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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

  • #40,221
  • Aug 6, 2009 8:09pm Aug 6, 2009 8:09pm
Quoting Jigsaw
SP,

I feel exactly the same way, I think your example is perfectly valid as well. I for one will be looking for the PA tomorrow . . Another thing I sometimes think about is like that example above, where a sort of "aggregate PA" occurs, ie eventhough price is not going very far there seems to be a lot of either bullish or bearish PA over a period of time and then the opposite setups seem to fail. . .

Nice entry and management btw bro

I still can't use ICCE to save my life though, I have lurked that thread since the start and...
That picture made me throw up a little
skype: ststroud. let's talk trading.
  • #40,222
  • Aug 6, 2009 8:13pm Aug 6, 2009 8:13pm
Quoting tyler812
That's what I love about this thread! The content in this thread is what opened my eyes to PA, and the great learning community is what kept me
That sounds good Tyler so guess what we can share information and learn from each other as we learn from the pros
  • #40,223
  • Aug 6, 2009 8:17pm Aug 6, 2009 8:17pm
Quoting ghous
It's just simple amazing KK,
.
.
And hang on,
I have something to share...
.
.
Ghous ,mate.... wow.
That took a lot of courage.
Bundy's status today: "Waiting..."
  • #40,224
  • Aug 6, 2009 8:19pm Aug 6, 2009 8:19pm
Any thought on the GU short anyone......i see a BEOB on the daily
  • #40,225
  • Aug 6, 2009 8:23pm Aug 6, 2009 8:23pm
Quoting jigsaw
sp,


i still can't use icce to save my life though, i have lurked that thread since the start and still have no idea about it

Quote
i could read your posts all day joel, i have an insatiable appetite for them . . for moar ! :d

http://i37.photobucket.com/albums/e9...ohara/moar.jpg




- actually do tell me moar the next time you post ,

OMG !!!!
I'm pretty much done with all this ...
  • #40,226
  • Edited 8:42pm Aug 6, 2009 8:29pm | Edited 8:42pm
Quoting Jigsaw
Was there any say, abnormal type orderflow before it the QE which would have given up the gig ?
Not abnormal, as such - but you can see the 'footprints' in the chart, pointing the direction that the smart money thinks the market will head... which is basically what you were describing.

If you were in on the transaction and someone you knew had inside information (or higher quality information than everyone else), you could use that to your advantage. BUt that probably involves being on a desk, unfortunately.

Quoting Jigsaw
So, Since hedge funds need banks for their orders, would the banks not either

a) Piggy back along with the hedge fund orders for some momentum and then pick up some pips

or

b) use the Hedge fund orders as liquidity and then trap them in the opposite direction.
Order flow is quite possibly the most valuable info you can have. If you know what people are going to do (because they told you to place the order) before they actually do it (because you havent placed the order yet), you could jump in front of them... aka 'front running'.

Basically, assuming you are a big executing bank, if one of your clients calls you and asks for a huge short position, and you *know* it is going to push prices down a bunch, you put in a short order first, then place their order - effectively using their money to push price down even futher, making you a profit. Not *strictly* bad, unless your order pushes the market price down before you put through their order, since they would lose a couple of pips there. But it isnt like big orders all execute at the same price level, or at the same time anyways.

The other thing, using the orders against the client, is a bit dodgier but undeniable happens - generally to smaller accounts though. After all, your big clients are the ones making you money, so you dont wanna annoy them too much

Quoting StoragePro
One thing has consistently bothered me about economics as a whole - the desire of the economist to reduce to a model, no matter how complex and impenetrable, human behavior. Depending on the decade, there are the theories du jour.

I heard a quote once that fits - "everything is true in its own time"
At its core, economics is about explaining things complex things by simplifying them to the most basic, simple level... and then building on it. LIke, obviously there is more to it than supply/demand... but that is a decent starting point. Then you can 'bolt on' things explaining how people get to their supply and demand decisions, how that moves in a market, etc.

It gets alot of criticism for sometimes 'assuming away' anything that makes it relevant. And it is a fair criticism in some cases - the more you remove, the less explaining power your theory has.

But I guess in the end we are closer to explaining why things work the way they do, and that can only be a good thing. I dont know how to fly a plane, but I know vaguely how it works, and that is good enough for me to get on one.

In a way, economics and human behaviour almost seem like a problem that can never really be solved. At the core of pretty much all economic and finance theory is the idea of the 'rational agent' - everyone acting in a rational and predictable manner. This is generally simplified to 'on the whole, when taken as a group, people act rationally', but just look at dotcom/residential real estate/tulip bulbs/south seas/etc... people dont act the way we think they 'should'.

Human behaviour is a fascinating thing, both on an individual and macro level. I doubt we will ever figure it out.

