The Really Useless Thread

It's not important why or what or if his definition is right and your or mine is wrong, etc , the only important part is whatever you choose is STANDARIZE IT and MAKING IT CONSISTENT.... If you choose fibs/mofu or what have you must follow the same principle in and out for any chart and any instrument, etc ...

The point I am trying to make to IMARICH rather than preaching if this or that or the other xxxxx tool is better is that he must be able to exactly define how he call his S/R whatever definition, it has to be measurable, repeatable and clearly extendable to any chart ...

Saying yes sometimes is high and sometime is low and sometime a wick is good and sometime is not and sometimes etc wont cut it ...


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The following post are a hack of copyright material that is long gone on the cemetery of forgotten data in the internet. Sadly most of the content and images are gone but the 10 absolutely key basic principles are still there ... so will try to add the images and fill the blanks ...

From the Gourmet Trader .... TBC

sisse

Agree, and do not forget about confluence where several different levels meet, more of the hundred of thousands individual has the same levels but look different things.

Sorry deleted it, after I edited my comment 7+ times I decided to just let the whole thing play out without my interruption I have a bad habit of that...I'll edit my comment so many times after reading it that everyone has already commented on it before I've finished editing

but yes, I saw the point you were trying to make. The same point you were trying to make with the multiple TA iteration.

Dissecting the market (The Basics)

" More than a recipe book, the first collection Dissecting the market in a few bars (The Basics) defines the fundamental elements behind price analysis. These are my core trading principles, all trading analysis and decisions are derivate from them.

Trading is just a probability game based on pattern recognition

If every potential trade is a probability game, the job for a trader/scalper is not forecast the future but to minimize risk using every available tool to find the best available scenario.

1. The importance of order in the analysis.

In mathematics the order of the factors doesnt changes the result (5 x 8 = 40 and 8 x 5 = 40). However, when trading the order of analysis change everything.

a. If you only focus in how to pull the trigger (timing i.e LT rainbow, Stoch Crossover, MA Crosses, CCI, etc ,etc ,etc ) you can have some results especially in trendy markets, but you are doom to fail in the long run.

b. If you only focus in direction you will have 95% hit rate but only in your head cause u will end up getting stopped out every single time, full of loses because whipsaws or caught with million doubts every time a S/R or trendline is touch or broken.

But before analysing DIRECTION, TIMING and MOMENTUM...

2. Price moves in Waves.

Regardless of the instrument and timeframe and despite of the market direction or its condition (in a trend or in a range) markets always move in waves. Thats why the Elliott Wave Theory and its followers. But we scalpers [traders] are not interested in counting waves or forecasting the next possible move but in minimizing the probabilities of a bad trade.

a.What we dont know about waves:

i.The exact beginning or end of a wave
ii.The potential height of the next wave

b.What we know:
i. Where we have less probabilities for a successful trade regardless of the direction or condition of the market



c. Have u ever wonder why you end up trading the death lows or highs in a trend



Your analysis might be right, the direction, condition and timing might be good but you are playing a low probability trade because you are forecasting that next wave is going to be a lot deeper than the previous one when statistically this is not true.

3. The first factor for a scalper trader is to understand in which part of a wave is the market.

Not using a statistical method but using common sense (sadly the least common of the senses). Before you analyse trend S/R lines, Direction, Timing, Momentum and despite the drawdowns, etc a trader should ask himself in which part of the wave is the market.

The only rule of thumb is the later you enter a new wave the less probabilities you will have to be successful.... "

TBC...

sisse

I have the original copy with all content and images !

Must admit I been doing some of that this week. It's almost a bad thing that I can make some money doing it cuz it reinforces a path I take that does not lead to consistency. I need to keep the bigger picture in mind. It's tough because when I see a little money on the table I want to take it. Done it all my life. (Even when i was a kid my aunt learned quick to keep her purse on her lap when I was around)

Recently all Canadian data were below the expectations which denote the state of Canadian economy. In addition +/-80% of Canadian economy and Exportation are with US. Is it not reasonable to extent the state of Canadian economy to US to some degree, which is inline with the latest GDP forecast (from 2% to 1.8%)? Food for thought! Good weekend Everyone!

Bar 1: The Forgotten

A single bar is the first and one of the main pieces of information in a chart and is usually forgotten or overseen by Indicators, S/R zones, Volume, Fibs, News, etc filtering the noise of a single bar. But a sound analysis of that noise in key areas can have a huge impact in market direction analysis and sometimes can make the difference between a good or a bad trade.

We can spend days defining each potential 1 bar formation (e.g. doji, hammer, hanging man, etc) but the important issue is understanding the core implications for any 1 bar formation. The 4 cases in Figure 1 cover all potential formation (all other cases derivate from them). The obvious static analysis is:

 

1. A bull bar opens on the lows and closes on the highs. Buyers were in control in all or most prices covered in that bar

1. A bear bar opens on the highs and closes on the lows. Sellers were in control in all or most prices covered in that bar

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1. In a bullish bar buyers managed to control the lows and the close but at some points (the highs and below the open) sellers were in control.

