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Where can I learn more about Price Action like those in James16 charts? 9 replies

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james16 Chart Thread

  • #6,061
  • Edited 1:10am Sep 14, 2007 12:59am | Edited 1:10am
Quoting JoshDance
Hi all,

After considering one component of system development as outlined by Tharp, namely opportunity (the number of trades you get in a given period of time), the last week or so I've been trying new ways of trading--trading on very small TFs. I've been using a method outlined elsewhere here on FF where the traders use a 5 second chart, and there is a ton of action there--can be quite dangerous, but can also produce tons of opportunities.

As Tharp notes so well, a system which produces an average of, say, 3R return per trade (twice the initial risk, in other words), can not be assumed to outperform a system which produces an average return of only 0.5R. This can easily be the case if a day-trading or scalping system can produce, say, 10X more trades per a given time period. Over an average day, in this example, the day trading system with a 0.5R expectancy produces a 5R per day "expectunity" (Tharp's term), while the other hypothetical system only produces 3R, if it gives one trade per day on average. Moving on...

Well, I've been an advocate of longer TFs, as is the general approach here, and I still believe greatly in the validity of longer TFs--but I believe now more so than ever that one must trade what fits him or her best, and not just take a general rule and forcibly apply it to himself/herself. That's why I forced myself to revisit shorter timeframes.

The case against shorter TFs has always been that price action is less reliable--basically price will move in a more erratic fashion... at least, that's what I interpret as the main disadvantage to shorter TFs. But take a look at the attached 1 minute chart of EURJPY which spans the last couple of days. Now, if you didn't know any better, would you guess this to be a 1-min time frame, or might you believe at first glance that it was a well-behaved daily chart?

While IMO bar patterns like BUOB, pins, and so forth may not be as reliable, look how well price, overall, respects S/R and trends so nicely. This is just a small data sample, but this pair, and many others, behave just as nicely on a very regular basis on much smaller TFs as they do on larger ones. With so many opportunities, a disciplined trader with a fixed %R position sizing system could potentially do well.
This is a great post and I completely agree with you!

From my experience, I don't think any timeframe is more reliable than the other but I do think that trading daily/weekly teaches you discipline and patience which is a vital tool to take over to trading smaller timeframes.

I traded daily for a long while and didn't have a great deal of success. Since I moved to hourly, things have been looking up. I have had eight winning weeks back to back with real money...although of course, having said that, this week is shaping up to be a loser...
  • #6,062
  • Sep 14, 2007 1:14am Sep 14, 2007 1:14am
Quoting JoshDance
Hi all,

After considering one component of system development as outlined by Tharp, namely opportunity (the number of trades you get in a given period of time), the last week or so I've been trying new ways of trading--trading on very small TFs. I've been using a method outlined elsewhere here on FF where the traders use a 5 second chart, and there is a ton of action there--can be quite dangerous, but can also produce tons of opportunities.

As Tharp notes so well, a system which produces an average of, say, 3R return per trade (twice the initial risk, in other words), can not be assumed to outperform a system which produces an average return of only 0.5R. This can easily be the case if a day-trading or scalping system can produce, say, 10X more trades per a given time period. Over an average day, in this example, the day trading system with a 0.5R expectancy produces a 5R per day "expectunity" (Tharp's term), while the other hypothetical system only produces 3R, if it gives one trade per day on average. Moving on...

Well, I've been an advocate of longer TFs, as is the general approach here, and I still believe greatly in the validity of longer TFs--but I believe now more so than ever that one must trade what fits him or her best, and not just take a general rule and forcibly apply it to himself/herself. That's why I forced myself to revisit shorter timeframes.

The case against shorter TFs has always been that price action is less reliable--basically price will move in a more erratic fashion... at least, that's what I interpret as the main disadvantage to shorter TFs. But take a look at the attached 1 minute chart of EURJPY which spans the last couple of days. Now, if you didn't know any better, would you guess this to be a 1-min time frame, or might you believe at first glance that it was a well-behaved daily chart?

