Reading Charts in Real Time

[Cory2679 11]

Hi Folks,

 

Before I get to this edition of Weekend Reading, since I have your intention, I have something to say, and a couple of requests.

 

Great post, Thales. I haven't been very actively involved with the thread, but next week I will make an effort to post some charts and price action I'm monitoring in real time.

 

Have a good weekend everybody!

[Kiwi 16]

Excellent post Thales. Although I think Giving is easier than Trading. Its been a good thread with some interesting elements developing for a variety of styles.

 

I found a weird system over at forex factory that uses two timeframes and a single ma on each with a couple of price pattern entries which I'm going to investigate this weekend. I'm thinking that if it is as good as it looks (it looks to simple to be as good as it looks) I might post an introduction to it and then post trades it generates on a couple of pairs.

 

I'm looking at 240/15m for timeframes so its the same as the S&R/Trend/123b trades generated here - but thats might be the end of the similarity. Can I post them along in this thread or do you think it'll take away from the thread?

[thalestrader 14]

Can I post them along in this thread or do you think it'll take away from the thread?

 

 

 

I thought it would be interesting if we had a thread where we could all post charts of potential price moves in real time. These do not have to be actual trades you are taking. The purpose would be for us to learn from one another how to recognize these opportunities in real time. Therefore, when you post a chart, be sure to clearly state the direction in which you anticipate price to move, and the reason you are interpreting price action in that manner. This is not a thread for secrets, show-offs, or salespeople selling systems.

 

As long as one complies with the purpose and spirit of this thread, then go for it. I have no problem if you or anyone want to use this thread as an incubator for other ideas and approaches. If it gains sufficient currency, it ultimately may support its own thread here at TL.

 

Best Wishes,

 

Thales

[MidKnight 12]

G'day all,

 

In adapting to this new schedule I'd normally be napping right now, but my neighbor has other plans and is banging something into the ground - how I'd love to move to the country where my closest neighbor is 100 acres away....

 

This post is more for my own progress throughout this exploration than anything else. Maybe over the weeks ahead this will show improvement. If not, hopefully the why not can be seen.

 

Overall, a better week than the weeks prior. I only traded 3 nights due to sleep adjustment getting used to order control with Sierra charts 'chart trading' feature. Thales made some great posts on cutting losses and I was given some good opportunity to apply and think about some sort of management approach on how I will do this going forward. At the moment it is a sort of feel thing based on pace. Maybe that is as good as it will get, but I'll spend more time over the weekend study trying to see just how good that is.

 

Spent more focus this week on the 15m timeframe for its assessment of overall trend and near S/R. Still using the 240m S/R, but I just can't expect it to react immediately off this high timeframe S/R. I need to develop the sensitivity to seeing (feeling?) how the immediate price is reacting to the bigger picture S/R. It's a weakness of mine with respect to S/R trading.

 

Most of the weeks trades were of the high/low failure type and continues to be a struggle for me to go with the trend unless a decent sized pullback is underway. On Friday I pushed myself to take a with the trend move on EUR/GBP and was rewarded quite nicely. The situation was slightly different than what I would normally call 'going with the trend' in that the market had gone up strongly and the had consolidated in a tight range for quite some time (from memory, it was like half a day?) and then broke out, pulled back to test the consolidation and I ended up buying the break of that pullback high. Pretty slow market that pair though and I may take it off my tradeables watchlist.

 

Some total stats since exploration (BE trades count as losses):

Average winner: 0.97R

Average loser: 0.43R

Average w/l: 2.23

Profit factor: 1.48

 

What did I do right last week?

• Explored cutting losses quick and was pretty happy with that result
  
• Became a little more systematic on my targets and also the trailing stop
  

 

What can I do better next week?

• Reduce the number of pairs looking for opportunity on, it is leading me to spend a lot of time manually scanning and ends up spreading my study of real-time price movement too thin to keep properly immersed.
  
• Focus more on what the market has been doing rather than becoming immersed in scenarios of what could happen at XYZ. I'm not saying that isn't good to come up with scenarios, just that I have a tendency to become absorbed into them and end up ignoring the now.
  

[Kiwi 16]

I suspect its dead thales.

