The no BS, obfuscation-free price action thread

Discussion in 'Trading' started by 1a2b3cppp, May 17, 2013.

  1. As some of you know, my current style of trading is based around price being random (meaning unpredictable). Price very well may be predictable, but I am unable to tell where it is going to go, so it is random to me.

    I am getting interested in price action recently and would like to compile everything into a thread where other members who are interested can join in the discussion. My goal is to learn to trade based on price action and prediction. If you can help you are welcome to contribute. If you want to figure this stuff out along with me you are welcome to contribute. If you are going to drop vague hints, post unrelated indicators, or not share specifics, you will only clutter up the thread with nonsense, so please make your own thread for that.

    Here are the rules for this thread:

    - No indicators besides volume. Why volume? Because volume is legit trade info not some price derived nonsense indicator like MACD and most of the others.

    - No obfuscation. Create your own thread for that. I'm sure you're a genius who makes 5 figures per day, but if I cannot understand what you are saying, it is of no help to me. The problem is not in my inability to decipher fortune cookie nonsense.

    - Price patterns are cool. See a head and shoulders or something? Let's see what happens next.

    - If you are annotating trades on a chart, only information which was known at the time of the trade may be used. This means if you're trying to say "go long here when price touches the trendline," but you're talking about the 2nd trendline touch, there is no possible way to know the trendline existed at that point, and you're a scammy "guru."

    - If you are annotating a chart with a specific setup and that setup occurs multiple times on your chart but you say you would only have taken the trade the one time it would have worked out, you need to give the specific reasons why one trade was valid vs. another trade with the same setup not being valid. Failing to do this is a common tactic by scammy "gurus."

    - No platitudes.

    I will be posting charts in hindsight (if you want realtime calls, go to my journal thread, but remember it's not based on prediction). Let's use these charts to identify price patterns, S/R points, and other things that may be useful.

    The key is likely to be able to identify when price is reversing. For example, price always begins a downtrend after a HH (higher high) or DT (double top), but what makes certain HHs significant turning points while others are not? And how is a HH identified in real time vs only knowing after the fact that it is a HH.

    By default I use the following chart setup (in case anyone wants to follow along):

    5,000 constant volume ES chart. Grey OHLC (red and green is distracting to me and are not necessary to know if it was an up or down bar).

    I mark the following levels:

    - opening range high (ORH), which is the high from the first hour
    - opening range low (ORL), the low from the first hour
    - overnight high (aka. "Globex high"), the high from the overnight session
    - overnight low (aka. "Globex low"), the low from the overnight session
    - daily high
    - daily low

    Why? I've been told that sometimes these levels indicate S/R points. Of course, sometimes they don't, too. So another thing to figure out is why they will or won't in real time.

    I have also recently been looking at pivot points. It seems sometimes price uses them as S/R levels, and sometimes not. I want to establish if this is important and if so, how to determine in real time if price will respect these levels or not.

    A Daily ES chart or a 50,000 constant volume ES chart, for two reasons:

    1) to establish long term "trend" (a concept with which I struggle greatly as I have not seen any evidence to suggest that "the trend is your friend," and I also believe that the trend only exists in hindsight, but I'm trying to ignore this belief for now. That article does a good job of explaining why the idea of a "trend" is nonsense and I don't want to get my own thread off topic.)

    2) more importantly, to identify levels that have been S/R in the past which may function as S/R in the future. I've observed that sometimes this happens, although it seems to be random, so a key point is to figure out how to determine in real time how to tell if price will respect a previous S/R point or ignore it.

    A 5 second ES chart, with volume. I've been told that this may give some clues as to what price might do, although I'm still working on what those clues might be.

    I also watch the DOM and Time and Sales, although I have not been able to find any patterns or important info on them yet.

    I know that's quite the setup. Hopefully I'll be able to get rid of some of it in the future.

    Charts to follow.
  2. Lucrum


    Any reason you chose 5000 CV "time" frame? Seems kinda short to me, especially since you're struggling to identify "patterns".
  3. Today's chart. I've identified the things that readily stand out to me.

    I welcome others' input on things I may be missing.
  4. I like the number of bars it produces throughout the day.

    It will likely allow for entries with reasonable stop losses.
    I originally was looking at a 10,000 constant volume chart but decided I liked 5,000 better.

    I may change to something else in the future if I find another chart works better.
  5. Lucrum


    I also like to watch the previous three days highs and lows.
    An idea I got from Ross.
  6. I've heard of people using yesterday's highs/lows, or open and close, but I feel like that's going to be putting too many lines on your chart. I already think the 6 I mentioned plus the pivot points is getting to be a bit much.
  7. Lucrum


    Your choice of course, I've never been a big fan of pivots points.
    1) With the exception of the PP Their calculation seems rather arbitrary to me
    2) There are several ways to calculate them (Which one is "right"?)
    3) I read an old school floor trader years ago saying that pivots were never intended to be traded "SR" levels. They were merely stop order levels for existing positions.
    4) unlike an arbitrarily calculated pivot level, previous daily highs/lows ARE significant AND real levels where meaningful buying/selling took place.
  8. I see what you are annotating, but I dont see how any of this has predictive value, annotating the past is good for story telling, but that is all it is.
  9. dom993


    The biggest discovery I made (from a trading performance point of view) is this simple fact:

    "Everything works sometimes".

    (actually, it wasn't the fact itself, but taking action on its implications)

    The key (for me) is to get good statistics on :

    - where/when something has a solid positive edge (go with it)
    - where/when something has a solid negative edge (fade it)
    - where/when something has a random outcome (ignore it)

    For "good" statistics, I get thousands of samples (through automation).
  10. I'll participate.
    #10     May 18, 2013