Improving Chart Analysis

[tech/a]

Nizar.

If interested you could look up Fixed Fractional Position Sizing.

 

[MichaelD]

One other point to clarify - my Initial Stop (aka Money Management) stop IS my trailing 6.5 ATR stop. There is evidence that a tighter initial stop is better until the trade reaches break-even, but it is not possible to backtest this with the tools I have at present.

Rule #1 of my trend following system is if I can't backtest it to prove it works better, I don't use it.

 

[nizar]

One other point to clarify - my Initial Stop (aka Money Management) stop IS my trailing 6.5 ATR stop. There is evidence that a tighter initial stop is better until the trade reaches break-even, but it is not possible to backtest this with the tools I have at present.

Rule #1 of my trend following system is if I can't backtest it to prove it works better, I don't use it.

Thanks MichaelD
Interesting what you say in the above, brings a new light on things. So getting stopped out would mean u lose like 20% on THAT trade (2000/9856). I guess the upside is you wouldnt get stopped out that much, and give the stock time to ride the trend...

tech/a - what has your research showed on this?
ie. where to put initial stop?
and how long do u decide that yes uv got it right its going up, and then switch to a trailing stop or an exit.

 

[swingstar]

Let me see ........... if Mag is rolling around on the floor hurting himself with humorous gyrations ........... Barney has probably said something dumb (again :homer: ............... PS You wouldn't laugh at me if you heard me cut a riff on the "Les" ............. Anyway, I can take it .....someone around here has to make everyone else seem intelligent

Just as a follow up to that chart I posted on AWB It is basically 3 gap down days in a row Todays volume was higher again today .......Will that signal a slow down, or is it likely to keep bombing??? Interesting scenario. Yours in total humility, Barney.

Bang on the bottom of the channel at 2.40. Will it hold?

 

[MichaelD]

So getting stopped out would mean u lose like 20% on THAT trade (2000/9856). I guess the upside is you wouldnt get stopped out that much, and give the stock time to ride the trend...

Yes that is correct, but it is only 2% of your overall capital, which is the important point. Individual trades mean nothing in the overall picture so long as on average your winners win more than your losers lose.

 

[barney]

Bang on the bottom of the channel at 2.40. Will it hold?

You were spot on with the channel bottom prediction SS ................. Today saw AWB gap open and rise again on V good volume ................. Looks like the buyers are back ............ Its interesting how this all works .......... Essentially nothing has changed fundamentally during the past few days, yet we have seen a roller coaster ................ I think this example of AWB as it unfolds might provide some very interesting insights into how the market works in general .............. Could be more an example of how sometimes "Chart Analysis" can't identify what is actually "driving" the SP ................. As Mag elluded to in an earlier post; These situations may be best "left alone" due to the "inconsistencies/"too much excitement" encountered (I hope I'm "analysing/comprehending" your words correctly Mag??) ........... Cheers Barney.

PS The earlier referral from Mag was related to a stock at the opposite end of the spectrum .......... ie SP spike on high volume .......... this one of AWB, is kind of a "mirror image" so to speak??!! If I have misinterpreted that analogy, please let there be retribution ......... I can take the heat!!

 

[tech/a]

Looks pretty clear to me Barney---its tanking.

 

[MichaelD]

AWB - some pretty good volume on the last 2 up days. A short on the breakdown in my paper system, but has it reached support or is it a dead cat bounce? Who knows? Me, I'm closing the (paper) short today.

 

[RichKid]

AWB- looks like capitulation judbing by the price/volume story on your chart Barney and Swingstar's, but this doesn't mean it'll necessarily bounce straight back up. I'll post more in the AWB thread.

 

[Magdoran]

You were spot on with the channel bottom prediction SS ................. Today saw AWB gap open and rise again on V good volume ................. Looks like the buyers are back ............ Its interesting how this all works .......... Essentially nothing has changed fundamentally during the past few days, yet we have seen a roller coaster ................ I think this example of AWB as it unfolds might provide some very interesting insights into how the market works in general .............. Could be more an example of how sometimes "Chart Analysis" can't identify what is actually "driving" the SP ................. As Mag elluded to in an earlier post; These situations may be best "left alone" due to the "inconsistencies/"too much excitement" encountered (I hope I'm "analysing/comprehending" your words correctly Mag??) ........... Cheers Barney.

PS The earlier referral from Mag was related to a stock at the opposite end of the spectrum .......... ie SP spike on high volume .......... this one of AWB, is kind of a "mirror image" so to speak??!! If I have misinterpreted that analogy, please let there be retribution ......... I can take the heat!!