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1. In a bearish bar sellers managed to control the highs and the close but at some points (the lows and above the open) buyers were in control.

Every time we introduce a piece of static information in a chart we are adding many new variables to the equation. Some are clearly seen in a chart, others are hidden because of the static nature of an ex-post chart. In this case:

1. A closed bar only identifies in absolute terms where buyers or sellers were in control. We dont know if the buyers/sellers in those areas were strong enough relative to the market participants (e.g. volume). In other words, in a bear bar we can see that sellers were stronger in all or most prices in that bar but we dont know, for example, that this was because of lack of buying interest (too high to continue = the start of a retracement in an uptrend) or because there were a genuine new selling pressure (the continuation of a downtrend or a top in resistance) or because liquidity disappeared and even small sell trades can push the market to the extremes (news, consolidation after a major break, etc)
2. The other important hidden issue is that in a static 1 bar we dont know what was the flow of trades in that particular bar. For example in a bullish bar we dont know if buyers first push to the highs and after that sellers took control but they couldnt get rid of the buyers on the lows (more bullish signal) or if sellers first push to the lows but buyers took control but they were overpowered by the selling on the highs and barely could close above the open (a more bearish signal).

Paying attention to this information in areas of potential trades or in the analysis of macro direction will definitively help a trader to stay in the right side of a trade. It will be clearer when more bars added to the analysis.

TBC....

sisse

Bar 2: Two to Tango

A second bar adds a lot of depth in the analysis but before analyzing its implication is important to remember that there are many variables in a consistent and sustainable trading plan: the most important are timeframe, risk, market liquidity & volatility and capital.

All of them have their unique implications, yet they all are mutually interdependent. The success or the failure of a trading plan is given by how consistent these unique implications and their interrelations are in your own trading plan. Finding the equilibrium between those is the key for trading successfully and consistently.

However, these interrelations must never interfere or blur basic price analysis; on the contrary they are adaptive variables that have to be used to facilitate trading. As in any chart, the longer the timeframe (or a widely use timeframe) the stronger its implications. Nevertheless, with the cases in figure 2) we can outline the key implications that are applicable for any chart.

As you can see for example in 2a), sellers took control from the close of the 1st bar. The early buyers on the opening of the 1st bar are the stronger. We dont know if they are long-term positions, swing traders, day traders or scalpers. But 100% sure there are in profits (or out with profits) even after the second bear bar. On the other hand, the late buyers (we dont know who they are) on the close of the 1st bar are in red.

Additionally is clear that weaker long hands (scalpers, small daytraders, amateurs, etc) are betting on a break of the previous high to be in profits and every tick down can trigger their stops especially if price break the low of the 1st bull bar. The same analysis can be done for the sellers.

The early sellers on the opening of the 2nd bar are the stronger and a break of 1st bar lows will confirm the move down. We dont know if they are long-term positions, swing traders, day traders or scalpers. But 100% sure there are in profits at the close of the 2nd bar. On the other hand, most of the weak sellers on the 1st bull bar are out and a break of the 1st bar high will almost 100% confirms their defeat. However the break hasnt happened yet.

Good to know but what do we do with this information? Is there any way to define these implications in a coherent, objective framework to use them for price analysis? Yes, with only two bars and ceteris paribus (with all other things being constant) there are core notions (mini points of control, when is too late to take a trade, and price breaks) that are relevant for any chart in any timeframe. Lets check them for the 4 main cases:

Case 2a)

Attached Image

 

1. The stronger buyers at the open of the 1st bar have a wall protecting them. This make the open/low of the 1st bar a mini point of control. As long as price is trading above these levels bulls will be in control. A tick below will put buyers underwater, weaker hands will start covering their position with a loss and new potential breakout sellers may appear.
2. Sellers need to break the bulls in every single price on the 1st bar range to take control. In this case, and although sellers were dominating in the 2nd bar, the outlook is still bullish. If the sellers that werent taking profits (and betting on the top/reversal or pullback) on the 2nd bar fail to take over the bulls (break the wall), they will stoke the move up when they cover their positions. This make the open/high of the second bar the second mini point of control. A tick above will confirm the move up and force the bears to cover and new potential buyers may appear.
3. This case is a clear setup for potential longs. The closer to the 1st point of control (open/low of the 1st bar) you go long the smaller the stops and the higher the potential targets for profits but because the move is not confirmed until a break of the 2nd point of control (open/high of the 2nd bar) there is also greater chances that price can fail to continue the move up.

Case 2b)

1. The stronger sellers at the open of the 1st bar have a wall protecting them. Buyers need to break the bears in every single price on the 1st bar range to take control. In this case they already failed to break the mini point of control (open/high of the 1st bar).
2. The 2nd bar confirmed the move down. However, buyers overwhelm the sellers at the lows closing the bar at the break point (low/close of the 1st bar) meaning that sellers on the break that didnt take profits are not in profits anymore and every tick above the close of the 2nd bar (and especially the high of the 2nd bar) will add pressure on them to cover positions or trigger short stops (especially weaker hands).
3. In this case bears are in full control and its too late to get in the train.

