I only understand this post better, and what I believe what you mean is, you are looking for consolidation quietness before the next big action up or down. ACtually, I read over your other post 4 times hahaha while I Was posting , I know what you are trying to say now. Basically its when price consolidation with low interest is when price breakouts, which is of course the spring to catapult it through any resistance or support. That is the correct pattern you would be looking for before any type of meaningful breakout intraday-longterm-anything. I believe we are now talking about a broader subject which ecompasses not just what happens before the breakout, but what fuels it to continue, how to spot it, it consists of many ideas. As I said before, I don't believe breakouts are the best oustrategies mainly because they have a statistical failure. You want to spot them earlier and get in during the buildup (compression as you mention), usually you will need to know how close are you to breakout point. This way you will not be whiped, And the ranges would be how I Would know how far the market has to be jumping before it tires from overheating. Your understanding of the markets may be much greater, I try to view it from a rudimentary standpoint at this time of my level of progress. Grob: Investment Secrets Hedge Fund Manager: Exploiting the Herd Mentality of the Financial Markets by Laurence A. Connors, Blake E. Hayward (Hardcover) Is this the book you are talking about? If not please mention the title, laurence a connors seems to have written quite a few. Thanks.
Gotta thank you. What you said made me back test an idea that worked quite well post-bubble crash (and very consistently as well). In fact, you gave me a number of ideas that I'm going to try. Not sure how to test "and you see it reverse" though. I'm into systems trading and haven't found a good way to do that one but I'll keep thinkin'... Thx for the ideas.
It is certainly important to understand trend days in order to improve one's trading results. Perhaps one should first define what one means by a trend day. For me a trend day is when, for example in an uptrend day, the Dow closes +100 and the low is near the open and the high near the close with the high being made in the last hour of RTH. A couple of observations from trading them intraday. (1) Interestingly enough it seems in my past observations that trend days tend to occur more on Mondays and Wednesdays than any other days of the week (not that this matters at all) (2) Support/Resistance zones are taken out like a knife through butter (3) Very small pullbacks against the trend and the longer time frame charts often look like a staircase (4) Very strong market internals such as the NYSE Advance to Decline ratio and Trin (5) High volatility does tend to follow low volatility generally in the market and so with low range and high range days (6) Strong reactions to important economic reports are often catalysts (7) Often strong first hour moves I personally find it difficult to know whether a day is really a trend day until the afternoon as often days that seem like trend days early can often be massive fakeouts later.
I'm not saying you "need" a trend to successfully intraday trade but it sure makes trading simplier and eliminates a lot of stress.
This is a bold statement, which I assume you have discovered for yourself. Can you state this on all instruments? Bollinger Bands for example demonstrate that when they squeeze there is a 30% chance on most instruments, but when you can identify those instruments that react better, then it could be as high as a 70% chance of higher volatility. But I am not talking about trend or direction. Michael B.