How to Learn Price Action

[dozu888]

once again, a decent thread is turned into 'give me the parameters to plug in so that I can produce the same result' baby cry for spoon feeding.

stop asking questions..... the answers are already given.... now go stare at the screen for 10,000 hours..... you will find it in the charts. (as Ben Hogen once said, you will find it in the dirt)

 

[BoneFishGA]

Quote from Dustin:

That's the easiest part. You can use a scanner, or just a gainers/losers list. For example anything +1%, >500k volume with >2 times relative volume would satisfy the strength criteria. After trading this stuff for a while you will begin to learn what is comfortable for you. Maybe you prefer thicker traded lower priced stocks that trade >1M/day, or maybe you like the thinner more wild high priced stuff. These are the things you learn to narrow down your style and become a pro at that one thing. That's all you need to make a living in this business.

EDIT: I want to add...if you are trading something that doesn't show higher than normal volatility on that day you are wasting your time. Find the volatility and trade that instead. There are great trends out there every day that anyone can easily be a part of with basic entry and trade management rules.

Thanks Dustin for all the insight. Thats a great place to start.

 

[Lamont_C]

Quote from daveb351:

SoCalTrader619:

Search the "dbphoenix" old posts: He wrote a very good e-book on Price Action. Or PM me your email & I'll send the pdf's.

Not very fair to dbphoenix, is it?

LC

 

[jdkgroup]

FAST TRACK:

1. Read Anekdoten's Thread start to finish

2. Buy a book on patterns (you can support an ET member & buy the great book from surinotes.com)

3. Get some charting software & watch several different types of charts...1/3/5/30/60 minute.....250/500/1000/2000 tick.....1000/2500/5000 volume & see what you like...you will start getting more comfortable

4. Paper trade.....paper trade.....papertrade (ninjatrader.com is free)

5. you will start getting the hang of it....dont make it too complicated

 

[Dustin]

Quote from newguy05:

Hi dustin, just want to clarify. Your definition of a strong stock in your quote is based on CURRENT day only right? Not if it's moving up in the past 6 months etc..?

But then my question is also how do you define a strong stock? Becuase when the market opens, noone knows if a stock will be strong or weak for the day. It only becomes clear after the market is running for a while.

Do you scan based on yesterday's action to determine what is a strong or weak stock today?

thanks

I am talking about strength on that day. What happened yesterday doesn't matter.

Of course you don't know what is going to happen before the open so don't try to trade on so little info.

I suggest not even trading the first 30 mins if you are new to trading. Let some trends define themselves in the strong and weak stocks then start taking little jabs. You can add to positions as they go your way. You will learn trade management by trading small and only adding to winners.

Make it simple. Have 20 charts available to you. Use whatever software you have that has a gainers/losers list, and populate 10 charts with the top 10 strongest stocks, and the other 10 for the weakest stocks. Some of them will be too thin to trade, or too high priced...the important thing is that you find the ones you do want to trade, and have a chart available to watch them the entire day. I use 30 charts (15 for strong, 15 weak).

This type of strategy is the oldest, simplest form of trading, and it works.

 

[Dustin]

Quote from my7tvette:

Dustin, I really appreciate your advice. I've been trading since '05 at a prop firm. It is so easy to get into the trap of shorting the strongest stock on your screen ("it can't go any higher, can it?), or buying the weakest.

I've read many of your posts after noticing your results in the Trader P&L thread last year. I am currently working to tweak my trading to incorporate some of your scanning ideas (I usually scalp a small group of big-cap high volume stocks).

Anyway, just wanted to give you some props for your sound advice and common-sense approach!

Thanks, and I know what you are talking about. I get into trouble on some of those trades too. Sometimes there's just no telling when the steamroller is going to stop. That's why I think traders with <1 year experience just shouldn't be allowed to sell strength or buy weakness. If I was training traders, that would be a hard rule. In fact I think if most traders followed that for their entire career we would all make a lot more money.

 

[MandelbrotSet]

Quote from Dustin:

Make it simple. Have 20 charts available to you. Use whatever software you have that has a gainers/losers list, and populate 10 charts with the top 10 strongest stocks, and the other 10 for the weakest stocks. Some of them will be too thin to trade, or too high priced...the important thing is that you find the ones you do want to trade, and have a chart available to watch them the entire day. I use 30 charts (15 for strong, 15 weak).

This type of strategy is the oldest, simplest form of trading, and it works.

Quote from Dustin:

... I think traders with <1 year experience just shouldn't be allowed to sell strength or buy weakness. If I was training traders, that would be a hard rule. In fact I think if most traders followed that for their entire career we would all make a lot more money.

Thanks for your input Dustin.

It goes a long way to confirm what we found in our own trading.

What started out as a basic question has turned into text book lesson on trading.

We're all smart enough to see it and know exactly what he's talking about.

The lesson now is to See the Setup, wait for your confirmation Trigger and Follow-through with the the Trade.

 

[Joab]

Quote from Dustin:

That's the easiest part. You can use a scanner, or just a gainers/losers list. For example anything +1%, >500k volume with >2 times relative volume would satisfy the strength criteria. After trading this stuff for a while you will begin to learn what is comfortable for you. Maybe you prefer thicker traded lower priced stocks that trade >1M/day, or maybe you like the thinner more wild high priced stuff. These are the things you learn to narrow down your style and become a pro at that one thing. That's all you need to make a living in this business.

EDIT: I want to add...if you are trading something that doesn't show higher than normal volatility on that day you are wasting your time. Find the volatility and trade that instead. There are great trends out there every day that anyone can easily be a part of with basic entry and trade management rules.

Dustin,

Thanks for the feedback.

I've used gainers and losers myself screened with volume but found this doesn't always produce directional moves so well.

I find that screening for important news releases (earning etc..) as well as volume helps a lot.

Your comments on expanding volatility are interesting care to give an example.

 

[ProfLogic]

Quote from smilingsynic:

Most traders lose money period. There is no evidence that traders who lose use minute bars and that those who win use something else. Indeed, minute (time-based) bars provide information that volume bars do not. If volume bars work for you, great.

One must be careful not to confuse correlation for causation.

It wasn't my intention to imply that only those that use CVB charts are the only ones to make money because that is definately not the case.

That being said, please tell me what information "time-based" bars provide that volume based bars don't other than abnormal spikes caused by varying volume per bar?

 

[dozu888]

Quote from ProfLogic:

It wasn't my intention to imply that only those that use CVB charts are the only ones to make money because that is definately not the case.

That being said, please tell me what information "time-based" bars provide that volume based bars don't other than abnormal spikes caused by varying volume per bar?

to some, the 'abnormal spikes' (or the lack of them) are the key indication of things such as:

professional accumulation
professional distribution
lack of demand
lack of supply.

How do you observe the above using CVBs?