If You Can Draw A Straight Line . . .

db,

The first trade was not a set up on the 1 min, however the other 3 morning losers look pretty much the same.

Appreciate your input.

bmw

 

First, they may have been losers, but they weren't necessarily bad trades. There's a difference. Even a good trade can be a loser. That's just the way it works.

Your first long is legit. You had a nice runup, maybe too nice, and then you got a retracement that didn't break the demand line, or at least poked it. I would have tightened it a bit when price started angling up, but what you have is okay except for the fact that it didn't sufficiently warn you.

And by the way, drawing the channels is not likely to be helpful. If you're trying to draw demand lines and supply lines, confine yourself to demand lines on the way up and supply lines on the way down. Otherwise you end up with too much clutter and your thinking goes to hell.

In any case, the first long is perfectly legit. When it didn't make a higher high you should have exited faster, but that's mostly tinkering.

The second long, no. You're banging up against serious resistance, and you're better off -- clearly -- waiting until that's behind you before entering on a subsequent retracement. If you can justify entering a position before the breakout, try that. But let other traders carry the heavy load of the breakout itself. If you can't enter ahead of it, enter after the smoke has cleared.

As to the third, no again. Price did find S at the last swing low at 32/33. But then it made a lower high, which puts you back in the congestion, i.e., the chop. Again, wait till all that's behind you before taking a position. If you're trying to enter in anticipation of another breakout attempt, remember that they already tried that and failed, and this isn't a lengthy consolidation where buyers have been rallying their members. Let them lead the charge then reassess the situation. If it's a good breakout, you'll have an opportunity to join in. If it isn't, you don't want to be there.

Now as to the reversal off the higher high at 1150. Any thoughts on how that should have been played?

 

"Now as to the reversal off the higher high at 1150. Any thoughts on how that should have been played?"

Well, in retrospect, trying to see it as I think you are, I see that price
pierced the 2940 level, then broke through a minor trend line (demand). I am thinking that you would have sold where I indicated on the first small pullback.

Close?

 

Information costs – both too little of it.. and too much

More specifically;

Too little;

Results in increased losing trades (not waiting till the proper PA condition (aka a setup) develops before entering)

Which then of course leads a trader to start thinking erroneously that mkt is out to get him/ her - FACT, mkt doesn't even know we exist


Too much;

Results in delayed entries, which then equates to;

Missed profits – from the overall move underway

Increased risk – IF one doesn't wait till the next proper PA condition before entering

A trade fails where a trade fails, as per PA… NOT at some arbitrary % of one’s account

===================================


There resides a sweet spot between too little and too much – where we must trade

In order to do so consistently requires suspending one’s opinion/ bias/ BS, and remaining totally absorbed in what PA is saying

Then of course – executing accordingly, and timely

==================================

As Bighog said;

monkey see… monkey do (I need a banana about now)

Or if you prefer; Trade what you see..., not what you think

RN

 

dbphoenix,

You mention the power of reading price using a line on close chart and learning from the"continuous movement".

For those of us that have stared into the matrix for years and still only see little green characters, can you share some detail. Maybe a few screenshots of what you are seeing as price moves. The pace changes. The micro consolidations. The fact that price often fakes one side of a consolidation zone before finally moving in the other direction.

I am sure many here would love a few clues on what we are missing out on and maybe a few subtle suggestions will cause that "continuous movement" to make more sense. I know I would like to have that "Ah-Ha moment" after so much screen-time.

A few hints might be the difference.


Lostinspace

 

As I've said, the market will tell one what to do if only one is able and willing to listen. Unfortunately, nearly all traders, particularly beginners, have become deaf, partly due to vendor clamor and financial media assaults but also from what has by now become a virtually infinite pile of books, articles, monographs and whatnot. And we don't even have to go into indicator and pattern territory.

