Trading the NQ

Gring0

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Aug 31, 2015
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NQ 2008 vs 2018 tick

In 2008 prices dropped from 2200 to 1000. That's a 1200 point drop. It was around 55% drop or thereabouts. Recently we had about an 1100 point drop from 7700 to about 6600. Percentage wise this is much less, around 15%. Each tick still has the same value on NQ? In other words, is it a lot easier to make money doing the same thing if one was profitable in 2008? I remember the good old days when for a few days price wouldn't move much. It hasn't been happening much of that any longer. At least that's what my experience has been. I don't trade the futures but was just wondering as it is about trading the NQ.
 

Gring0

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Aug 31, 2015
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The 6900 level held yesterday as Db had pointed the important level out a few posts ago. Price showed first the ability to arrest downward movement yesterday and then showed strength today. Considering price was retracing and all, it is time to stay alert and perhaps be open to possibilities.
 
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Gring0

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Aug 31, 2015
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NQ Weekly and Daily Analysis

NQ has shown quite some strength. Yesterday was a pretty strong up day and today so far the price has not been too weak. It is normal in a trend for price to gyrate and take a breather. So far it seems the movement downward today has been small compared to the gains and demand appears to be in charge. Price is also above the 50% level (~7155) from to top of the drop to the bottom. Being above this level again implies strength as it shows demand was strong enough to push beyond it. Lots of signs of strength after this whole month of weak October.

This talk is for this recent daily run up. It doesn't imply we may not already be in a recession or the drop in prices that can accompany it. What the price movements are called is irrelevant as we make money by being in sync with the market whether it's going up or going down. Speculating is a business of gauging the temperature of the demand and supply, deciding which side holds sway, having a plan to deal with the situation, and acting on that plan in a timely manner. For all this we use demand & supply, trend, ranges, price, volume, and time.

Looking at the weekly I've drawn a simple straight line that was breached when this October drop came. This upward movement in the bigger picture could just be the retracement for that larger trend. Keeping it simple usually allows the mind to remain nimble to act when conditions warrant.

So far the daily trend is up and that's what my focus is on. I would again remind that looking at the horizontal price levels is very valuable. The more experience I gain the more reliant I am becoming on the horizontal. I am also monitoring the volume but couldn't figure out how to put it on this chart. Usually I just look at the non-futures Nasdaq indexes directly for a quick glance at the volume at the end of the day.

Gringo
 

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dbphoenix

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So far the daily trend is up and that's what my focus is on. I would again remind that looking at the horizontal price levels is very valuable. The more experience I gain the more reliant I am becoming on the horizontal. I am also monitoring the volume but couldn't figure out how to put it on this chart. Usually I just look at the non-futures Nasdaq indexes directly for a quick glance at the volume at the end of the day.

Gringo
Even though I draw my trendlines and support and demand lines differently than you do, none of that is particularly relevant to the current trend, which, as you point out, is up. As for "looking left" to the horizontal, yes, as this is where one finds those levels at which "the money" reversed price in the past and may do so again, in this case, 6580 on the 29th. At this point, the trader relies on his protocols to tell him whether or not to exit his short and, if so, when. But assuming he's exited by the 2nd, he's then faced with a downmove and the necessity of deciding what to do about it. Is it a retracement or the beginning of a reversal? Most beginners assume it's a reversal and panic. The SLA trader, however, understands that after a move of 150pts one can expect a little profit-taking. So he leaves it up to the market to tell him what to do. He anticipates buying if price exits from the top of this bar and re-entering his short if it exits from the bottom (it's a "dog"). Here it exits from the top, on the 6th, which makes a retracement more likely than a reversal. There's no reason to exit in the meantime, and the retracement is confirmed on the 7th when price exceeds the 2nd's swing high. No need for anxiety or hand-wringing or any sort of "emotional" response. It's just a matter of understanding price movement.

At this point, price is hung in the middle of the hinge formed between the 11th and the 17th as well as the middle of the downmove from the 1st to the 29th. Until The Money decides what it wants to do, all one can do is make sure his stops are properly placed and wait.

Db
 
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Gring0

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Aug 31, 2015
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As they say in Richville: A stop is a traders best friend.
 

Gring0

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That was quite a reversal. Though looking to the left it does make sense. 7200 had some suppliers that had shown up in the past. So now the 50% got whacked. The DL for the upside move on the daily is breached. So are we going to get a retracement again? That would mean there's potential for more downside. We're also as Db mentioned stuck between certain important levels and this might turn into a ranging area. Many possibilities.
 
Jul 25, 2018
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Northern CA
NQ -Daily 11.13.18 My first contribution.....

My first real chart example....please chime in and point out anything I should or should not be noticing.

The newest UP move did not hold, and the reversal pushed through through the 50% mark very forcefully. This suggests weakness at this time.

