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Trading the SLA/AMT Intraday

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Trading the SLA/AMT Intraday

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  #1 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

For an explanation of what this is, click SLA/AMT

End of Market

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  #3 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

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  #4 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

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  #5 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

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  #6 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

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  #7 (permalink)
Naperville IL
Experience: Intermediate
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Welcome DB, followed you on ET and TL. Hope to learn more from you here

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  #8 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

There's virtually no interest in this, but I'll try to update it once a week.

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  #9 (permalink)
Wrocław, Poland
Experience: Intermediate
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DbPhoenix View Post
There's virtually no interest in this, but I'll try to update it once a week.

Lack of interest comes from lack of understanding. I admit first time I had seen your original post I've missed the link to Traders Lab with those 2 pdfs. So looking at the thread at first I thought: "great a guy posts chart screenshots with trendlines/SR lines"

Wish your thread good luck but advise you add a bit of narration anyway

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  #10 (permalink)
Phoenix AZ
Posts: 470 since Dec 2012

The charts are pretty much self-explanatory to those who've read the SLA/AMT. But I posted the following to ET a while ago for those who were new to the whole idea:

Given that Saturday was given over to an influx of Piranhas, Trolls, and Trolls-In-Training, I have to back up a bit to return to business, which is deciding what to do this afternoon when the market re-opens.

So far, none of the trolls have offered any opinions on what should be done when the curtain rises. This may be the result -- or cause -- of a question that was asked earlier: "Don't you people ever tire of yesterday's news?" The answer, to a price action trader, is, of course, no, as yesterday's news and the news of all the days preceding yesterday (or, technically, Friday) provide the context for the upcoming session. Some traders prefer to wait until the market opens before they assess the situation and then trade by feel, in "real time". What they miss is that in the market there is no "real time". By the time that "real time" trade is noticed, much less posted, it's already in the past. In the market, as in life, there is the past and there is the future; there is no "now". Therefore, if one wants to make the most of the upcoming session, it is wise to prepare.

For example, here is Thursday's chart:

Notice that while the weekly trend is up, the daily trend is down. And it is down in a channel, which is common among mean-reverting instruments. Notice also that it reversed off the upper limit of the channel three days previous.

Here is Friday's chart:

In a mean-reverting instrument, price will gravitate toward the median of the channel that is created by traders as they move away from that median, i.e., the "value area", the level or zone where the bulk of trades take place within a narrow range of prices. Without knowing anything about "yesterday", a move such as this comes as a complete surprise, and those who trade by "feel" often end up on the wrong side of the trend. They are the buyers who are taking what the sellers have to sell on the way down.

For convenience' sake, this is a copy of the chart I posted two up. You can see that we are at a juncture here. Will price bounce off that juncture? Or will it plunge through and make its way toward the lower limit of the daily trend channel?

Astute price-action traders will note that we were involved in the same conundrum a few months ago: price dropped to the median of the weekly channel and seemed to hold there for weeks on end. However, if one provides the additional context of the daily channel, price held at that particular juncture for only 4-5 days:

And rather than make it all the way to the bottom of the daily channel, price instead rallied up to and through the upper limit of the daily channel all the way to the upper limit of the weekly channel. Will this happen again? Maybe. Maybe not. The PA trader doesn't care one way or the other; he goes where price leads. Which is where the range comes in.

Here is where we are now:

The range represents traders' search for equilibrium, or a balance between supply and demand. The juncture of the median of the daily channel at about 42 and the median of the weekly channel at about 37 adds drama to this, but what is more important is what traders are doing at this level in this timeframe (9 hrs). At noon they were hovering around 45. They then tested the waters at 50 and 30, coming back to 45, settling in at 47 just before the exchanges pulled the plug.

Though this is an embryonic range, there's enough information here to provide at least a preliminary assessment of what traders have in mind. A lot has happened since Friday afternoon, though, so the PA trader must be nimble. But if price settles into this 30-50 range when the market re-opens in a few hours, there are only two options available to the PA trader: buy long or sell short:

And that's really all there is to it: context, preparation, execution. If one ignores the context and doesn't prepare, his execution may not be quite what he imagined it would be.

There are three kinds of men. The one who learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves.

Those who have just tuned in and are interested in this subject might find The Foresight Thread informative. These charts whizzed right by those who see no need for context or preparation, but that they are worth doing should be self-evident.

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August 15, 2015

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