S/R and the Mirror of Erised

[dbphoenix]

Ok, there are a lot of points indicated, but I'll try my best:

Thanks for the work. However, let's leave this for a day or two in case someone else wants to give it a try.

Db

 

[firewalker99]

Thanks for the work. However, let's leave this for a day or two in case someone else wants to give it a try.

Db

Ok no problem, just to have an idea or inspire others, is this what you had in mind or did you mean something totally different?

 

[dbphoenix]

Ok no problem, just to have an idea or inspire others, is this what you had in mind or did you mean something totally different?

Anyone trying this will likely get more out of it by not putting it into an emotional context or worrying about what they'd "do next". Instead, focus on what you see at each point, that is, not what you feel or what you predict.

Db

 

[Szimba]

Thanks for the work. However, let's leave this for a day or two in case someone else wants to give it a try.

Db

If this game is free for everyone,than here is my view:



1: Price denied to close back under the previous SL created by bars number 4-5-6. Indicates that traders were interested int hat price to buy.

2: This the retest of the potential support from point number 1. Since at this point buying pressure lift price that is what makes point 1 and 2 significants.

3,5,6: All of them are retests of the SH made between point 1 and 2. Every time price declined from this area, that is what gives significance to point 8, where price finally managed to elevated higher by buyers.

4,7 : Nothing special. Just pullbacks int h middle of a range.

9: This is the test of S from 3-5-6 and as buyers stepped back in one can reasonable expect at least the retest of the SH between 8 and 9. The action is significant as it happens on support!

10,11,12,13 The continuation of the trend through previous SHs.

14: This is a significant point as this is represent the break of the uptrend, break uf potential support from the SH between 8 and 9 and here we also have a lower high and a lower low now.

15: price finds support as selling exhausted for the moment and buyers pushed the price up to previous support now resistance at 16.

17 ,18 sellers won and price decline didn’t manage to stop not even at potential support that originated from 3-5-6-9.

20,22 significant points as price here tested previous support from 15 and finally turned south as selling interest was heavy from market participants. Price declined until found enough buying interest at 24 and 25.


So the significant points are where there was action at S/R: 2, 8, 9, 10, 14, 17 ,20 ,22


Regards
Szimba

 

[firewalker99]

If this game is free for everyone,than here is my view:


So the significant points are where there was action at S/R: 2, 8, 9, 10, 14, 17 ,20 ,22

I think a lot of the points are significant if you place them in the context of what happened next. I'm not sure how you're going to exploit the things you see while they're developing at the moment itself. After you've been able to indicate it was indeed a significant point, it will already have passed. Also, how would one profit from identifying significant points in hindsight?

 

[Szimba]

I think a lot of the points are significant if you place them in the context of what happened next. I'm not sure how you're going to exploit the things you see while they're developing at the moment itself. After you've been able to indicate it was indeed a significant point, it will already have passed. Also, how would one profit from identifying significant points in hindsight?

Even if I take a look at a printed chart, is NOT hindsight.
All you have to do is ignore the big picture, and start to read the chart from the left to the right bar by bar.
There is no other way to read a chart if you do not want to fool yourself.

My approach is that I draw S/R lines and when price get there I'm looking for action from traders. Is there any trading interest, etc?

For example if we are in a downtrend and price goes up toward a potential resistance than I'm expecting traders to show me selling pressure. That is why that point is significant! Because there you can reasonable expect traders to show up themselves. If they start to sell and price goes lower, you can expect that the trend remain in force and price will go lower.

But as there are no two persons are the same, probably Dbphoenix will show you other significant points. But as I learned nearly everything from him, maybe there won't be too much differences.

(At least if I managed to learn correctly what he taught.)

Regards
Szimba

 

[dbphoenix]

I think a lot of the points are significant if you place them in the context of what happened next. I'm not sure how you're going to exploit the things you see while they're developing at the moment itself. After you've been able to indicate it was indeed a significant point, it will already have passed. Also, how would one profit from identifying significant points in hindsight?

Do your comments above apply also to the chart you annotated in the following post?

http://www.trade2win.com/boards/showpost.php?p=268993

 

[firewalker99]

Do your comments above apply also to the chart you annotated in the following post?

http://www.trade2win.com/boards/showpost.php?p=268993

Although I would have seen a possibility at point 1 as it developed in realtime, because of the previous support level which was clearly defined. My second line that reaches through point 2 however, isn't there until point 2 has been reached. Around F price almost goes back to my S/R line but it would have been too far away for me to enter. So yes, I would only have seen one profitable entry and missed out on the trend.

