Registered: Mar 2012
04-28-12 08:57 PM
There are a zillion people chasing around indicators looking for the best signals and this and that... You can look at every price cyclic indicator in existence, and MACD and etc... Trade off RSI divergences, etc... And still lose.
There is one little missing key which a lot of good traders understand instinctively, but can also be put in number!
Time is the missing key. A lot of people see the same trade setups, and jump into the same divergences off of lows/highs, etc... But, they don't have a time stop.
Each trade setup has an expiration date. If price isn't moving in your favor within a certain amount of time the odds are price will do the opposite of what the technical setup was. Think about it... A bunch of people see a long setup. They all start diving in... Then they sit around waiting for it to start rising... If it doesn't start rising, only a matter of time before they start getting scared. ;) If I take a trade setup that is bad time rules generally get me out without a loss before it moves against me.
To summarize everything... If price isn't rising off a divergence within the amount of time it should be rising, and in the amount it should be rising... Fear will build in the longs and price will likely drop again.
Or vice versa. ;)
Some dizzying logic huh? If price isn't rising when it's supposed to be rising, and when it's supposed to be rising by, it's likely going to fall! Traders need continual emotional reinforcement via price movement in their favor to keep pushing in a direction.
Attached is a chart of bernanke's recent speech after FOMC. Notice that each bottom and top is occurring in relatively the same same number of bars or ticks. Each move is taking about the exact same "relative" amount of time to bottom or top. I was talking to a banker who trades currency recently and was surprised he understood time rules perfectly and used them in his trading...
Whatever timeframe I'm using... 25 bars/ticks/minutes is the most ill hold a trade for unless the trade is moving heavily in my favor. That is the far upper end though. You should start seeing a move go in your favor in around 10 candles from a good setup. If you let it go past 40 candles and it still isn't moving in your favor your a gambler... Not a trader! If your counter trending you honestly need to be in and out within fifteen candles... Tricky stuff! If I miss the long setup, I sometimes take the short setup... Only if the trend is really slow though.
The bottom indicator I have here post-marks each exact high on the next downward cycle, and each exact low on the next upward cycle. The locations of the highs and lows generally keep occurring in the same relative location in time for upto hours at a time.
This has been downloaded 767 time(s).