Trading with price action

[OldTrader]

Quote from slapshot:





OldTrader it is GREAT to see your posts again

I wanted to state publicly that you have helped me a great deal to expand my time horizons (I weaned off just trading on 1 and 3 minute charts and start looking more at 15, 30, 60 min) and to learn more about what is actually moving the market and ways to read it. My trading has improved considerably from your ideas.

Thank You.

I notice a lot of indicator supporters tend to blast your assertions but I feel they only do this because they don't want to lose confidence in what they are trading with, regardless of the solid truth of your postings. So don't take it personally.

I have found a combination of charts that works well for me to read "the big picture". Some of them are pure candles only and a few have indicators, mostly just MACD because it is when price action DIVERGES from what the lagging indicators are telling you that good opportunites arise - at least for me.

IMO, the understated value of indicators is to tell a person when NOT to trade - such as when an MA cross shows nothing more than chop. I use indicators more as a filter when not to trade than when to trade.

Please keep sharing your experience with us.

Sincerely,

Paul

Slapshot:

Thank you for mentioning your success. Just remember that the success you experience is all due to you. I can point in a direction, but implementing a trading plan/strategy is very personal. One guy can make an idea work...another will simply botch it. So good for you, I'm glad you're experiencing some success in a challenging business.

You know, when I first showed up here I wasn't looking at intraday charts at all. But all of you guys got me started looking. For a while I watched the 1 minute chart...and decided to try fading the chart. It was working pretty well too...until one day they got me. LOL.

I still have a tendency to focus more on the daily chart...and rely on other types of indicators to guide my intraday trading. But I now seem to have settled on at least watching a 5 minute chart. It seems to add some value at times...and in that regard it's one more avenue to look for clues as to the next move.

I think the longer the chart, the more apt you are to see the big moves developing. Of course, to ride the bigger moves is going to require a bigger risk tolerance than some here seem willing to take on. It's rather amazing though how simple the market can be at times when you allow the market to work for you, as opposed to making this constant effort to make a point or two out of a 1 minute chart.

OldTrader

 

[doctoroe]

I suppose one man's "squiggles" might be another's key indicator.
To each his own. But some of the comments here remind me of grandpa bitching because everyone knows the only way to hunt squirrel is with a musket and not with them new fangled rifles with bullets! They got all them extra doo dads on them that make no sense and just distract you.

 

[jack hershey]

Quote from OldTrader:



Thanks for the chart including indicators. I was unable to read the settings on the stochastics or the MACD. If this isn't something proprietary would you post the settings involved?

With the settings I can take a look at some charts to observe what happens with them. I guess the principle is that if one is good, then 3 must be 3X as good huh?

Or there's another theory out there that a guy should watch several different time periods in terms of charts...perhaps 1 min, 5 min, 30 min.

I suppose the point is that the stochastics are derived by formula from the price action. So different settings on the stochastics just puts a different type of spin on the price action...just like different time periods in charts put a different look to the chart.

OldTrader

Thanks for the help nohkio, As you know I am not very swift on the way to get info into the chat properly.

Regarding your three paragraphs in the order you presented them

My personal policy is to give away any settings I use for anything, any software that is provided to me as a courtesy of others and all maths (like the seven basic equations for anticipation and the 7 through 0 scoring using the P, V relation and the addition of the third variable A/D.

The MACD setting are 5, 13, 6
three stochastic settings are: 5, 2, 3, 14, 1 ,2 and 14, 1, 3.

PP 2. The purpose I have for posting three is to help beginners get through tripling their initial capital on ES in a matter of several weeks trading only fast paced markets. My objective is to use almost nothing to make a lot of money by some standards. I ask that they tape out the space between 20 and 80 completely so they can only see when the market is fast paced and they cannot see the signals that do not matter intially until a person is optimizing capital on a time based velocity profit/ unit time).

Use only the 14, 1, 3 taped until you have made three times your initial capital. Watch price and watch volume. Watch the MACD.

The major thing you first learn is the entry and exit. When you see both lines, then you enter (long or short as the case may be.) When the lines disappear you exit the trade. On Friday there were four trades for a toal of 45 units. A unit on the emini for ES is about fifty bucks. A beginner will do about 50% of that for reasons of not following directions mostly. 22 times 50 bucks is enough for one day. That is a good portion of the capital needed for margin.

I also have the people practice keeping a log for stops. Make a list from the market formations and C&R every 5 to15 min using the listing two entries behind your last listing. This is to keep people's eyes peeled.

