Making of a method

http://www.sierrachart.com/image.php?l=1374105171978.png

Prep:
The 65 level was tested 3 times yesterday and then once ON. Traders supported price but no one could take it up. Consequently, yesterday was a small range day just like the previous two days before that.

Buying pressure is evident from ON onwards. Since price found S at 65, it has been climbing sharply with a surge at PM that has retraced, but is now showing up pressured through HL's. So the immediate trend is up.

The repeated test of S at 65 from yesterday as well as the test and subsequent up wave since ON gives me to a long bias for today.

S: 3077 (SL since PM)

R: 3082 (High from PM)

0834 The first major downwave found S at 77 and there is now a rally.
0838 The retest of S resulted in a HL. Price now displaying some buying pressure. With traders having explored the downside and 2 S levels being formed, will price explore towards the R from PM now?
0840 Price surges through high of 82.
0842 While retracements since the BO have not gone below the previous High level, buying pressured seems to have weakened. Will price come back down a bit for a longer retracement before building buying pressure for another try?
0847 Price drops down fast and back towards S level. If S manifests a third time resulting in another HL, there will be more evidence of S, although the uncertainty of whether pressure can manifest to take price to new highs still remains.
0849 Presence of LH and HL now
To 0854 Price cuts right through prior S level of 77 but has now retraced back to that level.
To 0859 The exploration to the downside has been stopped with an established retest at 0855. Signs of buying pressure in the immediate retracement, but given that the upside was rejected earlier and that the downwave was formed after overcoming S levels, it is not likely that price will go right back up. Likely sideways action coming up.
To 0907 Price breaks out of sideways. The presence of a lot of S underneath along with immediate buying pressure may be indicating an opp to ride price up to R.
To 0915 Price drifts but with an upward slant as it makes small HH's and HL's.
To 0927 The up drift has lost momentum and turned flat and then recently turned down. Buying pressure at 0925 created a HL, so indications are that price will turn down now. But with the flat pace and number of traders below, it will likely be a slow turn with chop in it.
To 0936 Buyers came in size. The large volume on both 0935 and 0936 indicating that there was a lot of selling as well. But the fact that price has risen dramatically means that this attempt to discover new highs has backing.
0938 As before, traders do not join in to chase the breakout. Price drops back down into past zones of activity.
To 0944 The many traders who bought at the 78 level must have been happy to see price zoom up and breakout. But not it has dropped fairly quickly to their level. Will they take this as an indication that price isn't going to go up today? If so, will they start closing their bets, thus making price explore the downside?
0950 The ret of the downwave seems to be over and pressure is down again. Seems like a place to bet in anticipation of a continuation.

Key thoughts:,

1)Seems that more often than not traders test both opening S and R levels. So if S is tested and shown to hold, it is likely that price will promptly move the other way in an attempt to test R.

2)Also moves seem cleaner in the first 15 to 20 mins of trading, in that they are at least definite. If a trade works, it generally moves with convincing range and pace in the direction of the bet.
But once the hesitation from the open is over, things become a lot more choppy and require a measure of patience. Compelling opps seem to develop earlier than later.

3)The surge from 0933 to 0936 was a surprise. Although S had been building, price had been moving sideways and had recently turned just a little bit down. Someone came in and pushed it all the way up. But for now, I can leave these moves alone as I can't identify any plausible markers indicating the buildup of this move.

4) The compelling opp was the long off the retest of S at 0838. It was compelling because:
a) The intermediate trend was up, as seen by prep work done of ON and PM.
b) The anticipated S level held
c) The anticipated S level was confirmed to hold through a retest
d) The upside had still not been explored and it was worth seeing if PM high would hold or be broken.
e) Lower price risk due to this not being a V reversal
 
http://www.sierrachart.com/image.php?l=137419044743.png

Prep:
Just like yesterday, the ON action showed an uptrend with a surge at PM that has now been retracing. Movement on the hourly has been largely sideways since the 12th. Nobody has been showing up to take price higher and yet there has been S every time price has dipped. Bias is for range action to continue today as well.

