Best Thread Firewalker's Journey: A path of discovery in search for enlightenment

[firewalker99]

They may look the same, but one of them covers several weeks. The other covers two or three hours. Plus you don't include the context for the second chart, making interpretation somewhat meaningless.

We seem not to be communicating on the volume thing. You're not removing it at all, you're just holding it behind your back. But, it's your journal, and it really isn't my place to tell you how to proceed.

Db

Indeed they are of a different time frame, but similar patterns occur at whatever timeframe as markets behave in fractal ways? What do you want me to include with the second chart? By context do you mean the day before or...

I appreciate the suggestions and I've been discussing the chart with SIMA hence the volume references. I'm just seeing totally different things. I guess SIMA has a point, but I guess I have several points to in my analysis which makes is next to impossible to have a valid conclusion. I bet a 3rd or 4th person would see other things so this leaves me in the dark.

 

[dbphoenix]

Indeed they are of a different time frame, but similar patterns occur at whatever timeframe as markets behave in fractal ways?

What makes you say that markets behave in fractal ways?

Db

 

[firewalker99]

What makes you say that markets behave in fractal ways?

Db

Ehm, well mainly because the same principles and patterns occur at different time frames.
For me it's like when you see for example the coast line from the sky: it's not straight but goes swirling around looking at it from without let's say a helicopter. As is the same when you look at it standing 100 meters from it.

The concept is also mentioned in several books.
Anyway, apart from my beliefs in don't know how this relates to my lack of understanding?

 

[firewalker99]

So, again, if you want to learn S/R, set aside volume and any diagonal lines for now. Learn to read charts left to right. Start, if you lke, with the chart I posted to the S/R thread.

Db

What chart do you mean? Yesterday you put one up with 25 mark points. This morning I tried my best at putting signficance to them... are did you mean another chart?

 

[dbphoenix]

Ehm, well mainly because the same principles and patterns occur at different time frames.

Do you know all of this to be true from your own experience? Is it something you can rely on for entry, trade management, risk management, exit?

Db

 

[dbphoenix]

What do you want me to include with the second chart? By context do you mean the day before or...

I'm sure you realize that providing my own charts to tell me what happened prior to what you post takes time. Scrollling back through all these posts looking for previously posted charts also takes time. I don't always have that time. Therefore, I'd appreciate your showing me the context. S/R depends on everything that went before, not just what happened a few minutes ago or a few hours ago.

Db

 

[firewalker99]

Do you know all of this to be true from your own experience? Is it something you can rely on for entry, trade management, risk management, exit?

Db

My "experience" has only taught my that I'm wandering around in circles.
I didn't mean anything by saying fractal behaviour, only that I believe it doesn't make much difference for studying a theory if you're using 5, 15, 60 minutes... Of course using different time frames implies different stop sizes, targets, entry points,... I only switch to greater time frames to compare, not to enter. Entering a trade is on 3 minute chart.

 

[firewalker99]

I'm sure you realize that providing my own charts to tell me what happened prior to what you post takes time. Scrollling back through all these posts looking for previously posted charts also takes time. I don't always have that time. Therefore, I'd appreciate your showing me the context. S/R depends on everything that went before, not just what happened a few minutes ago or a few hours ago.

Db

I completely understand you don't have the time to go all through that, moreover I already find it very pleasing to get so quick responses. I don't want to pressure you in any way, I'm justing trying very hard to learn and so far I'm not succeeding in applying the theory.

About context, I've always posted multiple related charts together I believe like in #40, I'm usually posting a weekly, monthly and daily one so you can relate and put things in greater perspective. In case you were suggesting I also post a yearly chart, I just added one to the original post.

 

[dbphoenix]

I completely understand you don't have the time to go all through that, moreover I already find it very pleasing to get so quick responses. I don't want to pressure you in any way, I'm justing trying very hard to learn and so far I'm not succeeding in applying the theory.

I suggest you go back to the goals you posted earlier -- which were relatively general -- and be more specific about just what it is you're trying to accomplish. I don't know, for example what you mean by "applying the theory". The theory of what? Apply it to what?

If you already have a trading plan, you need to post it. If you don't, then you need to be specific about the hypothesis or hypotheses that you're testing. If you're not ready for any of this, then translate and organize everything you're confused about or frustrated about into a series of specific questions, then set about answering them, preferably one by one. Otherwise, you are likely to flounder.

