What creates spikes?

[i960]

Okay kp, I think you've gone all the way from wait for retrace to don't wait at all and get on it ASAP. There's an area in between. In general I'd consider the PDH to be a form of S/R but not necessarily a heavily defended area that has strongly established a battleground if you will (particularly from going off of the initial chart you posted where it doesn't look like a whole lot of trading has even happened there). It doesn't look like it was significantly tested either, just a few nudges with it - but that's going off the 5s chart, which I wouldn't use for trading decisions. I don't know if you're actually using a 5s chart for decisions, but I definitely wouldn't with something like an index. Way too much arb/algo-noise and other crap going on at that timescale. Move up to 1m or 5m at the very least. Myself, I prefer 5m.

What you want is you want to see it tested and then you want to see the reaction to that test as a signal for what to do next. You also want to consider the context of the session at a higher TF. Bullish? Bearish? What might other traders be thinking around there? Consider too that the market likes to do the same thing 2-3 times before doing something else - and you'll notice in the initial 1m chart you posted that there were multiple occurrences of double bottoms and springing off of those right around this related area. Additionally, consider the pseudo-IHS patterns around your specific area of concern (1m chart). They're definitely not perfect, are descending and distorted, but I consider them patterns nonetheless (head-like things at 11:33, 12:25). What if one considered that a signal to go off of, in addition to other information present at the time like session sentiment, order book (DOM), higher TF context?

It's completely possible that the traders who were buying on that dip were also taking a gamble as well - a gamble that worked out to create a high probability situation after price continued in the direction they expected it to.

Don't immediately short right after getting stopped out of a long. That's FOMO straight up right there and may even be a form of revenge and/or chase trade in the back of the mind (I know this because we've all done it). NQ is not crude oil - it's not going to just rip the second it breaks a minor support (and even CL doesn't do that - otherwise we'd just short everything testing support). Wait to see how traders are reacting to price movements around that area, watch order positioning in the DOM (atleast I do), wait for positive reaction, then enter on pullback if you still believe in the trade.

Remember, support and resistance like to be tested multiple times. In the initial 1m chart I see only a single test of that PDH and that might not even have been a real test at all but stops simply cascading below it. Pro traders are anticipating this situation - that's why they are there buying from you. They're also considering how price has moved before it, other technical patterns, etc. and are mentally projecting a trade following a given direction before it even happens.

IMO, "safe" entry probably would have been around 12:37-12:53 (based on the 1m chart). Complete conviction entry would have been right where you went short (but obviously should have gone long). That being said, more information is needed because the trend was down - and I don't exactly blame someone for not wanting to hop on long following a downtrend that just dipped below PDH; however I think a safe good play would have been long at 4438 around 12:50. Price has shown demand to be present and personally I would have taken that risk - particularly with that upper support obviously showing some significance.

 

[monoid]

going back to our big trader if we know where a concentration of stop losses are then we know that we can fill our limit orders up with the liquidity provided by the stop orders of the retail traders and therefore reduce our cost of entering or exiting.

I know very little about the markets, and am always interested in learning about it. With that said, lets think about what you said above.

If there is one big trader, it is only conceivable that there could be another bigger trader, right? So, what prevents this bigger trader to go against the big trader knowing that the big trader is going after this so called stops being accumulated beyond certain levels, there by filling the bigger trader's orders and leaving the big trader in limbo?

Just out of curiosity: Do you guys want to be traders or masters of intellectual masturbation? If it is the former you seek, none of this conversation is useful. If it is the latter you seek, then please continue and I will stand aside.

All the best.

Regards,
Monoid.

 

[k p]

IMO, "safe" entry probably would have been around 12:37-12:53 (based on the 1m chart). Complete conviction entry would have been right where you went short (but obviously should have gone long).

I think there is a bit of a mix up. The 1 minute chart you refer to from the beginning of this thread was from that day I think when I started this thread... Tuesday. The chart I showed with actual trades was all the way back in February. Funnily enough though, it just so happens that both charts show the same type of thing....a possible support level.... a penetration... and then price rejecting this penetration and heading higher.

As for my 5 sec charts... I just like them because it allows me to see how trades are actually behaving around these levels. I think its harder to concentrate on a 1 min chart because I have to remember how price moves within that 1 minute. But on the 5 sec chart, I can see how there are perhaps 3 tries to go above a level without success. Now this level of course I'm getting from either a 1 min chart, or hopefully 5 min or hourly. The nice thing about a rejection is that its there on a 5 sec chart as much as on the hourly chart.

 

[k p]

Just out of curiosity: Do you guys want to be traders or masters of intellectual masturbation? If it is the former you seek, none of this conversation is useful. If it is the latter you seek, then please continue and I will stand aside.

