Christmas In March For Price TA Trader Wannabes

[NoahA]

2. You need to look at both the ES and NQ charts for structure. That's because they vary a bit in their structure so that there may be a setup in one that you don't see in the other. The key to this notion is that when the market sees support on any index chart, THEY BUY EVERYTHING... not in the same magnitude, of course.

Yes, this is a huge part of what I do, playing ES and NQ off of eachother.

3. The notion about "not chasing breakouts" is waaaaay wrong. All big moves involve breakouts and you need to be on the right side of them. Deal with false breakouts as they occur.

4. Price TA is all about "recognizing setups". That's all you get. You can't know how long the play will last or how far it will go. You have to play everything after the setup "by ear". If a setup ends up being a 5 point move, fails even before that, or goes for 50... you don't get to know that in advance.

Both of these points are excellent, but the devil really is in the details. Clearly you aren't going to give away the details, but honestly, with trading, everything actually works. Since no trade is going to be an 80% winner, heck, 60% seems to be a healthy and realistic number, this means that 40% of the time, the trade ends in a loss, and that loss means that someone can take the opposite trade and turn that into a winner. This means that a setup which for you might look like a breakout, someone else will treat it like a fade. To make it work, the details of where to get in and exactly where to get out, for either a profit or a loss, is really what makes trader profitable. And none of this is unfortunately very KISS friendly.

I was going to post another chart with a very fast chart at some of the key areas you suggest would be trades, but since its all hindsight, it might not matter much.

But I do wonder if you can comment on some metrics. You mention things that make sense like:

You short resistance. If it fails and breaks out, you stop your short and go long. It's not "either/or", it's "both".

and also:

Your objective is to "catch some of the good stuff" and putting up with the fizzlers is part of the price for trying

So what to you is a healthy stop in terms of points? What is a realistic win rate?

Bottom line... If you had taken every setup I market, exactly as market... and any others that you thought might work that didn't (and stopped when they failed), you'd have made a bundle.

It just so happens that with a bit of volatility, there were some good moves, but if you end up taking stops on failed breakouts, or trying to go long at double bottoms that break, and then maybe lose twice in a row by trying to first short resistance and then get on board with the breakout, which also fails, then you're likely not going to have a good day.

If you're gonna tell me that half of your trades end in losses, then using a Monte Carlos simulation, I can see how having 5 or 6 losers in a row is expected, and hence shouldn't be feared, but as I'm suggesting, adding metrics to any talk about trading price action is absolutely necessary.

For example, using your methodology, and taking every trade as you should, and using a 5 point stop, and knowing you might get 5 losers in a row, if you tell me some days you are down 25 or 30 points, when your average gain on an average day is only about the same amount, then this makes sense. But seeing as how often these setups fail, it makes a person want to dig deeper, and then of course try to cherry pick trades, hence skip them, which clearly doesn't work since we never know what will happen. So you have to take them all as you suggest, and be prepared to lose 5 or 6 times right out of the gate. Would you say this is realistic?

 

[Scataphagos]

Both of these points are excellent, but the devil really is in the details. Clearly you aren't going to give away the details, but honestly, with trading, everything actually works. Since no trade is going to be an 80% winner, heck, 60% seems to be a healthy and realistic number, this means that 40% of the time, the trade ends in a loss, and that loss means that someone can take the opposite trade and turn that into a winner. This means that a setup which for you might look like a breakout, someone else will treat it like a fade. To make it work, the details of where to get in and exactly where to get out, for either a profit or a loss, is really what makes trader profitable. And none of this is unfortunately very KISS friendly.

Au contraire.. Some of the trades ARE 80% and perhaps greater (I don't keep count). I would never consider a type of play with <50% win rate. Actually on your "breakout or fade". It's 2 trade consideration. "Breakouts in the direction of the psycho" (like upside break when bull). You should ALWAYS take them. If it fails, you stop out, and maybe you short. This is really very KISS. Play the break like a pivot... long above short below allowing some for noise in your stops, of course.

So what to you is a healthy stop in terms of points? What is a realistic win rate?

Stops.. While we must use, they are subjective. If I place a limit buy and I'm AFK, I usually do 10 points. Otherwise, it depends on where I got the trade on relative to the setup. That is, if my play is a little late, I need to "allow more room" with stop beyond the signal point. However, I see guys on Twitter posting trades with 30-60 point stop losses! I would never risk 30 point stop let alone 60. Price TA setups are surprisingly precise. No need to risk large stops.

For example, using your methodology, and taking every trade as you should, and using a 5 point stop, and knowing you might get 5 losers in a row, if you tell me some days you are down 25 or 30 points, when your average gain on an average day is only about the same amount, then this makes sense. But seeing as how often these setups fail, it makes a person want to dig deeper, and then of course try to cherry pick trades, hence skip them, which clearly doesn't work since we never know what will happen. So you have to take them all as you suggest, and be prepared to lose 5 or 6 times right out of the gate. Would you say this is realistic?

