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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (11738)	3/21/2001 8:23:00 PM
From: Michael Watkins	Respond to of 12039

Gee, that's about the same time that I was exiting my trades! :) Of course, I use the HindSight trading system.

To: Chris who wrote (11738)	3/21/2001 9:05:49 PM
From: Michael Watkins	Respond to of 12039

Ok, I can't just enter a glib response :) ottographs.com 5 min chart; was trading off 1M, three trades this am (1 on NQ not pictured). Thought I'd post the entire day's picture just as an example of what I'm looking for. So there's the thought process, distilled since its time for wine: 1. Knowing a strong move happened to the close yesterday, expect a chance of selling exhaustion / buyers trying to shake things up. 2. 2 comes before 1, I sleep in. It is after all 6:30 am where I live when the market opens. So I miss the first continuation of selling. 3. Ok, I'm here, not drinking wine but do have coffee. Yeah! 4. In the first 90 minutes of trading I'll very frequently use the 1M chart to set up trades. Volume is high, price discovery is taking place, lots of controlled chaos is happening. Frequently the first moves of the day in the first half hour (4-5 price bars) are not the direction for the next hour. Thanks to sleeping in, I get here in time to witness a test of the prior low of the morning. 5. Knowing that price has moved down very directionally, its set up for a snap back of some sort. If its going to happen it is going to happen right here. I position a buy stop limit order and as price reverses from the new low, I am taken in. My technique this morning was not very good, I was sitting in the living room with the kids, didn't have tradestation in front of me, and was guessing at the buy stop level. Later I learn that its a trade I would have passed on (but would have grabbed a few 1 minute bars later on a retracement). So, I'm long at 1143.25 and price is immediately moving strongly in my favour. My sell stop (protection) goes to break even immediately once I'm in the money, because if this move is 'real' it will not come back here. This is a test of a bottom after all (realize that its in 1M time frames. Price never returns there and heads higher. I'm still in the living room, sell stop in place, morning snacks for the kids doled out, I can confidently pack up the laptop and retire to my den. If my stop is hit, big deal, I'm out some potential profit and commission costs at 2.95 per side * the number of contracts I trade. No big deal. In the den, hook up the laptop to the network, Tradestation is humming away next to me and I discover that price has indeed move upwards on reasonable thrust. My targets identified on the chart are T1 - 20EMA5 (20 period EMA on 5 minute chart) and the 50EMA5. Experience tells me that when things have been stretched so far to the downside, price will frequently move up quite quickly to the 50EMA5 region. I decide to scalp since this test of bottom on the 1M chart is not the test of a real lasting bottom. Two trades on ES, 1 on NQ, and I'm out for the morning. Last exit at 48 min past 10. So for Ron, what I need to do is show a day where I have a few losers, and show why stops in my opinion are the best tool a beginner or experienced technical trader can employ. Sorry for blathering on here, I don't have time to edit it or clean up the language. I guess my point in posting it is that technical trading isn't just about indicators and such, we need to understand the fundamentals of price action, most of this knowledge can only be gained experience. And feed the kids their morning snacks. PS: For the rest of the day that I missed, I did not miss that much. ADX, which I like, was telling us that price had stopped going down directionally for a while. Traded within the range first with lower lows and highs and then higher lows and highs only to clunk straight down near the end and pick up directionality then as well. You can see on the swing lines that when price is moving generally down, the up swings will be shorter. The reverse is true when price is moving up. If that's the case then I'd position trades underneath up bars in a downtrend, and above downbars in an uptrend. Middle of the day price did what we call 2B bottom, a marginal new low. There was an opportunity for price to move up from there but it needed thrust and staying power. But that thrust didn't stick around. Sellers decided to show up, ending in a very directional move for about 13 down bars (just eyeballing, the wine is sinking in). Enough for now.