I find the conversation intellectually stimulating, but first and foremost, I want to put money in my account.

So it matters not to me who is buying or who is the biggest fish. All that matters is, if price should happen to penetrate an important level via the spike, is it because there is no buying interest and hence price will continue to drop, so I should look to get into a short? Or is this penetration temporary, which will attract enough buyers to push price higher, and hence I should be looking for a long.

I have thought quite a bit about your lovely example Monoid, and I even notice that DbPhoenix made a point of starting a new thread by quoting it. But I'm not quite sure how to use what you say for helping me see the market in any different way than I already am, and therefore helping me to place a trade. I would love to know what else I need to see, or how else to see, or how to acquire those glasses so that I could see the snakes amongst the apples.

 

[monoid]

All that matters is, if price should happen to penetrate an important level via the spike, is it because there is no buying interest and hence price will continue to drop, so I should look to get into a short? Or is this penetration temporary, which will attract enough buyers to push price higher, and hence I should be looking for a long.

KP: You seem to be concentrating on just one price (your so called important level). Although all traders see it, you can almost be certain that none of them would want to enter AT that price 'cos it is too risky. What everyone will most likely do is to follow their trading plan that they prepared as part of their analysis (research). I am going to repeat what I said earlier: No individual trader knows if their trade is going to be successful. Price moves because the ideas of a large number of traders converge, even though these traders might use completely different ways of looking at the market.

You seem to be looking for certainty in this [spike] trade. It does not exist. Just following your trading plan that you prepared for this context derived using the framework you use to view the markets. This is all you can do. If your analysis is in sync with a majority of traders, you will become part of the move. Period. With experience in the market, you will be able to adjust your context and will most likely become in sync with other traders. There is no other way.

Forget about stop runs, and large trader stories. They are just stories no one can prove or disprove.

how to acquire those glasses so that I could see the snakes amongst the apples

I have already answered this question in one of my previous posts.

All the best.

Regards,
Monoid.

 

[k p]

KP: You seem to be concentrating on just one price (your so called important level). Although all traders see it, you can almost be certain that none of them would want to enter AT that price 'cos it is too risky. What everyone will most likely do is to follow their trading plan that they prepared as part of their analysis (research). I am going to repeat what I said earlier: No individual trader knows if their trade is going to be successful. Price moves because the ideas of a large number of traders converge, even though these traders might use completely different ways of looking at the market.

You seem to be looking for certainty in this [spike] trade. It does not exist. Just following your trading plan that you prepared for this context derived using the framework you use to view the markets. This is all you can do. If your analysis is in sync with a majority of traders, you will become part of the move. Period. With experience in the market, you will be able to adjust your context and will most likely become in sync with other traders. There is no other way.

Forget about stop runs, and large trader stories. They are just stories no one can prove or disprove.



I have already answered this question in one of my previous posts.

All the best.

Regards,
Monoid.

Thank-you again for the reply. Its interesting that you say that nobody would want to enter at that level as I was thinking this was perhaps not a bad place. Either the trade instantly reverses and you're in at a good level (of course price would have to come exactly to the tick to get filled), and if it penetrates, you could account for this by seeing what stop works the best most often (2 vs 3 points, etc). When price reverses before it hits this level, its a bit trickier for me.

I'm trying to stay away from looking for certainty, but what I do want is a trade that I have taken at a level which makes it more likely to work, and at a level that if it fails, will more than likely mean price isn't going to continue in the intended direction (if this is at all possible of course). Many posters here only seem to show their best trades of the day, which makes it seem as if they are hunting for that one perfect trade that they somehow sniff out. So this makes it seem as if trades that don't work, can be analyzed further to figure out why they didn't... implying that a spectacular ratio is possible. With nobody actually showing how they trade, where they enter, where they exit, etc., and only sharing trading ideas (how they think a person should trade), it just makes it difficult to establish a sort of baseline.

I guess i was just mostly quite curious about what made you go long in your given example because given what I was seeing that price was doing at this time, it was heading down. I'm not sure if you saw any support levels or anything of this nature, but it still looked quite interesting to have been given a signal to go long there. So I was just curious about what you saw.

 

[redbaron1981]

My last post here because this thread has gone the wrong direction and changed into a how to click buttons thread.

Yesterday the YM dropped over 100 points from the open. I don't have an exact number as i am not in front of my computer. However this was caused by not by a trend line break dojo or anything else. It was caused by the entry into the market of a large number of traders with an immediacy for liquidity. These traders were driven to enter the market due to the NFP causing a change in perceptions not any visual clues derived from the chart.

Secondly my reason for posting about micro structure was important. A lot of traders choose to ignore it which I feel is incorrect. For example why try learning a language if you don't learn the grammar.

