Pr0Crast's Sim trade provides an excellent segue into what I hoped to discuss this evening - falling into the clutches of the next lower (or beyond) resolution level and not making it back. Attached, I have shown two different Gaussian formations - one much larger than the other in an effort to assist you in determining: "How Large is the Forest?" First some reminders. When you find yourself in a Point Three channel, you need to know which color bars dominate. It seems simply enough, yet too often we 'forget' which side controls the day at this point in time. Note the first highlighted area of the attached chart. We begin where Price breaks through the 'sea' green up channel (left side of chart) providing increasing volume as Price heads lower. Good so far. As we approach Point Two, we see a black volume and Price Bar. Uh oh? Is it a flaw? Is it an FTT? Is it a WTF? We tense up and wonder if the trend has ended because we forget Price is about to do (or more accurately going to attempt to do) exactly as we should expect - retrace back and form a Point Three. In this example, Price never makes it back to the right side trend line. In fact, price heads even lower on the next bar. Only later does price actually make it to the right side. Note the black volume bars - they are decreasing (just as expected). Price even helps us out by instantly reversing as it formed a Point Three - heading lower quite quickly - and showing increasing red volume (again, as expected) all the way down. No need to worry about mysterious black bars within this Forest. It's simply Price doing (or attempting to do) what it does all the time - attempt to retrace to form a Point Three. The above red Point Three Down Channel formed the Final Leg of our 'Kelly' Green Point Three (Big Red Circle). From there, we see (first) decreasing black (as expected), and then in one large bar, we traverse the entire channel for the break out. While certainly unexpected, we to receive increasing black volume every step of the way - all the way, to the top. Now, here is where it starts to get a bit messy. In the third highlighted area we have a Point Three red Downtrend once again (Medium Red Circles). If you watch the red volume bars within the highlighted areas, you see exactly what we would expect, decreasing red volume, for our retrace. However, these increasing black volume bars often confuse us and make us wonder, "Did we do the right thing here?" Again, Price is doing nothing more than what we would expect. Price is attempting to retrace through this channel. Fails. Continues on, and attempts the process once again. On A Tree Try level, we have FTT to FBO over and over again. When you find yourself confused as to direction (such as in this case here) ask yourself, "What is my context?" Down channel? Retrace? Of a Big Kelly Green Forest? Oh well then, I have nothing to worry about until I see a Point Three (opposite direction) or an FTT. IF you do not understand the size of the Forest in which you find yourself operating, you will freak out, lose your cool or just plain exit out of frustration. After we hit Bottom, the blue arrow takes us back up to the top where we repeat the process when encountering an FTT. However, just so you understand about the size of the Forest. Note the Brown Arrows among the Gaussians. This Very large Kelly green Forest shows us how we go from Retrace to Reversal (small red circle in volume pane) over an hour and 15 minute period of time. This is important to note due to what happened just before the last highlighted area. Had you forgotten to note the decreasing black volume, you may have seen the price formation as a Point Three Uptrend (14:30 - 15:05) and found yourself on the wrong side of the market. Had you drawn in that formation (See dotted pink lines), the bar just before the Point Three of the Down Channel would have ben your FTT. Now decreasing black volume would have told you in advance of the FTT (pink circled) that this simply wasn't right providing you ample opportunity to reverse and catch the express train lower. Note again how over the 'big picture' we see decreasing to increasing red volume - just as we see it on a smaller scale. Always know your context (How large a Forest in which you currently find yourself operating) and avoid a very common error - ending up on the wrong side of the market. - Spydertrader <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1379701>
Ahhh, this helps a lot. It is so easy to get distracted by something and not "see" what is really going on. Debriefing like this is pure gold.
