switching gears to Price Action via SLA

Another replay session, but this one was short and sweet because I have a ton to do around the house. Just watching price 1/15/14.

1. Just prior to the open, the DL in place is tested - nothing extreme, but it is tested while price also isn’t able to make a HH.
2. Immediately at the open, the DL is definitively crossed and price shoots down in a vertical fashion, but it’s 0931 so it’s not shocking.
3. Then after a quick trip south, price resumes it’s trip north and makes a HH than prior to the open. Parabolic move up (tight DL drawn), so not sure if it’ll continue or go into a yo-yo pattern.
4. Though the bars being formed look like it’s just a steady pace up, there’s a lot of retracing during each one-minute bar.
5. DL area checked out but it wasn’t compromised. But a HH wasn’t achieved.
6. DL definitely crossed and price goes through the 50% area of the up move from just after the open.
7. Price bouncing around in a tighter range but is struggling to go lower.
8. Pops up, but not getting any support there either.
9. Back to the 50% area but for the moment, agreement is NOT happening at that price point (91).
10. 3rd time was the charm to get by 94 and back up to the morning high level. But as soon as 97 was met, it turned and headed south. Double top, just a rejection or a stronger pullback?
11. Price seems to be struggling to get back up after a fairly strong pullback.
12. And then it rockets up to 3600 and a longer term DL is drawn.
13. There’s some pullback, but 97 is holding whereas before, going higher than 95 was a challenge.
14. Able to make it up to 3602, but didn’t stay there long. Not enough buyers and sellers agreeing there,
15. Some pullback, but DL remains untouched.
16. I know that the bars aren’t that important, but 1010 and 1011 both close at the high end - showing an inclination that price will continue to rise which is then followed by a HH.
17. Vertical price - a lot of movement up in just one minute. Though the DL remains, the time spent moving up is almost half of what’s spent with a RET or regrouping. One or two minutes up to three to four minutes sideways or downward.
18. LH followed by a screaming retrace down through the LSH. Hmmm - maybe there’s something to the time spent going up vs. sideways/down? (insert sarcasm)
19. Tried to push price back up, but hit a ceiling.
20. SL in place and getting close to the 50% area of the up move.
21. SL immediately tested and doesn’t hold. Another attempt occurs.

Felt good again to sense what might be coming up next. I'm not trying to be cocky, it just feels good to be seeing more and more nuances of movement. It's one thing to sense a change, but it's another thing to sense it due to a, b and c happening. That's pretty damned cool from where I'm sitting. I'll keep on keeping on.

 

I'm giving myself time in between sessions. Seems like there's a fine line between doing the work and overworking.

Duly noted.

Thanks man - I really appreciate the support and encouragement.
Learning that every trade isn't going to go your way and that it's ok/expected is hard to get comfortable with. You're taught to always 'win'. But I'm working on it. Trading seems a little bit like sales - it's a numbers game. As long as you have a good plan and work your plan, you'll win some and lose some.

 

Yup, trading is exactly the opposite - to ultimately be successful at trading.., one must be a good... and at times frequent - loser

With one additional qualifier;

Our actions must always be congruent with current PA conditions (knowing conditions do/ will evolve)

=====================

Unlike sales - where a salesman's job is to convince prospective buyers to buy....

We have no control over what the mkt does - or how it acts

=======================

Our job is to identify the current PA conditions - then trade accordingly within / for those conditions

With our overriding priority always being;

Keep risk & each trade that doesn't work's - loss

Small


(btw, each trader must define "small".... absolutely nothing in trading is a one size fits all - at least that I've seen)

RN

 

Another replay session using 1/21/14 was a good one. It really is amazing how much more I see now after having watched price and not really knowing what I was looking for, to going the sim route with somewhat of a hope and a prayer and now back to watching just for the sake of watching. Small clues seem to be jumping out at me at times and I'll think to myself, "if such and such happens, then I'll know for sure."