 

[dbphoenix]

Although I would have seen a possibility at point 1 as it developed in realtime, because of the previous support level which was clearly defined. My second line that reaches through point 2 however, isn't there until point 2 has been reached. Around F price almost goes back to my S/R line but it would have been too far away for me to enter. So yes, I would only have seen one profitable entry and missed out on the trend.

So with regard to your earlier comments

I think a lot of the points are significant if you place them in the context of what happened next. I'm not sure how you're going to exploit the things you see while they're developing at the moment itself. After you've been able to indicate it was indeed a significant point, it will already have passed. Also, how would one profit from identifying significant points in hindsight?

you are in fact able to exploit at least some of what you see "while they're developing at the moment itself", you are able to indicate that it is "a significant point" before it has passed, and you are able to "profit from identifying significant points" in real time rather than wait for hindsight?

How?

Db

 

[firewalker99]

How?

"some" would have to be "very little", but nevertheless indeed I see a possibility, albeit a small one. But this chart in particular is one with a pretty clean move.

To answer your question: by looking back at what price did at previous levels and then wait and see what price does at the current level. But as the first line connected more than just two dots or zones, that was - imho - already a clear signal that that specific price level had a meaning to buyers/sellers. Most of the time I get something like an "Aha-erlebnis" after which I draw a correct S/R line but missed the opportunity. In this example the double top strenghtens the idea that price was reacting to that level. Say you posted the same chart, but left out everything starting from A up to the midpoint of B-C, than I would not have related that much signficance to point 1 and most likely would not be able to profit of the situation.

 

[dbphoenix]

"some" would have to be "very little", but nevertheless indeed I see a possibility, albeit a small one. But this chart in particular is one with a pretty clean move.

To answer your question: by looking back at what price did at previous levels and then wait and see what price does at the current level. But as the first line connected more than just two dots or zones, that was - imho - already a clear signal that that specific price level had a meaning to buyers/sellers. Most of the time I get something like an "Aha-erlebnis" after which I draw a correct S/R line but missed the opportunity. In this example the double top strenghtens the idea that price was reacting to that level. Say you posted the same chart, but left out everything starting from A up to the midpoint of B-C, than I would not have related that much signficance to point 1 and most likely would not be able to profit of the situation.

So rather than a possibility, you would have seen a "small" possibility. Would you have taken the trade or not?

Db

 

[firewalker99]

So rather than a possibility, you would have seen a "small" possibility. Would you have taken the trade or not?

Db

Not sure where you're going, but yes I would have...

 

[dbphoenix]

Not sure where you're going, but yes I would have...

So if you're very clear about just what it is you're looking for, you can take these trades in real time with at least some confidence in their outcome, i.e., it is not necessary to wait for hindsight in order to say whether or not the trade would have been taken.

Db

 

[firewalker99]

So if you're very clear about just what it is you're looking for, you can take these trades in real time with at least some confidence in their outcome, i.e., it is not necessary to wait for hindsight in order to say whether or not the trade would have been taken.

Db

Yes I agree, but that kind of clear signal doesn't appear so frequently. Take today (journal), I saw not one opportunity according to plan. The "confidence" isn't based on any statistical probability. If testing were to point out that in 10% of the cases the trade would be profitable? Whether or not to wait for hindsight wouldn't matter, if the success rate would be that low, not?

 

[dbphoenix]

Yes I agree, but that kind of clear signal doesn't appear so frequently. Take today (journal), I saw not one opportunity according to plan. The "confidence" isn't based on any statistical probability. If testing were to point out that in 10% of the cases the trade would be profitable? Whether or not to wait for hindsight wouldn't matter, if the success rate would be that low, not?

Whether you saw any ops today or not is irrelevant. The issue is whether or not you -- personally -- can recognize them in real time. You've said you can, so why does it stretch the bounds of credibility to believe that Szimba -- or anyone else who has learned how -- can do it?

The "confidence" is based on how sure you are of a successful outcome. That's probability. If the trade has only a 10% chance of a successful outcome, why bother trading it?

