Reading Charts in Real Time

[fxThunder 10]

Looking at the daily EURJPY I see a short opportunity in the making.

 

Blue = entry, red = stop, green = potential targets.

 

Cheers,

fxT

[SIUYA 11]

EURUSD - been waiting around a bit.....but this has formed an interesting compression for what i consider low risk trade.

The chart is not too good - so the explanation is

The current 1.2800 level is where it broke from before, its has now rallied back to it....an area of interest.

The compression has occured in the price, and it has tried and failed to break up, Or decsively fall again.

The green line is an alert line, and I am long at 1.2801, stop and reverse a close below 1.2794

(the red line)

(I went a little early on the entry - in fact i missed my real earlier entry by 3-4 pips)

 

No real profit targets except to let it run. (The upside I am more worried about it stopping near the upper trend line crudely drawn.

 

Point is its taken a long time to get here, and now I figure it is worth a trade.

 

http://www.traderslaboratory.com/forums/attachment.php?attachmentid=32985&stc=1&d=1353407075

[SIUYA 11]

Update -

stop moved to BE, and i have halved the position......

why? - because I thought after waiting this long it should have broken, accelerated and kept going.

It has not, pausing at 1.2820, pulling back to 1.2805 as a low.

Keeping some on in case it goes through the original thought and kicks on.

Otherwise - its a trade that did not do what it should have in the original "if this then that..."

Wait until the next opp.

[nelsonhimes 10]

Great Charts. Thanks for the technical perspective and the data points

[thalestrader 14]

Hi Chaps,

 

I still lurk here from time to time. Good to see you are still keeping at it Cory, absolutely anyone can make it in trading if they persist. I strongly believe that.

 

I've had the worst year since 2008 this year. The quick summary is my city was pretty much destroyed by 2 major earthquakes in Sept 2010 and Feb 2011. The ongoing aftershocks has kept me on edge and frequently knocking out power and water services. Dealing with the government bureaucracies to get my insurance covered has been highly stressful. In the end I got sick of it all and moved 3/4ths of the way across the country. The insurance still has not been resolved over 2 years later. I sold the house with cracks in walls you could fit your fingers through. Not much fun living in a house like that when you are getting snow outside - heating was an absolute waste. When I moved the aftershock count was over 12,300 and still rising nearly every day. Anyhow, enough of that....I've now moved to a near sub-tropical climate and am hoping to get back to more normal things again.

 

We should get back to posting content in this thread.....

 

All my best guys and take care. Hope to see some posts here - I'll play too!

 

With kind regards,

MK

 

Hi there MidK,

 

I knew you had been impacted by the earthquakes but I had no idea to such a degree! I am happy to hear that you were able, quite literally, to move on. But I do feel sorry for your suffering. There is no way that I could endure half as much distress and continue to trade soundly. Moving on and putting such circumstances behind you as best you can is likely the best strategy for you.

 

I wish you and your family well, and I hope the earth shakes as far from you as possible.

 

Best Wishes,

 

Thales

[Cory2679 11]

Kind of a random note, but here it is anyway...

 

I was reading an interview in Jack Schwager's new fourth Market Wizards book, "Hedge Fund Market Wizards," and the manager was answering a question about controlling risk...basically what he does is adjusts his position size based on the volatility in the market (in his case, using an EMA of the daily dollar range per contract) in an effort to keep his volatility relatively constant, regardless of the volatility of the market.

 

I started thinking...we've also indirectly done that here, in a way, with position sizing and R-multiples...adjusting position size to the volatility of the market (or the size of the swings), resulting in a relatively constant volatility of our equity curve. Different paths to the same destination.

 

I just thought it was interesting to think about so I thought I'd share.

 

Here's the excerpt, for anyone interested:

 

How do you control risk?

 

The core of the risk management is evaluating the risk of each market based on an exponentially weighted moving average of the daily dollar range per contract. This risk management metric has kept our volatiltity relatively stable near the target level, even through periods of wide gyrations in the markets. One of the things I'm particularly proud of in terms of risk management is that through the chaos of 2008 and 2009 our volatility remained very near our target level of 12 percent annualized.

