Its all about "tests"

S

steve46

We are gettting to the end of what I can offer folks, but one thing that I can talk about pretty freely is this the concept that trading is about "tests"

Lets begin with today's chart of the ES

As you can see, price began by testing the previous day's low

Then it tested the low for the day before

It also tested the midline of the LRC

This is why it is a good idea to look at a chart like this and try to develop a your ability to "see" potential tests before they occur.
 

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I can agree with this and have seen it also in Currencies. It is actually part of the premise on which I trade. Carry on Steve46 if you will. Everytime you are in one of these posting modes I learn something from you or the stimulus that surrounds us.
Michael B.
 
steve46 uses a modified pivot point methodology If I can remember...I gotta find that gem of a link again...

The guy practically has revealed what he does in parts here...but many do not realize how well it works..I will try it someday.

maybe in between steve46's senality moments, he will allow a visit...:)

Quote from NickBarings:

What is the LRC line ?
More...
 
LRC is Linear Regression Channel

I use that method to frame the price action on various time frames.

I have posted examples of that most recently on MarketSurfer's thread "Surf Report"

The midline simply bisects the channel.

Steve
 
Quote from steve46:

We are gettting to the end of what I can offer folks, but one thing that I can talk about pretty freely is this the concept that trading is about "tests"

Lets begin with today's chart of the ES

As you can see, price began by testing the previous day's low

Then it tested the low for the day before

It also tested the midline of the LRC

This is why it is a good idea to look at a chart like this and try to develop a your ability to "see" potential tests before they occur.
More...

I took that 1272 break this morning, exited on the 11:15 candle. What do you think of a 1264 test and break today? I'm giving it 3:1 at the moment (against)...
 
If I resize the LRC to accomodate a move from that point (1272) I get a statistical probability of about 62%...so say 60% or so that price will continue upward from that point to test the midline of the LRC on a short term basis (today for instance).

Those odds are not good enough for me to bet strongly on that move.

For my opinion to change, I would have to see price move strongly through the present resistance at 1270

If we get back to my main thesis, I would say it is also about "attitude". For instance in the situation that Mike presents, the implication is that he has a bias toward that move. In contrast, I try to be indifferent to price direction. Either way I am looking for some specific behavior and then I will react. If for instance, price moves up through 1270 on a volume spike of let say 10-12,000 contracts, then I am going to look for a long setup. If instead it fails here and drops on similar volume, I am going to look for a short entry below 1268.50

In terms of bet sizing, I would point out that there are two basic approaches. One is to put on a full size position and to manage risk via stop loss on that amount. The other is to put on a token position and scale in at intervals, looking for a larger move. In this market I favor the latter, as it allows me to maintain a presence in the market with less initial exposure.
 
Quote from steve46:

If we get back to my main thesis, I would say it is also about "attitude". For instance in the situation that Mike presents, the implication is that he has a bias toward that move. In contrast, I try to be indifferent to price direction. Either way I am looking for some specific behavior and then I will react. If for instance, price moves up through 1270 on a volume spike of let say 10-12,000 contracts, then I am going to look for a long setup. If instead it fails here and drops on similar volume, I am going to look for a short entry below 1268.50
More...

I hear ya, your assessment reflects my sentiments about todays action almost to a T.

Irrespective of what will actually happen, I try to "bias" myself against what others may be thinking at the moment.
 
Dont know exactly how to show it with a chart, but two candles ago, we had what I call a false break out (FBO) and it happened on volume of about 8,800 contracts. Referring back to my previous posts, you can see that we fell short of what I would like to have seen to get a move down.

Edit:

That failed move down was on 8,804 contracts
 
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