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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

  • #41,281
  • Aug 18, 2009 12:34am Aug 18, 2009 12:34am
.... How could i forget? lol
  • #41,282
  • Aug 18, 2009 1:07am Aug 18, 2009 1:07am
Quoting mbqb11


No regrets buddy, it isn't about this trade you know that. It is about all your trades, and you know what works for you. That is what it comes down to in the end. Confidence is very important and Jarroo has it and that is why he kills it!
Mike has spelled it out....
  • #41,283
  • Edited 4:19am Aug 18, 2009 4:07am | Edited 4:19am
Quoting joelcf
I love candlesticks as much as the next guy (possibly moreso - look at my reading list from a month or two back! ) but I think I should throw out a word of caution here.

Candlestick 'patterns' are, on the whole, overrated.

Yup, I said it.

Why? Because they lead to bad decisions from people that dont really think through what they are doing.

Look at that 'three black crows' pattern. What does it really tell you? All it really says is 'price went down a...
In fairness though if you read any books from the source (Nison) he explains to use them at S/R or with other indicators. You could easily say the same about pin bars etc, if you just play them blind they will fail a lot of the time. They are all just ways of identifying price moving is a recognised way that we should use as a hint to where price might go next. If you say candlesticks are overrated then you are also saying price action is overrated.

Never use one reason to enter (exceptions are base trades) i.e. a pin bar, or a hammer, or divergence, or a ma crossover..... Dont blame the tool (candlesticks) its the way that they are used.

Mark
I hear and I forget. I see and I remember. I do and I understand.
  • #41,284
  • Aug 18, 2009 4:58am Aug 18, 2009 4:58am
Quoting tac
If you say candlesticks are overrated then you are also saying price action is overrated.
That's not really what I said at all.
When you have to shoot, shoot. Dont talk.
  • #41,285
  • Aug 18, 2009 5:21am Aug 18, 2009 5:21am
Quoting tac
In fairness though if you read any books from the source (Nison) he explains to use them at S/R or with other indicators....
I have one of Nison's books. I found much of it so I could not see the forest through the trees.

Not that he was doing anything wrong, but those books are not the simple path - at all.
I'm pretty much done with all this ...
  • #41,286
  • Edited 5:36am Aug 18, 2009 5:25am | Edited 5:36am
Quoting joelcf
That's not really what I said at all.
You said candlestick where overrated, candlesticks are just patterns like bar patterns all price action. Anyway I agree that using these things with out looking at context will not work.
I hear and I forget. I see and I remember. I do and I understand.
  • #41,287
  • Aug 18, 2009 5:43am Aug 18, 2009 5:43am
Quoting tac
You said candlestick where overrated, candlesticks are just patterns like bar patterns all price action.
I said candlestick 'patterns', especially the more esoteric 3 and 4 bar setups, are too abstract to be of any real use.

I said people, especially new traders, look for the patterns and dont understand the underlying movements, but assume they dont need to think about it because 'its a shooting star + harami pattern which means short'. It teaches pattern recognition, which is the least important part.

I said that a new trader, who was looking at a bunch of obscure patterns and asking whether he should be trying to match them to a chart and trade them, was a recipe for disaster, because they are concentrating on the wrong thing and - as StoragePro said - they are running headlong into a forrest/trees issue.

I also said I use candlesticks and have for a long time. I only said the patterns are overrated as a trading tool, especially for new guys.

Let's not take one line out of two long posts, take a key word out and then quote it out of context. Because otherwise, 'this stuff is dirt...folks'.

When you have to shoot, shoot. Dont talk.
  • #41,288
  • Aug 18, 2009 5:54am Aug 18, 2009 5:54am
Quoting joelcf
I said candlestick 'patterns', especially the more esoteric 3 and 4 bar setups, are too abstract to be of any real use.

I said people, especially new traders, look for the patterns and dont understand the underlying movements, but assume they dont need to think about it because 'its a shooting star + harami pattern which means short'. It teaches pattern recognition, which is the least important part.