 

It looks really really good until you realize (as the thread originator over at FF hasn't, nor have the followers) that there is a fundamental look forward error in it. The idea is called "Simple Pips Generating Machine" and for anyone looking at it the error is this:

 

The comparison is between a 5 period SMA of the close and the decisions are made at open. This means that things look better (and should you be fooled, test better) than they really are - to find the truth I had to create a 5 period SMA of close but for the last bar recalc it for the open price (where the decision is made).

 

This is a classic error where "future information" is eyeballed into the decision when visually backtesting. A successful entry will move in your direction so the close will be further that way than the open ... and the ma will be pulled along with it.

 

http://www.forexfactory.com/showpost.php?p=3250223&postcount=1365

Edited November 21, 2009 by Kiwi
added link to diagram

[tradedayworknight 10]

There are very few threads that discuss about how manual backtesting is done properly.

 

Btw, what's the deal with those people at forexfactory posting their trading system?

[brownsfan019 17]

Btw, what's the deal with those people at forexfactory posting their trading system?

 

You mean how Thales has done right here?

 

[ziebarf 10]

Am I seeing this right? I get the idea, trading the reaction off of support or resistance. Just making sure I am looking for the correct sequence of price swings. So as I see it, there is a HH, HL, LH. So the LH is kind of the disruptive swing that might clue to the sentiment of price? Also, if the market opened and went on to print a HH would I just disregard the trade and look for a different setup? I guess if price made a double top the trade would still be valid.

[rigel 10]

Great post on being charitable,

 

essence of the LAW OF KARMA

[forrestang 10]

Am I seeing this right? I get the idea, trading the reaction off of support or resistance. Just making sure I am looking for the correct sequence of price swings. So as I see it, there is a HH, HL, LH. So the LH is kind of the disruptive swing that might clue to the sentiment of price? Also, if the market opened and went on to print a HH would I just disregard the trade and look for a different setup? I guess if price made a double top the trade would still be valid.

 

Just an observation...........

[Kiwi 16]

Am I seeing this right? I get the idea, trading the reaction off of support or resistance. Just making sure I am looking for the correct sequence of price swings. So as I see it, there is a HH, HL, LH. So the LH is kind of the disruptive swing that might clue to the sentiment of price? Also, if the market opened and went on to print a HH would I just disregard the trade and look for a different setup? I guess if price made a double top the trade would still be valid.

 

I would also observe that you have dropped one layer into more noise.

 

If this was a 15m chart you might not have lower highs and lows. Not saying its "wrong" just that as you drop down the timeframes significance may drop and as a non-forex expert I've seen a lot of "lower timeframes = less reliable signals" comments.

[thalestrader 14]

Am I seeing this right? I get the idea, trading the reaction off of support or resistance. Just making sure I am looking for the correct sequence of price swings. So as I see it, there is a HH, HL, LH. So the LH is kind of the disruptive swing that might clue to the sentiment of price? Also, if the market opened and went on to print a HH would I just disregard the trade and look for a different setup? I guess if price made a double top the trade would still be valid.

 

Hi ziebarf,

 

Thanks for posting and thank you for the questions!

 

What Forrest is pointing to is that in your chart, price has printed a HL and a LH, and thus it is in what we call the chop zone. Once in the chop zone, you should take your cues from the last real H and last real L. You might want to go back to this post:

 

http://www.traderslaboratory.com/forums/208/reading-charts-real-time-6151-84.html#post79635

 

and then read forward from there. The concept of the chop zone arises quickly after that post.

 

To add a thought to what kiwi said about using a lower time frame, the important thing to keep in mind is that you will be trading off relatively small swings. Your profit targets wil be correspondingly small. For example, if you are trading short off of a 5 pip swing that retraced 4 pips to put in the LH, you are realistically looking at a first TP that is only 2-pips below entry. Thus, many of these trades would be theoretically profitable but in practice, given the cost of the spread, you have reduced your chances of success on any particular trade and over all to just that - chance.

 

In other words, these patterns occur on all price charts, however you choose to bundle the price data, from the smallest increments to the largest. You should look for sufficently large bundles to allow for reasonably favorable profit targets.

 

Best Wishes,

 

Thales

[Gabe2004 10]

http://www.traderslaboratory.com/forums/208/reading-charts-real-time-6151-84.html#post79635

 

Going back to the chart in the above post, would the pink marked levels be valid entry points?

