Observations (an example)

[fortydraws]

I think it also might be instructive to consider this in light of what DbPhoenix says about patterns vs. behavior. NoDoji, for example, has posted some links in the other threads explaining what she calls a 123 pattern and a 2B pattern. These are "reversal patterns." Some people may look at yesterdsay's high and low and they may see a 123 or a 2b at either the top or the bottom yesterday, I don't know. And, by no means am I trying to be critical of those who trade patterns - each individual is responsible for determining what he/she trusts to trade upon.

But, imo, from what I have read here in the journal section of ET, once someone latches on to the notion of a pattern, they put a barrier between themselves and the actual price activity by limiting in their mind what a reversal "looks" like. And once they do that, they will, possibly forever, miss the small little signs of waning demand or dwindling supply that always occur at reversal, even when this that or the other pattern is absent. It Furthermore, by focusing on the pattern, and not the behavior within the pattern, they will likely also miss the signs that the pattern itself is going to fail. Absent the pattern, all else appears to be mere "noise." I'm not saying there is not "noise" within price action, but if there is, it is far, far less than most assume. Price is telling a story, and every tick is a word, which is part of a sentence, which is part of a paragraph ... you can see where I'm going with this.

And I don't dismiss patterns either. I read Edwards/MaGee, and while I have little use for head and shoulders and the like (if you need to wait for price to break the neckline of an H/S to know the trend has changed, you need to go back to Wyckoff, imo), I do see these little flags and pennants and of course we all know what hinges look like. But, imo, these are all merely trading ranges of different sorts, and if one is going to trade them effectively, imo, it is best to understand first what the implications of a trading range are, so that one knows what to do when the breakout comes, what to do if the breakout fails, and what to do if the failure fails.

Finally, one thing that really impressed me when I was first studying Wyckoff's trading course was the notion that one should pay attention not merely to supply and demand, but to the quality of supply and demand - who is buying? Who is buying that low? And who is selling it? Who was buying the opening range breakout yesterday? And who was selling it? I know I'm not the smartest guy in the room, and I know there are many here with more education than I, with more impressive titles than I could ever attain. But though I was merely a blue collar tradesman for nearly 30 years, I am and have all my life been an avid reader of fiction. And to me, the type of thinking and imagining I engage in when reading price action is not all that different from than what I experience when reading my all favorite novel Crime and Punishment. Every tick is a word ...

The above quoted passage was originally posted to DbPhoenix's journal. I may want to touch upon this further, and so I am copying here.

 

[fortydraws]

Worth noting here that today's opening range high occurred at the level where supply had outstripped demand during the initial arc of observations (the first 25-27 charts of this journal). Here is my S/R chart with trading levels as it looked before the open, with the blue arrow above the last price activity drawn at the level of the 1/15 failure high.

 

[dbphoenix]

It's also worth noting that price retraced exactly half the opening downdraft at 1012 before making a lower low.

 

[fortydraws]

An observation ...

 

[dbphoenix]

I should point out that these levels apply only if one eliminates the overnight data. Given that these contracts are traded globally, leaving out 70% of the data is not a good idea if one is going to rely on these levels for any reason.

 

[k p]

I should point out that these levels apply only if one eliminates the overnight data. Given that these contracts are traded globally, leaving out 70% of the data is not a good idea if one is going to rely on these levels for any reason.

Do you suppose there could be something inherently different between the psychology of the different traders in the different geographical locations? Explanation for this is below.

Traders are looking to make trades, and most trades happen where they find value, where the congestion area is, the level at which most of the volume happens. So could it be that the Asian/EU traders find value in a different area than the US traders? (of course anyone is free to trade at any time, but it seems the big money would stick perhaps to their respective time zones)

Fortydraws has always said that he wouldn't go into the day without looking at the overnight action, but some of these charts he is showing with only the US hours are compelling. One does of course have to test this, and I have often seen excellent trade opportunities at the overnight levels, so perhaps being aware of both is the key.

I guess I have sometimes thought that when the market opens up, the big boys might not care so much about what happened overnight because they just want to pick up where they left off at the close the day before. So in some way, plotting only the US trading hours I'm thinking might track the big boys a little better? (The elephants as you so beautifully put)

 

[fortydraws]

I should point out that these levels apply only if one eliminates the overnight data. Given that these contracts are traded globally, leaving out 70% of the data is not a good idea if one is going to rely on these levels for any reason.

I hear what you're saying, DbPhoenix, and I do understand. I wouldn't trade either pre-market or NY session without knowing those Globex levels. I have found, however, that once the bell rings in NY, I am more likely to find a trade at a previous high, low, or midpoint of a recent NYC session's range than at the overnight high or low. I do take special notice of areas of premarket equilibrium, aka my beloved "hinges" as well. But given the propensity for these NY session highs and lows to develop into what Wyckoff calls "trading areas," I have found I am very comfortable using them as areas to look for reversals, failures, and breakout/pullback types of trades. As you know, I do not blindly sell or buy into these levels. As you taught me, it is not merely where price is, but what it does once it gets there.

 

[dbphoenix]

And if that works for you, that's fine. I'm pointing out that most who trade price will find it advantageous to see what other traders see.

 

[fortydraws]

By request from a friend.

Looking for a trade:

20 Tick tracking to make entry:

View on a 5 minute bar interval chart:

 

[eminiman414]

How far are you willing to let price come against you? I find that when low points like that break there is often a pullback thereafter which there was albeit not a very large one. Of course not always does price pullback after low and high points break but I do find it to be common.