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Underexposed - Canadian Stock Journal
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Underexposed - Canadian Stock Journal

  #481 (permalink)
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In an earlier post I said I would raise the trailing limit stop-loss for lundin Mining [TSX:LUN] if the price closed above $5.80.

Well it did yesterday so now the limit stop-loss has the range $5.65 - $5.67 and will remain there unless it is tripped or the share price rises over $5.90 and closes above that point.


Last edited by Underexposed; November 26th, 2014 at 02:12 PM.
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  #482 (permalink)
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Good posts on the BB's, fwiw I still have JB's original training VHS.... (now that's clearly an age thing!)

The three most important takeaways for me were always:

a) The pinch before explosion or larger move, usually with small headfake/flip first.
b) Hugging bands is strength to be followed, not faded.
c) Look for more serious trend changes only after price has made a new extreme inside the bands after it's progression along them and/or a lesser extreme outside them.

Seems to fit with what you say, just nowhere near as sophisticated as the totality of your methods.

In the end I had to stop using them as they were becoming part of a 'let's ring a bell at tops and bottoms' approach that demonstrated the massive naivete of my early trading, as opposed to the more wrinkled approach that I use now. Maybe I'll revisit them in some form, but I just have this nagging doubt that they work better for stocks than futures, or maybe it's a longer timeframe thing. Dunno mate.

Cheers

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I just brought it up for discussion,m rather than for use. It confers a similar idea, by setting an arbitrary range around price of 2 ATRS for the standard deviation plot. But like was said above, it's easy to just eyeball when the BB pinches. I've read your discussion a few times, but probably need to dissect it a little bit more. Here's a question for you:

In the following daily chart, a location where the BBwidth is flat (previously rising) and the macd and stochastic are both heading down - this should be a headfake in previous upward trend. But really, the upward trend was a headfake in a previous downward trend.

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My second question is regarding when the BB width is decreasing, yet the macd and stoch are increasing

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While both are increasing, it looks to my eyes that the stock is just pulling back into consolidation, but hasn't turned into an uptrend yet. It is somewhat concerning that there seems to be a divergence between the BBwidth peaks and price. This was my question earlier - the MACD rising when under 0 may mean an uptrend, or may just mean the stock is going into a period of consolidation (BBwidth decreasing).

Here's a similar situation where both the macd and sto are increasing, while BBwidth is decreasing. In this instance, the consolidation was brief in a upward trend.

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  #484 (permalink)
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Underexposed View Post
Thanks Bob for confirmation of my quick search of this method.
...
I see absolutely no advantage to my ability to read the chart by wrapping the BB's inside the Keltner channel.... doing so just clutters my chart making it harder to read.

I've used both. I pretty much agree that the pinch in the Bollingers is very valuable, and the Keltner won't ever do that. You could use Keltners as a substitute for traditional hand-drawn straight-line channels, and they can be good for that. The Bollies are much more responsive to price changes, and give you a different kind of information. I also would not bother putting the BB's inside the Keltner's -- just eyeball them, they're clear enough.

I do like what you've done with them, by the way.

Bob.

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Underexposed View Post
I am not knocking the indicator for NinjaTrader and the Price Action method....it just does not fit in with what I do.

Since you occasionally mention "price action," and it's apparently kind of a new term for you, I thought I would, for illustration, just show you a price action chart. This is a style of chart reading, very bare-bones, no indicators at all except, sometime, a moving average. Just trend lines and support and resistance. Buy or sell decisions are based on what price, and price alone, is doing.

It's not really my cup of tea. It does keep you very focused on just the action of price.... hence the name .

You would act on breaks of support or resistance, or of trendlines or channels, or if price bounces off the lines, and stay with the trend until it changes. Although this became somewhat a fashion a few years ago, it is actually a very old way of charting. It is basically from before the days that anyone had the computing power to calculate indicators, or had even thought of them. Sometime you see this done with a time chart, sometimes a tick chart. The "price action" method has nothing to do with the chart style -- time, tick or the more exotic ones; it's a type of chart reading and trading. When it was revived and made popular in recent years, mainly by a guy named Al Brooks, it was with 5-minute charts of the regular session.

You have to recognize where the lines should go and draw them in by hand with a line-drawing tool. That obviously depends on judgment and can be hard to master.

Here's a sample, a 5-minute chart of the S&P stock index. This is literally all that goes on a price action chart:


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This can be hard to trade, which is why people often give it up after a while and try some indicators to give them a handle beyond what pure price shows. I do keep one of these around, and it has helped me identify trends and trend changes, but I like having a little more to go on, too.

This is just FYI, no particular relevance to your method, and certainly it's not my main preference, either. But that's what it is, anyway.

Bob.

PS, hope I didn't lose that chart to that futures.io (formerly BMT) bug while I was editing the text -- I may have taken too long. Let me know if it didn't come through.

