDJPY at the moment ...

 

 

Best Wishes,

 

Thales

 

Took awhile - but that first target hit after it finally rolled over. Question for you Thales - do you keep in trades for this long - or had you long since bailed on this?

[thalestrader 14]

Took awhile - but that first target hit after it finally rolled over. Question for you Thales - do you keep in trades for this long - or had you long since bailed on this?

 

Still long this (long 6J) - 1/3 PT at +30 filled, 1/3 PT +90 filled, stop on remaining 1/3 is +45 from my 11031 entry with a +140 PT. Here is how I planned it ...

 

 

Best Wishes,

 

Thales

[MCM 10]

To add on to the questions...(appreciate your time)

 

1) What made you trigger the long initially? Not an obvious entry point from supply/demand level. Had a previous pivot high (marked #1 on pic), a small Rally-base-rally area (#2), and the 618 retrace - but with that fast of a drop - I dont think I would have planned on either of those three (even combined) stopping the freight train.

2) Have been plotting out the previous days highs/lows (mentioned in some of your previous posts) - and trying to learn a little bit about the Taylor method . Was this at a certain predicted # - and therefor a low risk entry once the initial 60 min candle that drove down finished above its low - and the new candle was formed above.

3) Do you move down on time frames to trade - you show a 60 min chart. I believe in the past I have seen your charts moving off some 15 min levels (might be mistaken).

 

Realize some people may feel OK answering these questions - others - would rather defer. No hard feelings either way. Cheers.

 

P

 

PS - also assume the 11171 exit is placed there due to the March 1st pivot low?

Edited March 9, 2010 by MCM

[rigel 10]

At least currently oil is one of the easiest markets I've ever day traded, but it can be quick to punish you when you are wrong - do not trade it without a stop that goes into the market at the same instant you go into the market ( a small intraday leg can easily be the equivalent of 10-12 ES points).

 

It is also very uneven in terms of liquidity. I never know whether I am going to be filled on a stop at the tick or a nickle a way. Today I had a buy limit get filled one tick below my limit order and my trailing sell stop was filled one tick above my stop price. That is the second time this week I had positive slippage on both ends of a trade. But I also have had a buy stop get filled a nickle above the stop price and my stop loss get filled with negative slippage of 5 ticks, though not in the same trade. But I agree, Brownie. All in all, Oil is one slick trade right now. Enjoy it while it lasts. Nat gas was the same way four years ago and then seemingly overnight it turned into the ES. The ES, by the way, has, in my opinion, become more and more unpleasant to trade.

 

Best Wishes,

 

Thales

 

Since every market is manipulated to some extent, how does Taylor's methodology perform on CL as per your limited experience. . I want to start tracking the market and observe for myself whether or not Taylors rules apply here.

Presume it is SS day as per the count here.

Notice you trade from daily charts, wonder why not from 15min or less.

[thalestrader 14]

To add on to the questions...(appreciate your time)

 

1) What made you trigger the long initially? Not an obvious entry point from supply/demand level. Had a previous pivot high (marked #1 on pic), a small Rally-base-rally area (#2), and the 618 retrace - but with that fast of a drop - I dont think I would have planned on either of those three (even combined) stopping the freight train.

2) Have been plotting out the previous days highs/lows (mentioned in some of your previous posts) - and trying to learn a little bit about the Taylor method . Was this at a certain predicted # - and therefor a low risk entry once the initial 60 min candle that drove down finished above its low - and the new candle was formed above.

3) Do you move down on time frames to trade - you show a 60 min chart. I believe in the past I have seen your charts moving off some 15 min levels (might be mistaken).

 

Realize some people may feel OK answering these questions - others - would rather defer. No hard feelings either way. Cheers.

 

PS - also assume the 11171 exit is placed there due to the March 1st pivot low?

 

As far the location of the trade, I think the chart I posted last night shows fairly clearly that the decline on the 6J (and hence the rally in the USDJPY spot) was coming into an area of potential support. That is the primary consideration - where is support, and where is resistance. While I scale out as price goes in my favor, my ultimate target is the red resistance zone noted on the chart in my last post.

