The Trouble With Scribbles

[dbphoenix]

QUOTE="Buy1Sell2, post: 4106030, member: 45994"]

And they are facts: price stopped rising here, it stopped falling there, this trendline tracked supply until its break indicated that demand had taken over and vice versa. Whether anyone can use this information to trade is the subject matter of our threads. If you do not wish to find out for yourself, that is fine with us. But why this crusade of yours to make us stop? Is this no longer the free world?

Actually this thread is an excellent venue for addressing misconceptions held by those who haven't read the material (45pp, 30 without charts; hardly War and Peace), either because they are not at least curious or because they are afraid they will go blind, the most obvious nonsense being that of the lack of "stops".

So if BS wants to don his clown suit and put himself out there as representative of his group, that's perfectly okay by me. Helps relieve the bloat that occurs so often in journals that attract the troll population.

(Incidentally, this is now the most-viewed thread on ET)

 

[dbphoenix]

Speaking of technical analysis, may as well post this here:

dbphoenix said:

"TA is not the use of past price and volume to make predictions about future price.

TA is the study of price behavior. What the trader does as a result of that study is outside the purview of TA."

DB, I have a question. While I'm not new to TA, I have a lot to learn and your following quote confuses me, and I'm sure would confuse others: "TA is not the use of past price and volume to make predictions about future price".

Maybe I'm misreading, but, what about "measured moves" and should price targets based on supply/demand (TA) be thrown out? Thanks.

Technical analysis is the study of price behavior. While anything that relates to price behavior could be called "technical analysis", most of what is called technical analysis is not essential to it or even necessary. One needn't know anything about "patterns" and/or "indicators" in order to observe price behavior and formulate hypotheses regarding why it is moving as it is. Indicators have been around for decades, but technical analysis has been around for centuries.

As for prediction, one cannot even begin to predict what price is going to do until he thoroughly understands what it is currently doing. But while it's current behavior is in the market, i.e., the high of the day is the high of the day regardless of what one thinks about it or who sees it, any predictions that are made by the observer/trader are in the mind.

This brings into question anything that may originate with raw data but which is interpreted by the mind: measured moves, risk:reward ratios, price targets, patterns (too many to list), bar intervals (1m, 5m, 15m etc), candles, indicators (hundreds of them), and so on.

In order to distinguish between what is real, i.e., in the market, and what is gurubabble, one must test these propositions in order to determine whether or not they have any value at all and, if they seem to, whether or not they have enough value to enable the trader to incorporate them profitably, e.g., is the probability of success of whatever it is high enough for me to screw around with it or is it just another half-baked idea that sometimes works and sometimes doesn't but not nearly enough for me to trade real size with it?

Once one does this testing, he finds that much of what is commonly-held to be true about TA is wishful thinking. But the essentials of TA, the study of price behavior, the results of demand/supply imbalances, are today what they have been for thousands of years.

 

[fortydraws]

Here is a scribble that I find of interest. Price tending toward equilibrium around the midpoint of yesterday's range, an attempt to break down from that equilibrium quickly found demand materialize. Implies somewhat bullish potential to me. But I wouldn't trade it without a bit more price information, and I would certainly use a stop no lower than a few ticks below the low of that break down attempt

 

[dbphoenix]

Or it may just be price discovery without any bearish or bullish implications. That's part of what I find fun about PA.

I posted this a few minutes ago. May as well copy it here (note the level of the apex):

 

[fortydraws]

Or it may just be price discovery without any bearish or bullish implications. That's part of what I find fun about PA.

I posted this a few minutes ago. May as well copy it here (note the level of the apex):

You know me ... I'm always looking for an angle

We're just a couple of points from it now, but "00" is the premkt midpoint, so I would look to see if price trades there, and if so, what to (other) traders do about it (buy/no buy)?

 

[fortydraws]

Long 1.50, stop 99.25, see if it gives a chance ot take profits at +5 I'll not be updating. If stopped, stopped, if out, assume out.

 

[fortydraws]

Long 1.50, stop 99.25, see if it gives a chance ot take profits at +5 I'll not be updating. If stopped, stopped, if out, assume out.

OK. That was quick. I once said that, imo, the NQ is as easy as it gets to find 5 point trades. It is literally like $100 bills are laying around in the middle of the street, and all you have to do is keep looking both ways and wait for traffic clear long enough to pick them up.

Of course, being well versed in the art of scribbling helps

Here is how it looked on my chart: Bought the higher high (white line was the position open line), Red line was my Stop Loss, and Green Line was my $$Line. Bar interval is 55 ticks.

 

[fortydraws]

Last one as I really have got to stop wasting my time on ET, but I do know how Buy1Sell2 likes to have fresh scribbles to misrepresent.

For me, a long trigger is the price sequence Low - High - Higher Low - Higher High at a scribble, or what Richard Wyckoff called a "Trading Level."

Here is what that looked like to me in this case - still showing the 55 tick chart. Nothing special in the selection of the bar interval. When price gets to a trading level, I just pick one based on my experience that helps me "slow" the market down based on the current pace of trade. You can see the same thing on a 5 minute chart, though if you blink or sneeze, you might miss it there, where it will be visible on a smaller bar interval because of data bundling.

 

[dbphoenix]

And here, at 1000, is an example of what is meant by new traders coming into the market, i.e., a different group of traders. Those who trade hourly bars have a swing high at 19 and another at 34. These become "levels of interest". They need not have anything to do with one's trade management, but it is useful to know the possible reasons why price stalls at one level or another. Whether that group will buy, sell, or short remains to be seen.

 

[Buy1Sell2]

Here is a recently posted entry/exit chart posted by a scribble student. Notice how the steep diagonal lines offer much more ability to just buy or sell on either side with a buy stop or sell stop. The horizontal scribbles would actually have you in the trades later than if the trader would just buy or sell on a cross of the diagonal lines. There are no stop outs listed on this chart. I realize that this chart is being posted in hindsight by the student, but the first thing that should be done is to establish stop loss areas and this chart still needs that done. The focus here is on being right instead of trade management. It's ok to be right, but I would make a recommendation to look at potential loss first.

Further analysis of the entry/exit chart here reveals that by taking trades both long and short with entries executed by stop orders on simple diagonal line crosses, approximately 27 NQ points would have been realized on this day 13 months ago. The SLA method using the horizontal scribbles and dots that the student annotated would have netted approximately 9 points. That's a significant difference.