With the explsibe rally in the stock markets a number of traders, including yours truly, have been left out. I have been very reluctant to jump in and every day the market goes higher. What strategies do you suggest and under what conditions would you join this trend.
I'm in and out of trends all day, everyday. You need to be more specific, are we talking about trading or investing and what time frames?
Assuming you are talking about mid term investing (just a hunch), I would wait for a pullback before getting long. Not necessarily a major pullback, but a pullback nonetheless. Wait for the risk/reward to come to you as opposed to chasing it. Just my two cents.
Certainly very grateful for your two cents but here is the question: When is a pull back, a pull back and when is it a trend reversal? I agree with you that one should not chase the market. I also remember many a time that I have been very patient and waited for a pull back only to see the pull back railroad over me and stopped me out? I appreciate it is a hard one to answer but your effort would be appreciated. It is always good to hear how others deal with situations we all encounter.
1) Wait for 3 days of consecutive lower closes. Ideally, the uptrend will resume. 2) If today's low is lower than yesterday's low and then tomorrow's low is higher than today's low, you may have a short-term bottom in place and can then feel more confident to buy the market. 3) Wait for some type of "large" downday. If the next day trades thru that day's low and then trades back up and stays above the low, a "J-hook" you may have a bottom in place and may then feel more comfortable buying-in. 4) Those things can have the potential to get you in "closer to the bottom" instead of the top. 5) As with anything, be careful.
This is not difficult to answer nor keep track of. The window you are examining is closed on the left as you describe it. This is unfortunate for you and is the cause of the errors you will be continuing to make. Most people are in the same boat as you and cannot differentiate a retrace from a reversal either. The information you are not keeping track of is what has been defeating you. What happens is you apparently get into the market for reasons after a point in time where you begin your "patient watching". You stay in as you patiently watch. Somehow you built up a confidence in betting as you enter all relative to the beginning of this period of patience. You expect a payoff when the pullback is completed and then the former trend resumes. This means you DO have a refererent context to the former trend. At an Expo I asked Pring the same question you are asking but I stated it in his context that was shown as a chart (unannotated). I asked the question of him twice and he said the same asnwer twice. It was "I don't understand your question". There was no possibility he could, I found out later. He did not understand what was happening in the market. If you can grasp that you do not understand what is happening in the market, you do not have to continue to be like Pring. I assume that you can change your ways simply because you want to succeed and become relatively rich. Step one is to learn to annotate the trend and annotate the pullback. Notice that the pullback is within the confines of the trend. This is the source of the beginning of your patience stint. By looking at the relative volume during the beginning of your patience you see the volume is declining. So you are in a pullback and probably you entered in the former trend direction and set a stop based on money management or risk or their combination. This is called betting when you do not know what is going on. The biggest single cure for this is using little or no money to make the bet (See traderzones mistaken concepts). Reversals and retraces start at the same time and both begin with decreasing volume. You have seen this over and over during your period of patience. In both cases you entered at some point by entering on the wrong side of the market. Entering at any time on the wrong side of the market is called "hoping". Entering a pullback at the beginning of the pullback on the right side of the market is a sure winner. If you annotate trends this is called entering on a nondominat beginning on the trend LTL (left trend line). This is my custom and I do it when the first leg of a trend has been completed as a dominant traverse of the new trend. It is a reversal trade for me and I got into the trade because the hold period was on a "trend reversal" of the prior trend. So if you annotate trends, then you see the first leg, the second leg and the last leg. trends have three legs and the last leg has some overlap with the new first leg. The overlap is called a pullback in your parlance. In my parlance it is the leg from the FTT (where your patience stint began) to the RTL of the former trend. That was my question to Pring: "Dr. Pring, how do you consider the overlap of trends as shown