Personal thoughts and collections

Discussion in 'Journals' started by OPG, Dec 18, 2017.

  1. OPG


    This thread is more for self reading and reminders to myself. I'm a scalper still in learning mode so it's not really an advice for anyone either. If you happen to be reading this please feel free to read them or skip them. These are just general quotes I thought was valuable in my learning experience so far and I may add or remove from it as time goes on. To me they were a real gem. ET has many valuable resources I find.

    Wave Analysis (Helps me identify setups)
    1)Markets move in waves
    2)What we don't know about waves: Exact beginning of the next wave, Length/Height of the current or next wave.
    3)What we do know: Where we have less probabilities for a successful trade regardless of the direction or condition of the market
    i) 3 or more waves in 1 direction without a significant correction = high risk
    ii) significant correction : complete retracement (or nearly so) of a wave). Exception: retracing a small wave is not so significant

    Chop analysis
    (This was key to ending losing streaks for me)
    Back to back opposing bar breaks: Price swings on any given chart consist of two or more price bars that trend in a direction. If it's a smooth swing, there is no bar overlap. If price is falling for two or three bars and then the high of a down bar is broken to the upside, that signals a potential turn of direction. The key word here is potential. If the upside break fails quickly or if the very next bar breaks in the opposite direction, we have...chop.

    Break of a wide range bar: The break of a wide range bar in the opposite direction of the previous price move is usually not the signal of a turn of direction. It's often a nice head fake trap. Think about it: If price prints wide strong green bar, then the next bar retraces all that green and breaks the low of the green bar, what's happening on the same chart with a shorter time frame? It's a range and the initial break of a range fails more often than not.

    Two-leg pullback traps: When price turns following a strong directional move and retraces more than half the move with one or two strong pullback bars, and there's a key S/R level closer now than the previous swing high or low, a break of a retrace bar back in the direction of the strong directional move is frequently a two-peg pullback trap, and the journey to the key S/R level will often resume.

    Price closes on the opposite side of a rising or falling 20EMA: In well-defined trend, the 20-bar EMA will be clearly rising or falling. In a really strong trend price may not even pull back to it for a long time. Once price closes on the other side of it, though, it flattens the 20EMA. This is a sign of a potential trend reversal, but it doesn't usually happen quickly. Often there's a period of back and forth chop as the previous trend-following side vies for continued control against the side that's trying to take over.

    Initial break out of a range: The initial break out of an established range usually fails.

    Initial break of a symmetrical triangle: The initial break out of a symmetrical triangle usually fails in both directions.

    (If the range or the symmetrical triangle is very narrow, the initial breakout is usually strong.)

    Inside bars, outside bars and doji bars: These are simply ranges or flags on a shorter time frame chart. Since initial breaks out of ranges are prone to fail, be careful about being the first mouse to trade the break of single inside or outside bars.

    Initial break of a well-defined trend line (overshoot): These are nearly always fades on the initial breakout. Be the cautious second mouse who gets the cheese in such an environment.

    Running into the defense ("congestion between camps€"): Price levels where a previous group of traders successfully went long or short for a decent ride will nearly always be defended if price gets all the way back to that zone. Also, channel lines, trend lines and 20-bar moving averages in a well-defined trend will nearly always be defended on the first re-visit. If you're planning to put on a trade, be sure you have enough ticks of room (airspace) between your entry and these defensive zones to escape with little damage if the defense is strong and drives price back against you. If these levels are really close together, you're dealing with congestion between the bulls and bears and this can often lead to...chop.
  2. Handle123


    Excellent Excellent post, but don't worry, won't help five to none as too many on forum don't believe useful material every offered.

    For me where bar closes means very much importance as I believe programming will alter closes within couple seconds of end of one minute bar, so John Hill's classic "Thrust Bar", into itself looks like strong close but as "OPG" cautions all "Initial break out of a range:" fails often is because scalpers were prepared by getting in near lows and retail or HFTs made price pop and scalpers feeding those who jumped on and near highs of one bar HFTs are reversing or existing and price comes down even quicker as looks like a wrong move-and it can be, but where as the close of the "Thrust Bar" can give a hint of continuation, if finished closer to the high of the bar and closed above most recent one bar pivot high, price will fade causing weak retail to bail into our arms to buy buy buy to push it higher, enticing the weak retail to jump on board whereupon scalpers might have triggered some HFTs to jump as well and scalpers be getting that free 2-3 extra ticks, it is an all day game.

    I wouldn't say a break out of initial range is a failure, but the amount of ticks beyond previous pivot high/low can give hint of continuation and does close finish strong or weakened, yes if broken by 3 ticks or less gives clues of "small breaks" or you can spot a "rounding" of the top/bottom, but most times another small break will be spotted and between the two, chances are has formed a left shoulder and possible Head, if another attempt is short of the head, we have nice Head and Shoulders, and at very least tighten up stops and/or go other way.
    Luv the Game.
    beginner66, OPG and Xela like this.
  3. OPG


    This is from "Reading Price Charts Bar by Bar" by Al Brooks. Larger bodies in general indicate more strength, but an extremely large body after a protracted move or a breakout can represent an exhaustive end of a trend. The chart attached shows exactly that from ES yesterday 12/19/2017.

    To me this type of large bar with large volume at the end of the current wave is a beautiful take profit level if I was lucky enough to have been in the move. After this bar I'll look for a new signal before taking another trade. Sometimes tiny counter trend scalp but not for anything more than one bar and with a really tight stop.

    The ES made further moves down after a bit of pull back and consolidation after that. Some days it does the V-shaped return but I'm always scared to take those :confused:
    beginner66 likes this.
  4. OPG


    I love it. I've seen those often as well. It breaks out and pulls back then pushes again for the real wave to start. I remember someone on ET called them 1-2-3 setup. I find the second push a better set-up most of the time because it now has a higher high and a higher low as a result for me to trade with the trend. :)
    beginner66 likes this.
  5. OPG


    Very old post by another trader that I took to the heart.

    There are only three types of trades I do:
    1. With-trend value entries (pullbacks in the trend that pivot near S/R or a carefully observed moving average in the given market and time frame, aka higher lows, lower highs)

    2. Trend reversals (The first higher low/lower high following a strong trend)
    The thing I have to be careful of is when price is trending, is making the 3rd push in the trend and is reaching overbought or oversold on lower time-frame, it usually looks like a reversal is coming, but you have to look at where the next support or resistance level is, because it will, more often than not, be tested and there's no need to counter-trend too soon. Better to wait patiently for confluence from the higher time-frame chart, or wait for a failed test of the next S/R level.

    3. Breakouts (sell new lows, buy new highs)