Thanks dbphoenix You are correct that I shouldn't take anyone's word without doing personal DD. You are a long term and respected member, so I do give lot of weight to what you have to say. Secondly, I have seen many a times things look good on charts, but executing them in real time to get desired results, quite a number of times the gap between real time execution and lines applied on charts is substantial. Thats why I asked if you are willing to share the PF you have actually achieved following these methods in real trading. Thanks again for the great thread.
Executing anything in real time is a challenge for nearly all traders because so few of them bother to do any testing other than computerized, assuming they do any testing of any kind. Add to that the fact that few have any sort of trading plan, much less a thoroughly-tested one, and it's a wonder anybody succeeds at all. In any case, the goal is not "to get desired results" but to track the course of demand and supply. Whether you do it with lines or in your head is irrelevant. I stopped drawing lines years ago. But few traders can tell up from down, so drawing lines becomes necessary, at least until they learn to see. If you refer back to post #7 and the charts that correspond to the "real-time" remarks I made, this may be a bit more clear. And if you spend a few hours in replay "trading" your favorite instrument, you'll learn whether or not this is worth your time.
10-30-13 NQ Open: The Trend: Strong up-trend for the past few weeks. Demand is beginning to level out but buyers still have the strength to keep making new highs. Where we are: Buyers make an honest attempt to break out of the 60-90 trading range overnight and form a new high. The Action: Consistent Resistance at 3400 overnight finally forces buyers back down temporarily, but they find support at the top of the trading range and make an attempt to break the Resistance at 3400. They barely penetrate it, but sellers take advantage of the lack of follow-through and quickly force price back into the trading range. --- Ah, the continual process of learning this method has been such an emotional experience for me at times. At the beginning, I experienced fascination and some euphoria at the discovery of such a simple and efficient perspective to view the market through. Discouragement set in as I would continually review the material, but multiple times would fail to absorb and understand concepts that were plainly discussed multiple times. However, the continual patience of my peers and teachers helped to strengthen my resolve to stay undeterred and engaged in the learning process. I have been excited to feel some of the concepts beginning to move past the barriers to my learning, and begin to integrate themselves into my understanding of Supply and Demand. More and more often, days like these occur where the price action seems so obvious and easy to understand, and act as affirmations of the progress I've been able to make. It was very satisfying to finally be in on a long move like the drop from 3400 this morning, instead of standing on the sidelines watching price continue to rise or plummet, wishing I didn't make an extremely premature exit, or too hesitant to enter on the tiny retracements of such a steep movement. My journey is definitely still in its infancy, but I am very grateful for all the continual contributors of this discussion, and especially to DB for taking the time and effort to teach us beginners the same things over and over again until we finally begin to understand.
Balance and Imbalance Can we discuss the idea of balance and imbalance? Let me start with my idea of the concept: Let's begin with the mental image of a strongly trending upwards market, with multiple retracements and continuations, all the while respecting an initial demand line. This means that demand is overwhelming supply, a "steady imbalance" between demand and supply, with demand in control. Now let's examine the "top" of our imaginary strongly trending upwards market: Price breaks a demand line, there is more here than a simple break of a line, there is now a break of the "steady imbalance" between the forces of demand and supply in our uptrend. We must be alert. Fundamental forces at work in our uptrend have shown themselves to be weak. Do we short? NO. Have we a "steady imbalance" between demand and supply in favor of supply yet? NO. Price, after breaking the demand line (the "steady imbalance between demand and supply), attempts to continue upwards but cannot create a new high, it stalls a few points below the previous high. We must be alert. Balance between supply and demand is present. Do we short? NO. Have we a "steady imbalance" between demand and supply in favor of supply yet? NO. Now, after failing to surpass the previous high, price falls below the prior swing low or other key area, leading to a short entry. There is now a clear "steady imbalance" between demand and supply with supply winning and moving prices lower. We enter and attempt to join that trend as long as we can, giving price a chance to retrace and continue as long as the "steady imbalance" between supply and demand favors supply. If price is moving up, up. If price is moving down, down. Up is up and down is down. We can't be afraid to admit to ourselves that it really is that simple. ---------------------------------------------------------------------------- Are my ideas of balance and imbalance in align with the focus of this thread?
You are very close to the mark. However, merely a failure to surpass the previous high, and passing through the previous low will lead to premature entries often times. You have the right conceptual idea of waiting until the balance of power has clearly shifted in the favor of the sellers, but you still need to wait a little longer for the failure of the buyers to exhaust themselves with one last attempt in order to get the best entries into the beginning of a down-ward movement. See my quick sketch for a visual. And yes, the concept is literally that simple. I am still baffled at the trouble I give myself from time to time with being able to accept that fact.
I am on pins and needles waiting for the "FIFTH COUSIN" edition of basic follow the bouncing ball advanced trading for professionals that have not yet bought the book.