How do you know if it turns or continues???

Dear Traders!

As you may know I have had a wonderful opportunity for Tony Oz rank some of my plays and give me a free lesson to his trading but he left when it was the "peak of the party" - There was no Q&A

So, I'll fire away and If anyone can help, thx! He has a play he calls Bottom fisher (Skyscraper in reverse).Basically - 3 or more consecutive down (up) days followed by a reversal day. As I get it it should also be arround lower BB (for bottom) or upper (for top).

What we are doing here, as I see it, is calling short term bottom/top.

My question is :

HOW DOES ONE DECIDE WHEATHER ITS A TOP/BOTTOM OR A CONSOLIDATION/PULLBACK WHICH WILL RESUME IN THE SAME DIRECTION?

Since like EVER I have been thought that TREND IS YOUR FRIEND (it looks to me like we re fighting it here) and that we should enter on pullbacks yadda yadda yadda.

Now, when it finally looked so perfect to me (and simple) comes Tony and "ruins it all" (Thanks for really awesome advice!)

It can be this way or another...its so confusing. What I dodnt get a chance to ask him is does the volume matter here, # of days it has gone up/dn , overall market, what ind. could I use to confirm/deny the move etc.

So any info from you guys, more than welcome.

Good trading today,
Alex

 

Hello Neo

was able to read Tony's advice .
Infact, he didn't "ruin" the "trend reversal system" or "buy at the dips" at all.

He trades just a different timeframe and applies slightly different patterns.
He slices a piece out of the cake somewhat earlier than trend-followers by "anticipating" the likelyhood of a reversal very early and secures himself by applying a tight stop and adequate positionsize - just in case.

He's also using intraday support and resistance as triggers. The multiday swing-trader might also consider intraday S/R levels, but again, on a longer time frame ( say 60 minute instead of 5 minute bars ).

If a multidaytrader would consider the same pattern, this multidaytrader would probably trade other positionsizes and place different stops and would also apply different Profittargets. Trends ( and their reversals ) exist in all timeframes.

This doesn't mean, that longerterm reversal- trades ( over the course of several days ) wouldn't have worked out better or worse in the end. It's always a matter of how much risk I'm willing to take and which timeframe I want to trade.

What is right for Tony must not be right for you. Although I appreciate very much, that he talkes the time to give some "free lessons to a beginner and that he really tried to put himself in your shoes - he has millions on his accounts and you have 4 K to trade with.

You're limited to 3 intraday trades in 5 day period with IB. This limitation might deserve another strategy to trade a reversal - if you're stopped out twice because of a slight misjudgement, you have only 1 trial left - and this one you have to carry overnight !

Markets are neither white or black - they are grey. Traders must always live with a high degree of uncertainty. Otherwise, we would all be millionaires ( like Tony ;-)) ) and writing books.

Of course, Tony is right when he says the meat is in the first large moves of a reversal. But if it turns out to be a new trend, the real meat comes after the initial reversal.

I like to see some sort of confirmation first, even on the cost of missing a part of the move, before entering a reversal trade. It gives me a better chance to get an idea about the magnitude of this reversal.
Yes, being a lucky trader is fine - but sometimes, luck just runs out. So it's better to be a lucky and smart trader altogether - also just in case..... ( Tony is certainly one of that kind , lucky + smart
;-))

I don't use intraday setups anymore since I don't have the time to follow each tick. And even if I would, it's all to easy to loose track of my original plan because of a few tricks MM's and specialists play intraday. Each tick represents new information and may change the perception we have for this trade ( whether this perception is right or wrong doesn't matter here ).

Take the market you trade as an egg. Try to place this egg on the tip or the bottom and it will skip.
Take a knife and cut off 10% of the tip and 10% of the bottom and will will stay stable, regardless whether you place it on it's tip or on it's bottom.
So I'd never try to catch the low of a bottom and I'd never try to sell at the peak of a move. It's just too hard to identfy ( in advance ). But I'd be really lucky and happy, if I can catch 70% - 80% of a move.

If you look at some trades Tony described in his great book "The Stock Trader", there are some which would have paid out for the multiday swing trader as well.

Actually, he made a substantial profit from a multidaytrade in QQQ's which he closed only a day or 2 after the pre-settled 4 weeks period selected for this trial-purpose.

Finally - trading is, and I think Tony can agree with that, a probability game. How does a trader know in advance whether an important support- level will hold or a reversal will take place ?

Well, actually he doesn't. He'll know only after the fact.
But he sees the opportunity and judges the probability as high, so he's willing to bet some money ( the stop-loss ) on a reversal at that level. That's anticipation. Depending on the degree of his conviction, this bet can be large or small.

