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The Fundamentals of Trading

  • #581
  • May 19, 2016 2:29am May 19, 2016 2:29am
I have a basic question around levels and trade entry points. In many cases I don't see levels starting with clean wick-less bars. Instead I might see it start with a big bar with a wick or even a small bar behind it. I've noticed on charts and I've noticed you point out in posts that when price returns to a level it will often ride up those wicks in search of orders. Yet conversely I've noticed you almost always label your levels at the start of the bar (open/close) rather than the start of the wick (high/low). I'm wondering how you generally think of trade entry. Do you start from the bar start/finish and adjust based on the case...OR....do you start from the wick start/finish and adjust from there? I'm just wondering what, more often than not, works better. I ask because I find that finding levels is easier than entering them without getting stopped out so I'm looking for better trade entry technique.
  • #582
  • May 19, 2016 6:25am May 19, 2016 6:25am
I hope your OK Simon....I've been missing your informative posts the last couple of days. Wishing you the best in PIPS.
  • #583
  • May 19, 2016 8:59am May 19, 2016 8:59am
Quoting SuperP
Hello guys! GBP/CAD I spotted a major level around 1.8858. How about a pending short targeting 1.8755? {image} Regards, SuperP
Hello traders!

It seems like there wasn't any significant level around 1.8850. Looking at the daily chart the first real stop could be at 1.9328.
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And another thought: the crude oil is gaining for a while and the USD/CAD hardly correlate with it lately. Interesting... Maybe the CAD strenghtening period is over?

SuperP
  • #584
  • May 20, 2016 4:56am May 20, 2016 4:56am
Quoting WageSlave
I have a basic question around levels and trade entry points. In many cases I don't see levels starting with clean wick-less bars. Instead I might see it start with a big bar with a wick or even a small bar behind it. I've noticed on charts and I've noticed you point out in posts that when price returns to a level it will often ride up those wicks in search of orders. Yet conversely I've noticed you almost always label your levels at the start of the bar (open/close) rather than the start of the wick (high/low). I'm wondering how you generally think...
Good question and the mere fact you asking it says to me that your getting way better at this because this shows a level of sophistication with your thought process around trades so well done with that.

I tend to think about in a really simplistic way, the open or close is like the gatekeeper, basically its showing you where the entrance to the level begins, once the gate opens then your skill as the trader begins and being able to look at PA and make assessments at when to get in.

Simon
99% of Traders fail, so don't follow the herd
  • #585
  • May 20, 2016 4:58am May 20, 2016 4:58am
Quoting Dew9
I hope your OK Simon....I've been missing your informative posts the last couple of days. Wishing you the best in PIPS.
Yep I am fine, had a very busy few days with my business, we have been working on a couple of big deals which we look like securing this week.

Thanks for the thoughts.

Simon
99% of Traders fail, so don't follow the herd
  • #586
  • May 20, 2016 5:03am May 20, 2016 5:03am
I would also say with PA, keep in mind that you need to consider the TF you might be looking at for your levels, I know when I first began trading I traded of weekly charts with wins of 600 or more pips and SL's at 120 to 150 pips so you need to keep things in perspective, if you are trading off 1h chart then 20 or 30 pip SL might be the limit as the wins might only be 80 or 90 pips
99% of Traders fail, so don't follow the herd
  • #587
  • May 20, 2016 5:11am May 20, 2016 5:11am
EA

I have been partially watching this week, so perhaps I am not seeing everything but 1.56 looks like the top for now, The danger is there is no real push down for the sells so perhaps the bulls get confidence from this, one to watch for now, Aussie looks like it needs a breather I dont think it can make 70 or below before a short squeeze rally.

Simon
99% of Traders fail, so don't follow the herd
  • #588
  • May 20, 2016 11:29pm May 20, 2016 11:29pm
Quoting sweetaction
{quote} Good question and the mere fact you asking it says to me that your getting way better at this because this shows a level of sophistication with your thought process around trades so well done with that. I tend to think about in a really simplistic way, the open or close is like the gatekeeper, basically its showing you where the entrance to the level begins, once the gate opens then your skill as the trader begins and being able to look at PA and make assessments at when to get in. Simon
Appreciate the encouraging words Simon although truth is I'm still very much a neophyte at this. I think for me there are 2 big tweaks I need to make based on what I've learned from my experiences so far and your helpful comments.

[1] Rather than looking for levels in general I think its best to filter down to only levels that are super easy to trade. Near perfect conditions. It means less trades but higher probability. This is less about finding them and actually more about patience and discipline.

[2] The comment you made about SL being tied to the TF confirmed something I had been thinking. I was doing short TF trading before I started this so was used to very small SLs...too small in fact. I'm going to increase my SLs. No reason not to so long as the R:R make sense and I pair down trade size to keep capital at risk the same as I'm comfortable with.