Price has been arrested just above 6800, as it has a few times in the past. This is an important area of S/R to watch, and a break of this line will likely not find support until the last swing low area at 6600.

If it bounces upward, it is entering into a new, larger hinge that is forming. This could cause an explosive move upwards if price pierces the hinge's upper line.

If it remains in the hinge area until the end of the apex, then we are likely in a range area where equilibrium is being searched out.
 

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Gring0

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Aug 31, 2015
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My first real chart example....please chime in and point out anything I should or should not be noticing.

The newest UP move did not hold, and the reversal pushed through through the 50% mark very forcefully. This suggests weakness at this time.

Price has been arrested just above 6800, as it has a few times in the past. This is an important area of S/R to watch, and a break of this line will likely not find support until the last swing low area at 6600.

If it bounces upward, it is entering into a new, larger hinge that is forming. This could cause an explosive move upwards if price pierces the hinge's upper line.

If it remains in the hinge area until the end of the apex, then we are likely in a range area where equilibrium is being searched out.
I would suggest you open your own thread so it is more tailored toward your needs. We most likely would try to add our bit if we can. It would also be a log of how much improvement you've made instead of trying to find relevant posts that pertain to your questions.

As per this chart and the lines, to me it appears you're not so crystal clear about when to draw new DL/SL lines and what constitutes a hinge (deducing from the hinge drawn in image). So this is going to take the thread on a tangent in my opinion.

Hope to get a link when you start a thread with clear goals as to what you're trying to achieve and how you're going to go about achieving it.

Gringo
 
Jul 25, 2018
25
4
3
Northern CA
That bad? LOL

I would suggest you open your own thread so it is more tailored toward your needs. We most likely would try to add our bit if we can. It would also be a log of how much improvement you've made instead of trying to find relevant posts that pertain to your questions.

As per this chart and the lines, to me it appears you're not so crystal clear about when to draw new DL/SL lines and what constitutes a hinge (deducing from the hinge drawn in image). So this is going to take the thread on a tangent in my opinion.

Hope to get a link when you start a thread with clear goals as to what you're trying to achieve and how you're going to go about achieving it.

Gringo
That bad, eh? LOL.

I knew that last SL was not correct, as price had not traveled past that last swing low. That I chose to post the pic anyway teaches me something about myself at any rate.

I have read DB suggest that others start their own thread and keep a log. So I will go ahead and do this. Thank you for reminding me. I just get a feeling no one will go on. But I know that it is important for me, regardless.

Right now my main goal is to learn the SLAB. DB had said I could contact him here if I had questions. But I suppose if I knowingly post a chart with an incorrect SL, then I am just wasting people's time. I apologize for this.

But until DB tells me to NOT post, then I will still continue to come on and ask questions. I, too, would like to be as good as you are Gringo, and I have to start somewhere. I am nothing if not tenacious.
 
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dbphoenix

Well-known member
Aug 24, 2003
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My first real chart example....please chime in and point out anything I should or should not be noticing.

The newest UP move did not hold, and the reversal pushed through through the 50% mark very forcefully. This suggests weakness at this time.

Price has been arrested just above 6800, as it has a few times in the past. This is an important area of S/R to watch, and a break of this line will likely not find support until the last swing low area at 6600.

If it bounces upward, it is entering into a new, larger hinge that is forming. This could cause an explosive move upwards if price pierces the hinge's upper line.

If it remains in the hinge area until the end of the apex, then we are likely in a range area where equilibrium is being searched out.
When analyzing price movement via a chart, it is essential to do it from left to right rather than right to left, forwards rather than backwards. Otherwise whatever hypotheses one formulates or conclusions one draws will be incorrect (the fact that nearly every technician reads charts from right to left is one major reason why they take years to learn how to trade rather than months; or weeks). This particular chart begins in 2016 (see post 288). It isn't necessary to go back that far, of course, but if you look at that chart, you will note that the upper and lower limits of your trend channel are too low. They are not wildly low, but why not begin with the correct placement?

I don't know the significance of the horizontal line placed under the swing low from May 23, so I'll set that aside.

Your goal appears to be the assessment of strength vs weakness. If so, none of these lines are going to do you much good. Trend lines have to do with assessing trend. Supply and demand lines have to do with assessing the balance between supply and demand. They are also useful in assessing the relative strength of buyers and sellers, and in this regard they can be helpful. However, in this particular instance, they are not particularly relevant. What does matter with regard to strength vs weakness is your assessment of what Wyckoff called "force".

The particular state of affairs in which we find ourselves began when the upward price movement peaked on Oct 2nd. This peak exists regardless of whatever lines one draws or even if one doesn't use a chart. It exists independently as a price point, a transaction. It then ends with a climax on Oct 11th after travelling 821 points. 50% of this move is 7318. Price rallies to 7368 which, at the end of the day, is positive, suggesting strength. However, this movement fails immediately the next day and drops almost 800pts over the next nine days. This does not suggest strength. It does reverse, however, at the apex of the hinge that I pointed out from April and May.