PP3 This is all done on the trading fractal. For ES the fractal is 5 min and you anticipate on the 1 min. The list of stops gathered on the 1 min is the most effective for making money. It alone will double your inital results. What I mean is that it drives you from only 22 points toward 45 points. You are gaining an even more valuable thing as well. You are in the market longer and operating nearer a beginner's optimum.

PP4. this is a very important consideration. we all know there are two basic types of indicators: relative and absolute. designers, by intention or otherwise choose one or the other. here we have an absolute and a relative indicator. It is Obvious how the differences play out as they diffrentiate market pace, volatility and so on. Were I to use an absolute indicator for training a beginner to make money I would spec out the absolute value ranges that depict the fast pace, the only pace beginners should use. With stochastics, as a relative indicator you have to tune the defaults to various settings to optimize money making. This set up is a simple one which rapidly trains a person in relatiavistic indicators by simply using three.

I am not really getting into making money with beginners what I am doing is getting their NLP straightened out and seeing to it that they are not stuck in any place mentally.

From beginer to getting to making money efficiently their are about eight levels to go through. You definitely get to a KISS operation after you get past all the places where you get stuck.

It's a very good idea to take out your original capital after you triple your money. when your commissions per week equal your asalary it's time to have an annual fee contract and consider not being employed any more.

 

[slapshot]

Quote from doctoroe:

I suppose one man's "squiggles" might be another's key indicator.
To each his own. But some of the comments here remind me of grandpa bitching because everyone knows the only way to hunt squirrel is with a musket and not with them new fangled rifles with bullets! They got all them extra doo dads on them that make no sense and just distract you.

Don't "bash" my Hero! LOL but please get the facts straight.

Careful re-reading of the last several posts will confirm that nowhere does Oldtrader say not to use indicators nor is he bitching about any one else using them. But plenty of people will assault him for pointing out the limitations of indicators.

He simply points out that indicators (which are LAGGING) only tell a person what has already happened and suggests that more focus on macro-view and price action instead of indicator overload might be helpful.

Taken within the context of the thread, these comments are true, since it is a thread about price action trading.

 

[jack hershey]

Quote from iceman1:




Jack...

Interesting reply; good point(s)

In fact over the past months been thinking over what you allude to, i.e. enhancing one's decisions by additional input to an already solid foundational understanding. However the more I'm in the markets... and the simpler it's kept, the better it goes (for me). Yes I do utilize some other indicators. But have no doubt that too many nouveau traders believe "more is more" (or more is better)... when (imho) some of the best on-floor and off-floor/screen traders know that "less is (often) more".

Would be interested in any insights on my premise.

Less is more indicatorwise.

I feel that the sequence of signals from a minimalistic system is the definition of KISS.

Truly a sequence gives you successive branch points where possibilities are eliminated in succession thus allowing you to focus on the upcoming critcal event.

It is like the slow motion of two lovers crossing to each other in a flower filled field. they never smash into each other but just do the right thing at the right time.

I will comment next on a screw up regarding "oversold" to show you the sequencing elements.

 

[inandlong]

Quote from jack hershey:
You can see... how not combining Magee, et al with indicators is a disadvantage in being able to think through what indicators are telling a person.

Apparently the boat Nitro, inandlong, and oldtrader occupy is one where they haven't as yet gotten the indicators now available to reinforce their intial TA understanding.

It is worth the effort instead of saying you like being stuck in a place instead.

Let's see.... let me get this straight.... if I trade by price action alone, as defined by the patterns in Edwards and Magee, and to not use indicators to "reinforce" my decision, I am saying that I like being stuck in a place.

The presumption must be that indicator usage results in improved timing. If this presumption is true, then hershey's statement is true.

However, if timing is not improved with the use of indicators to reinforce decsions made using price action alone, then for that trader, hershey's claim does not hold true.

 

[mktman]

Geez
Chill out.

We all have our favorite systems or what works for us.

btw ALL indicators are LAGGING.
Therefore timing using any indicator is lagging.
Learned that few years back.
A hard lesson.
I was into stoch then.
Have realized price/volume action and s/r is the answer for me.

Keep it simple as we say at ttrader )

mktsurf

 

[profitseer]

Quote from Lobster:

I have always wondered how they come up with those S/R levels. But frankly I have never been able to see how you could use those numbers profitably anyway.

