The Trouble With Scribbles

Well, I just would like to be pointed to an explanation whether you would be buying or selling once price reaches your predefined level and where would you be putting the stops. That is foundation of a system.

 

I have "pointed to an explanation" dozens of times, but you refuse to read it. However, I will point to the explanation again: THE SLA/AMT.

If and when you ever read it, you'll learn that there are no "predefined levels" or stops. The trader goes as far as the market is willing to take him (see the blue line?) and he exits when the market tells him to (see price breaking the line?). That is the essence of trading price.

You will also learn why the short is taken in that particular spot.

 

Scribbling is not a system. It is a contextual framework that frees one from the need for a system (this is not the same as being free from the need for a trading plan). Scribblers see no noise - only context. Signals are derived directly from that context. Trades are managed according to that context. This is called "Trading by Price," and one long-experienced practitioner of this very approach wrote some time ago the following observation about how trading by price versus trading by system requires one to look at market activity differently:

"Trading by price and trading activity requires a perceptual and conceptual readjustment that many people just can't make, and many of those who can make it don't want to. But making that adjustment is somewhat like parting a veil in that doing so enables one to look at the market in a very different way, one might say on a different level."

I can explain that no better than he who stated it so well above. But I will share the following chart, with a few observations of my own, and reiterate some observations of Richard Schabacker from his trading course.





The closest I can come to answering questions here in the language used by many to describe "set-ups" or "system trades" would be this:

"I decide to buy at support or above resistance after a retrace prints a higher low and price breaks the immediately prior high print since having traded into support or breaking out above resistance. My stop loss is a hard stop of 5 points, except under conditions where the daily ATR is >25, in which case my hard stop is 5.5 points. Most trades that require loss cutting are able to be exited with a less than 3 point loss."

"I decide to sell at resistance or below support after a retrace prints a lower high and price breaks the immediately prior low print since having traded into resistance or breaking out below support. My stop loss is a hard stop of 5 points, except under conditions where the daily ATR is >25, in which case my hard stop is 5.5 points. Most trades that require loss cutting are able to be exited with a less than 3 point loss."

All of which, I might add, I have posted too many times to count here at ET. It is there, along with real time calls, foresight charts, p/l's, blotters, etc. for anyone who is genuinely interested in exploring this approach further.

 

Most believe in only one way of trading : "system signal type of trading".
When they could understand that "system signal type of trading" is just a step to learn
to read a market.
Now, surely, you should be booted out for good, as you are spelling it as they have no idea of.
Just for your info : now there is a "superior" step to how you approach thing.
But then, it is not to me to spell the beans.
Good luck as week-end now finished.

 

Are trades only ever taken at pre-determined areas? Going though some of the sla threads earlier, it seems longs and shorts were being taken based on breaks of (and then a retrace of) trendlines with no concern as to where the trades were being taken in regards to the larger context (trades weren't being ignored if price wasn't at one of the predetermined level which were drawn on the longer term frame charts going into the day)

Or is it to do with trades only being taken at extremes of a range (if you can find one that is containing price) or anywhere (long and short) once price has left the range (where trades are based on the break and retest/failure of demand/supply breaks)

 

I tend to use the range levels until there is a breakout, after which I will use supply/demand line breaks. I would not the next S/R level, but while there is a definite tendency for price to test these levels, there is no guarantee it will, and certainly no guarantee it will do so during that session. Since nothing is certain, I will use supply/demand lines to manage trades, take profits, re-enter, etc.

Also, as I trade, I will not usually take a trade counter to the intra-day trend unless price has reached a prior S/R, or price makes an intra-session Double Top/Double Bottom failure.

One thing to keep in mind, is that as a contextual framework, rather than a system, scribbles is amenable to a variety of traders and trading styles. While some might be intraday trend followers who are able to ride a move all day long, others are more comfortable scalping a handful of points at high probability S/R levels and being done with it. Some traders prefer to trade reversals, other breakouts, and I have even heard from some who only trade long or only trade short. The very first step prior to setting out to compose a trading plan will be for you to identify the type of trader you ought to be based on your personality, likes, fears, etc.

Another thing to keep in mind is that not all scribbler charts are equal. If you go back to the original scribble thread, you will see a number of examples of my own where I was trying to short a run away uptrend or otherwise generally screwing things up. There is a learning curve - steeper for some than others, but each of us has one to overcome. It would be best not to take those charts as examples of trading you want to model lol. Most of us can be said to be somewhere along our individual curves, and many f the charts posted in the scribble threads are attempt by we apprentices to learn, and are not meant as models for others. There is a right way to draw these lines, but it is not formulaic in the was calculating a 20 EMA is. Learning to do it is a skill that requires practice and observation to develop.