I am asking this because it seems that i see opportunities everywhere but I am killed on most of them.

 

Gabe

[Don4 10]

For those of you who dont like more charts on your computer than you need I found this one very reliable. If you trade using MT4. It is here at Traders Laboratory under Rumpled One. Here is 2 screen shots showing 5min and 60min, 15m and 240m.

 

[Gabe2004 10]

For those of you who dont like more charts on your computer than you need I found this one very reliable. If you trade using MT4. It is here at Traders Laboratory under Rumpled One. Here is 2 screen shots showing 5min and 60min, 15m and 240m.

[ATTACH]15633[/ATTACH]

 

[ATTACH]15634[/ATTACH]

 

THere is something similar to this for NinjaTrader but this is much better.

I wish someone would make this version for NT.

What is the name of this indicator?

 

Gabe

[daedalus 10]

In other words, these patterns occur on all price charts, however you choose to bundle the price data, from the smallest increments to the largest. You should look for sufficently large bundles to allow for reasonably favorable profit targets.

 

 

Just another comment on timeframes. Its been mentioned before, but the chart in your example ziebarf looks pretty "thin" to me. What I mean by that is you have lots of bars on that chart that have little or no movement (and to me little or no importance). The chart does not look smooth and flowing to me. And I suspect its because it is a small timeframe time chart.

 

These patterns occur fractally - (if that's a word?) meaning in all timeframes but if you are going to trade the faster charts in my opinion you need to use a different type of chart (tick or volume or comparable) to interpret the price bars in a better fashion.

 

For example:

 

This is a 1 minute chart of the British Pound:

 

And here is the same time period (more or less) on a comparable tick chart:

 

Which one looks more smooth? I would say the tick chart does and that's because (at least I feel) it breaks up the price movement in a much better format than simple time charts. And because of that, any potential signals have more relevance to me than comparable time chart signals because the bars were formed due to price interaction and not due to X amount of minutes passing and that to me, shows a better picture to make a trade decision off of.

 

Longer timeframes aren't a problem usually as they "filter" out the bad signals inherently because they take longer for a bar to close so they naturally filter prices wiggles and squiggles. But if you are going to be trading under say a 15M timeframe you may want to consider using a tick chart or something comparable.

 

I guess what i'm saying is that you've got the concept down, but you need to apply it to a chart thats giving you a relevant picture and when you dial down on time charts too far often you aren't getting that relevant picture.

[Don4 10]

THere is something similar to this for NinjaTrader but this is much better.

I wish someone would make this version for NT.

What is the name of this indicator?

 

Gabe

 

Gabe, the name is Candle Color.

[Don4 10]

Sorry Gabe, I gave you the wrong name. The name is CustomCandle. And it is here at the bottom of the page. http://www.traderslaboratory.com/forums/208/never-lose-again-therumpledone-4859-5.html

[thalestrader 14]

Going back to the chart in the above post, would the pink marked levels be valid entry points? I am asking this because it seems that i see opportunities everywhere but I am killed on most of them.

 

I suggest that you focus your attention upon those areas that I marked off as tradable opportunities, and then consider the following from that post:

 

 

Here is a suggestion ... Why not take a week, and watch a 15 minute chart of the EURJPY or the EURUSD or the 6J or the 6E, and just focus on what happens if you bought the break up of every low-high-higher low-higher high pivot sequence and sold short every high-low-lower high-lower low pivot sequence.

 

Just mark off the high and low pivots, and make it mechanical if you'd like: Buy stop above a high, with an arbitrary 15 or 20 tick stop loss, and a 30 tick Profit target. Just go ahead and see how you do. Paper trade it - as I stated elsewhere, paper trading is marginally useful, and here is an example of where it can be useful.