 

Proportionally, the decline looked to be at a point where it might at least pause, if not reverse, and if one where to check it with a fib retracement tool, you will no doubt find that price was at or near the 61.8% retracement. Now, I do not act on fibs alone. Fibs have no relevance if there is nor S/R, in my opinion (other than range mid-points).

 

It also did not hurt that I had an email from richbois Friday afternoon that read, "Hey look at 6J over the weekend vs Yen - Good long on 6J or short on Yen." Again, I do not act on TTT alone. But when the cycle and the TTT levels coincide precisely with a test of an S/R zone, it always gets my attention.

 

So as far as why I entered where I did, I had, first and foremost a decline into Support. Add to that a significant fib level, TTT level, and TTT Cycle, and that is all I need to watch price for sign that it is ok to enter, which brings me to your real question, which is what you refer to as a "trigger."

 

I have basically one main "trigger," and that is a "123." I also use what I consider to be a subset of the "123'," and that is what Trader Vic refers to as a "2B." Here is how a 2B works: In this case, price broke the prior day's low. When that happens, and when that low is at or within a support zone, Trader Vic would say to place a buy stop one tick above the now broken low, because if the prior day low breaks and quickly reverses, you have a high probability that the decline is, at least temporarily over. I look at it this way: a 123 presents itself by printing a low, a high, and then a higher low. Te trigger is a buy stop above the high, as that would be a higher high and the first indication that the trend may have changed. A 2B, when a prior low is broken and quickly reversed, is an early indication that price may be ready to present a 123, as the 2B anchors a possible low, from which we now await the high and the higher low.

 

Now, as I have said many times before, these patters exist at all levels of trend or degrees of swing. In the case of the 6J trade, I entered watching the DOM for either the first sign of a 123 at support, or a 2B type entry. I was telling someone yesterday that you do not need to use a DOM. Atto made a very good post a day or so ago in another thread that can be found at this link:

 

http://www.traderslaboratory.com/forums/f34/price-action-traders-what-actually-7618.html#post91488

 

In that post, Atto mentions using a 5 second chart. Now, a five second chart would be of little use much of the time. I do not know, of course, but I doubt that Atto is constantly peering at a 5 second chart all day. I would guess that he uses that chart much as I use the DOM - when price gets to a level of interest, he uses that 5 second chart to gauge whether his play should be long, short, or to stand aside. I think you could look on a 5 second chart for what I am looking for on the Dom - I want to see that price has done something to indicate that support is holding or breaking.

 

I decided just now to take a look at a 5 second 6J at the time I made my long entry, and lo and behold, you will easily see a 2B, and the a 123. I entered on the tiny 4 tick range 2B (I did enter a tick or two early). Had I missed that, I'd have entered on the somewhat larger 123.

 

 

And that is really all there is to it. S/R gives me the location and 123's and 2B's tell me when it is time to go (and more importantly, when it is time to get out).

 

Yes, I find fibs helpful. Yes, I find TTT to be an excellent tool.

 

But in the end, all you really need is a chart. If you are able to see support and resistance, the only other thing you need to know is how do you get into a trade with a known risk - that is what the 123 and the 2B give you. After that, it is up to you, your emotional control and your discipline.

 

I see you mention "60 minute candle." I will respond to the time frame issue in my reply to Rigels's post below.

 

Best Wishes,

 

Thales

[thalestrader 14]

Since every market is manipulated to some extent, how does Taylor's methodology perform on CL as per your limited experience. . I want to start tracking the market and observe for myself whether or not Taylors rules apply here.

Presume it is SS day as per the count here.

Notice you trade from daily charts, wonder why not from 15min or less.

 

Hi Rigel,

 

I've never been too comfortable with the notion that markets are being manipulated. I think what Taylor noted was a natural ebb and flow of human market activity. It really doesn't matter whether one feels the markets are manipulated through a trading cycle, or if the trading cycle is something that simply occurs and re-occurs more or less regularly and naturally for our purposes, but I just wanted to note that I do not feel that it is overt manipulation.

