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

[Huyang]

Quote from dbphoenix:


No one has mentioned this during this current series of posts, but there was no retracement in the downmove after price broke the first demand line. What does this tell you?

the selling is strong at this moment from both buyers who are taking profits and sellers who are initiating shorting. Or supply is much stronger than demand from sellers who are taking profits and buyers are initiating new longs.

12:12PST:
After i submitted the post, i found out DB has a new response before this post. Anyway i will keep it anyway.

 

[Huyang]

Quote from dbphoenix:

To back up a little, you say in your post to "trace a line" and "look for signs of change". Where would you trace a line here, from Friday's pre-market, and what signs of change would you look for?
http://cdn3.traderslaboratory.com/f...1778034-re-trading-off-daily-charts-10111.png

DB:
I tried to answer your question to Niko, to learn how to analyze the market. If possible, please help to comment the notes in the chart. Thank you.

 

[dbphoenix]

Quote from Huyang:

DB:
I tried to answer your question to Niko, to learn how to analyze the market. If possible, please help to comment the notes in the chart. Thank you.

This isn't what we're talking about. See Friday's posts, from the first posted for the day.

 

[Gringo]

Just draw a straight line; either a demand line or a supply line. Then focus on what happens after its break. Does price continue in the new direction or does a retracement takes place.

 

[tradewhatuc]

Quote from dbphoenix:

Yep, either because they're overwhelming buyers or buyers aren't interested. Whichever, price will drop. So one watches and waits to see how far price drops. What else does he look for in the meantime?

In the meantime look for another supply/ demand line?

 

[Gringo]

This thread has caused me to question and refine a few of the things from my plan. I'll have to do some testing now to see the effects of this greater clarity, obtained as a result of the comments from the past few days. Following each up and down move of the price, and keeping track of the resultant demand and supply lines, had my eyes opened to price behaviour I had taken for granted. In my case, the difference has been a reduction in fuzziness that used to develop when the trend was partially unclear. Obviously just because I have identified a few loose screws doesn't mean my brain has already gotten accustomed to identifying these newer and easier possibilities. Some observation and getting used is going to be needed, which exactly is my next course of action.

I thank Db, for his continued guidance. Who would have thought the minimalist straight line would bring something new to light. What I find astonishing is how simplified, and dare I say almost mechanical, trading is turning into. I am beginning to notice another subtle shift in my mind. Now, this shift is different from the earlier shift when I had started to see price action better for the first time. This time around it's seems like another evolution, at least I hope it's an evolution and not some kind of a devolution. Instead of using the theory to justify and explain price action, I am using the price action to justify and explain the theory. It's as if price action has first priority, whether or not it fits the theory, and the theory is there to just put that price action in a form that's comprehensible. It's as if the theory is the training wheels when one's learning to ride a bike, and eventually these training wheels are removed. This removal also leads to a certain freedom of movement that's not conceivable while the training wheels are on.

There is a lot to think about and quite likely I am getting a bit philosophical. The point is to benefit from whatever experiences we have had and attain greater clarity and profitability. As with most things in life, perhaps the passage of time will crystallize these thoughts into a more comprehensible and logical chain of reasoning. Isn't another word for a comprehensible and logical chain of reasoning, a theory? Huh! :eek:

Gringo

 

[tradewhatuc]

Quote from tradewhatuc:

In the meantime look for another supply/ demand line?

I tried to attach a chart to this post, hopefully it takes!

 

[yossy]

Just draw a straight line; either a demand line or a supply line. Then focus on what happens after its break. Does price continue in the new direction or does a retracement takes place.

Gringo, but nothing is done unless there is a retracement. Right?

What confuses me is this. If, price moves down and a Demand Line breaks, and then a retracement takes place and price moves up, is it a short at the end of retracement, i.e., at the crest? But if the upmove results in a new high then you go long on the 1st retracement down. Right?

If a DL breaks, how is the break seen? As a Ret of the Uptrend prior to DL break or as a new downmove?
Or is it that the downmove itself is a Retracement as long as the DL is not broken. If a DL is broken, then it is a downmove which on a Ret up will be shorted? So DL break becomes the differentiator.

When is the earliest that one has a DL? Is it the moment you have 2 consecutive bars with HH and HL? (assuming I am looking at 1 min bars). Or is it when there are higher swing lows?

In an uptrend, after a downmove, when is the earliest that a SL is drawn. Is it drawn, if DL is broken or one waits for lower SH? In Niko's question, it was almost immediately while I though a SL would connect the high with subsequent lower high which Db said was incorrect.