1. You can get whip-sawed at any point when the market is in chop... you already know that.

2. You don't have to take every possible indication... and yes, "cherry pick". You make it a point to play the ones you know "should be bigger/better plays". The better you are at TA, the better you will become at picking. Remember in my comments before where you market spots and I replied, "I have no trade there"? Same concept.

3. I can't remember the last time I had 5 losses in a row. I do recall having 9 consecutive losses years back when I was trying to trade commodities. I didn't know TA very well back then (maybe didn't know it at all... too far back to remember that). The ONLY way to catch a string of losses now with TA is to be "trading with the wrong bias". That is, playing shorts in a bull market and longs in a bear. Proper TA requires you trade with the correct bias... and yes, you can trade counter to the bias and even have some winners. But you have to expect less success because you've "got the wind in your face". Now when I get 2 trade failures in a row I reflect upon the notion that I might be trading with the wrong bias. This is often a question when the market has been rallying and then "rolls over" to turn down. You can "buy the dips" just like you did yesterday, except now it's not working because the market's bias has changed... you just don't recognize it yet.

As a final note, and this just might blow your mind... There are places on the chart which are "all profit potential and zero risk" (for the next swing signal, and even for the entire day)... of course we only know those in hind sight. However with Price TA you have a chance to pick or come close to some of those "all profit, no risk*" trades. I know... incredible, right? But this is no exaggeration. And perhaps the best part is that you can be very successful without knowing all the setups and nuances. You only need to get some of them right and not take large losses.

*examples you already know.... (1) the breakout point and the backtest low sometimes are "to the tic", (2) "test of 50 or 200 MA when approached from above and the slope of the MA is positive". That low often marks THE low for a big move up

I tout Price TA like it's the greatest thing since sliced bread... and it certainly is one of them in the trading world**. But it's easy to mess up if you're lazy, inattentive and undisciplined... just like anything else.

**It's KISS, baby! That is, it's the basic "Buy support, sell resistance, chase breakouts, use stops". Support and resistance are expressed in a few ways each. Learn what they are and trade them while keeping in mind the market's bias. You obviously already know some of it and are using it. I'd suggest you make the effort to refine.

I had a PM with an talented artist in Europe a few years back. That you?

 

[NoahA]

I had a PM with an talented artist in Europe a few years back. That you?

Nope, this wasn't me. Did you tell him anything juicy that you're willing to share again?

Thank-you again for the thorough write-up. It is interesting that you call this all KISS because really, when you describing it in detail, it is quite complex and reliant on an incredible amount of experience and strict discipline. I guess a heart surgeon would say that what he does is easy as well after he has done thousands of procedures, but the rest of us would perhaps use a different adjective.

 

[Scataphagos]

The Noah guy sent me a pic of his drawings and I thought they were terrific, but he said he was having a hard time capitalizing on his artistic talent to make a living.

As to the "complexity" of Price TA... (1) the "whole thing" seems complex because there are many setups which may occur at any one time, but (2) each setup itself is simple and specific. That is if you know "only one setup", you look for that and trade it. If you know 3 setups, you look for those and trade them. I know of at least "30 setups*". It's too much of a challenge to constantly be "on the lookout for 30". If you know perhaps the "best 6"... those with the best success rate, highest r/r, and occur most often"... and your play on them is strategically correct, you've got it licked...that's why you don't need to try to trade "every wiggle". But if you fancy yourself as a scalper and want to try to trade every wiggle, there are accurate plays for that too... just too manic for me. Principles are the same for all time frames!

* What exactly is a "setup"? It's an identifiable price structure regularity... some don't occur all that often... some of the "highest percent win rate" ones don't occur all that often... but they all work "regularly enough" to put money on. Some are subtle. You don't "need" those (nice to have you got it), but not necessary. Many people/traders believe the market is random. Lots of it IS random noise. SOME of it is not random... that's what Price TA is all about. Identify the not-random and play it.

 

[Scataphagos]

I got a PM today from one of the ETers who may/does have a bigger purse than mine. (We haven't ever "compared piles".)

He said, "...he'd received PMs from others who (1) completely understood and agreed with my chart posts on Price TA, and (2) said they "poo-poo'd" the whole thing to others because they wanted to direct them away from The Golden Goose".... like, "this is really good, but I don't want you in on it to compete with my trades".

They really shouldn't do that... there's plenty of room for all of us... but it gave me a chuckle. Just thought you might want to know.

 

[NoahA]

I got a PM today from one of the ETers who may/does have a bigger purse than mine. (We haven't ever "compared piles".)

He said, "...he'd received PMs from others who (1) completely understood and agreed with my chart posts on Price TA, and (2) said they "poo-poo'd" the whole thing to others because they wanted to direct them away from The Golden Goose".... like, "this is really good, but I don't want you in on it to compete with my trades".

They really shouldn't do that... there's plenty of room for all of us... but it gave me a chuckle. Just thought you might want to know.