One needn't draw any lines to see that price has fallen over 1100pts. Nor does one need lines to see that the volume accompanying the price climax on the 29th (not the 26th) is far less than that which accompanied the climactic move on the 11th, which is consistent with a reversal scenario.

So now what? The midpoint of this entire move is 7154. Price reaches 7143 in its attempt at a rally on Nov 2nd but then falls. It tries to rally again the next day and reaches 7225 but then fails to hold this advance and drops back below the midpoint the next day. It then drops below the last swing low, which is where we now find ourselves.There may be evidence of strength today or tomorrow or Friday. Or next week. But the story so far has for the most part been weakness, and this story has been told by rally failures, not by supply and/or demand lines.

Technical analysis is not about lines and angles and geometric shapes but rather behavior, what buyers and sellers want and what they're doing to get it. These efforts sometimes form shapes, such as a hinge, but the shapes are coincidental to the behavior, not a driving force of it. The elaborate copy-and-paste posts about such constructions as "ascending triangles" which go into great detail about converging lines and angles and what to do when this or that line is "broken" miss the point entirely, and if those who are following these instructions ignore the behavior that's creating the "pattern" in the first place, they will most likely trade in the wrong direction and lose their money.

The behavior which defines a hinge is that of attempts on the parts of buyers and sellers to determine fair value. While an attempt to reach this agreement could begin as early as today, so far the story has been about failure (I suspect buyers are very disappointed that that reversal didn't amount to something more lasting), and as long as buyers are on the defensive, a hinge won't form. They can't deal from weakness. Algorithms don't change this one iota.

Complex? It can be, at least to the extent that behavior is complex. But complicated? No. Not if one keeps it simple and focuses on guiding principles of behavior. The midpoint of the move from Oct 29th to Nov 8th is 6905 and we're below it. What one does about this will depend on how well he assesses current conditions, which is what real-time trading is all about.

Db
 
Jul 25, 2018
25
4
3
Northern CA
Wow. Greatly appreciated.

When analyzing price movement via a chart, it is essential to do it from left to right rather than right to left, forwards rather than backwards. Otherwise whatever hypotheses one formulates or conclusions one draws will be incorrect (the fact that nearly every technician reads charts from right to left is one major reason why they take years to learn how to trade rather than months; or weeks). This particular chart begins in 2016 (see post 288). It isn't necessary to go back that far, of course, but if you look at that chart, you will note that the upper and lower limits of your trend channel are too low. They are not wildly low, but why not begin with the correct placement?

I don't know the significance of the horizontal line placed under the swing low from May 23, so I'll set that aside.

Your goal appears to be the assessment of strength vs weakness. If so, none of these lines are going to do you much good. Trend lines have to do with assessing trend. Supply and demand lines have to do with assessing the balance between supply and demand. They are also useful in assessing the relative strength of buyers and sellers, and in this regard they can be helpful. However, in this particular instance, they are not particularly relevant. What does matter with regard to strength vs weakness is your assessment of what Wyckoff called "force".

The particular state of affairs in which we find ourselves began when the upward price movement peaked on Oct 2nd. This peak exists regardless of whatever lines one draws or even if one doesn't use a chart. It exists independently as a price point, a transaction. It then ends with a climax on Oct 11th after travelling 821 points. 50% of this move is 7318. Price rallies to 7368 which, at the end of the day, is positive, suggesting strength. However, this movement fails immediately the next day and drops almost 800pts over the next nine days. This does not suggest strength. It does reverse, however, at the apex of the hinge that I pointed out from April and May.

One needn't draw any lines to see that price has fallen over 1100pts. Nor does one need lines to see that the volume accompanying the price climax on the 29th (not the 26th) is far less than that which accompanied the climactic move on the 11th, which is consistent with a reversal scenario.

So now what? The midpoint of this entire move is 7154. Price reaches 7143 in its attempt at a rally on Nov 2nd but then falls. It tries to rally again the next day and reaches 7225 but then fails to hold this advance and drops back below the midpoint the next day. It then drops below the last swing low, which is where we now find ourselves.There may be evidence of strength today or tomorrow or Friday. Or next week. But the story so far has for the most part been weakness, and this story has been told by rally failures, not by supply and/or demand lines.

Technical analysis is not about lines and angles and geometric shapes but rather behavior, what buyers and sellers want and what they're doing to get it. These efforts sometimes form shapes, such as a hinge, but the shapes are coincidental to the behavior, not a driving force of it. The elaborate copy-and-paste posts about such constructions as "ascending triangles" which go into great detail about converging lines and angles and what to do when this or that line is "broken" miss the point entirely, and if those who are following these instructions ignore the behavior that's creating the "pattern" in the first place, they will most likely trade in the wrong direction and lose their money.

