A simple price action approach

Quote from NoDoji:

In the past I've been screwed by getting so focused on a smaller or larger time frame, I forget what my main time frame is telling me! I've learned to always be trading on the right side of my main time frame, focusing only on a smaller time for range trading and key entry signals.

The key to turning all our individual trend lines and interpretations into profitability is how you manage the trades. Limit the losses when price fails to provide follow through and be prepared at any time to reverse sides when indicated.

Here’s how I interpret the price footprints at the beginning of Jack's chart. It's a 2-min chart, so it’s a scalper’s point of view, but the concepts behind it are the same in any time frame:

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Start at the left and assume you have no access to anything that happened before that initial green bar. Also assume you’re going to allow 30 minutes to transpire so you have a little price action history before you begin.

By the time the 15th bar closes you have 30 minutes of history. What do you see at this point?

1. Price broke downside out of a small containment range, but buyers stepped in with enough conviction to drive price back up through range resistance.

2. Price is pulling back into the range and the red bar closes near the low of that range.

What to do:

1. Draw a line connecting the range resistance to the higher high (HH) before price began pulling back.

2. Draw a parallel line across the swing low of the downside breakout.

Now you have an initial channel to use as a guide.

What does the price action to this point tell you?

1. The likelihood of a down trend was dashed by the strong buying pressure that led to a break of range resistance.

2. If range support holds, price should test and break the previous high, reaching another higher high.

3. If range support breaks, the lower channel line is “in play” and needs to hold as support if a higher high is still likely.

4. If the lower channel line breaks, chance of upside action diminishes greatly and the previous swing low is “in play” as a line in the sand for the bulls.

What can you do with this information?

1. You can anticipate the range support level will hold, buy right there near range support (~11990) and place a stop loss just below either range support or the previous swing low, depending on your risk:reward parameters.

2. You can place a buy stop order a tick or two above the high of that red pullback bar, so you’re only entered into a long when buyers step back in with enough conviction to indicate price is likely to least retest that higher high, with a stop loss just below the range support level. If price continues to pull back, you can trail the buy stop until either a long position is triggered or all support levels break and you look to enter short.

3. You can place a buy stop a tick or two above the previous high for a breakout play. This is a low reward entry because there doesn’t seem to be a strong trend in progress here.

Assuming one of these scenarios places you long, what is a reasonable initial profit target?

You should expect at least a test of the previous high. If price breaks the high, a reasonable initial target would be the upper channel line (unless there are S/R levels “in play”, not known from this limited chart view, that would lead you to choose a different target). So it looks like my minimum target would be ~12001.

So price breaks out and prints a new high, breaks the upper channel line and offers me the chance for additional profit. I can take profits, take partial profits, or trail a stop now to see if the market is offering more.

Now if I keep all or part of my position on, when price pulls back a little, tries to test the new high and fails to go higher off that nice little ascending triangle, the fact that the triangle broke down instead of producing a further up move tells me that this is not yet a well-defined uptrend. I would likely take my full profit on the triangle break and wait for further clues to price direction.

It takes only 3 points to draw a channel: A high and a LH with the parallel line drawn across the pivot low between them; a low and a HL with the parallel line draw across the pivot high between them; a high and a HH with the parallel line drawn across the pivot low between them; a low and a LL with a parallel line drawn across the pivot high between them.

However, it only takes two points to draw a single trend line. Notice how an upper trend line drawn across the high and the slightly higher high of the first three bars on this chart provide the level at which the range breakout finds resistance. You can draw a tend line across two consecutive price bars. This is a method of anticipating early entries into possible trends.

I pointed out the textbook 1-2-3 reversal setup (common after two or more strong trending legs), as they can be very profitable, though it feels a bit scary to take that trade at the hard right edge. Not so scary when you see your P/L get green in a hurry.

Additionally I included a picture of the web woven by a spider on caffeine to show the uncanny resemblance to my charts as the day progresses. :p
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Me-e-e-e-e-ew!!!:D
 
Excellent thread, especially thanks to NoDoji and Xpurt ... I look forward to following and contributing to this thread so I can learn more.
 
"You belief system is inductively based as are most people's minds. Too bad. A mind cannot become differentiated (like driving a car) when a person believes inductiion is how the market works. Too bad."

My belief system is abductively based.Which is the only correct reasoning.You better stop your fadoodle,Jack
 


If a person wants to trade through 6 bars as you and others do, then he has to use a fractal trend formed from smaller price segments (three minimum). In deductive reasoning, these are built by "puttting the pieces together". ftt's of faster obeservable fractals are used as points on slower fractals. FTT's on slower fractals always have and ftt of faster fractals at that time of the FTT.

You wish to trade from bar 3 to bar 9 as one trade. This means you are trading a fractal that is slower than the fastest observable fractal on the 5 minute bar. To find your profits on this slower fractal simply take the net of the faster dominant and non dominant fractal trades. By reasoning you may be able to see two things:

1. Less money is made trading slower fractals.

2. You have to do the faster fractal monitoring and analysis anyway to be able to trade slower fractals. that is the main theme of the failurs being demonstrated by most posters in this thread.




I agree for the most part,but..

1.Less less,but with more accuracy and precision

2.And i do use this minimum - 3 fractals to trade slower fractal

Why do i need these .3 points or ( .2)points ever, using 12 leading indicators or whatever?It`s labour intensive,not accurate,the arguments for this become far-fetched.
 
Quote from SnakeEYE:



If a person wants to trade through 6 bars as you and others do, then he has to use a fractal trend formed from smaller price segments (three minimum). In deductive reasoning, these are built by "puttting the pieces together". ftt's of faster obeservable fractals are used as points on slower fractals. FTT's on slower fractals always have and ftt of faster fractals at that time of the FTT.

You wish to trade from bar 3 to bar 9 as one trade. This means you are trading a fractal that is slower than the fastest observable fractal on the 5 minute bar. To find your profits on this slower fractal simply take the net of the faster dominant and non dominant fractal trades. By reasoning you may be able to see two things:

1. Less money is made trading slower fractals.

2. You have to do the faster fractal monitoring and analysis anyway to be able to trade slower fractals. that is the main theme of the failurs being demonstrated by most posters in this thread.
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I agree for the most part,but..

1.Less less,but with more accuracy and precision

2.And i do use this minimum - 3 fractals to trade slower fractal

Why do i need these .3 points or ( .2)points ever, using 12 leading indicators or whatever?It`s labour intensive,not accurate,the arguments for this become far-fetched.

Where is the effectiveness and efficiency that you`ve so provoked?
 
Snake eye, please just drop it and let's stick to the thread. Jack is a disruption here, but nobody has to give him any more room than is necessary to keep on track.
 
Quote from NoDoji:

focused ......smaller or larger time frame, I forget what my........... main time frame ............ telling me! I've learned to always be trading on the right side of my ..............main time frame,.........( focusing )..............only on a ..............smaller time ...................for range trading and key entry signals.

The key to turning all our individual trend lines and interpretations into profitability is how you manage the trades.
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What do you see at this point?...it seems like you must first be able to master watching market in several timeframes and deducing a likely scenario,once proficient,the trade management would be elementary.right most of the time,get out when wrong
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