Trading with price action

Discussion in 'Strategy Building' started by inandlong, Feb 14, 2003.

  1. Market walks not as pure random walk but by a serie of jumps. At each step it will coil (contract) and then expand. My model shows that there is often a price break zone at the beginning of the period: this explains why the 30 first minutes range are often used by traders waiting for the break.

    #31     Feb 15, 2003
  2. OPC


    Basically it means that any reasonable move will be preceded by a sharp range expansion? It sounds like it's about the same approach used for options timing, isn't it?

    #32     Feb 15, 2003
  3. OPC


    Oops... I mean, any reasonable move will be preceded by a range contraction....
    #33     Feb 15, 2003
  4. So Camarilla stuff works as described, eh?

    #34     Feb 15, 2003
  5. I'm in Lobster's boat here. I've never found a way to trade off pivots with cut and dry, disciplined rules. For example, what happens when the price starts chopping around the pivot, stopping everybody out (both the faders and the breakouters)? So you'd fade, get stopped, reverse and get stopped again. The signal/failed signal=signal strategy works well when the price either plows thru the level or bounces off it pretty neatly. But what if it chops?

    #35     Feb 15, 2003
  6. Maverick1


    Excellent point. The market will chop up those who rely on these levels mechanically. I think that using a mechanical entry/exit only makes sense if it is based on an intelligent and logical setup as opposed to a blind trade around a number.

    You can't trade the number, imo. You've got to trade the reaction around the number, and of course that implies giving some upside or downside but doing so increases your win/loss ratio. Then it's up to you to control the risk.

    Look at the action on the sp futures on friday. The market went right through R1 at 826 and then topped out at 831 before putting in a reversal bar. Now a mechanical trader might say, ok, R1's been broken so let's get in. He buys at 826.50 and puts a stop in a 823.20 and within minutes is in the green. However suddenly, the market reverses. He might take profits on half and then gets stopped out on the remaining half for a tiny overall profit.

    The smarter trader will also take the entry but will not stop there. He/she will realize that 823,827 and 829 are a fib confluence zone and that it represents significant resistance. So now what?

    The market has shot through R1 on the upside. But now it is failing. Floor traders are getting ready to short through a recross of R1. But the advised trader knew that the 827-829 zone might offer resistance and when the first reversal bar closes at 826.80 he/she is ready to short, with a first target at the .50 ret of the prior upswing and protective stop at 829. When the first target is met, half could be taken off and the stop could be trailed down to 824 and further profits taken at lower prices. Also notice how the relation of the opening to the close on the bar that took you to 831, the selling pressure was evident on that bar.

    I don't trade pivots per se, my system had me in earlier on Friday but I hope the above helps.

    don't trade the numbers blindly, let the market tip its hand and then act. You can only win by taking intelligent risks.
    #36     Feb 15, 2003
  7. I am descibing the market. the market moves from one operating point to another. Think of the two imensions of the operating point as pace and price data signal indicator.

    I use a 7 pace by 5 price set of cells. Use for your convenience seven letters and five numbers. There are 35 cells. The operating point moves from cell to cell.

    Think of a path such as 5b to 6c to 6d
    to 5c to 4b to 3b.
    #37     Feb 15, 2003
  8. The posts describing the beauty of trading off price action are nice. "No need for indicators, etc. etc." But would anyone take up the task of doing a journal illustrating trading off price action every day, with charts? Well.. that's why the beauty of price action will remain just words to many newer traders reading this thread, including me.
    #38     Feb 15, 2003
  9. dbphoenix


    The Keeping It Simple thread under Futures describes how to trade using price action alone. It's not a journal, but there are a number of chart examples provided. And questions are answered whenever they are asked.

    It's a long thread, tho. Don't start any earlier than 12/21 unless you're a masochist.

    #39     Feb 15, 2003
  10. Maverick1


    That's why some of the more successful gurus out there charge big cachingos to let you watch them trade. No one is going to do that for you for free, I'm afraid.

    The guys who do trade successfully have gone through many years of sweat and toil to reach a certain level of comfort in the markets.

    I honestly think there is no substitute for experience and learning from the best.

    You just have to learn as much as you can and then get out there and do it. Take what you know about trading price only, write it down, systematize it, then trade. Create your own journal and learn from your mistakes. That has helped me a lot.

    As far as getting the knowledge, some of the helpful names are:
    Linda Raschke, Tony Crabel, Larry Williams, Larry Pesavento, Vic Sperandeo.

    Good luck.
    #40     Feb 15, 2003