A simple price action approach

Quote from IronFist:

Hey, I got a pm to come check put this thread.

There was indeed a lot of ambiguity in the jjrvat thread, including the normal "guru" type of stuff:

- Cherry picked charts

- Example charts with different time frames with no explanation of why one might be 50 ticks and another 1 minute or x number of volume

- avoiding specific questions

But that is to be expected on this forum.

That is not to say jjrvat is a "guru". He was the first person to open my eyes to the idea of price action, and while he may be a successful trader, perhaps he just wasn't able to convey everything he wanted in the thread, or maybe part of his trading is intuition, which he could not quantify.

But there was too much vagueness in his answers, so I decided to extrapolate from that thread concrete, 100% mechanical rules for a trading system. I'll post them if you want.
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Hi Ironfist.

Long time I haven't post in ET and I am glad that you are still in the business.

First, I am flattered for the "He was the first person to open my eyes to the idea of price action". For the rest of your comments I find them quite surprising and a little disappointed especially after all the time we expend trying to address your questions.

That thread became messy and out of control. Not only because spammers, the lack of tools in ET to manage a thread but especially because of the amount of newbies that wanted everything chewed and with pre-cook / pre-made instructions. I am also glad that you are trading price action but I am disappointed because I see now that you missed most of the message in that thread.

It wasn't meant to be a 100% mechanical rules. If you want that you were looking in the wrong place with Price Action. You need quant trading, fast algos,etc ,etc and some statistical edge. The cherry picked charts you mention were all from posters asking questions. I remember you posting a 5 minute chart i think with a 50 SMA and I developed 5 or 6 post around your time frame and instrument (as I did with many other posters with tick, vol, time, oil, ES, forex, etc etc).

My only point was the principles not 'teaching" a premade system. I expend hundred of post trying to explain that timeframes, indicators, time, etc were independent of some basic quantifiable price principles.

True, I avoided ALL questions that were aim to a chewed system. I used MA's for reference only (as I posted examples with all other indicators) and people and newbies keep coming with what MA 21 or 15 or etc...they missed the point and I lost my patience in the process.

I will happily discuss or answer any of your price action questions but I won't answer or discuss a canned indicator system or why a 12, 21, 45 or whatever system you backtested doesn't work. First, because I don't have a clue what you were trying to test and second I don't have a clue how can you translate price action reading to a quantifiable argument for an autonomic trading system.

I insist if you are looking for mechanical system, the price action principles we were discussing are useless. For the rest, I am always up for a discussion about price action.

jjrvat
 
anglagard,
Don't have a real good answer for you. Others may have a better answer. I will share my 2 cents.

Unfortunately nothing works consistently (or precise) in trading. Thing that worked in the past 2 weeks may not work next week (though some gurus sell system that they claim work all the time but they still sell it and not use it themselves:-). Things that didn't work last week may work this week. What matters is positive expectancy of your setup and your ability to continue to take the same setup again and again without fail. In other words, just because you see something not working last 2 weeks, you should not dump your setup and move on to something new every week as there is no holy grail. You will have losses guaranteed which does not mean your setup is bad. I don't know of (not come across) a setup that has no losses nor do I know of a setup thats extremely precise. Pick the channel in a time frame as the trend. Pick the signal that you want to play in the direction of the channel. Make sure your RR > 2. And end of the day study/review if you took all the signals you wanted to take and if you played it correctly by honoring the stop and the target.

My 2 cents.
B

Quote from anglagard:

Thank you for kind words.

Yes, when i started trading the markets I realized there are trends within trends, which makes it all quite confusing, yes the trend is your friend but with dozens of friends fading each other, whos really my friend! To end the confusion I have adopted the rule that whatever channel Im trading that is my trend.

I dont feel comfortable fading a channel trend at the outter line unless it also happens to be a trend based signal with the trend of a greater channel in proximity,keyword greater. Doing the opposite has led me to losses and uncertainty so I stopped doing that. Not due to lack of capital but due to not having a complete plan as of yet.

Have spent a great deal of the weekend studying this and I can say with good confidence that there is a lot of value in this. Still not sure how to deal with stops as many times the entry area works precisely and sometimes it seems like it won't work then ends up working. Any suggestions ? Do I keep using small stops then retry, if so how many times ? How can I differentiate between bad price action at the entry area and noise ?