The part I still struggle with is reading PA to enter the trade. That is simply due to a lack of experience. I did find the PA charts you put up the other week helpful. You might think some of the things in them rather obvious but there is a world of difference between an inexperienced person thinking something is true and having someone with a couple of decades experience say "ya based on what I have seen over the years that is true". Sometimes its new information but often its just that confirmation factor that makes a big difference. Thanks again!
  • #589
  • May 22, 2016 7:04pm May 22, 2016 7:04pm
Quoting WageSlave
{quote} Appreciate the encouraging words Simon although truth is I'm still very much a neophyte at this. I think for me there are 2 big tweaks I need to make based on what I've learned from my experiences so far and your helpful comments. [1] Rather than looking for levels in general I think its best to filter down to only levels that are super easy to trade. Near perfect conditions. It means less trades but higher probability. This is less about finding them and actually more about patience and discipline. [2] The comment you made about SL being...
time in the market is the biggest factor, you can't learn this in 10 minutes, the FX is marketed as a get rich quick scheme and truth is no business really is that, sure there is some luck involved but for the most part you have to make sure you love it cause FX will test your committment over and over again, and basically there is simply no substitute for time, just make sure you have a good money management strategy and the rest is gained over time.
99% of Traders fail, so don't follow the herd
  • #590
  • Edited 7:35pm May 22, 2016 7:13pm | Edited 7:35pm
Analysing Price/Charts

I want to start this week with some analysis of price but I will start at the top and work down. I think this is the easiest way for you to understand how I arrive at levels. Lets begin with EA

- Weekly Chart - At this level for me its more about reading the candles and looking for clues for what price is telling us
- Daily Chart - At this level we start to combine the weekly with the daily and drill down to whats really going on
- 4H Chart - lots of smaller candles, what is this telling you, perhaps the bulls are loosing momentum
- 1h Chart - notice how the bears are gaining the ascendency, the bulls are loosing it

I personally think that this pair goes down this week, but you have to be prepared to be wrong and stay out if need be, but also remember that before every fall there is a retest of the top this is the significant difference between a sell off and a rally. In sell offs the top is tested and then it happens, so the challenge as the trader becomes where is this level and where can we get in with a high probability of success

Hope this helps

Simon
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99% of Traders fail, so don't follow the herd
  • #591
  • May 22, 2016 10:22pm May 22, 2016 10:22pm
AU
So I thought I might move on now to Aussie, as I have given you a look at my thoughts on EA, its only fair and reasonable to analyise Aussie as this will need to prove out for EA's analysis to be correct.

Weekly Chart - After a lot of weeks of range trading the last 3 have seen falls but also with rejection on the 3rd week.
Daily Chart - nice stair pattern then we get our hammer
4H Chart - Looks like its just starting to rollover now

I personally think this pair goes up this week, however as always I will keep it nimble and react accordingly. the bears look to me to need a rest, they are getting tired every push lower looks to be met with buying pressure, we are getting some reversal signals like the hammer on the d1 indicating the turn is near.

Simon
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99% of Traders fail, so don't follow the herd
  • #592
  • May 23, 2016 1:52pm May 23, 2016 1:52pm
Simon, your posts have been more than just a little helpful, they are helping me a lot. I think this last chart set would be more helpful if all the charts were of the same time slot so we could compare the same apples. I am going to try this same apples comparison on my own, i think this is good stuff you are putting on here.

Jeff.
  • #593
  • May 23, 2016 2:40pm May 23, 2016 2:40pm
Quoting sweetaction
Trading Styles I hear all the time people say are you a swing trader, scalper, intraday trader, and my answer is always the same WHY THE F@CK MUST I BE LABELLED Dear Trading community a professional trader is someone with charting skills, matched with appropriate money management/business acumen and patience, that's it nothing more nothing less. Let me ask you this question WHAT DOES IT MATTER WHAT I AM I mean what are you going to do with this information, if I say I swing trade are you going to think to yourself, well I can't do that or I am scalper...
You're right.
It doesn't matter.
My Threads: Trading is as simple as 1-2-3, Highest Open / Lowest Open Trade
  • #594
  • May 23, 2016 5:57pm May 23, 2016 5:57pm
Quoting wingit
Simon, your posts have been more than just a little helpful, they are helping me a lot. I think this last chart set would be more helpful if all the charts were of the same time slot so we could compare the same apples. I am going to try this same apples comparison on my own, i think this is good stuff you are putting on here. Jeff.
Not sure I understand you, perhaps let me explain myself this way. I conduct top down analysis so normally when I look at a pair I first analyise the w1 chart then d1 then 4h and then 1h if necessary as this is the only way I know to really understand the PA and the direction of the upcoming movements.

Simon
99% of Traders fail, so don't follow the herd
  • #595
  • May 23, 2016 5:59pm May 23, 2016 5:59pm
Quoting TooSlow
{quote} You're right. It doesn't matter.
yep absolutely don't allow the world to label you this is the world's way of containing you, this is BS, the only way to fly is to spread your wings and in trading that means trading to make money not to be labelled, however it comes is ok by me money is money, success is success.

