Well before a pilot takes off he has gone through his flight plan in detail, got the weather, logged his plan with control, checked out his aircraft, gone through the pre-flight checks - at this stage most of his attention is on the dials and gauges inside the cockpit. As soon as he has taken off and cleared the ground his primary reference is methodical scanning out the cockpit window (coarse level), with occasional instrument checks (fine level). He has more than enough to keep him busy and plenty of mental capacity left in reserve. You are over-loading yourself. If you are entering on P1 or P3 (or as near as you can) what is the maximum adverse excursion before you know you were wrong? Hold unless this price is hit - you can place a protective stop outside the channel if you can't trust yourself to act in time. You've gone to all that trouble to get airborne but you seem to want to find any excuse to get back down on the ground. I suspect the trigger finger has arisen because you almost always have price go against you after your entry, even if only for a few ticks. If this is so, can you see a better entry on the same bar (assuming that bar was in all other respects a good one to enter on)? As with flying, the sooner you clear the ground, the safer you are. Hopefully you can tell I've had to think about this quite a bit too.
See Spydertrader's post, and pay attention to the <span style="background-color: #0000FF"><b><font color="#FFFF00" size="4" face="Arial Narrow">yellow boundaries</font></span>.
I think you fully grasp the mechanics. just not using it properly. It's not a break out system. I don't know how to explain it. maybe others with better understanding can help you out.
Please note the 10:40 to the 10:50 FBP on the attached chart. It seems that the :45 bar was actually a Formation FBO (because although Priced BO'd from the FBP Formation, it seems to have closed at the low of the previous two bars). As a result Spyder extended the Yellow boundaries to include this bar into the original two bar formation. If the above assessment is correct, the :50 bar is a case study in my confusion of a BO of FBP's and FTP's. Since the close of the :50 bar was outside the sloped side of the Yellow Boundaries of the FBP does it constitute a BO? It seems that Volume of this bar ( as well as the :55 bar) did not have the requisite increasing Volume over the previous one(s). Which incidentally is odd since it serves as a PT3 for the red down channel, but I digress. So although the initial move down of th:50 bar would have caused me some concern, ultimately I would consider this bar a Formation FBO as well. Lastly, although the :55 bar closed outside the Formation it did so on decreasing Volume. Signed, Confused in Pennant Land
Glad you posted this! Decreasing Volume is NEVER good, unless I completely misunderstand Jack's books. Trades are ALWAYS entered on increasing volume. The only variable is whether you are on coarse, medium or fine resolution. Decreasing vol on coarse means go to medium, decreasing vol on medium means go to fine. On fine the 2 pair is 2 pairing until one pair dominates, and price breaks in the direction of the domination. This is an unfailing rule. Thanks again for posting this. Best Regards Oddi
Actually it seems that I am of a different opinion about the decreasing volume. And what's even funnier is that I think that my view agrees with Jack's too ... . One place where I think I've read Jack advising to trade LTL to LTL (I assimilate here the FTTs too), which is the longer diagonal of the channel parallelogram, is "Building Minds for Building Wealth". Maybe I should look it up to check if I've understood it correctly ... I think that entering exclusively on rising volume leaves a lot of money on the table, and that it can't be applied to SCT anyway. EDIT: I'm not saying to enter exclusively on decreasing volume.
This is what I was referring to: <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1666503>
As price approaches the left channel line, there will either be a VE, or an FTT. A VE usually occurs on rising volume. An FTT usually occurs on falling volume. A VE guarantees an FTT. By this point we should be on the smallest resolution that allows us to enter on rising volume. The bar that interfaces with the LTL will be one of higher or lower volume. If it is of higher volume then there is nothing to do, we continue. If it is of lower volume we are on an FTT alert, and we should be on the 2min YM looking for acceleration in the opposite direction. This is what I mean that ALL trades should be entered on RISING volume. If I read this wrong, now is a great learning opportunity for me. Best Regards Oddi Edit: I should have said higher or equal volume, then we continue.
Hi Pointone, I'm sure its a very common malaise! I guess being aware is a start at least (the first step is admitting you have a problem). I like your plane analogy. You are also right that it is previous market experiences that have brought about this behaviour. It is clearly no longer appropriate (and probably never was). I also think I much better appreciate the whole 'building on success' philosophy, cunning stuff. Some of us (most?) have various other stuff in our backgrounds...not all are success'. Another random thought Spyder mentioned earlier to Bundlemaker and I think bears repeating - imagine that your entry was right at the extreme of the PT3 or FTT. I can see how this might be beneficial if you can really buy into it. I would really welcome other thoughts. Cheers.
Hi. I know exactly what you mean BlowFish. It's completely ridiculous; I notice that I often (almost daily) completely irrationally get out of >5 points moves after having .75 profit or so. Even if I entered the position at the exact right moment (pt3) which happens often BTW. There's something to say about exiting quickly in low volume periods but I also do it in high volume periods for example last Friday at the end of the day very nice pt3 up that I caught at the right moment: just 1 point profit and price moved 5 points more or so. Subsequently it just takes on or two minor mistakes to end the day in the red which then causes me to focus on "not ending the day in the red" and might result in exiting even sooner.... I am not unhappy with the results but really have to learn to to think about the opportunities that the market offers. The good thing is I see it, I know what's wrong but just don't know yet how to fix it. regards, Ivo