Though the questions may seem that DL/SL are almost taking on the role of Red/Green light indicators which is not Db's intent, but grateful if anyone can clear that.

Thanks

 

[niko]

Quote from dbphoenix:

At the time it occurs, however, you don't know that there will be a "next upmove". You have to trade what's in front of you.

As I said yesterday, when a supply/demand line is broken, the imbalance has shifted from one side to the other. As Gringo said, you then want to watch for signs that will tell you how much it has shifted. If there's no retracement in a downmove after breaking a demand line, then there's no entry, just jumping in because the line has been broken isn't going to work over a series of trades.

Therefore, the first thing you look for after the break is a retracement. If there isn't one, there's no short. However, there are only two outcomes here: that the move will be brief and not worth trading, or that price will collapse and you'll be left with no trade at all. The latter can happen, but if it does, a serious move to the downside isn't going to be short-lived and there will be an opportunity at some point to enter if one just waits for it. Yes, it's possible that price will reverse right after the short is placed, but that's a separate issue.

If there is a retracement and the short is taken, you then start looking for signs that the move is coming to an end, and this is where the swing lows and the extent of the downmove apply. If the swing lows are not breached and/or the downmove is not extensive -- the one on Friday was 25%, as I pointed out in the questions -- then you have to be prepared to exit as soon as the supply line, which you have by now been able to draw, is broken and look for a retracement in the subsequent upmove to go long again.

There's nothing new here, but until the trader puts it in his own words and makes it part of his own plan, it's just PAbabble.

To back up a little, you say in your post to "trace a line" and "look for signs of change". Where would you trace a line here, from Friday's pre-market, and what signs of change would you look for?

http://cdn3.traderslaboratory.com/f...1778034-re-trading-off-daily-charts-10111.png

Thanks for the homework. Here is my analysis.

At the edge of the chart we were in a diagonal congestion, and price just bounced off the bottom of it. The S and D lines are still in effect and therefore nothing shows an impending change on the trend. I am not taking into consideration in the analysis the fact that we are above the 50% level of the movement from 3110.

 

[dbphoenix]

Quote from yossy:

Gringo, but nothing is done unless there is a retracement. Right?

What confuses me is this. If, price moves down and a Demand Line breaks, and then a retracement takes place and price moves up, is it a short at the end of retracement, i.e., at the crest? But if the upmove results in a new high then you go long on the 1st retracement down. Right?

If a DL breaks, how is the break seen? As a Ret of the Uptrend prior to DL break or as a new downmove?
Or is it that the downmove itself is a Retracement as long as the DL is not broken. If a DL is broken, then it is a downmove which on a Ret up will be shorted? So DL break becomes the differentiator.

When is the earliest that one has a DL? Is it the moment you have 2 consecutive bars with HH and HL? (assuming I am looking at 1 min bars). Or is it when there are higher swing lows?

In an uptrend, after a downmove, when is the earliest that a SL is drawn. Is it drawn, if DL is broken or one waits for lower SH? In Niko's question, it was almost immediately while I though a SL would connect the high with subsequent lower high which Db said was incorrect.

Though the questions may seem that DL/SL are almost taking on the role of Red/Green light indicators which is not Db's intent, but grateful if anyone can clear that.

Thanks

Perfect timing, and a perfect example of why this can't be made mechanical as these are exactly the kinds of questions that come up when someone tries to use all this mechanically.

Little to none of this will make sense unless one has spent a considerable amount of time observing without looking for "setups" and entry and exit ops, much less trading. Once one has put in that time, the answers to these questions will be self-evident. Whether one does it or not depends entirely on how badly he wants to be able to do this.

I see no point in moving on to a new day until one has benefited as much as can be benefited from the review. Otherwise one just makes the same mistakes over and over again (many people settle into this groove for years). So we'll stick with Friday until the process has become clear for at least those who are interested enough to have read the thread and who have at least begun the observation phase (those who haven't read the thread and/or haven't begun the observation phase or who think they've completed it will be urged to post less and read/think/study more). I see no point in going over yesterday since any ***** could not have failed to make money. Hard cheese, but at some point interested individuals just have to man up and do the work or find something else to occupy their time.

So, going back to the chart I posted eight or nine posts back*, what does one do? What is one's starting point? What does one look for? The NY RTH open is only minutes away. No more time to crap around. The lights are coming down. The curtain is opening. What's your first line?

*Which has now been reposted above. Just ignore the lines for now and do your own analysis and make your own judgements. Niko's lines may or may not be correct, or, while they may tell him what he wants/needs to know, they may not be informative to somebody else. This is the purpose of testing: what do you want and what do you need in order to get it?