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bobwest View Post
Since you occasionally mention "price action," and it's apparently kind of a new term for you, I thought I would, for illustration, just show you a price action chart. This is a style of chart reading, very bare-bones, no indicators at all except, sometime, a moving average. Just trend lines and support and resistance. Buy or sell decisions are based on what price, and price alone, is doing.

It's not really my cup of tea. It does keep you very focused on just the action of price.... hence the name .

You would act on breaks of support or resistance, or of trendlines or channels, or if price bounces off the lines, and stay with the trend until it changes. Although this became somewhat a fashion a few years ago, it is actually a very old way of charting. It is basically from before the days that anyone had the computing power to calculate indicators, or had even thought of them. Sometime you see this done with a time chart, sometimes a tick chart. The "price action" method has nothing to do with the chart style -- time, tick or the more exotic ones; it's a type of chart reading and trading. When it was revived and made popular in recent years, mainly by a guy named Al Brooks, it was with 5-minute charts of the regular session.

You have to recognize where the lines should go and draw them in by hand with a line-drawing tool. That obviously depends on judgment and can be hard to master.

Here's a sample, a 5-minute chart of the S&P stock index. This is literally all that goes on a price action chart:


Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).




This can be hard to trade, which is why people often give it up after a while and try some indicators to give them a handle beyond what pure price shows. I do keep one of these around, and it has helped me identify trends and trend changes, but I like having a little more to go on, too.

This is just FYI, no particular relevance to your method, and certainly it's not my main preference, either. But that's what it is, anyway.

Bob.

PS, hope I didn't lose that chart to that futures.io (formerly BMT) bug while I was editing the text -- I may have taken too long. Let me know if it didn't come through.

@bobwest,

Price action trading also depends on perspective. I marked up your chart with what I saw. As you can see I have many more false positives. You are correct; knowing what lines to draw and where to draw them is the hardest part. By far, your chart is how is how it should have been traded.

It should be noted that Price Action always looks easy to trade in hindsight, however, trading the far right edge in real time is a very different story.

Robert

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jackbravo View Post
I've read your discussion a few times, but probably need to dissect it a little bit more. Here's a question for you:

I like questions regarding what I do from a charting perspective as it often causes me to pause and reconsider some things that I do.... more often they reinforce what I do :>

I use these charts not just for signals but also to draw out inferences from those signals. The former are somewhat easier to teach than the latter.


jackbravo View Post

In the following daily chart, a location where the BBwidth is flat (previously rising) and the macd and stochastic are both heading down - this should be a headfake in previous upward trend. But really, the upward trend was a headfake in a previous downward trend.


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I redrew the chart using my own Trigger chart

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the head fake is not really where you show it.... all that was was a very short bull break out that following a long uptrend from a bottom. The sudden rise in the BBwidth after that plateau showed its new direction which was hinted at by the fall of the SlowSto below 50 and sudden slope increase of the MACD.... that was your clue that things had changed....the BBwidth sudden rise just amplified that

There is a head fake earlier though.... that was in the purple circle.... Se how it gapped down for one day...which if you were just following the main chart would lead you to believe the downward direction of the price had continued and the weak bottom shown by the MACD/BBwidth pinch was only a rest not a bottom.

But look at the SloSto and MACD.... barely a movement.... look at the BBwidth.... it is still moving down...NOT reversing direction...so THAT is a head fake. "Head fakes" are reversals that happen the next interval or so....not 5 - 10 days later.

I note that you have added the Ninja Bollie Squeeze at the bottom and the red bars seem to define the downturns fairly well...except I defined the end of that downturn better...it got sucked in by the head fake I showed you. It is defining the last week or so as an uptrend with the same intensity as in mid-October...I would never make a long play on that data...I would wait until the Bollies got tighter...it is going to wander in the wilderness for at least 7-14 days before that happens.

You have also added a bunch of stuff to those charts that I would clean up. In the main chart I see "a diamond line" that makes no sense to me, you appear to use a 20dayEMA.... a 20daySMA makes more sense as it is the center line of the Bollies and I guess that is a 9dayEMA which oscillates around the candle sticks....telling you What???... it is useful maybe in an intraday chart but no much in a daily chart.

I have no clue what you have added to the BBwidth chart but is it helping the decision? Don't think so....finally I would eliminate the signal line and histogram from the MACD...they don't help much...... Just suggestions to make signals easier to read



jackbravo View Post
My second question is regarding when the BB width is decreasing, yet the macd and stoch are increasing


While both are increasing, it looks to my eyes that the stock is just pulling back into consolidation, but hasn't turned into an uptrend yet. It is somewhat concerning that there seems to be a divergence between the BBwidth peaks and price. This was my question earlier - the MACD rising when under 0 may mean an uptrend, or may just mean the stock is going into a period of consolidation (BBwidth decreasing).

You arrived at the right conclusion.... until the BBWidth reaches its normal trigger point, which, in this case is, about 5.0 - 2.5.... so the uptrend is encouraging for a positive breakout coming but no guarantee. it is in Consolidation.

