Unholy Grail to Success
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Actually, Mr. Spit, experienced traders know that the main moves in a security tend to occur about 2 hours after the open and 2 hours before the close. That leaves 3 hours during the middle of the day that represent lower volume, higher risk trading.
Just because the security didn't make it's move during the slower part of the day doesn't mean that a reversal will come. The chart will show a consolidation or continuation pattern so you just have to wait for the breakout.
When trading stocks, I would only expect a reversal if the futures start ticking down.
Just because the security didn't make it's move during the slower part of the day doesn't mean that a reversal will come. The chart will show a consolidation or continuation pattern so you just have to wait for the breakout.
When trading stocks, I would only expect a reversal if the futures start ticking down.
Game Plan #1
Just as Dennis Hopper, in that retarded Ameriprise infomercial, artfully laments in his half-sardonic tone that in life "ya need a plan", traders also must have a well-rounded plan. Wouldn't it be incredibly stupid to mobilize the military for war without first knowing where the battle will take place? So why is this concept, which is a familiar refrain in the realm of trading, remain alien to so many traders? You need to get into the bad habit of forecasting where the trading range (eg. HOD and LOD) will be for the next day. If you have no idea what I'm talking about, go back and read TRAP in its entirety.
One of the very first thing in the analysis of potential HOD and LOD (the PRICE factor) is to locate every important technical levels on the daily chart. These include major S/R and TL. Next, gauge the MOMENTUM of today's bar or candle. Is it strong or weak? I personally like to look at the candle body (open to close) rather than the whole range (high to low). A general rule of thumb is that the longer the body length, the greater the chance for momentum to continue. Finally, how fast, in terms of TIME, did it take for a given rally to materialize?
Does any of this make much sense? I hope so because all of them have already been covered at one time or another in the past. Also note that ya don't have to get them right every single day. No doubt, you'll likely to get them wrong on many occasions. However, with practice over time, it will become easier. The point isn't so much to nail the HOD and LOD but to get yourself in synch with the market rhythm, which I can't emphasize enough.
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Important note: Allow me to be blunt. I don't like to bitch anymore than I have to but there's a good reason why this thread was written in a chronological order. If you're new to this thread, start from page 1 and don't skimp on details!
Just as Dennis Hopper, in that retarded Ameriprise infomercial, artfully laments in his half-sardonic tone that in life "ya need a plan", traders also must have a well-rounded plan. Wouldn't it be incredibly stupid to mobilize the military for war without first knowing where the battle will take place? So why is this concept, which is a familiar refrain in the realm of trading, remain alien to so many traders? You need to get into the bad habit of forecasting where the trading range (eg. HOD and LOD) will be for the next day. If you have no idea what I'm talking about, go back and read TRAP in its entirety.
One of the very first thing in the analysis of potential HOD and LOD (the PRICE factor) is to locate every important technical levels on the daily chart. These include major S/R and TL. Next, gauge the MOMENTUM of today's bar or candle. Is it strong or weak? I personally like to look at the candle body (open to close) rather than the whole range (high to low). A general rule of thumb is that the longer the body length, the greater the chance for momentum to continue. Finally, how fast, in terms of TIME, did it take for a given rally to materialize?
Does any of this make much sense? I hope so because all of them have already been covered at one time or another in the past. Also note that ya don't have to get them right every single day. No doubt, you'll likely to get them wrong on many occasions. However, with practice over time, it will become easier. The point isn't so much to nail the HOD and LOD but to get yourself in synch with the market rhythm, which I can't emphasize enough.
[edit]
Important note: Allow me to be blunt. I don't like to bitch anymore than I have to but there's a good reason why this thread was written in a chronological order. If you're new to this thread, start from page 1 and don't skimp on details!
Trade School: Momo in Action (Momentum 101)
There's no one way to gauge momentum. But as a minimalist, I like to keep it as simple as possible. Here's the way I quantify momentum. I divide a price swing (figure 1) into two halves (figure 2). The first half is an up swing and the second down swing. Then I deconstruct each down to a single candlestick (figure 3).
