A simple price action approach

There are endless ideas traders can develop with market geometry as the market comprises multiple overlapping structures.

Unraveling these structures not only allow us to see PA relationships, but helps us to understand how the market breathes, pauses and runs. Just about every top and bottom are related and usually in many different ways.

Once a possible structure is in place you can further refine PA with volume and indicators to improve your feel for the market. Good thread Metal - keep it going.
 
PA tells the story. What helps me is to add fundamentals and then market psychology. For instance PA shows an uptend in 3 time frames. 3 minute, 15 minute and 60 minute, but then a gap up occurs in an area where people are likely to take profits IF PA shows an early failure, then the set-up is strong to begin selling the peaks of price as lower highs are made and yet in all timeframes the trend may not be established. Likewise fundamentals. If interest rate changes are made or earnings are expanding then well they will boost both the underlying psychology and underpin a stronger trend which of course will show up in the PA.

Thanks Metal.
 
Quote from IanMacQuaide:

NoDoji , do you use 24hr charts?
I'm a bit lost on when/how long to draw a trend line, when to start, etc.
Do you let the Mkt develop an hour after the bell before drawing a trend line?
Thanks for any help.

Ian
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Forgot to add I trade NQ Intraday, I like 2 min charts with a 10 Min for Trend.
 
Quote from IanMacQuaide:

NoDoji , do you use 24hr charts?
I'm a bit lost on when/how long to draw a trend line, when to start, etc.
Do you let the Mkt develop an hour after the bell before drawing a trend line?
Thanks for any help.

Ian
More...

By 24 hr charts, do you mean the daily chart? I always look at the daily chart to get a clue as to whether a range day or a trend day is more likely. Just as price breaks out of consolidation on smaller time frames, it does the same on the larger time frame. If a key level is in play on the daily chart and that level breaks out, a strong trending move intraday is very likely. In that case I'll be compelled to hold trades in the direction of the breakout for larger profits than I would if the day is more likely to be an ongoing battle between bulls and bears. Following a strong trending move on the daily chart, I expect one or more days of consolidation, meaning back-and-forth range days are likely. I'll then trade for smaller moves in either direction. This is just a basic guide. If price is pushing hard on a trade, I'll let it run, regardless of whether or not I "expected" a range day.

I draw lines in the 5-min and 1-min time frames I trade off of and I draw them as soon as I see potential. Yesterday, I got my platform going just before 7am PST and I immediately drew the lower TL you see on the chart I posted. The final bar of a strong price move can be used as a containment bar and an early channel line can be drawn off it and adjusted if needed when the next pivot high/low is put in. The last down bar of the down trending price swing on my chart occurred at 6:30 PST. So I could place a parallel channel line at the high of that containment bar (it had "contained" the price action at the point I got started). And that channel line then "contained" the upward price movement. If you waited until price broke the original containment bar and closed back below the 20 EMA and then placed the parallel line, it turns out to be positioned the same either way.

On my chart, look at the 7:35 and 7:40 bars: lower highs and lower lows. So leading into those bars we have internal double top resistance in a previously strong downtrend, and those two bars define a failed breakout of the double top resistance. Good enough for me, I'm drawing a TL across those key price reversal bars, so if the down trend resumes I'll use it a guide to where pullbacks in the downtrend are likely to find resistance and begin a new push down.

An initial parallel channel line could be drawn right away, using the lows of the 7:20 and 7:25 bars because those bars had consecutive lower lows. This parallel line would only have to be adjusted slightly when price dipped slightly below it during the 7:55 bar. The parallel line I drew on my posted chart is across the low of that 7:55 bar after the initial early TL served as perfect pullback resistance during the 8:15 bar.

So as metal made clear early in the thread, these lines are dynamic. They can get sloppy later on as volume dies off and smaller traders/algos position ahead of each other and push a lot of head fakes. Once a trending move gets "tired" the pattern has become obvious, and it will deviate during both lower and higher volume periods.

That's when adjustment is necessary. But it's good to just play the pattern until it fails, because there've been days when a trend line or a 20-period MA just keeps holding and holding and you think, "I can't believe these trades just keep working." Trend followers are a tenacious bunch; the bots are programmed to take advantage of these levels, so us little retail traders can just keep tagging along profitably until the big boys all go to lunch and the volume dries up.

