What Really Works for Technical Traders

[phantom 16]

I read somewhere on this site that technical analysis doesn't work for day traders. It sounds like most traders are having a hard time discerning what's important and what's fruitless with regards to intraday signals. I am starting this thread to cut through the clutter and tell you how the markets can be traded in ANY time frame.

 

In this lesson I will explain the two most elementary technical signals on the chart: price rejection and price acceptance. I'll bet that most traders have a hard time determining the general intraday trend and I believe this is due to your dependence on ultra short term charts, such as 1,2,3 or 5 minute charts. Moving out to 15 minute and 30 minute charts one can see things that are basically invisible on 1-5 minute charts. What I like to see on a 15 or 30 minute chart is a hammer or doji candlestick following a consolidation or range breakout.

 

What is the psychology behind the hammer? Price moved from the breakout zone to some new level. Then price then retraced towards the consolidation zone and was rejected (hammered) back into the direction of the new trend. The breakout of that hammer bar IS THE ABSOLUTE SAFEST BET YOU CAN MAKE!!! Why? Because if the market just got hammered away from a price level, what do you think the odds are that price will immediately return to that level? Not very good odds at all.

 

The doji is similar in nature because it still shows price rejection on a lesser scale, but also vividly displays the mini-consolidation which leads to a continuation move. And both breakouts CLEARLY DISPLAY WHERE TO PLACE YOUR PROTECTIVE STOP, at the other end of the hammer or doji bar following the breakout of that bar! Since the number one rule of trading is to always know your risk BEFORE you enter a trade, this is the best indicator in trading. (It doesn't hurt to have MACD confirming your trade direction, but it is not imperative). Just use the 20 period moving average as your trend filter and NEVER trade against the trend on the 15 minute chart.

 

Price acceptance is when the market moves to a price level that previously turned the market around but this time doesn't, thus indicating that the market may still go further in its present direction. This is most useful when the market is searching for support or resistance after a prolonged move and you are trying to decide whether to exit or add to your position. I'll leave trade management for another discussion.

 

Hope this helps!

 

 

Luv,

Phantom

[Tradewinds 12]

• How many trades are you making?
  
• Can you post a couple of charts?
  
• Are you exclusively trading just this pattern?
  
• Are you exclusively trading candlestick patterns?
  

[sspremj 10]

Hi,

 

I am a newbie. Please post a chart. This will help me immensely.

 

Thanks,

Prem

 

1. 
   

[phantom 16]

Hi,

 

I am a newbie. Please post a chart. This will help me immensely.

 

Thanks,

Prem

 

1. 
   

 

 

 

This is the July Beans showing a perfect consolidation breakout followed by a hammer. Notice the "rattail" that helps identify the hammer. See if you can identify the other two hammers in this down move (both excellent places to pyramid your position).

 

This is only one of several breakout systems I developed and trade but I'm able to get in on several sustained breakouts each week with this method in just the currency futures alone.

 

Hope this helps.

 

 

Luv,

Phantom

[phantom 16]

• How many trades are you making?
  
• Can you post a couple of charts?
  
• Are you exclusively trading just this pattern?
  
• Are you exclusively trading candlestick patterns?
  

 

I promise to provide enough fodder to get you profitable if you aren't brain-dead, but I refuse to spoon feed you. Fair enough?

[Tradewinds 12]

 

How many trades are you making?

Can you post a couple of charts?

Are you exclusively trading just this pattern?

Are you exclusively trading candlestick patterns?

 

I promise to provide enough fodder to get you profitable if you aren't brain-dead, but I refuse to spoon feed you. Fair enough?

 

It's a deal. Thank you.

[steve46 12]

Promising to "make" a person profitable is my opinion, a reliable sign of a scam...

 

I will leave the legal issues aside (there a couple that pertain but then it all depends on how much some poor person loses before they talk to an attorney).

 

Best of luck to all

 

Steve

[BlowFish 10]

Well you can lead a horse to water but you can't make them drink. Of course it's not surprising horses are wary if 99% of pools are contaminated.

 

Having said that trading the first pull back after price has tipped it's hand and then 'confirms' through subsequent price rejection is a pretty firm strategy. Arguable you need to assume a bit more risk depending if you place the stop under the area that gave birth to the move or under the area that price was rejected (the hammer), I guess the latter keeps things tight.

 

It will be interesting to see where you go with this. There have been a couple of threads here that have shown a very similar approach in reasonable detail. The big thing they had going for them was that they showed trades before they trigger rather than in hindsight thus giving people confidence that the approach works in 'real time'. Still it's early days yet, so good luck with your thread

 

One thing you said Then price then retraced towards the consolidation zone and was rejected this is the key imho, leaning too heavily on specific patterns or candles ultimately will inhibit ones understanding of price action and the underlying supply and demand equation that causes the pattern/candle to manifest itself in the first place

[phantom 16]

Promising to "make" a person profitable is my opinion, a reliable sign of a scam...

