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The Beauty and Logic of the 6E


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The Beauty and Logic of the 6E

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  #1 (permalink)
Salt Lake City, UT
 
Experience: Intermediate
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I trade the 6E exclusively. It's all my brain can digest. I respect those who can watch, analyze, monitor and trade multiple markets. I can't do it.

For years I've kept notes and journals. I review them often and am surprised and often impressed with how far I've come. I'm also impressed with varying degrees of insight and wisdom I've had over the years. Some points and distinctions have remained while others have gone by the way side. Those that remain must be the pillars upon which my personality and style of trading suits me best.

I am starting this thread for purely selfish reasons. While I certainly hope it helps others, my main hope is that through explaining, articulating and answering others that the trading principles and concepts I present will become better ingrained in my own head. "When the student is ready the teacher will appear." Teachers always learn more than their students.

More than once of late I've thought how beautiful the market is. How logical it is. There are reasons for what the market does. Oh nothing so cryptic as Supply and Demand. I'd go blind looking for that. No, I am a Support and Resistance trader. In one of my better displays of intelligence I wrote down the other day that "Support and Resistance are not the same as Supply and Demand." Said I, "Support & Resistance is where the market responds. Supply and Demand is when. Supply and Demand is confirmation of Support and Resistance." Without Support and Resistance how do you know where to look for Supply and Demand. Doesn't everyone trade Support and Resistance? Is there ever any long trade put on without it being an area that is hoped where Buyers aggressively lift the offer? Isn't that the definition of Support? Demand overcoming Supply. Conversely, is there ever a short trade put on where it isn't hoped that Sellers will aggressively hit the bid to drive the market lower? Isn't this the definition of Resistance? Supply overcoming Demand.

I trade Support and Resistance. In fact, I have my own definition of market activity. An uptrend, by my definition, is Support is holding and Resistance is failing. Conversely, a downtrend is Resistance is holding and Support is failing. A sideways range is both Support and Resistance are holding. It's more practical for me to define the market in this way. My tools allow me to identify potential S/R levels. Unfortunately, my tools are proprietry and are not available to the public. But that's not the point. The point is there is beauty and logic to the market.

This thread would be grossly incomplete without here including respect for the US Dollar (DX). Of late, I have concluded that S/R on the USD is more important that S/R on the 6E. Over and over again I have witnessed how the 6E responds to S/R levels on the DX when there are no S/R levels on the 6E. At least not on my charts. And since I can only trade what's in front of me, I need to stick to my assessment until I can prove otherwise.

For example, today's 6E low was 1.2570. Why did it stop there? Is there a reason? I say, "Yes". But I am getting ahead of myself.

I trade Support and Resistance. I also trade Moving Averages. Moving Averages, imho, are the best indicator of mass market sentiment. They begin to define the areas where I can begin to look for my Support and Resistance levels. I want to be on the side of the masses and I want to trade where they want to trade. I also want to trade with the least amount of risk and heat.

The Market is telling a story. It's my job, as a technical analyst, to listen. Every market has it's own personality. For years I traded the ES. I don't even look at it now. I don't even have a chart for it. It's taken me a long time to ferrot the ES personality out of my head so I can see the 6E.

Orientation is important to me. I need to know where the market is trading within the larger picture. At the Most Recent Highs? At the Most Recent Lows? Or, as usual, somewhere in the middle? Where are we in relation to the Moving Averages? Which Moving Average has been "satisfied"? Which hasn't? Where is the market trading in relation to yesterday? The over night trading? The day before? Orientation tells me a lot and can offer clues as to what the market is doing or trying to do and more importantly to me as a trader- when.

One nugget I realized just a few days ago. My Moving Averages tell me that after Thursday's and Friday's bolt higher, the market was in an uptrend. However, and this was key for me, like an epipheny, how could the market ever reach my slower moving averages without it moving lower? At some point, the market must move in a downtrend in order to reach them. I used to only look to trade on the side of the Moving Averages. I was cutting myself short. If I know where the Moving Average is at, then what must the market do to get there? That tells me what I should be doing as well. That was foreign to me. Why should I take a short trade when all my Moving Averages tell me I should be looking to take long trades? Answer: Because the market has to trade lower and I know where it is trying to get. If I know where it's going and I know what it needs to do to get there then those are pretty big answers to the puzzle. What a concept! Counter-trend trading! Has anyone else heard of this? lol!

This is way long but hopefully worth the read. I hope you can benefit from it. I look forward to sharing my journey into the beauty and logic of the 6E.

PLEASE DO NOT QUOTE THIS POST IF YOU REPLY TO IT. IT"S TOO LONG AND I KNOW TO WHICH POST YOU ARE REFERRING!

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  #3 (permalink)
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  #4 (permalink)
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A pictorial representation (chart, marked up with S/R, Supply/Demand, Moving averages) would be helpful.

After all, it's what you learn AFTER you know it all, that counts!
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  #5 (permalink)
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Yes, Chart please

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  #6 (permalink)
Salt Lake City, UT
 
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The MA's are converging and crossing. This tells me we are in for very low range trading until it breaks out. Very choppy.
I have Resistance on the DX at 82.10- 82. 25. I also have Resistance a little higher at 82.065-82.075. The MA's on the DX are Red and the higher Resistance levels are just above the slower Red MA. I also have Support on the 6E at 1.2591. There is also a lot of Support on the 6S (I'll explain this later- suffice it to say it is a correlation market for now) at 1.0494 and major major major (Get the point?) Support at 1.0490-1.0487.
Let's see what happens!

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  #7 (permalink)
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TheWizard View Post
A pictorial representation (chart, marked up with S/R, Supply/Demand, Moving averages) would be helpful.


supermht View Post
Yes, Chart please

Charts are coming. I promise. I will put it all together. Here's one for the DX over the last several days. The levels on the charts are levels to which the DX could potentially respond at, of course inversely the 6E responded as well. It's a moot point now but I had them on my chart. I promise. Of course the only thing that matters is the right edge of your screen not some hindsight after-the-fact should have done this nonsense. But it was actually these types of things that motivated me to start this thread.

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  #8 (permalink)
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As a precursor, and warning, I will say that most will probably hate my charts. It has multiple time frames. Some fast and some slow. The tools are linked to each one of the time frames I use. I have them to display three but they could display up to three times that. Too many levels. Just when I think about reducing the number of levels on my charts the market goes off and does some crazy thing like majorly responding off the level I was going to delete! So most will think I have too many levels on my charts. But to narrow the universe down, remember, I only need concern myself with those levels at/near the MA's.

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  #9 (permalink)
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I hate hindsight trading. And I hate putting up any chart after-the-fact. So to show where the levels today came from on the DX. This is the chart that had them. They came from June 29. They are displayed differently than some of the other levels on that first chart because the market had already traded through them so they weren't technically "naked". However, as the markets have memory, I want to display them so I can at least be aware that there was a previous level at that price.

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  #10 (permalink)
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Last post and then I'm off to bed... Did anyone happen to notice that the 6E traded down to 1.2592 and is up over 20 ticks? Did anyone happen to notice that I put that in almost a half hour before it got there? Did anyone notice that it didn't get to 1.2591 but was one tick shy of it? Does anyone know why it didn't get there? My theory is because the other aspect of that post was that Resistance on the DX was between 82.010-82.025. The DX was already at Resistance (82.015) before the 6E got to Support. I said in my initial post that S/R on the DX is more important that S/R on the 6E. Food for thought. Now it's off to bed.

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