Question regarding PA

[lcranston]

Thank you, but the purpose of this thread is to understand what makes the difference in a Break out, based on the analysis of the behavior during the preceding congestion, in any time interval.

With all due respect to Sprout, which is considerable, before you slip down the Jack Hershey rabbit hole, you owe it to yourself to study at least the basics of auction market theory. There aren't many and they don't require reams of paper and years of study. As to your specific question above, see this post, which also illustrates the AMT addressed in the above link.

If you've ever been to a farmers' market or a yard sale, this shouldn't take more than a few hours.

 

[Sprout]

Thank you, but the purpose of this thread is to understand what makes the difference in a Break out, based on the analysis of the behavior during the preceding congestion, in any time interval.

There are both low and high volume breakouts, BO’s that succeed and others that fail - FBO. BO’s that XO a RTL or boundaries set by a lateral formation several bars ago. There are BO’s that occur in 2,3,4, etc. bar formations. BO’s that occur near the ends of trends or in between these ends.

Performing Jack’s ‘20 day to expert’ drill clears all that up. It’s a very difficult drill (at least for me). After successful accomplishment, one will be amazed of three things,
1) how could I’ve missed so much when it was right in front of me ?
2) how could anyone have figured this out from scratch?
3) how was is possible to leave a path for others willing to do the work to follow and ‘get it’ for themselves yet also being illusive to others more interested in ‘show me the money’ ?

However, that drill is a pretty big bite to chew. Easier ones that begin the process of differentiation are the 5x5 grid, taping or zigzag.
Each are different in the focus and the concept the drill itself is designed to convey. As well as the appropriate path forward.


For me, approaching the dynamics of price action is as clear as the language one uses to describe it. More descriptive words are a measure of differentiation of the language and what external environment it developed within.

The Inuit’s description of snow is coupled with the information they need for survival. More observable distinctions were advantageous.

For some PA traders all they have the capacity for are larger more inclusive labels such as bull bar or bear bar. Others prefer working with support and resistance levels.

However, for one building capacity, that single bar can have an expanding yet finite and limited elements of a dataset. The elements of a dataset track that bar with a precision that makes ‘what must come next’ based on what has been observed far more accurate than not having the distinctions.

Annotating and Logging the dataset builds a practice, the practice builds a habit, the habit is internalized and having the ability to ‘see’ and read a market becomes realized.

Some folks will be content being speed readers, others want cliff notes. Others want news or gossip on social media.
There are others still willing to read word for word. They will enter an authors mind in a way the previous others have no accessibility.

The author is this case is the market. Reading a market requires a vocabulary - the same vocabulary as the author uses.

Ten price cases, 11 volume elements is a descriptive alphabet. The various combinations make words. Words build sentences. Sentences convey concepts. Concepts illustrate principals. Principals combined with values create relevancy and meaning.

Jack’s approach is comprehensive and systemic. It encapsulates both price and volume as a finite set which when combined create a sequence of events. The sequence of events follows a progression as certain as the sun rising and setting. In this metaphor, gathering pressure readings, temperature, wind shifts and cloud patterns adds to the dataset.

Taken as a whole, the weather for the day can be anticipated.

 

[PAAddict]

Yes, I am. His work changed everything for me. You may also want to look at a series of posts focused on reversals and accompanying volume beginning here with post #69. So simple once somebody shows you what to look for.

Thanks I read the posts, and I think I understand the basics of AMT: Wait for the extreme (Range, Channel, Hinge) and price will most often than not return to the mean. As everything in trading that is easier said than done when it comes to applying that to real time trading decisions, as a thrust outside the range area could always be a breakout or a reversal, and I have not yet learned to identify one from the other in a consistent basis. My reading was that I was missing something in price action, something that I assumed was related to volume. From all I have read from Db, I have yet not been able to transform that knowledge into action regarding this specific issue (trading inside a range, at least a small range) maybe I am just stupid and don´t get it (you obviously did get it) so I decided to explore other venues, and I am open to new Ideas, in the end I will do the testing by myself and decide with my numbers what I will apply, so thanks for pointing me to this material.

