# Estimating/anticipating the magnitude of a price movement



## pavilion103 (30 March 2013)

No doubt this has been discussed throughout various threads many times, but I couldn't find an all encompassing thread on this particular topic. 

This is a discussion about whether you estimate the magnitude of a move, what methods you use and how this impacts your trade management/exits.

For me, I don't like to have a preconceived idea of when I will exit a trade. I simply trail my stop and don't try to guess which ones will be shorter moves and which ones will be home runs. I focus my attention on risk management and the defensive side of the trade to ensure that I don't give back big profits. For me, the main form of anticipating how far price may move is strong support and resistance levels where I trail my stop tighter in higher risk areas like these but I don't sell at a target.   

So some of the methods others might use are:
- Simple support/resistance/high volume areas
- Measured moves (e.g. the height of the range in measuring how far price will go after breakout)
- Elliott Wave
- Wyckoff point and figure charts for prediction. 


Feel free to include anything I have missed and I'm interested to hear how others go about it.


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## tech/a (30 March 2013)

> - Elliott Wave




Id include fibonacci here.

All your really doing is setting possible levels for the exhaustion of a move (if its an exit).

Then there are a heap of various *time frames* that will have you working out the same levels.

I also like to use Volume and range bars along with tests.
Ideally youd like to see a* confluence* at these points.
Some will be stronger points than just a line on a chart.
Price action will be the ultimate guide at these levels.
Divergence and even Over Bought and Over sold indicators (USED CORRECTLY! the number of times I see people use an RSI in an uptrend and call over bought!!!).

But in the end its simply analysis (like all analysis) which will be *proven or dis proven.*

The art of trading is putting it all together in a way in which you can consistently profit.--*The Application of analysis.*


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## CanOz (30 March 2013)

Some other things to consider is that mean reversion strategies have profit targets, trend following strategies have trailing stops....

Generally.

For intraday mean reversion.
Range extensions using fibb work very well as do prior highs/lows, initial balance highs and lows, closes, opens, areas of high volume ( value areas ), VWAP, 1st and second std deviations....

Cheers,


CanOz


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## pavilion103 (30 March 2013)

I know that AT these levels we look at things like price and volume and things like bar range etc to signal climactic action. Important once we are in a trade and looking when to exit/move stops.

I'm thinking in terms of initially entering a trade if people have any preconceived idea of where they anticipate the move to end. I for the purpose of maybe a profit target? 

1. How far do they anticipate the trend to travel ? (If they do choose to anticipate it)

2. I guess then a separate question would be what they look for at this level as a signs of a change of trend (which isn't the question I'm posing in this thread).


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## CanOz (30 March 2013)

pavilion103 said:


> I know that AT these levels we look at things like price and volume and things like bar range etc to signal climactic action. Important once we are in a trade and looking when to exit/move stops.
> 
> *I'm thinking in terms of initially entering a trade if people have any preconceived idea of where they anticipate the move to end. I for the purpose of maybe a profit target? *
> 
> ...




That's what I was thinking mainly when replied, those are thing I can use to calculate reward.

CanOz


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## Boggo (30 March 2013)

pavilion103 said:


> So some of the methods others might use are:
> - Simple support/resistance/high volume areas
> - Measured moves (e.g. the height of the range in measuring how far price will go after breakout)
> - *Elliott Wave*
> ...




Interesting topic pav.

I think that it is in your best interest to use every tool you have, having said that though there is a risk of creating analysis paralysis.

I tend to glance at where a stock may be in a potential pattern, EW being my preferred view.

As an example, I went long on NST recently while being aware that it showed signs of being in the early stages of Wave 4 on the daily EW pattern which gave me an approximate target where it may hesitate or reverse.
So basically I had another opinion on NST that I need to be aware of.

EW at best works on 50% of charts 50% of the time but when it does it also means you can have reasonable confidence in assuming that Fibonacci levels also work.

At any time I usually have 3 to 6 stocks that are following an 'expected' pattern similar to NST that I am keeping an eye on (not necessarily holding though).

I tend to avoid posting any of my observations up here even if it is a stock that is being discussed as it usually attracts the usual comments etc.
I think my most recent published targets were on the TGA thread a while ago where EW predicted the likely end of W.3 and then the likely end of W.5.
Eventually it went to 2.20 but it was another example of where the EW process was a good guide all the way up to 2.10 and apart from a short excursion above that it is still currently below the final 2.10 target.
Probably was a good example of where to just take profit at the predicted level and move on to the next candidate.

Process examples...
TGA target for W.3 here - https://www.aussiestockforums.com/f...=18617&page=45&p=727561&viewfull=1#post727561
and target for W.5 here - https://www.aussiestockforums.com/f...=18617&page=47&p=732749&viewfull=1#post732749

Current daily chart of NST - click to expand.


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## chops_a_must (31 March 2013)

pavilion103 said:


> I know that AT these levels we look at things like price and volume and things like bar range etc to signal climactic action. Important once we are in a trade and looking when to exit/move stops.
> 
> I'm thinking in terms of initially entering a trade if people have any preconceived idea of where they anticipate the move to end. I for the purpose of maybe a profit target?
> 
> ...




There are simple things like w1=w5 when it's distinguishable. A = C etc.

Also when trading pennants, and flags, there are ways to measure targets based on the sizes of these to set targets, tighten stops and exits based on any subsequent price action at these levels.

I have found fibs quite handy for retracements and extensions in longer term moves, and in swing trades. I'm not sure how you would ever test this though.


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## pavilion103 (22 April 2013)

I read "Adaptive Analysis" on the weekend by Nick Radge from The Chartist. 

Great book. Really enjoyed it. 

There was a lot about Elliot Wave in there. I'd read another highly recommended EW course a couple of years back. I think this warrants further exploration. No intentions of knowing it inside out, but a general overview would be handy. 

Radge also talks about confluence at these critical levels for confirmation.


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