Lobster, You just draw a line and say, "If prices hold here and reverse That's bullish, but if they break down through this line that's bearish." And you trade accordingly.

S/R doesn't measure anything but the strength of the markets memory. When the market is able to forgive the past, then we are free to move on to the next point of contention.

 

[iceman1]

Quote from jack hershey:



Stochastics has really gotten beat up by folks.

Old observed that during "oversold" is when he sees the market still.....etc

now you see the "oversold" condition.... as something reversing from something......

Look at ES on the 5 min today (17 FEB 03) using beginner's 14, 1, 3. Now that's oversold!!!

A relative indicator is always going to be at an extreme under these conditions.

It looks like people see coming into "oversold" as a signal. Well it is, of course. It is an entry signal for fast pace markets and a "hold" signal for all other paces.

You also get to know that a prolonged "oversold" indicates what?......the answer is a lateral period of congestion leading to convergence and centering. where will the Stochastics arrive at at the end of this pattern of three formations?? Where else but on neutral....because it is a relativeistic indicator and 50% is neutral point.

Reversals?? What is the indicator sequence for reversals on stochastics?

Well there are three kinds of trends and only two pairs of them can lead to reversals. The other two pairs have as a first trend a lateral trend.

When can you reverse? Not until you are making about 150,000 a year per contract on the ES.

Its best to do a wash trade several times a week as a warm up for reversals. Once you can do wash trades any day of the week you can then see where revrersals are possibilities and how to extract yourself when you need to.

If the pace is fast and you are picking off 10 or more points on an ES trend, then you are seeing "overbought" all during your hold period. When you slip out of the trade, the stochastic is headed out of overbought and NOT to a reversal. Now that it is gone from "overbought" it goes to one of two places. the first place it must hit is neutral. From neutral it can chosse to reform into the prior trend (rezoom as they say) or cool off from the prior trend into an opposite trend. No reversal here though neutral comes first.

When you get to slower trends than fast paced you will see all the typical formation pattern folk use.

a long trend at a slow pace with the 20 80 taped (intermediate level trading) looks like icebergs flaoting in a row (count three usually. You enter when "over sold" appears as firt iceberg. You hold thorugh the second and third iceberg. You didn't exit like in fast pace because the "oversold was" sustained... old notices this.

You exit only when the lines come out the other side of the tape which proves there are no more "rezooms". Each iceberg is, of course, a rezoom.

yuo can see how by building on the "fast pace only" beginner thing and including slow paces too that you creep up from 90,000 a year beginner level per contract to 150,000 by adding slow pace.

I know that the effort of using an indiocator like stochastics to get started is not pleasant...maybe. to me it seems a good way to understand the market better and get into learning what sequences of patterns or indicator signals mean.

We still aren't able to trade reversals. first you have to do two more things. To get ready.

If anybody is reversing out of "overbought and is pulling down less than 150,000 per year. just stopping what you are doing will put you further into the chips.

who knows maybe we can get a little milage out of indicators after all.

KISS is a nice place to be.

if my stuff is hard to read to one of two things: use a yellow high liner to accent stuff. Or second after you highlight use black to kill about half the rest. Do not cross out the annual money made; you need to underline that in green.

thanks for the reply...

could what you are saying in many paragraphs... be described with the term: "stochastic pop" ?

Just asking.

Ice

 

[Gordon Gekko]

Quote from jack hershey:

Thanks for your comment be glad too chill out. I am new here and I thought this was a forum.

Now that I know that everyone has what works for them as you state, it is certainly proper for you to shut me down.

I'll miss posting; it was getting to be quite pleasant.

SOME OF YOU PEOPLE ARE GOD DAMN UNBELIEVABLE! (this is NOT directed at you, Jack)

The #1 most ANNOYING phenomenon on ET is when someone opens up and tries to teach, AND THEN PEOPLE COMPLAIN AND TELL THEM TO "CHILL OUT!" UNREAL!!!!!!!!!

Asking questions is FINE, but to hint that they should stop/slow down is one of the DUMBEST things you could possibly do! Are we here to learn or not?!

JACK, I find your posts very interesting and you should continue. There is one very important thing you need to learn about ET: IGNORE negative posts! Just do your thing and don't waste your time with negative responses! Please continue posting as much as you want. I'm sure others want you to continue, too.

OldTrader, glad to see you back posting again. I think both OT and Jack make interesting points and it's cool to see some veterans stating their opinions and debating them. I'm glad you're BOTH here.

GG