Trading is about managing risk. How do you manage your risk? All this mambo jumbo is useless unless you can show us the risk/reward and success rate. Or what is the PF? What is the point of failure? What is the target? Is the target based on hope or greed or...? Is the failure point based on hope or fear or...? You fill the blanks.
The thing is all these systems have their limits. Personally I like being in and out of the market to limit risk and do other things. Some others solve the problem by position trading smaller contracts. The other point is that when price goes vertical that you don't want to be on the other side of it. ie. keep losses small. As to the other posters, your thoughts, comments and criticisms are welcome. There is a ton of information out there on this. http://www.cbot.com/cbot/docs/handbook.pdf
I think you are overanylzing. Here is a candle chart which really conveys the same information. An entry at the wick of the candle works well. The candle wick is telling you that price was here and rejected. The profile says there was no resistance from sellers on that large ensuing candle.
I have read that pdf and yes it does have some good things to say. But after 346 pages, I am afraid that s&r is still king. As ivanbai mentioned earlier, it is what you do with the info that is the clever part, not the info itself. In fact I would go further and say that if the info or indicator is clever then it serves as an even greater distraction. regards f9
AMT, would this type of divergence and price action within the 907's-910's area constitute a decent short held inventory zone? If so, I should then be looking to short any rotations into this level once I see initiated selling resume, real-time?
One of my models is telling me to start selling SPY as we may be less than 0.50 way from the start of a retreat. As I type this on May 06, 2009 at 12:30PM: SPX is at 914, SPY at 91.60. Let us see what you delta folks have to say. Make your prediction now, not later after the fact! Let her dump!