Db

 

[Porks]

I think the problem many traders have is the same problem many salesmen have.

They can do a great job everytime, but only a certain percentage will be 'winners'.

It's too frustrating for many people to be salesmen, doing a perfect job(that's taken a long time to learn) and 'failing' at least some of the time...asking themselves why why why ?

Some people love this uncertainty, most do not.

same same trading.

As a trader you can understand probabilities, but living with them is another thing entirely.

Porks

 

[dbphoenix]

Looks like no more takers, so . . .

If this game is free for everyone,than here is my view:

1: Price denied to close back under the previous SL created by bars number 4-5-6. Indicates that traders were interested int hat price to buy.

2: This the retest of the potential support from point number 1. Since at this point buying pressure lift price that is what makes point 1 and 2 significants.

3,5,6: All of them are retests of the SH made between point 1 and 2. Every time price declined from this area, that is what gives significance to point 8, where price finally managed to elevated higher by buyers.

So far, so good. Nice job. Your focus is on what's in front of you rather than on what's going to happen next or on what you think you should be doing about it.

4,7 : Nothing special. Just pullbacks int h middle of a range.

Oops. What's special about 4 is that (a) it's a higher low and (b) if it holds, you've defined your trend. What's special about 7 is that it's an even higher low, and push is coming to shove. The release of all that pent-up energy at 8 is a confirmation of all that has come before. Note also the ease with which price rises during that portion of 8 before which there are no immediately-preceding trades. This creates an air pocket.

9: This is the test of S from 3-5-6 and as buyers stepped back in one can reasonable expect at least the retest of the SH between 8 and 9. The action is significant as it happens on support!

Note also that it "fills" the pocket. Price is not required to move all the way back to the line drawn by the trader.

10,11,12,13 The continuation of the trend through previous SHs.

Worth noting, though, that price at 10/11 makes a higher high, confirming the ongoing trend. The red portion again represents another pocket.

As for 12/13, here, finally, volume becomes significant (the volume that is grayed out is grayed out for a reason) and worth paying attention to. Price closes off the highs, buying pressure is insufficient at 13 to push price higher and trading activity is less (i.e., sellers have little trouble preventing price from making a new high; if they had had more trouble doing so, trading activity would have been higher). All of this suggests the last of the distribution.

14: This is a significant point as this is represent the break of the uptrend, break uf potential support from the SH between 8 and 9 and here we also have a lower high and a lower low now.

The uptrend isn't broken quite yet. 14 is there to point to that 5-7 bar consolidation just below the high. In a longer bar interval, this would be a doji. This is a fish-or-cut-bait point. The uptrend is broken between here and 15.

15: price finds support as selling exhausted for the moment and buyers pushed the price up to previous support now resistance at 16.

17 ,18 sellers won and price decline didn’t manage to stop not even at potential support that originated from 3-5-6-9.

And the plunge itself confirms the importance of all that had been thought to be support, in addition to defining the trend reversal.

20,22 significant points as price here tested previous support from 15 and finally turned south as selling interest was heavy from market participants. Price declined until found enough buying interest at 24 and 25.

And here again volume becomes important for only the second time in the chart. Trading activity is far less at 25. That plus what can now be seen as an SC at 24 suggests that sellers are done. This is confirmed by the character of the bar that prints three bars after 25.

Regards
Szimba

Thanks for playing.

Db

 

[Szimba]

Thanks for playing.

Db

Thanks for your insights.

Szimba

 

[dbphoenix]

Thanks for your insights.

Szimba

Given how comfortable you are with S/R by now (what's it been? two years?), and if you are reasonably confident with the retracement part of your strategy, I suggest you move on to the breakout and reversal parts. Since you now know the drill, they shouldn't take that long.

Db

 

[firewalker99]

So far, so good. Nice job. Your focus is on what's in front of you rather than on what's going to happen next or on what you think you should be doing about it.

I see the difference between Szimba's and my analysis. It's cleary coming from a different "mind". But how does one learn to profit from situations, signals, moves, without thinking about what to do next? I'm not a scalper and I'm not trying to "act" all day long. So fine if I have to stick to looking at what's in front of me instead of thinking about what to do next, but I wonder at want point a trader acknowledges his/her signal if he keeps focusing on what's behind him instead of for instance anticipating what could be a retest of support at a later time without keeping that in the back of his mind.