 

I promised to provide info (fodder) such that a previously clueless trader can get profitable; I never promised anyone profitability per se. That, of course, would be in violation of CFTC regs.

 

Please come here to learn, you're not invited if you're here to "stir the pot." Nes pas?

[phantom 16]

 

Let's take a look at another breakout. This one occurred last week in the euro.

 

What is striking here is how distinctive the post-breakout hammer was leading to a marked downswing.

 

These are the "picture perfect," ultra low risk type trades I love, for sure.

[phantom 16]

One thing you said Then price then retraced towards the consolidation zone and was rejected this is the key imho, leaning too heavily on specific patterns or candles ultimately will inhibit ones understanding of price action and the underlying supply and demand equation that causes the pattern/candle to manifest itself in the first place

 

You are right on the money, BlowFish. UNDERSTANDING WHAT IS CAUSING THE PRICE ACTION TO OCCUR is paramount to trading effectively. I don't take any hammer the chart provides; its always contextual with regard to previous price action. This is exactly what makes this entry so strong: the market was range bound, it broke out, it tested, it failed the test with price rejection, it continued away from the consolidation zone.

 

Furthermore, depending on how much "potential energy" was built up and stored inside the consolidation range, these breakouts can give tremendous reward for every dollar risked. I'd rather be patient and attack these trades than fritter my capital away scalping 3 or 5 minute charts, but that's just me...

[phantom 16]

 

Using this chart of yet another euro breakout, allow me to instruct you on another form of price rejection, the false breakout-reversal.

 

Pay strict attention to the price action around the red arrow. Following a break below the 20 period moving average at around the 3:40 mark, the market moved into a sideways channel consolidation. The market moved up to a close near the high end of the channel range after peeking above the prior range high (the green bar just prior to the red down bar signified by the red arrow). The red bar moved all the way across the range and closed below the entire channel range. Following a short test, ie the "rattail" portion of the subsequent bar, the market plummeted. I sold the break of the arrowed bar with my risk stop one tick above that same bar.

 

Let's take a closer look at the market dynamics behind this form of price rejection. Prior to the breakdown the market tested the range high and even broke above the high. But the key element here is that the market did not FOLLOW THROUGH (false breakout). Instead, it moved all the way in a single bar through the trading range with a close outside the range on the other side (reversal). In other words, the market rejected the attempt to breakout on the high side of the range and opted to breakout strongly through the low side of the range. If the market doesn't meander back into the range and stay there any longer than it had to to complete the test (rattail portion of next bar) I am short this market!

 

I call the red-arrowed bar a volatility breakout bar due to its relative length with respect to the other bars in this consolidation. Also note that the MACD turned down with this vol breakout bar, confirming market direction and momentum.

 

This is a case whereby a hammer wasn't used to enter the market, but was replaced by a volatility breakout bar. In either case, price rejection was the "signal" used to enter the market relatively safely. Once again, the driving force behind the huge follow-through was the breakout of the much larger range that preceded the small consolidation breakout, providing enough "potential energy" to convert to the kinetic move you see at the right of the breakout bar.

 

That's the lesson for the day. Now go locate these opportunities for yourself and make some money!

 

 

Luv,

Phantom

[ricastein 10]

There's always someone that wants to stir the pot. I hope you won't be dissuaded from contributing to this site. Rational and logical strategies are always appreciated. And this talk about a scam is a bunch of crap. I didn't see anywhere, where you asked for money. This guy needs to go pee in somebody else's cereal. Thank you for taking the time to contribute.

[phantom 16]

There's always someone that wants to stir the pot. I hope you won't be dissuaded from contributing to this site. Rational and logical strategies are always appreciated. And this talk about a scam is a bunch of crap. I didn't see anywhere, where you asked for money. This guy needs to go pee in somebody else's cereal. Thank you for taking the time to contribute.

 

You, and guys like you, are always welcome.

 

 

Luv,

Phantom

[johnw 10]

hi Phantom,

 

I have just read your narrative with respect to your posted chart.

 

All very clear indeed to the point where even a person like I can follow and clearly understand

your thought process leading into your successful trade.

 

What I struggle with, is why you refer to Bolly Bands, 20 ema, MACD, Hammers etc,

when it is obvious that you can read price behaviour so clearly.

[phantom 16]

 

 

Here we go again!

 

Let's take a look at this morning's natural gas market.

 

The bar at 6 am tests the high from yesterday afternoon and forms a hammer. The market then traverses the entire channel range in a single bar and closes near the low. The next bar tests the 20 period moving average. The bar signaled by the red arrow breaks above the test bar high and reverses all the way to the low, signifying PRICE REJECTION (my favorite two words), closing on the low. At 7 am sharp the market plummets...

