Quote from BlowFish:
Hi Jack,
I wondered how much 'confirmation' you need before a reverse. I know you look at a hole bunch of stuff (Stretch/squeeze, DOm, a couple of squigly lines et.c) but in order to phrase the question I'll stick to PV.
Lets assume that you are in a place where a reverse might be anticipated (from channel/tape) and you have had a thrust on good volume to get there. You then get a small inside bar on low volume (as you might expect) Would you reverse right there? The reason I ask is at the moment we are in quite a neutral place all the other tools are likely to be going 'neutral' too. (They dont always just slam from + to - sadly ;-).
Would you wait for the next bar? and compare it to the previous one or two?
This issue is even trickier with a ftt. An inside bar and a pause in trading activity (volume) does not even have the channel as 'context' for a reversal.
I know you look at a bars price compared with the one before (a sound way to keep context and focus btw) perhaps you might say some more about that (or point to where it has been diuscussed) with particular attention to what constitutes a reverse and where you might hold. I would gues that the default is hold until there is clear evidence to reverse?
Cheers,
Nick.
My answer here is designed to cover all the bases in a brief manner.
Doing 20 the 40 actions a day, largely involves taking profits and making sure that you are on the right side of the market.
It is now the "last half" of the year and the daily H-L is expanding daily. So there is a lot more money to b made these days compared to before the dull listless days before labor day.
It is very unwise to use hold as a default if you do not have a firm grip on what is going on.
All excellent trading systems always have sufficient information to be able to make decions with all data sets that can be collected. The key rule is to always have collected a "sufficient" data set to move on to analysis where a conclusion is paired accurately with the data set.
As reversing comes on the table, your chore is to be on the right side of the table.
We had an an exit (not a reversal) today on a market order that gave a print of 21.25 (21.1 as I log the price). Look at the three extraordinary bars of volume. You were also seeing a "stonewall" of 4K orders on all levels above 21.50 (21.2). Trailing on the bid side were only two pairs of "light" bids off the exit pair.
This is the CLUE on FINE that says to you that a fast strong paced "trending" day is only going to have terrific profit making "long" advances AND no chance to make money on the short side for two reasons: the "short is just a low volume (relatively) "drift" that is so low in channel volatility that 3 tick regular slaloms are not possible.
If a person is monitoring and cannot collect a "sufficient" data set when he feels a reversal is in the offing, then is is best to sideline and observe.
Using a 5 min fractal to trae (ES)and a leading 2 minute fractal (YM) as part of the monitoring data set always affords you lots of sweep time. There is a continuously onfolding broad set of data that is always available.
As you get to the place of an action, you have gradually gotten to this place after several sweeps.
It is very very true that there is a set of traders that is operating in "reaction" to the markets. They usually collect one element data sets and "act" immediately. This is in marked contrast to, after seeing one element, collecting enough other data elements; then, comparing the data set to the conclusion set to get the appropriate conclusion element from the set; then, pairing a decision with the conclusion element; and then taking he appropriate action for that decision. This mental work excludes "reacting" and drives a person to be skiiled and expert.
The felling asociated with this is a comfortable feeling that you know what is going on and you know what to do at all times.
Getting to this place is an effort that is like doing sets of physical conditioning exercises at your physical limits. You know you are putting out and you are getting extreme results because it is your common workout practice.
If you log on the log sheet, you are going to see a major change in what is going on. The market's operation will appear to slow down more and more as a day goes by. you will be reversing in slow motion and you will know when to just tak profits and sideline on fast paced days that are just one sided (low volatility stalls following legs of advancement (rockets, often).
In a fast paced trending day a person can be hyper or very relaxed. That is constantly concerned about the advancing price and then the lateral low volatility moves back to the channel TL. Or being relaxed and just shifting to the15 or 30 minute fractal and understanding the overlap of the consceuctive bars.
The middle ground is the place to be. That is, leaning forward. This means taking clear comprehensive data sets and following the routine. You can creme the advances from the extreme valuse at each end of an advance. Then just sideline when no money can be mae on the low volatility extended stalls. It is like doing physical training sets. You put out, take the rewards and then go back to work when the time comes.
Five pages of logs is what a workout for the day looks like. 30 points on a 10 point H-L is what conditioning gets you.
You saw the day start with 2 point legs (4) intersperced with sets of HVS 3 tick trades every bar inbetween the spurts (2 or better point legs).
The PM was less eventful as time passed because the daily range was beeing expended and then price hung at R on low volatility.
To summarize on your set of Q's.
Keep alert and take profits as the DEMANDING activity; if you need to look after that to see what is what, do it from the sidelines and get back in if you find that is appropriate. Do not do the "hope" thing, thinking that you have a bar to decide stuff; the market is "not on your side" by then. You have to stay on the right side of the market; the market does not have an obligation to stay on your right side, ever.
