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Trade Anatomy - ramblings of an old-timer

  • #41
  • May 31, 2010 1:21am May 31, 2010 1:21am
hi OND im on board and thank you for starting this i see an epic thread in the making. i have read all of the system with irony 1 and learnt alot but didnt get much into 2 because of the time frame involved(dont like scalping). also i read PeterCrowns thread and learnt alot. hope i can learn alot from you to. im all for no indicators k.i.s

regards damien
i pull the trigger when others are fearful---me
  • #42
  • May 31, 2010 2:08am May 31, 2010 2:08am
Hi Damien

Thank you for your kind words. You have chosen your learning well if you have absorbed what Feb and PeterCrowns have shared.

Welcome to the thread. I look forward to your contributions.

Kind regards,

O N D

Quoting damosdmf
hi OND im on board and thank you for starting this i see an epic thread in the making. i have read all of the system with irony 1 and learnt alot but didnt get much into 2 because of the time frame involved(dont like scalping). also i read PeterCrowns thread and learnt alot. hope i can learn alot from you to. im all for no indicators k.i.s

regards damien
  • #43
  • May 31, 2010 4:39am May 31, 2010 4:39am
Quoting Old_Not_Dead

Drill down to the daily Dollar-Yen chart and the picture will probably look quite different. The lows from 4th March and 6th May seem to me to be screaming out to be tested again imminently. If I was interested in trading this, I'd be looking for evidence of a swing high forming and riding price down for another go at getting under 88. Drill down further to the hourly chart and you'd likely notice that a breach of 90.60 would be a good sign we're headed down.
Hi OND

Thanks for the scatter graph explanation. Much clearer now.

As you'd expect I have some questions on your USDJPY post.

Why are the lows of 4th March and 6th May screaming out to be tested again ? We’ve had a bullish break of the 90.60 level in the last few days. There has also been a successful test of this level as support, and to me, this would negate any imminently bearish bias I might have. Of course, like you say, price can and does go where it pleases, but for you to use the term ‘screaming’ I must be missing something. Actually, thinking about it, I see the big tail of the 6th of May daily low, and I’m presuming it’s the subsequent PA that gives you this view, with a break above 91.60 negating that view.

If you were to take a position on a breach below 90.60, what timeframe and setup would you be looking for to get on board ?

Many thanks,

Astellas
  • #44
  • May 31, 2010 5:33am May 31, 2010 5:33am
HI OND

Reporting for duty and wanting to learn PA

Could you give a list of "criteria" to look-out when trading (i.e. what are the systematic steps ?)

Thanks
  • #45
  • May 31, 2010 5:44am May 31, 2010 5:44am
Good morning

The position at this very minute is rather different for Dollar-Yen compared to when I posted originally. Personally, I still think the recent retracement from the 89 area is about to exhaust itself but this is based on an intuition that I would struggle to map out sufficiently to make sense, most likely. The point I made about feeling that that test of the 88 area, although rejected, was a sign of where price wanted to go.

Hmm, this is where I sadly think I will fail you all. I wish I could hand out the hundreds of thousands of hours of watching price structure I have experienced and the intuitive and unconscious actions it has provoked in me over the years. There's a trader called HiddenGap whom I recommend you all seek out. Reading his posts will be an absolute pleasure because, not only does he understand the markets, he explains his knowledge and methods with beautiful clarity.

Now that I've told you all to go elsewhere (haha!) I'll do my best to fumble my way through trying to explain what I see and why.

The massive daily down bar on 6th May closed 250 pips above the low of the day. That's bullish, right? It leaves a long tail after all. I would say not. The bar actually closed marginally in the lower half of the daily range. More importantly, look at the price action that went before it (stick with daily chart for now). This wasn't a further push down that was rejected. This happened following an uptrend (follow the low from 4th March upwards). Now look for the two biggest daily bars that occur after 6th May. The two days with most volatility again resulted in price closing in the lower half of the bars. Now look at down bar from 20th May. We are now on the 7th daily bar since that one and still haven't taken out the high of that bar.

