Price Action - Seriously

[timsk]

HoCo,
Actually D-Toast knows a helluva lot about trading and, imho, is one of the best half dozen traders and contributors here. You could learn a lot by reading what he has to say.

Spot on Richard.
There are issues regarding the running of T2W about which DT and I disagree strongly. However, when it comes to trading, I completely agree with the sentiment quoted. I have learnt a lot from DT and, if he continues to make posts like his response to kimo'sabby above, I'm sure I'll learn a whole lot more.
Tim.

 

[DionysusToast]

Well Tim - not a huge disagreement... we are still Skype buddies after all.

I just thought that as Himself was teetering on the edge, as he has blown his cred, then a tiny little nudge might push him over. Still no-one wants to be told what to do and T2W aren't different.

He'll inevitabley be banned eventually, I thought a carrot might encourage you to use the stick.

I reckon we need more carrots - it is obvious that my carrot isn't big enough!

 

[TheBramble]

I've also noticed (as have you I suspect) some absolutely pathetically amateurish attempts at NLP (which is 99% bs anyway).

And how do you feel about those attempts? Do they simply sound wrong to you? Something you can't quite grasp perhaps? But it's not all smelly poo poo. Perhaps if you could enjoin with him and look to those parts that do gel with your inner self, something more to your taste would be forthcoming. Who knows? There's nothing overtly fishy about the guy, but a clean wind of commonsense blowing through the verbiage would be a breath of fresh air, for sure. You can feel good now about the prospect of making sense of his sense.

Namaste.

 

[DionysusToast]

Bramble - why do I suddenly feel the urge to buy some seafood off you?

Here's another one of those T1, T2, T3 thingies.

Long at T1 is much better than shorting T2 (if it got there) or going long T3 (if it got back there). Yet T2 and T3 are obvious and T1 isn't. T2s and T3s will get you stopped out more than T1s.

I am fairly sure to be clipped out on this one soon. It is so slow today but right now I think the trade has even more promise to make a good move up if the shorts start to get nervous.

So - I'm staying in but I'm not willing to take a loss on it. I have no regrets that it came up to within a cent or so of my first target, which is fairly narrow (but considering low range for the day is where it should be). Still - if you keep tightening these things you start to need smaller losers too which leads to more losses...

Does anyone know why T1 is better?

 

[Vorbis]

Does anyone know why T1 is better?

Stop cluster below recent lows?

(Thinking of those cheap apples).

 

[DionysusToast]

On the right track Vorbis...

Actually, it's a cluster of stops that would be created by T2 & T3. A lot of amateur traders will take trades here and put there stops just above the high for the T2 trade and just below the low for the T3 trade.

The T1 is a trade that does not look at all obvious to lots of people at the point of entry. It is quite obvious that some people did enter here as the price went up BUT it is nowhere near as obvious as those latest 2 support/resistance levels. Still the T1 trade isn't based off any pre-set level, nor is there any magic formula/rule behind it. It's not even a secret.

Of course, you could argue that lots of people taking a trade would be good as it would give power to the trade. Problem is that the 'lots' of people is often lots of retail traders who have put orders to exit the market all around the same place.

Right now you might be thinking "some hedge fund has a magic program to hunt my stops" (the [email protected]@rds). Taking this view will probably keep you out of trouble but in fact the stop hunting computer is not the reason these trades fail.

The reason these trades fail is simple. This is the carrot. Still, I won't be such an asre and not tell people...

If you go long at T3 mechanically and objectively, you will lose money over time. This would happen in an electronic market and a non-electronic market. There is a non-technical, common sense reason for this but it would be nice to have some other opinions on this first.

Maybe HC himself will reveal some previously unseen theories on the dynamics of supply and demand which will make this clear before I do.

I think Arabians 'organic' market theory is fairly relevant to this aspect of price movement.

 

[amit1986]

On the right track Vorbis...

Actually, it's a cluster of stops that would be created by T2 & T3. A lot of amateur traders will take trades here and put there stops just above the high for the T2 trade and just below the low for the T3 trade.