 

You are right, today is Short Sale day for CL, and it has achieved as much of its decline as it needs in order to satisfy the cycle, but it does have room for further decline as well.

 

As far as time frames go, I feel that the 15 minute is a good view on which one will learn to see important and repeating patterns of price behavior and also be able to learn to recognize levels and zones of support and resistance. But I do not think in terms of "bars" or "candles". Again, to reference Atto's post that I linked to in my immediately preceding post, he says he views price as flow. I cannot think of a better way of understanding price. The time interval is unimportant, irrelevant. What I chose to put on my chart will depend upon how much "history" I want to see. I can as easily trade from a 1 minute or a daily bar chart. The manner in which I select and enter trades ia based solely on where price is and how it got there and how it is acting at the moment.

 

MCM asked about the "60 minute candle" and do I "move down time frames" and the answer is that if I am attentive and watching and I know the price levels of inerest, I can watch a price movements recorded on a 60 minute bar a daily bar, a weekly bar, a monthly bar, a T&S window, DOM, ticker tape - it does not matter. The only reason to move down a time frame is so that you can see what you may have missed. Even when I referred folks to a 5 second chart above, that is really just to get them closer to the "now" as I read it off the DOM, or as an old timer would have read it off the ticker.

 

So at times you may find me watching a 15 minute chart. Other times I may be watching a 40 tick range chart. Still others, I'm sitting here watching a daily chart. When price nears a level of interest and I start looking for an entry, I am usually just looking at the DOM. In the end, I trade from the DOM. Charts simply provide an easy to read summary of price's travels across the middle of nowhere while I wait for it to arrive at a more interesting level from which I may take action.

 

Best Wishes,

 

Thales

[MidKnight 12]

Most of the yesterday continued with the downward momentum from Monday until the USA session staged a minor rally back up into that pivotal minor S/R for a flip. Yesterday took out the immediate support putting the major and immediate trend back in alignment to a down state. Continuing to favour shorts within the pivotal minor S/R zone, but will trade a flip to the long side should that happen.

 

Attention Points

1.5120/200 rally high R zone

1.4980/5020 pivotal minor R

<------ 1.4990 --------

1.4850/900 last S before capitulation low

1.4783 capitulation low

 

Working with the capitulation theory still, a test in the 1.4850/900 area would be normal so I shall stay alert in that zone. Longs taken in there will be out of 1/2 within the pivotal minor S/R zone of 1.4980/5020 and ideally looking for a multi-day move back up to at least 1.5120 . If instead the market rallies cleanly through the pivotal minor S/R, then I will look to buy the flip with a goal to be out of 1/2 before 1.5120 trades, with an ultimate goal on the other 1/2 into the 1.5240/80 area.

 

I feel like I've probably missed the short from the flip of the pivotal minor S/R - we'll see how it looks when I start today late in Asia. If I have missed it in then I've probably missed the boat to get on the short side with the easy stuff. I'll keep an open mind on the shorts though but more than likely just scalps if I see anything obvious.

[Kiwi 16]

Experimenting with trend based S&R trading on eu, uj, gj and au. Hourly bars seem to be a good compromise with daily for a broader view.

 

Bars are colored while I'm awake and gray while you're awake

 

.

[Kiwi 16]

Stop to be+ ..... Going out for a couple of hours.

 

.

[thalestrader 14]

Experimenting with trend based S&R trading on eu, uj, gj and au. Hourly bars seem to be a good compromise with daily for a broader view.

 

Bars are colored while I'm awake and gray while you're awake

 

.

 

Nice, Kiwi. So you are entering on the test of the BO level, but not he initial BO, or am I misinterpreting your chart?

 

Best Wishes,

 

Thales

[Kiwi 16]

I have 3 ways to enter. Two related to good hourly price action but the most common is a retest of breakout. The nice thing about that one is that because you are entering against momentum you can fill as much as you want with little slippage. The issue is that you may find price skating all the way to your stop.