 

I assume then that you were trading a much smaller number of contracts in each market per million dollars in 2008 than you normally do?

 

Absolutely. As volatility increased, the number of contracts we were trading dropped precipitously.

[Niko 10]

Interesting thread, is Thales still around?

[thalestrader 14]

Interesting thread, is Thales still around?

 

Haven't seen him.

 

Best Wishes,

 

Thales

[Trader Nick 10]

I've been a lurker here for sometime but haven't visited in a while..

 

Is thales still updating this section?

 

This thread has been talked about around other parts of the forum and made me wanna come to see if any updates have been made..

[DbPhoenix 42]

He lurks, but it's not likely he'll be back. Do a search of thales' posts from February.

[Trader Nick 10]

He lurks, but it's not likely he'll be back. Do a search of thales' posts from February.

 

 

Oh, I see what you mean now...I never realized the changes here on the forums took such an impact on the participants.

 

That's a shame...

 

Is there anything we can do? I'm willing to contribute with help and assistance.

 

This forum has been the best education (not to mention free!) then any of the thousands of dollars in books and course I bought...

[Cory2679 11]

Watched the 6th episode of Cosmos: A Spacetime Odyssey with Neil deGrasse Tyson on Hulu yesterday evening...was excited to see Thales (briefly) featured! (Come to find out, it was Thales of Miletus, not Traders Laboratory.)

 

I'd always pronounced it wrong...I always pronounced it like "tails" but with the "th" sound from "three."

 

It's pronounced like "thay-leez," with the "th" sound from "three" (as opposed to the "th" sound from "the").

[SIUYA 11]

Watched the 6th episode of Cosmos: A Spacetime Odyssey with Neil deGrasse Tyson on Hulu yesterday evening...was excited to see Thales (briefly) featured! (Come to find out, it was Thales of Miletus, not Traders Laboratory.)

 

I'd always pronounced it wrong...I always pronounced it like "tails" but with the "th" sound from "three."

 

It's pronounced like "thay-leez," with the "th" sound from "three" (as opposed to the "th" sound from "the").

 

I always thought it was a speech impediment issue and it was meant to be - Sales trader

:doh:

[MidKnight 12]

No matter how you say it, he's a top bloke. Those were good days on this forum back then. Who says all good things must come to an end????

 

With kind regards,

MK

[jfw215 11]

Hi all,

 

I have read Thales since the beginning of this thread. I feel a bit down right now that after all these years i'm still not consistently trading. I am up slightly this year (first year ever) due to a nice swing trade. I am curious if anyone here have reached consistency using the 123 trading method. Midknight? Cory? Niko?

 

Your sincere comments will be appreciated.

 

Best,

 

J

[thalestrader 14]

Hi all,

 

I have read Thales since the beginning of this thread. I feel a bit down right now that after all these years i'm still not consistently trading. I am up slightly this year (first year ever) due to a nice swing trade. I am curious if anyone here have reached consistency using the 123 trading method. Midknight? Cory? Niko?

 

Your sincere comments will be appreciated.

 

Best,

 

J

 

This thread is nearly six years old. The nut of this approach is to enter the first higher high long or the first lower low short at a significant support or resistance level. If you are not seeing success, two areas of concern might be as follows:

 

1) You are taking entries all over the place, and not at price levels that have had prior and obvious significance. As price travels from significant support to significant resistance, it will make any number of "lower lows" along the way higher as normal pullbacks and consolidations take place. If you are going to trade in the middle of nowhere, trade for continuations rather than reversals. Ideally, you refrain from trading in the middle of nowhere completely. "Obvious" means even a nine year old looking at the chart can point to the last "Big High" or the last "Big Low."

 

2) You are cutting profits short. Most who try this approach have no problem with the corollary of cutting one's losses short, especially as the stop level is "built into" the "set-up." However, most also succumb to the too great temptation to cut profits short by moving the stop to breakeven before the re-test of the entry or a HH or LL in favor of the trade direction.