Hello barney,


My comments were about trying to play stocks that had already moved significantly, especially under takeover scenarios where it is difficult to know when to enter and exit either long or short.

If you’ve been watching Daffy’s (tech’s) thread on ‘Discretionary Trading Method-----Trading Outliers', this is an example of an approach to this situation.

I my view, it is better to recognise the potential for this kind of situation when it is forming, and look to exit on these strong moves up or down by being positioned the right way.

This includes downward capitulations as much as bullish spikes. They are similar in that they are high momentum moves, but panic moves down can behave differently. It’s kind of a bear/bull thing – one is motivated by greed and fear of not getting in, the other is motivated by fear of losing and panic.

So, once the move has happened, trying to enter at these times in my view is very risky. There are a range of styles that attempt to profit from these situations like the one outlined by tech.

My point earlier was if you think you’re able to consistently trade these situations profitably, by all means be my guest. There are a minority who seem to have a gift for this kind of trade. The majority (including myself) tend to have mixed results in my experience.

In capitulation moves either up or down, it is hard to know where the top/bottom is, hence my approach is to take profits (especially when they reach the 1000% range for me in options). But that is a style of dealing with this kind of uncertainty. What we do know is that there is high volatility. The problem is working out where in price (and in my case, time) to exit.

Some of these fast moves can reverse and move all the way back, so they can be dangerous. A lot depends on the unique circumstances that surround these moves, but there are some common chart elements which can help to make an interpretation of events, and styles/systems can be developed to deal with situations like this.

As I said, once you’ve had a substantial move, and you have a spike with an inside day, trying to second guess the market at this point in time is highly risky, but as I said, if you can work out an approach that returns consistent profits, by all means be my guest.

My personal choice is to trade what I can assess, and attribute probabilities and determine the risk to reward parameters. Once this kind of move has “matured”, there comes a point I decide to ignore the situation because it becomes impossible to assess.

There are top and bottom picking styles where the focus is to try to find the bottom or the top of a move. The approach I subscribe to is the opposite. I’m happy to exit before the bottom/top, and wait for signals to go long/short after it.

In a downward capitulation there are T/A approaches to forecast where this might be, but it is very involved, and requires a layer of different T/A knowledge. Key things I use other than straight charting (looking at the bars and volume, patterns, trend), is looking at price increments (retracements, ranges) and extending these to determine probable areas of support (resistance) in both time and price. Once the trend is at risk I look to lock in at least partial profits.

Food for thought…


Regards


Magdoran

 

[tech/a]

As I said, once you’ve had a substantial move, and you have a spike with an inside day, trying to second guess the market at this point in time is highly risky, but as I said, if you can work out an approach that returns consistent profits, by all means be my guest.

My personal choice is to trade what I can assess, and attribute probabilities and determine the risk to reward parameters. Once this kind of move has “matured”, there comes a point I decide to ignore the situation because it becomes impossible to assess.

There are top and bottom picking styles where the focus is to try to find the bottom or the top of a move. The approach I subscribe to is the opposite. I’m happy to exit before the bottom/top, and wait for signals to go long/short after it.

Food for thought moggie!!!--- its a smorgasboard!!!

Bon apetite'
Just add dressing!

 

[Magdoran]

Food for thought moggie!!!--- its a smorgasboard!!!

Bon apetite'
Just add dressing!

Hi Daffy!


By the way, that’s a really interesting thread you’re running on outliers. I’ve been reading it daily. You make some really insightful observations in it.

Do you find you can trade these kinds of moves profitably with any consistency?

Regards


Magdoran

 

[tech/a]

Yes Moggie.

As you know its a case of win some lose some then every now and then win a biggie.
Since 18/9 when I arrived back from the UK Ive done more discretionary trading with good success.
I really dont like it (discretionary trading) Im very much like Michael if I cant measure it and have a blueprint Im not that happy.

But having a ticker on my desk time and again (and it happens almost daily even now) I see many great opportunities pass by.

So I made the decision to get on a few. Trading in 15K parcels makes it worth while both for small wins and ofcourse those outliers I get every so often.
Now 45% on initial capital from 18/9 so happy with that.

Distracting though but cant be ignored---and being the boss I can shut the door and play if I have to.

Much prefer the portfolio trading though and as you know thats where the majority of my trading funds lie.
Most like to do the short term style hence the thread.

Think the important thing is and I hope this is coming across is the minimisation of loss/Risk. 1/2 positions tight stops and trailings.
Havent had one yet where we can investigate letting stops trail a little looser and let profits run.

WSA and NWR working nicely at the mo.

Gotta go.