 

That trade gave a nice first target and a be+ for the second half by the time I got home.

[Kiwi 16]

Euro this morning. The down sloping line on daily worries me a little so I would have questions about the probabilities of this trade. If entered and the line fails it is unlikely to be be allowed to reach the initial stop.

 

AU. Uptrend. Looking too extended off the daily for a long at this point.

GU. Dntrend. Need more study to propose a S&R trade on this one .. I think it could be doing a large retrace

UJ. Very confusing currently. Seems to be going up in congestion of weekly downtrend.

 

Edit moved euro entry point down to just above red dotted lines.

.

[Kiwi 16]

Couldn't make up my mind, after first test down moved limit up slightly and went long 13635. Not a lot has happened since above, below, above, below etc etc ... slow day in Asia.

 

Edit: Now new hourly high ... stop to be+ as has tested down once, now tested up. I suspect a further test down would drop another 15-20 points so I'd look for a better entry.

Edited March 11, 2010 by Kiwi

[thalestrader 14]

FXCM

 

Hi Folks,

 

I have received a number of PM's regarding FXCM's recent decion to double or triple spreads on micro accounts. I have answered a couple, but I'd rather just have my say here in one post to which I can refer folks in the future without having to re-type anything.

 

First, you can keep the low spreads if you deposit 10K with FXCM. I personally would never give a bucket shop more than a few hundred dollars. If you want a 10K account with a bucket shop, then you ought to take it from them, not give it to them.

 

For the small, retail trader, bucket shops are for learning to trade. Futures are for trading for a living. If I were starting out as a trader, and I wanted to trade currencies, here is how I would do it:

 

I'd set up a demo account with a Bucket Shop. I would trade only one pair, and it would be either the EURUSD, the GBPUSD, or the USDJPY, because these are the only three whose corresponding futures seem to have sufficient liquidity to make day trading a worth while pursuit. If I lived in the UK, and if I knew I would have acces to a futures broker who would let me trade Crude (CL), then I would add oil to the list of potential instruments. Again, I'd pick only one - I want to learn not only how to trade in general, but the personality and patterns of one insrument in particular. My daughter, for example, had her greatest success when she focused nearly 100% of her attention on just the EURJPY. Unfortunately, there is nearly no liquidity (yet) on the EURJPY futures. At any rate, once I could string together four weeks of net +50 pips profit on the demo, I'd go live with a small account.

 

I'd set up a small account with BucketShop. I'd fund it with a maximum of $500 ($25 is enough - no reason to trade for more than dimes after all at this point). I'd set my leverage to no more than 50-1, preferably 20-1 (the smaller the better - this is myr learning account. I will make mistakes and I will have losses, so I want to keep my size as small as I can). My goal is learning to trade and achieving consistent profitability, not to win a contest or otherwise get rich quick. Once I could string together four weeks of 50+ tick profit net, I'd fund a small futures account.

 

I'd find a broker who has good customer service and offers a demo/sim live account alongside the real account. Interactive Brokers, Infinity, and OEC seem to have a decent following among TL traders. I'd do some research, search the forums, ask some questions.

 

After I could string together four weeks of +50 ticks net profit trading a sim 1 lot (and I must not forget to figure in commissions if my sim platform does not do so for me - If I'm paying, for example, $6.25/round turn and it took me 30 trades to make 50 ticks gross, I have only achieved 35 ticks net. If I am paying $9.00/round turn, I have only netted 28.4 ticks profit. This must be 50 ticks net after commissions and fees (and I will make sure I know for certain what my "all-in" round turn cost per contract is before I fund my account - I want to get it in writing, at least in an email from my broker. After four weeks of sim with an average net of +50 ticks, it is time to go live.

 

Once live, I'd increase my position size every four weeks of net +50 ticks. If I ended any week down by 50 ticks I'd quit, for the rest of the week, and I would come back the next week trading reduced size until I could put together two back to back +50 tick weeks.