Another thing I concluded is that projected shoulders are far more precise than opposite line projections, so Ive been concetrating my trading on them.

Oh well, back to my studies, can't wait to have a full plan ready so I can start doing this for real, even if its with limited size until i learn the ropes.

Cheers everyone.
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Quote from PABuster:

anglagard,
Don't have a real good answer for you. Others may have a better answer. I will share my 2 cents.

Unfortunately nothing works consistently (or precise) in trading. Thing that worked in the past 2 weeks may not work next week (though some gurus sell system that they claim work all the time but they still sell it and not use it themselves:-). Things that didn't work last week may work this week. What matters is positive expectancy of your setup and your ability to continue to take the same setup again and again without fail. In other words, just because you see something not working last 2 weeks, you should not dump your setup and move on to something new every week as there is no holy grail. You will have losses guaranteed which does not mean your setup is bad. I don't know of (not come across) a setup that has no losses nor do I know of a setup thats extremely precise. Pick the channel in a time frame as the trend. Pick the signal that you want to play in the direction of the channel. Make sure your RR > 2. And end of the day study/review if you took all the signals you wanted to take and if you played it correctly by honoring the stop and the target.

My 2 cents.
B
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PABuster:

i am mighty curious to learn something from your vast trading arsenals....

just how does a trader.... Make sure your RR > 2....

just how does a trader goes about.... determining which resultant outcome would fit your criterion of risk/reward > 2.... or better....

pls provide some concrete examples.... will be much appreciated indeed....

ready to learn from your repertoires, if you would care to delineate in more details.... thx and cheers....:)
 
Quote from Daal:

How do you guys define a trend in say a 5min chart of CL or ES futures?
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after having taken into consideration your senior status over many of us in terms of longevity on board on et, according to your vista.... that you have been on board around 8 long yrs.... is that a correct assumption, no?

may i pls use you as an example? as you already are aware of there are just numerous trends, long term trends, medium term trends, short term trends, scalper trends.... and several others more for sure....

if i can find some time over the weekend, i'll try to devise a elementary chart to help those who wish to consider dabbling with going into trading of any kind.... stocks, bonds, derivatives, commod, financial products et cetera.... so each person will need to find out what kind of trading that is most appropriate for that individual....

at the moment, many people are asking questions that perhaps of immense interests for many potential traders.... but in terms of individual style and suitability, the good nature and good intended questions do not have anything to do with helping the individual to progress toward being able to define for himself/herself how to trade or what to trade, or if to trade anything at all AT THIS POINT IN TIME....

daal, for example, if i were you i would quickly google to find out what does the trading terms--tread and trendline mean in general and particularly what does it mean in terms of me being able to integrate it into my trading strat.... in my humble opinion, you would get alot out of searching and googling yourself.... than asking it in here....

'cause each successful trader does have their own definition and their own application of whatever trendline means to that trader....

IF AND WHEN, a person already defines and decides on the kind of trader he/she would like to become.... such as, short term trader, medium term trader, long term trader or a combination of several which is alright too....; THEN THE QUESTION to entertain would be much easier and much more precise and to the point....

daal, for example, would not have to wade through mountain of info most of which might or might not pertain to what daal wants to know at all.... just because daal perhaps is a different kind and type of traders than those trying to provide assistive answers to help daal to become even a more prolific trader of his/her own rights....

so.... daal, what is your preference according to your own likes and dislikes and personal temperament.... scalping, day trading, swing trading, holding on a trade for several days or weeks or perhaps months----the last of which would require you to financially able to sustain possibly some 100,000 usd drawdown/profit, depending on the product you choose to trade in....

if you wish to only risk some 5k or so, you would have no alternative but to choose very short term trading in order to survive the many almost insurmountable unknowns awaiting everyone new to the shark eats shark trading pool....