Db

 

[firewalker99]

I suggest you go back to the goals you posted earlier -- which were relatively general -- and be more specific about just what it is you're trying to accomplish. I don't know, for example what you mean by "applying the theory". The theory of what? Apply it to what?

The basic principles of demand, supply, support, resistance, trendlines. I mean I'd like to stick away from indicators, mathematical ways to predict market movement, fundamental analysis, scalping,... With "the theory" I'm not implying anyone's theory in particular, just that I want to gain an "understanding" of the market. I want to be able to explain why the market moves up, down, turns at a point, drops below a line. Perhaps I'm aiming too high, but I have a great urge to understand things, I'm very eager and curious.

Let me put it this way: whenever I'm faced with a fascinating problem in nature, maths, physics, economics, statistics I've always wanted to comprehend it fully. Not just apply the principles, but understand WHY. This has sometimes caused me quarrels with professors who wanted me to just "take things for granted" instead of asking why. But that's just who I am. I don't want to be like a robot and click my mouse to enter a trade whenever I see line A crossing line B with MACD indicating x and RSI being y...

If you already have a trading plan, you need to post it. If you don't, then you need to be specific about the hypothesis or hypotheses that you're testing. If you're not ready for any of this, then translate and organize everything you're confused about or frustrated about into a series of specific questions, then set about answering them, preferably one by one. Otherwise, you are likely to flounder.

Db

I have some stuff written down, I also used a template from this forum to complete it, but I don't see any use in uploading a 10 pages document. The main purpose for opening a journal was to discuss charts, have practical examples illustrate the forces of supply and demand.
But you're heads on, I'm loosing sight of the forest.

 

[Tubbs]

I've got to say that these S/R lines that you're drawing are only the smallest part of what makes a system - i.e. the entry. At the entry you can't make any money it's just a level. The close is far more important. Put another way you must have a statistical study of exactly what you expect price to do once it is triggered by one of your lines. Only then can you make money with your system. You've got to get all of these aspects concrete. Do you agree?

 

[dbphoenix]

The basic principles of demand, supply, support, resistance, trendlines. I mean I'd like to stick away from indicators, mathematical ways to predict market movement, fundamental analysis, scalping,... With "the theory" I'm not implying anyone's theory in particular, just that I want to gain an "understanding" of the market. I want to be able to explain why the market moves up, down, turns at a point, drops below a line. Perhaps I'm aiming too high, but I have a great urge to understand things, I'm very eager and curious.

Let me put it this way: whenever I'm faced with a fascinating problem in nature, maths, physics, economics, statistics I've always wanted to comprehend it fully. Not just apply the principles, but understand WHY. This has sometimes caused me quarrels with professors who wanted me to just "take things for granted" instead of asking why. But that's just who I am. I don't want to be like a robot and click my mouse to enter a trade whenever I see line A crossing line B with MACD indicating x and RSI being y...

Understanding the "why" is not necessarily a negative. However, you're trying to understand all of this at the same time that you're trying to apply all of it to a trading strategy. In other words, you're putting the cart before the horse.

Therefore, the first choice you have to make is whether you want to understand why price moves as it does OR develop a consistently profitable trading strategy. If you can't do the latter without first doing the former, then I suggest you stop trading entirely until you've scratched whatever itch you have regarding theory.

Db

 

[firewalker99]

Understanding the "why" is not necessarily a negative. However, you're trying to understand all of this at the same time that you're trying to apply all of it to a trading strategy. In other words, you're putting the cart before the horse.

Therefore, the first choice you have to make is whether you want to understand why price moves as it does OR develop a consistently profitable trading strategy. If you can't do the latter without first doing the former, then I suggest you stop trading entirely until you've scratched whatever itch you have regarding theory.

Db

I agree I perhaps need someone who guides me the way so that I don't wander off in the desert and seeing fata morganas. If I'd were to pursue developing a profitable strategy without understanding why price moves than I would never have bothered studying and reading theory. But I see no point in rereading everything. My problem: I understand it, I agree, but cannot find the right signals in realtime charts. In hindsight ok, but live trading or papertrading takes me nowhere.

 

[Tubbs]

I really don't think price moves for a reason on 5 min charts - it just does. You'll never track down that reason. Just look for signals to it's moving. Quantify them all. Do not trade in generalities - there is no such thing as a general trade.

 

[dbphoenix]

I agree I perhaps need someone who guides me the way so that I don't wander off in the desert and seeing fata morganas. If I'd were to pursue developing a profitable strategy without understanding why price moves than I would never have bothered studying and reading theory. But I see no point in rereading everything. My problem: I understand it, I agree, but cannot find the right signals in realtime charts. In hindsight ok, but live trading or papertrading takes me nowhere.