 

The cure for (1) is to pick a sufficiently liquid market, do your homework before the market opens, identify those areas where you will be looking for a trade, and then only trade if and when price reaches one of those levels and only if price exhibits the behavior defined by the set-up. Trade one market until you get it. After you get it, most should probably still just stick with one instrument.

 

The cure for (2), assuming you have entered based on the set-up conditions at an obvious S/R level of prior importance, is to set your stop loss, set a profit limit of at least 1 if not 2 times your risk, set an alert via text, email, sound, or what have you that will alert you to the trade being closed, leave the room, and do not come back until you've been stopped for a loss or limited out with your profit.

 

Best Wishes,

 

Thales

[Atti2dTrader 11]

There are a lot of things I could say here before getting to the point of this post, but I won't.

 

The one thing I would like to do before starting here is to simply say thank you to Thalestrader and the other traders who have contributed to this thread over the years – for their willingness to share and their patience in helping others.

 

Now to the point:

 

By the time I had gotten to the "Please, folks, do not make this more difficult than it is" post in this thread, I knew that I needed to go back to the "Try it for one week" post, follow Thales's suggestion, and start building a foundation.

 

So I've committed to follow the exercise for this entire week (doesn't sound like a long time until you actually begin).

 

Over the weekend I devised a plan for implementing it. Within 30 minutes of trading it this morning I realized that I had taken on more markets than I should have. In other words, "Trade one market until you get it. After you get it, most should probably still just stick with one instrument."

 

I quickly revised my plan for one market. I'm using fixed stops/targets because this week-long exercise is not about profitability, but about taking the time to learn how to "read charts in real time."

 

In the next post I'll outline my simplistic "training plan."

 

I'm sure I'll make mistakes, look stupid, and probably unintentionally violate the rules I've outlined for myself, but hopefully they will be few.

 

I know that this thread is over 5 years old, but I'm hoping that I'll be able to get some feedback from others here who still follow this thread and have more experience looking at price this way than I do. Regardless, I'll post here each day for the duration of this exercise.

 

To be clear:

I AM TRADING THIS IN A LIVE DEMO ACCOUNT. THESE ARE NOT "REAL-MONEY" TRADES.

 

I'm new to posting to this forum, so if I haven't explained myself fully, my charts/images aren't clear, or if anyone has suggestions for improvement, just let me know.

 

"Training Plan" forthcoming...

[Atti2dTrader 11]

I want to reiterate that although I will be keeping records/stats as I take trades, this plan is NOT about profitability. It is about taking the time, and doing the work, to learn to "read charts in real time."

 

This is the "training plan" I have outlined for this exercise using a live DEMO account – NOT real money:

 

Execution

 

1. I will follow this training plan starting Sunday night, 1/25/2015, through Friday afternoon, 1/30/2015. I'm using my live demo account to take and manage the trades in real time.
   
2. I will watch one product: ES. I'm not going to worry about the dollar value of the ticks for now. I'm only interested in the marking of my charts as price moves, and the execution of my plan. I'll keep track by simply counting ticks made/lost.
   
3. I will mark each H, L, HL, LH, etc. as described in Thales's post.
   
4. I will trade 1 contract using a fixed 12-tick target, and a fixed 8-tick stop loss.
   
5. I won't move the initial stop unless:
   
   • A new "natural" stop (swing point) is created prior to the target being reached.
     
   • There is a new setup in the opposite direction (stop & reverse).
     
   • Price touches my target but doesn't fill - stop moves to BE+1.
     

[*]If I am not currently in a position, I will take a new position at successive breaks in the direction of the current trend.

• If I am currently in a position, I will not take new successive breaks.
  

[*]I will mark S/R, as I see it, on a separate chart, but I will not use it for entry/exit decisions – only as practice marking S/R.

[*]I don't plan to take any trades after 14:30CT.

[*]I will normally cancel any open orders 10 minutes before important reports.