S: 3075
R: 3082

0833 S forming at 76. No trend either way yet.
0835 after a little bit of hesitation, price falls to 74. Now it's a downtrend with next S level of 70 from ON.
0839 Price making a mini hinge within the ret pocket. How do 5 min traders watch the 1 min to enter the trend that appears strong on their TF.
0842 The previous bar could be seen as a retest HL. But the bar before that was brought down from it's upside exploration as well. Lot of trades just above and just below price, so no clear direction for now.
0843 The lack of smooth descent will have traders worried. Downwaves are immediately meeting buying waves. Indication that either price will chop or go up.
0843 A strong surge confirming retest through a LL. Watch for upside pressure
0845 Traders will be looking at the SH of 77 as a key point. Opp to enter in anticipation of that level being reached.
0848 77 was breached but came down fast. So enough sellers at that level. Price at around mp of downswing since open.
0853 Rejection of the breach over 77 turned to sellers joining in to explore continuation of the downmove. But this bar's action shows buyers willing to come in here.
0900 Previous bar closed to form a HL, showing pressure building in anticipation of a breakout of this range between 77 and 73. But if a trade is taken here it would be right in the middle of the range and there is no strong indication that R will not hold.
0902 Pace has increased quite a bit over the last 2 mins. Wide ranging bars with no direction. Lot of traders must have been stopped out.
0908 Price surge to range top. This level is clear on most TF's.
0911 Price retraces after BO but remains above range R. This will get buyers coming in.
0918 making an attempt at 82. This is PM R and a lot of trades here from yesterday's exploration of upside. The most recent RET was shallow
0928 This ret also has been shallow, although price is now moving sideways. Close to highs, so they will probably be a breach to try and see what the reaction is at that point.

Ideas:

1) 0843 Price bouncing off the re-test LL gave information that the S that has been shown on dips over the last few days continues to show itself. This gave a long opp in anticipation of traders exploring the upside, as they had not done so yet.

2) Could the observation of volatility increasing from 0900 onwards, have tipped me off to taking a long in anticipation of the BO? This could have been jumping into either the 0908 bar or waiting for the slight hesitation at the 0909 bar.

3) The ret after the BO remained above the range and buyers saw that as a confirmation of direction to jump in anticipation of the rise.
 
Quote from dbphoenix:

You're welcome. But providing hindsight examples makes things appear a lot easier and more certain than they really are. Which is why gurus and vendors always use hindsight charts. Everything is crystal clear in hindsight. Real time, however, is another matter.

Let's say you have something moving south from 100 and it's all the way to 60. Then it stops and starts moving north. Is this a reversal? Or is it only a brief retracement in an ongoing downmove? You can be mechanical about it and bring in indicators and formulas and statistics and so forth like so many people do these days, or you can be a trader, recognizing that it's not just a dot floating in space but the print of transactions between buyers and sellers. There are many reasons why price may have stopped and turned, even if the "turn" was only a brief one, and without becoming immobilized by the "why?", you can apply what you know to the situation in order to make real-time sense of it.

For example, if you have the experience, you'll know that parabolic moves come to an abrupt and often terminal end. To do nothing in anticipation of a continuation is merely hopeful. A move in the opposite direction here is much more often a reason for an exit, particularly since one always has the option of re-entering if that is called for later. But, in the case above, let's say it's not this obvious. So we look at just how strong this maybe-reversal is, which is where the resistance line comes in handy. Does it break it or not? If it does, there's some evidence that this is a reversal and not just a retracement. But it's not enough. Is it forceful or is it wimpy? Does it run out of steam at the crest of the move with shorter waves or does it move ahead as if the way were free and clear, like a cork bobbing to the surface?

And this is where you have to keep your wits about you and not only interpret what traders are doing but anticipate and possibly second-guess them. Let's say you've been short all the way from 100 and you don't know whether to exit or hang on in hopes that there will be a continuation. The easy answer is that if you're hoping for anything you should get out immediately. Or maybe you're afraid that there won't be a continuation. Same answer. Exit and watch. Whichever way it turns out, there will be a later opportunity to rejoin the move.

But even if hope and fear are not part of the landscape, you still have to decide what to do. If the move north has been strong and broken the resistance line, you still want to wait for a slight pullback -- or retracement -- in this supposed reversal in order to go long. If you were short and exited that short, you're free to do whatever you want. You may think that this "reversal" was weak and that whatever pause may occur here is not a retracement in what will be an ongoing move upward but a retracement in an ongoing move downward. At the moment, without any regard for support or resistance, the only clue you have is that your resistance line was broken.

