Saturday, June 10, 2017

Nine Transitions -- The book

One of my readers was kind enough to organize all the material in the blog by category. This may be an easier form to consume for most people.

Download Nine Transitions Book

Soon, I will restart the blog with a focus on trading crypto-currencies.

Trading setups have been greatly simplified, enabling easier recognition in time.

We are back in business!

EDIT: Link updated

Friday, October 23, 2015

Patience and discipline as keys to trading

The key to trading is not simply taking the right trades, but to also pass on any trades that don't seem right. After all, its easy to just take every trade and ignore the failures, but this only makes your broker rich.

When the price action is choppy or the signal is weak, wait for the market to move away and give a better setup. This is patience and the key to limiting your losses.

Once you are in the trade, follow your trading plan. Do not be shaken out of your position. Exit where you think is a reasonable and conservative exit. Do not be greedy or your winner may turn into a loser.

Tuesday, September 29, 2015

The shallowest trendline from the prior day

There is a shallowest possible bull and a shallowest possible bear trendline every day. These trendlines have some predictive power as to where the price can turn and trend. For example, the shallowest bear TL from the prior day from HOD and b21 caused a reaction that led to a large move. If the final bar is the highest or lowest bar of the day, then you can use a TCL instead, which has lower predictive use.

Note that when the price gaps far from the prior day's action, the shallowest TL from the prior day may never be tested and you should not wait for it.

Friday, September 25, 2015

Small trend bars in a hard trend

When the first two bars have strong closes and very little overlap, it is reasonable to assume a hard trend is in progress. In a hard trend, any small bar can use used as a signal bar, especially if its a trend bar near the TL (b3). In a pullback, you can often enter above any small trend bar (b10).

Thursday, September 24, 2015

Large inside bar on 1W

Inside bars are tricky and often require judgement to trade correctly. In general, large inside bars are overlaps and therefore a mini trading range. It is generally best to wait for the trade to trigger and take a pullback.

An outside bar that traps traders who did not see the reversal and entered (b23) makes an excellent signal bar if its not too large. If it does not trigger any small trend bar after it (b24) should work.

Tuesday, September 22, 2015

Waiting for chop to end

The day opened choppy from b1-8. From b8-11, bars suddenly had strong closes and shorter tails. This is a sign that the chop is ending.

When the chop ends, the initial move can usually be faded. In today's case, the initial move was a continuation up, which resulted in a large down move. If on the other hand, the move had been down, we would probably see a trend break up

Trading a choppy day

A choppy market is characterized by bars with large tails, occasionally interspersed with overlapping, opposing bars with large bodies. Its clear that the opposing bars are effectively a tail if you consider them in the aggregate.

Capturing large moves in this price action is very hard to do with a tight stop. The large move down from b3 only occurred after deep pullbacks and stopped me out.

There are ways to predict a breakout such as b29 but these are very hard to read. One way to keep yourself out of trouble is to wait for price action to be less choppy, i.e, you start to see more trend bars and less overlap.

If you must trade, deep pullbacks to the trendline are the safest and three push pullbacks are generally safe. Note that in choppy markets, you should always take an early profit and swing entries are hard to gauge.

Often, the mark of the successful trader is that he knows when the odds are against him and knows to sit out of the market when his expertise is not called upon. The trader who frets at missed opportunities is well advised to weigh against the missed losses and be content with making the right choice of staying out of the wrong market.