 

Every four weeks of +50ticks/week, I'd add a contract. Remember, the 6B trades at half the tick size of the 6E, so if I want to trade 12.50/tick and I had selected the GBPUSD, I'd trade two contracts, and then double that to four contracts after four weeks of profitability. But I can do anything you wish - I could trade one 6B, and work up from there. Nothing I say here is writ in stone or smoke or anything else until I actually put the plan in motion, and even then, I can always revise the plan in the interest of reducing or increasing risk if my actual results dictate that such a change would be prudent and beneficial.

 

Each of you have to make your own decision. I am just saying what I would do if I were to do it all over again.

 

As far as which bucket shop, with the change in spreads, FXCM is no longer a shop of choice, so any Bucket is likely as good as the next. I know a fw here use Oanda. I like Oanda's flexible position sizing. We had problems at Oanda because you never know when and how far Oanda will widen their spreads. I admit that except for NFP and GDP announcements, I tend not to know what is going on with respect to the news. Trading futures, this typically has no effect on my trade, my position, my stop loss, etc. But in Bucket Shop world, when news is pending, spreads can widen to however many ticks the Bucket shop wants - and this can trigger a transaction in your account at a level that would never have occurred on an exchange regulated futures contract. If you do not know what I mean, open an Oanda demo account, and watch the spread before any news pending data release. I've seen spreads go 50-60 pips, and that was during a very brief trial of Oanda. That is more than enough to trigger an otherwise sensible stop loss/stop entry order, though the real market never traded there.

 

As always, trade at your own risk (and be mindful of the risks).

 

Best Wishes,

 

Thales

[thalestrader 14]

Hi Folks,

 

Sorry for the late post. It took longer to write the above post than I thought it was going to take, and so I did not get a chance to snap a chart or post this before it triggerd. At any rate, I had the order set in the demo account as well, so you can see that it was at least possible to take the trade, whether you believe it or not.

 

Sold at 1.3685, initial stop loss was 10 ticks, price reversed from a 1.3686 high, and my stop was lowered to 1.3697. If I am not stopped out, and price instead gives a 123 short sequence, I will add if the short sequence triggers. If I am stopped out, it will be -.2R.

 

 

 

Best Wishes,

 

Thales

[thalestrader 14]

... If I am not stopped out, and price instead gives a 123 short sequence, I will add if the short sequence triggers. If I am stopped out, it will be -.2R

 

Added on the new break low after the retest of the high - the entry was the break of 1.3667, the demo platform is showing the average sell price. I have attached both a 1 minute and 15 minute views. Current stop loss on both is 1.3647, (+38 ticks/+19 ticks respectively) ...

 

 

 

 

Best Wishes,

 

Thales

[thalestrader 14]

. Current stop loss on both is 1.3647, (+38 ticks/+19 ticks respectively) ...

 

Out at 1.3647 for +57 ticks total gross, +56 ticks total net, or +5.7R ...

 

I had a -1.21R Tuesday, and a +1.23R Wednesday, so while I would like to hit for +5R every day, and while it may sometimes seem like I hit every trade for +5R, that is absolutely not the case. I just keep taking my swings, cutting my losses (and sometimes my profits) short, but trying to make certain I win larger, on average, than I lose.

 

Best Wishes,

 

Thales

[thalestrader 14]

Just bought the BO above 64 with a 65 buy stop - in real life I was filled at 65 on all but one contract, not 64 as here on the demo, so my average entry is just a shaving beow 65. Initial stop loss was 57, and it is now 62, reducing risk to -.375R ...

 

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Just bought the BO above 64 with a 65 buy stop - in real life I was filled at 65 on all but one contract, not 64 as here on the demo, so my average entry is just a shaving beow 65. Initial stop loss was 57, and it is now 62, reducing risk to -.375R ...

 

Raised stop loss to 66 - so depending upon slippage, this will be no wrose than a +/- a few dollars ...

 

 

Best Wishes,

 

Thales

[thalestrader 14]

Raised stop loss to 66 - so depending upon slippage, this will be no wrose than a +/- a few dollars ...