The DL and SL are helpful but I don't rely on them as much. They're a guide and not an absolute. I'm more in tune with the distance price travels during one minute, how the retrace bars form in contrast to the directional bars, how much time is spent with price moving in it's direction compared to the retraces/sideways movement. It's just very different.

1. DL in place prior to the open and at the open, it was immediately tested.
2. And then it shot up towards the overnight high area (3608.75).
3. Made a HH and to the 08.75 level, but it was weak and immediately retraced.
4. Price shot up like a cannon and as quickly as that occurred, it dropped back down toward the overnight high level. Tighter DL drawn.
5. DL broken and price easily goes through the 50% level of the up move from the open.
6. SL drawn and price falls out of the ceiling down in a parabolic move through the longer term DL.
7. While inside the SL, a HL was followed by an attempt to make a LL that failed.
8. SL broken and price returns to a familiar area - the 50% area of the up move.
9. Price moves in a parabolic manner back up towards the morning high.
10. HH occurs, but the retrace within the bar is fairly substantial.
11. Struggling to get back up to 3612. After 3 attempts, price goes through the tighter DL but remains inside the initial DL.
12. It’s movement like this that gives me all sorts of trouble. I’ve created a tighter DL due to the parabolic move up. But I’m not sure if my less steep DL is drawn correctly because the anchor of it is inside the SL. My thought process is, if price makes another attempt at a HH but doesn’t make it and gets back to the price level the low of 0953 and 0956, then the LOLR is down. If it makes a HH, obviously UP is still in play.
13. Couldn’t make another HH and did go below 0953 and 0956, but just by one tick. Db definitely says that a tick is just that - a tick - not a huge sign.
14. Price pops down, SL is drawn and immediately retraces and give another shot at going higher.
15. No real agreement between buyers and sellers as to value. Price is moving quite frantically - in a range of sorts and in a “two steps ahead, two steps back” kind of way.
16. SL being tested. Trying to get price up, but it’s moving more sideways.
17. And then price falls like a rocket. Back down toward another familiar area - 3604. The range for the morning has been from 3604-3611.
18. Price went through the 3604 area, but can it stay there or will another REV occur?
19. Price dropped like a brick in a parabolic fashion. Looking left, this is familiar territory - the overnight low.
20. As tends to be routine after a parabolic move of that nature, the RET occurred quickly and swiftly and the tighter SL drawn is tested.
21. Less frantically, price moves down again.
22. But it is struggling to meet the previous LL even though the move down is more orderly the 2nd time than the initial time. Back at the overnight low area so it makes a bit of sense.
23. Price does get to a new LL, but doesn’t stay there - like touching a hot stove price moved back up.
24. As soon as the SL was fanned, price crossed it and went above the LSH. The distance of price covered in the RET was almost double.
25. Another pop down of price, but it stays there - doesn’t shoot back up immediately. SL fanned.
26. Some resistance encountered to make a LL and buyers and sellers weren’t happy at that level as it popped up very quickly to the SL area. The push TO the LL was an effort. The move AWAY from it seemed effort-less.
27. SL tested and prices moves down again.
28. Can’t get back to the LL area and pushes up pretty forcefully.

Good stuff and I'll keep on doing what I'm doing. I know I sound like a broken record, but I'm making progress as I do this so I've got to keep it up.

 

I had a rough morning so I knew it was definitely a good idea to do some replay and watch price (as I just posted about). This morning was likely pretty clear-cut for those skilled in reversals or those with patience to stay out when things are a bit rocky. I'm still working on retraces and though I'm reading the zen stuff, it's taking a bit to penetrate my skull.

Today was a day when patience was needed and I'm having a hell of a time with it. The interesting thing is that the day I chose for replay is similar to the opening 30 minutes of this morning, but today actually had more trading opportunities. I'm having a hard time with watching the nuances of price AND managing entries and exits. When watching the one-minute chart, things go by so quickly and you can find yourself on the wrong side of things in a heartbeat.