---
and I think I should stop my weekly derail now
When you have to shoot, shoot. Dont talk.
  • #40,227
  • Aug 6, 2009 8:42pm Aug 6, 2009 8:42pm
Quoting joelcf
Nope, its definitely not you! In fact, there is even a name for it - the efficient market hypothesis - and it is the basis of all modern finance

Broadly, the EMH states that in an efficient market, price incorporates all known information.

Some smart guys (ignoring the fact that they later had a massive shocker with LTCM(5) and almost crashed the world) in the 1960s had pretty much the same observation as you - price seems to already 'know' these news releases before they are made.

So they...
Joel, this is a fascinating post! I really look forward to all your posts... very interesting stuff... stuff we can't get from a book, but only from some one with the experience. Thank you.

Josh
  • #40,228
  • Aug 6, 2009 8:55pm Aug 6, 2009 8:55pm
1st chart post here. like to take this opportunity to thank J16 for creating this thread, and the contributors for making it a long time success. you can tell i learn certain things here from my trade approach.

two sideways trades as i see them. stops are above/below pa, entries when break.

i was struggling btw CADJPY and EURJPY. CADJPY has divergence as a plus, but its pin didn't exactly make the high. EURJPY's pin made the high of the swing. chose to trade EURJPY.

welcome all comments.
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  • #40,229
  • Edited 10:07pm Aug 6, 2009 9:16pm | Edited 10:07pm
Quoting kk007
Cheers. Bundyraider,

I think the reason some expert level members here don't care much about R:R is that they are trading at a very high winrate (+90%), so even if they are making a 7:1 trade, they have a positive expected value. Nevertheless, I wonder if most of the consistent winners here are happy to trade in this way.

kk
The reason the R:R idea is skewed in this particular case is that the 7:1 Risk:Reward outcome isn't a locked in result. ...That's the bit people aren't able to fathom.

That 7:1 result wasn't a planned stop:target trade. It was an entry into a trade that was managed in a way to prevent a full loss , yet had potential to go a lot further if the market allowed it to. Which happens a lot

All those small , seemingly bad, R:R results pay off when a lot of trades shoot through the management points anyway. It's not the same style of trading you learn anywhere else and the same rules don't apply. The math does. But the rules don't.

I'm yet to see anyone mention that they use both styles of trading here like I do, so maybe I have a unique perspective (anyone else??). When you ask if some people are really happy trading this other way I'd have to say "yes", because I'm one of them. For the trades I manage like that ...it's nothing. I don't even think of it as doing anything wrong (or right). These days I just know it works and it's just as profitable as the way taught in all these books we've all read.

For an example:- I passed on a trade two nights ago (when I had to fetch groceries) that managed Jim's way would have reached more than 8 times the original Risk , eventually stopping out at 6 or 7 or so. (by eye I thought it reached about 10, but I just measured it then for this post. lol ) I had no problems with coming back later on and seeing the result (mostly no problems ) I know they come along all the time. There are examples like this ALL THE WAY THROUGH THIS THREAD.

When you have very few losers, a few break even trades, a few small winners and a lot of very satisfactory winners, then those bigger winners just add cherries on top of what's already a positive expectancy method of trading.
.
Bundy's status today: "Waiting..."
  • #40,230
  • Aug 6, 2009 9:19pm Aug 6, 2009 9:19pm
Quoting tyler812
Actually, I play keyboards and guitar (classically trained as a pianist for 11 years...)
Nice.
Bundy's status today: "Waiting..."
  • #40,231
  • Aug 6, 2009 9:20pm Aug 6, 2009 9:20pm
Quoting joelcf
Nope, its definitely not you! In fact, there is even a name for it - the efficient market hypothesis - and it is the basis of all modern finance
I do agree everything is baked into the chart, however...

I maybe getting this mixed up, but aren't the folks that preach efficient market the same people that talk about random walk?

If they are then it's a joke. Efficient markets presume that markets are rational, which they are not. I respect things like indexing and over the long haul does well, but I think the Market Wizards pretty much prove you can beat the market by a long shot.

Which pretty much debunks efficient market / random walk since the Wizards are doing something that is supposedly impossible to EMH & Random Walkers.

Also you have to look at irrational exuberance and bubble all of which are irrational and not efficient. Then you also have manipulation. I'm no expert, but Efficient Market Theory, to me, doesn't make any sense.

I just trade what's on the chart, it is all there. We agree on that part at least.


