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brownsfan019

Using Daily Charts to Trade W/ Thales H,L,HL Method

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It's not too often that something grabs my attention on forums, but I've always enjoyed Thales' posts and once he dissected his trading with pictures I wanted to see how it looks on daily charts.

 

I started the thread here b/c I plan to look at candles and might end up w/ my own spin on it so I didn't want to take his thread off track.

 

Idea here is that I'll use freestockcharts.com and look at some daily charts as time permits and see what I can find. My interest in this would be for swing trading as my daytrading style doesn't really mesh with swing trading that well. I'm very much an intraday trader and it's been awhile since I've looked at daily charts.

 

If you're not sure what analysis will be used, go to this thread and start reading. If you want the shortcut, read this post.

 

Feel free to join along if you are using the same analysis as Thales has presented. The only difference I am adding (at this point) is seeing how the candles look as well on the daily.

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AAPL JUN09-JUL09

 

attachment.php?attachmentid=14851&stc=1&d=1257303459

 

 

I wanted to try out a stock and found AAPL. I'm not sure how smooth this will work on daily charts with stocks due to the gaps. This particular timeframe on AAPL provided 3 trades - 2 winners, 1 loser. But with minimal gaps, it was doable. Some other stocks, even AAPL later, have such big gaps that if you do trade them you could get massive slippage on the entry or get skipped over on your entry price.

 

I might just put together a collection of liquid ETFs and see how that looks for now. That will also help me focus on a small group b/c where do you even start w/ stocks? That's always been my issue w/ stock trading. We'll see.

5aa70f4da7655_AAPL(JUN09-JUL09).png.3cd24695f2afe3a9339dfe4350f20b74.png

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Now here's why I didn't want to post in the other thread b/c I could take things in a different direction...

 

Personally, there's something that just gets under my skin about buying above a big high or selling below a big low. That's just not in my blood. So here's a spin on the idea - plot your H and L then look for a candle pattern with the HL or LH "Zone" and take the trade. Examples:

 

attachment.php?attachmentid=14855&stc=1&d=1257305486

 

attachment.php?attachmentid=14856&stc=1&d=1257305759

 

attachment.php?attachmentid=14857&stc=1&d=1257305885

 

attachment.php?attachmentid=14858&stc=1&d=1257306302

 

And if you want to refine that zone even more, you could use basic fibs to give your possible trade zones. Basically the key is entering between the H & L.

 

This is also where I think a background in candlesticks is very useful. In the examples, highlighted candles are bullish in nature to get long and bearish in nature to get short. Keep in mind my version of bullish or bearish may not be exactly what you've read in books, but basically I want to see some bullish activity to get long and bearish to get short. If it doesn't match a shape on a book or website, I could care less.

 

Entry method is also key here, which I discuss here. At this point, I would feel comfortable entering on a buy stop above a high or sell stop below a low.

 

The observant guys will say - isn't that just pullbacks? And I guess it is but it's a filtered pullback system. If you've traded or tried pullbacks before, the decision is always defining whether or not it's pulled back to your entry area or not. And how long is the pullback valid for? This at least gives you some general rules to use in that regard.

5aa70f4dbd169_IWM11-3-09.png.9bfb63d338f8230862874724531d58a6.png

5aa70f4dc1d1f_XLF11-3-09.png.0d1e9ed170c26dc03b4074e706500fc1.png

5aa70f4e3315f_GLD11-3-09.png.70b68b7b07a7be5803e8eefc34aaf07b.png

5aa70f4e3a7b8_URE11-3-09.png.9c28d3fb3392cfdd594580db44c503c5.png

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Here is a trade I happen to be in that fits, (sort of) with this type of thinking.

That highest high candle and the one after that was a 2B signal. One could get short right there as price breaks the low of that HH candle, but I waited till the next failed HH candle, which ended up being a bearish reversal bar.

I watched the market that following morning and when price started out above the low of the RB, I hit transmit on my orders and walked away.

 

The tricky part is now where to go with the stop. I took first profits as it neared the last low and got stop to BE as quick as possible after that, but now, things are looking real good and I hate to give any back, but I want to be there if things develop into an extended run. If I had enough, I would buy some more back now, but I only traded 200 and the first 100 was first profit, and, apparently IB wont work with odd lots on SMH, so here I am.

 

Now we have an RB on the bottom side, so, I should be thinking of just getting out, but we have taken out a few lows and a fairly significant one a couple days ago, so I will move my stop over that last 2 bar DT and hope for the best. That's just a hair more than 50% of my potential profits gone if I get hit, but ya gotta give it some chance, (at least that is what my plan tells me).:hmmmm:

 

JH

 

I came back and added a weekly chart for SMH. Everything works the same on the weeklys, a chart is a chart after all...

 

And then a couple other charts I am watching.

SNAG-0033.thumb.gif.10dde8f8dc8ec076bcd7e373047ee97f.gif

SNAG-0034.thumb.gif.97d0c6aca0bdc4ee21e52c2623e109b5.gif

SNAG-0037.thumb.gif.2dd08637cd53ba57a16a184c296f58ae.gif

SNAG-0038.thumb.gif.02efa1b1fdc14f277db0b832fd931e20.gif

Edited by JEHs

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Keep in mind my version of bullish or bearish may not be exactly what you've read in books, but basically I want to see some bullish activity to get long and bearish to get short. If it doesn't match a shape on a book or website, I could care less.