 

[tech/a]

Moggie.

I see your "McClaren" inside day principal worked really well on NLX.

Damned well missed it. Said it was likely to go to 10C---think there will be another pullback first so not over yet.

 

[Magdoran]

Moggie.

I see your "McClaren" inside day principal worked really well on NLX.

Damned well missed it. Said it was likely to go to 10C---think there will be another pullback first so not over yet.

Hello Daffy,


The concept is McLaren inspired, but the patterns are not quite what he calls “trading against the spike”, this is kind of a hybrid interpretation of that principle, and there are some caveats to consider…

Agree, a pull back would be good for a long entry if your view is bullish. I’d be watching the resistance at the 16/03/06 low at 0.095, may test into here and come back. It’s also one eighth the range down at 0.09.

If it can break through this level and find support above it, that would tend to indicate to me a good probability of a bullish drive, but dependent on the pattern.

It could of course just be a bullish counter trend to the bearish campaign. Bet it finds resistance around 0.25 if it gets there.


Magdoran

 

[barney]

Hi Lads, Re the chart on AWB ..........

Thanks Mag, some good insightful info there ............ still digesting .........

Rich I'll have a look on the AWB thread .........

Tech, Re;
Looks pretty clear to me Barney---its tanking.

Could you perhaps give us some more detailed info re the chart as it finished today Gapped open but finished on its lows, yet still higher than yeterdays close ........ Volume still reasonable .......Thats 3 days in a row up from the all time low .......... Does today clarify or cloud our judgement re tanking or was today simply inconclusive either way (considering it was an up day for the market in general)
Just wondering what we can make of this at this point in time, if anything? ........... I still think this will be a good learning exercise though for us newer chums as it unfolds, Cheers Barney

 

[It's Snake Pliskin]

Hi Lads, Re the chart on AWB ..........

Thanks Mag, some good insightful info there ............ still digesting .........

Rich I'll have a look on the AWB thread .........

Tech, Re;
Looks pretty clear to me Barney---its tanking.

Could you perhaps give us some more detailed info re the chart as it finished today Gapped open but finished on its lows, yet still higher than yeterdays close ........ Volume still reasonable .......Thats 3 days in a row up from the all time low .......... Does today clarify or cloud our judgement re tanking or was today simply inconclusive either way (considering it was an up day for the market in general)
Just wondering what we can make of this at this point in time, if anything? ........... I still think this will be a good learning exercise though for us newer chums as it unfolds, Cheers Barney

Good evening Barney,

You sure do pick the difficult ones.
A stock plummets with EMOTION, GROUP BEHAVIOUR, and BAD NEWS GALORE.

...and some will think it is CHEAP (I don't care for that way of thinking)

Who knows what it will do!

Wednesday's action is important, and what happens at that low, if it goes there again.

I have a LES too. Good things aren't they.
Regards
Snake

 

[barney]

Good evening Barney,

You sure do pick the difficult ones.
A stock plummets with EMOTION, GROUP BEHAVIOUR, and BAD NEWS GALORE.

...and some will think it is CHEAP (I don't care for that way of thinking)

Who knows what it will do!

Wednesday's action is important, and what happens at that low, if it goes there again.

I have a LES too. Good things aren't they.
Regards
Snake

Hi Snake, I guess I just find this one interesting cause there is so much going on with it .......... Wednesday .... the initial reversal day Big volume ........ Is there any way of knowing who the big "buyers" were on that day?? I imagine not? .. Frightening for the share holders if it gets below that low again.

You have a Les eh...............Often wondered why you role in late of an evening .......... out gigging?? I've had mine for about 25 years or so...... Better not get off topic here, Cheers, Barney.

 

[It's Snake Pliskin]

Wednesday .... the initial reversal day Big volume ........ Is there any way of knowing who the big "buyers" were on that day?? I imagine not? .. Frightening for the share holders if it gets below that low again.

Barney,

You don't need to know who was buying. The point is there is a lot of supply there without a spiking rejection. Then there is that GAP.....

No gigs yet, in the new year though.

 

[barney]

Barney,

You don't need to know who was buying. The point is there is a lot of supply there without a spiking rejection. Then there is that GAP.....

No gigs yet, in the new year though.

(Cool about the gigs Snake Rehearsals are why you get in late?)

There is obviously so much stuff I don't understand about these situations. I was thinking that the reversal on wednesday followed by the gap up on thursday, and again today to a lesser degree was indicating a reasonable short term stabilisation of the big downtrend, but are you saying that because of the gaps, there will be little resistance if the sp takes another dive?? Cheers Barney