The basic criteria for entry is when the second move passes the first move. However, there are other aspects such as reward greater than risk, that need to be checked as well. More understanding will come when people understand the basics. More teaching will also come then.
edited... I just deleted what I posted to simplify it. you are right, I am posting this for emphasis, that the mean must be tested, not just higher lows and highs. Example: uptrend, pullback Before the mean is support, it is a mean. Price can trade on both sides of it. When does the mean change to support? When price moves away from the mean, and then comes back to it and bounces of it exactly. Only then is it support... it is not just a case of trading away from the mean and making higher highs and lows. It must test the mean exactly in order to be called a support. Why? Because the mean line just supported the price! Otherwise, any move away without a mean test where the mean transforms to a support, is just a move away from the mean and not a move off of support. What happens when price moves away from the mean? It comes back to it. IT"S THE MEAN. So the mean test says this is now support and then the subsequent second move breaking the first move confirms it and entry is here.
Okay, got it, thank you. It clearly shows the mean line being retested in the lower time frame, no need to post another chart. Please continue Schaefer
Thank you, this is a valuable post. The wolf-pak method is useful for determining entry when you want to enter a trade. So far I have only covered entries for pullbacks in a trend... You have to determine the trend direction. I will get to that. I jumped right into the method of entry because it is the difficult part. Everyone can see when the trend is ripping up, but where to get the low risk entry? The answer? The wolf-pak method for pullbacks. You cannot simply buy on a pullback, you must have risk reward parameters and they should be based on something. I say that something should be price action. When mean becomes support or resistance it becomes a powerful entry. It gives the entry substance. edit: Added to the ignore list: johnyy40, Champion, baddabling
This is important so I will post it agian. I should have said it this way from the beginning. Example, uptrend, pullback. Price fluctuates around the mean point After extreme and possible more fluctuation around mean, the first move comes. At this point, the first move is just a fluctuation around the mean. Now if the first move pulls back and touches the mean and then bounces , it is called a mean test. We now start to look at the mean as a support line. Now the second move must break the first move. Now the conversion of the mean to support is clear. Without this conversion, and specifically without this mean test, any move away from the mean is just a fluctuation of the mean and there will be mean reversion. We don't want mean reversion, so this is why the conversion of mean to support line must happen in this specific way.
I want to make sure I understand your definitions. If you look at PB 1, are you saying that the mean is established by the equal lows of the first 2 candles, the extreme is set by the lowest low of candle 4 and then when the low of candle 5 touches the previous mean set by the lows of candles 1 and 2 then that confirms the "mean test"? (btw what significance do you apply to the low of candle 3 which breaks below the "mean"?)
The mean is indicated by multiple points... open's, low's, high's, and closes. So it doesn't matter that it traded through it (bar 3) Go in on the 100 tick and you will see more hits as well. But yes, you are correct, the mean was established by those first 2 bars, and by the mean test itself going to that level. Until the mean becomes support, price can fluctuate on both sides of it.. as long as their are multiple OHLC's at the mean, I call these multiple points.
I have been getting a lot of pm's about an ebook, website, etc. I have decided to set an irc room up so that people can discuss the methods and trade setups in realtime. I registered #tradingwolves on othernet.org . It should be live in a day or two. For now we can meet there on othernet, pm me my nick is wolf-pak. this is not about making calls or a trading contest, only about discussing possible setups during the day. it is very informal, lets discuss and learn. meanwhile I will continue to update this thread and answer questions... however, I may have to put together an ebook or faq at some point to consolidate the information.
http://www.trading-naked.com/Setups.htm Naked Trading http://www.trading-naked.com/FloorTraderMethod.htm