Perhaps the best way of dealing with this rather than indulging in a lot of useless hand-wringing is to place your buystop above what looks like it will turn out to be a retracement in a new upmove and just wait. If this is a retracement in what will be a new upmove, price will resume its upward course, stop you in, and you're long. If it doesn't, then wait for a lower low, which means that price will drop below your resistance line again (it happens). If it does make a lower low, then the odds have shifted back in favor of a continuation downward, and you have three choices: jump in when the lower low is made, wait for the hesitation which often happens in these cases and place your sellstop just below it, or wait for a pullback or retracement after this lower low is made, placing your sellstop inside the crest of it but far enough away from it so that you don't get trapped into a trade that doesn't go anywhere after all. Paradoxically, if the downmove is a good one, the last option will not likely come up because there won't be the necessary indecisiveness, which is to some extent what retracements are all about. You'll just have to be ready to jump in, if you're ready, but be ready as well to exit immediately if things don't go your way.

And to add another ingredient to the mix, if what you thought was a retracement doesn't work out and you exited your short thinking that it would and even went long, price may shrug all this aside and head south again anyway, only in this scenario it makes a double bottom. In this case, you may have an even clearer sign of a reversal since everybody has by now had plenty of time to think about it, and since you now have a more definite line in the sand, you can either plant your flag and place a buystop above this or bracket the trade in the event that the "double bottom" is after all a ploy (unlikely but possible) and be in position for a new short trade.

As a further help, of course, there are the macro support and resistance, such as in this chart:

http://cdn3.traderslaboratory.com/f...-markets-wyckoff-way-making-bazillions-d1.png

Resistance may have been of more definite help in these trades than support, but knowing in advance where to look for "reversal behavior" helped to take advantage of the two reversals at the January trading range, one in early April and one two weeks later (which we're still enjoying).

This is an ongoing process and you learn something new every day. The "schematics" and "templates" that vendors are so fond of may be helpful, but they more often encourage the trader to start thinking in terms of patterns rather than behavior, and the odds that he will make the wrong call at the wrong time increase that much more.
More...

Revisited this gem of a post from May. There is just so much here. A reminder to make it simple and then keep it that way.
 
Human Nature to
Human Behavior to
Buying & Selling Pressure to
Markers of Pressure to
Context to
Anticipated movement of price to
Human Nature

Defined as:

Human Nature: Properties of the mind - Emotion - Systematic Biases
Behavior: The buying and selling
Markers of Pressure: The prints of price showing the quality of behavior
Context: Weaving of all the above
Anticipated movement: Historic outcome of woven pattern
 
Quote from game:

Revisited this gem of a post from May. There is just so much here. A reminder to make it simple and then keep it that way.
More...

Here is a short quote from a post by DbPhoenix at another forum:

"Trading price begins with determining the context, i.e., what is the market doing outside the intraday world? By finding the various support and resistance levels, i.e., those levels at which sellers have turned price down and buyers have pushed it back up in the daily and even the weekly charts, the trader will have some idea where to find zones and levels of tradeable action in his upcoming intraday chart.

Why bother? Because if you learn to trade price, your edge will never fail." - DbPhoenix

I know it probably sounds hokey, but I actually typed that up, printed it out, and pasted it to an index card that I keep taped to my desk next to my computer. I put it there when I started trading the NQ a few weeks ago, and it has kept me focused on the simple things that matter.
 
http://www.sierrachart.com/image.php?l=1374349075670.png

Prep:
Price showing a slight down drift during ON, following the plunge at yesterday's close. Some buying pressure came in PM with a recent 5 pt Reversal surge just before the open. This most recent strong Support action gives me a long bias. The mp of the big fall is 3057 and traders could take it there.

Price has moved through the mp of the hourly channel and is now closer to the lower boundary. On the daily, it remains just below the mp of the channel. Yesterday's big fall means traders have been brought out of the lull and there could be a lot of jockeying for position today.

R: 3047
R: 3057

S: 3039
S: 3029

0830: Price fell 7 pts in an instant. One of the faster falls I have seen. Is this an example of climactic selling? The buying shown upon this selling was just as dramatic and a sign of strength, even though price has not yet pushed much beyond the opening price. Bias remains long.

