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

[llIHeroic]

Okay, thanks a lot for going over this again with me, niko and DB. I feel like I have a realization dawning, but still need to work out the pieces.

Up until this point, even though I've read the frequent discussions about trend lines and S/D Lines, I didn't fully realize that I need to explicitly differentiate the two in my mind. I've been viewing trend channels as price's movements away from the base of a long-standing demand or support line.

Describing trend channels as diagonal trading ranges where oscillates around the mean of the long-term range where it finds value consistently over time makes something click in my brain.

I still need to work out the details, and take another trip back into the prior discussions again. What is still fuzzy on how exactly trend channels come to be defined and formed, since I was mistakenly assuming long-standing demand and support lines create the base of a trend channel, and then the width of the channel is formed by watching how far price moves away from the core underlying support of a movement.

I feel confident [at least relatively] in my ability to spot demand and support lines, and so I thought that these "trend channels" I was seeing price react to were valid as well. I now realize that what I've been creating and watching aren't trend channels at all.

I am a bit weaker on spotting and understand ranges and means, as we can even see from my analysis this morning. It is a little harder for me to grasp and understanding of how to improve here, especially when the ranges are longer-term and are therefore diagonal. At least understanding the problem I have is a step in the right direction.

Thank you for the insight.

 

[dbphoenix]

Quote from game:

Given that strong trends often have a lot of back and forth before eventually changing direction, would you wait for the first Reversal wave to attempt some kind of re-test before putting on the short or would it be a straight V Reversal bet? This is for the short on the Daily.

I just follow the drill: wait for a break of the demand line, then short the first retracement. That's the way tops work ('00, '07, etc).

Since the ES has broken its demand line and has yet to make a higher high, the wait may not be much longer.

 

[dbphoenix]

Quote from llIHeroic:

I still need to work out the details, and take another trip back into the prior discussions again. What is still fuzzy on how exactly trend channels come to be defined and formed, since I was mistakenly assuming long-standing demand and support lines create the base of a trend channel, and then the width of the channel is formed by watching how far price moves away from the core underlying support of a movement.

The mean of any trading range, whether lateral or diagonal, represents value, otherwise traders wouldn't keep returning to it. How far traders venture from this value is not as important as the value itself. When traders look for and find value elsewhere, the trend will change. John Bollinger figured this out years ago, which is not an endorsement of Bollinger bands since I've never come across anyone who really understands them. In the hands of the amateur, they only encourage overtrading.

 

[llIHeroic]

Quote from dbphoenix:

The mean of any trading range, whether lateral or diagonal, represents value, otherwise traders wouldn't keep returning to it. How far traders venture from this value is not as important as the value itself. When traders look for and find value elsewhere, the trend will change. John Bollinger figured this out years ago, which is not an endorsement of Bollinger bands since I've never come across anyone who really understands them. In the hands of the amateur, they only encourage overtrading.

Okay, this is encouraging. Some more pieces of the puzzle are coming into place. I can see that I already started to drift in the right direction of my internal understanding of price behavior even though I was working with false concepts, especially from a few of our exchanges on the tendency I have to act too rigidly off of perceived Support and Demand, specifically in regards to longer-term ones.

I started to hypothesize and observe that the larger a channels was, the more "gravity" it had, and so they still would remain intact at times when price crossed the lines but would then fail to break out of the channel I created.

I figured that the smaller channels, especially the tiniest ones created with 1m interval supply and demand lines had such little "gravity" that they would much more easily shatter when price violated them, so I have been quicker to discard and re-define them, or to just go back to seeing price within the next larger channel which is still intact.

I began to perceive the the entire market as a series of infinitely re-occuring patterns several weeks ago, and that was one of the first drastic evolutions of my understanding of price action. I think I had it a little too simple though, I didn't fully understand until today that my observations weren't focused in the right place. I was too busy trying to see how price interacts with the bounds of the various interval channels that I didn't see the big picture of a continuous oscillation around a core level of value moving though time.

