Channels

[frenchfry]

Quote from tradingbug:

...Also, what are the other leading indicators of price besides volume.

"...
"Smart Money" offers leading indicators of ES price at the following locations on the display that is advocated by the SCT trading: ES volume, ES volume bouncing ball, YM volume, YM bouncing ball, YM price, T &S, DOM button, DOM 4 games, DOM stalactites, Stretch/Squeeze display (using indexarb. com offest), ES tick chart volume and price and YM tick chart volume and price.
..."

 

[oraclewizard77]

Since this is TA, let's talk a bit on knowing when to use an indicator and when to ignore it.

On my chart my indicator tuned up and green which was bullish. However, price was trading below a moving average that I use, so I want to wait for confirmation that my indicator is correct so I rather go long higher above the average instead of getting in at a better price and being wrong. Next I saw price start to fall. So as we continued down, I decide to short for a small scalp and let the market get me into the trade.

This is where it becomes hard in that when do you take a scalping profit and when to go for more profit. Obviously, I guess I could have done 2 contracts and let 1 run, however, I over traded yesterday and need to remember if I am going for 1 winning trade, I need to stop trading after 1 losing trade. My thought is if the market has been either going up or down for awhile, then I should go for a scalping profit, if on the other hand I can catch the 1st swing down then I should go for more profit unless the market is in a tight sideways range.

Now the trade started to go my way, and as extra confirmation, I now notice the indicator has turned back down. However, this type of indicator works best when it turns up or down from the extremes and price follows the indicator. The good news is my target was hit, but I could have gotten a slightly better target which I will aim for in the future.

Now looking back on the trade, we can see that price was trending down in a channel and that I was trading with this trend which did increase the odds. However, I would say price looked more like it fell off a cliff rather than going down in an orderly fashion but this could have been due to the roll over effect of the futures.

So as noted, once you notice the channel and price trending with the channel, you should be ready if you use an indicator to sometimes ignore the indicator if price is respecting the channel, and to take a scalping profit rather than a swing longer term profit if channel might be getting old, and not being able to get in nearer to the start of the channel. However, note that channels can sometimes last much longer than u think.

 

[tradingbug]

Quote from frenchfry:

"...
"Smart Money" offers leading indicators of ES price at the following locations on the display that is advocated by the SCT trading: ES volume, ES volume bouncing ball, YM volume, YM bouncing ball, YM price, T &S, DOM button, DOM 4 games, DOM stalactites, Stretch/Squeeze display (using indexarb. com offest), ES tick chart volume and price and YM tick chart volume and price.
..."

Thanks...I should have clarified that my question was in regards to equity trading.

 

[frenchfry]

Quote from oraclewizard77:

Since ...

channel...

...

Moderator...would you mind and please post a chart so that we understand what you are talking about?

The interesting thing would be how you create your channels:

Where is your point 1? How did you determine it?
Where is your point 2?
Point 3?
How is your channel approach different from Jack's?
Where do you enter?
Where do you exit? Or do you reverse?
Do your channels overlap?
etc.

Thanks!

 

[oraclewizard77]

Ok, I created a new chart in sim to remove my indicators which I don't want to reveal. I used arrows to show the real money trade (sim will not show my real trades). I did what was a breakout trade against my indicator and under a moving average which I also removed.

I manually created LH, LL, HH, HL, and DB instead of using an indicator and I think I may want to go back to manually doing this since the indicator for this is not as accurate.

I did 1 scalp trade and stopped trading, but I wish I went long the breakout of the triangle which was caused by Fed announcement that they were not going to do tapering. I would have gone for a longer trade hopefully on that break out.

 

[frenchfry]

Thanks for that!

First as a disclaimer: I probably wouldn't be able to do it better!

Now let's bitch: That was a lousy trade!!!

Do you realize how your focus on your indicators HH's, LH's, DB's, support, resistance, etc. is clouding your view and judgement?

Do you realize how if you even applied the BASIC principles of how Jack draws his channels you would have seen multiple opportunities to either short or go long!? How you could have even been ready for the Fed announcement?

Just saying.

I hope we will see more examples how people use channels.

 

[oraclewizard77]

As Jack says "you are inventing again". A winning trade is NEVER a bad trade unless you go against your rules. In hindsight, if I shorted the 2nd LH and went for more ticks, that would have been a better trade, but I was not watching the market when that occurred. I was watching the market only around the time I made my one and only trade. I don't trade all day.

However, once I recognized an opportunity for profit, I was able to pull the trigger. Trade went with me right away, so I was able to move my stop down so that my reward vs risk actually was 2 to 1 even though this was a scalp not a swing.

And trust me, if I was watching the market and went for a 2nd trade, my indicators would have been able to get me long with the Fed decision. I think I need to try to take better setups with more profit potential.

Quote from frenchfry:

Thanks for that!

First as a disclaimer: I probably wouldn't be able to do it better!

Now let's bitch: That was a lousy trade!!!

Do you realize how your focus on your indicators HH's, LH's, DB's, support, resistance, etc. is clouding your view and judgement?

Do you realize how if you even applied the BASIC principles of how Jack draws his channels you would have seen multiple opportunities to either short or go long!? How you could have even been ready for the Fed announcement?

Just saying.

I hope we will see more examples how people use channels.

 

[frenchfry]

Quote from oraclewizard77:

As Jack says "you are inventing again". ...

Thanks!
That is true... especially as again you didn't post anything about how you use channels. ;-)

 

[tradingbug]

Quote from tradingbug:

I usually just exit when price reaches the left side of the trend channel.

In regards to Volatility Expansions, how does one know to hold through the VE or if it is just going hit the left trend line and retrace back to the right trend line?
let me guess...volume...

Also, what are the other leading indicators of price besides volume.

Here is a real time example of hitting the ltl....the volume is without a doubt peaking volume and hit the left trend line. Do we hold looking for a VE or exit...what are the clues to hold or not. FYI, I exited on the ltl to play it safe and have capital to put into something else.

 

[frenchfry]

This is the old question: Is it a retrace or a reversal?

Looking at some old JH statements you will find:

1. Trends don't change at the LTL!
2. Trends change direction in between RTL and LTL. Hence FTT, failure to go from RTL to the LTL

Taking profits (at the LTL) accoring to Oraclewizzard is never bad!