 

If you do this for a week, you will learn to read price action in a way that will put you solidly on track to where you want to be. One week. You should mark each high (H) and each low (L) and when the market turns, you should have an (H) pivot, followed by an (L) pivot, followed by a Lower High pivot (LH) followed by a Lower low (LL). If price makes a high and pulls back to a low and then rallies to the exact high tick of the previous high and then begins to pull back, consider that a Lower High unless it is bettered (and vice versa for two equal lows) ... Try this for one week. Post your chart at the end of the day here and if you have any questions I'll help you. I'll help anyone here who will put in the effort and post his or her chart (I prefer not to do this through PM as this should be individual efforts that benefit all of us as a group). I would bet that anyone who does this for one week will, after that week, have much more confidence in his or her ability to watch price and determine whether to buy, sell, or wait. I'd bet even Gabe would be willing to shed his MA's forever.

 

I know it is tempting to hurry up and trade, but why not take a few weeks to learn how to trade first. I have not seen anyone post a chart here that atempts to mark the highs and lows, higher highs and higher lows, lower highs and lower lows, as I did in that chart.

 

No one can make you do it. You can chose to do so or not. But if you are "seeing opportunities everywhere and getting killed on most of them," you need to stop getting killed and learn how to see.

 

A little bit of patience now will pay off handsomely later (and not much later at that).

 

Best Wishes,

 

Thales

[thalestrader 14]

Hi Folks,

 

Bed Stuy Campaign Against Hunger

 

Best Wishes,

 

Thales

[thalestrader 14]

Hi Folks,

 

Here is a 60 minute Crude from the last few weeks. One of our silent readers tells me that he has been using our little approach on the hourly crude. He didn't send me a chart, and as he has not responded to my request to post his chart here, I have reconstructed his trades based upon is identification of the times of the Highs, Lows, and triggers. He is using a simple 1.62% fib extension of the primary swing for his profit target. He has a $1 disaster stop, and adjusts it "quickly" to the high/low of the trigger bar.

 

Any thoughts? Comments?

 

Best Wishes,

 

Thales

[Gabe2004 10]

I suggest that you focus your attention upon those areas that I marked off as tradable opportunities, and then consider the following from that post:

 

 

 

 

I know it is tempting to hurry up and trade, but why not take a few weeks to learn how to trade first. I have not seen anyone post a chart here that atempts to mark the highs and lows, higher highs and higher lows, lower highs and lower lows, as I did in that chart.

 

No one can make you do it. You can chose to do so or not. But if you are "seeing opportunities everywhere and getting killed on most of them," you need to stop getting killed and learn how to see.

 

A little bit of patience now will pay off handsomely later (and not much later at that).

 

Best Wishes,

 

Thales

 

You are right.

Most of those who posted did a half a$$ed job - including me. (pardon my French).

It is my resolution to follow your suggestion and starting tomorrow (Sunday) I will post atleast one marked chart per day.

 

Gabe

[brownsfan019 17]

 

 

I would question trade #2 if one could have held through a very healthy retracement. Trade #3 could have been an easy trade based on when you entered in comparison to the retracement up.

 

IMO there looks to be 1-2 easy trades and 1-2 trades that takes some serious fortitude to remain in the trade.

[Gabe2004 10]

You are right.

Most of those who posted did a half a$$ed job - including me. (pardon my French).

It is my resolution to follow your suggestion and starting tomorrow (Sunday) I will post atleast one marked chart per day.

 

Gabe

 

Just warming up

 

Gabe

[thalestrader 14]

 

 

I would question trade #2 if one could have held through a very healthy retracement. Trade #3 could have been an easy trade based on when you entered in comparison to the retracement up.

 

Hi Brownie.

 

Both shorts do look relatively easy, as you put it. If you go back and look on lower time frame charts, you will see that the "long wick" on the hourly saw the high print well before the short entry triggered (this is agood example of why it is always somewhat difficult in hindsight to say what one would have done, because the way price is acting is as important as where it is, and how it is acting is not easily seen on dead charts).

 

I also agre with you on the long trade. Had I been in that trade, I see an opportunity to get at at -30 and then await either a re-entry at a new high or wait for a short entry to present itself. The trader who sent this to me said he used a 100 point initial stop from entry. I assume he was entered on the gap, and he would have had to sit through about a 79 point drawdown before price finally moved in his favor. I was hoping to draw him out by posting this chart, so maybe he will join us here and share with us the blow by blow on these trades. Just to be clear, I did no trade these. In fact, now that I look at the chart, he may been trading the Nov contract and not the Dec as shown here.

 

 

Best Wishes,

 

Thales