Don't know what you mean by the "it" in "I understand it". If you mean that you understand the theory, then you would not be having so much trouble in the application, which is why people generally go back to the theoretical when they run into trouble with the practical.

The reason why this stuff is always discussed in hindsight is not that it's easy to explain it all (though many people misuse hindsight in this way) but that hindsight is the only way one can detect movement patterns and formulate hypotheses. However, all of this activity is pointless unless and until the hypotheses are tested. If whatever "principles" one believes he found in hindsight don't pan out in real time, they are useless to him. In fact, they probably never existed to begin with.

You continue to be frustrated by your attempts to apply what you think you understand in real time. Therefore, either you don't understand what you think you understand, or what you think you understand is all a crock and you're wasting your time with it.

Therefore, if you believe you've explored the theoretical enough, then start trading your plan, preferably in simulation. Each day pre-market, post charts of the previous day, the previous week, the previous month. Plot your S/R lines. State where you plan to go long or short and why. State what your stop is going to be and why. State what your target(s) is(are) and why. State how and where you're going to exit and why. Without all of this, your progress is going to be slow, if you progress at all.

Db

 

[firewalker99]

If you already have a trading plan, you need to post it. If you don't, then you need to be specific about the hypothesis or hypotheses that you're testing. If you're not ready for any of this, then translate and organize everything you're confused about or frustrated about into a series of specific questions, then set about answering them, preferably one by one. Otherwise, you are likely to flounder.

Db

Ok, I'll share some essentials of my trading plan for taking an entry.
They are however based on S/R lines or trendlines; that's where I fail to make it. Often in hindsight I see other points that indicate a better support zone, and if I'd taken my entry conform strategywise that would have been a possible profitable trade. This part doesn't say anything about position sizing, risk reward, profit/loss, fixed or variable target, stoploss, etc. If you'd want me to add let me know but perhaps it's better to take it one step at a time.

1) If a break through a previous resistance level should occur on a wide range body (closing above middle, this does not necessarily imply one bar try to "blend" bars), check if volume is equal or higher than the previous upswing. If it is (but not extremely high because that would indicate too much supply), than wait for a retracement (lower volume, small spread) to touch the resistance line. If it waffles around or slightly above the line for a minimum of three bars on lower volume (possibly dry-up), than take an entry. Also check for support to the left of the weekly/monthly chart if the marubozu upbar didn't create an air pocket without support.
In case of a support line -> similar situation but turn everything around

2) After a potential selling climax (of course easy to say in hindsight, although I have described some elements where too look for), look for a high volume wide spread hammer that closes above the low of the previous wide spread down bar (sometimes you'll have to "blend" two bars to see it). If price slowly starts to move up than wait for it to go back very near or to the lowest point of the SC. On that point if you see three bars that have an end above the middle, place your long entry.

3) Once you see a triangle (coil, hinge,...) developing check what happened before. This should be a low volume move converging into a point in the future. If after a selling climax, enter long on one of the lowest points, then if a false outbreak would occur you'd still be breakeven. If price has been ranging before, then if price > opening price => go long on lower boundary, otherwise short on upper side.

For now, I'll reframe from posting anything further. Although this is my journal, I'd have no problem with anybody else explaining his/her plan in this thread...

 

[firewalker99]

Don't know what you mean by the "it" in "I understand it". If you mean that you understand the theory, then you would not be having so much trouble in the application, which is why people generally go back to the theoretical when they run into trouble with the practical.

The reason why this stuff is always discussed in hindsight is not that it's easy to explain it all (though many people misuse hindsight in this way) but that hindsight is the only way one can detect movement patterns and formulate hypotheses. However, all of this activity is pointless unless and until the hypotheses are tested. If whatever "principles" one believes he found in hindsight don't pan out in real time, they are useless to him. In fact, they probably never existed to begin with.

Db

If I'm still at a loss after checking the theory, going back to it, having a break for two weeks & taking some time to do something completely else, coming back and checking it out all over again to have one the same conclusion. I'm unable to read the charts in real time. Indeed people get frustrated after that, I haven't given up but I see no point in getting back to the books when they apparently haven't taught me anything useful or I am unable to put it into practice somehow.

 

[firewalker99]

I really don't think price moves for a reason on 5 min charts - it just does. You'll never track down that reason. Just look for signals to it's moving. Quantify them all. Do not trade in generalities - there is no such thing as a general trade.