The T1 is a trade that does not look at all obvious to lots of people at the point of entry. It is quite obvious that some people did enter here as the price went up BUT it is nowhere near as obvious as those latest 2 support/resistance levels. Still the T1 trade isn't based off any pre-set level, nor is there any magic formula/rule behind it. It's not even a secret.

Of course, you could argue that lots of people taking a trade would be good as it would give power to the trade. Problem is that the 'lots' of people is often lots of retail traders who have put orders to exit the market all around the same place.

Right now you might be thinking "some hedge fund has a magic program to hunt my stops" (the [email protected]@rds). Taking this view will probably keep you out of trouble but in fact the stop hunting computer is not the reason these trades fail.

The reason these trades fail is simple. This is the carrot. Still, I won't be such an asre and not tell people...

If you go long at T3 mechanically and objectively, you will lose money over time. This would happen in an electronic market and a non-electronic market. There is a non-technical, common sense reason for this but it would be nice to have some other opinions on this first.

Maybe HC himself will reveal some previously unseen theories on the dynamics of supply and demand which will make this clear before I do.

I think Arabians 'organic' market theory is fairly relevant to this aspect of price movement.

Great post(s) Dino! It's true that looking at a chart and seeing obvious areas of support/resistance for trade entry/stops is a lot easier in hindsight. As an extension, the more obvious the place for a stop, the more likely the stop will be hit. Market makers are smart - they know there are stops at important levels of apparent support/resistance. If an instrument is close to these levels, market makers will do everything in their power to go through the stops and screw over a lot of amateur traders.

Nice to see you posting after a while!

 

[megamuel]

T1 is a horrible trade to take at the time, it's against a big move down, it's in the middle of nowhere. Why go long there? (clue - has nothing to do with pin bars). T2 & T3 are easier trades to take, they are visually appealing, there are 'reasons' for price to bounce off the level. We can see people reacted in a certain way at that point previously and there is an expectation that they will do this again.

So did you answer why you went long at T1? I mean what made you choose that exact spot? When you say "People reacted in a certain way at that point previously", did you mean to previous to T2 and T3 or previous to T1. Thanks,

Sam.

 

[TheBramble]

I do teach other subjects such as [...] a presentation skills workshop for technical people.

LOL. Sorry Howard, only just saw this one...

Do you feel based on the kind of feedback you've been getting on this site that presentation skills are very context dependent?

DT - apologies for off-tracking what is turning into a rather good thread (only a pity some may miss it entriely based on expectations from the title).

 

[HowardCohodas]

LOL. Sorry Howard, only just saw this one...

Do you feel based on the kind of feedback you've been getting on this site that presentation skills are very context dependent?

DT - apologies for off-tracking what is turning into a rather good thread (only a pity some may miss it entriely based on expectations from the title).

Presentation skills are, for the most part, content independent. "Don't fiddle with the change in your pocket" is a frequent reminder to those I've taught and certainly presentation contents independent.

Some of the feedback I've received here has proved worthwhile to me in that it has helped me modify my strategy. Otherwise it is one data point in a data set that forms a more complete picture. Each forum has its own culture. In some cultures, the strategy I practice is not held in such low esteem as it is here. Some hedge funds practice similar strategies. So I watch, learn, occasionally comment and am content.

 

[Martinghoul]

In some cultures, the strategy I practice is not held in such low esteem as it is here. Some hedge funds practice similar strategies. So I watch, learn, occasionally comment and am content.

In some cultures, cannibalism is also perfectly acceptable. And yes, some hedge funds do practice similar strategies. They fall into two categories: a) the ones that blow up and are never heard from again; b) the ones that explicitly advise investors of the risks/drawdowns inherent in their portfolios. For an example of the latter, see here:
http://www.ljmpartners.com/english/history.php

 

[TheBramble]

Presentation skills are, for the most part, content independent. "Don't fiddle with the change in your pocket" is a frequent reminder to those I've taught and certainly presentation contents independent.

Some of the feedback I've received here has proved worthwhile to me in that it has helped me modify my strategy. Otherwise it is one data point in a data set that forms a more complete picture. Each forum has its own culture. In some cultures, the strategy I practice is not held in such low esteem as it is here. Some hedge funds practice similar strategies. So I watch, learn, occasionally comment and am content.

