At the same time that I was covering my TNA trade, the Bankrobber was going short. And I really mean "the same time" because his entry price and my exit price are the same and at the same point on the chart. His chart and mine are posted here.
There is something very significant about this from a technical standpoint; or better described, from a trader behavioral standpoint.
Understanding this divergence, at least from a technical perpective, is something that will increase the odds of my success.
I agree, very interesting. Has your perspective or ability to sense momentum changed in the time that has passed since this day? What have you done to be able to read market conditions better?
ReplyDeleteIn some ways it has. The clouds are parting and I am seeing the patterns in how stocks and indices behave in the past few weeks. I recently sold my 20+ year business to allow me the time to do so. I just completed my first month of full-time study of the markets. Not only am I seeing the patterns better but I am also beginning to discover the reasons why the patterns exist; I am finding context. Acting on pure faith has never been right for me; I must understand the “why.” I operate best if it makes sense to me. I am in the phase now where the "why" is coming forth. The individual technical analysis principles that I know and have tried, as well as the new ones I am experimenting with, are making more sense now because I am combining them together. The painting is only revealed when one stops looking at individual brush strokes. I recently asked you a question on your blog about rating different signals you see. And your response was the one I had anticipated, based on what I am finding through my own study. That is, you make decisions based on many factors taken together. That was confirmation to me that I am on the right path. Admittedly, I've arrived at this by using all the indicators you don't use; fib lines, pivot points, stocahstics, etc. The fact is is that there is nothing random about how markets move. Which makes sense, when one thinks about it. Professional money managers who have the power and size to move markets are not going to bet their financial futures willy-nilly. They will obey rules of the market, whether through their personal trading or through the algorithms they develop for their bots, which then further perpetuate the patterns. And when they do, we ride along with them. It makes no more sense to behave randomly in such an ordered construct like financial markets. It is illogical, and dangerous. It is no different than a pedestrian defying the traffic laws in a big city. It can only end badly. The rules are there and the system works for those who do the right thing. Obey or be run over. But first, traffic patterns and motor vehicle laws must be learned!
ReplyDeleteI am advancing by paying attention to price movement at the critical moments where price meets trend lines, meets fib levels, meets pivot points, etc. Bid/ask behavior, volume and stochastics are pictures of what the big traders are doing at the given levels. For example, Friday in TNA, when one overlays the Pivot Points on the chart, we see that at the 10:00 am candle (a doji), price reached up and touched the Pivot before dropping and forming the doji which also happened to be the initial part of a trend line which acted as a great resistance spot later in the day at 12:35 and 12:45. What was interesting was that at the 10:15 candle, price jumped up to “test” the pivot before dropping down enough to be the largest candle of the day. I suspect that wahat a re-test actually is is the market makers or large trading firms driving price up to take out stops, providing liquidity to fuel their shorts. The size of the candle and the large volume are telling me that many traders were faked out of their shoes.
My intent is continuing to watch price interact with these critical indicator levels on a chart, figure out which of them, when combined, provide the greatest odds of success (volume & bid/ask behavior are clues to determine how important the different levels are), then discard the indicators altogether when I have internalized them. In fact, I am starting to "see" the fib. lines on a chart without actually having to draw them. I can estimate the percent levels and see traders react to them by watching how momo behaves there. Your model of simplicity is one I intend to follow… it makes sense. If I discover a stock moving strongly, I want to act! I don’t want to fuck with plotting a dozen different indicators first. A crutch always gets in the way. ---
Continued...
The fact is, you have made this easier for those of us who are willing to work hard enough to find out how your edge applies. I always believed this was the case. That is to say, that there was truth and credibility in what you were putting out here; and why I studied what you blogged with such intensity. I am trying now to understand the laws of the market so I can then understand how your edge applies. This is not easy to do. Like when I listen to Joe Satriani or Steve Vai then try to replicate it on my guitar. It is an episode in frustration most of the time. However, the real value of paying attention to what others have done beforehand is in already knowing the destination.
ReplyDeleteTo get back to your question, Scott, What I have done in the three weeks since my post is to draw all my trendlines, S/R lines, pivot points, etc on a chart of the stock you were playing, then insert your entries, stops, and exits. Then I study it. It is revealing a great deal to me. For instance, your last post is a BTU short. What I see there is difficult to figure until I plot trendlines: One from the highest point of the 2:20- 2:25 pm candles on Tuesday through the 10:30 am doji on Wednesday extended through the near-doji closing candle of Wed, and on down through Thursday’s chart. It is no surprise that you set your stop just above that trendline 50 cents away from where you took it short as it broke to a new LOD . My guess is you found it late, otherwise you would have taken it short in the area of $68.85 after the 11:10 candle changed to 11:15 with your stop in the exact place where you had it. It is also no surprise that the 50% fib retrace of the whole move from the Open to Noontime was right where you had your stop. So, you got short at $68.53… a parallel trendline to the other one drawn from the low of the 11:40 am candle on Wednesday runs through the consolidation area of 11:35 – 11:55 am where you exited. But more precisely, you waited to exit where price crossed above the trendline after the doji and volume spiked down but didn’t continue. In other words, you got out at the exact best spot to enter the other way. I wouldn’t be afraid to bet a case of premium beer that you reversed and went long here, then got out somewhere near the price you went short for the first trade ar $68.53 (one penny from where price eventually touched at 12:05 candle). What confuses me a bit is why you didn’t cover on the turn from the big 11:30 candle (with large volume) when the 11:35 candle showed green. Like wher you got out a bit later, price was crossing back above the trendline. Obviously, waiting for the next signal as you did paid you an extra seven cents and a potential of more. But I’ve seen you exit a hundred times after a big surge down and green on the next candle. The only thing I can think is that you were looking to capitalize on the market makers’ price push to take out stops and generate liquidity to fuel their move upward.
- I study minor shit like this for hours on end. I really like your edge and am working hard to approximate it. What I am hoping is that by becoming clear on how to understand the patterns in the market that it will take some of my apprehension away and then… allow me to be comfortable taking losses through setting stops. Long after I figure out the market’s motion, I will still have that mental hurdle to clear. It likely will be the last step.