0834 Crosses DS lines showing signs of Reversal, but is brought back strong again by buyers.
0836 Hinge in place with value around 3042. No clear direction.
0839 The brief attempt to go up did not work and traders exploring the downside now.
0840 Price falls below climactic low level, and this time S does not come in with strength. Indication of weakness and likely direction of price is down.
0843 Downwave finding some R at the 36 level with previous two bars bouncing back.
0844 Strong buying Reversal goes to the mp
0846 retest attempt makes HL setting up a possible buy stop coming up
0849 another test attempt
0852 Although price has not crossed previous low, there does not seem to be any immediate strong buying either. At this point more likelihood of a break below low
0854 crosses DS line signalling that bottom has been made
0856 Compelling situation seems to be setting up for a long in anticipation of a break beyond the mp.
0859 Attempt to break lost steam but the zone is still good for long if HL's continue to be made. But there is going to be R just above from all that hinge activity. So not that compelling after all.
0901 Slow sideways movement to avoid
0908 Upwards drift from test of bottom seen through hL's changes into a move towards R at 3041. Opp to get in on anticipation of break if there is hesitation here.
0918 Price bounces off Range S.
0920 Short opp in anticipation of breakdown. Buyers who bought for bounce back at S see that trade fail and sell
0921 Breach and ret of the breach not very strong.
0926 The downwave seems to be resuming since buyers could not take price back much inside the range. S will now become R.
0930 Sell wave turned into buying and any trade would be exited.
0933 Some serious buying has come in and it seems that the range will finally be broken to the upside although range traders will be taking profits at R.
0935 Hesitation after the BO happening. If it does not dip down into range, there will be a long opp.
0940 The failure to BO turned into sideways movement with small range and finally, price is turning down. Perhaps traders are seeing that no one is coming in to push price higher and they are finally selling on higher TF's. Seeing this, the range traders are coming in to short. Since the ascent from the bottom was fast with fewer trades, the descent will face thin R.
0942 The fall was stopped and buying pressure being shown in an anticipation of the break again.

Ideas:

1) There was reason to take this because
a) The hinge resolved to the downside
b) The strong S that came in at 0830 did not repeat itself. Thus, information risk component was satisfied.
c) There was hesitation during the fall giving a lower price risk entry.


2) The buy stop would not have been hit. It was placed because:
a) There was a Reversal in effect with cleared markers.
b) The ret of the Reversal formed a HL fulfilling the retest marker and lowering info risk

3) The buy stop would not have been hit. It was placed because:
a) The rise from the lower low once again lowered info risk.
b) The swing high of 41 was right above and this stop was in anticipation of breaking that level.

4) The sell stop would have been hit. Taken because
a) The range had been breached on the downside
b) The fall from yesterday and the presence of the hinge overhead justified the short even though the ret had gone just a little back into the range.

5) Taken because
a) The breach attempt had been convincingly rejected
b) There was recently validated strong S right below
c) The previous action had been range behavior and the entry was in anticipation of price going back to R.

6) Buy stop would not have been hit. Placed because
a) Price had made a strong run from bottom through range R, showing intentions of exploring territory above the hinge and open.
b) There was hesitation


Of these 6 opportunities, the best balance of price and info risk was

2) Because the breakdown from the hinge had been rejected with a strong Reversal and there was a good chance that price would have explored the upside

5) The breach below S had been rejected with recent signs of building pressure. The past behavior of price indicated range, so there was a lot of room to explore above.


More Ideas:

2 basic types of trades

Those that anticipate to break S/R
Those that have S/R right behind them as backing
 
Great effort game, you are on the right path. Try to define clearly the chop, to be able to avoid it in RT as soon as it forms.

Db,

As always great posts, although you have said things that you have said before in TL, I think the devil is in the detail, and your posts in this thread have helped me even more to clear the context doubts i had.
 
Quote from niko:

Great effort game, you are on the right path. Try to define clearly the chop, to be able to avoid it in RT as soon as it forms.

Db,

As always great posts, although you have said things that you have said before in TL, I think the devil is in the detail, and your posts in this thread have helped me even more to clear the context doubts i had.
More...

what ever happened here with LNKD- was anything learned, how can you move on and write and write, I hope this was d, so you buy it now its 200.00 !

"04-18-13 08:54 PM

Okay, let's look at LNKD. Draw a straight line under the swing low on 2/26 ($155) and the swing low on 4/3 ($165). This is your trendline for this purpose. A buyer doesn't want to see price drop below this line.

Now the high made last week was just a touch higher than the one made in March, for all practical purposes a double top. Price is already showing weakness by breaking a "support" line that you can draw from the last swing low mentioned above along the daily lows extending to yesterday.