While IMO bar patterns like BUOB, pins, and so forth may not be as reliable, look how well price, overall, respects S/R and trends so nicely. This is just a small data sample, but this pair, and many others, behave just as nicely on a very regular basis on much smaller TFs as they do on larger ones. With so many opportunities, a disciplined trader with a fixed %R position sizing system could potentially do well.
Hi Josh,
I agree with you, I think its a personality thing...I still believe what Jim says though, you need to trade the longer timeframes before tackling the smaller ones and if you cant make money on demo, well its unlikely you can make it on a live account...its all about developing good habits that will carry you through your difficult moments. I find longer timeframes more calm, I expect a certain amount of drawdown and it doesnt make me panic...but like you said, its a personal preference thing really, and if you think about it, its all mathematical so really fibs and pa should technically work on any timeframe...I have traded as low as the 1m, and I can even remember drawing trendlines on the 5m Who needs coffee?? LOL my heart starts pumping just thinking about those days...take care, Raz
Never say never.
  • #6,063
  • Sep 14, 2007 1:24am Sep 14, 2007 1:24am
So it was Northern Rocks announcement that triggered the GBP nosedive last night...I love it...forget sitting infront of the computer, anxiously awaiting the latest economic news...all you have to do is be about to switch off for the evening...and then happen to catch an interesting report - have a notion of how it will affect the masses....see the market begin to react and then the magic words unexpectedly hit the news wires: "The report stresses that there is no reason to panic" and you are guaranteed that everyone is going to panic and easy money is going to be made
  • #6,064
  • Edited 2:02am Sep 14, 2007 1:50am | Edited 2:02am
JoshDance,

You have a good point. But here is my personal opinion why I trade large time frames instead of trading 5sec - 5min.

It's not that I am unable to find good opportunities with high winning frequency on small time frames. After years of experience in this market and thousands of trades under my humble belt I found out I can do that without any problem whatsoever.

I like longer term trading because I like looking at the charts 1, maybe 2 hours max a day and I can figure out how to make 100 - 1000 pips a week. Yes I said 1000 pips a week because I have these weeks sometime. This week was around 1000 pips. It's not not a miracle to catch 1000 pips in one week, you just need to analyze your charts correctly. They tell the entire story there is to tell (past, present and FUTURE).

Long story made short: each trader with it's own preferences. End of story

I wish you profitable trading session
  • #6,065
  • Sep 14, 2007 2:00am Sep 14, 2007 2:00am
Example: I can spend all day in front of my computer and I can find 5 - 30 pips opportunities on multiple pairs.

I for one, trading a very small time frame, I wouldn't be tempted to jump with more then 0.5 - 1 lot on any of these trades. Even if I know the winning rate is higher then the opposite scenario, I just don't feel like taking that chance with a pattern emerging on a 5 min time-frame.

When I see a beautiful price action&ema&trendline&whatever pattern emerging on a 4h or daily chart, I do have the trust to jump on it with 5 to 50 lots if I feel like it. I am that confident on the setup. No noise, no bullsh*t, I know it will work better, and for MORE PIPS. That is what counts for me in the end. Less trades, more pips.

I admit my first big trades were off a small time-frame chart, but my most profitable trades were off large ones.

For me it's a no brainer.
  • #6,066
  • Sep 14, 2007 2:35am Sep 14, 2007 2:35am
Raczekfx / Tiki...

abc is just a 123 move off of the high, which can either end after that 3 step or pull up again and then do a last final push down in a larger ABC 3 step in turn.

Then the old abc is just the A, then a move back up happens in B, then a final push down in C....

But the initial abc is enough to get a first initial target, in this case FE 100 - 161.8 are usually a good idea to look for confluence with other things with.

In this case the channel low = FE 161.8 as well, so that might be a nice spot to TP and if it breaks, possibly readd on a TL underside retest+PA setup.

Then it's just s/r and fibs, I'd trail until contrary PA shows.


This is all just crutches, simplest way is just to trail things.