 

Quiet as crickets round here lately ...

 

All out at 68, so +.375R ... I did not get short on the reversal. I'll be looking for a larger 123 sequence here to get short. I would prefer to get short 5-10 ticks above the morning high and then add on a short sequence initiated from those levels, and it would look something like this ...

 

 

 

But, you have to trade the market that you have, not the one you want - And I always have the choice to not trade it at all.

 

Best Wishes,

 

Thales

[thalestrader 14]

I have 3 ways to enter. Two related to good hourly price action but the most common is a retest of breakout. The nice thing about that one is that because you are entering against momentum you can fill as much as you want with little slippage. The issue is that you may find price skating all the way to your stop.

 

So I presume this is a discretionary experiment as it must be difficult to quantify "good hourly price action" in code!

 

I was wondering about the size of your stop loss - you seem to be exposing yourself to the same risk as one who took the trade on the initial breakout - Is that so, or am I misinterpeting your charts? I would have thought that one purpose or goal of waiting to enter on the retest rather than the initial BO would be to reduce risk, presumably by reducing the size of the required initial stop loss. I'm not criticizing, just asking.

 

Thank you for sharing this with us.

 

Best Wishes,

 

Thales

[Kiwi 16]

In retrospect tightening the stop yesterday was a mistake. However, operating in real time is what alerts you to real time mistakes.

 

Today nothing is clear on daily so unless hourly leaps out at me I'll be trading HSI and thinking about this forex strategy some more. My view:

 

EU Downtrend but in month long consolidation. Down sloping trend line over consolidation still holds. It looks as though at least one more push to the bottom will occur but time will tell and I'll wait for some pa to provide decent probabilities and a risk reward on a trade.

AU Uptrend. Looking too extended off the daily for a long at this point. Pulling back? Ok, one dip does not a pullback make.

GU Dntrend. Pushed down to 78% after 5th daily thrust down from mid jan consolidation. Looking for an abc or double before short reasserts?

UJ Very confusing currently. Seems to be going up in congestion of weekly downtrend.

 

Did I mention fibs Thales? My order of decision making is: S&R, progression of S&R (call it waves or maybe boxes), fibs at those zones, any emas that seem to have provided support for the pair frequently in the past but mainly to keep me on trend.

 

I am looking for an S&R trade but if I can find one where people who look at fibs or mas also think their is support then I expect that their views will provide me an assist.

[MidKnight 12]

Continuing to react from the test of the last S before capitulation low as the pivotal minor R resolved to become pivotal minor S for a solid bounce in USA session. Overhead resistance is not far away for testing the pullback highs and I will expect a fairly decent reaction there before the pullback high is exceeded.

 

I note that lately I've been happy to play both sides of the market because I'm anticipating volatility or at least wiggle (not necessarily wild swings) from this capitulation low theory.

 

Attention Points

1.5240/80 refined zone within upper R just prior to exhaust low

1.5120/200 rally high R zone

++ 1.5074 ----------

1.4980/5020 pivotal minor S

1.4850/900 last S before capitulation low

1.4783 capitulation low

 

Certainly will be alert for longs should we be so lucky to come back and test the upper edge of the pivotal minor S/R in the 1.5020 area with 1/2 off before 1.5120 trades, another 1/4 off before 1.5160 trades and trail the rest for a test up to 1.5240/80 area.

 

Look for shorts in the rather large area of the rally high R zone 1.5120/200 but be a little more aggressive on scaling out as I do a favouring for the long side. Cover 1/2 before PDH in the 1.5060 area and another 1/4 before the top of the pivotal minor S at 1.5120, trailing the rest for a move into 1.4940/60 area.

[Kiwi 16]

Long GU 1.5063.

 

Why: I still think this is retracing up. It formed a short pin bar (down) and broke into the area it broke out from. So, long the breakout zone and anticipating a short pinbar failure.

 

If it fails to move up reasonably soon I will try to get out be+ on basis that I'm wrong.

 

.