Quote
Not insiders, per se - just people with alot of resources who have crunched the numbers themselves ... And while the government might have the official figures, every single bank, investment bank and economic research firm have done their own figures to get an estimate of what the number will be. And they are very, very good at it.
I can accept that, net effect is basically the same, someone somewhere knows the numbers before the release and it shows in the PA on a chart. At least the way you describe it makes it 'legit'.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #40,232
  • Aug 6, 2009 9:37pm Aug 6, 2009 9:37pm
Quoting joelcf
In a way, economics and human behaviour almost seem like a problem that can never really be solved. At the core of pretty much all economic and finance theory is the idea of the 'rational agent' - everyone acting in a rational and predictable manner. This is generally simplified to 'on the whole, when taken as a group, people act rationally', but just look at dotcom/residential real estate/tulip bulbs/south seas/etc... people dont act the way we think they 'should'.

Human behaviour is a fascinating thing, both on an individual and macro level....
Hi Joel, speaking of human nature, one of the most interesting schools of economics (the one without triple integration and stochastic calculus) is the Austrian School.

Von Mises wrote Human Action, which in essence, uses human action to explain economic behaviour rather than the classical school which bases its models on sometimes... ridiculous hypothesis(s).

It seems to be based off observation rather than conjecture. Guess it appeal to the speculative blood in me... as traders we base our actions on what we observe and act accordingly... so yeah, economics wise.. this looks pretty good.

Haha. In manias and panics, people ARE acting as they should: Irrational and driven by the Crowd.
Manias, Panics & Crashes. Extraordinary Popular Delusions and the Madness of Crowds

Ok. I think I'm digressing from the thread topic~
One Mind, Any Market
  • #40,233
  • Edited 10:09pm Aug 6, 2009 9:43pm | Edited 10:09pm
Quoting LasVahGoose
I do agree everything is baked into the chart, however...

I maybe getting this mixed up, but aren't the folks that preach efficient market the same people that talk about random walk?
Kinda. They are related concepts, not necessarily the same though. Random walk basically says that price fluctuations are random, and you cant use past price to predict future price (although, another conclusion is that prices tend to move upwards in the long run).

Why is this? Because news, by definition, is random and unpredictable. And if the only thing that can change the fundamental value of a security is news, then movements (in aggregate) will be random.

There are also variations on it that seek to incorporate other factors. Drunken walk, Noisy Market Hyp, etc.

Quoting LasVahGoose
If they are then it's a joke. Efficient markets presume that markets are rational, which they are not. I respect things like indexing and over the long haul does well, but I think the Market Wizards pretty much prove you can beat the market by a long shot.

Which pretty much debunks efficient market / random walk since the Wizards are doing something that is supposedly impossible to EMH & Random Walkers.
I kinda touched on that, but basically the whole 'this guy makes money therefore that theory is bad!' is almost always either a misunderstanding of the theory, or someone purposely twisting it for their own ends.

Part of the theory is that markets get out of line all the time. When they do, smart people see that they can make profits, so they pile into a trade until the potential for profit disappears. This is why alot of the tactics that worked in the past (like the whole Turtle trade, or MA crosses) dont work anymore. The information is so widespread that you cant make a consistent profit from it because everyone else is looking for it too.

It also says that as a group, you cant make above-average returns (without taking on additional risk). Obviously, within that group, there are winners and losers. Sometimes big winners and big losers.

And after that, you have the point that it just states that information is incorporated into price - people can interpret that price however they want. People like Buffett interpret information differently from other people at the time, and now he has 42 billion dollars.

Also, market efficiency doesnt preclude anyone from making profits. If anything, it explains how and why people profit from the market - by taking on additional risk. This kinda gets into CAPM (Capital Asset Pricing Model) territory, but basically you have to take on risk in order to beat the basic market return. And that is exactly what good traders and investors do.

Jack Schwager is a really, really smart guy. I have alot of his books (Schwager on Futures, in particular, rocks). But I feel like he is sometimes a little disingenuous when it comes to this topic.

In general, it seems to be used as a 'you, the ORDINARY GUY, can beat those WALL STREET IVORY TOWER FATCATS with their FANCY THEORIES... even without a fancy formal education in economics/finance' type of thing to get you to buy their book. No one really wants to hand over money to a guy that says 'this will take you 6 years study, hundreds and hundreds of hours reading and work, and a hundred thou in tuition!'. Well, except me

And of course you can make great returns on your money. With limited risk. It's called the James16 Chart Thread... and its free

Quoting Cyrus
Manias, Panics & Crashes. Extraordinary Popular Delusions and the Madness of Crowds
I think we have the same bookshelf

Austrian economics is an interesting area, although mainly as a new light to look at shortcomings in traditional models, rather than actually proposing solutions or explanations
When you have to shoot, shoot. Dont talk.
  • #40,234
  • Aug 6, 2009 10:12pm Aug 6, 2009 10:12pm
Cyrus,

Sounds very interesting. Quiet a bit of stuff there when I do a google search... any chance you could recommend some good introductory material with us? Would like to look into it...