If you take into consideration what I discussed about stop placement and the way different orders consume liquidity then you may note that it is not a good idea to have your stop in an area where others are. These are areas where price change happens quickly and if your looking to exit a losing trade in these areas you may find that your intended exit price is worse than you planned, and this will hurt your account.

Good luck.

 

[monoid]

If you take into consideration what I discussed about stop placement and the way different orders consume liquidity then you may note that it is not a good idea to have your stop in an area where others are.

What if a lot of "big" traders [your terminology] have their stops at a certain level. Will it hurt you to have a stop long with them at that same level? Or do they not trade with stops?

Clearly I don't know what I am talking about. So, I will shut up.

Best of luck with your trading.

Regards,
Monoid.

 

[monoid]

So this makes it seem as if trades that don't work, can be analyzed further to figure out why they didn't... implying that a spectacular ratio is possible.

Failed trades do help you learn more about your context. The better your understand of the context, the better your trade selection.

With nobody actually showing how they trade, where they enter, where they exit, etc., and only sharing trading ideas (how they think a person should trade), it just makes it difficult to establish a sort of baseline.

Why would they? They have worked their butt off to get to where they are. Why should I spill my beans when I was the one who put in the long hours and put my family thru' such financial strain in-order to get to where I am at now? Can you think of one reason why I should show you all my trades when I am accountable only to myself and my family? Think about that before asking traders to share all their trades.

Also, no trader will tell you how to trade or how they think one should trade. They all will tell you to pick any methodology that make sense to you and make it your own. They share their experiences not because they want you to follow their steps, but to give you an idea of what you could do if you decided to do it on your own.

Think: "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for life"

I guess i was just mostly quite curious about what made you go long in your given example because given what I was seeing that price was doing at this time, it was heading down. I'm not sure if you saw any support levels or anything of this nature, but it still looked quite interesting to have been given a signal to go long there. So I was just curious about what you saw.

For the last time I am going to repeat myself: You don't know my framework, how do you expect me to explain the trade to you? In other words, we are not looking at the market the same way. And, I am not going to tell you, in exact detail, how I look at the market either!

what I do want is a trade that I have taken at a level which makes it more likely to work, and at a level that if it fails, will more than likely mean price isn't going to continue in the intended direction (if this is at all possible of course).

If this is what you want, then why don't you do the work to find out? Why ask traders how they trade or ask them to show their trades? Who cares what other traders do? I certainly don't, and neither should you.

KP, in my few posts in this thread, you have all the answers you seek. Yet, you keep searching. If the search doesn't stop, you will never start. You, my man, are the creator of your own destiny.

All the best.

Regards,
Monoid.

 

[k p]

Why would they? They have worked their butt off to get to where they are. Why should I spill my beans when I was the one who put in the long hours and put my family thru' such financial strain in-order to get to where I am at now? Can you think of one reason why I should show you all my trades when I am accountable only to myself and my family? Think about that before asking traders to share all their trades.

Also, no trader will tell you how to trade or how they think one should trade. They all will tell you to pick any methodology that make sense to you and make it your own. They share their experiences not because they want you to follow their steps, but to give you an idea of what you could do if you decided to do it on your own.

When Ghost of Blotto was posting to my journal, he had mentioned that the way he trades, there are liquidity issues, so I take it that if he can't get the contracts he needs at his exact price, then his edge is going to diminish.

So this I could understand, but a price action trader I don't think has much to be worried about. If anything, the more people who are inspired to buy at certain levels that you are looking to buy at will just propel you further into profit and faster. Now too fast is perhaps a problem as you don't want to create climactic action, but I'm just not sure how big of a problem this would be.

As for why a trader should show his trades, there is of course no obligation. But why does a trader want to help in the first place? Why are they spending hours on here typing away? Some say they are bored, because trading is lonely and boring, so perhaps the conversation is providing some company, so there is an exchange of services so to speak.

Anyway, I could make points about credibility, full disclosure or some other ideas that come to mind about why showing some trades would be respectable, but I just haven't the energy, nor would this do any good as clearly nobody is willing to share, or else they already would have. I find ET to be frustrating in some respects because it is not much different than a group of beautiful women on a Friday night. They seek attention and will invest a bit of effort to get it, but then it all ends up being a big tease as there is really no follow through, no substance.

On the one hand we have DbPhoenix who liked your post so much that he started a new thread about it, but he trades supply and demand and watches key levels. And yet you said straight up that you don't even know what demand looks like and you stay away from key levels. Perhaps its just my lack of understanding, but you two are on opposite ends, and its all very confusing.

You are correct that I am the creator of my own destiny, and on that note, its best to end here.