I like another analogy of ‘forced trading’. Let’s suppose a trader sees the signal and thinks whether take it or skip. Context is good, but not ideal. Pros overweight contras, but contras do exist. Good idea is to pretend that trader is not independent, but part of institutional team/crew. The risk manager allows taking maximum two trades per day. In this condition, is it the trade to take or to skip?
The Trading Ranges book is one of the books in his trilogy. Chapter 29 deals with SL’s. The “How to trade Price Action Manual is an online book at his course web site. Part of it is free to the public and part of it is for members only i.e. those who have bought his video course. The excerpt about was from the How to Trade Price Action online manual.
Lets’ look at the kidnapping chart again. Context=85 bars or so sideways (range behavior). Overlapping bars....race up to top...race down to bottom. Ranges are formed because both bull and bears are pushing. Bears want a BO south. Bulls want a BO north. They go back and forth. Eventually one side will win. The bull did with the bull BO. Until then on strategy is to fade the edges of the range when price gets. Over and over until a successful BO occurs. What is a successful BO? It is one with FT. What s a range suitable for range trading techniques? It is sideways movement for 20 bars or more. At 20 bars it is no longer a PB. What is a trend bar? All bull bars are bull trends on a smaller TF. All bear bars are trends on a smaller TF. All doji bars are ranges on a smaller TF. All trends are price movement. All price movement has inertia. Hence all trends have inertia. Price tends to keep doing what it is doing until a stronger force acts upon that movement. Bars show the depth of movement and clarity of movement better than moving averages. Moving averages purpose is to “smooth” movement out. Bars are raw data and are formed as data pours in live. There is no smoothing. WYSIWYG. Large bars are indicative of buying pressure 95% of the time. Thus large bars show $$ in the market. Money drives the market. Big money drives it big. Large bars show ease of movement hence highlighting the path of least resistance. Large bars show strong momentum and inertia. Both of these raise the probability of continued directional movement, especially in strong BO’s. Large bars are like multiple legs with small PB’s on a smaller TF hence in a bullish move they are bull flags indicative of trend continuation. Price often tests high peaks and low points. Hence bars are more useful than MA’s or crossovers...etc.The latter smooths things hence covers up inertia and momentum. Like coverups in the political world. Assuming you know these things above would it take you 5 min, sweating on your brow, pissing in your pants to decide which direction to pick while a 357 magnum is held to your head? I would decide <<probabilty>> as significantly higher going long in about 30 seconds OR less. I would shout at the boys “put your guns down boys ...go long...with everything in your billfold cause within 30 minutes you will likely see multiple legs up. And when a PB comes borrow some money from rich uncle joe and buy more.” “Boys this is your day to go ALL IN long. I will be expecting a large ribeye boys!” “Put the gun down and enjoy the ride.” I certainly WOULD NOT TELL THEM TO SHORT. To do so I might as well tell them to pull the trigger. Why could I tell them to go long and not short? Because of the knowledge above and the context making this the most logical decision to make. Yes there will be a PB because profit taking will ensure that. And late bulls coupled and new bulls will likely ensure the PB is a flag with trend continuation. What actually happened? I saw the chart and price went way on up for a good profit. I was gonna post the chart but can’t find it now. I don’t know if I accidentally deleted it or what. Now notice something. The red MA gave no indication of such buying pressure. See line smooth. Bars are more aggressive in showing pressures. If I had the pick a direction based on just the MA for the “boys” I not only would be sweating profusely and pissing in my pants but I fear some other things would be in my pants too. ROFL! Look at the second chart without the big bar. Looks like things are going to be a continuation of the range. Even when the you look at the chart with the big bull bar the MA is barely starting to turn up by the close of the bar. I hope that answers the question of why I see bars giving better entries and exits than lines or crossover strategies. Put simply they show pressures better. if I did not take a long position during the formation of the big bar I certainly would not wait for a PB to go long. The chart is screaming at me “get long” immediately for ANY REASON. I would do so even at the close of the large bar. The proper place for the initial SL at the bottom of the big bar. I would raise the stop once PB takes place followed by the trend resuming. Can you see “probability” is about 80% by the close that any long position will end up being profitable even if a deep PB happens after entry on the close? On such a strong BO you have high probability coupled with likely big reward putting the traders equation in the positive for going long even at the close of the big bar. I would place the initial PT as a measured move up from the middle of any PB that happens. The odds are very high that price will reach my target (even if it takes awhile) before it will hit my SL.
If all I had to look at was this chart with the large bar removed I would see nothing of the buying pressure about to happen. Nothing to help me anticipate. Even the chart showing the inertia...momentum..buying pressure it would likely not be anticipated by the MA, if I were to look at the red moving average on the chart that shows the large bar. It was barely starting to turn up on the big bar. These sorts of things are why reading charts, bar by bar, is more effective in determining movement strength. Besides I can see the movements up and down to some degree on a single bar something I can’t see in lines such as MA’s.
just do it casino way...see my thread 3 days..... no context only traded set ups just lost a little....doing all the analysis for 13 years....... blew 100 accounts....
this is probably a loss because the break out was from a tight channel.........after a long bull run...so it should or can be traded like a bear flag,as brooks says