House of If You Can Draw A Straight Line
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Actually what bugs me more, assuming you drew this in October 2011, is that you didn't include the May 2010 and February 2011 highs, but stayed slightly lower. Why?
I've seen ranges double, so that's plausible, but I can't figure out your original logic.
New and Improved SLA/AMT
Well, not exactly new. I've revised the SLA/AMT to include a chart example of a range in the AMT section, added an appendix on fear (Appendix F), and added an Afterword to emphasize a few things that appear to have been overlooked by casual readers.
I've also uploaded a separate pdf of "The Mind Game". This is something I wrote sixteen years ago or so and I've always liked it, which sounds odd, but there it is. It is so very applicable to the new Appendix F in particular but also the SLA/AMT in general that I've posted it along with the SLA/AMT pdf in the stickies at TL. I hope both will be of benefit.
Well, not exactly new. I've revised the SLA/AMT to include a chart example of a range in the AMT section, added an appendix on fear (Appendix F), and added an Afterword to emphasize a few things that appear to have been overlooked by casual readers.
I've also uploaded a separate pdf of "The Mind Game". This is something I wrote sixteen years ago or so and I've always liked it, which sounds odd, but there it is. It is so very applicable to the new Appendix F in particular but also the SLA/AMT in general that I've posted it along with the SLA/AMT pdf in the stickies at TL. I hope both will be of benefit.
I'm reposting this because of the discussion that has been going on in the daytrading thread (starting here) and at TL regarding context and preparation.
This post was made two weeks ago, so, for at least two weeks (charts of the same sort have been posted here for nearly a year), those who know what a trend channel is have known what the upper limit and the mean/median are. Whether we've been pushing against that UL for a week or two or three does not change the fact of its existence, whether highlighted by a line or not. Even those who ignore charts and trade weekly prices know we are and have been at new highs, and the involvement of each group of traders who trade hourly intervals, daily intervals, weekly intervals, all in succession, alter the dynamic of price movement. In other words, it is when price movement attracts the attention of an ever-widening circle of traders that things begin to happen. Those who are "surprised" by these happenings just aren't prepared. It's all there. One has only to look at it and "see" it.
Since the above post was made regarding the ES, I'll post that first, and note that the post was made two bars back on this weekly chart.
The NQ and ES are linked again (they usually are, but not always and not tick by tick), so the reversals are pretty much the same, and the distance each has to travel to reach the medians of their respective trend channels is equivalent. Do we have a straight shot to those medians? Maybe. They're not that far away. And we could always have a countertrend move back up to the upper limit. But the rollover -- best seen on an hourly chart -- seems pretty definite, so I suggest that the line of least resistance is down. How far? No idea. I expected price to reach the lower limit in January, but instead it hung around the median for five weeks. The length of each of these swings made for nice trading, but they never reached that lower limit, choosing instead to test the upper limit again. Which was fine by me. At least I knew where it was.
And for those who care about such things, a drop on the NQ to its median would be 5%.
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I'm also cross-posting this oil chart since it continues to attract interest. As I said at the time, the trend was broken but not reversed, and until price exceeds the arrowed bar, it still isn't reversed. If it doesn't fall, then the only other alternative is to go sideways, which it's been doing ever since.
Those who see no value in this will of course be surprised when and if price moves above 55 or below 44. And they will most likely be on the wrong side of the trade, which benefits everyone who has done the work.
Those who see no value in this will of course be surprised when and if price moves above 55 or below 44. And they will most likely be on the wrong side of the trade, which benefits everyone who has done the work.
Cleaning out my hard drive, I found this posted to somebody sometime and thought it might be of interest. Though it addresses the development of a trading plan in general rather than the SLA in particular, I find that nearly all who take the SLA seriously want to go through at least the observation and backtesting stages, though some go through all five if they're truly screwed up and want to avoid yet another failure.
.....................................
It should be remembered that there are five phases here: observation, backtesting, forwardtesting, simtrading, real trading.
First, one must observe in order to find those "tells" which show the market's hand. In broad categories, these tells will manifest themselves in reversals, breakouts, retracements. This is analogous to meditation in that if one finds himself thinking about entries rather than focusing on price behavior, he should start over from the beginning. Eventually he will get tired of doing this and focus on the behavior in order to get through it [NB. This generally takes a couple of weeks with replay].
Second, he then finds instances of these tells in old charts (i.e., anything before now) to see if he's onto something or if what he thought was a tell was just his imagination. And since he'll be working right to left, this can be done fairly quickly.
Third, he tests these suppositions via replay, "reading" the chart from left to right. If the suppositions don't pan out, then he goes back to step one. If they do pan out, he moves on to simtrading.