Another trader might think, well, this is supposed to be an important supportlevel, but I'll rather buy the real reversal than trying to anticipating it - so he waits for the reversal to happen and jumps in afterwards - betting, that it will last for while.
He judges the probability for a sustained reversal move as higher, because it's a reversal from an important support-level. So he might take smaller position, because the first move created some more distance to logical stop-loss, but goes for a larger move, mabe even scaling in when proven to be right. Totally different strategy - but the same reversal.

If the stock has been in a solid uptrend before the reversal, odds are high, that the first test of an important support will result in a sustained reversal. Many investors considers such a reversal as a buying opportunity, unless there are catastrophic news out for the stock, the sector, the market.

It's certainly appropriate to assume, that if the stock resumes it's longterm uptrend, that such a stock forgives a somewhat later entry.

Vice versa, if the stock has been in a sustained downtrend before, it's more likely, that traders and investors who got hit before with their longtrades bale out on any sign of recovery - selling the shortterm strength. It's certainly a prudent approach, as Tony suggested, if you want to trade those reversals from the longside in downtrending stocks, to get in and our very fast and to set very tight stops. Often enough, the party is over faster than you might think.

Volume - yes volume is great indicator - any sustained move needs volume - it's the fuel which propells the stock higher or lower. Volume of 100% or more above the average volume for the last 30 or 50 trading days signals rising interest in the stock.

regards

 

"HOW DOES ONE DECIDE WHEATHER ITS A TOP/BOTTOM OR A CONSOLIDATION/PULLBACK WHICH WILL RESUME IN THE SAME DIRECTION? "

Come on Neo. You already know the answer. Thats why they have stops.

 

WoW, THX very much for the reply Privateer. "German accuracy" at work again

PRIVATEER = TONY he he

Good luck Monday!
Alex

 

"Privateer = Tony - he he"

Wish it would be like that - I started trading stocks just 4 years ago at the age of 38. Tony needed 6-7 years to become a millionaire -when I recall his CV correctly, so I have another 2-3 years to go ;-)

Unfortunately, experience in live or other jobs doesn't pay dividends when trading the stock-markets.

In a way, it's even harder, since at an age of 38 , being almost 18 years in amanager's position, you have already so much "common wisdom" about stocks accumulated, that it's hard to step into a trader's shoes.

Trading is not investing and technical trading is an art rather than a science. So one has to start all over again, hindered by his "normal live" beliefs and rules.

Sometimes, when looking at some of the errors I made, I think, even an ape may have made a better trader I was.
If you just teach this ape to push a buy button when a green indicator-light lit's ( and some banana's come out of a slit in the cage )
and to hit the sell button when a red light turns on and you use a fairly simple Buy/Sell system - this ape could make ton's of money, because he wouldn't second-guess the signals.

Good Luck in your endeavours.

 

Yes, Privateer You are absolutely right in your posts. 38? Well, the best years You use QQL right? If so, can you tell me how to get 2, 3 or more charts in a workspace? I seem to be able to open only one. Stillin trial mode.THX!

Alex_banana_ape

 

Have to post my reply again :

Just rightclick on the desired symbol and use the option : send to new chart - fairly easy.

You can group charts, news , T&S, L2, Optionchain windows to the symbols in your watchlist / portfolio.
When ever you click on a new symbol in any of these indows, all grouped windows will automatically display the info for the new symbol.

In order to do this, you need to define windows as "grouped".

Just click on the window you want to include in group, so that it's active and then click on the red "Group" button in the task-line.

Make sure, all windows have the same group number ( up to 4 groups possible / workspace )

Best is, to start with the watchlist window ( quote-window ) and then include whatever windows you like.

You can only run 1 Workspace at a time, but you run several QQL application at a time. Just duobleclick on the QQL icon on your desktop and run as many QQL's as you like - your PC can work with. The number is , as far as I know, only limited by your PC's memory ( RAM ) and processing power.

Good Luck

 

Magna,

That's probably one of the best advice I've ever read here. Thank you for sharing your wisdom.

 

Hello Privateer
From London again
I read always your posts with interest !

I didnot know about QQL
I use Quote.com with Qcharts. May be you have known that to day we had a lot of problems with Qcharts. Interruptions suspensions etc...
How QQL works in comparaison ?
Qcharts is very complete but it has often problems.
As it seems you work with Trade Prospector, and TP real time, that is very useful, is working exclusively with QCharts.

Do you have the 2 servers ?
May be that is the solution as a back-up ?