I said that a new trader, who was looking at a bunch of obscure patterns and asking whether he should be trying to match them to a chart and trade...
Ok no worries, glad you explained it in more detail as candlestick patterns can be a useful tool just like any price pattern.
I hear and I forget. I see and I remember. I do and I understand.
  • #41,289
  • Edited 6:57am Aug 18, 2009 6:01am | Edited 6:57am
Quoting tac
Ok no worries, glad you explained it in more detail as candlestick patterns can be a useful tool just like any price pattern.
hey, its all good. as long as people are thinking about what the chart is telling them and why they are trading, they can use astrological tea leaves for all I care

*edit*

So we have an actual chart on the page, here is something I have been demoing for the last few weeks, but still dont have the balls to take live - softs! I've started live with silver, gold, crude and nat gas... but I feel like I wont be a complete degen until I have made a fortune shorting frozen pork bellies

(sorry for the dodgy ms paint chart, I'm sitting in the car waiting for the gf, and my netbook doesnt have anything better)

Cotton:

Attached Image (click to enlarge)
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There is a failed pin in there that is bugging me, it seems like it should have worked (and if I had been patient, it did)... and that great bearish outside bar could have actually been a multi-period pin with a way better entry, but I guess that is why I am demoing it still

(specs: http://www.wikinvest.com/futures/Cotton_Futures )
When you have to shoot, shoot. Dont talk.
  • #41,290
  • Aug 18, 2009 6:03am Aug 18, 2009 6:03am
Quoting jarroo
Hey Mike. I'm in this great trade and my only regret is that I took half off the table and now I'm letting the 2nd half ride.

I don't know how you don't it . . . . not taking some off the table ( actually I do know how and why you do it.)

But I just couldn't do it . . . I couldn't do it.
Still on that trade?!
WOW...good for you buddy

Ben
  • #41,291
  • Aug 18, 2009 7:49am Aug 18, 2009 7:49am
Guys/Girls,

I know we have already done position sizing and % risk to death....

but if I may ressurect the bones briefly....

I'm trading daily candles at the moment and am currently going for the traditional stop at the bottom/top of the bar type senario.

If I use a more agressive SL strategy of say 50% of the bar or prefferably other close bar highs/lows then my risk in pips is reduced (50% in the above example) so therefore in theory I can double my lot size to keep my 2/3/4% or whatever it is acct risk.

but.....

I am more likely to loose a trade with a tighter stop so is my risk still the same? unlikely I would say...

and to muddy the waters I usually go for a fairly quick move to BE as well so rarely loose a trade to a full bars worth of pips (although it has happened!!)

Now don't get me wrong these thoughts stem from the man himselfs warnings about being under capitalised (which I am... severly) the initial thoughts where how to increase my lot size and maintain the same level of risk... I'm sure I wouldn't be asking this if I was running a £300k account but there you go...

I know the answer is to get more money in my acct and there is no real benifit discussing this in a public forum but the chain of thought did lead me to the initial portion of this post...

Summary...

decrease SL to increase lot size does this keep the real risk level the same or not? - discuss...

I would be intrested in thoughts from all on this and in particular those with large(ish) accts that trade for a living...

ummm...

must get back to work...

happy trading all!!!

Tom
  • #41,292
  • Aug 18, 2009 8:08am Aug 18, 2009 8:08am
Quoting fat_tom
Guys/Girls,

I know we have already done position sizing and % risk to death....

but if I may ressurect the bones briefly....

I'm trading daily candles at the moment and am currently going for the traditional stop at the bottom/top of the bar type senario.

If I use a more agressive SL strategy of say 50% of the bar or prefferably other close bar highs/lows then my risk in pips is reduced (50% in the above example) so therefore in theory I can double my lot size to keep my 2/3/4% or whatever it is acct risk.

but.....

I am more likely...
The problem with trading dailies is you will never build a small account up just trading them, there are simply not enough trading oppurtunites, for account building you need to get down to 1hr or 15min charts, where you can get trades every day. However to get down to them you need to move down from daily to learn pa and gain experience. So it looks like

Small account - start on daily gradually move down to 15 mins to learn
Build account up to large account then move up to daily.
I hear and I forget. I see and I remember. I do and I understand.
  • #41,293
  • Aug 18, 2009 8:18am Aug 18, 2009 8:18am
Quoting fat_tom
Guys/Girls,

I know we have already done position sizing and % risk to death....

but if I may ressurect the bones briefly....

I'm trading daily candles at the moment and am currently going for the traditional stop at the bottom/top of the bar type senario.

If I use a more agressive SL strategy of say 50% of the bar or prefferably other close bar highs/lows then my risk in pips is reduced (50% in the above example) so therefore in theory I can double my lot size to keep my 2/3/4% or whatever it is acct risk.

but.....

I am...
Hey Tom. After doing a lot of testing (which as always, I recommend you do yourself), I decided to use 50% of bar height as my stop on all daily trades.

Let's assume that in both types of trades (stop at full bar height or at 50% bar height) you take full profit at the same number of pips as the full bar height.

