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  • #301
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  • Jan 21, 2016 6:53am Jan 21, 2016 6:53am
Quoting FxClown
{quote} So far so good. My chicken syndrome is creeping up on me and telling me the move could stall at 9480. Comments please. PS The bravado in me is telling me, no, it is going up and up and for ever....LOL. PPS Closed with a bird in hand.
Wise i think. what with the min bid rate coming up, followed by the ECB Press Conference at 13.30, it'll probably go quiet now until then ( not that it's been fizzing over with excitement so far today). I do however think the price stands a good chance of rallying later, though atm futile to put any levels to it with the price stuck in no man's land like this, between today's high and low, but things are just beginning to shape up for a bit of a rally, which will probably now be the kiss of death and we'll plunge 400 pips this afternoon

ps - I do have a level for the Dax, it's 9378, on or around that, we just may get a reaction if the price gets there. Okay, enough predicting.
  • #302
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  • Jan 21, 2016 7:02am Jan 21, 2016 7:02am
Yes, fear is a massive obstacle any trader has to eventually overcome. I have had this quote framed on my office wall for years -
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  • #303
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  • Jan 21, 2016 8:40am Jan 21, 2016 8:40am
Quoting FxClown
{quote} This is beginning to sound creepy. What is that you want?
My apologies for any perceived "creepiness".

In answer to your question, step 2 of Medici's 7 step process, although it is in actual fact more of a "suggestion" than a "want".

Quote
Clearly and objectively define the patterns that appear profitable into setups, including rules for entry
  • #304
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  • Jan 21, 2016 11:14am Jan 21, 2016 11:14am
Quoting medici
{quote} If I may add something to it, there's an old thread with plenty of information on S/R trading. See http://www.forexfactory.com/showthread.php?t=86429 Also, I believe that betting on levels is a tough game, and you need a lot of experience to do it profitably. And even then I find it much easier and more profitable to use moving averages as dynamic S/R levels. Then for reversals around levels, add some measure of momentum, and let momentum turn, then enter as your dynamic S/R no longer holds in the direction of the trend. For example....
Hi Medici,

First off let me start by thanking you and Cat for the explanations, I'm still extremely new to trading so might need more 'basic' knowledge. I.e Learning the meaning and learning how to draw graphs etc. What is Fibonacci? It's all very alien to me and I'm so determined to get myself jump started into this industry with the right assistance of course. Any crucial information that I should know; I want to know! Everything explained in simple terms basically, it's very hard for me to comprehend these 'big' words. though they're probably the basics to you haha

Kindest Regards,
Rob
RKBR
  • #305
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  • Jan 21, 2016 11:21am Jan 21, 2016 11:21am
I get quite a few people ask me about books. As I am one of those people who love books, every room in the house is filled with them, I naturally own a few trading books, so here are four which I particularly recommend. The Marcel Link book is pretty much technical, whilst the Martinez and Douglas book deals with the psychological aspect of trading. The Selden book, which is over 100 years old and deals with crowd psychology, is an absolute gem and as relevant today as the day it was published. In my opinion it is an absolute must read for any trader.
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  • #306
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  • Edited 6:27pm Jan 21, 2016 11:57am | Edited 6:27pm
Quoting cat
Yes, fear is a massive obstacle any trader has to eventually overcome. I have had this quote framed on my office wall for years - {image}
Thank you. Reminds me of my favourite quote from the 18th century samurai manual Hagakure:

The calculating samurais must inevitably turn into cowards. Their calculation deals with whether they can gain profit or suffer loss. They cannot stop constantly referring to the idea of loss and gain. They think of death as loss and life as gain. No wonder they dislike death. That is why they become cowards. And the men of learning hide their cowardice behind the screen of their intellect and oratory eloquence. People tend to misjudge them.

Which is quite a deep and subtle perspective if you think about it. In relation to trading, it reminds me to focus on the process of trading to the exclusion of thinking about wins and losses, and that cleverness in predicting the market is a major source of trading problems.

If it looks like a setup, it is a setup - hit it without thinking. If you're in a winning trend trade, don't exit until the trend has exhausted itself. Then look for consolidation for possible re-entry, or for a reversal entry. Sounds simple, but thinking gets in the way.

Being so immersed in the process requires practice, practice, practice. Still working at it
  • #307
  • Quote
  • Jan 21, 2016 12:07pm Jan 21, 2016 12:07pm
Quoting Rob050395
{quote} Hi Medici, First off let me start by thanking you and Cat for the explanations, I'm still extremely new to trading so might need more 'basic' knowledge. I.e Learning the meaning and learning how to draw graphs etc. What is Fibonacci? It's all very alien to me and I'm so determined to get myself jump started into this industry with the right assistance of course. Any crucial information that I should know; I want to know! Everything explained in simple terms basically, it's very hard for me to comprehend these 'big' words. though they're...
Hi Rob, you're welcome.

