i don't mind your asking, what you need to grasp is the HH/HL concept
If price makes a higher high which is determined by a candle closing above the high of the last ZigZag LH in this case then the HH is intact, you will be looking for a long trade at this point.
Where you mark on the chart that this was not a higher high yes it was - the bar with the 3 green aroows under it closed above the "LH" swing. When price retraces and holds support as that down bar did and you get the signal on the 377 that point will be a HL.
In the next example you are correct about the LL when price turns up it makes a HH, at that point you start to evaluate the potential of HL as price comes down - the moment PRICE not the Zig Zag reaches support you start to look at the 377 for entry rules
You never wait for the Zig Zag to turn at HL"s it is a lagging indicator it takes 2 or 3 bars making a HH to turn that thing. The ZIgZag is there only to give price some structure so you can see inside the price action a little better.
Last edited by cjbooth; June 4th, 2011 at 07:54 PM.
The following user says Thank You to cjbooth for this post:
My markings on the chart where based on the ZigZag indicator as you state in the rules that the HH/HL are illustrated by the ZigZag indicator, not by price. Now you are saying it is price instead of the ZigZag indicator. I know that if price breaks a previous high, it will evidently make a new HH. However, the rules state "1508 chart MUST be making HH/HL illustrated by ZigZag either inside blue cloud or above red cloud".
So this in fact means that a break above a previous High would suffice to start looking for an entry long when price retraces to the MA/cloud. We would no longer need to see HH/HL on the 1508 tick chartas illustrated by the ZigZag indicator as stated in the first rule for long entries?
I just want to be clear on this first rule. So I can know what to look for when looking for entries. Because if the ZigZag doesn't show HH/HL on 1508 chart, then I immediately ignore any setups. But now you are saying that it is not the ZigZag, but a break of a previous high that tells me to start looking for setups when price retraces to the MA/cloud, without waiting for a HL to show on the ZigZag.
I think the issue is in the wording of rule #1. I made the same assumptions based on the wording of that rule. Maybe it should say price needs to take out the previous zigzag high, or something similar, to avoid the confusion.
The following user says Thank You to monpere for this post:
I'm glad you now understand. the rule has not changed
If PRICE has made a HH and retraces to support and holds then that is a HL
Hence the rule "Price must be making HH/HL illustrated by the ZigZag either inside red cloud or above blue cloud"
Price made the HH (trend is up), retrace to support (point of possibe trade on 377 chart), which will produce the HL (on the ZigZag, but you cant wait for it to turn) when the lagging indicators catch up. Indicators tell you what price did not what price will do. Support & resistance levels is where the high probability trades occur from
As I have mentioned throughout this thread my main focus is PRICE not indicators. Indicators all lag they are on the chart to give some sense of structure to the price action so I can making a trading decision with a high probability of success.
Concentrate on PRICE - where it is according to support & resistance , where the indicators are will filter the trades.
As you are watching your charts you are not to be watching the indicators so much. When price makes a HH in an uptrend or a lower low in a downtrend and then starts to retrace my method will give you a good sense of where the buyers or sellers will come back in buying the dip or selling the rally. This is what you need to be watching for.
The following 3 users say Thank You to cjbooth for this post:
It seems you are missing my point. I understand what you mean about price. The way I interpret your rule is that the chart must show a HH/HL on the ZigZag before looking for a retrace to the cloud/MA. But you are saying a HL is not necessary because you only need a HH to start waiting for a retracement (which might or might not form a HL) to start looking for an entry.
In other words my interpretation was:
Look for HH and HL in ZigZag and only until both have formed I look for retrace to enter.
Look for HH (dont wait for HL in ZigZag) and start looking for a retracement to enter.
that is my understanding regarding HH/HL, after obvious HH on zigzag, wait for retracing to MA, don't wait for HL on the zigzag, as soon as I find the price breakout MA or Cloud(but not below last HL), I start to look for entry on 377 chart, not sure if it is the right understanding. thanks
Last edited by supermht; June 5th, 2011 at 12:58 PM.
I am not missing your point at all, you are not understanding price action
I suggest you either contact me by email for a 1 on 1 or find some book on price action
I learned it by losing a lot of money until I figured a way for it to make sense to me
I do not want to extend this thread 5 pages to discuss this topic. I have explained it in great detail, if you cant comprehend it take my offer for private help or find more information on price action
I personally do not know of a good book or class on the subject as I painfully figured it out on my own. Perhaps another member can suggest a good book or class.
The following user says Thank You to cjbooth for this post:
I do understand price action, that is what I use to trade. Perhaps the problem is my understanding of the zigzag indicator as I don't use these kinds of indicators, so I am not too familiar with them. And my interpretation of the first rule seems to be mistaken.
I will disregard my interpretation of rule 1 and use your interpretation and @supermht's interpretation as to when to start looking for trades.
From a logic standpoint, let's say that:
A= HH in ZigZag;
B= HL in ZigZag;
C= wait for retrace on 1508 and look for entry on 377 chart;
My original interpretation of rule 1 was:
If A and B show up on chart, then look for C;
It seems the correct interpretation is:
If A shows up on chart, then look for C; (B does not need to show up on chart as retracement in C will possibly become B)
So I will use the second interpretation instead and will look for examples.
I apologize if I have taken too much of your time or the thread's space, I just thought it might help others as well.
On a different subject:
Once price has established a trend, say for example an uptrend, do you look for entries at every retracement to the MA/cloud as long as price is making HH, or do you only look for entries on the first retracement to the MA/cloud?
Last edited by Lmess; June 5th, 2011 at 01:12 PM.
Reason: added "On a different subject" part