Ghost of If You Can Draw A Straight Line

[trip]

I am not sure why there is a sudden cloud of doubt coming over the SLA thread again.
...
But please leave the SLAs threads alone.

A suggestion: Please be a bit more specific. Name names. Now I am wondering if you are referring to me or someone else.

I don't question the method. I question my understanding of the method. The only place where I know I can get help is here or in the chat and as I've chosen not to keep a journal, here remains until DbPhoenix tells me to go away. Which I will do if he tells me to.

 

[dbphoenix]

A suggestion: Please be a bit more specific. Name names. Now I am wondering if you are referring to me or someone else.

I don't question the method. I question my understanding of the method. The only place where I know I can get help is here or in the chat and as I've chosen not to keep a journal, here remains until DbPhoenix tells me to go away. Which I will do if he tells me to.

I assume he's referring to Redneck, though these journals are hardly troll-free. If it continues to be a problem, the discussion can always continue at TL. Even if I had the desire to do so, I just don't have the time to argue with people who can't even be bothered to read the material, e.g., tradingjournals.

 

[dbphoenix]

Given the hour, I'm going to cut to the chase.

The SLA is an approach, a method. It is not therapy. If the trader is crippled by fear, it will not make that fear vanish. But then no strategy will make that fear vanish as there is no strategy that guarantees against loss. If one has not yet accepted the fact that he will incur losses, that he will occasionally be wrong, then he is wasting his time in the markets, whether trading or investing.

These tight lines that you guys draw are nothing more than an attempt to insulate yourselves against failure, and that is not possible. You can't even allow price to make one subsequent swing high after your entry. If you could, you'd have a far more accurate SL. As it is, you're trading tick waves, and unless you're scalping for ticks, that won't work unless scalping for ticks is your strategy. But this is not about scalping for ticks.

In the chart that's being referred to, there are at least 8 retracements after the swing high at the far left of the chart. Every one of them is penetrated by a recoil. If one plots his lines above the tops of every 1m wave, he will of course be stopped out. But if he can allow price to make at least one swing high so that he can plot a useful SL, there are no breaks before the break shown. If he can't give price the freedom to move, which it's going to do whether he "allows" it or not, then he needs to go back to observation and stop trading entirely. Clearly those who are trading in the way shown in trip's chart -- which appears to be most of you -- are nowhere near ready to do so.

As far as further backtesting and forwardtesting go, if one is doing it to further understand price movement, fine. If one is doing it to find a way of insulating himself against any level of failure, then he's wasting his time. It ain't gonna happen.

 

[niko]

Yes and no. Not in the way I anticipated. Since the lower low and subsequent lower high toward the end of March, I've been trying to maintain an upper limit that would generate a parallel lower limit and a useable mean. This was fine until price kept making lower lows. Obviously this signaled a downtrend, as did the lower high, but the slope of the lower limit was so much more severe than the upper.

After the lower low we made three days ago and given its regularity with the two previous swing lows, it appears that the lower limit is in charge and we must reverse the process and draw the upper limit in parallel to it. If this is done, then 80 represented not the mean but the upper limit of the channel. And it certainly did its job today either way since it launched the downmove.

If all of this is correct, then the next downside goal becomes 3450, at least as of now. This line is pretty steep. The last swing low on the daily is at 3412.

As Wyckoff says, judge the market by its own action.

Very interesting procedure, when can one tell that is time to apply this method of drawing TCs?

 

[dbphoenix]

Very interesting procedure, when can one tell that is time to apply this method of drawing TCs?

I don't know that I'd call it a "method". It's simply an awareness that the trend channel one has drawn isn't tracking trend. The fundamental question with regard to trends and trend channels has to do with those points and levels beyond which traders can't find trades. Given a mean-reverting market, these points will plot with some regularity. This regularity forms trendlines either side of a mean. These trendlines may not be pretty, but not all of W's trendlines were pretty either.

 

[dbphoenix]

As regards this morning's trading, note that traders could not find trades above 85. They then could not find trades below 75. What does this mean? It means that you're going to trade in a range, which is what you do for a half hour. If instead you're worried about where you're going to enter and how much you're willing to risk, all this will likely go right past you.

At the open, price drops to 72. This appears to be a good op for a short off the first ret. But then price prints a DB at 72. This suggests that perhaps the short wasn't such a good idea after all. This is not a matter of drawing a tight line; it's a matter of watching traders and those points beyond which they can't or won't go. Therefore, scratching the trade is perfectly legitimate. It is reasoned. It is not just a flight response.

Price then takes off to the upside. One can go long here or not. Trader's choice. But now it's having difficulty at the mean of the downtrend channel that several people have mentioned. So what now? Without regard to entries, what are traders doing? Why? Where? What does it mean for the immediate course of price? If you don't know, then don't trade.

I suggest looking at game's and fluke's charts.

 

[dbphoenix]

Before we get too far into hindsight, note that the second time price tries to get through 3490, it fails. This creates a DT. One can short the next bar. But that trade rejects the downside as soon as it triggers. Not good. The other option is the upside, so one goes long in the next bar. This carries for a few points but traders reject 98. Why? Who knows? Who cares? The trader allows price to come back. Which it does. To 91. But then there's no upside continuation. Instead price continues to fall. This is reason for a scratch and even a short. But then traders reject 86 and you're back in a range. And you stay there for the next 4m.

Then price finally falls out of this -- what is the significance of this breach? -- with a ret at 1004. This provides a shorting op. Does price come back at you? Yes. A whole point. Then it resumes its downtrend. How long will this last? Who can say? But if you're more concerned about where you entered and how much money you're making/losing than you are about what traders are doing and where and why, then you're focusing in the wrong direction.

 

[dbphoenix]

While it's still fresh in your minds, if you were thinking about it at all, why did price stop at 3446? Why did price stop at the last swing high? Why did price stop at 3437? Where is it next most likely to stall? Why?

 

[niko]

I don't know that I'd call it a "method". It's simply an awareness that the trend channel one has drawn isn't tracking trend. The fundamental question with regard to trends and trend channels has to do with those points and levels beyond which traders can't find trades. Given a mean-reverting market, these points will plot with some regularity. This regularity forms trendlines either side of a mean. These trendlines may not be pretty, but not all of W's trendlines were pretty either.

Thanks

 

[niko]

While it's still fresh in your minds, if you were thinking about it at all, why did price stop at 3446? Why did price stop at the last swing high? Why did price stop at 3437? Where is it next most likely to stall? Why?

This is what I saw in RT today:

why did price stop at 3446: Hit DL from monday low.

Why did price stop at the last swing high? : Not really sure here. Just noticed in RT that buyers were not interested above 45 making a DT at this level.

Why did price stop at 3437?: I can see the sunday afternoon hinge apex at play at this level. Not much more.

Where is it next most likely to stall? Why?: The next level for me was 32. It is the bottom of the TR area (32-482) for me.