The bars, lines, angles, points, levels, candles and so forth have been presented as something akin to a giant ball of string, the center of which contains the answer to all of trading’s mysteries. If only we can ravel it, we have it made. I’ve been guilty of this myself with my boxes, striving to make things simpler, and, perhaps, for some people, I have. But I’ve seen these boxes take on a character not unlike the Andromeda Strain, exponentially growing into a complex of lines and angles that threaten civilization as we know it.

But if one is going to trade price, none of this will work. One can eke out a marginal success by incorporating all this junk into his trading plan, but it’s not unlike trying to run a marathon on crutches. Unfortunately, stuffing all of it into a file cabinet in the mind and locking it away isn’t easy, which is one reason why children are so much better at chart reading than adults.

One way of accomplishing this is to view the activities represented by the chart as a story. In some ways it’s like learning a new language, one which doesn’t have the vocabulary of bars, lines, et al. When trying to do it, one finds himself translating his current language (the bars, etc) into the new one in order to struggle toward meaning, but, eventually, the old language is forgotten, or at least set aside, and one begins to think in the new one.

This story is a drama. Sometimes a comedy, sometimes a tragedy, sometimes a thriller. But a story nonetheless. It has been going on for long before the trader clicks on his computer and it will go on long after he’s clicked it off. This is the chief purpose of studying context: what has everyone been up to, what have they been doing, where have they been, where are they going, what do they want, what have they been trying to accomplish? Not unlike catching up on old episodes of a soap opera, if one does so he has at least some idea of what’s going on when he enters this other world. If he doesn’t, he has no idea what’s going on, and by the time he gets up to speed, he will at least be all the way up to the first or second commercial break, unless he’s already lost so much money that he can’t continue.

Try, then, to hear the story. Doing so will make many things clear and even logical that otherwise would seem arbitrary and capricious.

I’m not going to start at yesterday’s beginning. I don’t have the time. Rather I’m going to focus on that reversal. This will offer at least an introduction to a practical application of what I’m talking about.

First, the context. I posted daily and hourly charts yesterday morning, premkt (the last two posts on p. 8, 10-post pages). Note again that the upper line of the daily is closing in on 40. Scrolling down to the hourly, one can see that the new channel that I plotted on the hourly was also closing in on 40. This makes 40 important, not because of a line or a trend or a trend channel but because traders have been trading, and their behavior – their wants and desires and fears and hopes and greed and tensions and anxieties – have brought them all to this point, like the invasion of Normandy. The convergence of lines is only a byproduct. What matters more is how and why traders arrived at this point.

So when the NY session opens, we have the ingredients for drama. Will traders test 40? Of course they will. What have they been working toward all this time? That’s why I said that the line of least resistance was up, and the reason why shorting at the open was most likely a non-starter.

Buyers make it all the way to 37, with a little help from sellers (sellers want to see higher prices too; they want to get the highest price possible then they begin to sell, which is why they so often provide so little resistance to buying pressures when buyers are on the move and why successful breakouts so often occur on unimpressive volume). Price then falls back to the midpoint of this rally, the 50-yard line, and buyers make another attempt at reaching sellers’ endzone. This occurs five more times before 1130ET, but the defensive line holds at 32/33 or higher every time.

Then they call in the big guns, the A-Team, and make one more effort to put it over the top, like a SWAT team with their battering ram, determined to break through the door and rescue the hostages. Will they make it? Will they fail? Can you stand it?

Using bm’s chart at the top of this page, 4 posts back,



note that buyers literally run toward a new high. This is an impressive effort, and the crowd cheers. However, they ran so hard and so fast that they neglected to bring along any reinforcements. Like an army rushing into an ambush, there’s nobody at the rear. So when price runs headfirst into a wall, there’s no underlying support; the move was too fast and too direct. And when price retreats, even slightly, those who bought on the way up freak, turn around, and sell what they just bought, feeding the frenzy and resulting in a cascade.