I'm not sure whether all those points combined will make sense or will present a compelling argument but that's as much of my thinking as I can probably explain in words as so much has become instinctive over the years. I'll let you into a secret, I have managed many traders but I have always hired a right-hand man to train them. Having knowledge is one thing; being able to share that knowledge with clarity is another.

To answer the hypothetical question about the timeframe I'd watch if I wanted to get short below 90.60, I'd say the 4H chart provides the best clarity of the position at present.

This ramble is over. Hope it makes sense but you know you are welcome to try to probe further if I haven't quite managed to explain enough yet.

Kind regards,

O N D




Quoting Astellas
Hi OND

Thanks for the scatter graph explanation. Much clearer now.

As you'd expect I have some questions on your USDJPY post.

[font=Verdana][color=black]Why are the lows of 4th March and 6th May screaming out to be tested again ? We’ve had a bullish break of the 90.60 level in the last few days. There has also been a successful test of this level as support, and to me, this would negate any imminently bearish bias I might have. Of course, like you say, price can and does go where it pleases, but for you to use the term ‘screaming’ I must be...
  • #46
  • May 31, 2010 5:46am May 31, 2010 5:46am
Hello Pete - welcome to the thread

I must offer my sincere apologies as I have just realised I missed your post.

I will endeavour to answer it soon, promise!

Kind regards,

O N D

Quoting Gasmeter
Hi OND,

Thanks for the excellent thread I have a question regarding fiesability of a couple of scenarios on the USD/CHF, if you'll excuse me I won't post a chart.

The weekly and daily charts suggest the price is hitting resistance, at the current 1.1587 mark. So a short entry below last weeks low at 1.1471 looks attractive.

My second scenario would be a buy on break of the the 1.1920 mark (9 Mar high)

[left]On the short trade scenario (althouh I would probably exit prior to this) if there was a smooth ride down to 1.045 I'd trade out, and renter...
  • #47
  • May 31, 2010 5:53am May 31, 2010 5:53am
Hello again Pervaz

I am afraid I will have to disappoint you. The thread will hopefully evolve in an extremely useful and logical way rather than me writing my memoirs in the first 5 pages and then leaving you all to interpret them

I'll throw the baton back to you as I know you were involved in previous price action threads. Tell me, what learning have you cemented that is proving useful in trading pure price? What do you struggle with? What demons/bad habits/blind spots do you have to still do battle with?

Kind regards,

O N D

Quoting Pervaz
HI OND

Reporting for duty and wanting to learn PA

Could you give a list of "criteria" to look-out when trading (i.e. what are the systematic steps ?)

Thanks
  • #48
  • May 31, 2010 7:04am May 31, 2010 7:04am
A big thanks to Astellas for raising AU which I hadn't really been watching.

As a result of our discussion I developed conviction that at least a temporary move down was likely. I shorted two positions at the 62% retracement which corresponded with resistance (1) and a big round number .8500 (2). This rose a little and then formed a pin bar (pink on my charts) which broke by a tick, retraced, and then broke solidly.

Someone taking OND's advice and waiting for the price action to confirm that price was moving down again would have awaited a convincing break of the pin bar to trade (imho).

First target was the up channel we discussed earlier and I've exited that while second target is above a support area below. I've moved the stop down over a 5m pullback area though because its nearing my bed time so it will be an excellent outcome either way.

OND. The question this raises for your thread is: what about pin bars? I like a nice long pinbar that is well formed and broken because, to me it illustrates price moving into a zone of decision and then solidly rejecting it. Without the zone of decision though (round number, s&r, channel edge say, and for me, fibs) the pin bar is completely irrelevant ... its only in context that it has probability on its side.
Attached Image (click to enlarge)
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  • #49
  • May 31, 2010 7:06am May 31, 2010 7:06am
Hello again Pete

My very quick scan of the daily and weekly charts for that instrument suggests minor resistance doesn't apply until around 1.17 area?