So how are you exactly s'pose to interpret these candles? Again, I must admit there is no hard and fast rule on this. Some people preach candlestick patterns while others preach common sense. I happen to belong to the latter camp. Even though I exclusively use candlesticks, I ain't too keen on candlestick patterns like "Rising Three Methods". Only so-called patterns that I follow are the narrow body with a long shadow formations, such as hangman and hammer. Otherwise, I stick with the good ol' commonsense approach. My understanding of momentum is that strength begets strength and weakness begets weakness until some greater force is exerted. This is similar to the Newton's first law of motion: Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it. For example, it stands to reason that the following analogy shouldn't be too far off the mark.
There's no one way to gauge momentum. But as a minimalist, I like to keep it as simple as possible. Here's the way I quantify momentum. I divide a price swing (figure 1) into two halves (figure 2). The first half is an up swing and the second down swing. Then I deconstruct each down to a single candlestick (figure 3).
So how are you exactly s'pose to interpret these candles? Again, I must admit there is no hard and fast rule on this. Some people preach candlestick patterns while others preach common sense. I happen to belong to the latter camp. Even though I exclusively use candlesticks, I ain't too keen on candlestick patterns like "Rising Three Methods". Only so-called patterns that I follow are the narrow body with a long shadow formations, such as hangman and hammer. Otherwise, I stick with the good ol' commonsense approach. My understanding of momentum is that strength begets strength and weakness begets weakness until some greater force is exerted. This is similar to the Newton's first law of motion: Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it. For example, it stands to reason that the following analogy shouldn't be too far off the mark.
- Strong Up + Strong Up = Strong Up
- Strong Up + Weak Down = Moderately Strong Up
- Strong Down + Strong Down = Strong Down
- Strong Down + Weak Up = Moderately Strong Down
- Weak Up + Weak Up = Weak Up or a likely Reversal
- Weak Up + Strong Down = Again, a likely Reversal
- Weak Down + Weak Down = Again, a very likely Reversal
- Weak Down + Strong Up = Need I say more?
Quote from saliva:
Counter-Momentum: Momentum in Reverse
By now, you should know that I have a knack for everything preceded by "counter". On that note, I confess that I never fully understood the concept of momentum until I came to realize the importance of counter-momentumâif there is such a thing. So what exactly is counter-momentum? Consider the following premise:
You can readily observe in any chart that a given stock will go up as long as there's enough buying interest. Once the buying interest dries up, the stock will in turn stop going up. Now consider another premise:
- If the stock doesn't go up, then it must come down
Suppose XYZ reaches a new weekly high at $50. It then comes down and stalls at $49.50. However, the stock never manages to drop much further and instead meanders in the range of $49.35 and $49.65. Once the buyers realize that the supply of sellers have dried up, they quickly step up to the plate and bid up the stock higher.
- If the stock should go down but does not, then it must go up
As you can see from the two examples, it ain't the momentum but rather a lack of momentum that can provide a greater insight into where the damn price will likely move.
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Game Plan #2: Deconstructing Trends
Know thy trading range! Anticipate targets not only for the daily range but for the intraday range(s) as well. Rarely ever do we start the day at the low of the range and end the day at the high of the range, or vice versa. There will be twists and turns that will lend themselves to one or more intraday trends.
Another very important concept is that just as Momentum can be broken down to a single candle (see above), you can also deconstruct a given trend into a bland candlestick. I suggest you get into yet another bad habit of visualizing each trend (as well as counter-trend) from the candlestick perspective.
Know thy trading range! Anticipate targets not only for the daily range but for the intraday range(s) as well. Rarely ever do we start the day at the low of the range and end the day at the high of the range, or vice versa. There will be twists and turns that will lend themselves to one or more intraday trends.
Another very important concept is that just as Momentum can be broken down to a single candle (see above), you can also deconstruct a given trend into a bland candlestick. I suggest you get into yet another bad habit of visualizing each trend (as well as counter-trend) from the candlestick perspective.
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After reading some preposterous remarks about trendlines and S/R elsewhere on this forum (viz. "trend and resistances are figments of overthinkers imaginations"), I feel compelled to make this post. Not only is he or she mistaken but to make such a lofty statement without any proof to substantiate it makes one look egregiously stupid. Anyway, here's a market replay for 12/12. Judge for yourself whether S/R or TL is a mere product of one's colorful imagination.
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