Is it Possible to pick Bottoms or Tops - consistently?

[tech/a]

Buying the bottom is ALWAYS luck, never though about the skill aspect and thinking about it i don't think skill plays any part, its a calculated decision.

Who can find the bottom first time with any consistency? Cheap enough for a decent long term return is cheap enough for a decent long term return. Picking the bottom is luck.

Not only do I think it is more than possible but I also believe it is a skill you need to have a proficiency in.
You need to know when your at a hard top or bottom or a soft one.
How to read price action as it nears either so you can take the best advantage of it going forward.

Obviously the connotations of a topic on tops and bottoms isn't without humor but this is a serious topic!

My ambassador for the topic!



Jokes aside

On both fronts you need to know what to do when you see one or one is approaching---Oh God--you just cant get away from it !!!

 

[notting]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

I'd say you can't consistently.

However there is nugget in that sentence.

You can pick a top and a bottom rarely yet pretty much perfectly.

The art of it is knowing when it is one that is right as apposed to all the ones 'you think' are right.
It is usually out of the blue, unintended and even self surprising but you know it, almost without realizing you know it. Even the way you know it is different most of the time.
The intuitive mind is unlimited in its capacity to manifest scenarios.
Once you've got a sense for it after about 30 years of experimenting with it!

Then comes the hard part!
Trading it.

As Techa said it's knowing what to do when it happens and preparing for the psychological meltdown you tend to have when entering a big trade 'on it' against all the nuances that have built into you that will immediately start cheering for the opposite direction once your neck is on the line.

What do you do?
Take the position, set a target and walk away.
Don't go back until it has played out.

Easier said than done.

 

[wayneL]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

It's actually dead easy. In fact the zigzag function in any charting package does it to the day every single time.:

 

[galumay]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

i guess it depends whether you subscribe to the theory that past events and be used to predict future action.

Thats a debate thats been raging since markets started and it wont be resolved any time soon!

 

[Valued]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

It depends what you mean by consistently. By consistently do you mean getting it right more often than not? P

The problem with a market bottom is even if you do pick it, the stock may get stuck in a trading range for months. If the stock is not in a trading range then you won't be able to pick a bottom since you won't know when a trend will end (of course on the short side 0 is the bottom... that's easy to pick).

 

[robusta]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

It depends what you mean by consistently. By consistently do you mean getting it right more often than not? P

The problem with a market bottom is even if you do pick it, the stock may get stuck in a trading range for months. If the stock is not in a trading range then you won't be able to pick a bottom since you won't know when a trend will end (of course on the short side 0 is the bottom... that's easy to pick).

Also throw into the mix how many times you are having a go at it. If you are day trading, in and out with tight stop losses the law of averages say you are going to hit the bottoms or tops eventually. Compare that to someone making one maybe two decisions a month on a limited universe of stocks...

 

[pavilion103]

I use these areas to increase probability.
There is a higher probability that price will struggle as it approaches these areas.

I use it for trade management - so I wouldn't just let a trade run near a significant level. The more significant the level , the greater caution I take.

I use major S/R as a potential entry point for a position trade. It allows me to estimate a potential RR and get in at a higher RR area.

Exits - I may profit take near these levels because the chance of at least a consolidation or range is greater.


I don't care about in depth debate though.
I only care about profit.

 

[tech/a]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

It's actually dead easy. In fact the zigzag function in any charting package does it to the day every single time.:

Bugga you know how I do it!

 

[robusta]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

So this zig zag function can be used in real time, forward looking to pick bottoms and tops with consistency? This is exciting news. Forgive my ignorance but how does it work and how do I use it?

 

[Caveroute]

Re: Is it Possible to pick pick Bottoms or Tops---consistently.

Last night between 7pm and midnight on the 150 tick FTSE a cursory glance shows there were ~ 12 potential double bottoms.

All of them failed.

A pattern is next to meaningless without context, here the context is a strong bear trend, all reversal attempts are expected to fail, until proved otherwise.

I don't know why would anybody would even bother to look for longs here when the shorts are high probability and low risk.

 

[tech/a]

So this zig zag function can be used in real time, forward looking to pick bottoms and tops with consistency? This is exciting news. Forgive my ignorance but how does it work and how do I use it?

You don't he's having a lend---now I've spoilt his fun!

Last night between 7pm and midnight on the 150 tick FTSE a cursory glance shows there were ~ 12 potential double bottoms.
All of them failed.
A pattern is next to meaningless without context, here the context is a strong bear trend, all reversal attempts are expected to fail, until proved otherwise.

I don't know why would anybody would even bother to look for longs here when the shorts are high probability and low risk.

