Funny KP, how when you look at the past you very certain about exactly where you would have entered and put your stop. But when you start to talk about what you would do currently, suddenly there's a lot of things that matter. You have to see if it looks weak, or strong etc... However, when looking back a few weeks, it's so easy to put on the trade. This is the problem with this type of analysis. It looks like it works. You can explain things out however you like, but in the real world, it does not work.
Here's the fact. The OP specifically asked a hindsight question. Therefore, all replies are hindsight including yours and mine. Simply, you should direct your response to folks that ask such type of hindsight questions. Yet, you will not and here's why...everybody does it including you (check your own post history). Heck, just yesterday someone at ET asked a hindsight question about computer software problem. ET members responded via different suggestions (analysis) about the cause of the problem and how to fix it...hindsight question and hindsight replies by those giving solutions about what caused the problem and how to fix it. Thus, you can't learn or resolve an issue until you ask questions and all replies with answers (correct or wrong) will be hindsight. By the way, it only looks like it works if it has not been backtested. That's a statement (looks like it works) about things that have not been backtested. Yet, lets pretend Kp statement was via an analysis he has backtested and knows that it does in fact works. Would you keep saying to him that it looks like it works even though his backtest results say that it does works 69% of the time ??? It other words, can you make money via a trade method that works 69% of the time or does 69% implies the method does not work ??? Something to think about.
wrbtrader did a great job with the rebuttal, especially the last line where he discussed stats. This is really all that trading comes down to. I have read that the smartest traders will be the first one to tell you that they have no idea what will happen, and even if they have a shockingly high win rate, what makes them so good is realizing that anything can happen at any time and a losing trade has to always be a consideration. I am of course certain of what happened in the past, I can see it. When discussing the future, of course there are more things that matter since nothing is fixed yet, so outlining this isn't that profound. But I outlined what I would be looking for if price same up, or what I would be looking for if price came down, and I couldn't say which one would happen since it hasn't happened yet, but if I didn't have to answer for every scenario, but reply would have been shorter. The other thing is that my answer is really two parts. First is analysis, second is what I would do. I don't think you can use the same set of criteria to judge these two since they are both so different. My analysis might always be shit, but perhaps what I would do is always bang on. Likewise, as you suggest, my analysis could be superb, and then what I do about it totally sucks. The best outcome is good analysis, and good actions based on this analysis in real time.
FWIW, the vast majority of my trade signals based on a statistically valid edge look the opposite of the position I'm supposed to be putting on. If I'm supposed to take a short position, it looks strong; if I'm supposed to take a long position, it looks weak. This is why so many traders fail. Price action tends to look/feel the opposite of what you should be doing with regard to a new position. The market rewards what looks/feels difficult. If the market rewarded what looks/feels easy-as-pie, there'd likely be no market worth trading. In hindsight it looks easy-as-pie because you see on the static chart exactly where your entry was supposed to be and the you immediately see where price eventually went. However, in real time, it probably looked and felt very different and the minor back and forth noise in any given time frame causes thoughts, and thoughts cause traders to screw up perfectly profitable trading plans.
Do another one, OP. Maybe choose one where you know the next 4 or 5 candles are quite a powerful move in one direction. See if any of us can get the direction right using out TA
I really like you NoDoji because in your quest to make trading work, you haven't forgotten what it feels like to not have a clue! Many of the replies from the other guys who know what they are doing, as helpful as they are, have trouble, in my opinion, making the connection with how it should be and how it is. They might all know, and rightly say that you have to be at point B to get the job done, but you always provide little nuggets to help someone get from point A to point B. What I especially like about taking trades now where it just doesn't look that good is if it does go against me just a bit, then I was fairly wrong about the direction anyway. (ie. If support should hold, don't wait till price has bounced off and gone 5 points higher... get in damn well close to that support level, and if it breaks, who gives a shit.. I've only lost a couple of point. If I wait till its gone 5 points higher and get in, of course it will retrace first, not exactly invalidating the up move, but more than likely hitting my tight stop)
That's not how real-trading works and its a poor way to learn. For example, the OP has been posting charts that doesn't contain all the information that he see when he trades nor does he explain why he selected that particular stock to trade versus thousands of other stocks. I'm sure there's a reason why he's trading this stock versus any other stock. Simply, take way the market context of the trade...you will not be successful in using any trade method including technical analysis. Therefore, if the OP post a chart again...post the entire chart, name the trading instrument and explain why he's trading that particular chart versus any other stock. Once again, TA does not work alone and it was not designed as such. You at least need to know what your trading at the minimum. Therefore, if the OP does this again...post the entire chart, name the trading instrument and explain why he's trying this particular stock versus any other stock to make any analysis worthwhile. Like I explained before...the exact same price action chart will have different market context when you slap on a different name for the trading instrument. Therefore, the analysis will be different just because the name of the trading instrument is different even though the price action on the chart is exactly the same. For example, a week ago...would you been going Long when China's markets were getting killed...now pretend the same chart was posted last week in real-time. Keep that picture in your head and now change the name of the chart to Treasury ZB futures for the exact same price chart at the exact same time... China's stock goes down as a downtrend while Treasury ZB futures goes higher as an uptrend. Same price action chart but the difference is the market context (different trading instruments).
Sometimes, you will see what I would call a "puff" of volume as people jump on the train for the ride up. So in a crash, you'll see the volume rising, then spiking, then the price will reverse, and then as the price rises, even though there is general concensus that the price should keep rising, you'll still see a few bars of slightly elevated volume as the people realize that the stock has bottomed and they are jumping on. Those are usually traders like us. I caution you with this. If you see a stock falling, then the volume spikes, wait until you see a couple bars (or more) confirming an upward trend. You can still be fooled, but it's better to wait for confirmation than jump right in. Also, as you're riding a money maker, if you start to see volume increasing, be thinking about using a trailing stop or some other kind of protection. Lastly, you can sometimes use volume spikes at the low and high prices of a range to identify where to trade a range-bound stock.
Cool...I nailed it. But I'm still not sure what you mean by an equal volume chart. Can't you just put the volumes in the chart? Makes them easier to predict.
So true. I swing trade, so I find that it is best to look at it about 2 to 3 times as often as the time scale I'm using (daily). Otherwise I get fooled by the movement within each candle.