Given that the preceding two Straight Line threads are now over a thousand posts each, it's time for a third. I'm taking a minimalist approach on this third thread due partly to the number of sidetracks the first two threads took and due partly to the circumstance that a lot of people do in fact have trouble drawing a straight line. When you get through the skin, and through the muscle and slosh aside the organs, down to the bone, you know what you do? When you get down to the bone you aren't all the way. Something's inside the bone. The marrow. That's what you got to get at. --Who's Afraid of Virginia Woolf? In this case, the marrow is supply and demand, i.e., the Law of. Everything else -- trend, support and resistance, and so on -- stems from the balances and imbalances between supply and demand. However, understanding how these imbalances work AND being able to see them in real time is evidently a real challenge for struggling traders. Therefore, supply and demand -- and the retracements that enable one to enter a trade -- will be the focus of this thread. No breakouts, no reversals, no hinges, no S&R, no trendlines and trend channels: all of that can be discussed in either of the preceding two threads. So. The first step is to determine the current trend of the market (Wyckoff). Some of this just can't be made simpler, and the first two steps exemplify that. The second step is to determine one's place in the current trend: The third step is to determine the proper timing of one's entry into whatever it is he's trading. There are three strategies: reversals, retracements, and breakouts. Reversals are generally employed at the upper and lower limits of trading ranges. Breakouts are traded when price breaks out of one of these trading ranges. Retracements are the first pullbacks which take place after a breakout. For the sake of simplicity, only retracements will be addressed in this thread. Those who want to discuss something else are welcome to do so in either of the first two threads ("If You Can Draw A Straight Line" and "Son of If You Can Draw A Straight Line"). The fourth step is to manage the trade by monitoring the balance between buying pressure and selling pressure through the use of "demand and supply lines", exiting when the balance is no longer in your favor. And here we go. And the afternoon: A precondition: Bars are nothing more than a choice the trader makes to illustrate the movement of price in segments. Price is continuous and uninterrupted (unless the market is closed). A more accurate representation of price movement would be a line chart, but this is nearly always too big a step for the wannabe to handle, which is why I usually recommend a very small bar interval instead, even a 1t if he can deal with it. If he can't, he's welcome to use a larger bar interval as long as he can view the bars as continuous -- which is far easier to do if done in real time or via replay -- rather than get tangled up in "opens" and "closes" which exist only because he has chosen a particular means of illustrating what is, again, a continuous movement. Put simply, there are no "opens" and "closes" except -- in the case of the NQ, which will be used in this thread -- from the Sunday evening open to the Friday afternoon close. This can sometimes become more clear if one zooms out of his chart window so that the bars melt together into a continuous line. Some have actually had Ah-Ha moments after having done so. Price is a movie, not a slideshow. And in case you don't know, or have forgotten: 1. Anything can happen, i.e., the outcome of any given trade is unknowable. 2. You donât need to know what is going to happen next in order to make money. 3. There is a random distribution between wins and losses for any given set of variables that define an edge. 4. An edge is nothing more than an indication of a higher probability of one thing happening over another. 5. Every moment in the market is unique. (Douglas) And the principles of Auction Market Theory: 1. An auction market's structure is continuously evolving, being revalued; future price levels are not predictable. 2. An auction market is in one of two conditions: balancing or trending. 3. Traders seek value; value is price over time; price is arrived at by negotiation between buyers and sellers. 4. Change in demand drives change in price. 5. One can expect to find support where the most substantial buying has occurred in the past and resistance where the most substantial selling has occurred. A final note: those who are fearful will scatter like cockroaches at the flip of the lightswitch when price makes the slightest move against them. Even a tick. But the money is made by staying in the trade for as long as it generates a profit. Therefore, the trader should look for every excuse to stay in a trade, not to get out of it. This doesn't mean sitting there like a post when the trade is clearly going against you. But neither does it mean setting "targets" and exiting as soon as they're reached, nor freaking out for no other reason than a line has been "broken". This approach is by no means mechanical. It requires instead that the trader be sensitive to the changing imbalances between supply and demand -- or selling pressure and buying pressure -- and act accordingly. Therefore, any break or countermove should not be cause for panic but for reassessment. Those who follow this approach will find it difficult to lose if they just pay attention and refuse to allow their egos and biases to prevent them from doing what's required.