Son of If You Can Draw a Straight Line . . .

[redbox]

I have another question for DB.

In the three step process above.Your second entry is a short and in to potential support too.

Am I missing something, the daily's are up and on the second chart you are looking at a bounce of the previous midpoint.

Going back to step one, wouldn't we be looking at longs only ?

Or was this just for illustrative purposes ?

Thanks

 

[dbphoenix]

Quote from redbox:

I have another question for DB.

In the three step process above.Your second entry is a short and in to potential support too.

Am I missing something, the daily's are up and on the second chart you are looking at a bounce of the previous midpoint.

Going back to step one, wouldn't we be looking at longs only ?

Or was this just for illustrative purposes ?

Thanks

The second entry is a short because that's how trading price works, and how markets work (and why reward:risk ratios are useless in daytrading). To do otherwise is to trade one's bias rather than do what the market tells him to do, and given the fact that the daily is providing him with a 180pt range, to ignore the opportunities provided by short trades would be foolish IF THE TRADER CAN DRAW A STRAIGHT LINE (sorry).

This is not to say that trading long only in an uptrend is a poor choice. To the contrary it is exactly what one ought to be doing if he's trading daily or weekly charts. But daytrading is a different animal. Within the sometimes extraordinary ranges provided by the daily, one must follow price's dicta. These downdrafts can be 20 or 30 or 40pts or more within a day, sometimes within an hour. To let that go by just because the trend is "up" is, again, foolish.

The straight line approach enables the trader to act confidently and decisively when price flashes a big red sign in his face that it's going to travel in a particular direction. If the trade turns out not to be worth much (if, for example, price makes it only as far as support in the example you cite and then turns), this same approach gets him out of a potentially losing trade rather than let him hang. He may even wind up with a point or two. More importantly, HE WILL NOT SUFFER A LOSS.

The lynchpins of all this, as I've said a couple of times , are a thorough understanding of support and resistance, supply and demand, and trend. I discovered in the other thread -- the Mother -- that a surprisingly large number of people are absolutely convinced that they possess this understanding when in fact they haven't the least idea what support and resistance and trend and so forth are all about. But even if one has no idea what these three cornerstones are, much less how to apply them, he can still turn a profit if he knows how to draw a straight line. Unfortunately, quite a few people can't do that either. These people ought to find some other way to trade. Or quit. Otherwise they will find themselves trading congestion, day after day, and getting chopped up in the process with no understanding of what wrong and blame the method ("another method that's all baloney, another scam, more snake oil").

I knew prior to the last thread, of course, that traders trade not the market but their perceptions of it. But this became even more abundantly clear in The Mother. Drawing a straight line can help prevent the trader from wandering into that particular field of weeds. But, like the werewolf tied to the chair, eventually, if he wants to sabotage himself badly enough, he will find a way to do so. This may be beyond even the power of a straight line to cure.

 

[dbphoenix]

This is not a bad place to suggest that those who are interested in this either copy it all out to their computers or print it out hard copy since these charts won't last forever and neither will I. Those who register for ET after the apocalypse are on their own.

OK, that's 13 posts. Anybody can read 13 posts.

 

[redbox]

Quote from dbphoenix:

The second entry is a short because that's how trading price works, and how markets work (and why reward:risk ratios are useless in daytrading). To do otherwise is to trade one's bias rather than do what the market tells him to do, and given the fact that the daily is providing him with a 180pt range, to ignore the opportunities provided by short trades would be foolish IF THE TRADER CAN DRAW A STRAIGHT LINE (sorry).

This is not to say that trading long only in an uptrend is a poor choice. To the contrary it is exactly what one ought to be doing if he's trading daily or weekly charts. But daytrading is a different animal. Within the sometimes extraordinary ranges provided by the daily, one must follow price's dicta. These downdrafts can be 20 or 30 or 40pts or more within a day, sometimes within an hour. To let that go by just because the trend is "up" is, again, foolish.

The straight line approach enables the trader to act confidently and decisively when price flashes a big red sign in his face that it's going to travel in a particular direction. If the trade turns out not to be worth much (if, for example, price makes it only as far as support in the example you cite and then turns), this same approach gets him out of a potentially losing trade rather than let him hang. He may even wind up with a point or two. More importantly, HE WILL NOT SUFFER A LOSS.

The lynchpins of all this, as I've said a couple of times , are a thorough understanding of support and resistance, supply and demand, and trend. I discovered in the other thread -- the Mother -- that a surprisingly large number of people are absolutely convinced that they possess this understanding when in fact they haven't the least idea what support and resistance and trend and so forth are all about. But even if one has no idea what these three cornerstones are, much less how to apply them, he can still turn a profit if he knows how to draw a straight line. Unfortunately, quite a few people can't do that either. These people ought to find some other way to trade. Or quit. Otherwise they will find themselves trading congestion, day after day, and getting chopped up in the process with no understanding of what wrong and blame the method ("another method that's all baloney, another scam, more snake oil").

I knew prior to the last thread, of course, that traders trade not the market but their perceptions of it. But this became even more abundantly clear in The Mother. Drawing a straight line can help prevent the trader from wandering into that particular field of weeds. But, like the werewolf tied to the chair, eventually, if he wants to sabotage himself badly enough, he will find a way to do so. This may be beyond even the power of a straight line to cure.

Thanks DB, Just to clarify. Positioning ones self in the trend only applies to Daily's and weekly.

Intraday we can take a whatever opportunities present themselves - short or long (at the extremes) because we have no idea who will prevail at these areas until they show themselves. ?

 

[redbox]

Quote from dbphoenix:

This is not a bad place to suggest that those who are interested in this either copy it all out to their computers or print it out hard copy since these charts won't last forever and neither will I. Those who register for ET after the apocalypse are on their own.

