Thanks very deeply for sharing, fortydraws. Really really appreciate it!!!
No offence meant, DbPhoenix, but somehow fortydraws has made things clearer for me.
Now I know why I have failed to observe (repeatedly).
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Observations (an example)
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Thanks very deeply for sharing, fortydraws. Really really appreciate it!!!
No offence meant, DbPhoenix, but somehow fortydraws has made things clearer for me.
Now I know why I have failed to observe (repeatedly).
Q: What does a thoroughly tested, consistently profitable trading plan look like in writing?
A: It might look something like this: "First, find a range, preferably one with an easily determinable upper and lower limit. Second, determine where price is within that range. Third, locate the extremes. At this point, you have three options: a reversal, a breakout, or a retracement. If, for example, price bounces off or launches itself off the bottom of the range (support), trade the reversal and go long. If instead it falls through support, short the breakout (or breakdown, if you prefer). If you don’t catch the breakout, or you prefer to wait in order to determine whether or not the breakout was “real”, prepare yourself to short whatever retracement there may be to what had been support and may now be resistance. A more boring alternative is that price is nowhere near the top or bottom of any range that you can find but rather drifting up and down, aimlessly. No change is occurring; therefore, there is no trade, or at least no compelling trade." DbPhoenix, Wyckoff and Auction Market Theory, page 34
Of course, such a plan requires that one first learns to find a range, and it assumes one then has the patience and discipline to sit and wait for price to arrive at one of the extremes. The missing piece would be when to close out. It can be as simple as "I'll take the first (insert #of points here), or "I'll take half off at the half way point of the range and the other half at the opposite extreme," or it could be "I'll hold for at least the opposite extreme of the range unless a supply/demand line break is accompanied by a higher low/lower high."
Oh, and it will probably be helpful if you spend some time observing price so that you can learn to recognize the behaviors that will enable you to have the confidence to place and manage these trades. And this is the part where I cannot "spell it out." Whenever I hear someone ask DbPhoenix "what do you mean, behaviors? Which behaviors?" And the best demand: "Why won't you just show me?" These apprentices do not understand. DbPhoenix is not holding out on us. This is where the experience of your observations alone will carry you forward. It kind of reminds me of Potter Stewart's definition of obscenity: "I know it when I see it." If you find the range, then your observations will be calmer and more deliberate. You will stop wondering whether what you just witnessed was a failure or not, because you will be focused on how price behaves only at those levels where a failure can really be said to be a possibility. You only have three options: A reversal, a breakout, a retracement. Find the range, and soon enough, you'll know them when you see them.
A: It might look something like this: "First, find a range, preferably one with an easily determinable upper and lower limit. Second, determine where price is within that range. Third, locate the extremes. At this point, you have three options: a reversal, a breakout, or a retracement. If, for example, price bounces off or launches itself off the bottom of the range (support), trade the reversal and go long. If instead it falls through support, short the breakout (or breakdown, if you prefer). If you don’t catch the breakout, or you prefer to wait in order to determine whether or not the breakout was “real”, prepare yourself to short whatever retracement there may be to what had been support and may now be resistance. A more boring alternative is that price is nowhere near the top or bottom of any range that you can find but rather drifting up and down, aimlessly. No change is occurring; therefore, there is no trade, or at least no compelling trade." DbPhoenix, Wyckoff and Auction Market Theory, page 34
Of course, such a plan requires that one first learns to find a range, and it assumes one then has the patience and discipline to sit and wait for price to arrive at one of the extremes. The missing piece would be when to close out. It can be as simple as "I'll take the first (insert #of points here), or "I'll take half off at the half way point of the range and the other half at the opposite extreme," or it could be "I'll hold for at least the opposite extreme of the range unless a supply/demand line break is accompanied by a higher low/lower high."
Oh, and it will probably be helpful if you spend some time observing price so that you can learn to recognize the behaviors that will enable you to have the confidence to place and manage these trades. And this is the part where I cannot "spell it out." Whenever I hear someone ask DbPhoenix "what do you mean, behaviors? Which behaviors?" And the best demand: "Why won't you just show me?" These apprentices do not understand. DbPhoenix is not holding out on us. This is where the experience of your observations alone will carry you forward. It kind of reminds me of Potter Stewart's definition of obscenity: "I know it when I see it." If you find the range, then your observations will be calmer and more deliberate. You will stop wondering whether what you just witnessed was a failure or not, because you will be focused on how price behaves only at those levels where a failure can really be said to be a possibility. You only have three options: A reversal, a breakout, a retracement. Find the range, and soon enough, you'll know them when you see them.
This is from one of the guys I've been privately discussing this with: "Thought I would share an update with you. I have been avoiding trades if they were not pullbacks off of a significant channel or s/r level on the 60 min chart and like magic my profitability improved."
Recognizing ranges really is step one. I didn't see your suggestion for backtesting, but I hope anyone wondering where and how to begin this process sees it here. It is excellent! Of course, DbPhoenix, you can say it, and you can write it out explaining it in a FREE easy to read 60+ page book, spell out step 1 ... step 2 ... step 3 ..., but you can't make someone hear it or read it if they are not inclined to do so, much less follow a step by step process that does not lead directly to profitable trading tomorrow (even though it might get them there by the end of the month).
The suggestion fortydraws was made to this deaf guy's journal here exactly one month ago.
ops:http://www.elitetrader.com/et/index...via-price-action.281995/page-150#post-4067434
I might have trouble listening by my memory isn't failing me yet.
EDIT: And, embarrassingly so, here as well, about 6 weeks ago:
http://www.elitetrader.com/et/index...via-price-action.281995/page-139#post-4064101
Feb, 4, 2015 7:30 AM EST
S&p500/ES are near or at the top of their daily trend channels, so a reversal or breakout there might influence the strength or weakness of any move the NQ tries to make, or not. Just an observation.
S&p500/ES are near or at the top of their daily trend channels, so a reversal or breakout there might influence the strength or weakness of any move the NQ tries to make, or not. Just an observation.
Observation: Price does not always wait to react when nearing extremes and half way points. This seems to be another area of frustration for some of those trying to learn this approach, but it is the way of the market ("I was watching the overnight low but price stopped a point and a quarter above it and started to rally. Drats!" It is all information for you to use - your observations will lead you to determine what, if anything, you infer from this information, and what, if anything, you should do about it.
I don't know what part if any the SLA plays in this thread (it takes care of situations like this), but if it does not, the trader can save himself a lot of grief by not getting all anal about where do I enter and what should my stop, if any, be if he simply asks himself "Do I want to be in this trade?" If so, take it. If not, don't. If nothing else, this may force him to actually look at what's in front of him rather than re-examine all of his fears once again.
forty, do you have an idea when you will post the next series of charts? Will volume find its way into the discussion in the next series?
The price action of the past several days, NQ's current price level, and daily NQ volume over the past few days are interesting and helpful observations that may add to the discussion.
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The price action of the past several days, NQ's current price level, and daily NQ volume over the past few days are interesting and helpful observations that may add to the discussion.
ged
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