Damnit ! Not making that mistake again
- Thread starter zanek
- Start date
+1
I have watched the last 4 years in the ES in 1 hour candles I really can't even say how long, but there is an infinite amount of tricks.
There might be less than a handful you will be able to take advantage of if you are lucky while your eyes are bleeding staring at the screen.
Find software to test your hypothesis and go from there. Otherwise you should quit trying to bottom fish, you are already figuring that out I am guessing.
I don't know your trading style, but here's a basic rule of thumb for me: When I look at my stats, I'm taking 3-4 trades with the trend for every counter-trend trade.
What I always focus on is the "big picture." That's what I'm REALLY trading. Current price action is for picking a spot to get in, but my most important decision is about the current bias, or what some people call "market context." Is the market going up? Is the market going down? Is the market going sideways? Is the market in transition (transition is only time I take a counter-trend trade).
Understanding market context is the most difficult part of trading. But if you learn to focus on the "big picture," you'll be on the right side of the market most of the time.
It is not easy and it is not for beginners. There are times to go with a trend and there are times to fade a trend. Both can be lucrative if you trade it right. Fading a trend is inherently highly risky because you are going against the tide. But reward can be great at times because when the price move accelerates, that's typical where a trend ends and the reversal can be abrupt. Emotions run high on both sides. But getting in too early can kill you.
To fade a trend, I suggest that you may want to use some momentum indicators to help you. (e.g. RSI, CCI, Stochastics, MACD, BBSqueeze, etc.). And study Momenum Divergence. Momentum Divergence is a very good reversal condition.
From my experience, when you see a "3 hump" pattern on the momentum indicator, the trend is near. If you see a 4th hump, plus momentum divergence, over 90% of the time it would reverse. This should be true for most time-frames but you should spend some screen time to observe. Each stock behaves differently. (I only trade on the intraday 1-minute charts.)
e.g. Take today's GS intraday uptrend run for example.
GS 2/22/01, 1-minute, GS ran up to 157.90+ near 12:20 pm PST. I use the BBSqueeze momentum indicator. You can clearly see the "3 humps" that corresponded to the 3 waves moving up. At last... momentum divergence was not too obvious but there was an equal high in price (that makes a Double Top) but lower high in momentum. Couple that with a Fib analysis based on a seed wave, going up to 262% without a real retrace. Probability for a reversal is high. And when it reverses, it can be big (as this time) because emotion ran high.
Another example:
AIG, 5-minutes, 2/11/10:
On 2/11/10 shortly after the market opened, you see AIG was brewing a third hump on the momentum indicator. It's likely that it will reverse but you don't know exactly where. Best bet is to wait until you see a momentum divergence: Price higher high and momentum only a lower high. (If you see momentum still making higher high, don't do anything.) Probability for a reversal is high from MoDiv condition. Fade it and manage your risk. May be for a re-entry at higher price. When price reverses (prices don't go straight up, ever), the reward can be big if you play it right.
AIG, 5-minutes, 2/11/10:
On 2/11/10 shortly after the market opened, you see AIG was brewing a third hump on the momentum indicator. It's likely that it will reverse but you don't know exactly where. Best bet is to wait until you see a momentum divergence: Price higher high and momentum only a lower high. (If you see momentum still making higher high, don't do anything.) Probability for a reversal is high from MoDiv condition. Fade it and manage your risk. May be for a re-entry at higher price. When price reverses (prices don't go straight up, ever), the reward can be big if you play it right.
It's high time you visit the "Woulda, Shoulda, Coulda" thread:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2703994#post2703994
http://www.elitetrader.com/vb/showthread.php?s=&postid=2703994#post2703994
Quote from Bolimomo:
Another example:
AIG, 5-minutes, 2/11/10:
On 2/11/10 shortly after the market opened, you see AIG was brewing a third hump on the momentum indicator. It's likely that it will reverse but you don't know exactly where. Best bet is to wait until you see a momentum divergence: Price higher high and momentum only a lower high. (If you see momentum still making higher high, don't do anything.) Probability for a reversal is high from MoDiv condition. Fade it and manage your risk. May be for a re-entry at higher price. When price reverses (prices don't go straight up, ever), the reward can be big if you play it right.
hahahah
not enough lines man , more more!
looks like a battlezone
no way you can focus correctly with 500 variables
Here is another genius with absolutely no value added to the discussion but playing big shot. Your mind just cannot see what is important.
I already had spent the time in typing up my response in sharing my thoughts about Momentum Divergence. I just didn't feel like spending the time to remove many of the indicators that I use regularly just to illustrate the point.
Here is a naked chart of the same thing.
AIG 2/21/10 5-minute. Trade it Mr. Big Shot.