Trade Anatomy - ramblings of an old-timer

Thanks for the reply O N D. You may want to slow down on all of that continent hopping! I get sick every time I fly! Hope you get well

Hi Scoot

On my Gold datafeed I would consider the candle on the 8th to be a pin bar (long upper tail, body open and close in the lower third of the bar). I would have liked to see a longer upper tail to make it stand out from the other bars more, but it’s close enough for me to be considered a pin bar. I think the more definitive description for a pin bar is provided by Martin Pring in his technical analysis book “Martin Print on Price Patterns” where he refers to it as a Pinocchio Bar.

Sure, the pin bar added to my feeling of a ‘potential’ reversal, and that was added to by our recent discussion of interpreting volume and volatility.

I think confirmation for me will be a lower swing low on the daily, followed by a lower swing high. At that point I’ll be looking for an entry short, with my stop-loss above the new lower high.

Take it easy,

Astellas

Hello everyone

My apologies that I do not currently have the time (or energy, unfortunately) to go into any great detail in progressing the thread at the minute. Unfortunately a trip to Asia to deal with a business matter is necessary as soon as I am feeling a little stronger. However, I will be keeping an eye on the thread and posting as much as I can.

In the meantime, I want to offer some reassurance to anyone who is struggling to combine the volume analysis with price action. Gradually, looking at a chart in this new way will become relatively natural but may I suggest those who are struggling begin with this very simple way of looking at charts....

Look at the attached GBPUSD chart or pull up your own hourly chart. Look what happens when, in an uptrend, a bar makes a new high but the close is lower than the previous close. Please note this does not have to be an engulfing candle or a pin bar. Vice versa for downtrends. When you identify such bars, look at volume and check if it has increased in that bar and the previous one. If so, you are likely looking at a turning point so be alert and wait for confirmation in the next bar(s).

I appreciate this is way basic and dumbs down the subject but I want to make sure that readers of the thread aren't put off by thinking this has to be supremely complex. This simplistic method of reading price and volume that I have just outlined will, on its own, likely be enough of a strategy to be profitable if stop placement and entry strategies are handled correctly.

Go ahead and look at a few charts using ONLY this filter. I think you will be pleasantly surprised.

Kind regards,

O N D

Good Evening All,

Hopefully everyone had a good weekend (minus the Brits who thought that at the very least they'd beat the US 1-0) First off, thanks for posting the chart this weekend O N D and providing more clarity on the connection between PA and volume analysis. I can post charts now and thought it would be appropriate to get them up and keep the conversations going. The three pairs I'm currently watching are: USDJPY, EURUSD, EURJPY. With these instruments I'm using the weekly,daily and 4hr charts. I use: the weekly chart to make sure I have the overall trend picture clearly understood, the daily chart for actual entries and analysis and the 4hr for catching a discount or the early stages of a move. What I've seen on the charts is below. Please feel free to tear my analysis to shreds as that is the only way someone learns.

USD/JPY

This pair has been in a downtrend since about April 2007. It "appears" to have bottomed in Nov. 2009 and had been trending up from there. (See Trendlines [I can't mentally draw them like O N D just yet!] on attached chart) May 6th and 7th saw significant selling pressure and the up trendline was broken on May 20th and hit support at the previous down trendline. Volume has dropped off significantly and the pair appears to be failing at the 92.00 level. This would signal to me that there is no clear current direction for the pair. For me, I'm long on a strong close above the 92.00 level and I'd watch the 94.00 level. I'm short on a strong close below the 90.60 level and I'd watch the 88.00 level.

EUR/JPY

I'm bearish on this pair and I'm looking for an entry point to hop back on the down-trend-train. The pair has recently been trading in the 109-113 range. The overall trend is down, and volume has maintained relatively high historical levels. However, it has begun to drop slightly. I know we're focusing on charts, but I think the fact that there is little in the way of clarity on the Euro issue justifies a bearish sentiment on the currency. I'm looking for a failure at the 113 range (if it makes it there) to enter a short.

I have to run, but I will add my EURUSD comments later. Once again please feel free to correct me and provide as much criticism as you find necessary. Take care

Hello OldTimer. I have been reading these forums for a few months now, but have only just signed upto FF to post this message to you. I have been following this thread with great interest as your trading methods seem like could bring success if adhered to.
I understand you do not wish teach your style to rapidly, as people will miss the points you make. But it would help me (and maybe others) if you could summarise the points you have covered so far, and after enlightening us with another point add to the summary.
Also I have read the 'Richard Wyckoff' book you reconmended. As it is based on the 1920's stock market all I was able to take from it is trading mentality and parts on voluime trading. Where there more asects relating to forex?

