Reading Charts in Real Time

[forrestang 10]

Wow.... this is a bit painful (going head to head against a 9 yr old girl!), but hopefully someone may find it entertaining.

 

Thales, your daughter's setup looks much better than mine!

I have a lot to learn from her

 

Oh it's entertaining:rofl:

 

Join the club!

[ZenMachine 10]

Your trade looks fine if I am reading your post correctly. You shorted just below 95.41, and it looks like the first profit target was hit, and quite possibly the second as well.

 

You would think, right?

 

But what you didn't know is that I actually had moved my stop down to what I had thought was a strong R line - Prior day's high.

I got stopped out before the price moved down again to hit my 1st Target...:crap:

 

(Sorry, I wasn't trying to hide it. Just forgot to upload it because I was too busy hitting myself)

 

Hopefully I've learned not to mess with initial stop positions casually.

Edited August 1, 2009 by ZenMachine

[ZenMachine 10]

Oh it's entertaining:rofl:

 

Join the club!

 

 

Thanks Forrest!

Glad you enjoyed it!

 

-zen

[BlowFish 10]

 

I guess this shows that sometimes, the correct stop, though a larger risk in both nominal dollars and % equity, is often less risk in reality than a tighter stop.

 

 

IMHO this is one of the more difficult part of trading (more difficult than finding entries). Do you aggressively bring the stop to BE? Probably unwise for BO trades as the break is often re-tested. How aggressively do you trail a stop, if at all? Do you close if price stalls 10 pips before your target? Watching price retrace 50% (or completely) to stop you out above the last SH is not fun. How do these considerations effect your overall profitability, more importantly how do they effect your 'comfortability'?

 

I think that not truly accepting your losses or constantly fretting about minimising them or worse avoiding them completely ultimately can lead to poor execution and indecision. Been there, got the tee shirt.

[Gabe2004 10]

Pictures from a hind sight are useful but looking into failed or successful entries or setups would be even more so.

So I was marking 15m and 1H EJ charts to see which condition would be the the least prone to whipsaws.

The jury is still out.

Thales wrote that previous sing points or areas could be used as Continuation points, Reversal points or both.

It seems to me that reversals at a given point occur more often than continuations but the profitability of reversal pattern would be less compared with a continuation pattern.

 

The picute is highly compressed. If any one has a problem with it's clarity, please let me know.

 

Gabe

Edited August 1, 2009 by Gabe2004

[Gabe2004 10]

And some more charts.

This time these are 5 minute charts (6 lower) of the 15 minute chart (above).

[thalestrader 14]

Hi Folks,

 

My daughter tried a long on the EURJPY. She moved up to a full mini lot tonight (10K). Her buy stop was 135.25, her initial stop loss was to be 134.88, with 50% profit targets at 135.60 and 135.95.

 

FXCM changed the way stops and limits are entered through their platform, and she was not prepared for how difficult they apparently have made the process. At any rate, I had her move her stop to 135.30 when she was up +20 ticks because neither she nor I could figure out how to get FXCM's new OCO order method to work properly (I thought I was beyond basic order entry years ago, but apparently not).

 

She was indeed stopped out for +5 ticks. Looks like she and I will be looking for instructions at FXCM's website on how to use their platform. She does not typically have temper, but she is so angry at FXCM that I had to laugh at her (and now she's a bit angry with me too). If we figure this thing out, she may re-enter as price is now back to her entry.

 

I attached the chart so you can see her trade. Someone had also asked for a shot of her trade blotter. I really don't see what that adds, but I took a shot of it and included it here. I think most folks learn much more from a chart.

 

Best Wishes,

 

Thales

[thalestrader 14]

The picture is highly compressed. If any one has a problem with it's clarity, please let me know.

 

Hi Gabe,

 

Either the charts are blurry, or I have to get my eyes examined. Perhaps it would be better if you zoomed in on sections and perhaps made a few notes, either in the charts themselves or in the body of the post.

 

I think what you are doing could be a very useful excercise, but is not as clear as it might be.

 

Best Wishes,

 

Thales

[diablo272 10]

Yes, those charts Gabe posted are pretty blurry. Gabe, try compressing with higher quality JPEG or PNG instead.

[Gabe2004 10]

Hi Gabe,

 

Either the charts are blurry, or I have to get my eyes examined. Perhaps it would be better if you zoomed in on sections and perhaps made a few notes, either in the charts themselves or in the body of the post.

 

I think what you are doing could be a very useful excercise, but is not as clear as it might be.

