since march 09 we've built this wedge which we seem to be breaking,there is a rounding top for feb apr and may where it tried to go above that long time top tl
There are a number of books/traders/writers that have illustrated this "technique"...brooks, parsons, saliva, & L chan quickly come to mind. They weren't the first and the certainly won't be the last to highlight this nuance. IMTSU
A trend line ahead of time with only one main prior point of contact is often exactly what a channel provides. If you only use a trend line you can get completely blind sighted. You are trading a gappy derivative of the main market so you can't look at your chart in isolation unless you want to be mugged. All the more reason to look at sister markets and see if you are being red flagged. The Dow was in a clear channel - I was asking what does that tell you but you missed it. What does volume tell you? In this move down who were the bigger players, buyers or sellers? What does lower high and lower lows suggest - up or down trend. What does the weekly structure say (that's getting critical here). You had a trend line break that got you all excited - that's a red flag on its own. The idea behind this approach that Metal introduced is price relationships. If you had copied the Dow channel structure to the SPY here's what you would have seen... (Keep this a secret because it's guru magic powder) This is not predicting PA, it's giving you a reason to take decisive action if PA signals. In other words you're not looking at a reversal and wondering if it is real. What is the meaning of that top candle hitting the channel? Look left - what do you see? You're playing long when the main players are playing short!
Sorry I must've missed that Volume doesn't really help me or factor into my trade decisions. I know there are some people who claim volume helps them figure out what is going on, but I've never seen any correlations between volume and price. Suggests a downtrend. But it depends on what scale you're looking at. Right now, the S&P could be said to be making LLs and LHs or still HHs and HLs (see attachment). So you drew a new downtrendline which invalidates the previous one (the thin one)? How did you know before hand not to go long when the previous one was broken? How does this affect your trading decisions? Yet I'm still consistently making money. edit - on the pic I uploaded, today's price has now officially made a LL rather than a DB as I had it labeled in the pic.
Yes, I have attached today's chart at lunch time. Sorry my reply is hard to read as I don't know how to use bold/unbold and just put my replies in brackets.
I see your lines marking increasing/decreasing volume trends, but it's kind of out of context so it doesn't help me much. Volume is increasing, so what? Volume is decreasing, so what? Volume increasing + price pattern x = ??? Volume increasing + price pattern y = ??? Volume increasing + price pattern n... = ??? Volume decreasing + price pattern n... = ??? etc. 99% of the time I ignore volume because I've found it doesn't seem to have any predictive power. That was kind of non-specific. My hand will eventually become strong and I'll have a huge position when that happens. Hedging can offset risk (while admittedly reducing gains sometimes, depending on where price goes) and give me more capital with which to add even more to my long position. I'm currently holding 1,800 shares of SPY (average cost $132.70) on the long side and am loving this little down trend that we're in. The more people panic, the more I will buy. Not everyone can trade the way I do. Most people are afraid of drawdown. They quote the "gurus'" rules of not being able to risk more than 2% of your account size per trade and only trading "with the trend" and all that other stuff. The moment I stopped caring about trying to identify the trend (since I was almost always wrong, regardless of if I used, indicators, S/R, PA, HH/HL/LH/LL, etc.) was the moment I began to turn my trading career around. So I'm all ears for anything that can help out. Volume analysis, trendline stuff, etc. As long as it isn't vague guru-speak.
http://www.elitetrader.com/vb/attachment.php?s=&postid=3199377 Monthly charts show the real trend. Can't hide money flows on a monthly...
No trader should be afraid of a drawdown planned in advance. That's what trading's all about. If you allow drawdowns to run farther than your average gain then you need a very high win rate to compensate. Still, it only works consistently over time with a plan in place. With a large enough account, leverage can act as an edge if you have money management rules in place. Many traders who have no idea how to trade technically with stops and targets, use leverage as an edge to trade. You can average down long or short until price reverses and you become profitable. Maybe such a trader is willing accept a drawdown of 10% on a trade to eventually net a 2%, but s/he has a very high win rate. Averaging down against a trend in your time frame becomes a problem if you're trading by the seat of your pants, without clear rules for money management. Is there a price/position size at which you would stop buying and exit the trade? I'm sure that in your trading time frame (which I'm guessing must be weekly if you're averaging down long and willing to keep buying if it drops more), there's a line in the sand below which you would say "The weekly trend is now down, I should start shorting rallies." Or not?
I agree. Size is the best leverage. But even then you can still mess it up in "black swan" type events without a properly designed money management and positioning system. Which is what you said right here: Actually, I think it's safer in my timeframe. When people start doing it intraday then they get into trouble and run the risk of wiping out. No. Not usually in this timeframe, but yes if we're talking intraday (which I don't do so much anymore). But I am often hedged so even though my drawdown can be big at times, big permanent losses are prevented, and drawdown actually pays a little back into my account.