ES Chart

 

I take entries only from a 5M ETH HiLo chart. I can use larger time frames to see the bigger picture, but all entries will be based on the 5M chart according to my plan.

 

Edit: I also have a 5M RTH HiLo chart where I will be marking S/R levels/areas for practice. It includes the previous day H/L/C and a measurement of the 5M OR. I'll post it over the course of this week as well.

 

Marking Charts

 

I will use an approach that will hopefully be consistent with this thread for marking entries, stops, targets, and S/R on my charts:

• Trade entry levels are marked with blue lines.
  
• Trade stop-loss levels are marked with red lines.
  
• Trade profit-target levels are marked with green lines.
  
• Yellow "up" triangles indicate long entries.
  
• Yellow "down" triangles indicate short entries.
  
• Yellow circles indicate trade exits.
  
• S/R levels are marked with grey lines.
  
• General S/R areas are marked with grey boxes.
  

I'm probably leaving something out but that will do for now. If I, or someone else, discover(s) something, I'll try to edit it before time expires to do that.

 

Edit: I did leave out that I intend to use only the two charts described above, without modification of any kind for this exercise/week - no other markets, no other indicators, no other bar-types - no modifications.

 

I'll post a brief summary with a chart at the end of the session for each day of this exercise.

Edited January 27, 2015 by Atti2dTrader
Forgot a few things...

[Atti2dTrader 11]

Because of the boxy way ES tends to move, there were a couple of areas where I was uncertain what to "call it." When I was unsure, I didn't label it, and I didn't take action, even though it looked like a possible "setup."

 

I'm not going to overanalyze today's work but rather just consider it a day of experience. I do however think my first trade today may not have been really appropriate as price was making LH's and HL's and not really creating a real H/L/LH or L/H/HL situation. Also, the rule I made about not taking trades after 14:30CT kept me out of a winner. I'll just have to see how it works over time.

 

I took 1 trade last night (Sunday night) just after the markets opened and I've attached a chart of it too.

[Atti2dTrader 11]

This is the ES RTH S/R chart I mentioned above, for today.

[Atti2dTrader 11]

I've been getting up earlier than usual for me (03:30CT this morning) in order to give this exercise as much effort and screen time as I can – I was in my first trade this morning at 04:40 in the Globex session.

 

As with yesterday, there were areas today where price "formation" wasn't clear, and therefore I just didn't mark it or act on it. Some of those areas "looked like" H-L-LH or L-H-HL type situations, and they likely were, on smaller time frames, but I'm only looking for clear patterns on the 5M right now - no smaller/other time frames.

 

And like yesterday, ES was very accommodating to my trading/training plan.

 

I did make a couple of errors today:

 

1. For this exercise I plan to cancel any existing entry orders 10 minutes prior to a major report and I hesitated to do that this morning (see chart annotation).
   
2. Toward the end of my day I missed an entry (short marked on the chart) that I should have taken – I missed it because I was preparing this post and it happened fairly quickly.
   

Once again, every trade marked here was taken in my live DEMO account. And to repeat, this exercise is about marking H's, L's, and their variations, in an attempt to learn to read price action in real time – it is not about P/L. However, as I said before, I'm recording every trade into my log/spreadsheet and will have a final tally at the end of this exercise.

 

I've attached today's marked chart as well as my "S/R practice" chart.

[RichardTodd 10]

So I've committed to follow the exercise for this entire week (doesn't sound like a long time until you actually begin).

 

I'm looking forward to hearing your thoughts on the exercise! It's just one of many things I learned from this thread.

 

I don't know if it will help you or not, but a couple times a day I actually reach out with a finger and trace the swings on my monitor. My brain lies to me all day, but my fingers are usually honest.

[Atti2dTrader 11]

I'm looking forward to hearing your thoughts on the exercise! It's just one of many things I learned from this thread.

 

I've done exercises similar to this before, and I will usually (not always!) get a little spark of new understanding. I'll definitely let you know.