The basic facts about S/R, Fibonacci levels, etc - and also some not so basics things - you can learn better at http://www.babypips.com/school than by getting it from us here snippet by snippet. Have a look, and feel free to ask questions.
  • #308
  • Quote
  • Edited 1:26pm Jan 21, 2016 1:12pm | Edited 1:26pm
Quoting FxClown
{quote} I picked up "Reminiscences of a Stock Operator" yesterday after looking at your profile. Thirty pages in, even the mighty Jesse Livermore had many many setbacks. I found that utterly reassuring.
Glad you like it! The words I remember most vividly from the book are

The big money is in the big swing

In other words, same old difficult thing - stay with the trend
  • #309
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  • Jan 22, 2016 2:54am Jan 22, 2016 2:54am
Rob asked about how to draw S/R lines, and here's an example of what I drew this morning. Note the multiple touches.

The lower line has put a temporary halt to the DAX, whereas the upper line could be a target, if not for today then for Monday.
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  • #310
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  • Edited 5:45am Jan 22, 2016 5:30am | Edited 5:45am
People have mentioned, and asked about, S/R levels and their relevance for trading, and here's a few thoughts about that.

I used to trade based on S/R levels only back in 2007-08. That wasn't the only type of trading I did, but it was very profitable in those days. But since then markets have changed a good bit. Algos do a lot of the execution, and the chaps in the dealer-rooms are getting a lot of heat from the regulatory watchdogs, and they can't play the same game anymore.

For these and other reasons I have stopped playing S/R levels. They are still vital to understanding what is going on in the market, as the example below shows. But I think they can be traded more intelligently than simply entering on the level.

The setup exemplified below goes by many names - failure break, failed breakout, Trader Vic's 2B (after Vic Sperandeo), and more - but the principle is the same: A level is broken, but then price reverses back across it. And you enter on the reversal back across.

In the M1 chart below of the DAX cash index, there's a long to be had when the index reverses back up over the 9715 level. Then, about half an hour later, the index reverses back below the 9776 level noted earlier.

The 9715 wasn't any major S/R level like the 9776 level, but was spotted "while on duty". Such setups occur over and over again throughout the day, and one could make it a strategy to trade only 2Bs. Correctly traded, they are high-probability, high reward to risk, setups.

The "bigger" 9776 levels was trickier to trade, which is usually the case with "bigger" levels. In both cases I required the entries not to go against my MA based system, and in this case they didn't - in fact I would have taken them without the presence of the 2B pattern.
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  • #311
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  • Edited 6:58am Jan 22, 2016 6:17am | Edited 6:58am
Quoting medici
Rob asked about how to draw S/R lines, and here's an example of what I drew this morning. Note the multiple touches. The lower line has put a temporary halt to the DAX, whereas the upper line could be a target, if not for today then for Monday. {image}
It's great that we all have our own measures for S&R, after all, what would the markets be like if we all reached the same conclusions. Without wanting to diminish anything you post here Medici, because I and many others greatly value your input into this thread, I have found such horizontal S&R lines to be not particularly useful ( for my trading ) as they set possible future limits based upon past lows and highs, many of which are barely discernible and which can easily lead to confusion for the inexperienced eye. For my S&R I prefer moving averages and fibonacci levels, combined if possible with pivot levels, round numbers and trend lines.

So you say that the Dax has currently been held by horizontal line resistance, which is a perfectly valid observation and may well be right, but you do not mention fibonacci, and on my charts the 76.4%, always a big player, is the guilty culprit at 9,784. It could however be both, the horizontal line and the fib level. On top of that, there is also the H3 100sma which the price hit and stopped to the pip at 9,800.

Just my own observations, and hopefully adding to the matrix of things traders following this thread wish to learn.

To add to this post, most charting software provides both horizontal and oblique support and resistance lines, mine does, though I seldom use them.
  • #312
  • Quote
  • Jan 22, 2016 6:21am Jan 22, 2016 6:21am
Quoting medici
Since then markets have changed a good bit. Algos do a lot of the execution, and the chaps in the dealer-rooms are getting a lot of heat from the regulatory watchdogs, and they can't play the same game anymore
So in this day and age "mean reversion" trading is a better bet than searching for the big "breakout"?
  • #313
  • Quote
  • Jan 22, 2016 6:34am Jan 22, 2016 6:34am
Quoting TradingGurus
{quote} So in this day and age "mean reversion" trading is a better bet than searching for the big "breakout"?
Depends on perspective, I suppose. If you look at the intraday charts of DAX, the juice is in the big intraday trends/swings, where the 2Bs occur as setups.

Typically fast moves end with a slow reversal - a HL/LH - whereas slow moves end with a fast reversal, of which 2B is one type. Exemplified this morning, with slow pullback ending in "fast" 2B and fast move ending with a LH, followed by a 2B across the 9776 level.