Case 2c)

1. In 2c) we already knew that buyers managed to control the lows and the close of the 1st bar but at some points (the highs and below the open) sellers were in control. Because of the static nature of an ex-post chart we didnt know the exact flow of action in that bar. Adding a second bar make the picture clearer.
2. The second bar shows, that the sellers on the high of the 1st bar were strong. They broke the wall protecting the bulls on the opening of the 1st bar triggering stops and new selling and every tick down will add a lot of pressure to the bulls that are still in. Also the 2nd bar broke and closed below the mini point of control (open/low area of the 1st bar).
3. Now, the strong sellers have a wall protecting them. Buyers need to break the bears in every single price on the 2nd bar range (and the highs of the 1st bar) to regain control. As long as the second mini point of control (open/highs of the 2nd bar) is holding bears will be in control.
4. In this case bears are taking control. There are potential setups for shorts forming but it need a better entry because its too risky to get in at the close of the 2nd bar (you dont want to be one of the weak hands that get shaking out before the moves continue)

Case 2d)

1. In the 1st bar on 2d) sellers managed to control the highs and the close but at some points (the lows and above the open) buyers were in control. The second bar shows that sellers are still in control. Buyers couldnt break the 1st mini point of control (high/open are of the 1st bar). The wall protecting the sellers is still holding (but it was already breach by the buyers on the 1st bar).
2. In this case bears are in control. This case is still a good setup for potential shorts. . The closer to the 1st point of control (open/high of the 1st bar) you go short the smaller the stops and the higher the potential targets for profits but because the move is not confirmed until a break of the 2nd point of control (close/low of the 2nd bar) there is also greater chances that price can fail to continue the move down. In this case the break of the 2nd looks imminent.

These notions are especially useful if you using a longer timeframes for your direction or S/R levels. In fast single timeframes analysing where are the mini points of control, who is controlling or losing control and where not to get in a trade are definitively key pieces of information that can exponentially increase your W% and improve your profit/loss ratio.



...Thats is enough information for now ...TBC

sisse

...and we rolled ...surprise surprise .... not really bastard closed 1.122x to the tick. Sterling in imminent break and Euro in W roll play closing very bearish this time on Weekly but both closed to the 'tick' to avoid leaving any clear trace open in charts....

Whatever the case, Europe news in the last few hours seem to be weighting heavier and we have a few days left for NFP to clear the path for the RMT play that is pretty much confirmed for DEC (trade expectations not facts and we are one NFP away from it) until then same levels, same trade same all ...

sisse

thank you for this, really great and continue please

I'll second that. After a week of chickening out on dollars to pick up dimes a little back to basics is just what I need. Bookmarking these.

Scam Danger!

Beware traders, he (keziahpie) is hunting for Account details!

Twee should react, since this is high danger for many traders with green account!


EDIT:
This was fast..

just wanted to take the time to say thank you guys for the kind words (sisse and pharm0r). 99% of all I know about trading Ive learn here in discussions or in the history of the thread and in my charts. And we all know who Ive learnt so many things from!!!! so thank you. still long way to go but its pleasure to walk the way with you here

GU Comment:
looks like no break down again to me. And if so, we are at short term extreme and possible great RR trade...

"it has to be measurable, repeatable and clearly extendable to any chart ..."

Thank you sisse. this is exactly what I need to work on!!!

European opening completed with all eyes on Sterling on the brink to unlock the capitulation move. One more time a small window for premium tickets available in the Euro so its choose your poison time for those not already holding positions....

European markets look very heavy and the political toll of Brexit is starting to weight very heavy after the round of bad news and announced lay offs from the banking sector last week ...

Tracking very closely Sterling as it will carry the FX board at these levels ....

sisse

Not getting what is the use of the drama on e/u ... Please explain ... Perfectly aligned for everything still loitering ... Why it's not getting a direction...

Mid and short term Neutral in the middle of the middle at the mid of both mate....

FA wise, we are stuck in the brexit bar (game changer in play)
in a 3mths +/- 200+ tiny ticks chop zone making shallower highs since thus year high but unable to break as every attempt has been match with strong flops in FA(primarily via the FED).

You are witnessing the narrow and choppiest Euro since 2003!!!!.... meaning patience. The mid term swing is in the oven, we are in neutral as for today....let it play out....

sisse

sisse,

Read all your material! Thanks for sharing that with visuals. I am anxiously awaiting more information to digest. I know candles give us information but this allowed me to tweak some information within the candle I may be overlooking and especially if it is near the S and R you have been asking me to define. I still am lacking an answering to educated at this point as I believe you are trying to stretch me to see it S and R as more dynamic than static.