Price, (Volume), Support, Resistance, Demand, Supply . . .

[djnsfc]

Quite right DB, I've gone a bit Maxim mad, sorry for that!

I'm not confident enough to reverse if incorrect on a trade. If I'm in doubt I get out and then re-evaluate the position. If a reverse is required then I'll do so.
I guess my trading plan isn't set-up for reversing as I tend to chart different time frames for an equity and only trade in the direction of the trend of the longer timeframe. I generally have 2 stops one mental and one physical. The physical stops are generally placed at extreme areas where my outlook for the equity would change e.g. Bullish to neutral. These stops are "emergency stops" and are very rarely hit. It's peace of mind if you like. My mental stop is placed much nearer my trade entry and tells me if hit I'm wrong on the trade. I always prefer closing the trade at my mental stop and once in a trade the market will tell me if I'm right or not e.g. If I'm bullish and buy I like to see the market confirm my bullishness by going up in the next few bars of the timepoint i'm trading. If I buy and then the market goes dead or drops this indicates that although still Bullish the market may need to drop further still in order to find demand so I'll exit and wait for the next opportunity. This is why I try and enter trades near S/R as it gives me great mental stops which are close to the market. The smaller the stops the less I'll loose, the less I loose the more chance I have of making money out of my profitable trades.

 

[dbphoenix]

I'm not confident enough to reverse if incorrect on a trade. If I'm in doubt I get out and then re-evaluate the position. If a reverse is required then I'll do so.

I include two elements beyond the usual in the definitions of my setups: (1) what will invalidate the trade before the entry is triggered and (2) under what conditions will I fade my own setup (i.e., take the reverse). These apply only to entry, of course, and I make as few entries as possible (preferably, one). If I don't do this, it's difficult to tell when the trend has reversed, and it's much easier to find oneself trading counter-trend than most gurus are willing to admit (day before yesterday, for example).

Edit: Incidentally, going through this process is also a handy means of determining the stop for at least a portion of what's held.

Further edit: I should point out that it is absolutely critically essential (or essentially critical) that one decide just what he wants to do about trading coils (or symmetrical triangles or hinges or whatever). To bypass this is a recipe for disaster.

 

[robq]

http://www.crbindex.com/techtip/tipv2n06.htm

In case anyone else shares my ignorance of coils and symmetrical triangles!

Still not sure about hinges.

 

[dbphoenix]

http://www.crbindex.com/techtip/tipv2n06.htm

In case anyone else shares my ignorance of coils and symmetrical triangles!

Still not sure about hinges.

My apologies for being unclear. And thanks for providing the link.

Unfortunately, the "explanations" of triangles is mostly wishful thinking.

What I meant with regard to coils, etc (having meant to equate them, not suggest that they were distinct from each other) had to do with making decisions in real time as to objectives.

An uptrend consists of higher highs, higher lows. A downtrend consists of lower highs and lower lows. When the highs begin to even out and the lows begin to even out, you've got a range. Whether that range is tradeable is up to you.

However, when price starts making lower highs and higher lows at the same time, the "triangle" pattern begins to develop, and if one doesn't notice what's happening with highs and lows, he can find himself trading shorter and shorter movements until he is more or less making random entries and exits.

Not that trading within these coils is a bad thing. However, it is important to make a conscious choice to do so since they require different tactics. If one gets caught up in a coil without being aware of it until it's too late, he can end up having made a lot of unnecessary and probably pointless trades.

For this reason, a lot of people avoid trading them at all, waiting for price to break out of them one way or the other. However, these "breakouts" are a messy subject in themselves, and the tactics require advance planning and testing.

Example of a hinge (actually, two):

Edit: Two things I neglected to mention about coils et al. One is that they should be "filled with price", as Schabacker said. Otherwise, you're looking at a different dynamic. The other is that the business of the breakout being faulty if it doesn't take place by 2/3 of the way through the triangle is not supportable. This scenario may apply in a highly-charged, volatile, trending market, but otherwise, the longer the base around the midpoint, the more likely there will be a strong, sustained move, assuming that traders are interested in the instrument in the first place.

 

[darktone]

Some thoughts on S/R

 

[dbphoenix]

This chart was posted elsewhere, but it may be of help in making certain concepts clearer.

The example used is the NQ, but the concepts apply to all trading vehicles regardless of timeframe or bar interval.

SC = Selling Climax
BC = Buying Climax

 

[TheBramble]

DBP, a belated (and hopefully not majorly off-topic) thumbs-up for this thread.

Always enjoyed your work and looks like this thread is developing nicely.

In order to retrieve this post from the depths of vacuousness though (I hope), there was (is?) a systemised software package (VSA) from Trade Guider or some such which attempts AFAIAA to encompass all these aspects.

Has anyone used it or have knowledge of it?

 

[dbphoenix]

It was discussed at length on ET in that inimitable ET way. I suggest that those who are interested pursue the subject there since the purpose of this thread was to get dirty with the subject rather than wear software gloves.

http://www.elitetrader.com/vb/showthread.php?threadid=34948

and

http://www.elitetrader.com/vb/showthread.php?s=&threadid=36256

 

[TheBramble]

I did go onto ET (once) and got a reasonable reply. But that's probably pushing it.

Point taken. Down and dirty with gloves off....

How many factors do we need to consider? Price, Volume and either a Support OR Resistance level?

Supply and Demand are contrivances at best are they not which determine the S/R levels?

