Making of a method

[game]

Quote from dbphoenix:

Pick any chart from the past, at random. Zoom out so far that you can't see anything useful or informative about any particular day, or, preferably, any particular week. When you open that particular chart, you'll have a starting point at the left edge and you'll have an ending point at the right edge. If it's a futures chart, these points may not coincide with the NY open and close. That doesn't matter. All you want is a starting point.

Now look at what's in front of you. Is price rising or falling? Where? How and where did it start? How far did it go? How much trouble did it have doing whatever it did? Are there any levels where it was turned repeatedly turned back, either to the upside or the downside? Might these be reliable S/R levels? And so on.

Now scroll forward, bar by bar, or let the replay function do it for you. How is price reacting to the context you're hypothesized? Is it respecting the S/R levels you hypothesized? Or is it ignoring them entirely and possibly creating new ones? Is it trending or ranging? If trending, what is the stride? If ranging, what are the limits? And so on.

Wash, rinse, repeat. Wash, rinse, repeat. Whether you replay ten days or twenty or thirty is up to you. You can replay an entire year in this way.



These "patterns", however, are consistent with any swing high or low, and unless the swing point is against support or resistance, the "pattern" may result in nothing more than sideways congestion, or it may actually be a retracement within a continuation which the trader will miss because he thought it was a reversal.

Naturally these patterns will "either work or not". But the more you focus on support and resistance and the balance between supply and demand when these "reversals" occur, the higher the probability that you will anticipate the direction of the resulting move and profit thereby. If support and resistance are not part of the equation, you're going to be doing an awful lot of stop-and-reverse.

It's been 3 weeks since I returned back to observation mode. A review is in order.

The focus of my observation was to see how price behaves around S/R and to build confidence in my ability to anticipate direction by reading the LOLR around these zones.

I am beginning to see the relationship between Supply/Demand and S/R. Changes in pressure occur all the time. But they count most when occurring at the extremes. This is because of either a move back from the extreme to the value zone or a move towards the creation of a new value zone. The link between AMT and Tape reading is clear and using them together is the best approach.

I will begin creating a trading plan from this basis of understanding.
There is much to learn - specifically, recognizing the interplay between price and volume at the boundary zones and it's effect on the LOLR.

 

[dbphoenix]

If you're developing a fondness for CL and you want to mix up your timeframes and bar intervals, you may also want to look at CL on a daily chart.

 

[game]

Quote from dbphoenix:

If you're developing a fondness for CL and you want to mix up your timeframes and bar intervals, you may also want to look at CL on a daily chart.

I don't have any strong attachments yet. I was initially considering CL within the context of my limited capital base. I was hoping to use it's volatility to increase return.

But if the long term goal is to trade size, CL could be a constraint - although I don't really have any idea on how much can be scaled in there.

If I can't scale there, then I will at some point have to move to a bigger market. If that's the case, why not develop expertise in one instrument from the start, knowing that it will be able to absorb scale in the future.

And then there is your advice from yesterday about understanding trader behavior in the given instrument. Considering that I don't have a working method yet, that is the most important issue to consider.

I am leaning towards resuming with the NQ.

 

[MadeMan]

Quote from dbphoenix:

My concerns are purely personal and may not apply to you.

I know some say that if one can read and trade a chart, he ought to be able to read and trade any chart. I may have said it myself back when I was young and stupid. And I suppose that theoretically it's true.

>>>But if one is trading behavior <<<

i have to jump in on that !


i for myself would consider me one that can trade anything under the sun... yeah iam young


but what is the purpose of anyone in the market ?

answer : to make money , "they" ( the ones who want to make money) probably dont care what the underlying instrument is
if they trade the behaviour , of lets say fishes.. ( the one whom "they" want to make money from)

therefore one wants to be on the side of the big swinging dicks
instead of the fishes in the pond.. i always hear that there is
some kind of characteristics to each instrument , that may be true
to some extend but the rules and players are the same in the
end , to that game ...

the underlying principles never change regardless of the instrument

 

[game]

The entire plan is based on going with the LOLR off S/R.

Breaking the plan down into key steps:

1) Anticipate key S/R levels before the session by looking at past S/R zones, trend, overbought, oversold.

2) Develop ideas about what one could do at these levels if they are confirmed during the upcoming session. Caution: Explore ideas without getting biased and taking action before the LOLR shows itself.

3) The loss of momentum as price approaches anticipated S/R signals tentative S/R. So a momentum signal is needed here.

4) Next is a signal that confirms S/R turning from tentative to current. There would be two types of signal here. Either a re-test signal or a strong initial Reversal wave signal.

5) Once S/R is confirmed, a faster signal is needed for the buy/sell stop so that entry is as close to the S/R boundary as possible. The boundary would be the retracement level in the case of a strong initial Reversal wave and the High/Low level in the case of a retest scenario. The important thing is that a lateral level be chosen based on short term S/R from the left of the chart.

6) Exits based on momentum, swing points and MP zone as last line of defense. In the case of failed trades, exits based on crossing of short term S/R levels established during entry.