Context totally agree
But I wouldn't say ALL reversal attempts expected to fail
Particularly in context.
Infact in context and leading upto a potential top or bottom
I'm sure you can successfully predict outcome.

You just need to know what to look for.
What to do when you see it
How to manage it after the top is broken or rejected.

 

[Caveroute]

You don't he's having a lend---now I've spoilt his fun!



Context totally agree
But I wouldn't say ALL reversal attempts expected to fail
Particularly in context.
Infact in context and leading upto a potential top or bottom
I'm sure you can successfully predict outcome.

You just need to know what to look for.
What to do when you see it
How to manage it after the top is broken or rejected.

Well, sort of.

If your in a TR you can take a view.

If your in a trend you can take a view.

If you in a trend within a TR, you can also take a view.

Nail the context and as you say 'know what to look for' and things should fall into place.

What could possibly go wrong after all.

 

[MichaelD]

Interesting proposition given the current market action.

I'd say all of the following = decent probability of the bottom.

1. Extended period of downtrend with bigger and bigger black bars, leading to...
2. A huge "kangaroo tail" candle on the open. Really unusually big compared to even the worst of the downtrend bars. Possibly representing the last gasp of the "desperate to get out at any cost" crowd. Pretty much the only candlestick pattern I pay any attention to at all.
3. You personally want to stay short, short, short with all your heart.
4. Newbie traders are asking about how to short stocks on forums.
5. The last trading session fell so much and so far that it made headline news instead of being relegated to the business section.
6. All the news is 100% grim with no hope in sight.
7. (Now a defunct indicator). The CommSec trading platform crashes on market open due to the volume.

Such a combination of events would likely see me closing my short positions & then sitting back and waiting to see what happens - heck, my trailing stop would trail down the kangaroo tail and be hit on the way up anyway so they're closing regardless of what I think of the situation.

I'd go short again if price action goes significantly below the bottom of the kangaroo tail.

 

[Caveroute]

Interesting proposition given the current market action.

I'd say all of the following = decent probability of the bottom.

1. Extended period of downtrend with bigger and bigger black bars, leading to...
2. A huge "kangaroo tail" candle on the open. Really unusually big compared to even the worst of the downtrend bars. Possibly representing the last gasp of the "desperate to get out at any cost" crowd. Pretty much the only candlestick pattern I pay any attention to at all.
3. You personally want to stay short, short, short with all your heart.
4. Newbie traders are asking about how to short stocks on forums.
5. The last trading session fell so much and so far that it made headline news instead of being relegated to the business section.
6. All the news is 100% grim with no hope in sight.
7. (Now a defunct indicator). The CommSec trading platform crashes on market open due to the volume.

Such a combination of events would likely see me closing my short positions & then sitting back and waiting to see what happens - heck, my trailing stop would trail down the kangaroo tail and be hit on the way up anyway so they're closing regardless of what I think of the situation.

I'd go short again if price action goes significantly below the bottom of the kangaroo tail.

These are epoch changing events, in 'geologic time', I thought we were talking day to day ..........

fwiw, the big bars you refer to are aka as climax bars - and form part of the regular day to day assessment.

I've just looked at the 15 min bars from the absolute classic session last friday and guess what - exhaustion preceded the turn - biggest bars in the trend, both up and down.

 

[IFocus]

Used to work with some one who got the DOW within a 100 points on three occasions during various crashes and always went all in each time, lost touch so don't know how he went in 2007 / 2008.

Need less to say he made a fortune all on gut feel.

 

[notting]

Every now and then it happens.
I had AGOs measure for a short period.
Picking the bottom -
5th-September-2012 01:10 PM here hit a low at around $1.20
All that happen was that I noticed a mood change in AGO. I had become a bit obsessed with it and some how against the market backdrop it suddenly behaved differently than it had been and so did the other IO stocks. I wouldn’t say this was a completely clear cut case however you can see there was nothing technical really showing.
I traded it.

Picking the AGO top here -
15th-February-2013 11:33 AM Fell from 1.875 to .685
This is a classic.
It would be a lie to say I picked it. Because I had nothing to do with it. It was an overwhelming instinct, I had a lot of AGO! It felt like I was saving my own life.
It was that strong.
Nothing made sense about it. I just involuntarily sold it due to an overwhelming feeling to. It was the highest point since that previously picked low.

I didn’t have the balls to go short.

You cannot do it consistently and you can’t try to. If you’re asking yourself questions like is this the top or the turn or this or that. It’s not that kind of special instinct. If you’re using technical or fundamentals it’s not that kind of special instinct. Though it does lean on the side of fundamentals. You can learn to know the difference between contrived action and something more profound. You can’t make it happen, it kind of does you rather than 'you do it.'