So in the first case, you will either make or lose 1R (stop at full bar height)...In the second case, you will either lose 1R or win 2R... so even though you will have more losers, you might (depending on how well you choose your trades) see improved results.

Since everyone trades differently, the only way to figure out which is better for you is for you to demo both methods to see 1) which is more profitable and 2) which you are more comfortable with. For the second case, it's even more critical to not take poor setups. I think that's one reason why as a newbie, we are advised to use the full bar height... not only does the end of the bar provide some ppz value, but it also gives our trade a little more room to work, while we practice finding what the 'best' setups look like.

You've already alluded to it, but do not change strategies simply to increase lot size...

I'm sure others will have better input, but that's my 2pips...

Josh
  • #41,294
  • Aug 18, 2009 8:19am Aug 18, 2009 8:19am
Quoting fat_tom
Guys/Girls,

I know we have already done position sizing and % risk to death....

but if I may ressurect the bones briefly....

I'm trading daily candles at the moment and am currently going for the traditional stop at the bottom/top of the bar type senario.

If I use a more agressive SL strategy of say 50% of the bar or prefferably other close bar highs/lows then my risk in pips is reduced (50% in the above example) so therefore in theory I can double my lot size to keep my 2/3/4% or whatever it is acct risk.

but.....

I am...

I may not hold the experienced answer your looking for (I'm sure the vets will help out there), but in my opinion the increasing of lots sizes in tandem with the narrowing of stops is a bad idea for beginners that could lead to a big increase in losers.

You are right in saying that when you narrow your stop by 50% and double your lot size that your risk remains constant i.e. if you were risking 4% of your account on x lot size and 100% bar stop, it is still 4% of your capital that is at risk at 2x lots and 50% of the bar stop. This however, is not the problem.

The problem my friend, is probability. You have just increased the probability that your stop will be hit and therefore (as the probability of anything happening with certainty is 1!), you have lowered the probability of your trade hitting your TP.

That being said, it may still hit your TP, it may hit your stop - heck, it might hit both! It might go up to hit your stop then hit your TP or vice-versa. Without getting into the whole theory of Random Walks, the main problem your creating for yourself is that the Expectency of your trade hitting your TP may have been drastically lowered. We just dont know how the market is going to go. You also have to think about the effect of increasing the number of losers would have on a rookies' confidence. Psychologically, I'd be much happier with a few big winners, lots of BEs/small TPs and zero losers. But maybe thats just me.

So my advice is mate, if you dont have the account size yet, don't go searching for it through over-leveraging. Be patient. Compounding is your friend. Keep adding to your account from discretionary expenditure/savings/wages/whatever. It all adds up.

You'll get there in the end buddy!
  • #41,295
  • Aug 18, 2009 8:20am Aug 18, 2009 8:20am
Hi,

What do you think about those 2 BEOB ?

USDJPY and EURJPY

Regards

Ps. Hello to everyone
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  • #41,296
  • Aug 18, 2009 8:24am Aug 18, 2009 8:24am
Quoting tac
The problem with trading dailies is you will never build a small account up just trading them, there are simply not enough trading oppurtunites, for account building you need to get down to 1hr or 15min charts, where you can get trades every day. However to get down to them you need to move down from daily to learn pa and gain experience. So it looks like

Small account - start on daily gradually move down to 15 mins to learn
Build account up to large account then move up to daily.
I respectfully disagree here. The main reason (and frankly only reason) that people don't build a small account using dailys is because of psychological reasons... it takes too long of plunging along with 2-4% monthly gains and 3-5 trades a month. There is nothing that says it cannot be done. It just takes extra discipline... if you build a $500 account to $1500 over 3-4 years time, don't you think you might be more inclined to start contributing another $30-$300 monthly to that account in order for it to grow more? It's not as simple as saying it can't be done... everyone's view of a 'large' account varies...

Read many of J16's posts for more thorough explanation... this is where I learned what can and cannot be done.

Josh
  • #41,297
  • Aug 18, 2009 8:26am Aug 18, 2009 8:26am
  •  2mas
  • | Joined Apr 2007 | Status: Thanks to James 16 family | 89 Posts
Quoting Radsson
Hi,

What do you think about those 2 BEOB ?

Regards
Hey Rad, you ve beaten me by 3 minutes.... good job. I am short after the break of 1hr BEOB, now BE.
For me, i think that 134.50 has been so generous for the past few weeks.
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  • #41,298
  • Aug 18, 2009 8:28am Aug 18, 2009 8:28am
Quoting Jduester
For the second case, it's even more critical to not take poor setups. I think that's one reason why as a newbie, we are advised to use the full bar height... not only does the end of the bar provide some ppz value, but it also gives our trade a little more room to work, while we practice finding what the 'best' setups look like.