but daal, go not give up, if that is what you choose to do, ok? just choose a product to focus on.... to start your self immersion into that product in depth.... like your life depends on it.... whatever you decide to do .... STAY AWAY, A MILE AWAY AT LEAST FROM CURRENCIES TRADING, at this point in time in your trading attempt.... ok? it is not that a trader can not make money in currencies trading.... but that it is something that only seasoned and successful traders would attempt to conquer, there are just too many iffies in currency trading for any beginners to overcome.... K?

good luck to you and have fun trading whatever you choose to indulge yourself in.... :)
 
Quote from nakachalet:

...Daal, for example, if i were you i would quickly google to find out what does the trading terms--tread and trendline mean in general and particularly what does it mean in terms of me being able to integrate it into my trading strat.... in my humble opinion, you would get alot out of searching and googling yourself.... than asking it in here...
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I'm sure Daal has used Google or any other search engine to find the definition of trend. He would find many traders definition, math definitions and definitions via statistics.

However, considering this thread is about trendlines...he could just read the OP's (thread starter) first message post to see how the OP defines trend.

Quote from metal:

...How do we determine the trend? By means of channels. A channel is created from a trendline that has been copied
to the swing high (for an uptrend) or to the swing low (for a downtrend) between the two points from which the
trendline was originally drawn...

metal
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There are other definitions or ways to determine a trend that has already been explained by others in this thread. Thus, assuming that he has read the thread...he must be asking because the definitions by others that he has read are not suitable explanations to him.

To answer his question, here's my simple definition that's applicable to a 5min chart of the CL, ES futures or any other price action.

Uptrend - Higher Highs with Higher Lows in which the volatility contraction in between the higher highs/higher lows do not retrace completely the prior volatility spikes. Also, there's at least one volatility spike reacting to a key market event.

Downtrend - Lower Highs with Lower Lows in which the volatility contraction in between the lower highs/lower lows do not retrace completely the prior volatility spikes. Also, there's at least one volatility spike reacting to a key market event

Key market events are explained as FED actions, ECB actions, IMF actions, global economic, sudden global concern...anything that catches the attention of key market participants.

**********

Thus, do to the fact that most trends involves volatility and key market events...it's the main reason why I don't focus all my attention on TA to understand a trend. Regardless if its an uptrend or a downtrend, at some point within that trend, you can use trendlines or channels to identify continuous directional price movement although not required to use such.

Also, I just want to say that to determine a trend is a hindsight analysis. Thus, if someone has any trading experience...most trends are obvious after their formation. Most trend traders want the trend to continue especially after they open a trade position. Further, in my opinion, trend should be obvious after the fact. Thus, if someone can not determine correctly if a hindsight chart contains an uptrend or downtrend without the aid of trendlines or channels...that trader should not venture into trend trading. :D

With that said, take a look at my 5 min chart of Light Crude Oil CL futures most recent price action...there are lots of volatility spikes and key market events involved in those shown trends. The key market events are NOT outlined because you can use any decent international calendar or financial news to pinpoint where on the charts they occurred. As for the volatility spikes, they should be obvious.

Yet, here's my question...at what point in the outlined trends on the chart would you have determine it's a trend via whatever definition you're using???

I've highlighted in red/green squares where I myself would have most likely said the word "trend" even though I'm not a trend trader. Yet, understanding a trend is extremely important in my trading especially involving my profit targets. Also, I just want to mention that some trend traders use trendlines and channels while other trend traders do not.

Mark

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Quote from Daal:

How do you guys define a trend in say a 5min chart of CL or ES futures?
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daal,

dear me, i beg your pardon....

i simply overlooked the most obvious as pointed out by wrb....

you can also read from the first post to gain more understanding as well.... if you have time and the inclination to do so....

wrb also posted a lengthy explanation for you as well.

hope everything helps.... cheers
 
Quote from Flashboy:

Channels even appear on 2 min. charts like on ER today.
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I am sure you saw this also and are just pointing out channels in this pic but the problem I have with channels is (downtrend) you need at least 2 lower highs and lower lows before you can draw a channel.

Now we can't always be at the beginning of every move but I would like to enter as soon as possible (obviously) when it appears (using your chart) that their is weakness in the instrument.

Based on the channel you drew on that chart can you mark where the first opportunity is to enter a trade based on how you use channels.

thank you
Bruce

p.s. Glad to see you are still in the game.
 

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