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Random Line Theory

  #181 (permalink)
 
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So the lines on the ES.

So on the ES - according to my observations and it's personality. The lines I use are:

- Overnight high & low
- Yesterdays high & low
- Todays open
- Yesterdays close

Here is yesterday (or most of it)



We can see that the overnight high & yesterdays high were very close.

We can see that we hit the overnight high (light blue) first, pierced it by 2 ticks and then reversed down. As it went back up, we can see acceleration where all of these early shorts had to buy to cover. So - what eaxctly happened at the overnight high there?

My theory:

- Some longs had exit orders for some or all of their positions at this level as it's such a common target on the ES. This would cause the initial down move.
- New shorts would have got in as it appeared the market was rolling over. Still, it wasn't rolling over on new selling interest, just people exiting at a common level
- We probably also had some people playing the breakout of the overnight high, these people would have added to the selling as it rolled over and they had to cover

We now have a bounce off a common level, we have new people short, we have breakout traders nursing their wounds. We have a sum total of 1825 contracts net short from the swing high which is not much conviction to the downside at all. We can see that multiple attempts were made to sell down through 1312.25 and it's likely that someone was sitting there, possibly with an iceberg order sucking up all the selling.

At this point, a nudge upwards is all it'll take to have those shorts running for the doors. This is what happened, price moved up and we can see the acceleration as it moved through the high. It appears the process was repeated a second time with very little move to the upside. This push would have been an intentional move to create buying against which the 'pusher' could exit. A few thousand contracts and 5 or 6 ticks is decent reward for holding the market and then throwing some buy market orders at it.

At this point, we are still net long quite a lot of contracts on the day. We see the market looks 'toppy'. We can also see that the last push up (with delta marked 6473) didn't get much of a move for it's money. There's no follow through. Longs are waiting for a greater fool to come in and move the market up some more so they can make more $$$. No-one seems inclined to do that. If you were long now - what would you do? If you were one of those last 6473 longs - how nervous would you be?

Even more important - if you had an account that could easily sell 50,000 contracts - what would you do? Would you throw a few thousand contracts short at it seeing as you know there's little upside follow-through and there's quite a few people that brought the highs? Of course you would...

Well, we can see how nervous the longs were because a lot of them got out as they saw the days first REAL sell off. (delta -8069). It would be interesting to know how much selling it took to before the longs capitulated... Shame I was watching Red with the missus....

So - that is how I see these lines working on the ES. It's a game, it's hard to assess in real time but very simple in hindsight. The lines can't just be traded in isolation, the first bounce is often a fake. Most of the time, it'll reverse and push through the high a few ticks to benefit from trapped traders. In the end, the market can't be pushed higher artificially for long and it'll roll over if there's not genuine new buyers interested. Still these are the lines I use on the ES. I could not say they would work the same in any other market, even a correlated one as in a correlated market, there is still room for fun and games for 15-20 minutes.

To trade this stuff, you really do need DOM and Time and Sales to get an idea of what's going on...

On this market, my belief is that it's the same big money playing the game day in day out. That's why I think a specific market will have specific levels based on the type of operators playing it.

Does any of this make sense? Does this seem a realistic explanation of levels and how they'd be market specific?

Of course, you could just put a couple of indicators & some moving averages on the chart and not worry at all about who's getting in, who's getting out and who's getting nervous.

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  #182 (permalink)
 
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 redratsal 
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Fat Tails View Post
I am so annoyed by this f...... Microsoft Windows. There are some shortcuts, which close your application immediately without saving anything.

One of these shortcuts is Ctrl-W. In German language all nouns have capital letters, and there are lot of nouns starting with "W". So, after having written some stuff for about 30 minutes, I will type a word with a capital "W" and miss the shift key with my little finger and hit the Ctrl key instead, which is located just below.

Windows will close the browser immediately and all my work of the prior 30 minutes is lost.

The engineers who have designed those shortcuts must be really stupid.

Hi Harry,

To avoid the problem you can remap windows keys; use this utility.

RandyRants: SharpKeys 2.1.1

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  #183 (permalink)
 
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This is yesterday...

Were these levels relevant? Yes.
Is this specific to this market? Yes.
Will this work in other markets? I have no idea.
Is it self fulfilling? Yes.
Will it work all the time? No.
Will you lose money trading these levels every time price approaches these levels. Yes!

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  #184 (permalink)
 
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 Fat Tails 
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TF 30 min chart Support/Resistance. Fibonacci Confluence Zones.

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  #185 (permalink)
 
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 trendisyourfriend 
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DionysusToast View Post

This is yesterday...

Were these levels relevant? Yes.
Is this specific to this market? Yes.
Will this work in other markets? I have no idea.
Is it self fulfilling? Yes.
Will it work all the time? No.
Will you lose money trading these levels every time price approaches these levels. Yes!

sounds like a discussion between Batman and the Joker. Or the ending found in one of Tigertrader's daily commentary:


The burning question now is, " Is that going to happen tomorrow, April 27th, the end of June, in 6 months , or a year from now.

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  #186 (permalink)
giovi
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HI guys , my first post here...i tried to post my random for EURUSD 5 min, chart , but i cannotpost....ridicolous rule......never mind ...i wanted also post my forecast chart......

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  #187 (permalink)
giovi
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giovi View Post
HI guys , my first post here...i tried to post my random for EURUSD 5 min, chart , but i cannotpost....ridicolous rule......never mind ...i wanted also post my forecast chart......


was nice...euro respected the random levels........

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  #188 (permalink)
 
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 Massive l 
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Well...

A lot of people 'got it' and a lot of people didn't. Excellent thread. 5 stars.


IMO
Professional money > supply and demand > price and volume > support and resistance

S/R lines are great for validation levels but I usually never trade off of them.

I spent over a year and a half tearing the ichimoku indicator and its concept apart.
I tried every setting and strategy you could think of. I married it for a period of time.

At the end of using it, I found myself repeating the same thing over in my head before
every trade. "These signals can change in 1 min because price may change'...and invalidate
my signal to enter the trade. I kept repeating, "it's lagging" and I found myself taking these
signals with a grain of salt. That's when I went back to the drawing board (and found this thread)
and started over from scratch. I've been trading off price and volume only for 1.5 months now
and I couldn't feel more enlightened. I feel sort of dumb for doing everything backwards. I was looking
for a holy grail in the heart of an indicator and I came to the conclusion that most indicators don't mean sh!t.
Everything you need to know is in price and volume. The foundation.

Back to Ichimoku - After all of the different settings and strategies I noticed one thing in particular.
No matter what I did, price would almost always have some sort of reaction/tussle/move/validation/bias confirmation with the setting or strategy I was experimenting with.

What you believe, becomes. Keep an open mind because bias is easily confirmed with your own thoughts or beliefs in the market.

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  #189 (permalink)
giovi
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i created random levels on EURUSD daily chart...are valid for 3 days.....let see......

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  #190 (permalink)
 
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 Fat Tails 
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These are pretty lines. You should careful consider each of them before entering a trade.

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