 

I'm intrigued. I have watched Nison's candle stuff and read some books. What formations do you consider bullish/bearish that aren't what you would call the "regular" formations? I would think the whole point of books and formations is to pick out anything that would hint at bullish/bearish activity so it can be identified. Maybe you just mean you interpret the actual candles more liberally than the books do. Give me an example if possible.

Thanks.

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I'm intrigued. I have watched Nison's candle stuff and read some books. What formations do you consider bullish/bearish that aren't what you would call the "regular" formations? I would think the whole point of books and formations is to pick out anything that would hint at bullish/bearish activity so it can be identified. Maybe you just mean you interpret the actual candles more liberally than the books do. Give me an example if possible.

Thanks.

 

attachment.php?attachmentid=14888&stc=1&d=1257364132

 

 

There's an example of F - that may not fit the definition of a perfect bearish signal, but it works for me.

 

So we could be short @ 7.34 and I want to see how it reacts from 7.00-6.81.

 

This isn't the best looking pattern to enter on, so if r/r reward impacts the decision making process, this one could be skipped over.

 

Initial trade r/r

Risk: .51 (7.85-7.34)

Reward: .34-.53

 

So not the greatest trade in the world b/c we are looking at 1:1 at best initially. My idea for exiting trades was just trail behind the daily candles and let the market take it out.

 

Day 2 trade r/r

Risk: .34 (7.68-7.34) -- stop placed 1 tick above high

Reward: .34-.53

 

Now that r/r is a little better. So if we find that trade usually move in our favor even just a bit, then we can improve the risk part of the trade.

 

Day 3 trade r/r

Risk: .10 (7.44-7.34) assuming the HOD has been put in as day 3 is today.

Reward: .34-.53

 

Now the trade is providing at least 3x our risk and that is attractive.

 

So even though an ugly entry candle, as long as price moves in our favor the next couple days after entering the trade, we can decrease the risk and keep the same profit goal. That's one advantage of using the daily charts as those highs and lows are important.

5aa70f4ee8f5e_F11-4-09.png.daf7dc7de8c7f32f68a5bd43e21d6e5b.png

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I will see about getting back to this over the weekend. I had to close my firefox and when I brought it back up, all my stuff on freestockcharts was gone - annotations, circles, etc. I'm not sure if that's b/c I did a ctl+alt+del shut down of it or if it doesn't save that stuff after you close firefox... I hope it's b/c I did an abrupt shutdown otherwise that won't work.

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I will see about getting back to this over the weekend. I had to close my firefox and when I brought it back up, all my stuff on freestockcharts was gone - annotations, circles, etc. I'm not sure if that's b/c I did a ctl+alt+del shut down of it or if it doesn't save that stuff after you close firefox... I hope it's b/c I did an abrupt shutdown otherwise that won't work.

I have an older version of Amibroker that I have had for years. All I do with it now is update the stocks and ETFs that I watch using Yaho data, it is free. Works real good for marking up EOD charts. I don't know if I would go out and buy AB now with all the free sites out there, but I like it for what I do and then everything is on my machine..

anyway, just a FWIW.

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AAPL JUN09-JUL09

 

attachment.php?attachmentid=14851&stc=1&d=1257303459

 

 

I wanted to try out a stock and found AAPL. I'm not sure how smooth this will work on daily charts with stocks due to the gaps. This particular timeframe on AAPL provided 3 trades - 2 winners, 1 loser.

 

Hi Brownie,

 

I like your idea for this thread.

 

One comment, if I may: The loss you mention appears to be a short trade. I would suggest that you do not trade the H/L in isolation from S/R. I attached a chart with some notes explaining what I mean (sorry for the font - I do not like Telechart's drawing tools, and so I used MSPaint. My daughters use Paint all the time. I have no idea how to change the font. I'm thinking that the last time they used Paint it was for some Halloween project.

 

Best Wishes,

 

Thales

AAPL2.thumb.jpg.27df776f8457c19bf3b88648e483408c.jpg

Edited by thalestrader
spelling

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Hey everyone, Browns, are you still interested in using this strategy? Its a great way of finding out stocks which have momentum...

 

Hope all is well.

 

If you want to post charts, please do. I'll be honest, my daytrading has been rather busy lately so I haven't touched this.

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I have to say I am finding it difficult to keep up with TT's 'real time' thread. This could be the perfect antidote with a bit more of a following. I don't really look at enough instruments on a daily that there is much to post. I guess it would only take 10 minutes a day and could be done on one of the free online sites.

 

I always plan to look at a bit more on this sort of time frame with a view to spending less time at work. It's ironic that I never seem to find time to!

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Here's one that I entered the other day. More of a TTE type trade, I guess than a break out, but, still, a momentum play...

I took profits already on half and stop is still at scratch. Probably will just stop out and be done here in the next day or two, but sometimes these down moves are strong...

I know this is after the entry, so the fact that I actually took this trade is not important, really, just the idea of the setup.

Anyway, I see this thread is coming back to life so what the heck.

I like this EOD trading and should probably do more of it since my daytrading sucks.

SNAG-0000.thumb.gif.916a2f216fcaa9166bccbff57e79503f.gif

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Found this thread yesterday - and spent a few minutes doing the Thales H/L method. Ideal entry not available (too far ranging) for this trade - but did find a nice low risk entry into the retracement to a previous pivot low after the H/L/H/L pattern shifted from downward to upward.

 

Thanks to Thales & Browns Fan for this thread.

eur-usd.thumb.jpg.e4baf232adcd8659a9fae850736346a9.jpg

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