You shouldn't look at trend lines as support or resistance. If you view them as a measure of the trend, then you will eliminate this voodoo mindset. Grab a chart and find a low and connect it to a higher low after a higher high has formed. From there monitor price in reference to that trendline. Is price moving far away from the trendline(increased momentum)? Is price consistently breaching the trendline(buyers losing momentum)? After a trendline break, we can infer that the trend is losing steam. Now until we see a lower high and a lower low, the uptrend is just pausing.
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IN THIS THREAD: IronFist learns (the elusive) PRICE ACTION
- Thread starter IronFist
- Start date
You shouldn't look at trend lines as support or resistance. If you view them as a measure of the trend, then you will eliminate this voodoo mindset. Grab a chart and find a low and connect it to a higher low after a higher high has formed. From there monitor price in reference to that trendline. Is price moving far away from the trendline(increased momentum)? Is price consistently breaching the trendline(buyers losing momentum)? After a trendline break, we can infer that the trend is losing steam. Now until we see a lower high and a lower low, the uptrend is just pausing.
Quote from osorico:
Without saying anything else, here is a thread that will help quite a bit.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=108364
For an extremely enlightening exercise, throw up a 10 second chart of your favorite instrument and paper trade it. Not a tick chart, not a range chart, just plain 'ol price candle or OHLC bar. Volume if it suits you.
PM's with specific inquiries are welcome.
Osorico
Just a reminder...
Price action, like chart patterns are valid across all times frames. However, some price patterns may be more frequent or more reliable on specific time frames.
Quote from IronFist:
Fibs are one of those things like Trendlines. In hindsight you can make them look awesome. But I never know where to begin or end them in order to get the correct retracements.
Great thread. I would like to add something about trendlines: I couldn't trade without them...and although some of my charts look messy, it really depends on how you draw them (quite often you can use the same trendline/same angle from the past)...they can be a great help in making decisions.
Quote from osorico:
Without saying anything else, here is a thread that will help quite a bit.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=108364
For an extremely enlightening exercise, throw up a 10 second chart of your favorite instrument and paper trade it. Not a tick chart, not a range chart, just plain 'ol price candle or OHLC bar. Volume if it suits you.
PM's with specific inquiries are welcome.
Osorico
Solid Gold
Thanks Oso
This is an excellent point, timeframes, time of day, and context of the market are all underlying keys.
Quote from osorico:
Just a reminder...
Price action, like chart patterns are valid across all times frames. However, some price patterns may be more frequent or more reliable on specific time frames.
http://milan.milanovic.org/math/english/division/division.htmlQuote from IronFist:
Fibs are one of those things like Trendlines. In hindsight you can make them look awesome. But I never know where to begin or end them in order to get the correct retracements.
And honestly, the rational part of me wants to say it's voodoo BS... but since they appear to be mentioned in that book by Suri that everyone keeps recommending, I will try to keep an open mind.
"Where a cell exists, there must have been a preexisting cell, just as the animal arises only from an animal and a plant only from a plant." "Omnis cellula e cellula" or "All cells from cells." - Rudolf Virchow (1855). The ability to reproduce distinguishes living organisms from nonliving entities and this perpetuation of life is based on the reproduction of cells or cell division. In unicellular organisms, the division of one cell to form two reproduces an entire organism.
...............
When we have reproduction of the more-cellular organisms the parents kept their generation and the children represent a new generation. The reproduction of the more- cellular organisms is universal law of the cell division:
Cell division results into two cells of different age!
We recognise the mother cell and the daughter cell.
........
The numbers of cells in each cycle produce the rows of the Pascal`s triangle:
1
1 1
1 2 1
1 3 3 1
1 4 6 4 1
1 5 10 10 5 1
1 6 15 20 15 6 1
1 7 21 35 35 21 7 1
1 8 28 56 70 56 28 8 1
1 9 36 84 126 126 84 36 9 1
Pascal triangle is the Model of the cell division. According to the Pascal Triangle and Fibonacci numbers, the planets of the Solar system are arranged.Also Pascal Triangle is the universal law of the atomic structure.There is the connection between numbers of electrons and protons on one side and triangular and tetrahedral numbers, on the other. So, the Pascal Triangle is the basic number`s expression in Nature.
By adding diagonal numbers of the Pascal Triangle Fibonacci sequence can be obtained.
It only makes sense that since the Nature follows specific laws the same laws should be applicable to price movements. Also given the fact the just by looking at charts one can notice definitive proof of self-similarity and scale invariance - I don't think one should regard fractals as isolated curiosities with non-intuitive properties. I wonder if anybody ever tried to estimate the Hausdorff dimension of, say 5 min ES chart.
Quote from romanus:
By adding diagonal numbers of the Pascal Triangle Fibonacci sequence can be obtained.
It only makes sense that since the Nature follows specific laws the same laws should be applicable to price movements. Also given the fact the just by looking at charts one can notice definitive proof of self-similarity and scale invariance - I don't think one should regard fractals as isolated curiosities with non-intuitive properties. I wonder if anybody ever tried to estimate the Hausdorff dimension of, say 5 min ES chart.
Oh, sure... I use 2m charts and I make these calculations in my head on every 18th tick! Live, in real-time. And I enter and exit trades, in real-time based on that extemporaneous calculation!
This is exactly what learning how to read price action is NOT about.
Osorico Rainman.
The point I was trying to make is that since fib numbers represent one of the fundamental laws (based on how they are derived) of nature and as such there may be a way to use these principles in trading. That's all.Quote from osorico:
Oh, sure... I use 2m charts and I make these calculations in my head on every 18th tick! Live, in real-time. And I enter and exit trades, in real-time based on that extemporaneous calculation!
This is exactly what learning how to read price action is NOT about.
Osorico Rainman.
Quote from romanus:
The point I was trying to make is that since fib numbers represent one of the fundamental laws (based on how they are derived) of nature and as such there may be a way to use these principles in trading. That's all.
I completely agree. And I'll go one better... Everything works, if it is applied consistently and with a proven successful discipline.
The OP desires to learn price action, and while there may be natural laws or mathematic principles that price patterns appear to honor at times, price patterns can be read (successfully, for profit) without any knowledge of such underlying fundamentals.
Osorico