| Home | My photos | Forex | My trading | Contacts |
|
|
You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
|
Successful trade execution aligns positions through a multidimensional time viewTIME Pattern Cycles oscillate equally through all time frames. Trade setups remain valid in every chart view, whether they print on 1-minute or monthly bars. Each chart length attracts a specialized group of participants that interacts with all other groups through the universal mechanics of greed and fear. This dynamic 3D process results in trend convergence-divergence through different time lengths. Swing traders improve performance when they adjust their chart view to match the chosen holding period. As Table 1-2 illustrates, modern swing tactics encompass both the world of the day trader and the position trader. Successful trade execution aligns positions through a multidimensional time view. First choose a primary screen that reflects the holding period and matching strategy. Then study the chart one magnitude above that period to identify support-resistance and other landscape features that impact reward:risk. Finally, shift down to the chart one magnitude below the primary screen and identify low-risk entry points. Alexander Elder defined many elements of this strategy in his Triple Screen system in Trading for a Living. The time has come to expand his classic concepts to accommodate the faster fingers of the modern high-speed markets. Evaluate a trade setup through all time frames that may affect the position. The view just above and below the intended holding period may not capture important trendlines, gaps, or patterns. Study that market’s multiyear history before execution as time permits to identify large-scale swing pivots. If the trade target passes through major highs or lows that are several years old, give those levels adequate attention. Other players will see the same chart features and may use them for entry or exit. But keep in mind that the importance of old price extremes decays over time. Consider the current emotional intensity of the crowd before dismissing trades based on old obstacles. Time frame analysis above and below the current setup chart will identify opportunity and risk in most cases. For example, when a promising setup appears on a 5-minute chart, the swing trader checks the 60-minute chart for support-resistance but uses the 1-minute chart to time execution to the short-term flow of the market. This multidimensional approach works through all time levels. Even mutual fund holders can benefit when they locate a potential investment on a weekly chart but use the daily and monthly to time entry to the highest probability for success. Market participants routinely fail at time management. Many never identify their intended holding period before they enter a trade. Others miss major support resistance on the daily chart when they execute on the 60-minute bars. Some sit on nonperforming positions for weeks and tie up important capital while excellent opportunities pass by. In all cases, time works as efficiently as price to end promising careers. Time of day, week, and month all display unique properties that enhance or damage the odds for profit. Market insiders use the volatility of first-hour executions to fade clean trends and empty pockets. Options expiration week can kill strong markets or force flat markets to explode. Thin holiday sessions offer dramatic rallies or selloffs in the most unexpected issues. And many Fridays begin with government statistics that ignite sharp price movement. Every profit opportunity arrives with a time shadow hanging over it. Learn to focus attention on important feedback at the exact time that the information will likely impact that market. It may flag an execution window that closes in minutes or offer an exit that should be taken without question when it arrives. Recognize the impact of time on reward:risk before position entry and update conclusions as each new price bar prints. Swing traders must manage time as efficiently as price. Calculate the expected holding period for each new position based on the distance to the next high-risk zone. Use both price and time triggers for stop loss management. Time should activate exits on nonperforming trades even when price stops have not been hit. Execute only when time bias improves the odds for profit, and stand aside frequently. TREND RELATIVITY Trends validate only for the time frame in which they occur. A trend in one time frame does not predict price change in the next lower time frame until the shorter period intersects key levels of the larger impulse. Pattern Cycles in time frames larger and smaller than the current trend are independent and display unique attributes of the trend-range axis. This interrelationship continues all the way from 1-minute through yearly chart analysis. Swing traders must always operate within this 3D trend relativity. The most profitable positions will align to support-resistance on the chart above the trade and display low-risk entry points on the chart below. But trend relativity considerations do not end there. Price evolves through bull and bear conflicts in all time frames. When ongoing trends don’t fit neatly into specific charting periods, trade preparation may become subjective and dangerous. Hard work yields promising setups that align to the swing trader’s holding period. But these opportunities must fit into a larger market structure for the positions to succeed. With trends in motion less than 20% of the time through all markets, odds do not favor a confluence of favorable trading conditions through three time frames. The perfect opportunity rarely exists. An exciting breakout on one chart may face massive resistance on the longer-term view just above a planned entry level. Or a shorter-term chart may display so much volatility that any entry becomes a dangerous enterprise. Few executions align perfectly with the charting landscape. Successful trading requires a careful analysis of conflicting information and entry when favorable odds rise to an acceptable level. When faced with a good setup in one time frame but marginal conditions for those surrounding it, use all available skills to evaluate the overall risk. If reward:risk moves into a tolerable range, consider execution even if all factors do not favor success. That’s the nature of the trading game. Support-resistance priority parallels chart length. Use this hierarchy to locate high-probability entry levels and avoid low-reward trades. For example, major highs and lows on the daily chart carry greater importance than those