One thing I'm struggling with understanding is the following notion:
Understand BEHAVIOR and not PATTERNS. Would someone elaborate on that? Don't behaviors manifest themselves into patterns?

 

This business of learning "patterns" early may be one of the reasons why struggling/failed traders are so sour on gurus and writers and so forth. Patterns are nothing new, but understanding why they form is critical to trading them successfully unless one is satisfied with random success. Schabacker made that clear a hundred years ago, and his caution was reiterated by his brother-in-law, Robert Edwards (of Edwards and Magee) when Schabacker asked him to finish his (Schabacker's) work after his (Schabacker's) death. Nonetheless, we nowadays generally look at patterns without any regard to how and why they form, which is why the claim is so often made that "they no longer work". The "flag", for example, is a retracement, and it works in the same fashion and under the same conditions that any retracement "works". To say that it no longer works is ignorant. Ditto with the pennant. The pennant is a trading range and it "works" just as a trading range works.

Perhaps the most famous example is the "head and shoulders", and that it is so often "found" without regard for the behavior that created it helps to account for all the imaginary heads-and-shoulders that one reads about in blogs and websites and posts.

Compare Bulkowski's description of a head and shoulders with a behavioral description:

Price trend: upward leading to the pattern

Shape: looks like a head perched atop two shoulders. A 3-peak pattern with the middle peak above the others. The pattern should look like a person's head and shoulders, proportional, and not lopsided.

Symmetry: the two shoulders should peak near the same price, be nearly the same distance from the head, and look similar (both wide or both narrow peaks)

Volume: highest on the left shoulder followed by the head [note this particular inconsistency with the behavioral example]. Trends downward 63% of the time.

Neckline: joins the two armpits

Confirmation: the pattern confirms as a valid one when price closes below an up-sloping neckline or below the right armpit when the neckline slopes downward​

And the behavioral:

The head-and-shoulders top is a tenet of classical charting theory, one invented when trading off price action was accomplished using pencils and rulers.

It suggests that buying in a bull move is composed of three waves - smart money, dumb money and dumber money. Underneath each of these waves is drawn a 'neck-line', which represents the approximate points at which prices fade off the peak of each wave.

Wave 1 consists of smart money and forms the left shoulder. It represents the activity of a syndicate of buyers operating 'in secret', quietly accumulating shares. These buyers have a 'real reason' to pick up shares, one derived from research. These buyers are not momentum investors (as at this point there has not been enough momentum to attract their attention). As such the volume will be higher than normal but not so high that it scares buyers away. In fact, it can't be too high since buyers are only beginning to be attracted to the potential.

Wave 2 consists of dumb money and forms the head. These buyers missed the first big move up, the strength of which attracted their attention in the first place. They take advantage of the fade in prices off the peak of the left shoulder and use it to aggressively accumulate shares. This volume is typically the highest.

It is during the fade off the top of wave 2 that the syndicates responsible for the first leg up start to unload shares. Since they have been vested in the stock from the beginning, they recognize when things are getting 'frothy' and are scared by the frantic buying of the momentum crowd (who are more concerned with missing 'the next big thing'). It's sort of like the end of a party where all the suits have gone home and you are left with a bunch of milling drunks. Prices fade back to the neckline.

Wave 3 consists of dumber money and forms the right shoulder. This last group of buyers missed both waves 1 and 2 and looked at the fade in prices as yet another buying opportunity. These investors consist of both new money and those who entered positions late in the second wave and are thus sitting on paper losses. The volume in wave 3 is typically weaker than that forming the head and the left shoulder. So the rise in prices here is short lived due to the fact that it is even less grounded that the rise that formed the head.

Once prices fade off the right shoulder, the formation is confirmed when prices break below the neckline. This is where the short hammer is dropped.