I usually wait for some price confirmation, rather than using pure limit orders off trend/channel lines. Confirmation is usually via a double/triple touch to S/R or lightly HL/LHs on a very small time frame. Many traders use tick charts for these precision entries around S/R levels.
 
The 'angle' of the trendline must always be taken into consideration. It seems very elementary but the initial angle has much to do about the sure to follow consolidation.

You will understand the trends and consolidations, retraces, continuation spots far better once you quickly register in the noggin that a 45 degree angle is the preferred one to have what is considered 'NORMAL' retraces. Many traders that can read a NORMAL retrace can expect a continuation where rookies will be reversing and soon dead meat as the CONTINUATION takes off.

Retraces are simply rest periods, time to hit the John, time to play grabass at the water cooler, time for the risk manager to jump your case, time to check out the legs of newest chicks. Armys on the march slowed down now and then for the rear echelons to catch up with fresh ammo, food and medics to take out the fallen. After refreshed, the traders and the Army continues on. Why retreat unless the conditions change or no more ammo?

Last post of month, busy boy lately ..:)
 
Quote from bighog:

Many traders that can read a NORMAL retrace can expect a continuation where rookies will be reversing and soon dead meat as the CONTINUATION takes off.
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This is the best thing you ever tried to drill into my thick head. What used to be most counter-intuitive concept to me is now my most comfortable and highly anticipated trade.

OK, I'll let you get back to the water cooler, now :D
 
the trendline is too subjective. first everyone has its own version, someone use 1'chart, others use 3' or 5', to be honest, when the market closes, I draw the best trendline.

second, for day trading, we need fast fingers, drawing those lines need your attention /efforts,consume chunky time, distract you.

third often intra-day trend is short-lived, after one to three pushes, or just you can draw your perfect lines, the market reverses.

the fourth, what the probability of this method is? other question is can you execute it perfectly, for example, just when it touches the channel line, it may touch, it may not, it may go through and reverse,how can you do it if not computer programmed.

to me, any setup without any statistically favorable probaility is not worth trying. why, cost money.

the simplest method may be just like that: when drop, go short, when go up, go long. you can use a fixed amount to say it is a drop or it is a goup, then use that fixed dollar amount as a stop loss. but as I said, market is complicated, you can not use the simplest method to make money.

a consistent profitable trader knows when to use the simple method, when to use other fancy ones. the conditional probability. market has different phases, rally, drop, trending, consolidation(rest area), pullback, indecisive zone, topping, bottoming, gapdown, gapup,runaway, exhaustion, momentum,panic,hype.... in different phases, you need different methods to trade.

anyway, you pointed a way to learn. but do not mislead them, that is the way toward consistent profit.
 
Quote from trader198:

the trendline is too subjective. first everyone has its own version, someone use 1'chart, others use 3' or 5', to be honest, when the market closes, I draw the best trendline.

second, for day trading, we need fast fingers, drawing those lines need your attention /efforts,consume chunky time, distract you.

third often intra-day trend is short-lived, after one to three pushes, or just you can draw your perfect lines, the market reverses.

the fourth, what the probability of this method is? other question is can you execute it perfectly, for example, just when it touches the channel line, it may touch, it may not, it may go through and reverse,how can you do it if not computer programmed.

to me, any setup without any statistically favorable probaility is not worth trying. why, cost money.

the simplest method may be just like that: when drop, go short, when go up, go long. you can use a fixed amount to say it is a drop or it is a goup, then use that fixed dollar amount as a stop loss. but as I said, market is complicated, you can not use the simplest method to make money.

a consistent profitable trader knows when to use the simple method, when to use other fancy ones. the conditional probability. market has different phases, rally, drop, trending, consolidation(rest area), pullback, indecisive zone, topping, bottoming, gapdown, gapup,runaway, exhaustion, momentum,panic,hype.... in different phases, you need different methods to trade.

anyway, you pointed a way to learn. but do not mislead them, that is the way toward consistent profit.
More...

I couldn't disagree more. What I posted and what CrazyAtrader and NoDoji have reinforced is truly a simple method that works. Sure there is a little more to it that I plan to introduce but make no mistake: this approach makes money day after day.

There are plenty of other trading methods but once you choose yours and learn what it means to be consistent you will simply smile at those who profess a need for complexity.

metal
 
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