Fourth, he simtrades his suppositions to see if the data matches what he came up with during earlier steps. If it doesn't, then he has to back up until he finds where things went wrong. Part of what may be wrong is that in simtrading he cannot pause or stop or replay what he's just done. In replay, the trader is in control of just about everything. In simtrading, he has no control over anything other than his entries, management, and exits. The market doesn't pause because the trader is confused. There are no do-overs. The shock of moving from replay to simtrading is a reality check. It is here that the trader begins to realize that he didn't understand this stuff as well as he thought he did.
Therefore, to get to the point, finally, marking up charts and reviewing the day and even going through the day again in replay isn't going to accomplish much unless one has gone through the first two steps thoroughly. This is why those who read chat logs and thus review the day, with or without charts, are pretty much wasting their time. A great many traders just cannot reconcile the facts that each moment is unique and the outcome of any given trade is unknowable with the idea of determining the probabilities of success of a particular "set-up", or cluster of behaviors. One cannot trade successfully by staring into the rearview mirror. He must look forward, but while doing so he must also know what he's looking for and what to do with it if he finds it. Otherwise he can literally spend (waste) years examining charts and dwelling on couldawouldashoulda.
I go into this at this length because this whole subject is so murky to so many people, and too often they persuade themselves that they can become successful traders if only they study enough old charts. This is of course wildly unrealistic.
You now know that you would not "feel comfortable entering and exiting this frequently in a live environment". Now you have to figure out why. Is it that you don't know the territory thoroughly enough to recognize those features of the terrain that will be of most use? Or is it that you recognize them but haven't tested them thoroughly enough to rely on them in the crunch, i.e., you're relying on a map of the territory that isn't in synch with it? Or is it there are unexplored emotional issues here that are preventing you from taking advantage of what the market has to offer?
Studying old charts in order to define something is rarely enough, particularly if done superficially. In order to act on something like a hinge in real time for example, one has to understand its defining characteristics, its "essence". Otherwise, it's just an assemblage of lines. Ditto with a lower high, or a higher high that immediately fails. The task is not so much to compare this with those hundreds of examples of lower highs one has found in old charts but to understand what traders are doing in this one, here, right now. And, again, it's impossible to do this unless one has thoroughly worked his way through the first three steps. If you find yourself choking in real time, just back up to a phase in which you are in control, then venture out of it on an experimental basis in order to see how you perform. The doors to previous phases aren't closed and locked. One can go back as often as and for as long as he feels the need to do so.
.....................................
It should be remembered that there are five phases here: observation, backtesting, forwardtesting, simtrading, real trading.
First, one must observe in order to find those "tells" which show the market's hand. In broad categories, these tells will manifest themselves in reversals, breakouts, retracements. This is analogous to meditation in that if one finds himself thinking about entries rather than focusing on price behavior, he should start over from the beginning. Eventually he will get tired of doing this and focus on the behavior in order to get through it [NB. This generally takes a couple of weeks with replay].
Second, he then finds instances of these tells in old charts (i.e., anything before now) to see if he's onto something or if what he thought was a tell was just his imagination. And since he'll be working right to left, this can be done fairly quickly.
Third, he tests these suppositions via replay, "reading" the chart from left to right. If the suppositions don't pan out, then he goes back to step one. If they do pan out, he moves on to simtrading.
Fourth, he simtrades his suppositions to see if the data matches what he came up with during earlier steps. If it doesn't, then he has to back up until he finds where things went wrong. Part of what may be wrong is that in simtrading he cannot pause or stop or replay what he's just done. In replay, the trader is in control of just about everything. In simtrading, he has no control over anything other than his entries, management, and exits. The market doesn't pause because the trader is confused. There are no do-overs. The shock of moving from replay to simtrading is a reality check. It is here that the trader begins to realize that he didn't understand this stuff as well as he thought he did.
Therefore, to get to the point, finally, marking up charts and reviewing the day and even going through the day again in replay isn't going to accomplish much unless one has gone through the first two steps thoroughly. This is why those who read chat logs and thus review the day, with or without charts, are pretty much wasting their time. A great many traders just cannot reconcile the facts that each moment is unique and the outcome of any given trade is unknowable with the idea of determining the probabilities of success of a particular "set-up", or cluster of behaviors. One cannot trade successfully by staring into the rearview mirror. He must look forward, but while doing so he must also know what he's looking for and what to do with it if he finds it. Otherwise he can literally spend (waste) years examining charts and dwelling on couldawouldashoulda.
I go into this at this length because this whole subject is so murky to so many people, and too often they persuade themselves that they can become successful traders if only they study enough old charts. This is of course wildly unrealistic.
