Menu
Sister Sites

Options

Bookmark Thread

First Page First Unread Last Page Last Post

Print Thread

Similar Threads

Back To Basics 473 replies

Back to basics or information overload? 12 replies

Back to basics- looking for a method to approach the market 15 replies

Taking it back to basics 12 replies

Trading the Blues - Monday Blues 6 replies

Attachments: (binned per thread starter’s request) Trading with the Blues?
Exit Attachments

(binned per thread starter’s request) Trading with the Blues?

Quoting Winston Reed
While analyzing charts I like listening to Blues. But if you've got the trading blues then let's talk. This thread will be about the basics of trading. When I say basics I'm talking about simple truths that are often dismissed before one has developed a firm foundation of basic trading concepts. Speaking about basics is sort of like a medical student learning anatomy and physiology so he can become a medical doctor. The Study of Human Anatomy is learning the parts of the body such as organs, bones, muscles, arteries and veins, nerves, etc. If you...
I'll be updating this thread.

The first post has been updated to give a primer on what to expect as this thread progresses. I hope to be more active.
This post begins a new start. Posts before this are still good to review.

This thread will be about the basics of trading from a purely technical analysis perspective.

When I say basics I'm talking about simple truths that are often dismissed before one has developed a firm foundation of basic trading concepts.

Speaking about basics is sort of like a medical student learning anatomy and physiology so he can become a medical doctor.

The Study of Human Anatomy is learning the parts of the body such as organs, bones, muscles, arteries and veins, nerves, etc. If you don't know where these things are and how they work together then there's really little sense in trying to learn physiology.

The Study of Human Physiology is learning how organ systems work on a cellular level and how organ systems affect other organ systems.

Market Structure is akin to Anatomy. We need to understand the anatomy of markets. This entails Trends, Ranges and Swings.

Price action is akin to physiology and entails understanding bar level price action and concepts such as effort and effort reversed.

We'll look at the subjects of market structure and price action closely. Understanding them will provide a foundation for trading from which trading strategies or methodologies may naturally evolve.

Technical Analysis



We trade to take advantage of price movement so we should understand the basics of how price moves.

When price moves it is not random. Real people are buying and selling all for different reasons.

Technical analysis doesn't really care why they are buying and selling, only that they are, so we, the traders can take advantage.

TRENDS


As people are buying and selling price moves up or down for varying periods of time. If price is moving up we say it is trending up or if down then it is trending down. The price chart never lies and will always indicate which way price is going.

ESSENTIAL TRUTH: If price is moving up it is moving up until it is not. If price is moving down it is moving down until it is not. Assuming otherwise is guessing or being hopeful.

If price is trending up we should assume it will continue trending up and trade with that expectation.
If price is trading down we should assume it will continue trending down and trade with that expectation.

Simple Trend

Behavior



This is a series of bullish candles that are trending up.

Each one makes a higher high (HH) and a higher low (HL) and we should expect this behavior will continue.
Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-05 at 12.10.59 PM.png Size: 20 KB

In this next chart we can see a change in behavior with the printing of 2 bear red candles that make lower highs (LH) and lower lows (LL) and thus begin a new down trend.

However after the two bear candles a new bull candle prints and resumes the previous up trend.

Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-06 at 8.03.49 AM.png Size: 37 KB

Trend Nomenclature



Before we move forward we need to make sure we talk about trends from a similar nomenclature.


Impulse


In an uptrend this price move leads to a new high in an uptrend.
In a downtrend this price move leads to a new low in a downtrend.

Correction


In an uptrend this is the price move that begins a possible new down trend. It is the pullback or retracement of the impulse.

Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-06 at 9.26.13 AM.png Size: 88 KB

Trends (continued)



So far we've kept the discussion very simple so we can clearly understand the basics of a trend and talk about them with similar language.

Uptrends


A series of HHs and HLs

An uptrend can be a series of single candles or bars that make HHs and HLs. Within each candle is an impulse wave and a correction wave. We just can't see them but we know they are happening.

Waves or Swings


A wave or swing occurs after a pullback or corrective followed by a new high.