I have ignored as a play these plays after a bottom has been found.

so far the only thing that I am confident about after finding a bottom.... is that the price tends to go to the 20day SMA...As you can see this has happened twice in this chart (another reason to have the middle band in the Bollinger band) but these are rather short swings and I tend to want swings lasting 2- 4 weeks not 1-2 weeks.

But I do watch them...and wonder about placing a large trade with a limit stop-loss to protect myself.... But so far I resist



jackbravo View Post
Here's a similar situation where both the macd and sto are increasing, while BBwidth is decreasing. In this instance, the consolidation was brief in a upward trend.

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Hmm...well that is basically 2 consolidations butt up against eachother... you would not possibly have gotten in on that jump if you waited for it....but you would have had it if you played the movement from the bottom....

For me this is a dicey play.... there are so many plays where the signals are much clearer...I just would avoid these kind of plays. But if you are stuck on milking just one stock/etf I guess you play what you find.

But I look for others which was the reason for me developing that quad chart.


Great questions...you are on the right track in thought.

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ratfink View Post
Good posts on the BB's, fwiw I still have JB's original training VHS.... (now that's clearly an age thing!)

The three most important takeaways for me were always:

a) The pinch before explosion or larger move, usually with small headfake/flip first.
b) Hugging bands is strength to be followed, not faded.
c) Look for more serious trend changes only after price has made a new extreme inside the bands after it's progression along them and/or a lesser extreme outside them.

Seems to fit with what you say, just nowhere near as sophisticated as the totality of your methods.

In the end I had to stop using them as they were becoming part of a 'let's ring a bell at tops and bottoms' approach that demonstrated the massive naivete of my early trading, as opposed to the more wrinkled approach that I use now. Maybe I'll revisit them in some form, but I just have this nagging doubt that they work better for stocks than futures, or maybe it's a longer timeframe thing. Dunno mate.

Cheers

Thanks for this comment, appreciated.....

I don't know either as to whether or not this would work on futures or not

But if you create a futures chart using my "trigger setup and post a screen shot (an eod or intra-day or both) we can discuss what works and what may not.

My gut says there are possibilities there as in the precious metals forum I have made some posts on gold prices

https://futures.io/stocks-etfs-trading/14652-precious-metals-stocks-etfs-12.html#post429429

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bobwest View Post
Since you occasionally mention "price action," and it's apparently kind of a new term for you, I thought I would, for illustration, just show you a price action chart. This is a style of chart reading, very bare-bones, no indicators at all except, sometime, a moving average. Just trend lines and support and resistance. Buy or sell decisions are based on what price, and price alone, is doing.

It's not really my cup of tea. It does keep you very focused on just the action of price.... hence the name .

You would act on breaks of support or resistance, or of trendlines or channels, or if price bounces off the lines, and stay with the trend until it changes. Although this became somewhat a fashion a few years ago, it is actually a very old way of charting. It is basically from before the days that anyone had the computing power to calculate indicators, or had even thought of them. Sometime you see this done with a time chart, sometimes a tick chart. The "price action" method has nothing to do with the chart style -- time, tick or the more exotic ones; it's a type of chart reading and trading. When it was revived and made popular in recent years, mainly by a guy named Al Brooks, it was with 5-minute charts of the regular session.

You have to recognize where the lines should go and draw them in by hand with a line-drawing tool. That obviously depends on judgment and can be hard to master.

Here's a sample, a 5-minute chart of the S&P stock index. This is literally all that goes on a price action chart:

you did not lose the chart

I do this type of charting sometimes and it is very valid as I see it. I have used it myself on occasion especially when discussing Gold eod prices as can be seen in this discussion I did

https://futures.io/stocks-etfs-trading/14652-precious-metals-stocks-etfs-12.html#post429429

what puzzles me most of price action charts is that most users restrict themselves to horizontal resistance/support lines when there are equally valid diagonal ones and they use only channels not wedges or triangles. Then of course you throw in "ticks" and the wheels fall off for me.

I still remember early in my posting here criticizing a chart for having an inconsistent x-axis and being told it was a "tick chart".... still don't like how indicators designed for normal time charts, are casually used in tick charts...makes little sense to me.

I use this "price action" but usually in the P&F charts that I use in a complete analysis.

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Silver Dragon View Post
@bobwest,

Price action trading also depends on perspective. I marked up your chart with what I saw. As you can see I have many more false positives. You are correct; knowing what lines to draw and where to draw them is the hardest part. By far, your chart is how is how it should have been traded.

It should be noted that Price Action always looks easy to trade in hindsight, however, trading the far right edge in real time is a very different story.

Robert

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Yes, I agree that @bobwest 's chart is easier to understand.... the one you posted has too many short buy/sell signals in it and perhaps of you looked at each situation in an intra-day mode and expanded the look it may make more sense...but for a long play his chart is easier to read and play AND causes less in broker fees

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