Trading Price:Phase One:Observation

[dbphoenix]

A Harvard professor once asked his students to do a special report on fish. His scholars went to the library, read books about fish, and then wrote their expositions The students were shocked when, after turning in their papers, the professor tore them up and threw them in the waste basket. When they asked what was wrong with the reports, the professor said, ‘If you want learn anything about fish, sit in front of a fish bowl and look at fish.’

– William O’Neil​

A month ago, I posted the following, in part, to someone's journal:

There are five phases here: observation, backtesting, forwardtesting, simtrading, real trading.

First, one must observe in order to find those "tells" which show the market's hand. In broad categories, these tells will manifest themselves in reversals, breakouts, retracements. This is analogous to meditation in that if one finds himself thinking about entries rather than focusing on price behavior, he should start over from the beginning. Eventually he will get tired of doing this and focus on the behavior in order to get through it.​

Given the number of people who are having trouble with the first phase, this journal will be devoted to this phase and this phase only.

To begin, what is the market -- buyers and sellers -- telling you with regard to the boxed section?

 

[eminiman414]

I suppose you could call it a battle within that 4 point range or so however in the nearest term sellers are moving the price down toward the lower end of the range. Are you asking what our play would be as well or just what we are seeing?

 

[dbphoenix]

I suppose you could call it a battle within that 4 point range or so however in the nearest term sellers are moving the price down toward the lower end of the range. Are you asking what our play would be as well or just what we are seeing?

No, not interested in what anyone would do with it or about it. Just want to know what people think the market is telling them.

 

[eminiman414]

Sounds good. My first sentence is what I see then.

 

[niko]

I think this is a great opportunity, people start watching price and dont have anyone to discuss that with, then get tired of watching price and think is nonsense and end up buying 6x WMA Crossover System with Elliot Wave Plus or something like that, that does the job for them.

For those who are REALLY interested in learning how to trade, this is the first step, knowing what is happening in front of your eyes, not half an hour ago, not a week ago, but now in Real Time, Db is kind enough to share his wisdom and experience, and that is one in a century offer. If you are really interested in learning how to trade, answer the question. If you don't know what is happening, write whatever comes to your mind, the worst that can happen is that your alias will be taught about something new. If you feel your ego is in jeopardy and everybody is gonna make fun of "MasterTraderVIP1234" or something like that (if that alias is taken, my apologies) just change your alias, but do participate, is the only way to learn.

 

[BonScott]

Price in a tight range indicating it has found value. Neither buyers or sellers able to break out and get past the previous swing highs or lows. Buying strength fading on the right side of the box.

 

[gears]

Price in a tight range indicating it has found value. Neither buyers or sellers able to break out and get past the previous swing highs or lows. Buying strength fading on the right side of the box.

+1

 

[deaddog]

I see that price hasn't spent much time at the lows of the range except for the last 1/2 hour or so.

 

[k p]

To begin, what is the market -- buyers and sellers -- telling you with regard to the boxed section?

The area in the red box tells us that buyers don't want to pay more, and sellers don't want to accept less, at this time. In the last few bars, price does stay below the midpoint of this super tight trading range, so it appears as if the sellers will win out. Perhaps its not even fair to call it a range. Chop is more appropriate given that chop is just overlapping bars. Should a trading range have a clear direction of price contained within the upper and lower boundaries that lead to reversals?

 

[ubo]

Consolidation after trendline break. As ND would say, I'll wait for further clarity until consolidation is clearly over if one is trading only the 5-min chart. Alternatively, one could trade the consolidation if the 1-min chart signifies a clear and sufficiently wide trading range and one has a plan to trade that. If breakout strongly above or below, be prepared to buy/sell first pullback if that's part of the plan.