Thanks
MM
"If it bleeds ... we can kill it"
  • #40,235
  • Aug 6, 2009 10:34pm Aug 6, 2009 10:34pm
Hey Joel,

Haha, very likely our bookshelves are similar. I find economic history & human nature pretty fascinating. They're inextricably linked.

You might like the legendary Dune series by Frank Herbert if you enjoy these 2 topics. Herbert weaves politics & power, technology, ecology, religion and human nature into a really insightful and fascinating story.

I agree. I'm not dismissing the previous economic theories, they do have their place. Like the re-liquification of the credit system (advocated by Friedman I think).. it's human incentive to do so. Human nature simply will NOT say,

"sorry fellas. Games over. Bite the bullet. You dopes over leveraged and didn't save? That was real stupid. To really let our future generations have a proper ground to push off from, we're letting whomever that needs to go bankrupt and work things out from scratch"

Simply aint gonna happen cause that president/central banker will go down in history as a criminal or uber hero. The risk of that is too much for most to bear. Austrian Economics kinda sheds a new light onto the causality of money and credit, although imho, human behaviour can be boiled down to 2 things,
Incentive and Survival.
Even in trading....Though the tough part is knowing what our personal incentives are.
Introspection tends to not be that common a trait unless one is by nature rather deeply introverted.

Ari,
Try here
http://mises.org/resources/3250
There're a few full versions of Human Action here for download from the Von Mises Institute itself.

You might like Supermoney and The Money Game by Adam Smith for economic history. Supermoney is pretty interesting. If you replaced the date to 2007, the central banker to Bernanke and the name of the big firm that collapsed to Lehman Brothers, in essence, you get the 2007 credit crunch.

Man, did I rant.
One Mind, Any Market
  • #40,236
  • Edited 10:56pm Aug 6, 2009 10:37pm | Edited 10:56pm
Dear all,

I've just taken so much from here without giving anything back. I can feel that many of you here sincerely want to help others, especially mbqb11, jarroo, ghous, TiaForex, joelcf, storagePro, etc. I should have thanks a lot for all of you who have give me your sincere reply here. Nevertheless, with current frustration, I cannot do that much.

I can see the PA working much more than not on the H1 chart for almost every pairs every day. I have selected the best 10-20% that I found, it is so strange so strange that most of them were killed straightly. A few of them were never turned into even 1 pip profit all the way until stoploss.

I found much more success with trading purely Support/Resistance (or PPZ here). With that, I get zero-drawdown trades occasionally, rather than zero-profit trades in my PA trading. I also have a much narrow stopless with my S/R trading. Yet, my experience still too short to make any conclusion.

I will start to trade some D1 to see what the difference will make to me.

Sincerely,

kk
  • #40,237
  • Aug 6, 2009 10:40pm Aug 6, 2009 10:40pm
Quoting kk007
Dear all,

I've just taken so much from here without giving anything back. I can feel that many of you here...
Thanks for the Thanks KK, We give to those out there who are willing to put the time and effort in which you clearly are. So just keep at it !

Best
Mike
  • #40,238
  • Aug 6, 2009 10:42pm Aug 6, 2009 10:42pm
Dear Ghous,

Your post is very inspiring and touching. Thank you so much!

I just wonder what have you changed technically to come out from loss to winning? I believed that before you wrote that on paper, you had already studied James PA for a while. How did you make the breakthrough after the writing?

It would be great if you can share!

Best Regards,

kk007


Quoting ghous
It's just simple amazing KK,

It's like me speaking a year ago...

truly amazing...

And hang on,
I have something to share...
Approx a year ago from today, I felt something very very close to what Kk just posted above...

This was a time when I had just begun my journey here with the J16 staff...

I had lost 6 consecutive pin bar trades on a live account,

I have a habit of "free writing" whenever I am not feeling normal, I.e when I am super happy or super sad or super exuberant or just feeling like superman.

This is what I wrote on...
  • #40,239
  • Aug 6, 2009 10:46pm Aug 6, 2009 10:46pm
I think it is not a good idea to take this outside bar, even if it break the high of them a little bit. Let me know if anyone think otherwise. I would say it is more likely to go down than go up.

cheers,

kk007
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  • #40,240
  • Aug 6, 2009 10:50pm Aug 6, 2009 10:50pm
Quoting kk007
I think it is not a good idea to take this outside bar, even if it break the high of them a little bit. Let me know if anyone think otherwise. I would say it is more likely to go down than go up.

cheers,

kk007
I wouldn't personally trade this based on the bar size, but let me just offer the other perspective. We have clear divergence, so we could be in for a temporary retrace(marked area going into 1.1). Again for me if this was a bigger outside bar then it would get my interest much more. But I say it time and time again, for me Size does matter(think pitbull analogy from James16).

Best
Mike
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