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  • #1
  • First Post: Edited Mar 6, 2022 8:28am May 4, 2021 6:12pm | Edited Mar 6, 2022 8:28am
Post #142 begins a new start. Posts before this are still good to review.

While analyzing charts I like listening to Blues. But if you've got the trading blues then let's talk.

All are invited to participate. Polite criticism or disagreement is welcome.

This thread will be about the basics of trading from a purely technical analysis perspective.

When I say basics I'm talking about simple truths that are often dismissed before one has developed a firm foundation of basic trading concepts.

Speaking about basics is sort of like a medical student learning anatomy and physiology so he can become a medical doctor.

The Study of Human Anatomy is learning the parts of the body such as organs, bones, muscles, arteries and veins, nerves, etc. If you don't know where these things are and how they work together then there's really little sense in trying to learn physiology.

The Study of Human Physiology is learning how organ systems work on a cellular level and how organ systems affect other organ systems.

Market Structure is akin to Anatomy. We need to understand the anatomy of markets. This entails Trends, Ranges and Swings.

Price action is akin to physiology and entails understanding bar level price action and concepts such as effort and effort reversed.

We'll look at the subjects of market structure and price action closely. Understanding them will provide a foundation for trading from which trading strategies or methodologies may naturally evolve.


https://youtu.be/B7HBzDTe9VY

https://youtu.be/4fk2prKnYnI
  • #2
  • May 4, 2021 6:21pm May 4, 2021 6:21pm
Where to start?

That's easy. TRENDS!!!

I'm sure you've heard it over and over...The trend is your friend until the end, etc. etc.

Is it true? Let's talk about it.

This is a discussion so y'all are invited to chime in with your comments. But for now just TRENDS and nothing else.

One other thing...No Indicators! Sorry but if you're using them and you're blowing accounts or you ain't making money then first things first.

You gotta learn what price is telling ya and not what the Indies are telling ya. That means not only will we talk about trends but other concepts of price action.

But TRENDs first! All right. Let's go but first

https://youtu.be/NU5xA6ty0a4
  • #3
  • May 4, 2021 6:35pm May 4, 2021 6:35pm
So let's get started with trends. Hang on because this will be the first of many of my posts and hopefully of y'all's too. We're gonna beat this one to death.

Remember, this is a discussion so don't be shy.

What is a trend?

Simply it's when price is goin up or it's goin down. I know thanks for that. That's rich!

Ok let's get more specific but first let's answer the question? Why bother with trends? It seems simple to me. In order to make money price needs to move away from your entry, either up or down in a sustained fashion. Right? If it doesn't then you makin' nothin'.

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There's a trend! I don't know about you but I would like to be in at the green arrow and out at the target!
  • #4
  • May 4, 2021 6:40pm May 4, 2021 6:40pm
A trend is the kind of movements the market makes in one direction for atleast several days.
A trade should be based on an assumption based on facts
  • #5
  • May 4, 2021 6:47pm May 4, 2021 6:47pm
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Trends have different characteristics.
Some just seem to go up or down with little retracement.
Some have large retracements.
Depending on how far you zoom in or out will also influence the way the trend looks
  • #6
  • May 4, 2021 6:56pm May 4, 2021 6:56pm
Quoting maverick2017
A trend is the kind of movements the market makes in one direction for atleast several days.
Hello Maverick.

Which one of these is not a trend or are they both representative of trends?
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  • #7
  • May 4, 2021 6:59pm May 4, 2021 6:59pm
Both of them are trends.
On the second chart, trend might have ended.
A trade should be based on an assumption based on facts
  • #8
  • May 4, 2021 7:04pm May 4, 2021 7:04pm
Quoting maverick2017
Both of them are trends. On the second chart, trend might have ended.
The top one is a day chart so this would satisfy your definition of a market moving in one direction for several days.

The bottom chart is a 1 minute chart so it wouldn't satisfy that definition but it is in fact a trend.


So time by itself can't define a trend.
  • #9
  • May 4, 2021 7:10pm May 4, 2021 7:10pm
So we need to have an objective definition of a trend and we know that time really has no bearing on the definition.

I mentioned earlier that a trend is when price is either going up or its going down and it is absolutely true.

But we can be a little more specific so let's try this:

An uptrend is when price is making consistently higher highs and higher lows.
A downtrend is when price is making consistently lower highs and lower lows.

Time is not a factor because price is fractal which essentially means price is price regardless of time frame.
  • #10
  • May 4, 2021 7:19pm May 4, 2021 7:19pm
Quoting Winston Reed
So let's get started with trends. Hang on because this will be the first of many of my posts and hopefully of y'all's too. We're gonna beat this one to death. Remember, this is a discussion so don't be shy. What is a trend? Simply it's when price is goin up or it's goin down. I know thanks for that. That's rich! Ok let's get more specific but first let's answer the question? Why bother with trends? It seems simple to me. In order to make money price needs to move away from your entry, either up or down in a sustained fashion. Right? If it doesn't...
Hi Winston

Trading trends is just trading liquidity until it becomes exhausted in either the Longs or shorts.
Therefore a trend would be better explained as an event where increasing volume expands price till it eliminates one side of the order book.

A trend starts with a volume shift by flipping the long positive delta to short negative delta and maintains pressure on the longs in a bearish move that always exceeds its resistance.

In other words, the selling orders has to overcome bullish resistance by increasing its volume levels without waste.

In other words, constant increasing Volume that has intent but without too much aggression.