 

[lcranston]

Thanks I read the posts, and I think I understand the basics of AMT: Wait for the extreme (Range, Channel, Hinge) and price will most often than not return to the mean. As everything in trading that is easier said than done when it comes to applying that to real time trading decisions, as a thrust outside the range area could always be a breakout or a reversal, and I have not yet learned to identify one from the other in a consistent basis. My reading was that I was missing something in price action, something that I assumed was related to volume. From all I have read from Db, I have yet not been able to transform that knowledge into action regarding this specific issue (trading inside a range, at least a small range) maybe I am just stupid and don´t get it (you obviously did get it) so I decided to explore other venues, and I am open to new Ideas, in the end I will do the testing by myself and decide with my numbers what I will apply, so thanks for pointing me to this material.

You're not missing anything; you just haven't translated it into a set of strategies and tactics. For instance, in your example, the thrust should not rattle you. If you allow it to do so (and there's no reason why it should), you won't be able to evaluate it. If it is a reversal, the weakness will show in volume. If you're unpracticed in that, wait for a test. If it's a breakout, wait for the retracement before taking a position. Tests and retracements are what professionals do. If one knows what they are, one can wait for them and take advantage of them. OTOH, if one has no idea what's going on, he will be more likely to make the wrong choices.

There are a limited number of things price can do at the edge of a range. List them and characterize them (what do they look like?). File examples of them and review them periodically. There are "tells" that one can learn to look for if one is focusing on price and isn't distracted by what is extraneous. But one must also understand that trading a range and trading a trend are entirely different. One cannot, for example, "let profits run" in a range. OTOH, choking off profits when price is trending makes no sense. But these are addressed in the Trading Price and Trading the NQ threads, with lots of examples. Then of course there is the Wyckoff thread, which is the basis for all of this. And it's all free.

I should emphasize in case it has not been made clear that AMT is not a matter of lines and patterns and doodles. The focus of AMT is the search for value, which is what ranges are all about. If one understands that professional traders are looking for trades (that's what they're there for), thrusts and failed thrusts and failed and successful breakouts and retracements will all find their places in context and one will have a window into what's going on in buyers' and sellers' minds. If, for example, sellers run out of buyers, the swing high that results is not important because of what it looks like but because it is the point beyond which there are no takers. Which is why the test is so important: are buyers now ready? or are they eager to unload what they bought just before the swing high? This can be determined by their behavior, which is determined by their trading, which is what PA analysis is all about.

 

[PAAddict]

If it is a reversal, the weakness will show in volume.

This one is still eluding me, weakness could be a climactic volume before moving back into the range, or just an upwave with less volume after a climactic move. Or it could be that volume rose before or at the break, but then stalled before the reversal.

For example, I took this chart from the Trading the NQ forum:

We come from a strong uptrend after the break of the lower range, there is an upside break where demand dried up earlier in the morning, but then comes the very clear reversal in hindsight. If I was looking at this in real time I would have been thinking that the most probable scenario would be a breakout and that the lower volume bar was the retracement (test) before the confirmation. So here is where I think I am missing the volume analysis bigtime.

 

[PAAddict]

Performing Jack’s ‘20 day to expert’.

By this you mean the task that he specifies here? https://www.elitetrader.com/et/threads/sctlearning-from-scratch.282221/

 

[lcranston]

This one is still eluding me, weakness could be a climactic volume before moving back into the range, or just an upwave with less volume after a climactic move. Or it could be that volume rose before or at the break, but then stalled before the reversal.

For example, I took this chart from the Trading the NQ forum:

We come from a strong uptrend after the break of the lower range, there is an upside break where demand dried up earlier in the morning, but then comes the very clear reversal in hindsight. If I was looking at this in real time I would have been thinking that the most probable scenario would be a breakout and that the lower volume bar was the retracement (test) before the confirmation. So here is where I think I am missing the volume analysis bigtime.

View attachment 181060

It's not so much a matter of elusion but of thinking in terms of traders than of bars. Db explained that bars are used rather than ticks because it's difficult to plot more than 15 minutes of ticks before they have to be scrunched up to the point where they form a line. However, price is continuous; there are no bars, no candles, no opens, no closes. The "bars" that are shown here are nothing more than connect-the-dots, the dots being ticks.

