If You Can Draw A Straight Line (You Can Become A Successful Trader)

[NVP]

Hey D

I'm enjoying every post here......and an excellent PDF.....thanks

N

 

[manraygun]

For example, the following is what is presented at 0900 NY time for the NQ.

What do you see?

What do you do?

Daily
Down trend passing through median of previous Swing Low to Swing High. Curious to see whether downtrend stalls and ranges around this 50% mark.

Hourly
Watching previous support level of 4512.5 which may become new resistance level or median of new range.

15 minute
Break out from 6:00-9:00 range and retracement. Possible trade opportunity.

5 minute
Break out from 6:00-9:00 range and retracement, though uptrend is not confirmed with Higher High. Watching for formation of hinge, achievement of HH or reversal. Possible trade opportunity.

1 minute
Same as 5 minute.

Glad I’m able to read your posts here, Db. Re Big Mike... ugh.

 

[dbphoenix]

Daily
Down trend passing through median of previous Swing Low to Swing High. Curious to see whether downtrend stalls and ranges around this 50% mark.

Hourly
Watching previous support level of 4512.5 which may become new resistance level or median of new range.

Don't overlook the importance of 4550.

15 minute
Break out from 6:00-9:00 range and retracement. Possible trade opportunity.

5 minute
Break out from 6:00-9:00 range and retracement, though uptrend is not confirmed with Higher High. Watching for formation of hinge, achievement of HH or reversal. Possible trade opportunity.

Where do you see retracements on the 15 and 5?

1 minute
Same as 5 minute.

Glad I’m able to read your posts here, Db.

Re Big Mike... ugh.

Kids. Waddaya gonna do? But at least I've received two offers to write.

Db

 

[tomorton]

Really thorough work dbphoenix, everyone should admire the discipline and dedication to learning evident here.

Good trading really is simple.

 

[dbphoenix]

Really thorough work dbphoenix, everyone should admire the discipline and dedication to learning evident here.

Good trading really is simple.

But not easy. Trading price really puts your feet to the fire because you can't rely on/blame an indicator or a platform; all you have is yourself. And you have to take a good, hard look at your true tolerance for risk. Most find it's far less than they thought.

All that aside, thanks.

 

[manraygun]

Db

Where do you see retracements on the 15 and 5?

On the five, I see the retracement as the low of the last bar. I guess it amounts to only 2 points on a "breakout" that maybe isn't even a breakout.

On the fifteen, the retracement and breakout are on the same (last bar). That's my theory!

As you can probably tell, I'm trying to get my head around what constitutes a breakout, retracement, reversal -- and fifty other things. Bouncing around different time frames adds to the challenge. Thanks for the introduction to these concepts.

 

[dbphoenix]

Where do you see retracements on the 15 and 5?

On the five, I see the retracement as the low of the last bar. I guess it amounts to only 2 points on a "breakout" that maybe isn't even a breakout.

On the fifteen, the retracement and breakout are on the same (last bar). That's my theory!

As you can probably tell, I'm trying to get my head around what constitutes a breakout, retracement, reversal -- and fifty other things. Bouncing around different time frames adds to the challenge. Thanks for the introduction to these concepts.

Understandable. It's a different way of seeing and a different way of thinking. Old, but different, at least if you're under 40.

The objective here, though, is to assess the balance between demand and supply in order to prepare for the day, not to look for trade opportunities (though if one wants to do that, he's welcome to do so, as long as he understands that trading before the open is a challenge all its own).

Here you saw that traders are exploring the area below 4512 to see if there's anything there. And there isn't. They've already determined that there's nothing above 4550, which is the high of the range we've bee in since April. This gives you "reference" levels ("support" and "resistance" have become loaded words, so use some different hook to avoid the implications of "S&R"). If traders suddenly find trades below 10, you may be in business. Otherwise, not. The fact that price has been "balancing" at 4500+ tells you that chop is the default, so unless something compelling comes up, the better alternative may be to do nothing other than watch. If you tried to trade this anyway, you'd most likely find that it would not only be difficult but confusing. This fact pretty much tells you all you need to know regarding whether you should be trading at all.

Look beyond this to what happens next.

What do you see?

What do you do?

 

[tomorton]

Good discussions here. I also trade by trend-following, I don't post much about it because in principle it seems so obvious as to make debate with disciples of other approaches a poor use of time. So congrats to you for even making the effort.

Could I summarise what look to me like the most significant elements of this approach here as -
a) putting the focus on how price got where it is and how it is pushed/pulled around now it has got there, rather than just the "snapshot" of the number attained?
b) avoiding indicators, which are like snapshots of snapshots?

 

[0007]

Good discussions here. I also trade by trend-following, I don't post much about it because in principle it seems so obvious as to make debate with disciples of other approaches a poor use of time. So congrats to you for even making the effort.

Could I summarise what look to me like the most significant elements of this approach here as -
a) putting the focus on how price got where it is and how it is pushed/pulled around now it has got there, rather than just the "snapshot" of the number attained?
b) avoiding indicators, which are like snapshots of snapshots?

Agree with all that. It took me a while to realise that indicators just present information in a different view – just like a chart can make it easier to visualise a page of figures.