Can I tell you what I think would be really helpful? (If you're inclined to share of course) Would you post some trades that you actually took with perhaps a time stamp? I'd love to plot the trades on a fast chart so I can see exactly where you got in and then be able to ask you questions about it. A nice mix of wins and losses would be great. It just seems more productive to discuss actual trades taken rather than just what could have been possible since we can all identify great setups from the past and then figure out the reason for why we would have gotten in.

 

[Scataphagos]

Can I tell you what I think would be really helpful? (If you're inclined to share of course) Would you post some trades that you actually took with perhaps a time stamp? I'd love to plot the trades on a fast chart so I can see exactly where you got in and then be able to ask you questions about it. A nice mix of wins and losses would be great. It just seems more productive to discuss actual trades taken rather than just what could have been possible since we can all identify great setups from the past and then figure out the reason for why we would have gotten in.

I've already been more helpful than I'd ever intended to be.

I posted the chart and the key... naming the trade setup. "Rising bottoms line support"... anyone can look up what that means. "Matched hi"... like a double top. Matched low... same. Breakout... don't know what that is, look it up. Bull and Bear Pivots... don't know what that means, look it up. Those are not just "one off" things on my charts.... that's how the market works. They occur over and over and always mean the same when they work as described. Stops are for when they don't.

I've tried to point traders in the right direction... where to focus their efforts

 

[Monobrowtrading]

got a PM today from one of the ETers who may/does have a bigger purse than mine. (We haven't ever "compared piles".) PILES Of HORSESHIAT

He said, "...he'd received PMs from others who (1) completely understood and agreed with my chart posts on Price TA, and (2) said they "poo-poo'd" the whole thing to others because they wanted to direct them away from The Golden Goose".... like, "this is really good, but I don't want you in on it to compete with my trades". LAUGHABLE

They really shouldn't do that... there's plenty of room for all of us... but it gave me a chuckle. Just thought you might want to know.
You Thought Wrong!

 

[NoahA]

NoahA, what's you modus operandi currently? How long have you been at it?

Too long.... as in years and years.

Everyone says trading is easy, and sure, you learn the setups and take the trades. But once money is on the line, once you have a string of losers, it gets difficult to keep taking trades. You end up going in circles trying to figure out if you're doing something wrong or if its just a string of loses. Sometimes you find your stop is too tight cause it always hits, so you increase it. Then your large stop hits and you take a bigger loss than intended. If you wait for confirmation of a trade, you're now getting in way too late, and if you get in early, you're maybe catching a falling knife. You get into the mental block of trading just to not lose vs. trading to win, and then you're truly fucked.

Everyone who shares something here is perhaps doing so with best intentions, but trading only works when its complete. Imagine teaching someone to drive and you're told by one guy "don't forget to use the break". Sure, good advice when approaching a red light. Another guy says "the steering wheel is used to turn the car." Also good advice if you're approaching a turn, but completely useless for that red light. "The gas pedal makes the car go".... great advice as well if at a traffic light and it turns green, but once again, used at the wrong time, it can be deadly. Apply the gas as you're approaching a red light, and you're in trouble!

Perhaps what trading needs the most is consistency, and that isn't anything anyone shows. Do I expect people to call out winning trades day after day? Of course not. But if trading truly was easy, then over 95% of us wouldn't fail at it. Clearly, trading is way, way more involved than setups and stops. No disrespect to @Scataphagos , but its almost like if someone says to just learn setups and stick to the KISS approach, you're really not talking about what is most important. With trading, its not so much about the setup, its more about where to get out once you're in, and what to do next, and, just as important, which setups to not take. Look at the chart I posted a few pages back. Most of the areas I outline he said he didn't take a trade there. Well why not? Everyone one of those areas had a logical reason for why.

Here is a shocker. Perhaps profitable trading isn't about where to take a trade, but more so where to not take a trade! In other words, which setup to skip. Since we never know which trade will work, you might as well just take them all. But if you learn more about what not to take, that is perhaps where the profits actually are.

Consider this chart here. Using simple concepts, we see lots of support around 12210 earlier. So when we come down to A, do we take a long? Or do we take the breakout of support and short?

Same thing when we get to B, the low of day. We can see it drops about 15 points. So maybe a long is stopped out, but so would a short. It comes back up to almost C. Is this a case of support turned resistance? It didn't quite make it to C. So at what point do we start chasing this down?

Now we come back down to D and spend several minutes trying to rally. Will this now be the low of the day so can we safely go long? Nope... it broke.

 

[deaddog]

But if trading truly was easy, then over 95% of us wouldn't fail at it. Clearly, trading is way, way more involved than setups and stops. No disrespect to @Scataphagos , but its almost like if someone says to just learn setups and stick to the KISS approach, you're really not talking about what is most important. With trading, its not so much about the setup, its more about where to get out once you're in, and what to do next, and, just as important, which setups to not take.

Do you have a trading plan?
A written document that answers the question "What the hell do I do now?"