Crieky, this is the first time I've received a direct experience of the Old Cohodas Two-Step. I had to read both the question and the response three times just to make sure it wasn’t me being wilfully stupid. LOL.

I’ll be generous and put it down to ambiguous articulation and lack or erudition on my part in wording my question in such a way as to make its meaning completely opaque.

I’ll rephrase it.

Howard, given the apparent large scale lack of connection you’ve managed to achieve with the majority of the membership on t2w, do you believe the trainings you provide in “Presentation Skills” suffer from precisely the same deficiencies that the majority feel your trading methods do – i.e. useful content?

 

[DionysusToast]

Great post(s) Dino! It's true that looking at a chart and seeing obvious areas of support/resistance for trade entry/stops is a lot easier in hindsight. As an extension, the more obvious the place for a stop, the more likely the stop will be hit. Market makers are smart - they know there are stops at important levels of apparent support/resistance. If an instrument is close to these levels, market makers will do everything in their power to go through the stops and screw over a lot of amateur traders.

Nice to see you posting after a while!

I agree that market makers do make runs at stops BUT I think there's a deeper issue related to the nature of markets that cause the 'obvious' T2 and T3 trades to fail.

So - even if this were a fruit market we would see exactly the same thing if the conditions were the same.

I don't want to turn this into a TE type 'cliffhanger' thread but I do want people to think about this before I blurt out my interpretation of why this would happen.

 

[TheBramble]

DT - not going to get in the way of your interesting discourse as I trade very differently to you, but for clarification, are you saying the T1 is a time & price point where you get in Long (in this example) or that after X bars of the reversal back up you get in, or at that precise level as it’s on its way down (or halting its retrace) as the trade is level rather than price action dependent?

 

[DionysusToast]

So did you answer why you went long at T1? I mean what made you choose that exact spot? When you say "People reacted in a certain way at that point previously", did you mean to previous to T2 and T3 or previous to T1. Thanks,

Sam.

I went long at T1 - on 2 trades mentioned on this thread.

T1 - NO-ONE reacted that way previously , so I took it.
T2 & T3 - people DID react that way previously, so I wouldn't take it, unless I thought the majority couldn't see it.

Right now my focus is futures - ES and a little 6E BUT if things are slow, or if I'm in a trade that is now out of the initial risky period & I'm letting it run, I'll switch to stocks.

I'll do this between 10am and 11am. I will use IBs scanner which is most unsophisticated. I am scanning for big movers for the day and I then look to see which have pulled back.

Scan:

What I look for:

When I find one with a good pullback, I bring it up and watch it. I need to get into the rhythm of the way it is moving and wait for what the esteemed Mr Charts calls a 'sea change'.

So - that entry point was a place I actually traded in the HGSI chart. The idea is to see a move up and then a pullback. The pullback shouldn't be too deep. To guage when to get in is subjective, it is done by feel & experience. L2/Time and Sales helps because they really help you see the pace. I do know people that trade this without too much attention to L2/T&S but they are WAY more experienced than me. In essence, it got to to the point where I thought the pullback was done. In addition to this, I know that the shorts are going to be a lot more nervous as price moves up and will certainly bail if we pierce the high. It's a safe entry where you take a few ticks heat.

On my side was a lack or people entering and the shorts being easily pushed into panic mode.

Soon - I'd like to discuss the reasons the T2 & T3 trades fail over time.

 

[SanMiguel]

I think it's necessary to give an explanation of why clear support & resistance won't make you money. No matter how you play it, if you play it in an objective (rules based) manner. The explanation will also cover why it may work if you play it in a subjective manner.

This reward will be my contribution. I will have this contribution vetted by any well respected member of this site. This may be the young Arabian, the Martinghoul, the Timsk, the 333, the Dr Iraj (RIP), the BSD, the Bramble or even the elitejets

For T2W to earn this reward, they have to do 1 thing...

GET RID OF THE HC (and his ilk).

