"Do trendlines work?" + Confluence of support... SP 4200?

[PPC]

You say this and that's the right idea. Then, you go on and describe the "additional things you need to see" (aka "complications") for you to execute the play.

An old timer once said, "Simplify your method as much as possible. When you've done that, simplify again".

Yes, the simpler the better, and since that’s works for you, then definitely keep it simple because simple strategy helps with decision making

What I meant is that I do things differently. For me personally, identifying a level is just one criterion, it’s like a filter if you like.

Then what I do is to wait whether or not the PA will start revealing some kind of price action structure or preferably a price cap on lower time-frame. If not, then I’ll not take the trade and I’ll trade something else that’s on my watchlist.

Locating the opportunities is relatively the easy part. What’s harder is the risk management and assessing each set-up on its own individual basis and thinking in terms of expectancy.

 

[Scataphagos]

For me personally, identifying a level is just one criterion, it’s like a filter if you like.

Then what I do is to wait whether or not the PA will start revealing some kind of price action structure or preferably a price cap on lower time-frame

The principles of "Price TA...KISS" do not make allowances for "filters" or "confirmations".... not even "volume". Those complicate decisions.

An anecdote about "keeping it simple"...

Years ago I used Meta Stock software. Equis (owner of MS) came to town to pitch an upgrade version... for upgrade price, of course. Invitations went only to current MS users and other market-experienced.

I could tell the presenter knew his stuff. He had to. No way to BS a room of 100 guys like me. (MS cost $~1800, and then there is the cost of data... $2500-$6500/year. Noobs not popping for that.) As to KISS he said, "we don't need to use indicators [though MS had them built in], right? But if we do, only one. Show of hands of those who agree." Was almost unanimous.

Why "only one"? Because the more inputs you have to a decision the greater the conflict potential. And when you have conflict, what do you do? Mostly you "wait... watching/hoping for resolution" and in so doing miss LOTS of potential gains.

Regarding conflict, "Price TA... KISS" says, "don't try to filter out what you think/fear may lead to a losing trade. (That's why you have filters and confirmations, right?) Just enter trades properly (at technical levels) and let stops control your risk."

 

[NoahA]

Just enter trades properly (at technical levels) and let stops control your risk."

Clarification here please. What do you mean by "properly"? Does this mean you enter every trade on a trend line touch or possible matched low or high? No entry criteria or confirmation that it is a double bottom or double top? Just take the trade and either let it hit the stop or manage the profits as it goes in your direction?

 

[Scataphagos]

Clarification here please. What do you mean by "properly"? Does this mean you enter every trade on a trend line touch or possible matched low or high? No entry criteria or confirmation that it is a double bottom or double top? Just take the trade and either let it hit the stop or manage the profits as it goes in your direction?

Those are 1/2 correct questions.

"Properly" always means "close to support/resistance hold or break"... where r/r is best.

A "trendline touch" may or may not be a matched high or low.

You can aggressively "dive in" on a test of support or wait for a bounce. And by "bounce" I mean even a tic or two. The bounce indicates the s/r "has held on the test at least for now". Will it stick? Don't know. Have to play by ear. If you want to play a specific support/resistance price, you can enter a limit order to execute there. Odds actually favor that play... as support/resistance "usually" holds so long as it's in the direction of the current trend.

The only criteria is "demonstrated support/resistance".... many occur as a spike.

THERE IS NO SUCH THING AS "CONFIRMATION"... Any setup can fail... any bounce or break can be a fake-out... either immediately or just after it "sucked you in to the failing side".

 

[Scataphagos]

Does this mean you enter every trade on a trend line touch or possible matched low or high?

Have to be careful on the notion of "every". That's more correct when trading with the trend. Of course you can play for a counter move... just be ready to take profits quickly and not "give it the benefit of the doubt" when it's going against you. IOW... stop out and take your hickey. Don't hang on (or even worse, average into the loss) "hoping it turns around to save your bacon".

 

[Scataphagos]

If you want to play a specific support/resistance price, you can enter a limit order to execute there. Odds actually favor that play... as support/resistance "usually" holds so long as it's in the direction of the current trend.

The start of this thread suggests possible "Buy @ 4200" on the SP. You could have placed a limit buy order there and it would have been (still is) totally legit. Problem so far... didn't get there. May or may not still.

 

[NoahA]

Odds actually favor that play... as support/resistance "usually" holds so long as it's in the direction of the current trend.

This is the problem though. The entry is usually against the direction of the current trend. If we head down to 4200, as you suggest at the beginning of the thread, it means the immediate trend is down. So you're catching a falling knife. If as you suggest you wait to see it bounce a tick or two, well, that is nothing, because every down trend easily has retracements of 1-2 points at least.

I find that often times, the matched lows as you called them aren't exactly within a point. For NQ, they might stop 5 points shy, or they may even poke 20 points. Now since a regular NQ day might be 200-300 points wide, 20 points isn't a huge percentage of the daily range, but it makes stops fairly large.