Essentially, there are two buckets where I thought there was one. Being aware of this will definitely improve my learning journey, though I still am unsure how to recognize and define the threshold, and I suspect it might be the case that a purely mechanical distinction doesn't even exist as to these two unique occurrences and is largely dependent on context:

1. When a channel has been formed around value which a majority of traders recognize, and which causes them to behave in such a way that the mean value has somewhat of a magnet effect for towards movement of price, at least for a time.

2. There is a supply or demand line that represents the controlling party's interests which are driving the current movement of price, which is a different occurrence entirely from the scenario above.

I had no idea how fascinating this was when I decided to begin studying it.

 

[game]

Quote from dbphoenix:

I just follow the drill: wait for a break of the demand line, then short the first retracement. That's the way tops work ('00, '07, etc).

Since the ES has broken its demand line and has yet to make a higher high, the wait may not be much longer.

07 would have been tough to time based solely on the DS line drill. Four straight days of sharp drop without much hesitation to provide a ret for entry.

http://www.sierrachart.com/image.php?l=138272677344.png

Similar story for 00 in that there was a sharp fall without a lot of opportunity to get in on a retracement.

Just two pieces of data, but they do contradict my earlier assumption that big trends have a lot of back and forth before eventually falling. 07 and 00 fell straight down, with deep retracements occurring only much later.

My backtesting has shown that most substantial intra day swings have a very prominent retest point or zone before Reversing. V Reversals are rare. This is what led me to avoid the short this morning, as the strength shown through ON and the bounce off S at 3376 pointed towards strength. I viewed the V Reversal as a low probability event.

 

[Hooti]

see if remember how to post a screenshot

4 trades today

one an hour before the open, exited near the open, to avoid volatility.

the 2nd was the same as Niko's, for the same reason.

the 3rd was an add-on at a 50% retrace of the opening range.

Exited 2 & 3 because it was friday and was going to be gone for awhile.
Used a measured move for a target for the exit.

Came back later and saw the short as indicated (red arrow),
exit as consolidating somewhat and had to leave again.

Edit: I didn't put all of the SL & DL in, just the one's I used for trades.
Will do better.
I'm in & out as one of my support people is on vacation.

 

[fortydraws]

Quote from dbphoenix:

Actually I'm not anything until the daily demand line is broken. But then I'm in the middle of remodeling the kitchen, so the intraday stuff is at the bottom of my list once it gets light enough to work.

Well, I may be early, but I have tended to trade that way, trying to anticipate turns as early as I can, whether intraday or daily. I am short during the 10:06 bar interval so I made a reasonably low price risk entry, barring a gap up. But my position is small enough not to hurt too bad if that happens, and large enough to make for a good base to pyramid on if things go in my favor.

 

[dbphoenix]

Quote from game:

07 would have been tough to time based solely on the DS line drill. Four straight days of sharp drop without much hesitation to provide a ret for entry.

http://www.sierrachart.com/image.php?l=138272677344.png

Similar story for 00 in that there was a sharp fall without a lot of opportunity to get in on a retracement.

My lines weren't that tight. I didn't short until April '00 and December '07. There are plenty of opportunities to short. Plus the Construction Index gave me a year's notice in '06/'07.

 

[Hooti]

Quote from Gringo:

The better I understand the movement the more obvious the conclusions look and less words to explain it. Demand stronger than supply or supply stronger than demand, or a stalemate. There isn't much more to it.

Over thinking is likely one of the more common errors, especially when learning something new.

I was thinking about that today while trading. I did my entries using demand and supply, but I used measured moves, support/resistance, etc. for exits because I didn't want to leave the trade running while I was gone, or at the open. Not sure what to think about that, but it worked today.

I'll have to see if I can better get to a less wordy place also....
and participate more at the same time.
thank goodness it's the weekend!

 

[niko]

Quote from game:

07 would have been tough to time based solely on the DS line drill. Four straight days of sharp drop without much hesitation to provide a ret for entry.

http://www.sierrachart.com/image.php?l=138272677344.png

I don´t know how you enter the market, but based on that line and assuming one was not long (Limiting the ability to take the short awaiting for more confirmation while holding the long). 2200 (beginning Nov) seems like a perfect entry according to the Line Break + RET drill.