Sounds like a lot of work, right? Wrong. This formation is so predictable that when a really good one is found (as you can see, there are a lot of conditions that must prevail for it exist fully) you are looking at a chance to trade with a high degree of success and a low amount of risk.​

See the difference?

As for the place of this particular pattern in the SLA, it's largely irrelevant since one would be short long before the right shoulder even began to form. But, for those who get a woody whenever they see an incipient H&S, the above may increase their chances of a successful trade.

 

That was great information. Thank you for providing it.
Guess I've got a lot of work to do in realizing other patterns and determining the behavior behind them.

 

Or just ignore them and trade price. Your trading session will likely be more relaxed.

 

Still feeling a need to be watching price so I did another replay session (1/22/14).

DL in place prior to the open. The market had been trending upward for the prior 3 hours and price was rising back to the overnight high of 3621 that occurred just after midnight.

1. Price immediately tested the longer-term DL at the open. Price hovered there for a few minutes, but it looked like the DL might not hold as price was struggling to get back to the 3620 range.
2. There was some hesitation before making a LL, but price did pop down through. SL drawn.
3. Was just thinking that price had been fairly orderly when 0939 popped up frantically. Not exactly sure of the SL I’ve drawn as there are a few outliers, but what’s drawn currently seems to be illustrating the general movement of price.
4. The pop up of price seemed like a last ditch effort to ‘short cover’ and then price fell quickly.
5. Every bit down was retraced back up. Buyers and sellers not really agreeing for the time being. But the retrace seems to match the down movement.
6. HL followed by a trip back up to the SL, but the SL wasn’t touched, much less tested. But, price isn’t having luck with getting back down to make a new LL.
7. Tighter and loosest SLs crossed. Within the one-minute timeframe, price popped up, but retraced significantly. If looking at the bar, price opened, went higher and closed lower. Support doesn’t exist to keep price at that level.
8. Just as quickly, price headed back down though.
9. Another attempt at the up side occurred, but it wasn’t successful.
10. Price again plummeted, but as with just a few minutes prior, price got to the earlier LL area, but immediately retraced. A 10-point trading range has been pretty clearly established. Let’s see if the lower level can be breached.
11. Yet again, price takes off north, but retraces almost 50% of the distance covered in the same minute.
12. LH followed by another attempt to push price up again. Couldn’t get past the previous level the 2nd time, but the 3rd time, price pushed through, but just shy of the last LH area.
13. Price sure is fluctuating -- oh yeah - and forming a hinge.
14. 1st attempt out of the hinge occurred, but price couldn’t even make it to the last LH area that was lower than the previous.
15. 2nd attempt out of the hinge was south and it went quite a distance, but retraced like crazy back in to the hinge price range.
16. 3rd attempt out made the highest high in 20 minutes, but price again found itself back in the hinge price range.
17. Don’t really have any feel for where price is going. 3615 seems to be an area where buyers and sellers have found value so they’re staying at that general vicinity.
18. Price drops out of the range. Will there be a new LL or will 3610 be rejected again?
19. A new LL it is. Is this the beginning of marching down to 3600 or will buyers and sellers take price back up to 3620? A tighter SL drawn due to the parabolic nature of 1016.
20. Pretty quickly price finds its way to the SL after a HL.
21. Price heads back up. Moving fairly steadily rather than in a frantic way, but without being slowed down, I don’t know if this movement can be sustained.
22. A pop of price up and as quick of a retrace intrabar. Tighter DL drawn.
23. DL fanned and price back up to the pre-opening price - in a parabolic move - likely won't be sustained.

This was another good session and I'm enjoying watching and getting a feel for when the tides might be turning. I believe it was eminiman414 who inquired about feelings of when something might happen and db replied that it's better to be able to articulate it rather than just feel it. That's kind of things are working for me during replay sessions - I get a feeling, but it's due to price activity/behavior that I can specifically see occurring. It's pretty damned cool!