 

[dbphoenix]

How many factors do we need to consider? Price, Volume and either a Support OR Resistance level?

Supply and Demand are contrivances at best are they not which determine the S/R levels?

The factors to be considered are in the title of the thread. Not sure what you mean by "contrivances". As for S/R, I believe there's been enough said at this point and the concept should be reasonably clear.

Nonetheless, given the fascination with indicators and their deceptive ease of use, it's unlikely that this thread will be abnormally popular.

 

[bracke]

The factors to be considered are in the title of the thread. Not sure what you mean by "contrivances". As for S/R, I believe there's been enough said at this point and the concept should be reasonably clear.

Nonetheless, given the fascination with indicators and their deceptive ease of use, it's unlikely that this thread will be abnormally popular.

I won't comment on the effacy of indicators, other than to say that people seem to cling to them through thick and thin.

This thread appears to be very similar to the 'no indicators' thread which was very popular until certain events occured of which you are all probably aware. So I would not be surprised if this thread also became popular

As a relative novice to trading I consider that the form of trading you are discussing is the nearest to the coal face and most likely to give me the best chance of success.

I will continue to view ( lurk ) and will ask the occasional question which will most likely be very basic, I apologise in advance.

Regards

bracke

 

[bracke]

TheBramble

Your question about VSA

I have been reading a book 'The Undeclared Secrets That Drive The Stockmarket' By Tom Williams Of TradeToWin.com

The isbn no is 0-9523465-0-8 Published by Genie SoftwareLtd

The book is about volume spread analysis.

Regards

bracke

 

[TheBramble]

The factors to be considered are in the title of the thread. "..

Thanks for the slap. I guess it was pretty obvious from the thread title.

Not sure what you mean by "contrivances"..

As in the supply and demand are contrived by those who can in order to manipulate the actions of others.

As in lack of supply does not necessarily imply increase in demand. And lack of demand does not necessarily imply increase in supply. They are used to manipulate the accumulation and distribution of stock at levels supportive of the big players aims. Hence, they are second-level contrivances which lead to Support and Resistance, which is where we get to play.

I wasn't dismissing supply and demand in asking 'what other factors' - but I think I get all I need to know about them from watching S&R. So what am I missing?

 

[dbphoenix]

So what am I missing?

I know nothing about your strategy or tactics, so perhaps you're not missing anything.

 

[dbphoenix]

I will continue to view ( lurk ) and will ask the occasional question which will most likely be very basic, I apologise in advance.

Feel free. This isn't a lecture thread or a pulpit of any sort, so if there are no questions, there won't be any posts.

And there's nothing to apologize for. Everybody was a beginner at some point.

 

[dbphoenix]

Another chart to chew on (first is attached to post 56 [now 46]):

 

[bracke]

Another chart to chew on (first is attached to post 56):

I have anumber of question, most, if not all are very basic, please bear with me.

Working from left to right along your chart.

1 r=resistance ?

2 note tails, what is to be noted ?

3 s=support ?

4 poor quality vol,unable to make new high, but volume was rising.

5 up vol gets worse. what is significance ?

6 pot'l SC off, what does this mean ?

7 pot'l exh, what does this mean ?

8 weak mammer accom by good vol, what is significance ?

9 slng exh, what does this mean ?

Regards

bracke

 

[dbphoenix]

I have anumber of question, most, if not all are very basic, please bear with me.

Working from left to right along your chart.

1 r=resistance ?

2 note tails, what is to be noted ?

3 s=support ?

4 poor quality vol,unable to make new high, but volume was rising.

5 up vol gets worse. what is significance ?

6 pot'l SC off, what does this mean ?

7 pot'l exh, what does this mean ?

8 weak mammer accom by good vol, what is significance ?

9 slng exh, what does this mean ?

Regards

bracke

1. yes
2. price is unable to hold at the highs
3. yes
4. vol was rising to the downside
5. vol declines as price rises
6. potential selling climax off minor support from previous day; note hammer
7. potential exhaustion, what some call "oversold"
8. weak hammer accompanied by good volume. The volume suggests a large number of shares being traded, but the weakness of the hammer suggests that buyers are not particularly strong
9. selling exhaustion

 

[bracke]

dbphoenix

Thank you for your reply

The major move of the day appears to have been at approx 12.00 with the price 1492. At that point what was there on the chart that would have indicated that the price was about to fall.
I appreciate that vol had dropped off but surely that is not enough to indicate that the price was about to fall. What else would you have used to indicate the fall ?

Regards

bracke

 

[dbphoenix]

dbphoenix

Thank you for your reply

The major move of the day appears to have been at approx 12.00 with the price 1492. At that point what was there on the chart that would have indicated that the price was about to fall.
I appreciate that vol had dropped off but surely that is not enough to indicate that the price was about to fall. What else would you have used to indicate the fall ?

Regards

bracke

The volume in and of itself would not imply a fall. Vol reflects only the number of shares/contracts traded. Demand pushes price, but the series of lower highs suggested that demand was insufficient to push price (if volume had been higher, one could assume a greater selling pressure).

Notice also that the bars get smaller and smaller, suggesting that equilibrium is being reached. At that point, you figure the probability of an upside breakout or a downside breakdown.

Given the soft demand and the increasing resistance, the line of least resistance is most likely down. However, one must also be prepared to fade his own setup and take the long side if that turns out to be necessary (most traders will allow themselves to be stopped out, get depressed about being wrong, and never consider the criteria for taking the opposite side).