The retrace before a point 3 is often hesitant, uncertain and a little shy. The new point 3 bar is thrusting and confident and tripping over itself to be noticed. YMMV.
Ivob, it helps to think in terms of the volume gaussians. Right before a FTT occurs, you are on the dominant traverse of the channel, what does the volume look like? Increasing red volume (because you are in a down trend). A FTT occurs (pt 1 of new up channel) and we have a non-dominant retrace so we expect decreasing black volume (note that we are still in the down channel). Price breaks the RTL, and we should start seeing increasing black indicating we have the new dominant up channel (B2B is here). When price starts retracing we have point 2 of the up channel and we are looking for pt 3 of the channel. During the retrace we are looking for decreasing red volume, eventually price will turn and we expecting increasing black volume. When we have the volume pattern mentioned above we have the pt 3 of the channel. Let me just throw out another possibility here for you. Lets assume that when the price broke the RTL, we continued to see decreasing black volume. What does that tell you? Basically price is operating within a much wider channel that is either drawn in your chart or not drawn. If it is not drawn, you are basically going to start looking for the point 3 of the wider channel and when you get the shift from decreasing black to increasing red you have pt 3 of the wider channel and you can draw the channel. If you have any questions let me know
Thanks a lot for your answer bi9foot I'd say we need increasing black volume quickly to confirm the break of RTL and the sentiment change. However, sometimes it's not that clear. I mean, we can see low black volume and think it's just a retrace of the downtrend. The next bar can be low red volume and the next one high black volume meaning uptrend confirmed. Sometimes we just need to wait one or two bars. However, this can be just enough to cause price to go quickly against you. I guess it is experience that we need. My (little) experience tells me that when we see an FTT (on downtrend for example) and price goes towards RTL and we see very little volume while price is exactly at RTL or right before that's a good sign it will go thru on the next bar. And we need to be very carefull if it doesn't and we have a position. Like last Friday this happened a few times on strong downtrend. However, as a beginner we wait for pt 2 and 3 to be established. regards, Ivo
Ok I understand. I suppose we do have to wait for some increasing price action and volume. Because after we open a long position on decreasing red colume assuming we have a pt 3 another red bar may follow..and another one.. I guess in this case YM should give some clues. regards, Ivo
This is one tough day to nail down. In 2 months of annotating I have never seen such little followthrough bar to bar. I suspect it's an artifact of the huge range on Friday.
Yep, continuation, change, continuation change... etc.. and that on short channels... tufie... fer sure... cj...
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