If one has his radio tuned to the correct channel and really listens to this story, he’ll understand that the seven or eight bars after the high represent an effort to hold the line at the previous swing high. There were, after all, quite a few trades made at those levels beginning with the first attempt off the open. If he also understands the events leading up to the effort and the significance of the failure, he will further understand that shorting at that little retracement represented by the fifth through eighth bars is a reasonably safe choice, at least in terms of probability. If 40 weren’t so important, and if buyers hadn’t spent the entire morning trying to get to it and through it and failing every time, that would be different. But that’s not the story here. So when the first intimations of disaster present themselves in the 1204 bar, the seller who shorted this can sit back and enjoy the show.

Now isn’t that more interesting than a bunch of bars and candles?

 

A half-hour to go and, given what I wrote above, the LOLR is down. Not necessarily today, but down. If buyers make another run for the endzone, I'll pipe up.

 

Your post just showed up, so you're probably being moderated as well. I therefore wrote my previous post before yours got posted, if that makes sense. If I miss any more, you'll have to PM me and let me know because I don't always review these things.

I've posted hundreds of charts on TL and I just don't have the time to do it all again. That may sound arrogant, but I really don't. If I did, I would. But I don't. My most recent thread there, in the Wyckoff Forum, had the same title as this one, but few people were interested, so I didn't pursue it. At least I didn't pursue it there. The sticky on Auction Market Theory may be of interest to you. The Trading In Foresight thread is a source of good charts, mine and others, though my approach to support and resistance did not turn out as well as I'd hoped. Yes, it's long. Yes, a lot of it can be skipped. But there enough charts there to choke a camel. The How To Do It thread may also be helpful, though it doesn't contain any charts. And it's short.

As for hints, I'm not into hints. That stuff is just too precious. I'll tell you exactly what to do. But you'll have to slough off a lot of what you know or think you know or have read or been told. Particularly by vendors. If you've been trading for a while and you haven't been doing particularly well, then you've got the whole fear/anxiety thing to deal with, which complicates matters. But I'm not a therapist, so much of that you'll just have to wrestle with on your own.

As for what I'm seeing as price moves, see p. 8. In fact, if you haven't read the first 8 pages (80 posts), you should do so now, something I expect everybody new to do in order to avoid yet another 600-post thread that nobody reads.

 

I was looking at the 240 min chart because I was looking for context, but I found something that still puzzles me when I am looking at the market RT in lower intervals, in this case, we had price returning to the DL, so the first thing i thought was RET, but then I realized i had a LH, so it could also be a REV, so far looks like it was a REV and we are in the middle of the first pullback after the REV.

When performing this analysis in RT I end up taking lots of HLs and LHs that are not really productive, guess it is because I am not yet very good at spotting S and R.

 

Price spent all yesterday evening hovering between 21 and 25, finally dropping below 20 at around 2130ET and testing 20 from underneath after midnight. Remember 20? It then fell, recovered, and now we're futzing with 20 again. There was a double top on the 1m about 10m ago at this same level, which has acted as both support and resistance recently. But a short off the dbl top would have been legit. Unsuccessful, but legit.

The course, then, is to wait for price to decide what it wants to do, in which case one either shorts a drop below this congestion or goes long above, even if it's only very short-term. This occurred five minutes ago, with a retracement a couple of minutes after.

Now it's up to buyers, but the long is in profit.

0959: this is like wading thru molasses, which is one clue. Demand line is broken. Trade should be exited.

1003: Price bounces off the midpoint of that little congestion.

1004: I was going to say dbl top and not a bad place for a short, but too late. Even typing comments without charts takes too much time.

Fact is, if you're watching price move in real time, it's not all that difficult to pick up on the imbalances between buying pressure and selling pressure if you can leave your ego out of it. But even if ego is not a problem, you have to be watching this in real time, not at work, not between classes, not while you're doing the laundry. If you can't watch it in real time, try a larger bar interval. Or re-evaluate the whole daytrading thing entirely. There is no cachet to daytrading if you're losing money.

1009: Midpoint of this downmove is around 21.5. Which is also more or less the midpoint of that opening congestion. The plot thickens.

1018: A higher low. Chop? If you're trading instead of watching, I suggest you do nothing until we exit this.

1025: At the middle of that premkt congestion from yesterday. And the middle of yesterday's range.