Thanks for your efforts and hard work. Keep it up

Si

Hello O N D,I have a question regarding S/R.I was hoping you or any of the other PASR traders could help with this;

My understanding of the S/R aspect of PASR is using price levels that have historically been points of resistance or support to identify trade set-ups,for example;

GBP/JPY being twice rejected at 128.90 on the daily chart during the last week of august,and previously being rejected in may at the same point,means that 128.90 is a fairly reliable support level,and with a double bottom at the end of august,going long GBP/JPY into september would be a valid trade.

Now,what happens when a currency pair/commodity etc. reaches a new historical high or a new historical low?Is it still possible to trade using PASR or do you switch to a moving average type system due to the fact that you no longer have any historical levels to draw S/R from?

Hello everybody.

Here is an old post from OND (http://www.forexfactory.com/showpost.php?p=1723117&postcount=687) that I put together in a visual chart representation. It shows step-by-step how he took the trade. I have placed his original comments on the charts where I believe they are relevant.

The first 3 charts show the Daily, H4 and H1 charts at the moment before OND took the trade. The remaining charts demonstrate ONDs thinking as the trade 'matured'.

There are still some things I still don't understand in his explanation; like why the market structure suggests a continuation of the two-way price action (chart 5) and why he thinks in the last chart that there is likely to be another test of the 16th November low (although I make comments in brackets that maybe this is due to the Smart Money making sure there are no more sellers at that level - I thought this due to the low volume on the 3rd bar back from the right edge).

Make of the charts what you will, but I thought I would share what I've put together from his teachings.

Happy New Year all,

Astellas

PS – I include ONDs original description of the trade below

“Trade 1 - Short E/J
I entered this at 18.41 CET on 15th November (I'm British but wintering in my 2nd home in warmer climes so I'll use European time). Entry price was 162.03. Clearly our data feeds and candle close times will all be slightly different but my entry was due to the heavy selling pressure that occured when price had climbed from 161.50 to 162.70. I entered on the 4Hr chart and could see that lower peaks (think of fractals if easier) were starting to be formed after the failure around 163.70. The daily bar for 14th was also showing me a clear rejection of the 164.20 area. My initial stop was infact just above that previous day's high at 164.40.

So, my initial risk was around 240 ticks. And my profit target was ... well, whatever the market gave me. This is where there is a lot of argument amongst trading styles. Some will say you must have a risk reward ratio of X or Y. Personally, I do not view the market as something you can dictate to in that manner. I accept the risk level that is appropriate to the price action and that my trading account and stomach can handle. My intention is always to pull my stop in tighter as price action allows it and I did this with this trade.

Ok, price moved in my favour for the next 3 or 4 bars (4hr ones) and was now sitting at just above 160.50. Clearly the mantra of "don't let your profits become a loss" is drilled into us and, with a floating profit of around 150 ticks you'd probably think me mad to do nothing.

That's just what I did though, and I didn't even move my stop at that point. So, I was still risking 240 ticks - crazy huh? Personally, I think it was the right decision at that point. Each trade has to be managed in the context of the market action occuring and it was clear to me that there would either be another assault on the 159 area or a slow consolidation before another attempt at an up move. This gave me the time to let the trade mature and guide me as to where it was headed.

Price then ran up as high as 163.20, giving me a floating loss of over 100 ticks before posting the lower high confirmation that it was ready to have another go at getting lower. The 4Hr chart again demonstrated nice selling pressure. It ended the day of 19th Nov at around 160.90 and this was my warning that there might not be the appetite for that assualt on 159. It was an inside bar and the market structure suggested a continuation of two-way price action (one day up, next one down etc).

I forgot to mention that my stop had been moved down to 163.30 by that point (just above the daily high for 16th Nov).

I thought it likely that there would have to be another test of the 16th Nov low before another push up and my limit order was therefore positioned at 160.50. This was hit for a profit of 153 ticks and price only went as low as 160.41 before moving up again.

Clearly I could have taken my profits at the exact same price a few days previous but the context of the market was such that there was a good possibility of more profit available to me. I fully appreciate this approach will not be for everyone but I prefer to never snatch at profits and to let the market guide me as to when I'm fighting a losing battle. It's difficult to put down in words what years and years of watching price action gives you so apologies if I haven't been able to articulate my thinking completely successfully. There is almost an intuition that develops but that is only through observation and recollection, not any great skills on my part.”

Thanks for replying to his thread - shame he couldn't reply himself.

Anyway thanks again for your input

Si