 

[dbphoenix]

Good discussions here. I also trade by trend-following, I don't post much about it because in principle it seems so obvious as to make debate with disciples of other approaches a poor use of time. So congrats to you for even making the effort.

Could I summarise what look to me like the most significant elements of this approach here as -

a) putting the focus on how price got where it is and how it is pushed/pulled around now it has got there, rather than just the "snapshot" of the number attained?

And where -- according to AMT -- it is most likely to go, yes.

b) avoiding indicators, which are like snapshots of snapshots?



Discussing this using static charts is obviously a disadvantage. But given the uncertainty of the environment, the more important it is to have rules. If one has good ones, thoroughly-tested and consistently-profitable, the easier it is, if one has the discipline to follow them.

Db

 

[manraygun]

Understandable. It's a different way of seeing and a different way of thinking. Old, but different, at least if you're under 40.

The objective here, though, is to assess the balance between demand and supply in order to prepare for the day, not to look for trade opportunities (though if one wants to do that, he's welcome to do so, as long as he understands that trading before the open is a challenge all its own).

Here you saw that traders are exploring the area below 4512 to see if there's anything there. And there isn't. They've already determined that there's nothing above 4550, which is the high of the range we've bee in since April. This gives you "reference" levels ("support" and "resistance" have become loaded words, so use some different hook to avoid the implications of "S&R"). If traders suddenly find trades below 10, you may be in business. Otherwise, not. The fact that price has been "balancing" at 4500+ tells you that chop is the default, so unless something compelling comes up, the better alternative may be to do nothing other than watch. If you tried to trade this anyway, you'd most likely find that it would not only be difficult but confusing. This fact pretty much tells you all you need to know regarding whether you should be trading at all.

Look beyond this to what happens next.

What do you see?

What do you do?

I see that buyers won’t let price fall beneath 4502. And that as of 10:00, they are pushing price toward the important level of about 4525. If price breaks through there, then traders may test 4550. If not, it may move back down toward 4502. So... what do I do? Watch to see what happens at 4525, I suppose (thanks for cueing it up).

In terms of context and expectation for the day, since NQ is a mean reverting instrument and we are very close to the 5-month range midpoint (4508 per my chart), the expectation is therefore for a non trending day. Past is prologue, the default? (Chop in this case.) Is that the gist?

I’m north of 40, but new to this game. Thanks for your patience.

 

[dbphoenix]

I see that buyers won’t let price fall beneath 4502. And that as of 10:00, they are pushing price toward the important level of about 4525. If price breaks through there, then traders may test 4550. If not, it may move back down toward 4502. So... what do I do? Watch to see what happens at 4525, I suppose (thanks for cueing it up).

In terms of context and expectation for the day, since NQ is a mean reverting instrument and we are very close to the 5-month range midpoint (4508 per my chart), the expectation is therefore for a non trending day. Past is prologue, the default? (Chop in this case.) Is that the gist?

I’m north of 40, but new to this game. Thanks for your patience.

And as traders spent two hours establishing a baseline at 02, why not enter the test of and reversal at 02 at the open?

 

[scholfield]

Why not short the pre market at 4545 and flip it long at the open at 4502?

 

[dbphoenix]

Why not short the pre market at 4545 and flip it long at the open at 4502?

If you're referring to the previous day, no reason not to, as that would be early evening for you.

 

[manraygun]

And as traders spent two hours establishing a baseline at 02, why not enter the test of and reversal at 02 at the open?

Seems like a good idea on the one hand -- but what about volatility and jump in volume at the open? Is this something to avoid? Or more a matter of one's risk tolerance?

 

[manraygun]

Why not short the pre market at 4545 and flip it long at the open at 4502?

Hi, can you please clarify the date and time (NY) for these trades? Thanks.

 

[dbphoenix]

Seems like a good idea on the one hand -- but what about volatility and jump in volume at the open? Is this something to avoid? Or more a matter of one's risk tolerance?

An increase in volatility and trading activity shouldn't discourage one from taking advantage of a trading opportunity. What have you got to lose?

On the other hand, if one can't trade confidently, there are longer bar intervals. The SLA in the original is after all based on an hourly interval.

 

[tomorton]

An increase in volatility and trading activity shouldn't discourage one from taking advantage of a trading opportunity. What have you got to lose?

This is true but sometimes you have to be flexible so our friend, volatility, doesn't let you down. I can remember trading stocks when I used to knock out my stops around the open - too much noise and didn't want to get shaken out by meaningless spikes. I always put hem back in later and for overnight though.

 

[dbphoenix]

This is true but sometimes you have to be flexible so our friend, volatility, doesn't let you down. I can remember trading stocks when I used to knock out my stops around the open - too much noise and didn't want to get shaken out by meaningless spikes. I always put hem back in later and for overnight though.

Stocks trade differently than futures, though, because they don't trade 24/5. Therefore there's a lot of pent-up energy at the opening bell. That's a big reason why I quit trading them, at least daytrading them.

There is no "noise", though, nor meaningless spikes. All those prints are trades. If we don't know why the trades took place or what the reasoning and motives of the participants were, that doesn't make them meaningless. Just irrelevant to whatever is our trading plan.

I, for example, trade the extremes. What does on inbetween is of no importance to me. But that doesn't make it meaningless. Just uninteresting.

 

[dbphoenix]