Then there are plenty of 2Bs on a smaller scale within the trends. For example, a pullback in a trend can end with a 2B.
  • #314
  • Quote
  • Jan 22, 2016 7:09am Jan 22, 2016 7:09am
Quoting cat
{quote}I have found such horizontal S&R lines to be not particularly useful ( for my trading ) as they set possible future limits based upon past lows and highs, many of which are barely discernible and which can easily lead to confusion for the inexperienced eye. For my S&R I prefer moving averages and fibonacci levels, combined if possible with pivot levels, round numbers and trend lines.
Agreed. Horizontal levels don't play a part in my trading either, but my experience is that it pays to be aware of them. Interestingly, I differ from you when it comes to 00 levels, which I find as useful as the the other horizontal S/R levels - it pays to be aware of them, but none of my setups or profit-taking rules involve them in any way. The 9776 level being an example (see chart). There was a 2B down across it, which was too counter-trend for me, and after that a HL down across it that I didn't take - it's consolidation time, and - more importantly! - I'm on my way to the gym.

Fibonacci levels I use in the same manner as other S/R levels - for gauging things, and for awarness - but all rules are based on MAs. Interestingly, a chap in NY called Adam Grimes, CIO for Waverly Advisors, has done some statistical analysis of the various Fibonacci levels across markets and time frames. His conclusion is that the only level worth watching is the 50% one.

At it again this PM.
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  • #315
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  • Jan 22, 2016 7:58am Jan 22, 2016 7:58am
Quoting medici
{quote} a chap in NY called Adam Grimes, CIO for Waverly Advisors, has done some statistical analysis of the various Fibonacci levels across markets and time frames. His conclusion is that the only level worth watching is the 50% one. At it again this PM. {image}
and I could show him countless examples from any day in any market on any time frame where that is nonsense, from my own experience, 61 & 76% are way more important.
  • #316
  • Quote
  • Jan 22, 2016 8:42am Jan 22, 2016 8:42am
S/R and horizontals lines are an afterthought with me. I guess it is confirming the obvious! So, I also avoid S/R and horizontal lines. I tend to favour fib extensions. Breakouts tend to head for at least T1, sometimes between T1/T2, and occasionaly T2/T3.
Because Breakouts tend to be a grind, most traders start contra trading (incluing me!). This is probably sure fire way to burn ones account.

Todays Dax is showing breakout from previous days HL. The move has stalled at T1 but could head higher towards T2.
Guess what my position is?
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None the wiser!
  • #317
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  • Jan 22, 2016 8:59am Jan 22, 2016 8:59am
https://www.rt.com/shows/keiser-repo...ax-keiser-865/

I always watch the Kaiser report, and yesterday's show on the collapse of the derivatives market was very entertaining. Max Kaiser is a former Wall St trader, and he knows his stuff, even though his constant interruptions can be a little annoying at times.
  • #318
  • Quote
  • Jan 22, 2016 9:11am Jan 22, 2016 9:11am
Quoting cat
{quote} and I could show him countless examples from any day in any market on any time frame where that is nonsense, from my own experience, 61 & 76% are way more important.
Oh, absolutely. Those are the building blocks of the harmonic patterns, which also are useful to be able to spot. Whether a mechanical trading strategy could be based on the 61% and 76% levels is a different matter, which is what I think he meant. Requires discretion, in other words, which perhaps means "don't try this at home" for many beginners.
  • #319
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  • Jan 22, 2016 12:11pm Jan 22, 2016 12:11pm
Quoting FxClown
Because Breakouts tend to be a grind, most traders start contra trading (incluing me!). This is probably sure fire way to burn ones account. Todays Dax is showing breakout from previous days HL. The move has stalled at T1 but could head higher towards T2. Guess what my position is? {image}
I hope you were long... Even though the sentiment would be short after the morning session, price rarely turns at levels just like that.

First the level is broken, then break back down again - that's how it usually goes. This is for the purpose of attracting liquidity - first it triggers stupid stops above the morning high at 9810, then it attracts buyers for a continuation upwards, then both categories of traders get screwed after half an hour of eating their buy orders.

So even if my sentiment was short, I took a long at 14.42 and joined the lethargic move up. Then the pin bar candle at 15.11 (circled) confirmed what was up - the vernacular bull trap. Finally a short from 9827 bore fruit (after a couple of stop outs), and, true to character , I bailed at 9776 even though I know that levels get broken first, even if they eventually hold. But it's Friday, I'm tired, so it was my last trade for the week.

So, FWIW, that's my perspective on the afternoon action. And I've marked three more 2B trades after that. Algos love 2B, for reasons described above, and on Fridays they sometimes run the roost.

Good weekend to all!
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  • #320
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  • Jan 22, 2016 12:23pm Jan 22, 2016 12:23pm
Quoting medici
{quote} I hope you were long... . Good weekend to all! {image}
Many thanks for your analysis. It was a tiddler and I was experimenting. I know I should not be doing that on live.

Have a great relaxing weekend everyone.
None the wiser!
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