Keep the paid advertisers. Just get rid of the freeloaders posing as board members.

If you want an absolute unequivocal and clear explanation of why any simple play of support & resistance will not work (AKA information pertaining to actually trading). Then support this move.

If you have information to donate. Add a summary (but not details) here. The more useful info available for this, the better.

If you work for T2W. Support a move to ban Howard Cohodas and his kind.

If you are Howard Cohodas & his ilk, post a wordy nonsensical reply that adds a mass of verbage to the T2W servers but says nothing at all.

So - here is the line in the sand. Respected (or otherwise) people may contribute free, useful information that isn't on the board right now in exchange for the removal of people who are here to line their pockets by selling people information that will lose them money.

Anyone?

Look at it another way.
I know that you are trading S&R so if I have more money than you I am going to sell into you heavily as you buy and keep selling until you stop out.
Everyone knows where the SR is so it is an easy choice to be spiked. However, all the TAers in the market want to buy there so there is a tradeoff between those taking advantage of it and those looking to use it due to the expected liquidity of market participants at that point.
It works if you have something else telling you to trade at the SR point.

 

[DionysusToast]

DT - not going to get in the way of your interesting discourse as I trade very differently to you, but for clarification, are you saying the T1 is a time & price point where you get in Long (in this example) or that after X bars of the reversal back up you get in, or at that precise level as it’s on its way down (or halting its retrace) as the trade is level rather than price action dependent?

T1 trades are usually taken based on
- big move up
- pullback
- pullback appears to be waning
- no instances of shorts being trapped previously today
- good chance that shorts will get nervous if we travel up
- price can't be at a place where the turn will be obvious

There is no calculated price level involved, number of bars is irrelevant and it is all price action - but using price to try to figure out who's happy & who's nervous.

Still - this sort of moves away from the intended topic which is the reason the T2 & T3 trades lose over time. MMs are mostly blamed for this but by my reasoning, it'll happen regardless of MMs being involved or not. In fact, it'll happen in any market - clothes market, fruit market, financial market.

 

[Vorbis]

I would guess that at the more obvious entry points, say T2, some will go short and place buy stops a short distance above. This is offering liquidity at a good price to anyone else who wants to go short and the opportunity of a quick scalp to anyone who feels confident that they can push the market up and use the stops for an exit.

There is also the danger that this push up above the high will be interpreted as a break out and initiate an avalanche of new buy orders. Presumably this is less likely if price spikes up, clears out the stops then falls back again.

I am finding this thread intriguing as this is precisely the type of PA reading I am currently trying to get a better grip on myself. Good thread, keep it up.

 

[DionysusToast]

Look at it another way.
I know that you are trading S&R so if I have more money than you I am going to sell into you heavily as you buy and keep selling until you stop out.
Everyone knows where the SR is so it is an easy choice to be spiked. However, all the TAers in the market want to buy there so there is a tradeoff between those taking advantage of it and those looking to use it due to the expected liquidity of market participants at that point.
It works if you have something else telling you to trade at the SR point.

Let's say a bunch of retail traders go short and an MM knows about it. All other market participants will still be there doing whatever it is they do and it is going to cost a lot of $$$ for someone to keep buying until they get to the stops.

Let's say on the ES, there's 10,000 contracts in sell stops 3 points away. How many contracts would you need to buy to get to that 10,000 contracts? Consider that there's still people selling.

Now - if someone had that much money, why wouldn't they just do this all the time? If a market is rising, couldn't someone with unlimited funds just short it until it went down and then just let reactive traders jump on the down move and get out when they are buying?

I understand the concept but I think there's something more 'organic' going on that doesn't get discussed much.

As for 'other reasons' to trade the S/R - what would those be? Confluence with other TA factors? Or some deeper, reasons related to the positions other traders find themselves in at that point?

 

[DionysusToast]

On an unrelated subject - I just got an email about this:

http://www.madscan.com/index.php/home/free_version

I have loaded it up and this is a very good FREE product for real time scanning.

I'll see if I can get this to tell me which stocks are pulling back after a 2% plus move up on the day. That would be nice....