Have you looked at my charts where I'm trying to indicate signals?
I guess I have some psychic ability to read all the wrong signals but still, have some points to argue in favour of them. If anybody were to sat next to me, and do exactly the opposite of the trades I'd took he would be a millionnaire by now.

 

[dbphoenix]

Ok, I'll share some essentials of my trading plan for taking an entry.
They are however based on S/R lines or trendlines; that's where I fail to make it. Often in hindsight I see other points that indicate a better support zone, and if I'd taken my entry conform strategywise that would have been a possible profitable trade. This part doesn't say anything about position sizing, risk reward, profit/loss, fixed or variable target, stoploss, etc. If you'd want me to add let me know but perhaps it's better to take it one step at a time.

1) If a break through a previous resistance level should occur on a wide range body (closing above middle, this does not necessarily imply one bar try to "blend" bars), check if volume is equal or higher than the previous upswing. If it is (but not extremely high because that would indicate too much supply), than wait for a retracement (lower volume, small spread) to touch the resistance line. If it waffles around or slightly above the line for a minimum of three bars on lower volume (possibly dry-up), than take an entry. Also check for support to the left of the weekly/monthly chart if the marubozu upbar didn't create an air pocket without support.
In case of a support line -> similar situation but turn everything around

2) After a potential selling climax (of course easy to say in hindsight, although I have described some elements where too look for), look for a high volume wide spread hammer that closes above the low of the previous wide spread down bar (sometimes you'll have to "blend" two bars to see it). If price slowly starts to move up than wait for it to go back very near or to the lowest point of the SC. On that point if you see three bars that have an end above the middle, place your long entry.

3) Once you see a triangle (coil, hinge,...) developing check what happened before. This should be a low volume move converging into a point in the future. If after a selling climax, enter long on one of the lowest points, then if a false outbreak would occur you'd still be breakeven. If price has been ranging before, then if price > opening price => go long on lower boundary, otherwise short on upper side.

For now, I'll reframe from posting anything further. Although this is my journal, I'd have no problem with anybody else explaining his/her plan in this thread...

While I admire the work you've done here, I can now understand why you're having so much trouble. If I were to try to trade this, I'd be spending more time banging my head against the wall than trading. This is not to say that what you're doing here is unusual. More people go through it than will likely admit it (or admit having done so at some point in a past best forgotten). I went through something similar before deciding that it was all nuts, throwing it into the trash, and starting all over again. You're trying to combine S/R theory, trend theory, candle theory, pattern theory, your own take on point-and-figure, and trader psychology into something that prompts you to enter or not enter a position at a given price. This may help explain your frustration.

If I'm still at a loss after checking the theory, going back to it, having a break for two weeks & taking some time to do something completely else, coming back and checking it out all over again to have one the same conclusion. I'm unable to read the charts in real time. Indeed people get frustrated after that, I haven't given up but I see no point in getting back to the books when they apparently haven't taught me anything useful or I am unable to put it into practice somehow.

I suggest beginning tomorrow with what I've suggested. I'll repeat it here for convenience:

1. Pre-market, post charts of the previous day, the previous week, the previous month. Plot whatever S/R lines you need for the current day.

2. State where you plan to go long or short after the open and why (no theory).

3. State what your stop is going to be and why (no theory).

4. State what your target(s) is(are) and why (no theory).

5. State how and where you're going to exit and why (no theory).

That's it. Nothing more.

Db

 

[firewalker99]

While I admire the work you've done here, I can now understand why you're having so much trouble. If I were to try to trade this, I'd be spending more time banging my head against the wall than trading. This is not to say that what you're doing here is unusual.

I suggest beginning tomorrow with what I've suggested.
Db

Do you mean it's all crap I wrote?
I'm not sure in what direction a trading plan should look like then... I've seen examples, people saying "if I see two shadows above a resistance line, I'd short", if I see a shooting star after high volume down bar I'd short, stuff like that... I was just trying to sort out something for myself and I've assembled some screenshots where my entries do actually work. But it's not a guarantee for success, but then again, no strategy works for every trade right?

Could you perhaps give me a hint about what a plan should look like then?
As for your suggestion, I'll start doing that tomorrow and leave volume out of the equation as you also suggested. To be honest, I'm not sure how I'm going to place an entry with leaving all this in the trashcan, only using S/R and not using any theorie. Seems like throwing darts at a cheesecake...