I see what you mean about a breach of the 1.1470 area potentially being bearish. A couple of questions are necessary for you though....

How will you play a breakout? Will you take any penetration of that figure using a pending order? Will you wait on a close of a bar below the figure? If so, will it be a daily bar or a smaller timeframe? Will you aim to get in on the initial move below 1.1470 or will you look for previous support to become resistance and fade the retracement?

The figures you are quoting, and the corresponding targets, are feasible but have a think about what your breakout trading style should be and where your stops need to go and let me know your thoughts. Also, clarify how you come up with your stop positions? Based on risk or price action or something else? I should then be able to give a little more feedback after that.

Kind regards,

O N D

Quoting Gasmeter
Hi OND,

Thanks for the excellent thread I have a question regarding fiesability of a couple of scenarios on the USD/CHF, if you'll excuse me I won't post a chart.

The weekly and daily charts suggest the price is hitting resistance, at the current 1.1587 mark. So a short entry below last weeks low at 1.1471 looks attractive.

My second scenario would be a buy on break of the the 1.1920 mark (9 Mar high)

[left]On the short trade scenario (althouh I would probably exit prior to this) if there was a smooth ride down to 1.045 I'd trade out, and renter...
  • #50
  • May 31, 2010 7:37am May 31, 2010 7:37am
Quoting kiwi_trader

As a result of our discussion I developed conviction that at least a temporary move down was likely. I shorted two positions at the 62% retracement which corresponded with resistance (1) and a big round number .8500 (2). This rose a little and then formed a pin bar (pink on my charts) which broke by a tick, retraced, and then broke solidly.
Nice work Kiwi Trader !

I’m watching for an entry long.
  • #51
  • May 31, 2010 7:39am May 31, 2010 7:39am
Congrats on your trade KiwiTrader

If I had to enter on this hourly chart my entry would have been later and less aggressive, after the close of the bar following the pin bar. So, I'd be in around 8467 with a stop above the most recent high, so around 8520.

However, my later entry would remove profit potential and my required stop position, together with the likelihood price could stall at 8420 area, would make it a trade I couldn't justify taking.

In terms of pin bars, I agree that one appearing in some random place on a chart doesn't automatically tell us anything. In this case, the following bar confirmed we were temporarily headed down.

There is a high likelihood we are now going to see price structure on most instruments contract somewhat now until the Asian markets tomorrow so you probably won't regret going to bed and catching some rest

Kind regards,

O N D

Quoting kiwi_trader
A big thanks to Astellas for raising AU which I hadn't really been watching.

As a result of our discussion I developed conviction that at least a temporary move down was likely....
  • #52
  • May 31, 2010 8:03am May 31, 2010 8:03am
Quoting Old_Not_Dead

There is a high likelihood we are now going to see price structure on most instruments contract somewhat now until the Asian markets tomorrow so you probably won't regret going to bed and catching some rest
Hi OND

Why do you think we may now see price structure contract until the Asian session ? Is it because of the Bank Holiday in the UK, or is the contraction a common occurrence for this time of day ?

Thanks,

Astellas
  • #53
  • May 31, 2010 9:39am May 31, 2010 9:39am
My posts have to be manually approved sine im new, so by the time its viewable, theres been a few others and it slips in unnoticed.

Quoting Old_Not_Dead
My very quick scan of the daily and weekly charts for that instrument suggests minor resistance doesn't apply until around 1.17 area?

I see what you mean about a breach of the 1.1470 area potentially being bearish....
For the breakout, I'll wait for a close above the target on the daily, on the short order, I'll place a pending order.

Quote
The figures you are quoting, and the corresponding targets, are feasible but have a think about what your breakout trading style should be and where your stops need to go and let me know your thoughts. Also, clarify how you come up with your stop positions? Based on risk or price action or something else? I should then be able to give a little more feedback after that.

