Keep up the good work Gary.
I haven't read your whole thread yet....its a long one! lol
Hope you don't mind me putting in my tidbit's here and there. Maybe down the line I will start my own thread,thats all we need is another Journal.
Being a scalper I dont ask much from the market,with each swing trade 10+ contracts 15 tics profit target .
Patience has always been the tough part and the strat thing gives me too much fear!
This is enough to keep me of the streets as flying solo is my Zen moment(s).
Last edited by Sunil P; February 4th, 2012 at 04:04 PM.
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I knew this was going to come up. And be challenged.
Price magnetism - consider a MP chart, or a PH (price histogram), or VSA - it looks like the basic design is to determine where price (by amount of volume, not time) spent hovering around. That zone acts like a magnet (for whatever reason - fundamental, news, current state of economy, whatever)
Observe price as it moves away from that zone, the tails and wicks should tell us whether price is comfortable probing the areas of extremeness (defined as PDH or PDL or PWH or PWH). Extremeness could also be BB or Keltner edges or SD levels as used by VWAP. The concept is same, does price come back aggressively to mean (also VWAP, or POC)?
That tells me something. If price on the other hand, is happy to probe the edges and stay there, that tells me something else altogther. If I can get a feel for that with my tools I start to form my market structure context. This is my term and my way of defining action.
Inter market - John Murphy and other experienced market students have popularised this concept that everyting in the market is connected. DX affects CL affects ES affects GLD and vice versa. Then again DX is affected by JPY or EU or 6A. The same old concept of chaos theory... butterfly flapping its wings etc etc. Obviously, I do not deny this connectivity, that would be foolish.
However, consider this, if the JCB intervenes in the FX market, buys DX versus JPY in effort to bring the JPY down, the DX will go up. By corollary the CL "should" go down. At the same time, if some nonsense about Iran is going on, CL "should" go up.
Which inter market behaviour are you going to base your buying ans selling? How? And why? Which factor rules over the other. How do the bigger players "perceive" this interaction? Can one reliably and accurately quantify this factor and co - mingling of IMA?
Everyday, one hears news that some inter market relationship is broken down, or resumed again. This tells me, I do not have enough information to logically trade. Quite simply, I challenge the notion of basing my trading on this IMA.
The best and most simple example is GLD versus DX (the inflation - deflation debate). Sometimes GLD is inverse to DX, other times it is proportional, sometimes there is no effect. Why? I do not know. More importantly, I do not care. The price bars tell me more. I am building my trading approach to withstand a broken down IMA or a working IMA. Quite simply, if I minimise the effect of IMA (not ignoring it completely though) - then I would have less of an impact when traditional IMAs break down.
Therefore I do not get surprised that DX stayed flat and CL went up 300points. Because I am not looking at the IMA anyway. I am judging a market on its own merit, on it's own intrinsic action. Not fundamental analysis, or a combination of news.
As a advanced price action observer I hope you agree that this is not gibberish, but something to ponder. There are several folks that will be offended by this notion that IMA has to be minimised in trading. It's perfectly acceptable to have different views, even healthy to be aware of them as one trades. I allow every notion in my head, especially opposing thoughts (as they tell me whether I am wrong). But that does not mean I agree with them.
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I have seen something similar, but related to confluence zones. If a market is trading down and starts to find support, but has not made it all the waay to a strong confluence zone, that zone seems to act like a magnet and will not let go of it's pull on price until it is reached.
I agree 100% with watching each market on it's own merit and by it's own chart analysis. But, where I find value to intermarket relationships is when two markets that are somewhat tied are both going in the same direction, they seem to compliment each other and make the path somewhat easier to trade. However, if two markets that are typically seen moving together take opposite directions, the moves can be choppier and harder to trade because of the conflicting signal it is sending. There are enough believers, and possibly just enough truth, in intermarket relationships that they can provide the friction that can cause whipsaws.
I believe I have sorted out why my trading is not as relaxed lately. It has to do with time.
When I started this thread, I had been trading roughly 8 hours a day, 5 days a week, for the majority of several years. While the repitition gave an obvious advantage to my "timing", the bigger element that was in my favor was time. I could watch patiently, quietly, for hours, just to take a single trade. I had enough time to devote that I could watch a single trade set up for more than one day.
In the fall of 2010 I started a new business that would require me to travel occasionally. Once a month maybe. But, since the fall of 2011, I have been on the road more than not, and that has separated me from the ability to relax into a trade. Instead of being free to watch the market for hours or days, I now have small windows of opportunity within which to find and execute a trade. And so, instead of sitting at the computer watching from 7am until 1pm, then finally taking my position, I may only have time in my schedule to be available to trade between 9am until 11am. I am basically requiring the market to move on my schedule.
I find myself feeling rushed, feeling pressured to find a trade. That time crunch has two negative results; 1) I am now scalping for smaller moves (which I believe does not have the best risk to reward), and 2) I am not as relaxed when the best trades do come, so I drop them before they have time to mature.
I want to finish my trading day "up", and so it is best sometimes to quit while I am ahead. If I am 'down" when my personal timer runs out, I am stuck with a losing day, and somtimes that may not just be until tomorrow. It is similar to the concept of banking wins on a Friday, but mine may go for 3, 4, 5, 6 days before I can trade again.
So, my question from myself as of Friday has been answered, but now I have a new set of questions. Should I continue to trade while I have a hectic travel schedule, or should I just watch? Am I willing to accept the additional layers of difficulty? Am I ok with lowering my reward to risk, which means I would need a higher percentage win ratio? Or, do I need to find something in between? Or, something altogether different, like swing trading equities, ETFs or forex?
Monday morning I leave for DC, then to Denver on Thursday or Friday, then possibly Houston next Monday or Tuesday, and Boston is a distant possibility within the next week or two... I may not see home again for a couple weeks. If I am going to continue to trade as I travel, I have some decisions to make, some rules to re-define.
Last edited by GaryD; February 5th, 2012 at 12:13 PM.
Reason: defining things for myself
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Regarding "price magnetism," I understand what you mean and take a very similar view and approach. In ES right now for example, I have been waiting for 1308 to attract price down from the 1330s; will it? I don't know, but it's an easy magnet to see when you profile the year to date and look at volume at price.
Regarding correlations of markets; I agree 100%, and am glad to see someone else with a similar view. I have a chart up of ES/YM/NQ and notice to see if they are all generally agreeing. I think Gary mentioned in his last post basically what I look for--if they are all jiving, then the movement may be smooth in one, but if others are diverging, then it may be a tougher path. I do not try to understand or quantify the vast complexities of the relationships of markets to another. Anyone who says they can is full of it, IMO. "XYZ leads ABC" .. yeah, today, for the next 5 minutes. After that, it's a meaningless correlation and something else will lead something else. I can only focus on one major market at a time during the day.
The following user says Thank You to josh for this post:
Gary - u still have a kick-ass thread here. thanks. Have you read Ari Kiev's book "psychology of risk"? published 2010. Ari died in 2009. The book is (IMO) awesome. I think that with where you are with your trading you will devour his book - he's got a unique take on trading performance and excellence in general. Very different than most other trading psych authors
By the way, what did you think of "inner voice of trading". I wasn't super impressed with it myself (not to bias your answer or anything ). But I'm curious to hear your perspective.
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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Inner Voice of Trading - not going to make my "favorites" list It was ok.
I have not read anything by Ari Kiev, but I do know the name and have looked at the covers on Amazon. I do like that topic. I have been putting together a short presentation on risk with interactive spreadsheets, but have gotten so busy recently it is about 90% complete and sitting there, not begging for attention loud enough right now. But I do plan to read his books and to complete my review also.