in the illustration you put up on the screen?" To differentiate a pullback from a reversal, a person looks at one place and has a choice of two answers. Having two future possibilies and having two separate conditions to consider makes the decision always right and always profitable. Currently you would be doing this from the sidelines and I would be doing in while in the market. For me it is a timing decision for you it is a setup issue that you use stops for mimizing losses. You are stopped out and I continue to hold and make even more money. One step in the cure for your pervasive problem, I have mentioned: annotate trends and pull backs. Assume you do that. This means you have a LTL on your chart. At the point where your patience has been beginning a price direction change is happening. Where the change takes place is the critical information the market is giving you. It is either ON the LTL or it is BETWEEN the LTL and the RTL. ON or BETWEEN. A VE is included because a VE places the change ON the LTL. ON gives you a pullback and BETWEEN gives you a reversal. So all during your period of patient, improper enter on the wrong side of the market, placing stops that may or may not be hit, you had the "tell" from the "market" which defined the pullback or the reversal. You are doing what is called high rish trading and you are just like traderzones and do not know what the market is doing. Never risk any significant money and always put in protective stops because you are ALWAYS on the WRONG side of the market. To stop this you do what I am telling you. But there is still a problem. Once you trade pullbacks and reversals on the right side of the market, you still are unable to understand how to do exits. So I have to tell you how to do these as well. For pullbacks you exit on the trough of volume. Use a snippet called PRV on volume bars so you know 12 seconds into the next bar if a trough occurred. For reversals you hold through the trough and continue to hold until a peak is reached. A peaking snippet for volume is available and it puts a P above a peaking volume bar. So actually all of this is codable as an ATS. For those who follow SCT; this is the one pager you always wanted instead of building your minds. The reversal is the trade from FTT to point 2. The pullback (his words) is the trade from point 2 to point 3. So he doesn't know how to get from point 3 to the FTT to complete the lego. Is is done, as usual with th the leading indicator of price called volume. To trade from the trough of point 3 to the peak of the FTT, you simply hold through the volume increase until it approaches or exceeds the volume at point 2. QED. Don't look for this TA stuff in MTA. MTA does not have a clue as to how TA works. Fro a laugh read the MTA recommended article in SFO. The current editor of the MTA newletter wrote the article. He said in the article he considered gettinga vaiver on the level 3 test by writing a paper. For over a year he considered volume. by all his studies for level 1 and level 2, he concluded volume cannot be used to trade successfully using volume as part of TA. Michael Carr iphoned me to reply to a Q I asked this week. He concludes that my taking the MTA tests would have no value to me as an amateur. He is absolutely correct on the value of tests to become a CMT. If I wrote the above as an essay response to ant charting question, for sure the SME's grading my response would fail me. On the otherhand this response is a very thorough anser to just what differentiates a pullback form a reversal and it is failsafe because the volume variable is included in the ananlysis of the market action right along with price. Neiderhoffer needs to sit on the squash court floor for a few years more to learn the TA relationship of volume leading price in trading. I hope you all enjoy the dry humor here. Has anyone ever seen the markets? get a display and an old fashioned icecream maker. You have all the time in the world to make icecream while you trade. Annotate, see the market, make binary decisions. I need a pistachio (sp) receipe.
Jack, Less than an hour ago Mr. NoD, noticing he had a plethora of pistachios in the pantry, said to me, "I need a pistachio recipe." I absolutely am not making this up. He located a promising one as we enjoyed dinner: http://www.recipezaar.com/Pistachio-Soup-214279 Cordially, NoD
[QUOTE Has anyone ever seen the markets? get a display and an old fashioned icecream maker. You have all the time in the world to make icecream while you trade. Annotate, see the market, make binary decisions. I need a pistachio (sp) receipe. [/B][/QUOTE] Thanks for a very thorough and informative response, especially the role that volume plays. However, I am a bit confused with all the initials you use like SCT FTT ....and also what do you exactly mean by annotating the chart?
"if you have to ask yuo shouldn't be trading" You have to ask this? What's your method? Sounds like you do not even have one?