For the long order, I'll have to wait until the price breaks to define the stop, however given the chart how it is now 1.1696 looks looks like a good starting point, depending on how it progresses I will hopefully be able to get it in tighter.

On the short trade the SL i've put in is 1.1589 (27th open/28th close)
  • #54
  • May 31, 2010 11:35am May 31, 2010 11:35am
Quoting Old_Not_Dead

Hmm, this is where I sadly think I will fail you all. I wish I could hand out the hundreds of thousands of hours of watching price structure I have experienced and the intuitive and unconscious actions it has provoked in me over the years.
Hi OND

Thank-you for your explanation. You are doing a fine job of sharing your knowledge. The hard part for me is knowing what it is I need to know, and articulating that in a question. I think we’re all getting there though, bit by bit.

Do you keep a trading diary of what opportunities might be coming up for the following days and weeks ? And if so, what form does it take ? I guess I’m coming back to this question of how you keep yourself abreast of upcoming trading opportunities.

Thanks,

Astellas
  • #55
  • May 31, 2010 5:11pm May 31, 2010 5:11pm
Hi Astellas

Yes, all due to thin volume.

As it happens, it did go for a dip below 8400 briefly so KiwiTrader will wake up to a nice result!

Kind regards,

O N D

Quoting Astellas
Hi OND

Why do you think we may now see price structure contract until the Asian session ? Is it because of the Bank Holiday in the UK, or is the contraction a common occurrence for this time of day ?

Thanks,

Astellas
  • #56
  • May 31, 2010 5:21pm May 31, 2010 5:21pm
Quote
My posts have to be manually approved sine im new, so by the time its viewable, theres been a few others and it slips in unnoticed.

Aha, that explains why I missed it. Feel free to point out if I miss any others in future


Quote
For the breakout, I'll wait for a close above the target on the daily, on the short order, I'll place a pending order.

Can you clarify why you will be treating the long and short entries differently?


Quote
For the long order, I'll have to wait until the price breaks to define the stop, however given the chart how it is now 1.1696 looks looks like a good starting point, depending on how it progresses I will hopefully be able to get it in tighter.

On the short trade the SL i've put in is 1.1589 (27th open/28th close)

I'm confused. What value are you waiting on a close above to go long?

Good luck with any trade that gets triggered and apologies for asking for clarification but I'm not picking up a defined strategy from you yet.

Kind regards,

O N D
  • #57
  • May 31, 2010 5:33pm May 31, 2010 5:33pm
Yes, a diary full of scribbles/strategies/musings/self-admonishments

I think it's good to have a certain amount of pre-planned strategy and to have areas on a chart or 'what if' scenarios but it must be balanced with an appetite for looking at the markets afresh each day. Becoming too married to a scenario is the same as wishing the market to go up or down really.

What is different is planning to get in on the action at opportune moments. I think this is logically going to be the next topic to tackle. If you can find me a couple of medium or long term trends you want to partake in and post your ideas about when you might have an opportunity to get in (and when your desire to get in will be invalidated) we can talk through practical examples.

Kind regards

O N D


Quoting Astellas
Hi OND

Thank-you for your explanation. You are doing a fine job of sharing your knowledge. The hard part for me is knowing what it is I need to know, and articulating that in a question. I think we’re all getting there though, bit by bit.

[size=3][font=Times New Roman]Do you keep a trading diary of what opportunities might be coming up for the following days and weeks ? And if so, what form does it take ? I guess I’m coming back to this question of how you...
  • #58
  • Edited Jun 1, 2010 10:39am May 31, 2010 8:24pm | Edited Jun 1, 2010 10:39am
I'm at work so posting from my phone and don't have my trade pad handy, so don't have numbers to hand.

My thoughts on the different entry criteria are that I think (from the daily chart) that the uptrend is ending and a downtrend is now likely, as such the Market taking out my price on the short trade is confermation of this.