Oddly enough on my IBFX feed the TL comes in at FE 138.2, but not on the Windsor one...maybe one of the two is broken or it's that stupid MT4 oddity...
Attached Image (click to enlarge)
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Trust price. Know yourself.
  • #6,067
  • Edited 2:51am Sep 14, 2007 2:41am | Edited 2:51am
Quoting the_wizard
So it was Northern Rocks announcement that triggered the GBP nosedive last night...

I'll take obscure elliot waves over news any day(5 wave sequence completes at high, makes 2 PBs at s/r, then goes into the usual abc / 123 / down retrace down for good pattern).

Another way to project a target to line up with s/r - fib extensions.

The "problem" with those is that they're usually not that "far" away, i.e. small targets.

Notice how there was a TBL at that s/r(2.0233) before it broke down after "pulling back" in the b to .786.

As always - battering ram logic. Bam, retrace, bam+smash through. 123. Dancing, dancing...


P.S. watching EURGBP for signs of stalling / retracing, maybe cable will finally get to make up at least a small bit of lost ground today or next week? Took my core long off for +102 for now, flat, waiting for retrace...just hit too many targets here (FE 100 + 161.8 fib extension of prior range + I've been counting crows, er, waves..also we've just moved above a TL, that usually causes exhaustion pretty soon afterwards because people just looooove to retest those...except in Gold and EURUSD it seems hehehe)
Attached Image (click to enlarge)
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Trust price. Know yourself.
  • #6,068
  • Sep 14, 2007 3:47am Sep 14, 2007 3:47am
Quoting SeekingLight
I'll take obscure elliot waves over news any day
I mostly agree with that except in situations like last night.

IMO, pin bars have a high probability of working...but the words DON'T PANIC after really bad news? That right there is going down...
  • #6,069
  • Sep 14, 2007 3:49am Sep 14, 2007 3:49am
The more I read, the more I see how very little I know !!!
  • #6,070
  • Sep 14, 2007 4:29am Sep 14, 2007 4:29am
Quoting SeekingLight
Raczekfx / Tiki...

abc is just a 123 move off of the high, which can either end after that 3 step or pull up again and then do a last final push down in a larger ABC 3 step in turn.

Then the old abc is just the A, then a move back up happens in B, then a final push down in C....

But the initial abc is enough to get a first initial target, in this case FE 100 - 161.8 are usually a good idea to look for confluence with other things with.

In this case the channel low = FE 161.8 as well, so that might be a nice spot to TP and if it breaks, possibly readd on a TL underside retest+PA setup.

Then it's just s/r and fibs, I'd trail until contrary PA shows.

This is all just crutches, simplest way is just to trail things.

Oddly enough on my IBFX feed the TL comes in at FE 138.2, but not on the Windsor one...maybe one of the two is broken or it's that stupid MT4 oddity...


Just wanted to add that the FE 161.8 was exceeded. This for me makes me very alert as the GJ PB also just triggered and is sitting on the daily / 4h TL now.

If that goes and cable does, too, this is dangerous stuff.

The fact cable exceeded that FE and lost the TL imho opens up risk for a wider retrace as it no longer fits just a simple ABC => it's a bigger move.

Might go all the way to 1.9990/2.0. Not impossible. EURGBP is back to rallying

Scary scary to see pairs so decoupled =)

270 off the high for cable, 70 for EURUSD...

My biggest dilemma with these situations is I can't look at pairs in isolation well.

I like / need an across the board "gist" of "what is going on". (USD sold? JPY bought? CHF? What?)