You've already alluded to it, but do not change strategies simply to increase lot size...

I'm sure others will have better input, but that's my 2pips...

Josh
A different opinion on a complex matter but also good advice.

Note the bit in bold!
  • #41,299
  • Aug 18, 2009 8:29am Aug 18, 2009 8:29am
Quoting tac
The problem with trading dailies is you will never build a small account up just trading them, there are simply not enough trading oppurtunites, for account building you need to get down to 1hr or 15min charts, where you can get trades every day. However to get down to them you need to move down from daily to learn pa and gain experience. So it looks like


Get these thoughts out of your mind Tac, you're completely underestimating the higher tfs.

More money lies with the lower time frames but that doesn't come anywhere close to suggest that you cannot build on a small account using dailies. In fact building on an account is much more easier to do on the higher time frames provided you're right on your mind.

Sorry if I appeared a bit rude,

Just had to get this across...
I believe . . .
  • #41,300
  • Aug 18, 2009 8:32am Aug 18, 2009 8:32am
Quoting fat_tom
Guys/Girls,

I know we have already done position sizing and % risk to death....

but if I may ressurect the bones briefly....

I'm trading daily candles at the moment and am currently going for the traditional stop at the bottom/top of the bar type senario.

If I use a more agressive SL strategy of say 50% of the bar or prefferably other close bar highs/lows then my risk in pips is reduced (50% in the above example) so therefore in theory I can double my lot size to keep my 2/3/4% or whatever it is acct risk.

but.....

I am...
Hi Tom,

Your trading plan should not be at all influenced by your money management. You work out a trading plan that is within your comfort zone and that you have demoed to ensure you are profitable. If this involved reduced stops, then so be it. You make sure you have experience through demo to know that the lower win rate that this brings is offset by higher profits and that you are comfortable with that.

Then and only then do you make sure that each stoploss is a fixed percentage of your account.

The %R system means that what you risk per trade remains fixed. So one loss is always a fixed percentage of the account. It matters not whether your stop is full bar or at 50%, whether it is a daily or weekly trade, or even whether you are scalping. Percentage R means that you have a fixed amount of loss per trade. What that percentage is will depend on your comfort zone, place in the learning curve, style of your system, frequency of opportunities etc etc.

Lot size is irrelevant. Percentage risk is. So say, for example, that you have been trading consistently and profitably with full bar stops for a few months. You risk 1% a trade. You have a spreadsheet that keeps a column on how far into the bar each trade retraced before hitting your TP. You notice that on all your profitable trades the retrace into the bar after entry was triggered was less than 50%. You therefore demo for a while the idea of the 50% stop. You discover that in demo your hunch is borne out and your win rate does not decline.

Then you have a new system.

So with that new system (pinbar trades on daily, 50% of bar for stop, for example) you use %R to risk 1% per trade again. Lot size should be irrelevant to you. Sure it will be bigger but all you want to pay attention to is the value of each loss to your account. It should be the same. Lot size is a means to an end to achieving this.

To make it clearer, on the 4H my lot size is often larger than the daily because my stops are smaller. But my percentage of account risked per trade remains fixed.

When you say "I am more likely to loose a trade with a tighter stop so is my risk still the same? unlikely I would say..." you are confusing win rate and expectancy with money management. Your win rate will go down with a reduced stop, your winners will be greater in value. Work out through demo and testing whether this is worth it. Then risk the same amount per trade.

You may find that Van Tharp's work on expectancy helps you. When he is calculating the efficiency of a system he is utterly unconcerned with how much he is risking. He just gives it a letter value, R. Then he works out how efficient his system is based on collected data. And then before he trades he uses MM to make sure R is the same no mater what.

I don't feel like I have explained this too clearly. Feel free to ask questions.

As regards large accounts, I do trade a large account but again this a separate issue. 50% bar stop has nothing to do with account size. One needs to know if over 100 trades a 50% bar stop will produce greater profitability than a full bar stop. That's all.

Where account size makes a difference is primarily psychological. When each trade produces 4-5 figure results then a string of losses has a very different effect, one is far more likely to bank small moves because they are large £ value moves etc etc.

To summarise:

The profitability of your system (win rate, average winner etc) which some call expectancy

Your money management so that each trade is a fixed percentage of your account, and one that doesn't spook you into messing with your system.

Your psychological tolerance for your trading style.

These are three separate things and need to be worked on separately. It strikes me that you might be confusing the purpose and effect of the three.

Hope that helps.

Aaron
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