Price Patterns.

[jacinto]

As to S&R, this to me is what many people miss about the whole H&S or RET/CONT or 1-2-3 or hammer/shooting star business.

As to the emotional component, I'm not sure what you're asking, so rather than go on in what might be a completely irrelevant direction, I'll ask for clarification instead.

Db

DB,

Thank you for your answer. In a way it touches another pattern I'm beggining to increasingly use (the pin bar or shooting star).

Regarding the emotion question, I guess I used the wrong term, and meant the psychology behind the players. However, as you say, I agree it is better leave that one alone due to the increased subjectivity of the question.

Thank you again

Jacinto

 

[superfly]

......failure in whose eyes jacinto...like i say....patterns never fail....just the ability to read there motive/function in advance.....weak hands will see a head and shoulders which never was.....as in what the books have taught them...reversal patterns.....a left head and shoulder in intself shows weakness in demand only...understand the context and levels of professional activity involved in the left hand and head and relate it to the open interest of the group of pros your viewing......and in advance youll be able to tell wether it is temp or a reversal.

if it is temp then its primary objective is to shake out weaks longs on the right hand break .....and to fake in weak shorts...thus releasing and creating energy for more upside so the pros get the demand they need to help to conclude business.creating supply so they can create demand...where ultimately the professional will be the seller.....re accumaltion can also occur on the fake down side from the right hand.

each pattern has a specific function....far beneath the visual...the visual is just the trigger for weak hands....know there function ....also the way they form tells you great deal about the underlying levels of supply and demand...and the current desire being shown for either side by weak hands.this in turn will be translating in the way future price moves.

Open intrest on options is straight forward, but how to asses the open intrest on stocks/etf?
interesting, lets see how this general dynamic materializes in my markets
What can volume, intermarket price behaviour tell me in this respect?

 

[jacinto]

They're all related, going back to Wyckoff's buying climax and technical rally. Schabacker coined the term "head and shoulders" about that time. Then there was Dunnigan's work. But if one focuses on the behavioral aspect of the "pattern", all of the efforts to determine whether that "blow-off" top and/or that lower high are part of a retracement or of a continuation are essentially the same. Only the names change. And if one knows nothing of history, then the latest and greatest seems new. (You'll note that an extraordinary amount of attention is focused on how to draw the "neckline", but if one has assessed the situation correctly, how and where to draw the neckline is probably the least important decision that one has to make.)

Which is not to say that one can't find something at least novel to look at while this process is occurring and perhaps find something to increase the probability of the most profitable decision. But the "1-2-3" is not the grail, either.

As to S&R, this to me is what many people miss about the whole H&S or RET/CONT or 1-2-3 or hammer/shooting star business. While I haven't done an exhaustive study, it seems clear that those potential turning points which occur at S or R are far more likely to become reversals than continuations, though reversals can and do occur in midair, often after news events, and price of course can and does break through S&R and lead to some pretty impressive runs. Which of these dominates will depend to a large extent to the general market environment, i.e., are you in a raging bull or bear or having you been drifting sideways for a month or months or a year or years?

As to the emotional component, I'm not sure what you're asking, so rather than go on in what might be a completely irrelevant direction, I'll ask for clarification instead.

Db

DB,

this is something i traded today in cable. I dont know if it seems to be in line with what you say above or I completely missed the point.

first chart is 5 min, second 1 min. I thought I started to "read" intent when i entered the first trade. I think I read intent correctly on the second trade. Finally, on the "mentioned" 5 minute spinningo top, I think I had a "signal" for support.

Unfortunately the news later on, took me out, for a profit, but out nonetheless. (I dont post the exit, as it is not important in this case, the trade was 50 pips in profit, with locked profits of 20). In hindsight, I should have closed prior to the news, but the decision was to stick with either +20, or a decent run up with the news release and targeting at least +100.

the comments are a post-trade recount of what went throught my mind as the setup arose.

comments are more than welcome

thanks

j

Edit: Mr. Marcus, apologies, saw a quote by Superfly above DB's answer, do you care to comment on setup posted?

Edit 2) Charts have been deleted by myself.

 

[jacinto]

.....cant really comment as it would mean turning the thus far given concept of heads and shoulders.....er....on its head....but it would be correct....and as im sick to death with all the bickering.....best to stay stum.think thru the logic yourself and you will see serious flaws.by the way i read the pin bar thread....it says very little....you need to go beyond the visual and see its function and why it occurs where it does....this will in turn help you to locate instances of reversals as opposed to those caused more by a deliberate professional withdrawal after the initial mark up/down ...ie a fake move.

same goes with open interest.....forget numbers......forget what the books tell you...its not an open interest figure that is important....as grouped as one.but 2 groups.....group 1 what are the pros holding and what do they need to complete this cycle of business......group 2.....what are the weak hands holding ....which ultimatley will come in line with what the pros need.the weak hands need will mainly be what the pros have or a route to this via detours.its all in price development.volume is not needed after a time,along with bid ask volume,dom etc.but you first have to understand how these all fit together to be able to go beyond them.

btw jacinto...everybar in your screen shots tell massive tales...not just the "pins"....look to what proceeds to see why the lead to these conclusions.it is an organic process....nothing just appears.

Mr Marcus,

Thank you for your reply. Words to read over and over again. Truly appreciate them.

Regards,

Jacinto.

