Making of a method
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I see a narrow congestion on the afternoon of the 12th and another the evening of the 12th,then another on the morning of the 13th, though I wouldn't call any of them trading ranges. Are you referring to one of these?
The trend channel begins on 5/22 and is defined on 5/28. Plot a line parallel to this and the lower line runs through 2900. This is the point of determining the context: what the trend is, where you are in it, where support and resistance lie, as I demonstrated this morning.
I was aware that price had been in a downtrend on the daily. But I have been using the hourly to look at S/R levels. So this is what I saw during the 2nd short.
http://www.sierrachart.com/image.php?l=1371508093951.png
As I indicated on the earlier 1 min chart - it was not a high probability short because of the context. But at the time I saw the RET as an opp to get in as price headed to what I believed at the time to be a TR with the bottom at 2914.
I understand, but it's not enough. Sometimes one needs to go back only a few days to determine the context. Sometimes one has to go back weeks. In this case, price was setting up to test an important trend. The 70pt rally that day confirms that importance. And since the primary and secondary tests of that trend took place overnite, by the open it was clear that the "line of least resistance" was up, particularly since price bounced off the premkt congestion at 14 at the open. And the target, the upper line of the channel, was reached today. I would not have anticipated any of that had I not gone back far enough to determine the important trends.
All of this can and should be done before the trading session opens, of course, so that the most important real-time decisions do not carry any emotional weight. Here, for example, after testing 14, price then rallies and bounces off the midpoint of the rally at 20. There's your long, and perhaps the last trade of the day depending on how it's managed.
All of this can and should be done before the trading session opens, of course, so that the most important real-time decisions do not carry any emotional weight. Here, for example, after testing 14, price then rallies and bounces off the midpoint of the rally at 20. There's your long, and perhaps the last trade of the day depending on how it's managed.
Looking at it from the viewpoint of the overnite test and re-test certainly changes the perspective. I see it now, especially in reference to the second short.
Regarding the first short: Price drops fast after the open all the way to 2914. The it swings right back up OH.Then retraces and makes a double top at 0847, indicating lack of pressure to move past high. Now based on the understanding of the overnite test and re-test my larger context is suggesting that the line of least resistance is up, but the action from the open on wards is suggesting Resistance. This R in combination with price falling at the open, makes a plausible case for taking the first short. Is this reasoning valid?
Price drops fast after the open down to the congestion at 14 which occurred after the double test (on a 1m chart) of the climax low, then bounces back to retrace the entire downward move. This is an indication of strength, not weakness. Given the context, it's certainly worth waiting to see if price drops below the midpoint of this rally (from 14). If it does, there's plenty of time to short. But "short" is not the message that the market is transmitting. If you decide to short anyway, which you did, the fact that price finds support at that midpoint and stops you out almost immediately is a signal to go long. If you then exit the long at 30 after price breaks the demand line, you have an excellent op to then re-enter the long at the test of the last swing low at 20. Two nice long trades, though you could easily justify going long as soon as price bounces off 14, given the circumstances.
As regards an analysis of what price is doing, it is equally important to look at what price is NOT doing, as with your second short. First, even though the selling wave is equivalent to the immediately preceding buying wave, that buying wave is twice the length of the selling wave before that, which is in turn half the length of the buying wave before that. Thus when price reaches 2930 and drops back to 2920, it does NOT drop below the previous swing low at 20. That sends a message regarding the balance of buying and selling pressures.
The market is not out to trick you. It plays poker by laying its cards on the table, face up. You just have to play it as it lays without reading complex motivations into it.
Day 7 of 20
Prep:
Price in the middle of a loose TR on the daily between 3005 and 2900. But yesterday's LH and LL means it's technically still in a downtrend.
Price in 13 pt TR since yesterday's close.
S1: 2956 (from PM)
S2: 2934 (MP of prior upswing from low of 13th to high of 13th
R1: 2967 (from PM)
R2: 2979 (from 12th)
R3: 2986 (high of 11th)
http://www.sierrachart.com/image.php?l=1371515579986.png
Prep:
Price in the middle of a loose TR on the daily between 3005 and 2900. But yesterday's LH and LL means it's technically still in a downtrend.
Price in 13 pt TR since yesterday's close.
S1: 2956 (from PM)
S2: 2934 (MP of prior upswing from low of 13th to high of 13th
R1: 2967 (from PM)
R2: 2979 (from 12th)
R3: 2986 (high of 11th)
http://www.sierrachart.com/image.php?l=1371515579986.png
Db,
Somewhere on TL you mention that InterDay Trend may not be too relevant to IntraDay trade, unless there are levels where you may find S/R. Otherwise you just find S/R as you go with swing H/L, congestion etc. But here, you are starting with InterDay trend and then using that to primarily locate the trades. Is my understanding correct?
What I am asking is, for a Intra Day trading using 1m timeframe, how important is InterDay trend and levels.
Thanks.
Somewhere on TL you mention that InterDay Trend may not be too relevant to IntraDay trade, unless there are levels where you may find S/R. Otherwise you just find S/R as you go with swing H/L, congestion etc. But here, you are starting with InterDay trend and then using that to primarily locate the trades. Is my understanding correct?
What I am asking is, for a Intra Day trading using 1m timeframe, how important is InterDay trend and levels.
Thanks.
I hope I demonstrated the importance of the interday trend yesterday with my "real time" comments regarding yesterday's trading as well as my hindsight comments regarding the trading for the 13th. Without knowing the trend and one's place in it along with pertinent S&R, one is left to guess at nearly every turn and will likely miss out on substantial moves, as was the case here for both the 13th and yesterday (and for the 16th, as far as that goes). In such a situation, trading size becomes ludicrous.
The 1m bar interval is irrelevant. Price moves continuously, in ticks. How one chooses to display the information is entirely up to him, but price moves without regard for how the trader chooses to view it (those who consider it to be "noise" just aren't listening). It does not begin to move at the opening bell. It has been moving continuously since Sunday afternoon. To ignore all that history and that wealth of information is at the least self-defeating. And, as I pointed out in the post I made on the 16th, it takes only a few minutes to review. Why one would not want to know this is a mystery to me. Scalping, of course, is a special situation, but that's not what any of this is about.