 

Best Wishes,

 

Thales

 

Sorry but I tried to compress the file too much to achieve a shorter load time on the users' computers.

I won't compress the files so much next time.

 

PS I looked at the charts again (the last ones with 7 charts) try to explode them to full size. They should be clearer.

As it is, I took Thales's daughter's trades but got out at different points.

[thalestrader 14]

The EURJPY long would have been stopped for a loss.

[Gabe2004 10]

Another go at it but in the opposite direction.

Eventually I could not take the heat and closed the second half at a loss.

18 pips net for the 2 trades.

Edited August 3, 2009 by Gabe2004

[Gabe2004 10]

Some more trades.

In the one that lasted the longest the direction was correct but I was sleeping and could not react to the change in direction (lost 17 pips instead of maybe making 23).

The last group of 5 arrows were revenge/hope trades.

[ZenMachine 10]

Just entered short EURUSD.

 

Entry @ 1.4390

Stop Loss @ 1.4431

Target 1 @ 1.4334

Target 2 @ 1.4278

 

-zen

[ZenMachine 10]

It broke down the level which I thought was a good resistance line, but would not go down.... It didn't move as expected and I exited at 1.4400.

 

Oh well.

[Gabe2004 10]

My initial target was the middle purple line but I chickened out and thus left about 100 pips on the table

The second chart shows the peaks and troughs that generated the purple lines.

Edited August 4, 2009 by Gabe2004

[Gabe2004 10]

The following chart shows prior peaks and valleys.

The purpose is to find out, how far back can we llok at peaks and vallyes to have a valid entry/target point.

 

Any ideas?

[thalestrader 14]

It is interesting to compare Zen's and Gabe's trades, both short, both in the same base currency (EUR), but one quickly and decisivly moved to a reasonable support level (profit objective) while the other, while moving down, has done so reluctantly, more drifting than swinging, ultimatley causing the trader to abandon the trade for a small loss.

 

Just entered short EURUSD.

 

Entry @ 1.4390

Stop Loss @ 1.4431

Target 1 @ 1.4334

Target 2 @ 1.4278

 

It broke down the level which I thought was a good resistance line, but would not go down.... It didn't move as expected and I exited at 1.4400.

 

My initial target was the middle purple line but I chickened out and thus left about 100 pips on the table

The second chart shows the peaks and troughs that generated the purple lines.

 

Zen traded the EURUSD. I am not sure, Zen, how you identified what you thought to be a "good resistance line," but as you determined on your own oncein the trade, you had thought that line or price level was more important than the market did, as price acted as though crossing that line was a non-event.

 

Gabe traded the EURJPY. EURJPY had a clear breakdown point from which one could expect that price would at least decline to test the first prior resistance level as support. Of course, price doesn't have to do anything of the sort. One may anticipate that price will so decline and reach that target, but it is free to reverse at anytime, and it is precisely that possibility for which the stop loss was created.

 

I have found it useful, in trading support and resistance, not only to recognize where price is, but also how price got there.

 

That is, the trader will help his or her cause if the trader learns both to recognize support and resistance (while distinguishing those important levels from the vast middle of nowhere), but also studies how price is moving as it makes its way through the space between these levels.

 

Is price moving in clear and distinct swings or is it simply meandering, drifting seemingly without purpose? Is price marching with purpose, spending little time at any particular price before mounting its assaults on subsequent levels, or is it coiling around itself, overlapping again and again, making no headway one way or the other?

 

I have attached a chart of each pair. In each case I have used heavy purple lines to trace out what I consider to be important swings. Thick blue lines represent entry points, thick red lines represent stop loss levels.

 

As you can see, the EURJPY has traced very clear, distinct swings, offering what I consider to be two very good entry points, one long, and one short (the short is similar, I presume, to Gabe's entry).

 

The EURUSD also shows what I consider two good entry points, both long. Price may indeed decline from current levels, possibly significantly. But as yet, I do not see what I would consider a safe entry for a short.

 

I have traced out price action on the EURUSD since yesterday's high with a thinner purple line, and added a "?" label to the end of that line which is at the current price. That is because I do not yet consider the price action subsequent to that high as a complete swing. In fact, it barely qualifies as a separate swing from the swing that carried price into its high. Certainly there are many overlapping swings visible within this downward drifting sideways movement, but none of these, individually, constitute the creation of a tradable point (S/R) in price action.