Trading is a business with zero points offered for style and all the points offered for results.
99% of Traders fail, so don't follow the herd
  • #596
  • May 23, 2016 6:25pm May 23, 2016 6:25pm
Candlesticks

As many of my regular readers have probably worked out by now I am fan of Japanese candlesticks and the work of people like Steve Nison, unlike a bar chart a candle chart leaves clues behind that you can use to read PA. Let me stress from the outset that if you are using what I am about to outline here as gospel on the 15m, 30m and perhaps even the 1h chart you are doomed to failure, candles and their formations work there best on the long TF charts like w1 and d1, they can give you clues as to what the market is thinking and perhaps what it might do next.

They are an excellent indicator of force within the markets or lack there off and also offer up signals of the next move, but you must use them wisely:

1. A hammer is very clear when it happens, but many people get this formation wrong, for example a hammer is only valid where a pair has had a long sell off, it signals the bottom. If it occurs in the middle of a trend then best to ignore it. It also is rarely retested if a hammer is heavily retested then this is a clue that PA is breaking right through and ignoring it.
2. A Hanging Man - Opposite to the hammer it occurs at the top of a rally and can signal a reversal, importantly though every single hanging man is retested, before every sell off there is a point where the market tests the top before falling.
3. Bullish or Bearish Engulfing Pattern - this occurs on where the body of the candle completely engulfs the prior period, what I like most about this is that it shows you the force of the buying or selling, depending on direction and where in the trend they occur it can either indicate the last gasp or direction change.

These are my top 3 patterns i like but only on the long TF's to give clues to direction and motivation in the market, trading will never be a science but if you want to get good at price then study the work of Steve Nison he has taken an ancient Japanese art form and basically dumbed it down for the rest of us mere mortals to understand, his work is worth reading if like me you like the study of price action.

Simon
99% of Traders fail, so don't follow the herd
  • #597
  • May 23, 2016 8:31pm May 23, 2016 8:31pm
Quoting sweetaction
AU So I thought I might move on now to Aussie, as I have given you a look at my thoughts on EA, its only fair and reasonable to analyise Aussie as this will need to prove out for EA's analysis to be correct. Weekly Chart - After a lot of weeks of range trading the last 3 have seen falls but also with rejection on the 3rd week. Daily Chart - nice stair pattern then we get our hammer 4H Chart - Looks like its just starting to rollover now I personally think this pair goes up this week, however as always I will keep it nimble and react accordingly....

Good Day to you Sweet

Regarding the Aussie Daily. This one peace to your explanation #1 that is vital to this candle IMHO: " a hammer is only valid where a pair has had a long sell off " and " in the middle of a trend then best to ignore it " Many tend to forget these two points.

Nice thread

TSD
  • #598
  • Edited 8:58pm May 23, 2016 8:36pm | Edited 8:58pm
Quoting TraderinSD
{quote} Good Day to you Sweet Regarding the Aussie Daily. This one peace to your explanation #1 that is vital to this candle IMHO: " a hammer is only valid where a pair has had a long sell off " and " in the middle of a trend then best to ignore it " Many tend to forget these two points. Nice thread TSD
thanks TSD
99% of Traders fail, so don't follow the herd
  • #599
  • May 23, 2016 8:54pm May 23, 2016 8:54pm
So as many of you know I hate repeat hate Indicators because they are always lagging and for that reason never ever arrive early to the party, however there is one that isn't really an indicator which can be useful and that's Fibonacci. In my opinion it will never give you exactly where you should be trading but it can assist in the following ways:

Fib's can help determine where an over stretch is occurring and where you should at least be looking for levels. By over stretch I mean a pair that's had a really big push in one direction or the other. Lets have an example

I must point out that I only really use Fibs on the W1 chart ( i learnt on w1 and EOD charts so I have a real affinity for them) and I draw my fibs in a backwards fashion. I don't care what the textbook says I use them the way I have seen them work for me for years. If you have a bullish candle then I draw the fib on that candle from the high to the low (not the textbook way which is low to high) and vice versa for a bearish candle. I also only use candles that have a bullish or bearish engulfing pattern because at least you know there was some determined buying or selling pushing this move.

It depends on the pair but for GBPNZD which is the example I am using here over stretched to me is a move of 161.8 to 200% of the original Bullish/bearish engulfing candle.

I am sure this won't make sense but see how you go, happy to answer questions if this sounds like rubbish.

Simon
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99% of Traders fail, so don't follow the herd
  • #600
  • May 23, 2016 9:32pm May 23, 2016 9:32pm
Quoting sweetaction
{quote} yep absolutely don't allow the world to label you this is the world's way of containing you, this is BS, the only way to fly is to spread your wings and in trading that means trading to make money not to be labelled, however it comes is ok by me money is money, success is success. Trading is a business with zero points offered for style and all the points offered for results.
My Threads: Trading is as simple as 1-2-3, Highest Open / Lowest Open Trade
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