The behavior which defines a hinge is that of attempts on the parts of buyers and sellers to determine fair value. While an attempt to reach this agreement could begin as early as today, so far the story has been about failure (I suspect buyers are very disappointed that that reversal didn't amount to something more lasting), and as long as buyers are on the defensive, a hinge won't form. They can't deal from weakness. Algorithms don't change this one iota.

Complex? It can be, at least to the extent that behavior is complex. But complicated? No. Not if one keeps it simple and focuses on guiding principles of behavior. The midpoint of the move from Oct 29th to Nov 8th is 6905 and we're below it. What one does about this will depend on how well he assesses current conditions, which is what real-time trading is all about.

Db
As usual, your post is exceedingly instructive and gracious in its length. I truly appreciate it and will now work more using the actual swing highs and lows, not so much the lines. Your comment regarding the lower volume on the second price climax (being the true climax and most probable reversal area) occuring on 10/29 are straight from The SLAB. Still a bit difficult for me to pull it ALL together, but your comments bring everything around very quickly.

I hear you loud and clear on watching for "patterns."

Very helpful post!
 

dbphoenix

Well-known member
Aug 24, 2003
6,915
1,155
223
As usual, your post is exceedingly instructive and gracious in its length. I truly appreciate it and will now work more using the actual swing highs and lows, not so much the lines. Your comment regarding the lower volume on the second price climax (being the true climax and most probable reversal area) occuring on 10/29 are straight from The SLAB. Still a bit difficult for me to pull it ALL together, but your comments bring everything around very quickly.

I hear you loud and clear on watching for "patterns."

Very helpful post!
As I wrote in the SLAB and also in the introductory pdf to it (which is excerpted from the SLAB, so the two are identical), "the purpose of the 'Straight Line Approach' (SLA) is to enable both the beginning and the damaged trader to focus on what is most likely to affect their ability to enter and manage profitable trades." The beginning trader is by definition new to all this and so doesn't understand exactly what it is he's looking at. The "damaged" trader has been at this for weeks or months or years yet continues to fail because he still doesn't understand exactly what it is he's looking at. The task for both is the same: (a) to understand price movement and (b) how to translate that understanding into a profitable strategy. The lines are not essential for understanding price movement, but without them the discussion quickly and easily slips into the sort of vague, metaphysical baloney that is so common in the trading carnival and skipping them is not wise. It is important instead to understand them and how to use them before moving on to anything more sophisticated.

The chief purpose of the lines, again, is to provide an alert, or a warning, with regard to a change in the balance between buying pressure and selling pressure, or demand and supply. One can't skip this. One must be solid in it. Otherwise everything quickly comes unglued. Referring back to your chart, price makes a series of higher highs and higher lows in the segment you've provided. This is of interest whether you're in or not because the pushmepullyou of demand/supply is dynamic, and it can change quickly. A demand line underneath these higher lows would be helpful, in large part because of the double top on October 2 and the attention that a demand line would draw to itself if it were there, that is, if it isn't broken, you're looking at a range; if it does break, then you're looking at a reversal, all of which you need to know in order to make an informed trading decision.

Price then makes a series of lower highs and lower lows, breaking not only the demand line which isn't drawn but dropping below the last swing low on September 7th. This changes everything, and you're nowhere near the point where the blue line you've drawn is even possible: you've got decisions to make on the 8th and 9th. Are you, for example, long? If so, what signals are you using to exit that long? What signals are you looking for to enter a short? The lines will be helpful to you in making these decisions (as explained at length in the SLAB). But both the long and short entries and exits are made after an understanding of price movement has been reached. Without that understanding, the lines are of no more value than a randomly-plotted doodle.

Learn to read your charts from left to right. Use replay so that the right edge of whatever you're working on is as much as you can see (if you can see to the right of what is pertinent to your charting, that information will most likely influence your perception, and you may not even "see" what is critical to your decision-making process). If, for example, you were tracking this using replay, your right edge would not extend past October 5th, or possibly even the 1st, since that is what alerts you to a possible change in the first place.

Db
 

Lindsaybev

New member
Jul 25, 2018
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Northern CA
Dear DB and Gring0,

I have opened up my trading journal. Please take the time to glance over at my very tentative thread. (Tentative in that I really just want to hear from people who are helpful. I see what you have endured at times, and it is a testament to your continued kindness in the face of some real jerks....) I really want to become adept using the concepts in The SLAB. I love coming on this thread and reading what you each post. But I do not want to take away from what it is that you offer to others.

https://www.trade2win.com/threads/tj-of-trading-price-on-the-qqq.234213/

I look forward to all of your posts here, and will be checking in daily, as I have been!

-L