 

Why call S/R a "tradable point"? Because S/R represent a price level at which the market has made a decision in the past to change direction. Upon revisiting that level, a tradable moment occurs as price will decide either to reverse again at that level, or break that level and continue to the next recent S/R level.

 

Watching the manner in which price is moving will help you to distinguish support and resistance froom a mere course adjustment out in the middle of nowhere, as can be seen from these two trades.

 

Best Wishes,

 

Thales

Edited August 4, 2009 by thalestrader
grammar, typos, etc.

[Gabe2004 10]

Selecting the peaks off of which to trade is a tough one for me too.

I think I solved the problem by looking at much higher time frames than I would trade off. THe peaks and troughs in the higher time frames are less ambiguous but still which one to choose is a challange.

For that reason I am looking at a way to define the relevance of the peaks/troughs by wheir distance from eachother and whether there is a clear LINE OF SIGHT between the current price point and the peak/trough that I am considering.

By line of site I mean - if I draw a trend line from the current price point to the peak/trough that I am considering to trade off , there should be a maximum of 1 leg of a swing being cut by my trend line.

If my trend line cuts more than one leg it could be a lesser probability entry point.

[Gabe2004 10]

Nice fit of the price to previous peaks and troughs.

The second chart is identical to the first one except that it is a BAR chart instead of a CANDLE chart.

Edited August 4, 2009 by Gabe2004

[ZenMachine 10]

Zen traded the EURUSD. I am not sure, Zen, how you identified what you thought to be a "good resistance line," but as you determined on your own oncein the trade, you had thought that line or price level was more important than the market did, as price acted as though crossing that line was a non-event.

 

Thank you Thales.

 

Yes, looking back, I was puzzled myself why I ended up with the idea that it was a good support (I meant to say "good support" not "resistance" in my previous post. Sorry for further confusion).

 

I was picking entry points based on boxes drawn around consolidation areas, and if the price goes outside of it, it's my signal. (see attached chart. Blue rectangles are what I considered consolidation, and blue arrows point to possible entries)

 

In doing so, I was losing sight of larger swings and this caused me to pick the "middle of nowhere" as S/R mistakenly. :doh:

 

(I am not trying to justify my thought, but this is just an observation of what I was doing)

[forrestang 10]

Don't know what's going to happen, so I'm just messing around;)

 

Green is initial targets, reds are entries and stops. I'll trail if I get a fill and try to update thread.

 

 

[thalestrader 14]

Don't know what's going to happen, so I'm just messing around;)

 

Hi Forrest,

 

How has the NQ trading been going for you? You had looked to be doing some excellent work before the summer hiatus.

 

I'm one of those old fashioned guys who tends to still think the cash is important (which may explain why I still believe in the existence of gaps).

 

Looking at the cash SP, I would anticipate that price should have difficulty breaking and holding above 1018. I was expecting this 1018 to print on Friday, but price fell short by a little less than 2 points. Had 1018 printed, then I would have anticipated a gap opening tomorrow below Friday's close tomorrow. I still expect that cash will open below friday's close, but not with the same confidence I'd have had 1018 printed Friday. If it does gap open lower, I would not be surprised if that gap is substantial. This is based simply on the breakdown below 1018 ... decline to 992 ... rally back to test 1018, i.e. trend is now down until until it is up, and I anticipate accordingly. Should trend confirm itself to have turned back up, then use S&R too trade accordingly.

 

I see 992.50 is significant support. Should price get there, I would anticipate that support to fail to contain price, and SP500 should decline to test the June 956 high. Beyond that, we shall see.

 

For what it is worth, I am short at 1018 (current 1019.50) and targeting 60 points. Of course, the market could not care any less about me, and it may be heading for 1060 rather than 960.

 

We will know more by this time tomorrow.

 

Best Wishes,

 

Thales

[Gabe2004 10]

Don't know what's going to happen, so I'm just messing around;)

 

Green is initial targets, reds are entries and stops. I'll trail if I get a fill and try to update thread.

 

It may be clearer if youcould mark the entry color different than the stops.

 

Thanks

 

Gabe

[thalestrader 14]

It may be clearer if youcould mark the entry color different than the stops.

 

Thanks

 

Gabe

 

I think he is bracketing a range, and therefore, if price triggers long, i.e. breaks out above the top of the range, then his short entry becomes his stop loss; and if price triggers his short entry, i.e. if price breaks down below the bottom of the range, then his long entry becomes his stop. Therefore, it makes sense that he uses one color to denote his possible entry points.

 

Best Wishes,

 

Thales