Finally, with respect to trend channels, there is affixed or model-like way to draw them. I believe DbPhoenix had posted the instructions earlier in this thread. The difficulty many have with tis aspect of scribbles is that the tendency is to look at the break of the lower limit of a channels as a "break" or "signaling a trend change" when in fact, to a scribbler, the first instinct will be to view price as oversold, and be looking for clues indicating it is time to take a long position.

The first task must be to understand the components of the framework: Trends vs ranges, trendlines, S/R. Then one must learn what a reversal looks like, what a breakout looks like, what a retracement looks like, and how t do so in real time. Only then should one begin the all important task of building the trading plan to take advantage of the understanding of price activity that this framework will give the trader. At that point, it does become very clear when to rely upon the trading levels and when to switch to reliance on the supply/demand lines.

 

Note: I didn't see 40D's response while I was writing this, so there will be some repetition.

Without a specific chart, I can provide only a general answer. If you're referring to longs and shorts being taken by a variety of people, someone who's been doing this for twenty years will likely take different trades than someone who's been doing it for twenty minutes. But, as for the "larger context", it isn't a straight shot from the upper limit of the weekly trend channel to the lower limit. We haven't even touched the lower limit since October. Therefore, though the "cleanest" trades will take place when reversing off an extreme, they won't be the only trades that the market offers unless one is trading off a daily chart, i.e., not daytrading or anywhere near daytrading.

The SLA/AMT is an acknowledgement that it is the market that is in control of price movement, not the trader. The only control the trader has is over what he does about it. This, for example, is why the "Scribbler" doesn't use stops, other than catastrophe stops (loss of connectivity, etc). He instead has decided upon very specific criteria regarding what he wants to see in his trade. And once he no longer sees it, he exits. He doesn't hand over that responsibility to the market with a hard -- or, worse, a trailing -- stop and sit like a deer in headlights hoping for the best.

Therefore, even though the weekly trend may be up, a mean-reverting market such as the NQ will provide both trend and counter-trend opportunities, the trending opportunities when price moves from the lower limit of the range to the upper and counter-trend opportunities when price moves from the upper limit of the range to the lower. It is when price straddles the median that the direction becomes less clear and the avoidance of any sort of bias even more important than usual. For example, we spent five weeks three months ago straddling the median, which made for great trading for those with no bias but misery for those who couldn't address the market objectively.

And, yes, this is probably far more than you wanted to know, but the context is necessary in order for any response to make sense.

We bounced off the median a month ago, then made a lower weekly high, after which we returned to the median, which we've been straddling for three weeks. Therefore, it is even more important to follow the market's lead rather than try to force it to do one's will. And ths is what I tried to show in the month's worth of charts in the Foresight thread.

Which at last brings us to a possible answer to your question.

There are two states available to price: trending and ranging. If one doesn't know how to tell the difference, he won't understand this approach. If he does, he will also understand that all trends begin with a range, a state of balance or equilibrium, what the Market Profile people call "value". As the business of a market is to facilitate trade, big money traders will naturally gravitate to those levels or zones where the most trades are taking place (they do, after all, have a lot of contracts or shares to trade). This activity will eventually though quickly form a range. Price moves out of these ranges for many reasons, none of which are relevant to the Scribbler. But when they do, one of the three trading strategy options comes into play: the breakout (within the range, another of the three is most useful: the reversal). If one doesn't like trading breakouts for whatever reason, he can wait for the first pullback, or "retracement", the third and last available strategy. At that point, one must follow the market's lead, turning when the market turns, reversing when the market reverses, standing aside when the market enters "chop" (which technically is a "range" but one which is so narrow and chaotic that it is essentially untradable), quitting when he's tired. Whether one does this using a 1m bar interval or a daily bar interval is irrelevant.

If any of helps to answer your questions, that is to the good. If it doesn't, I'll have to see specific charts. Even then, however, what I've posted here may make interpreting those charts easier.

 

Eddie:

This was posted several hours ago and no response. But it serves to illustrate what I said in my post above. If you'd care to play with it, feel free.

The question, of course, is why the SLA short is posted where it is.

 

It proves he took too much risk, nothing more, nothing less. but remember

Niederhoffer was also ranked #1 money manager for a decade after making 100's of millions for his clients.

What price action type fund was ever ranked for anything other than losing money for its clients?

surf