on the 5-minute chart. As the shorter bars drift down toward the lows of the longer view, strong support exists for a significant bounce. These 3D mechanics also suggest that resistance in the time frame shorter than the position can safely be ignored when other conditions support the entry. Profit opportunity aligns to specific time frames. But many participants never clearly define their targeted holding period and trap themselves in a destructive strategy flaw. They see their trades in one time frame but execute them in another. This trend relativity error often forces a new position just as the short-term swing turns sharply against the entry. Neophytes fall into this trap with great frequency. They feel pride when they see an impending move on their favorite chart and recklessly jump on board. The action-reaction cycle then kicks in and shakes them out as price tests support before heading higher. Trend relativity errors rob profits on good entries as well. No one wants to leave money on the table. So marginal players may freeze as soon as a new position moves in their favor. But inaccurate price targets can measure one trend while the initial entry springs off another. Natural wave motion then whipsaws the flawed position sharply and sends the trade into a substantial loss well before reaching a reward target. Visual information seeks to reduce noise and increase signal as it travels from the eye to the brain. The rational mind sees large trends but may conveniently filter out the many obstacles along the way. Or the marginal participant manipulates the chosen holding period and curve fits the opportunity to match the current plan. Most players should never change their holding period without detailed preplanning. Specific time frames require unique skills that each swing trader must master with experience. This noble effort should not begin trying to rescue a loser from bad decision-making. Compensate for this mental bias through precise trade management. Begin with a sharp focus on the next direct move within a predetermined time frame. Prepare a written trading plan that states how long the position will be held and stick with it. Establish a profit target for each promising setup and then reevaluate the landscape that price must cross to get there. Consider the pure time element of the trade. Decide how many bars must pass before a trade will be abandoned, regardless of gain or loss. VOLUME Emotional forces shape trends through all market conditions. New uptrends build crowd enthusiasm, which attracts waves of greedy buyers. Gaming mentality slowly overcomes good judgment as prices push higher and higher into uncharted territory. The frantic rally finally cools and the herd turns nervous. As the market rolls over, fearful selling replaces greedy excitement. The decline gathers force and continues well past rational expectations. Panic replaces fear, but just as pain becomes unbearable, value players jump in and end the correction. Price starts to form a bottom and a new Pattern Cycle springs to life. In a turbulent marketplace, distorted expectations characterize both long and short positions. Price destabilizes and crowd participation swells as bulls and bears swing through emotional battles. Although these constant waves of accumulation and distribution appear chaotic, they often conceal an axis of directional movement. To measure this underlying tendency, study the emotional imprint of buying and selling behavior. Two simple pieces of data unlock the mysteries of emotional markets: price and volume. While technicians manipulate price through many patterns and indicators, the best volume analysis arises from the simple histograms offered through most charting packages. These spikes and valleys in the lower pane of the price chart often tell swing traders all they need to know about the current crowd. Common histograms display volume through a single hue or color-code the action based on the price bar’s closing direction. The two-color (red for down and green for up) version offers a powerful view of that market’s trend-range axis and uncovers complex insight into crowd direction. Once this is detected, watch for opportunity as the indicator tracks the interplay between buyingselling behavior and directional price movement. Volume rarely reveals accumulation-distribution in a straightforward manner. Bursts of emotional buying or selling may dictate price direction over short periods of time, regardless of the underlying trend. Effective longer-term analysis requires filtering mechanisms to distinguish between these pockets of frantic volatility and significant participation that will eventually guide prices higher or lower. A hidden spring ties together volume and price change. Accumulation-distribution may lead or lag trend. As one force steps forward, tension on the spring increases. The leading impulse pauses until a release point strikes and the other surges to join its partner. This tension measurement between price and volume offers an important signal for impending market movement. Since positive feedback requires synchronicity between both elements, volume leadership predicts price change. Classic technical indicators provide continuous accumulation-distribution readings. Lesser-known techniques measure the tension on the price-volume spring itself. Like water brought slowly to a boil, volume reflects latent energy that releases itself through trend. Accumulation-distribution and histograms measure the power of this emotional force. Analysis of crowd participation through volume has little value unless it accurately predicts price change. Profitable setups arise through recognition of climax volume events and identification of emotional force building at key breakout and breakdown points. Human nature swings greed and fear between stable boundaries most of the time. The master swing trader can identify those narrow conditions where volatility will spike and destabilize crowd behavior toward its emotional extremes. Accumulation-distribution reaches into herd behavior better than any other form of technical analysis. It also requires great effort to filter out meaningless data and focus on key crowd interactions. Markets generate volume for many non-emotional reasons, such as secondary offerings or block trade reporting. But these technical events never move trends the same way as greed or fear. In most cases, successful trade execution belongs to those who can consistently read the paranoid mind of the markets. |
|
|||||||||
Previous Issues
|
| ©2007 Olesia | Home • My photos • Forex • News • My trading • Contacts |