7) Avoid taking trades unless price is either at a boundary zone or preparing to move past it to a new value level.

I am avoiding becoming precise with my entry requirements because I do not know them yet. Instead, I hope to get the big pieces right for now, i.e. taking trades once S/R has been confirmed and the LOLR is clear.

I can always optimize by discovering the right balance of price and info risk during Forward Testing and the review process.

 

[niko]

Quote from game:


I am leaning towards resuming with the NQ. [/B]

Good choice...

The main problem i have with oil is defining context and s/r levels that are usefull in real time. You have put a great deal of time into NQ then why not take the most out of it before switching to another instrument.

Just my 2 cents.

 

[game]

Quote from niko:

Good choice...

The main problem i have with oil is defining context and s/r levels that are usefull in real time. You have put a great deal of time into NQ then why not take the most out of it before switching to another instrument.

Just my 2 cents.

I am sticking with the NQ. CL traders can be rest assured :0

 

[game]

Quote from MadeMan:

i have to jump in on that !


i for myself would consider me one that can trade anything under the sun... yeah iam young


but what is the purpose of anyone in the market ?

answer : to make money , "they" ( the ones who want to make money) probably dont care what the underlying instrument is
if they trade the behaviour , of lets say fishes.. ( the one whom "they" want to make money from)

therefore one wants to be on the side of the big swinging dicks
instead of the fishes in the pond.. i always hear that there is
some kind of characteristics to each instrument , that may be true
to some extend but the rules and players are the same in the
end , to that game ...

the underlying principles never change regardless of the instrument

MadeMan- since you shared your perspective here, could you also share how you learnt what the underlying principles were? What is an example of one? Thank you.

 

[MadeMan]

Quote from game:

MadeMan- since you shared your perspective here, could you also share how you learnt what the underlying principles were? What is an example of one? Thank you.

Well i learnt it from reading Books , forums, websites/blogs,
but first and foremost i asked the right questions to myself then
went out and looked for the answers by myself ..

if ya want links and/or books i read , just ask

...
in short

the underlying principles , are made up from:

<b>The Players:</b>
+InformedTraders
+UninformedTraders
+Weakholders
+Strongholders

<b>The Psychology of the Players:</b>
+Greed
+Fear

<b>The Behaviour of the Players:</b>
+Predators
+Prey

<b>The Rules:</b>
+Demand and Supply
+Cause and Effect

add some Fullfilled/Unfullfilled Expectancys

mix those points up and u get...

<b>The Game</b>


..................

Price is in an continoues flow and actually is advertising itself all
the time in order to facilitate a trade , attracting all of the above
ingredients , resulting in what u see everyday on a simple chart,
orderbook, depth of market or Time and sales ...

as a result , one of many situations could occure when u mix does
ingredients up

like a quick example would be that of predators and their prey:

lets say weak bears lean against an obvious resistance level
those predators make the market look weak to lure in more weak
bears , whom all will sell right into the buy positions placed by the
predators and as soon as they bought all they wanted , they
remove , their resting ask orders and might buy right thru
resistance , wich will cause a rise in price as the weak bears start
to puke and we see new money(buyers) coming in at the same
time .. so we got scared and new money coming at the same time
running in the same driection , the created liquidity is used by the
predators who offset their position on the way up..

the predators know how the prey will act and what the result will
be and use it to their advantage...



but that doesent mean that only foul games will be played on the
markets nor that they work out all the time , but they do concur
in many shapes and forms..

 

[game]

Forward Test Day 1
Aug 22

Price is just above mp of trading range that has formed on the hourly over last few days with a mp of 84. Action since ON shows strength. There has been no significant ret of the upwave since the lows from ON. Chance to go back to range top at either 90 or 97.

R: 3014
R: 3097
R: 3090

S: 3078
S: 3071 (mp of upwave from ON lows)
S: 3067


Review:

Trade 1 (Short): Momentum lost at ant R zone + retest set up the short opp. The initial turn down was brought back strong on two occasions, with the second bring back making a HL. This indicated buyers bidding up the reactions at higher prices and led me to exit.

Trade 2 (Long): The Reversal wave was off the mp zone of 90. The ret here gave me a chance to enter long in anticipation of trend continuation.

Trade 3: (Long): The mini range between 96 and 90 was showing signs of imminent break as price bounced strong from S to top of range. Entry taken on the ret. Once again the anticipation was of the longer trend to continue, possibly going up to the 3014 level. The exit could have been given room as it had not yet come down to the mp zone at 94. However, BE thinking came in and led to the exit.

Missed Opps:

I did not take the ret during 0833/0834 because price was close to ant R zone of 90. The case for a long here would have rested on the bias from prep work, since price was launching itself from the mp of the hourly range at 84, with a good chance of testing Range top of 3100, which it did.

Edit: Long at 0911 as the break below SL was brought back strong. Since this areas had been a mini range, entry here would have been straight without a need for a ret. S had been established and this was a good opp to get in for the anticipated trend continuation.

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