Just to clarify - by saying immediate price action I, by no means, explore opportunities of entry as soon as 1000 lots have been sold, I continuously monitor what's happening after that action has taken place looking for a good entry point. Like most wise ones out there, I do not jump the gun by trying to chase the market, because as you have rightly pointed out it could be a fake action. Don't forget that e-minis are linked to positions in the S&P futures and traders can enter/exit at both markets proportionally.
I don`t care too much about OB/OS, i remember one sentence, "There is nothing like overbought/oversold", don`t know the source, but a serious trader.... and "trends are often go much further than anybody can imagine" or so... The OS/OB thing is a subjectiv construction, a try to find some rules in all the random, by looking on charts it seems to work often, but by testing a real system you are faced with the reality. I even don`t like to trade in so called OS/OB daily levels, cause i found more erratic moves and sharp intradayreversals occurring, cause the higher emotional stress of traders and the OS/OB traders... you can find rare conditions with high prob of return to the mean, but fading every socalled OS/OB situation does only work with very large stops and/or by adding to losers(need of deep pockets...) May be OB/OS is working to some degree in the S&P, but not in many other markets, you get cooked in the german dax, which is much more trendy. It`s more about predicting volatility. Volatility is much more predictable than price. And i definitely don`t want to trade after a large WideRange-Trend Bar like friday. The probability of a following rangeday(especially on monday) is very high, for me in the nearly sure area...this means lousy trends, narrow dayrange and you can probably sell breaks over openrange and buy breaks under....
To go more in detail of OB/OS, i could not found any edge using daily or 60-120min OB/OS situations in filtering the tradedirection of the day, like if Overbougth only short and similar, that seems of very low importance (to my system...) may be it`s different with other strats....but i guess this is simply one of the public "common senses" not meeting reality, like many others too. There is exhaustion, but this is different from OB/OS, go through the videos at Linda Raschke to see how to find exhaustion by volume and TICK Michael
Great quote Murray t turtle Keeps the risk to reward way in your favor instead of risking pennies and nickels to pick up pennies and nickels. Risk the nickels to pick up dollars. [/B][/QUOTE] ========================== Monee; Good points. Also interesting the shorter trend,/weekly trend is down; and also whacking the 20 day lows. And while not using the 60 minutes as a main work- trade chart; it finds fast S&R levels[ more of an area than exact numbers usually] l
This is where a person would start small and add each time until the trade worked. Or conversely, if you were all in (which I would never be), you would use an extremely tight stop. It should all be related to percentage of portfolio size.
short here at 1305.25. Using the 12 minute chart on this one for entry. OB condition with RSI and a nice close on the bar near the low. 60 minute chart beginning to show cracks and a reversal down. (3 minute chart would have had me short at 1307.00 today with an RSI double top coupled with bearish divergence in both Histogram and RSI).