Waves or swings usually contain more than one candle or bar for each leg but it is possible for every other candle to be a swing. For the purposes of future discussion we'll assume that waves or swings contain multiple candles in each wave or swing.

Complex Swings



In the real world of trading we'll usually be dealing with complex swings. Going forward we'll be dealing in this world.

Impulse Integrity


An impulse leg is intact until its origin is taken out or violated.

When price takes out a LL in a down trend the previous LH is validated or confirmed and this entire down segment becomes an impulse.

In the chart below LHB to LHC is the impulse leg. Until LHC is taken out to the downside or LHB is taken out to the upside it remains intact. What price does in between LHB and LHC makes no difference in this regard.

Once LHC was taken out to the downside a new impulse leg began.
Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-06 at 10.12.30 AM.png Size: 141 KB
Some observations from Friday
Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-19 at 7.52.20 PM.png Size: 333 KB
Notes for next week
Last bull impulse with HH intact until its origin is taken out to downside.
Price currently correcting with smaller swings (complex correction) but as of yet does not imply new down trend.
Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-19 at 8.00.52 PM.png Size: 1.3 MB
Hello Winston Reed. Thank you for the interesting thread.
In my understanding in daily timeframe we have a HL (14 March) and a HH (17 March). Since then we see a correction of the move and the "critical" level is the LH 1,08993 in 14 March.
At the same time in the 4 Hour TF the trend is down (I think that the diagramm you show above is a 3 hour timeframe which again is in a down trend).
So my question is if my understanding is correct in relation to the procedure of the higher - Lower Highs/Lows in a diagramm..
Thanks in advance for your answer.
Quoting Geris
Hello Winston Reed. Thank you for the interesting thread. In my understanding in daily timeframe we have a HL (14 March) and a HH (17 March). Since then we see a correction of the move and the "critical" level is the LH 1,08993 in 14 March. At the same time in the 4 Hour TF the trend is down (I think that the diagramm you show above is a 3 hour timeframe which again is in a down trend). So my question is if my understanding is correct in relation to the procedure of the higher - Lower Highs/Lows in a diagramm.. Thanks in advance for your answer....
Hello Geris. The time frame is a 3 minute time frame. In regards to this thread I don't analyze price with respect to higher or lower time frames which is stated in previous posts in this thread. That is not to say that multi time frame analysis may be helpful to some, only that I don't use it myself and not in this thread.

Having said all that I am still not sure what your question is.
Hello Winston !! Thank you for your prompt answer. Sorry for my bad english and the misunderstanding.
My question was about my understanding of the HHs - LLs.
I have attached a picture of the 4H TF in EUR/USD how i think that the HHs and the LLs are depicted. I am not sure that my view is the correct one.
The blue horizontal lines show where the daily HHs - LLs have been created (can be deleted).
So the question was that in my understanding the trend in the 4H Tf was down until the last bar where the last HL was broken and we have a possible change.
Is my understanding correct ??
Attached Image (click to enlarge)
Click to Enlarge Name: EURUSD H4 (03-29-2022 1306).png Size: 39 KB
Quoting Winston Reed
Where to start? That's easy. TRENDS!!! I'm sure you've heard it over and over...The trend is your friend until the end, etc. etc. Is it true? Let's talk about it.
Well, according to my own trading experience, there is no issue on following any specific market trend; but don’t try to marry any specific trend! In our trading, we would count the strength of the counter trend movements! It’s all about the supply & demand game! So, there is no way to avoid the counterpart! Besides, I use higher time framers (H4+) to count the current market trend! Do I need to change anything?
Quoting Geris
Hello Winston !! Thank you for your prompt answer. Sorry for my bad english and the misunderstanding. My question was about my understanding of the HHs - LLs. I have attached a picture of the 4H TF in EUR/USD how i think that the HHs and the LLs are depicted. I am not sure that my view is the correct one. The blue horizontal lines show where the daily HHs - LLs have been created (can be deleted). So the question was that in my understanding the trend in the 4H Tf was down until the last bar where the last HL was broken and we have a possible change....
If you read back through this thread you'll find answers to your question.

Here is my view. This is the best I can do.

Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-03-29 at 2.24.28 PM.png Size: 374 KB
0 traders viewing now