 

I don't know if it will help you or not, but a couple times a day I actually reach out with a finger and trace the swings on my monitor. My brain lies to me all day, but my fingers are usually honest.

 

Can I borrow one?

 

Thanks for that. As Thales might say "Just use your eyes, not your brain."

 

A friend and I have recently been joking about "dumbing down" in order to be more successful traders - and I mean that in the most respectful way. In other words, getting away from all the things we tend to do to complicate this, and just doing the simple, straightforward things like you (and of course Thales) suggest.

 

Thanks for replying, and I'll look forward to any other input/suggestions you may have.

 

-AT

[Atti2dTrader 11]

As is often the case, the pre-FOMC price action was a bit choppy, and as such, wasn't very conducive to the plan today. Regardless, I stayed true to it and let things play out.

 

I have to make note here that although I'm not trading for P/L, from a psychological standpoint I was not enjoying the losing trades I took today (most of which were in a string from ~06:50-09:00 – four in a row). I found myself contemplating taking profits early on some trades just to "book it," as well as having my mind wander to alternative approaches and markets – the typical (for me) fear-based reactions.

 

That being said, it's interesting (to me anyway) to note that despite how "poorly" my plan did, one would still have ended the day with a net profit (albeit small) – even paying $5/RT. That's better than a lot of days I've had using my brain and being "smart."

 

I also want to make note that I've already discovered something about myself in this process:

1. Watching price dance up and down on my DOM creates a lot of anxiety within me. I realized this early on Monday and since then I've been placing my orders and then minimizing the DOM. From there I can keep track of my open orders in one of the platform windows.
   
2. Using HiLo bars (with one color for both up and down) has also reduced the anxiety I've felt previously because price isn't displayed, in each bar, in a way that shows "going up" or "going down" the way that OHLC, candles, and similar bars do. That's not to say that OHLC or candles are "bad," just that right now it's a relief to not try to make judgement calls based on them.
   

Charts are attached. I intentionally cut the last 30 minutes or so, of the RTH session, off of the marked chart. I did this because the generous post-FOMC move skewed the scale of the chart making it even more difficult to see the annotations in the 08:00-09:00 area. The full RTH session is visible on my S/R practice chart.

 

And speaking of my S/R chart – it may look a little busy, but there are really only three things going on:

1. My idea of S/R in the form of the shaded rectangles.
   
2. The prior session(s) H/L/C displayed as green/red/gold lines respectively.
   
3. A Fib measurement of the 5M Opening Range.
   

All of the rectangles and lines are drawn before the RTH session, with the exception of the OR measurement which is drawn at the end of the first 5 minutes of the session. So I find it more than just interesting to see price often reacting at/around those levels for the rest of the day (and even during the pre-market/Globex session). I don't have a way to really use that yet, but I thought I'd point it out.

 

Please note: Because I'm new here my posts are still being moderated and are taking upwards of 12 hours to be reviewed and then released for posting - I apologize for the delays.

[Atti2dTrader 11]

Today I came across this post, and while Thales does talk about the "one market, take every H-L-LH and L-H-HL sequence" exercise that I'm doing here, he also talks pretty emphatically about not trading at all and just watching, which is something that I know DbPhoenix strongly suggests as well.

 

Obviously I'm not following that advice. As I've committed to this exercise for the week, I'm not going to stop the demo trading aspect until I've finished what I set out to do.

 

However, in the meantime, I am going to make a point to do more watching of price action while I'm trading it.

 

I created a chart with the exact same settings and proportions as the chart I'm trading from, but I'm simply marking the swings/waves (in pink) as they happen and drawing a "break" line (in blue) as I see it (maybe I'll call it my "crayon chart"). I don't have any specific rules for this. I'm simply doing it as a way to "watch price" as it progresses from swing to swing, wave to wave. The chart is attached, along with my usual trade chart and my S/R practice chart.

 

Tomorrow I'm going to be leaving my office shortly after the ES RTH open to take care of some other business, so I'll only be able to mark/demo-trade in the Globex and early RTH session. I'll post my charts in the evening when I get back to my office.