I've mentioned this to Spyder already: The elephant in the room is: how will you perform when real money is on the line. The detractors focus on this while we are learning; they have a point although they are also normally very close minded, damaged and negative (for whatever reason). I'm suggesting a rationed use of real money or paper trading (for fun) say once or twice a week for everyone. If you lose 2 points - stop. If you have 2 points profit going into a FTT then reverse. Wash as often as you like. Something like that. See how you do, how your heart rate and breathing responds etc. Then do debriefs and real time monitoring, return to calm. Eventually you should find this calm monitoring state when real money is on the line. For me I can ace the paper trading all day, I mean it is ridiculous. Then I open my account and I sometimes freeze when I see the FTT (the detractors will jump on me now - I don't care). I wait for just a little more confirmation - it's real money you see. Then it moves as anticipated and my emotions get inflamed (a little) and if I don't chase this move I'm off balance for the next one (probably counter trend and more risky to boot). I've got FTTs marked on my Nikkei chart as I type this that I did not trade this morning: 270 points missed (conservatively) and its only 90 minutes into the session. Maybe I need to decide more clearly if I am just monitoring (MA) or trading (MADA) for the day (apologies for thinking out loud). I don't want to get to October and not have more experience in the line of fire. Without detracting from Spyder's very well structured and thought out syllabus, does anyone else think this is a good idea? I know we are all free to do whatever we want! P1
LOL me too My paper trading has been sick. Again, not to detract from the syllabus, but I think this month is a perfect opportunity for those of us who are comfy with the gaussian stuff to talk/debrief about actual trades more and find out where the "kinks" are so we can work them out together before piling on the next layer of complexity.
Some may chose to view the following post as rude or negative. It is my hope, that you will see it for what it really is - a frank assessment of where many find themselves. Please read the following words a few times before responding, and allow my thoughts to sink in an effort to make sure you received the correct message. While everyone here is an adult, and welcome to choose their own path, I wanted to remind everyone of my initial desire to take two full months per syllabus topic to give everyone enough time to develop the skills necessary when this thread first began. Back then, few would have understood such a rationale. After all what could possibly take two full months to learn? Over the last two days, I have seen many people make numerous errors indicating they have not progressed nearly as far as they believed. The rationale behind the errors ranged from the ridiculously absurd to the enlightened. Baggage from past attempts at profitability, bad habits and failed efforts to focus on mastering the fundamentals have infected the subconscious of many participants. While some here have progressed far enough to warrant Sim, or even real dollar trading, many have not. I do not believe the elephant in the room is how people will do when they are ready to trade. I believe the elephant in the room resides further back down the path - well in advance of the time when real or sim trading begins. The elephant resides in the area of basic fundamentals far removed from placing trades. Drawing channels correctly, focusing on Gaussians, monitoring for continuation vs change: these are the areas where effort needs to be applied. If one cannot master each of these areas now, no amount of SIM trading is going to push you into profitability. I encourage everyone to take stock of their own efforts. Take a long hard look in the mirror and determine where the difficulty resides. Be honest with yourself and find the answers needed to move you forward. In my experience, when learning a new concept, obstacles develop from one (or more) of three basic areas: 1. The Instructor 2. The Material 3. The Student If you feel I (or anyone else who offered assistance) hasn't provided the material with enough clarity, speak up. If you feel the difficulty of the material itself falls beyond your understanding, speak up, so that someone can provide additional clarity. If you find no problems with the first two, then perhaps its time to look at this from a different point of view (a different mindset or vantage point). On Tuesday, following the basic Forest Level guidelines netted you 39 points as price failed to breach a right side trend line for over 5 hours. If you did not 'see' this develop, if you did not SIM Trade it, If you did not place real dollars into it, then the bridge you need to cross exists way before SIM trading. The elephant in the room you need to deal with is you. For those who have already progressed far enough to know (and you know who you are) where you reside on the learning curve, you don't need anyone's permission. You know where you need to go to focus, and you know when the time is right to move forward. For the rest of those following along, cross the bridge in front of you, before worrying about the one several miles down the road. Again, I hope all receive this missive in the spirit intended. As always, Good trading to you all. - Spydertrader
Thank you Spyder. I was trying to second guess my channels with additional lines where you put the dotted pink channel. Your explanation helps me understand this. better.
I have been testing with 1 contract at a time. I need real money to be on the line for realism. 1 contract is small enough so that a bad day is not a big hit.
Bundlemaker: Thank you for sharing your bloody/true statement about your learning progressiveness. First warn is first armed. Yes, most of the time "symmetery" is what I see in price movement. Such as "Boomerang", is what I see of Tuesday's price changes/movements. Your patience and diligence will be greatly rewarded. And: ".....that which we are,we are, one equal temper of heroic hearts, made weak by time and fate, but strong in will to strive, to seek, to find and NOT TO YIELD." ---A. Tennyson---
Today's Nikkei chart for those interested. AM was well behaved (like a smooth downhill race course), the PM was more technical with a lot of HVS (like moguls / bumps). Note pace change. Forest view FTT kept you on the right side all day although holding through the HVS is tough (fan from Pt1 repeatedly) as TL is walked across. (If this is useful I will continue to post NK and DAX charts as I cannot contribute as much to the ES discussion.)