The trendline you drew crosses price's path at 170. If you're confident in your ability to exit a trade immediately if it doesn't go your way, you could short any rally attempt above 170. But if it doesn't go, then exit and wait for it to drop below 170 and short there in whatever way you usually short, remembering that by then, if further weakness does occur, it will be obvious to more people and you are far more likely to be manipulated.

If you like MAs, plot a 200d simple and note that price is 150% of this MA. This is unsustainable. 125% would be high (155). 115% would be more like it, which would take you down to the gap.
 
Quote from trilogic:

what ever happened here with LNKD- was anything learned, how can you move on and write and write, I hope this was d, so you buy it now its 200.00 !

"04-18-13 08:54 PM

Okay, let's look at LNKD. Draw a straight line under the swing low on 2/26 ($155) and the swing low on 4/3 ($165). This is your trendline for this purpose. A buyer doesn't want to see price drop below this line.

Now the high made last week was just a touch higher than the one made in March, for all practical purposes a double top. Price is already showing weakness by breaking a "support" line that you can draw from the last swing low mentioned above along the daily lows extending to yesterday.

The trendline you drew crosses price's path at 170. If you're confident in your ability to exit a trade immediately if it doesn't go your way, you could short any rally attempt above 170. But if it doesn't go, then exit and wait for it to drop below 170 and short there in whatever way you usually short, remembering that by then, if further weakness does occur, it will be obvious to more people and you are far more likely to be manipulated.

If you like MAs, plot a 200d simple and note that price is 150% of this MA. This is unsustainable. 125% would be high (155). 115% would be more like it, which would take you down to the gap.
More...

Funny you should ask as I was looking at the beginning of the thread yesterday to recall where Game started.

If he had shorted on the 18th, he would have been out the following Monday with a small loss. If he had then used a "follow-short", he might have been able to short below the low of the bar on the 2nd, though probably not. If he had, he'd have been up by as much as 20pts. Otherwise, he'd be right back where he started because the price was overextended.

Afterward, price simply moved sideways, getting nowhere, at least until it approached 160 on June 5th, which just happened to be 115% above the 200MA, which is where I had suggested a sustainable rally might occur (keep in mind that the MA had been rising all this time, so the base for a sustained rally had been rising as well). Such a rally did in fact occur and took price all the way to its high on Thursday, where it found expected resistance, after which it declined on Friday.

Those who trade stocks understand that price need not fall in order to find support. Price can also move sideways until support catches up to it, as in this case. Given how futures move, this is generally not an issue, though there are exceptions such as with the NQ in April, which was addressed in a series of posts at TL. In real time.
 
Just for the hell of it, and in the context of what Game has learned over the past three months, let's look at the LNKD chart during the period in question.

Beginners, of course, usually read charts from right to left. This prompts all the "if onlys" and the couldawouldashouldas. However, it is not possible to trade from right to left. One can trade only from left to right. Until one learns to read charts from left to right, he will find frustration to be an almost continuous state.

I won't explain the meanings of all the lines again. If one is interested, he can read this journal. If he isn't interested, there's no point in explaining.

Here the support and resistance levels are determined by the time the events in the above post take place. So is the demand line. Given the fact that price found resistance at the expected level and given that it broke the demand line, a short is legit. As I said above, this would have been exited the following Monday, but one can't know that at the time.

Given that the short was not successful, and given that one can by now draw a supply line, one can if he so chooses go long after the supply line is broken. The risk here is somewhat high given the fact that the long would be taken inside the range and that overall the price is overextended But the long is arguable. One could also wait until price breaks through resistance and go long on the first retracement thinking that this would be involve less risk. And if the stock weren't so overextended, he might be right. But the risk resulting from the overextension is still there (it's all about mean-reversion and auction markets, boys and girls). If he took it anyway, he'd wake up to a gap down and a loss. If he had gone long earlier, inside the range, he might show a small profit, if he can get out, though he might show a small loss even there.

So we're back in the range, and we do nothing until the market tells us that it's time to do something, what to do, and where to do it, on June 5th (one could also go long off the test of support the following week if he was reluctant to enter on the 5th or 6th, though he would not know at the time that such a test would occur).

36667d1374419294-re-trading-off-daily-charts-lnkd.png


If one understands that this illustrates the difference in thought process between "real-time" trading and hindsight trading, i.e., left to right instead of right to left, then he may benefit from these comments. If he doesn't understand or he disagrees, he may nonetheless benefit by changing the way he evaluates old charts, even if they are only as old as the charts from the current trading day.
 
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