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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Robert Graham who wrote (22459)	3/25/2000 7:54:00 PM
From: Chris	Respond to of 42787

yes, i mainly trade swing trades that i hold for multidays. I use the swing trade mentality when the market is choppy and playing the high risk stocks. As for some of the methods for determining the pivot points, i think the most important thing is to get the "bigger picture". As in the "Trading for a Living", by Elders, he stated that one should always look at ONE DEGREE higher in terms of time frames. IE: If you're working on daily chart scale, do look at WEEKLY charts to get confirmation. IE: Intraday 15 min chart --> look at 30min or 60min. To me, that is the most important for an investor/trader of any time frame. Make sure trend is on your side.

To: Robert Graham who wrote (22459)	3/26/2000 11:49:00 AM
From: Robert Graham	Respond to of 42787

I want to clear up what I mean be a strong trend when I avoid trading against the trend. There is the intraday market that I trade in, and then there is the daily market with a given trading instrument like a stock or future. The daily trend may be very strong, but it can and much of the time does unfold differently in the intraday time frame to the point where I actually consider them separate "markets". For the two time frames usually involve different types of traders that move in and out of the market. While the daily trend may be strong and up, the intraday trend for instance can be made up of a series of gap openings followed by congestion most of the day. So this type of intraday market may be best described as a congested trading market. Or the intraday market may show a pullback and a continuation all in the same day, where shorting and going long both prove to be profitable on the intraday time frame while the daily chart is showing a strong uptrend. Specifically, a trend on the intraday chart is what I define as a breakout from a basing pattern, which includes tops and bottom formations, followed by a successive breakout from a pullback or smaller congestion. This is the basic definition I use even though there are exceptions. The best moves are made when the pullback really turns out to be a brief congestion before price makes its second leg. But these can be tricky to trade without the proper perspective on the move it has already made as I will discuss later in this post. Some trends may last several minutes, a significant part of the day, or after an extended congestion, continue up for the rest of the day. Aside from the intraday trending market, there is a market that trends in a trading range. This is what I refer to as a running market. For it manages to put together at least two pullbacks before the third where price may reverse and head the other direction in the same way. When I talk about not shorting a strongly trending market, this is where I am talking about the intraday market that which I trade in. So if the market is in a strong uptrend in the time frame that I am trading, then I will not short. I will look to play the breakouts instead of the retracements depending on how the price action unfolds. The larger time frames compared to the one I am trading in do help give me perspective on this trend. But it is the time frame I am operating in that I am concerned about evaluating here. Strong uptrend on an intraday basis can unfold in different ways. One classic is a move from a bottom formation past the high of the congestion trading range defined for the bottom. Then a small pullback or congestion that ends up blasting off for a lengthy continuation. This small congestion often happens right above the breakout from the bottom formation making the risk for an entry at that point very manageable. Another is when there is allot of "slop" or congestion style trading as the price moves up in the time frame I am trading. This can be misleading. The part that is indicative of a trend in progress is that when price action indicates a pullback can be anticipated at a juncture, and instead price just keeps moving up and up and up. Many traders with some experience in the market may be looking for this congestion style trading to form larger congestion areas. So they may continue to play for the anticipated retracement. I have learned that after price does not reverse where I anticipated it would, and this happens twice to me after what I consider are two significant points on the chart, then I am thinking this price will continue to move up. In this case, instead of playing retracements, it is alright to take breakouts which actually may be the only type of entry that is provided. Also price has a certain way it trades in this type of situation that experience will help ferret out. I call this price "bubbling" up in this type of trend. Yet another type of strong trend that shows up on intraday charts is where there is a series of long moves punctuated by retracement swings that widen over the time of the trend. At some points this fools many traders including myself when the retracement swings start to become significant where I was anticipating a significant pullback in the form of a price reversal. Price has gone already a long distance much above what I would consider normal for the market. Indicators and price targets are telling me of this possibility, yet just when the price looks to be ready to continue further in the reverse direction, price blasts off again for another extended move. Very difficult to determine tops or bottoms in this situation. It actually can look like successive bottoms are being made in a downtrend. But the pattern it is making is indicative of what is actually happening, not specifically the way price does not turn around successive times where I would anticipate it to do so. On a larger time frame you will see what is actually happening which is a strong continuing move down. Only when the swings become significant in the larger time frame is there a chance of a bottom that may be gauged. The way this does usually terminate is an initial good thrusting move to the upside perhaps breaking a trendline. The different quality of this move indicates this time it may not be a retracement. This also tends to happen at a juncture defined in a higher time frame. Markets that are strongly trending in the intraday time frame do tend to have their termination at a juncture on a higher time frame, which sometimes can be much higher. For instance with the SPOOs, I can find a strongly trending market in the 5-min time frame but find the actualy reversal to that trend to take place in the 15-min, or even the 45-min time frame. In some rare cases, there is a price reversal that can be found in the 135-min time frame which may result in a countertrend or extended congestion that can last a period of time. I want to note that there are types of strong trends I have not mentioned here, but these are the ones that first come to mind of this subject due to their rather marked behavior. I find it is important to understand how to play trending markets. First, the way I play a strongly trending market is very different then I play other markets, including congested markets. In a congested market, I play retracements, and in a strongly trending market, I play breakouts. This is the basic difference. Note the overlap between what I consider a congested market and a trending market that is not strongly trending. Also it is important to identify a trending market as soon as I can to take advantage of the initial swings, for I do not know how long it will last. This is an important point for me to make here. In very strongly trending markets, where I am anticipating a continuation day of an existing trend, I will play even carefully selected small congestions which I would not normally think of playing. This assumes there was no gap opening in the direction of the trend which I will have to account for. This is what I consider the "sweat spot" of the strong daily trend that is now showing up in a regular fashion the intraday time frame. Also I will play setups that show up which I would not normally play due to the profit to risk profile of the trade. But I always have to be careful of evidence indicating that price is working into a congestion style of trading. If I ended up in the trend early enough to trade the initial strong moves up, as long as I manage the risk part of the trade by cutting my losses on losing trades, I can make mistakes here and still retain most of my profits. The trick here is not to get into the habit of taking breakouts which can blind me from evidence of a trend reversing where all I can see are breakouts on the chart. Or trading every small congestion that starts to come by in knee jerk fashion which can lead to me trading every wiggle which relates to the psychologically self-destructive cycle I mentioned in an earlier post. All the market has to do now is start to whipsaw or generate the dreaded "chop" and watch me take my account to a significant loss by the end of the day. Perspective is very important and at times can be very difficult to maintain in the market. This is particularly difficult when the market moves from congestion to a strong trend which requires a different mindset to trade. In trends I do go for the longer moves and stay in as much as I reasonably can. I use displaced MAs for this and watch what happens at important junctures like highs of previous days in an uptrend. In congestions, I trade for the shorter move, and frequently scalp for a few points. Just some more thoughts. Comments are welcome. Bob Graham