For example (from the Trading Price thread):

That these ticks are connected by vertical lines is nothing more than a choice made by a group of software engineers thirty years ago. Vertical, horizontal, or diagonal, it's still just connect-the-dots. If you're following the course of price in real time, this is not difficult to perceive (if you can't do it in real time, use replay). And if you do follow it in real time, you'll see that the story begins before the "opening bell" ever rings. Sellers run out of buyers where the first "demand dries up" note is made, i.e., buyers aren't interested above that level. And given that this provides a very clear stop, this makes for a potentially nice short. There is a drop, a test three "bars" later, then a cascade down to a selling climax (price stops falling) preceded by a volume climax (buyers are re-entering the market and putting the brakes on the decline). There are several tests thereafter. Sellers are impeding the buyers efforts (price isn't gaining traction), but their hearts aren't really in it (volume is relatively low). This may in fact be a "search for value" described in the AMT stuff. Then for whatever reason, perhaps news, buyers take the upper hand and drive price back to the level it occupied at the open. But demand is rapidly withdrawn. For whatever reason, this level is a problem for buyers and they refuse to get past it. So what does the small retail trader do now?

Is all of this hindsight? Of course it's hindsight. All preparation is hindsight. All review is hindsight. But this trading opportunity doesn't just materialize out of nowhere; it has been forming itself for quite some time and over quite some territory. If one doesn't know what a trading opportunity looks like then, yes, it does seem to just pop up. But even here, if one can engage in "hindsight" fast enough and understands what has been happening since the pre-market, he still has time to act and profit.

Reading occasional posts and analyses isn't going to get you very far. Better to begin a journal where you post your charts and your real-time observations (even if it's replay). When the session is over, then go back and enjoy hindsight appraisals of what you saw and didn't see and what you need to look for next time. Otherwise you may wind up just spinning your wheels.

One last comment: you said that "if I was looking at this in real time I would have been thinking that the most probable scenario would be a breakout and that the lower volume bar was the retracement (test) before the confirmation." There's no need to guess. If for some reason buyers have decided that this is a giant bargain and plan to break out to new highs, all you have to do is wait for that breakout and buy the retracement (a test of buyers' resolve). But if the breakout doesn't materialize, much less provide a retracement, the opportunity for a short is pretty much a duh. Unless price launches itself into a range, there are only two ways for price to go: up or down.

 

[Sprout]

By this you mean the task that he specifies here? https://www.elitetrader.com/et/threads/sctlearning-from-scratch.282221/

Yes, that one, Exact Science and I’m getting my butt handed to me on a daily basis.

My personal journey with RDBMS started with

Fortes Fortuna Juvat
and
https://www.elitetrader.com/et/threads/fractal-theory-redux.303677/page-7


As mentioned by lcranston, there are simpler methods but I would assert none as comprehensive in putting pieces together as Hershey’s work.

Jack quantified and categorized a systematized approach based on the combination of present time backward and forward testing using price cases to measure or gate volume. This measure defines where one is in the progression of any observable trend. I would describe it more as a descriptive language as opposed to a prescriptive one.

The approach speaks for itself and is definitely a road lesss traveled. Not due to the results that it produces but more the transformation of one’s perception to notice and ‘see’ things not perceived before yet have been right in front of one all along.

An productive approach is to post a chart and log with your annotations.

Perfectionism is not as supportive as being messy in annotations. Mistakes bubble up to the surface. Reconsideration of context is a muscle that with training gives one access to ‘blink’ - the grokking of complex datasets in a split second.

 

[PAAddict]

Lcraston and Sprout, thank you very much for your help. I am very interested in both methods and as both have suggested, the only way to actually achieve anything is to roll up my sleeves and put myself to work. So that Is what I will do.

 

[murray t turtle]

With all due respect, this is made so much more complicated than it needs to be. I strongly suggest you at least look at this thread before venturing too far down this particular course. Understand also that you are not trading price but trading bars. There is a vast difference.

%%
True; but a big advantage of 1 minute charts, its more fun + more commissions/action. Besides, its not rocket science, but i would rather do more analysis than i have to . As far as pretending its rocket science,LOL to each his own LOL