You now know that you would not "feel comfortable entering and exiting this frequently in a live environment". Now you have to figure out why. Is it that you don't know the territory thoroughly enough to recognize those features of the terrain that will be of most use? Or is it that you recognize them but haven't tested them thoroughly enough to rely on them in the crunch, i.e., you're relying on a map of the territory that isn't in synch with it? Or is it there are unexplored emotional issues here that are preventing you from taking advantage of what the market has to offer?
Studying old charts in order to define something is rarely enough, particularly if done superficially. In order to act on something like a hinge in real time for example, one has to understand its defining characteristics, its "essence". Otherwise, it's just an assemblage of lines. Ditto with a lower high, or a higher high that immediately fails. The task is not so much to compare this with those hundreds of examples of lower highs one has found in old charts but to understand what traders are doing in this one, here, right now. And, again, it's impossible to do this unless one has thoroughly worked his way through the first three steps. If you find yourself choking in real time, just back up to a phase in which you are in control, then venture out of it on an experimental basis in order to see how you perform. The doors to previous phases aren't closed and locked. One can go back as often as and for as long as he feels the need to do so.
You posted this to me actually… I'm still not comfortable entering and exiting super frequently, but I'm ok with that now as I'm also not looking for any excuse to get out when I do put on a trade (sim). But my thoughts with regard to the market came from much more observing and really watching price. Thinking of trades wasn't the key to making me more comfortable - but that's just me.
Did I? Sorry. In that case, this should have gone to the "intraday" thread. But that's been pretty busy lately.
Nonetheless, it seems to have been written before I put the pdf together, and if nothing else, the SLA prevents overtrading. Yes, there may be a few false starts if one is nervous about his entry, but, for example, Friday there were only two trades, and these could be anticipated before the open: the reversal off the LL of the range, and the breakout through the LL of the range. There was nothing else. A lot of sitting and waiting, but no trades.
It's clear by now that no one trades this other than intraday, except perhaps Gringo, at least no one that I know of, and there may be no point to this thread. What more is there to say? But while we're on the subject of Friday, I should point out the retracement on the daily last Thursday, and the short entry just happened to coincide with Friday's short at the LL of the range I was referring to above. A little lower, but what the hell. The hourly has been a lot messier, but since no one trades it, I haven't bothered to post anything about it.
Nonetheless, it seems to have been written before I put the pdf together, and if nothing else, the SLA prevents overtrading. Yes, there may be a few false starts if one is nervous about his entry, but, for example, Friday there were only two trades, and these could be anticipated before the open: the reversal off the LL of the range, and the breakout through the LL of the range. There was nothing else. A lot of sitting and waiting, but no trades.
It's clear by now that no one trades this other than intraday, except perhaps Gringo, at least no one that I know of, and there may be no point to this thread. What more is there to say? But while we're on the subject of Friday, I should point out the retracement on the daily last Thursday, and the short entry just happened to coincide with Friday's short at the LL of the range I was referring to above. A little lower, but what the hell. The hourly has been a lot messier, but since no one trades it, I haven't bothered to post anything about it.
It's a bit strange that so many people choose to trade intra-day. I would have thought more would trade hourly or EOD simply because they can continue to make money elsewhere and just keep improving this skill on the side. The thought of trading not being the primary source of income ought to give some solace and peace when learning this. This discrepancy may be due to the sampling bias as to the nature of crowd at this website.
In a way it is beneficial for me as not many bother me much as I continue to get comfortable with my craft without getting killed for every call. What's interesting though is that I specifically identify SLA in my comments in RT before and after entry and exits and it's not hard to check my calls and deduce the reasonableness of whether the SLA framework (as @monoid put it I believe) makes sense.
The talk about SLA or AMT providing the framework for us to comprehend the market and to identify sequence of situations or events that lead to probable outcomes is a wonderful way to look at this analysis business. We can use eyes to pick those apples or come up with plans where the ear is used to identify movement of snakes. The point is that it's the practitioners who have to decide how to use what's available to them.
In a way it is beneficial for me as not many bother me much as I continue to get comfortable with my craft without getting killed for every call. What's interesting though is that I specifically identify SLA in my comments in RT before and after entry and exits and it's not hard to check my calls and deduce the reasonableness of whether the SLA framework (as @monoid put it I believe) makes sense.
The talk about SLA or AMT providing the framework for us to comprehend the market and to identify sequence of situations or events that lead to probable outcomes is a wonderful way to look at this analysis business. We can use eyes to pick those apples or come up with plans where the ear is used to identify movement of snakes. The point is that it's the practitioners who have to decide how to use what's available to them.
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