In other words, increasing Bids on a bearish move and increasing Asks on a bullish move.

In other words - VOLUME

Volume

I thing you get my message, just my 2 cents worth
Trading thin liquidity at the boundary of the charts
  • #11
  • May 4, 2021 7:23pm May 4, 2021 7:23pm
Quoting Winston Reed
So we need to have an objective definition of a trend and we know that time really has no bearing on the definition. I mentioned earlier that a trend is when price is either going up or its going down and it is absolutely true. But we can be a little more specific so let's try this: An uptrend is when price is making consistently higher highs and higher lows. A downtrend is when price is making consistently lower highs and lower lows. Time is not a factor because price is fractal which essentially means price is price regardless of time frame.
I have a question.

why is only higher highs and higher lows OR lower high lower lows be considered when there could exist another pattern which repeats but moves only in one direction?
A trade should be based on an assumption based on facts
  • #12
  • May 4, 2021 7:30pm May 4, 2021 7:30pm
Quoting RickM
{quote} Hi Winston Trading trends is just trading liquidity until it becomes exhausted in either the Longs or shorts. Therefore a trend would be better explained as an event where increasing volume expands price till it eliminates one side of the order book. A trend starts with a volume shift by flipping the long positive delta to short negative delta and maintains pressure on the longs in a bearish move that always exceeds its resistance. In other words, the selling orders has to overcome bullish resistance by increasing its volume levels without...
Hi Rick,
Can you explain in terms of limit orders and market orders?

Thanks.
A trade should be based on an assumption based on facts
  • #13
  • May 4, 2021 7:52pm May 4, 2021 7:52pm
Quoting RickM
{quote} Hi Winston Trading trends is just trading liquidity until it becomes exhausted in either the Longs or shorts. Therefore a trend would be better explained as an event where increasing volume expands price till it eliminates one side of the order book. A trend starts with a volume shift by flipping the long positive delta to short negative delta and maintains pressure on the longs in a bearish move that always exceeds its resistance. In other words, the selling orders has to overcome bullish resistance by increasing its volume levels without...
First
https://youtu.be/lxWXoiGybTA?list=PLqhB61yJZzkjH8rgfPAwzjj_l5AlQHZvq

I don't disagree with you Rick. Your explanation likely explains underlying and unseen, by most, dynamics of the appearance of a trend on a price chart which is really the focus: What does a trend look like on a price chart?

In addition most who are trading forex are probably uninterested in volume, "the order book" or DOMS and such. I think these things would be very helpful trading futures which is also not the focus here. Actually I've never used volume in forex nor futures and I don't miss it.
  • #14
  • May 4, 2021 8:06pm May 4, 2021 8:06pm
So far we've looked at some basics of trends. Let's review...

1. When price tends to move up overall it is trending up (if price starts near the lower left of your screen and ends near the upper right of your screen then it is most likely up trending. The opposite is true for a down trend).
2. When price tends to move down overall it is trending down.
3. More specifically trends can be defined by the following: An uptrend on a price chart is when price is consistently making higher highs and higher lows and a down trend on a price chart is when price is consistently making lower highs and lower lows.
4. We've also described why it's important to understand what a trend is and how trends behave: To make money price must move away either consistently up or consistently down to make money.

I know this all seems too simple...and it should be. Trading doesn't need to be complicated. Getting this trend thing down will get you well on your way to making money and it won't be because I show you a method or system. You'll end up developing your own trading method by having a firm foundation in the basics. You don't need a so-called "edge" either.

Don't let the "basics" fool you either. These basics can get a bit complicated as you'll see.
  • #15
  • May 4, 2021 8:15pm May 4, 2021 8:15pm
This is an excellent example of a market that was trending up and now appears to be beginning a down trend. Without going into detail can you see why the red down arrow was a pretty decent entry?
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We'll go into this chart in more detail.
  • #16
  • May 4, 2021 8:18pm May 4, 2021 8:18pm
Quoting maverick2017
{quote} I have a question. why is only higher highs and higher lows OR lower high lower lows be considered when there could exist another pattern which repeats but moves only in one direction?
We are talking about trends which either trend up or trend down. I'm sure there are other ways to describe the behavior and I'm all ears.
  • #17
  • May 4, 2021 8:19pm May 4, 2021 8:19pm
Quoting Winston Reed
This is an excellent example of a market that was trending up and now appears to be beginning a down trend. Without going into detail can you see why the red down arrow was a pretty decent entry? {image} We'll go into this chart in more detail.
Notice after each HH price eventually retraces to a LH before going on to make a new high. The retracement can also be called a corrective leg. The move in price from the HL to the HH can also be called the impulse leg.
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  • #18
  • May 4, 2021 8:26pm May 4, 2021 8:26pm
Quote
I'm sure there are other ways to describe the behavior and I'm all ears.
Me too
A trade should be based on an assumption based on facts
  • #19
  • May 4, 2021 8:28pm May 4, 2021 8:28pm
This is a model of an uptrend with impulse and corrective legs which are fundamental components of a trend.
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  • #20
  • May 4, 2021 8:45pm May 4, 2021 8:45pm
Let's go back to our 15min EURUSD chart. In this first chart the red notations identify impulses and correctives with their HHs, HLs, LHs and LLs in the context of the data that fits into my screen. We can also just call them swings.

That means that there are smaller swings making up the impulse and corrective legs of the larger swings.
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In this chart I've taken a segment of one corrective swing and zoomed in to show the smaller swings in more detail.

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Is this revealing to you? It is to me!!!
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