My simpler interpretation. FWIW
A simple price action approach
- Thread starter metal
- Start date
I don't mean to complicate things too much, since most of this discussion is about TL's and channels. However, there are some great strategies that involve looking at 50% retracements for entry as well. Although I personally never mastered it, I know of people that trade them exclusively and do really well with them. Oftentimes, price can be seen as a series of smaller pullbacks and targets. If a trade hits its target, then you draw the next move in the series from last 50% bounce to the recent low. Once the "series" fails, you look for a trade at the first 50% pullback in the opposite direction. Of course there are nuances, and not every trend is as clean as the one on Friday, but it is a valid price only trading method.
Pullback one: 50% from Globex highs to most recent lows.
Next move in the series:
Next move in the series:
Next move in the series:
Next move in the series FAILS:
Buy first move in the opposite direction:
Pullback one: 50% from Globex highs to most recent lows.
Next move in the series:
Next move in the series:
Next move in the series:
Next move in the series FAILS:
Buy first move in the opposite direction:
Quote from ES.Dreamer:
Thread is a breath of fresh air with input from people that have obviously been studying the markets for a while.
Albeit it's only the beginning.
Couple of additional tips I would like to suggest.
Mark the dominant trendlines with a specific color, this is your main market direction, without clear direction, you have no business taking trades, for the trend to be your friend you actually need a trend to be present, otherwise you have no friend.
Mark the counter-trend lines with another color, this is your secondary signal, I will come back to the primary in a bit.
Mark the return lines with another, this is the one parallel to the dominant one, your exit point, what completes the channel. Market loves to trade in channels.
Here's what to do:
Dominant trendlines give you direction but they aren't very precise, lot of choppy action due to stops so the touch can be erratic, you think it's breaking but it's not, this is why you need the counter trendline for entry confirmation.
Don't anticipate a fade at the dominant trendline, let it "break", let the market take you in, most likely it's a fake because of the strong dominant trend, otherwise, there would not be a dominant trend line in the first place, it exists for a reason.
Your entry confirmation, when the counter trendline breaks *and* price is once again on the trend side of the dominant-trendline, stop goes above-below the counter move high-low. You need confirmation because trends do end, don't be a hero.
Your exit, the return line, unless the dominant trendline is "broken" once again, then you exit your trade and wait for a new counter-trendline to once again break.
Sometimes you will be kicked out in noise, make sure you don't let this discourage you and you are prepared to re-enter as long as the conditions are still valid.
Pretty simple, just needs to be done and do not ever fade the channel's trend or dominant trendline, don't let the temptation of counter-trading interfere with your trading-plan.
Don't pay anyone a single cent to trade profitably, all you need is strong discipline, patience and the above and you are set.
Oh yes and capital, lots and lots of capital
ESD
Perfect
1. Learn to identify the main trend and master that first
2. Counter trend trading is much more risky and requires greater skill and faster trading
3. As a guide, using a 20 ma lets you see when pa is overbought/sold. When the excursion is allowing a safe trade, look for the set up
4. Look at how pa is setting up. If the approach is messy the risk is higher.
5. Consider how long the trend has been in place. Markets need pull back breathers even in strong trends
6. Look left! How is the evidence building up that a counter is justified.
7. Learn to distinguish quality from risky set ups. It not just the pa signal but the prior movement that tells you a trade is coming
8. Make sure your trend line is well defined/confirmed
9. Multiple time frame reading will let you know if the trend stands a chance of terminating. At that point a counter trend trade can become the new trend
10. While it is a skill well worth learning, you can make all you need sticking with the confirmed trend. Counter trend is not just the opposite of trend trading - it is much more advanced
Excellent post. This is moving on to Chapter 2 content.
For anyone who took the trouble to look, I mapped out a possible market top on the Dow months in advance and so far it is following my projection.
Let's say bmw's chart point A is the market top. How do we have a go at projecting where the market will drop to? How do we build up a market view in advance that helps us to see the major trend ? How do we get self adjusting time and price targets? How do we anticipate and map the minor wiggles?
I will cover that later in the thread but for now study bmw's framework as it is one of the keys to understanding price structure and how to ambush the market.
Broken channels tell you as much as working channels and it is all about reading the market. Decades back the first thing I learned from an old timer was S&R plus trend lines. I thought that was what everyone learned. Next I learned patterns and projections. Then next was market structure and target projection. I thought everyone learned to use channels. Guess not.
Ditto. This is what trading is about - preparation most of the time and that means you don't need to scale in/out. The less you know the more you need to scale meaning the most profitable runs have your lightest trade.
It's funny watching the cynics that never want to learn, the skeptics who want to prove it to themselves, the lazybones who can't be bothered to read prior posts let alone the thread and the learners who pick up the spade and start digging.
I have all the time in the world for skeptics and learners.
If I am trading a 5 min chart, would I find the "dominant trend" on the 15 min, 60 min, day,or week chart? And how far back would you start the trend line? All of these different variables will determine a different outcome of where the dominant trendline is, correct? I am not trying to be a hardass I am asking what different people use. It will be different for everyone. Would anyone like to share?
Personally I like to stick to using a 60 min to find "dominant trend" I use the previous 5 days. As of now....anyway
Don't get me wrong I would still use daily and weekly levels . But like I said alot of this is very subjective correct?
Personally I like to stick to using a 60 min to find "dominant trend" I use the previous 5 days. As of now....anyway
Don't get me wrong I would still use daily and weekly levels . But like I said alot of this is very subjective correct?
and here it is going back 20 days on the hourly chart.
In order to avoid confusion do you just stick to the same timeframe sets to draw your trendlines?
If you only go back 5 days the trend is down, if you go back 20 the trend is up. So if im trading on the 5 min and am bearish does that mean I am countertrend trading according to the 20day hourly chart?
I think alot of this might come down to defining a set of timeframes to use within your plan and sticking to it right? or no?
With the current method I use, I don't care if I see the setup on the 2 min or the daily, I take it as long as my risk permits it. I might have a setup on the 2 min, 3, 5, 10,15,30,60,4hr, day or week. I take the setup. That's why this method is giving me a little confusion in this area. Before I never had a set timeframes, I just toggled timeframes like crazy looking for my pattern signal.
In order to avoid confusion do you just stick to the same timeframe sets to draw your trendlines?
If you only go back 5 days the trend is down, if you go back 20 the trend is up. So if im trading on the 5 min and am bearish does that mean I am countertrend trading according to the 20day hourly chart?
I think alot of this might come down to defining a set of timeframes to use within your plan and sticking to it right? or no?
With the current method I use, I don't care if I see the setup on the 2 min or the daily, I take it as long as my risk permits it. I might have a setup on the 2 min, 3, 5, 10,15,30,60,4hr, day or week. I take the setup. That's why this method is giving me a little confusion in this area. Before I never had a set timeframes, I just toggled timeframes like crazy looking for my pattern signal.