On the long position I'm more worried about the trend restarting and then turning back on me. Aditionally if I were to place the trade now I'd need to place an arbatrary stop loss figure, which will probably have little relevence once my price is hit.

Basically it comes down to conviction, I'm more confident in the short sell, so I'm happy to fill it once the price becomes avalible, and I think the 100 or so pip SL offers enough protection to do so, while at the same time affording me the wiggle room neccessary.

On the long possition I'd need to place circa. 200 pips SL at present to be confident of allowing my the room to breath incase of a false signal, and so I'd rather risk a few pips potential profit by being late to the party, than risk hundreds by turning up early.

Update: The price looked to be taking out the upperbound price, and I cancelled my pending sell order when the price hit 1.1730. The price U turned and took out my Sell price at 1.1471, bevore retracing up to close at 1.1532. The down trend looks like it is still continuing though, and I will wait for a close below that mark now before enterning, as it appears I was ready to jump the gun.
  • #59
  • Jun 1, 2010 12:42pm Jun 1, 2010 12:42pm
Hi OND

Here is a trade I took last night, and am just about still holding. I would value your feedback.

Reasons for Entry short

Price structure was showing lower lows and lower highs
Price hit the descending trendline, at the point it met the ascending trendline
PA on lower time frame suggested a bearish move would soon be underway

Entry

Entered short on break of bar with arrow above it (entry bar in pink)
Initial Stop 25 pips above arrowed bar, putting stop above the trendlines

Target

What ever the market will give me. Plan - Trail the stop down using support and resistance levels, take partial profits at around the 0.8218 level

So, my preferred trade management is very similar to Option 3 as you discussed in post 6. I see there was an opportunity to bank some profits on the inside bar (highlighted in green), but as this was not a big rejection of that level (and I wanted to stay with the plan) I decided to continue holding. Price has then gone up most of the afternoon, despite my anticipation that it might be rejected back down by the 0.8350 level.

My stop is now at breakeven, putting it above what may or may not turn out to be the swing high bar (highlighted in blue), and descending trendline.

My question is – Do you think the trade should have been played this way, taking into account the context of the market.

Many thanks,

Astellas
Attached Image (click to enlarge)
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  • #60
  • Jun 1, 2010 1:51pm Jun 1, 2010 1:51pm
I think you need to look for synergy between the timescale you are trading and the length of time you want to ride a trend.

Perhaps I have been too keen to impose structure on the development of this thread and have, as a result, kept matters too simple. I will try to find a balance between gradually providing building blocks of knowledge and doing justice to the sophistication required in approaching different market conditions and timeframes.

Your entry, and the rationale for it, is logical and efficient. What you need to better establish is... are you trying to get in on a longer-term trend or are you swing trading?

If it's the latter, partial profit taking makes sense. I don't, quite yet, want to get into more advanced reading of price structure on this thread but I have already given a nod in the direciton of following HiddenGap's posts if a better understanding of price structure is not going to confuse your learning. In simple terms, that small bar that closed at 8300 (also note: round number), followed by the slightly larger bullish bar, would tell me that supply is temporarily absorbed and price is ready to move up again. Conversely, the bar that closed above 8400 has shown itself to be a temporary climax of the up move and we should expect price to move down again. I must stress though, that does NOT mean it will automatically be the high point of that swing.

If you want to ride longer trends, you really need to be analysing based upon the daily/weekly charts. By all means use the hourly to find efficient entry points to maximise your profit but don't confuse swing trading and position trading.

Hope that makes sense. Either way, I'm hopeful this post will generate some further discussion amongst us all.

Kind regards,

O N D



Quoting Astellas
Hi OND

Here is a trade I took last night, and am just about still holding. I would value your feedback.

Reasons for Entry short

Price structure was showing lower lows and lower highs
Price hit the descending trendline, at the point it met the ascending trendline
[size=3][font=Times New Roman]PA on lower time frame suggested...
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