Not happening right now...so I could just be talking total BS, as usual ;d


P.S. who else here hates the fact MT4 isn't worth s...t for across timeframe TL drawing? Draw one on 4h, it's in the desert on daily, draw one on daily, it's completely elsewhere on 4h.....arghhhhhhh....
Trust price. Know yourself.
  • #6,071
  • Sep 14, 2007 6:01am Sep 14, 2007 6:01am
It's good to have a respect for those old S/R areas.
I posted this setup yesterday some 100ps before it materialized.
Purple line was my target long and reverse to short,
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  • #6,072
  • Sep 14, 2007 6:06am Sep 14, 2007 6:06am
... and another one. Picky, picky, overtrading is not the key here.
This one went against my some 40ps before turning finally lower..
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  • #6,073
  • Sep 14, 2007 6:13am Sep 14, 2007 6:13am
Quoting raczekfx
... and another one. Picky, picky, overtrading is not the key here.
This one went against my some 40ps before turning finally lower..
two days of struggle.... let's see if we can get a nice pin today.
Next week rate announcement. what's a gonna be, .5 - it will be bad.
No rate cut? even worse, very tough job for the feds, but who cares.
Our daily setup is forming slowly...
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  • #6,074
  • Sep 14, 2007 6:27am Sep 14, 2007 6:27am
.
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  • #6,075
  • Sep 14, 2007 6:33am Sep 14, 2007 6:33am
Quoting raczekfx
not sure about ABC (it's been a while since my last english class), but I have a question..
Suppose I was short cable since yesterday and was looking for opportunities to take some profit (I could take some now ~2.0180). I was also thinking of taking some at 2.0060 and the rest around 1.9960/80. Does that make sense?
Thanks.
R
..never mind. I already know the answer..
Thanks Seeking Light.
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  • #6,076
  • Sep 14, 2007 6:53am Sep 14, 2007 6:53am
Quoting Goozman
JoshDance,

You have a good point. But here is my personal opinion why I trade large time frames instead of trading 5sec - 5min.

It's not that I am unable to find good opportunities with high winning frequency on small time frames. After years of experience in this market and thousands of trades under my humble belt I found out I can do that without any problem whatsoever.

I like longer term trading because I like looking at the charts 1, maybe 2 hours max a day and I can figure out how to make 100 - 1000 pips a week. Yes I said 1000 pips a week because I have these weeks sometime. This week was around 1000 pips. It's not not a miracle to catch 1000 pips in one week, you just need to analyze your charts correctly. They tell the entire story there is to tell (past, present and FUTURE).

Long story made short: each trader with it's own preferences. End of story

I wish you profitable trading session
Gooz, thanks for your feedback from your experience! I remember starting with 5min bars about 6 months ago, and knew nothing of what was going on. Then I began associating with the good folks here and began to use 4-hr and daily bars. I think that really helped me get an understanding of how price moves, and so now I can confidently try out lower TFs. I'm trading with a very small Oanda account, which is equal to about one good night out with drinks for me, so it's no big loss if it blows up :-)

With regard to screen time, I have only been trading the 5s TF for about 2-3 hours per day. And I only risk 0.5% per trade. But with the method I'm using I tend to find at least 3 good setups per that time period, so it's working well. In fact just now I caught a 15-pip move on EURJPY, with an 8 pip SL + 2.3 spread, so I got about a 0.8% increase in equity just in the last 3 minutes. :-) Like you said though, each person must do what fits him or her best!!
  • #6,077
  • Sep 14, 2007 7:08am Sep 14, 2007 7:08am
.. a bounce off 4hr support and now we have a 4hr PB
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  • #6,078
  • Sep 14, 2007 10:03am Sep 14, 2007 10:03am
Quoting JoshDance
I'm trading with a very small Oanda account, which is equal to about one good night out with drinks for me, so it's no big loss if it blows up :-)
So 5 pips equal a beer? Or something like that?
  • #6,079
  • Sep 14, 2007 11:09am Sep 14, 2007 11:09am
Quoting Goozman
So 5 pips equal a beer? Or something like that?
Well, that gives me a whole new view of Money(Beer) Management. Now where was that MM thread....
  • #6,080
  • Sep 14, 2007 12:19pm Sep 14, 2007 12:19pm
Quoting Goozman
So 5 pips equal a beer? Or something like that?
I wish! Typical is 1 pip = 7 cents. So I'd have to have a BIIIG winner for a beer. At least a good Bass or Newcastle. :-)
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