 

Anyone else make any money on this breakout?

 

Start tracking some of these setups and at the very least paper trade them!

(Your bank account will love you for it).

 

 

Luv,

Phantom

[phantom 16]

 

What I struggle with, is why you refer to Bolly Bands, 20 ema, MACD, Hammers etc,

when it is obvious that you can read price behaviour so clearly.

 

My friend, All this "stuff" just acts like guard rails on a highway; these particular indicators have very special uses which I will most likely touch on at a later date.

 

 

Luv,

Phantom

[johnw 10]

My friend, All this "stuff" just acts like guard rails on a highway; these particular indicators have very special uses which I will most likely touch on at a later date.

 

Luv,

Phantom

 

Excellent ... I knew you would have an appropriate answer ..."guard rails" is not a term

I am familiar with and so I will await your ongoing postings with anticipation.

[Flex1975 10]

Hi Phantom,

 

Although I respect your willingness to share your knowledge and I think your advice is decent...please allow me to add a few thoughts on technical analysis for all struggling traders reading this thread and show these thoughts in a chart based on your EUR/USD example.

 

Phantom described his 'hammer trade setup' as the safest bet you can make. I am a '100% technical analysis' trader and one rule I have is to avoid betting. When I make a trade it is purely based on the information from a number of indicators that proved to be 100% reliable and accurate in all market conditions. Reliable indicators does not guarantee a winning trade but trusting your tools is step one before you can apply a single piece of technical analysis in real trading. I think that's crucial advice for (new) traders.

 

Please take a good look at the chart below. It contains the same data as the EUR/USD (20 min) example of Phantom and shows a number of the indicators I use. As you can see the vertical lines and yellow trendlines prove that all indicators confirm price action. No need to bet.

 

Technical analysis is a very powerful way to position yourself at the right side of the next price direction no matter the timeframe but only if your TA tools automatically adjust to the constant changing market reality. And you need to define a clear set of rules based on your TA tools that work both in trending and choppy price action.

 

Hope this helps a bit...

 

Good Trading!

 

 

 

[Mysticforex 13]

I may as well through my hat into the Ring.

 

I employ a few methods in my trading. as some may know, some methods work better during certain Market conditions and not as well in others.

 

One method that works consistently well for me, in just about all market conditions, Trading trend line to trend line. Just for the sake of giving it a name I call it the "Too Trendy".

( I am sure others do the exact same thing and call it something else ).

 

On the attached AUD/USD 1 hour chart there are 2 trend lines, The lower was drawn on the 1 hour, the higher was drawn on the 4 hour. When price reaches the lower trend line it will either be rejected, or go through. If price is rejected at the trend line, I might take a short scalp, depending on the R/R. I price goes up through the trend line ( remember to always wait for the candle to close on whatever TF you are looking at) I would buy, looking for a TP at the 4 hour trend line. Care should be taken when price approaches previous highs ( there are 3 on this chart).

 

The other MAs and indi's on this chart have no bearing on this setup, I was just too lazy too create a new chart.

Also, I am not following A/U at the moment, I just happened to have the chart open when I read this thread.

[Flex1975 10]

Attached a better version of the chart...my bad!!

[phantom 16]

 

Phantom described his 'hammer trade setup' as the safest bet you can make. I am a '100% technical analysis' trader and one rule I have is to avoid betting. When I make a trade...[/img]

 

My friend, understand that I said bet, not uninformed gamble. Every single trade I make is a bet in the strictest sense but I NEVER make an uninformed gamble.

 

I think that you and I are on the same page here, just semantics...

 

 

Luv, Phantom

[johnw 10]

Attached a better version of the chart...my bad!!

 

Top marks to your coding skills Flex1975 ...but what does it all mean.

[ricastein 10]

Flex1975, the chart is too small (and can't be enlarged) to see what indicators you are using. Would you care to tell us what indicators and settings for each, you are using? And what time frame are you using? I would like to try to examine your use of these indicators and time frames, also. Thank you.

[Flex1975 10]

Top marks to your coding skills Flex1975 ...but what does it all mean.

 

Hi Johnw,

 

Thanks for the compliment... Yes, I developed the indicators myself (and to avoid the thought I'm trying to promote them here on this forum....they are not for sale)

 

Í'll give you a brief description what the indicators measure:

 

- Trend Filters (slow/medium/fast): These filters classify each bar with a certain degree of tolerance and measure the related swing length.

 

- Trend Index: This is the leading indicator I use for entering a trade. It measures the trend quality based on a dynamic oscilator length.

 

- Market Heartbeat: This is my version of the ADX.

 

- Market Power: Shows the gear-box of the market (same as a car).