What creates spikes?
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Then, they take a lossJust because one is a pro does not mean they trade without taking a loss!
Regards,
Monoid.
LOL.. I like it. I know NoDoji is reading, and I bet she's thinking "there is kp again looking for the perfect trade!"
So let me ask you, since you sound quite knowledgeable given what I'm reading in Yukoner's journal, would you consider that fading these spikes is a good strategy and if the drop should continue, then so be it and take the loss? It does seem like often after a firm level of support or resistance is established, the running of stops is pretty drastic when the level does break, but this move never goes far, and price pops right back into the range and above or below the level that it was just at.
The question is very generic. I interpret the above statement to implicitly contain the words "all the time". There are times when I aggressively fade spikes at its edge, there are times when I watch the spike from sidelines, there are times when I wait for a rebound after a spike and go in the direction of the spike. So, to me, it all depends on the context!
Regards,
Monoid.
Ah... most excellent reply.
Can you say just a few words about the context under which you would fade spike aggressively?
I'm thinking this has very much to do with how close one is to major levels of support/resistance from higher time frame charts like hourly or daily. If, such as the case is now where we find ourselves in a range in the NQ for a number of days, any spikes that may exit this range could be faded because the tendency to go back into the range is so strong? Meaning that it will take more than the first effort to exit this range. Two days ago we tried up, but went back into the range, and today we tried down, but came back up.
The spikes of course that I am talking about happen in a much shorter time frame like seconds, but the general idea about well established levels is the same, where a well established level needs more than just a spike down to keep going and will require several attempts?
You have to look for termination points of the given move on a lower period while in context of focus & higher period levels. If you aren't doing this then you are seeing with half of one eye.
Hmmm... care to provide an example perhaps? When you say lower period... what time frame are you talking? And by termination points, do you mean lower lows for example that aren't getting much lower?
My context will not make sense to you. But I will proceed anyway. I trade ES. So, I will give you an example from today in ES.
My context was "HLLH-V-(H,_) Step 4". Sounds like a football call doesn't it? 'Step 4' is my anticipation of a spike. The context was set in motion at 9:08:21 CST. At 9:12:53 the spike occurred to the downside. I went long. When I went long, I had no idea if the trade would work or how far it will carry. All I knew was that it was part of my trading plan! I exited at my profit target. On hindsight, I could have doubled my profit if I had held to that trade -- but, I don't care, 'cos hindsight trading is not part of my trading plan!
I don't look at time-bars or volume-bars, so can't help you with analysis of the market 's support or resistance based on time-bars. My style of trading requires raw data, and no I don't scalp for few ticks. However, I do draw horizontal lines based on raw data (which I classify into Buy bars, and Sell bars).
As you can see there are multiple ways of skinning a cat, and this is yet another way.
I will leave you with one thought to ponder: A lot of traders talk about incorporating multiple time-frames in their trading. Instead of multiple time-frames can one use two completely different ways of analyzing the markets and use that combination as a baseline to trade thereby doing away with time-bars? This is what I do.
All the best.
Edit: I just realized that that spike was also today's low. But, when I was in that trade I had no idea that it would be the day's low. Also, I had already forgotten about that trade until I read your post and remembered taking one today. That spike being today's low and me getting in right there is nothing but a big coincidence -- let's not make anything more out of it!
Regards,
Monoid.
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I would do my own work, re time periods. Termination points - same answer.
Think of it like this:
Take your higher period - what are you surmising that will occur there for that price bar?
ok, now - focus period - where are you in the HTP context?
ok, and now - lower period - where are you in both? Are we progressing towards the HTP target? If not, then that means what - that the opposite will occur? You have to account for all of this if you're going to get it right.
Like I said, viewing only one period is trading with your eyes mostly shut.
Very interesting. I plotted your two times that you reference on a time chart (since this is all I really have to go on). Its a very compressed view, but I wanted to incorporate enough of the "context". I changed my chart to CST, so hopefully I got it right.
Sure enough, it does look like price is spiking down right when you say you went long, and, even though we don't know your exit, it looks liked price stopped within ticks of our entry and went higher.
Zooming out even further, it does look like a range was beginning to form around the time you said your context was set in motion, but my gosh, that entry to go long is certainly not all that apparent based on what I've been looking at.
When you say raw data, do you mean watching the T&S window? How on earth can you keep the levels in your head without having a chart to look at?
I certainly see what you mean by using two completely different ways to analyze the market. All time charts, regardless of the time you use, are essentially the same since they are based on the same thing. So having another way to analyze can very much be an interesting method.
Its like a woman perhaps looking to see if a potential suitor will make a great husband. On the one hand, she wants to look at his ability to provide. So she might consider his job, his future earning prospects, his possessions, etc. But all of this is based on monetary stuff (like all time charts are just based on transactions in a specified time period.) But in order to enhance her ability to pick a good one, she could also now go in a completely different direction and figure out the type of relationship the man has with his mother and see if he is good to her. This will provide her with a completely different viewpoint, but this will still nevertheless help her answer the question of how good of a man he will be for her.
So how else to analyze the market if not via time/volume charts? It must somehow involve transactions... correct?
Yes, I certainly understand this from the point of view of first looking at the daily chart, and seeing where we are in that trend, then moving to the hourly, and then the 1 minute. And so if we are having trouble making new daily highs, or those daily highs don't hold, then of course going down seems most likely.