 

[dbphoenix]

DB,

this is something i traded today in cable. I dont know if it seems to be in line with what you say above or I completely missed the point.

first chart is 5 min, second 1 min. I thought I started to "read" intent when i entered the first trade. I think I read intent correctly on the second trade. Finally, on the "mentioned" 5 minute spinningo top, I think I had a "signal" for support.

Both charts appear to be the same. Nevertheless, did the HrL made the previous day enter into your tactics for the 21st?

 

[jacinto]

Both charts appear to be the same. Nevertheless, did the HrL made the previous day enter into your tactics for the 21st?

Yes, they are the same chart, one is 5 the other is 1 minute bars.

the HrL was key to the assessment.

j

 

[dbphoenix]

Yes, they are the same chart, one is 5 the other is 1 minute bars.

the HrL was key to the assessment.

j

By "same" I meant identical; they are both 5m charts.

As to the HrL on the previous day, I don't see any mention of it and the 20th is not on your chart. Perhaps you could explain your reasoning more fully.

 

[jacinto]

By "same" I meant identical; they are both 5m charts.

As to the HrL on the previous day, I don't see any mention of it and the 20th is not on your chart. Perhaps you could explain your reasoning more fully.

apologies, you are absolutely right. will correct in a minute, and post "bigger picture too"

j

 

[jacinto]

DB

Charts are now corrected in its original post, and a 60 min chart included.

Bear in mind, this was not a swing trade, just intraday.

Basically the reasoning was to mirror the previous 2 days trading behaviour, where an apparent new trend bias is being established, Europe sells cable but failing to make LL than the Lowest Low in chart, then NY buying to either making a new HH as the previous day, or almost accomplishing it as 2 days before.

my first target was the high of the day, and depending on price, a new high.

thank you

Jacinto.

 

[dbphoenix]

I understand it was an intraday trade. However, knowing the context and knowing that you're taking the third HrL gives you some idea of what to expect. The "intent" of traders changes as the cycle works itself out, and you're entering a trade at a time when price is working toward equilibrium. Knowing that will enable you to assess the potential of the trade and set your stop accordingly.

Note that from the low of the 13th to the high of the 14th/15th, price works its way toward the midpoint of this range. Even though you don't show volume, it's clear that the volume is in this midrange, i.e., that's where traders are finding trades. Buying each successive HrL is "safer" up to a point, but the potential reward is correspondingly less.

 

[jacinto]

DB,

THank you for your comments. I appreciate them

Regards,

Jacinto

 

[Paul71]

So, 'patterns' are 'intentional', they are born out of the 'games' and 'intent' of the market participants.

Have patterns changed through the ages?

Does advancement in technology change the rules of the game?

Does technology change the pattern?

Would the daily movement and the patterns of any given market look the same today as they were 80 years ago?

Has intent changed and have strategies changed?

Anythoughts?

 

[dbphoenix]

So, 'patterns' are 'intentional', they are born out of the 'games' and 'intent' of the market participants.

If these are directed toward me,

what we interpret as patterns are born out of trades, but trades are also made by mechanical programs. One could argue that these programs are expressive of intent, but there are a hell of a lot of programs out there, and, in the end, it doesn't matter all that much. If price makes a higher high, the why of it isn't critical. However, given the potential for gamesmanship, money management and trade management take on added importance.

Have patterns changed through the ages?

Not that I can see, though the labels have changed

Does advancement in technology change the rules of the game?

see above

Does technology change the pattern?

Not really, though one may have to be much more attentive and much quicker. He must have a fine sense of when he is in trouble and the willingness to act.

Would the daily movement and the patterns of any given market look the same today as they were 80 years ago?

In Wyckoff's original trading course from the 30s, he traces an entire year, price and volume, examining the intent of traders throughout each pulse or cycle or swing or whatever you want to call it. One would be hard-pressed to tell that the movements and the analysis were 75 years old.

Has intent changed and have strategies changed?

From 80 years ago, of course. Some would say they began to change with the proliferation of funds in the 80s. Then there's the availability of news, the hedging, the arbitrage, the globalization, the instantaneousness of everything. But fear and hope haven't changed, and the dynamic that Wyckoff came up with nearly a hundred years ago is as powerful today as it was then (repeated since in various guises by Edwards, Dunnigan, Jiler, Sperandeo, Ross, Williams, etc etc). If you're sensitive to the behavior that's creating the pattern you think you see rather than the pattern itself, you are much more likely to position your ducks correctly.

.

 

[Paul71]

Thanks for the replies, DB. Very informative indeed.

 

[dbphoenix]

This is an illustration of the "dynamic" I was referring to:

 

[Paul71]

So it would be fair to say that price is just a reflection of volume?

Does this thinking apply to 'bubbles' and 'crashes'?

Thanks in advance, DB, or anyone for that matter.

 

[dbphoenix]

So it would be fair to say that price is just a reflection of volume?

Does this thinking apply to 'bubbles' and 'crashes'?

Thanks in advance, DB, or anyone for that matter.

Price reflects the difference between buying pressure and selling pressure. "Volume" is trading activity. If there is a great deal of buying interest but little selling interest, or vice-versa, price can move substantially with very little "volume" at all.

 

[Paul71]

I would be interested in reading your book, DB. Where could i get a copy?

 

[dbphoenix]

I would be interested in reading your book, DB. Where could i get a copy?

Click "Trading By Price", below.

 

[Bez]

Or price can practically standstill ( narrow spread) while large volume prints go off, which is a good hint of mischief especially at tops....