Take ES today for example. We can see that A, during the overnight session, it didn't get quite close enough for a double top with the previous day high during the RTH session. Then before the open, we did get maybe a slight bounce at B from the double bottom at the previous day low, but it ended up poking a bit into C. So in one case, we didn't hit the level, and in the other case, we broke the level.

Then of course after the open, we came down to this level again, and here there was no support this time. On a fast chart, there was a bounce, but it very quickly failed.

So I guess the point that I am making is that if you need to take into account that a trade might have to be entered before a level is reached, since it can turn shy of that level, and then we have to take into account that it can also poke the level before turning around, then it means our stops need to be large. And if stops are large, then its difficult to make up for the many losses that we have in case we try entries at every possible areas of support and resistance, and especially since these trades will have to be against the immediate trend.

 

[Scataphagos]

This is the problem though. The entry is usually against the direction of the current trend. If we head down to 4200, as you suggest at the beginning of the thread, it means the immediate trend is down. So you're catching a falling knife. If as you suggest you wait to see it bounce a tick or two, well, that is nothing, because every down trend easily has retracements of 1-2 points at least.

I find that often times, the matched lows as you called them aren't exactly within a point. For NQ, they might stop 5 points shy, or they may even poke 20 points. Now since a regular NQ day might be 200-300 points wide, 20 points isn't a huge percentage of the daily range, but it makes stops fairly large.

Take ES today for example. We can see that A, during the overnight session, it didn't get quite close enough for a double top with the previous day high during the RTH session. Then before the open, we did get maybe a slight bounce at B from the double bottom at the previous day low, but it ended up poking a bit into C. So in one case, we didn't hit the level, and in the other case, we broke the level.

Then of course after the open, we came down to this level again, and here there was no support this time. On a fast chart, there was a bounce, but it very quickly failed.

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So I guess the point that I am making is that if you need to take into account that a trade might have to be entered before a level is reached, since it can turn shy of that level, and then we have to take into account that it can also poke the level before turning around, then it means our stops need to be large. And if stops are large, then its difficult to make up for the many losses that we have in case we try entries at every possible areas of support and resistance, and especially since these trades will have to be against the immediate trend.

You know the market can turn a bit early or overshoot a bit. (Unless you're thinking, "that's close enough" when the market turns up early, you miss... at least I do.) That's why you have buffers on your play. Some plays hit almost/on the tic. Suggest drawing your lines with a "wide-tip highlighter rather than with a razor blade", if you get my drift. The buy at B-C was technically correct for 20 pts bounce. The bottom line on that was, "there was support at the matched low" even though it wasn't "spot-on, to the tic". Whether you get filled to-the-tic or a couple higher isn't the issue... The concept of the buy is important because it represents multi-points, potentially.

 

[NoahA]

You know the market can turn a bit early or overshoot a bit. (Unless you're thinking, "that's close enough" when the market turns up early, you miss... at least I do.) That's why you have buffers on your play. Some plays hit almost/on the tic. Suggest drawing your lines with a "wide-tip highlighter rather than with a razor blade", if you get my drift. The buy at B-C was technically correct for 20 pts bounce. The bottom line on that was, "there was support at the matched low" even though it wasn't "spot-on, to the tic". Whether you get filled to-the-tic or a couple higher isn't the issue... The concept of the buy is important because it represents multi-points, potentially.

In reality though, that isn't gonna be a 20 point trade because how do you know to exit right there? You perhaps only capture 10 because you maybe slide up your stop and trail it at bar lows or other swing lows. And then, if you try again at D, you perhaps give back most of your profits.

So the point I'm making is that this is all KISS, but the execution is really where the money is made. And you're not talking much about execution and trade management. Trust me, if you buy and sell every possible area of support or resistance with a healthy stop, you will be negative.

 

[Scataphagos]

In reality though, that isn't gonna be a 20 point trade because how do you know to exit right there? You perhaps only capture 10 because you maybe slide up your stop and trail it at bar lows or other swing lows. And then, if you try again at D, you perhaps give back most of your profits.

So the point I'm making is that this is all KISS, but the execution is really where the money is made. And you're not talking much about execution and trade management. Trust me, if you buy and sell every possible area of support or resistance with a healthy stop, you will be negative.

All of what you said is true. You have to manage your trade, you kow.

With the Buy at B-C, you have the "start". After that you have to play it by ear. When you learn more about Price TA, you'll learn about the indication that would have told you to sell very near the 20 point bounce high... even to perhaps take a shot at a short there.

I never intended to teach Price TA, and I'm not going to start now. I only highlight obvious plays. If that motivates you to learn more about it, to your benefit. You see the B-C "matched low" play. After a quick 20 pts, it got a bit difficult and messy. But lots of times a setup like B-C just races away to the upside... you want to catch those.