Ghost of If You Can Draw A Straight Line

Discussion in 'Journals' started by dbphoenix, Jan 1, 2014.

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  1. dbphoenix


    A new thread for a new year.

    The first thread, If You Can Draw A Straight Line (You Can Be A Successful Trader) wound up being a sort of omnibus thread which grew far longer than it needed to be, largely due to trolls. So after it became unwieldy, a second thread was initiated: Son of If You Can Draw A Straight Line. This was an attempt at refocusing and simplifying that succeeded to a large extent but was still too sophisticated for many people. Hence the third thread, Bride of If You Can Draw A Straight Line. This simplified the SLA (Straight Line Approach, not the Symbionese Liberation Army) even further, as much in fact as I was capable of simplifying it.

    (Those who want to explore the first thread should begin with this stickie. Those who want to venture into the second one should read the first five posts of that thread to gain their footing. Those who want to study the third thread need read only the first and possibly the seventh posts there to get up to speed.)

    This thread will be an extension of all that has come before, drawing upon the first and second as resources. Those who are confused can explore the first and second threads on their own. Those who need the absolute basics and/or a refresher in discipline and focus should sidle up to the third thread.

    In brief, the objective of all this activity is to track the balances and imbalances between demand and supply, or buying pressure and selling pressure. Once you learn how to do this, you will understand trend and how to play it, including its endings and reversals. You will also learn how to distinguish between trending and ranging, the latter including "chop", which is a collection of micro-trends which generate tons of commissions and very little if any profit.


    We go back to where we were at the beginning of the first thread, the long-term trend beginning in 2009 (and if you want these charts, I suggest you copy them; I can't guarantee they will be here if and when you come looking for them):


    Those who aren't new to trading will recognize that this sort of advance cannot be sustained. That doesn't mean that it will end tomorrow. However, in order for price to continue to rise, buyers much be found who are willing to pay these prices. If those buyers cannot be found, or if enough of them can't be found, price will of course fall (demand and supply again). The fact that price has left the trend channel is at the very least a warning.

    The daily chart (the tail end of that rise) brings us to the present:


    Yes, it is possible that price will rise to 3700, but, again, buyers must be found. If they aren't found, price is just as likely to return to the immediate trendline, which as of now is at 3470 (it will reach 3500 in about a week). That demand has been steadily weakening for a couple of months is not encouraging for longs.

    And a bit of review, from the Bride thread:

    • 1. Anything can happen.

      2. You don’t 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.
  2. dbphoenix


    For grins, the hourly:
  3. slugar


    Thanks db look forward to learning more
  4. dbphoenix


  5. dbphoenix


    An update on the hourly:
  6. dbphoenix


    For those 46 of you who are following along, price was turned back at the halfway mark (the dashed blue line) before a long was triggered and has now made a lower swing low. Therefore, the short is still on.
  7. slugar


    Are we using the hourly for this thread or just a longer term view?
  8. dbphoenix


    Welcome to the now-105 lurkers.

    Price was unable to reach half the preceding downmove, half being 49, and made a lower low Friday and last night. However, it should be clear that the character of the move since Friday is different: the swings or waves are tighter and the movement, such as it is, is sideways. This represents the halfway level between the top that I "called" in the first post and the lower trendline, which, at the time of the first post was 70, more or less. By now, however, the lower trendline has reached 93+/-, so if one is into "targets", those have to be adjusted to fit the current reality, i.e., the map has to be redrawn to reflect the current territory. Given the current level of the lower trendline, price is two-thirds of the way there. Will price reverse before it reaches that trendline? What do we look for? If one has no idea, I suggest reviewing -- or reading -- the Bride thread.

    Not all the lines from the preceding charts have been brought forward as there's really no need to do so. By now they are mostly clutter. And it's a simple matter to scroll up and look at the previous charts if one has just tuned in and requires context. Explanations are bare bones given that this thread is preceded by 3000 posts.
  9. dbphoenix


    And price makes a new low.

    Isn't this fun?

    Short is now worth 50pts.
    #10     Jan 6, 2014
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