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Strategies & Market Trends : Trade What You See, Not What You Think -- Ignore unavailable to you. Want to Upgrade?

To: chris- who wrote (269)	1/17/2001 11:27:45 PM
From: TraderAlan	Read Replies (2) \| Respond to of 867

Chris, My schedule has been winding down after 15 months of major intensity. Maybe I should start thinking about a topic for the second book <g>. Actually the only things brewing are my trading, end of year accounting issues, a few new products and an article that I'm writing for Bridge Trader. That may sound like a lot but to me it's practically unemployment. We need to peek at the price mechanics in cycles longer than the ones that we're trading for several reasons. First is trend hierarchy. Simply stated, trends in longer time frames take precedence over those in shorter ones. Second is support-resistance. Movement in shorter time frames will be impacted by larger scale barriers. The analysis has two benefits: a. it points to levels where risk must be managed more defensively and b. it assists in developing profit or risk targets before the trade is taken. Pure 1-min scalping taps into the most basic ebb and flow in market mechanics. I need to go eastern right here and compare it to what the Hindus call the science of pranayama, or breath control. In the simple act of breathing, the yogis try to control inhalation and exhalation to draw power. In the same manner, the scalper lines up execution within the pure buy and sell in the market. At this "primal" level I'm not so sure that multi-time frame technicals are all that important. Success depends on executing in synch with the ebb and flow, and not much more. The 20-bar MA is broadly associated with short-term support-resistance the daily chart. I've used it for years on my TC2000 stuff (an EMA as opposed to a SMA). I tried a few years back to apply it to intraday charts but got a little frustrated. Toni Hansen's column at Morning Trader got me thinking again about using the classic averages on intraday charts and I am applying a 200-bar on a 5-minute chart and seeing some value. But I still use a 13-bar for most of my intraday charts. Frankly I can't apply MAs without BBs. I keep 13-bar, 2 std dev Bollinger Bands around all my intraday charts (and the standard 20-day on the daily chart). The bands give me a lot more info on how much "stretch" to expect from a moving stock than the MAs alone. Also remember that MAs are totally useless in flat markets. And the natural cycle of price development tends to stretch or compress the optimum crossover or support-resistance MAs. For example, you could trade very nicely on pullbacks to a 6-day MA last January but that would be totally worthless right now. As for the 1-min, 2-min etc, I strongly believe that you've got to find your main chart and be willing to give up some space in-between. Chart time frames that are close together serve no real purpose by themselves. The value is in your understanding of whether you tend to be early, right-on or late in your signals. Choose a faster chart if you're late and a slower one if you're early. Whatever one you choose, learn how it signals and how it fools you. At that point you don't need another one in the same time range because your vision has that covered. Alan