SLR 3rd-December-2013 05:20 PM
It will double.
That’s all I got. No price sense nothing. Just - it will double.
It did.
I only bought a small amount because I’ve been gun shy lately.

Others I can remember where they did exactly what some self assuring sense indicated they would after a strong instinct were KAR, QBE, ASL, TRY and NAB during the crash. These I can remember from the last 5 years or so probably some more that I didn't play.
Not many, but enough amidst hundreds of others that I am playing like everyone one else and winning and losing.

But every now and then - something just lines you up.

It’s really hard because if you say to me, OK then, dick head, tell us when you next have the instinct.
I will immediately start thinking I have to tell the next time. That changes the chemistry. It’s like you have taken a vow and it is pulling on you.
You have to be in this neutral space where nothing is going on no predispositions but you never know.
I will try to indicate something if it ever happens that strongly again, as I have done with AGO and SLR fairly recently and bothered to record it in ASF.

 

[Caveroute]

Every now and then it happens.
I had AGOs measure for a short period.
Picking the bottom -
5th-September-2012 01:10 PM here hit a low at around $1.20
All that happen was that I noticed a mood change in AGO. I had become a bit obsessed with it and some how against the market backdrop it suddenly behaved differently than it had been and so did the other IO stocks. I wouldn’t say this was a completely clear cut case however you can see there was nothing technical really showing.
I traded it.

Picking the AGO top here -
15th-February-2013 11:33 AM Fell from 1.875 to .685
This is a classic.
It would be a lie to say I picked it. Because I had nothing to do with it. It was an overwhelming instinct, I had a lot of AGO! It felt like I was saving my own life.
It was that strong.
Nothing made sense about it. I just involuntarily sold it due to an overwhelming feeling to. It was the highest point since that previously picked low.

I didn’t have the balls to go short.

You cannot do it consistently and you can’t try to. If you’re asking yourself questions like is this the top or the turn or this or that. It’s not that kind of special instinct. If you’re using technical or fundamentals it’s not that kind of special instinct. Though it does lean on the side of fundamentals. You can learn to know the difference between contrived action and something more profound. You can’t make it happen, it kind of does you rather than 'you do it.'

SLR 3rd-December-2013 05:20 PM
It will double.
That’s all I got. No price sense nothing. Just - it will double.
It did.
I only bought a small amount because I’ve been gun shy lately.

Others I can remember where they did exactly what some self assuring sense indicated they would after a strong instinct were KAR, QBE, ASL, TRY and NAB during the crash. These I can remember from the last 5 years or so probably some more that I didn't play.
Not many, but enough amidst hundreds of others that I am playing like everyone one else and winning and losing.

But every now and then - something just lines you up.

It’s really hard because if you say to me, OK then, dick head, tell us when you next have the instinct.
I will immediately start thinking I have to tell the next time. That changes the chemistry. It’s like you have taken a vow and it is pulling on you.
You have to be in this neutral space where nothing is going on no predispositions but you never know.
I will try to indicate something if it ever happens that strongly again, as I have done with AGO and SLR fairly recently and bothered to record it in ASF.

Yes, i've heard this sort of thing -but again were talking visionary one off's.

When Herman Bhul ascended K2 solo, an unclimbed Himalayan peak, he said voices were telling him where to go and how to get off the mountain. He followed the voices and got down ok.

Stepped off a serac a few years later though, on Changabang (?), he didn't trade again:

 

[notting]

Yes, i've heard this sort of thing -but again were talking visionary one off's.

Yes!!
But that's the point!
It's learning to identify those and it's possible.
If your looking for 'consistency' or a pattern or a perfect record or whatever that's not the way it works and you will never find it!
There are lots of areas of life that it is incredibly useful and you will usually get dragged through all kinds of s&#@ that your conceptual mind conjures up to make you second guess and trip yourself up. The market is one of the hardest arenas to use it in because it's so loaded with all of the worst motives and opinions and egos self doubt and on and on.
The more you try to explain the more lost you get.
So I will just try to share if it ever happens again.
Yes. Expecting it to happen is an obscuring predisposition.
So just be a mug or technical probabilist cumulative trend winner and forget about it.
And then that tap on the shoulder in a moment of stillness.
When you have given up or forgotten about it.

 

[Caveroute]

If your looking for 'consistency' or a pattern or a perfect record or whatever that's not the way it works and you will never find it!

Mate, nothing is perfect.

Everything requires analysis.

All analysis requires a framework.

I work within a price action framework.

In hindsight everything is crystal clear, as long as you take the right view.

The last bit is work in progress .................

Is there an alternative you might recommend ?

 

[notting]

Sure, Be Buffet or Radge.
Far easier.

I just happen to be very interested in this particular insight as well.