OK, that's 13 posts. Anybody can read 13 posts.

You've mentioned not being here before. I hope you are well DB. Or are you talking about retiring from your altruistic pursuits on Trading Boards ?

 

[dbphoenix]

Quote from redbox:

Thanks DB, Just to clarify. Positioning ones self in the trend only applies to Daily's and weekly.

Intraday we can take a whatever opportunities present themselves - short or long (at the extremes) because we have no idea who will prevail at these areas until they show themselves. ?

Truth and clarity sometimes oppose each other, so it's best to resort to what's practical. No, trend does not apply only to dailies and weeklies. However, I've learned that trend is too much of a puzzle for many. They think that a move from 10 to 10.25 is an uptrend. This trivializes the whole idea of trend to a point where it's equivalent to scalping and loses all utility. This particular approach allows one to apply what he knows -- or at least what he thinks he knows -- about trend to dailies and weeklies and abandon all of that when he opens up his intraday chart and plots his initial line. Once price begins to move, he follows it, without regard for his preconceptions or his bias or whatever personal problems he may have (nor does he concern himself with earnings reports or the Fed or weather or the Thai Baht).

Which is not a bad time for a little review:

• 1. Anything can happen.
  
  2. You don’t need to know what is going to happen next in order to make money.
  
  3. There is a random distribution between wins and losses for any given set of variables that define an edge.
  
  4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
  
  5. Every moment in the market is unique. (Douglas)

And the principles of Auction Market Theory:

• 1. An auction market's structure is continuously evolving, being revalued; future price levels are not predictable.
  
  2. An auction market is in one of two conditions: balancing or trending.
  
  3. Traders seek value; value is price over time; price is arrived at by negotiation between buyers and sellers.
  
  4. Change in demand drives change in price.
  
  5. One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred.

 

[dbphoenix]

Quote from redbox:

You've mentioned not being here before. I hope you are well DB. Or are you talking about retiring from your altruistic pursuits on Trading Boards ?

Not ready to kick the bucket yet. But a lot of people have died over the past dozen years. Take Tampa, for instance, who I think about quite often. And I'm well past the point where I think I'm going to live forever. And I've seen many websites wink out. My suggestion then has only to do with the temporal nature of things. In fact, those who've seen Life After People may want to chisel this stuff on clay tablets.

 

[redbox]

Quote from dbphoenix:

Truth and clarity sometimes oppose each other, so it's best to resort to what's practical. No, trend does not apply only to dailies and weeklies. However, I've learned that trend is too much of a puzzle for many. They think that a move from 10 to 10.25 is an uptrend. This trivializes the whole idea of trend to a point where it's equivalent to scalping and loses all utility. This particular approach allows one to apply what he knows -- or at least what he thinks he knows -- about trend to dailies and weeklies and abandon all of that when he opens up his intraday chart and plots his initial line. Once price begins to move, he follows it, without regard for his preconceptions or his bias or whatever personal problems he may have (nor does he concern himself with earnings reports or the Fed or weather or the Thai Baht).

Which is not a bad time for a little review:

• 1. Anything can happen.
  
  2. You don’t need to know what is going to happen next in order to make money.
  
  3. There is a random distribution between wins and losses for any given set of variables that define an edge.
  
  4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
  
  5. Every moment in the market is unique. (Douglas)

And the principles of Auction Market Theory:

• 1. An auction market's structure is continuously evolving, being revalued; future price levels are not predictable.
  
  2. An auction market is in one of two conditions: balancing or trending.
  
  3. Traders seek value; value is price over time; price is arrived at by negotiation between buyers and sellers.
  
  4. Change in demand drives change in price.
  
  5. One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred.

Thank you DB. Sorry to labour the point, hope this is not coming across as really dumb but I'm still a little confused.

Why determine the trend of the daily's for intraday trading ?

I thought the three steps were a logical progression ?

 

[redbox]

Quote from dbphoenix:

Not ready to kick the bucket yet. But a lot of people have died over the past dozen years. Take Tampa, for instance, who I think about quite often. And I'm well past the point where I think I'm going to live forever. And I've seen many websites wink out. My suggestion then has only to do with the temporal nature of things. In fact, those who've seen Life After People may want to chisel this stuff on clay tablets.

That's good to hear. I haven't quite reached that age yet when my peer group start dying off in numbers. But I've seen it, I imagine it's quite sobering when it starts happening.

Was Tampa a user on here, I have no idea if anyone on these boards ever meet each other or become friends?

Good advice as always DB.

PS, Love your way with English, you should write a book. I'm sure many would read it.

 

[dbphoenix]

Quote from redbox:

Thank you DB. Sorry to labour the point, hope this is not coming across as really dumb but I'm still a little confused.

Why determine the trend of the daily's for intraday trading ?

I thought the three steps were a logical progression ?

Yes, the three steps are a logical progression. And you want to see what everybody else sees, which means at least an hourly and a daily chart. Not only will these provide a framework, but you are also most likely to find those levels where support and resistance are most likely to be rejected in a manner that provides a profitable trade (a rejection of support or resistance that nobody sees, much less is aware of, is not likely to put bacon on the table). Once those levels are determined, however, you must make yourself what Douglas calls "available".

When you enter a boxing ring, you have no idea how the fight will unfold or who will be the victor. But it is a ring, after all, bounded by canvas and ropes. Ditto football fields, tennis courts, pool tables.

As for Tampa, he had three journals. This was the first: http://www.elitetrader.com/vb/showthread.php?s=&threadid=9334

There really was nobody like him, nor has there been since. If you want to know more about him, check this article: http://en.wikipedia.org/wiki/Bob_Lassiter

Magna knew him personally.