Need Some Help with Reading a Price Chart

Good evening! I am practicing reading price action on a candlestick chart. Specifically, I am practicing identifying market trend vs consolidation. I annotated the attached chart, and I was hoping someone could look at this and see if I am in the ballpark or if I am way off base.

Guide to my shorthand abbreviations:

SP = Starting Point
OR = Outside Return
ISH = Initial Structure High
ISL = Initial Structure Low
NSH = New Structure High
NSL = New Structure Low

I tried to keep all my annotations to strictly impulse legs instead of both anchor legs and impulse legs. Thanks in advance!

Jane, Jane Seymour, the actress??? Naaaah just kidding, welcome. Before you get as deeply involved as it seems you want to get in price analysis, could you try a little experiment.

What was the average daily range for the past 30 days, and then the average daily range for the past 6 days. Get these numbers and I will explain why I ask, or not. I know this does not answer your question, but, it might save you some money etc.

The Ever Cryptic VIPER

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Ok, got the numbers tabulated.

For the 30 day period ending 9/5/2017 (same as the chart I posted), the average daily range in pips was 27.43 pips.

For the 6 day period ending 9/5/2017, the average daily range in pips was 29.5.

I calculated this by subtracting the close price from the open price for each day in the range, then taking the absolute value, multiplying it by 10,000 to convert it to pips instead of 0.XXXX, and then taking the average of 30 days and the average of 6 days.

I hope I did that right.

Edit: forgot to mention that I am no relation to Jane Seymour, and am certainly not as attractive (wrong gender to boot) :slight_smile:

What are you aiming to do? i.e. What questions does your TA need to answer?

I fully support price action as a route to successful trading, but what I’m looking for is how your very precise analysis will inform your trading. Its possible to devote massive time to TA, but if trades are only ever entered bullish pin bars, you might just end up confusing the picture.

There is no doubt that price action is a good way for successful trading. But before diving in to the deep with price chart every trader should practice first in demo account. You can see the assumption from the demo account. Also you can try different experiment here. It won’t effect in to your real account. But you can realize weather it could worked or not. If the analysis goes wrong it will bring disaster instead of profit.

@Ethan_Jeremiah Thanks, and already doing that.

@tommor At this point, not really sure what I am aiming to do as far as a trading methodology. I like the idea of the simplicity of just trading pure price action, but I also am not a fan of anything that has objectivity and drawing support or resistance levels seems to be somewhat objective.

I am a computer programmer by trade, so the idea behind a purely mechanical system that I can automate the testing portion of really appeals to me as well. I am also just starting. I have been following YouTube channels, reading books and blogs, and doing free courses online for a little over two years, but I still have a few gaps in my knowledge that I am trying to fill.

I think maybe you mean you don’t like subjectivity in TA and if that is the case, I fully agree with you. Support and resistance lines, trend-lines, trend channels, Elliott waves and how much importance should be applied to any move on an off-chart indicator are to me just too subjective. There will be three opinions on each for every two traders assembled to look at them on a chart.

Which is not to say these things aren’t useful they’re just not as reliable as people make out they should be.

Keep at it to find your own style.

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@tommor D’oh! Yeah, I mean subjectivity. If I have to rely on my eyes to interpret patterns then I tend to doubt what I see, or pay way too much attention to small, irrelevant details.

For one example, I tried testing the cypher pattern and I found that it would take me three hours to test two potential trade setups because I kept second guessing where to draw my initial XA move. On the other hand, trading a moving average crossover is appealing because it’s very clear when to enter a trade. The only thing that hangs me up there is that a lot of traders seem to think that a moving average crossover system is not sufficient to make a full time living.

I know that I should just do the work and test it for myself, but I am very much confused about what trading methodology to start with. I have all my other parameters worked out as far as when to trade, what pairs, what platform (either NinjaTrader or MT, depending on if I do Fibonacci based entries or exits - last I looked at MT it didn’t have a Fibonacci tool), initial account deposit, etc…

My overall goal is to make trading my first source of full time income so that I can quit my day job and branch out into other business opportunities such as acquiring rental properties, building a strong long-term stock portfolio that focuses on dividend-paying stocks, creating a charity to run scholarship investment funds for my local community, volunteering at non-profits, etc… but to achieve all that I need to not spend 10+ hours a day just trying to pay my bills, you know?

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Hey J, now a few more factors and I promise we are almost done. By the way this is not just a thought exercise, it is to help you to “see” the current state of the market.

Ok, now consider this, on the daily, low to high range for 23 days is 245 pips. Now to capture that, you would have had to Buy at the exact bottom, and sell at the exact top, as we know that is near impossible and then stay out after the top.

The same goes for your calculations, lets say 30 pip range per day, it is my observation that one would have to be using at minimum 15 min for trend Establishment, and Sub 15 min for entry and exit. Now think about this, 30 pips, how many pips does it take to establish a trend or throw up a reliable pattern. If it takes 15 pips, well there is half of your daily range right there. Not to mention, it might move 15 pips, you might think there is a trend and then price immediately reverses.

Look at the daily, from 6/1 to 7/26, that is a nice smooth trend and everyone and his brother in law was making bank. Notice how small in general the wicks and tails are during this time, then look at the wicks, tails, open and close, from 7/26 to today and compare the two. It is clear that the market is going through a shift.

Also throw in the VIX number, the markets in general are quiescent. Bottom line one would be better off to stay out at this time, or change tactics, and figure out something that functions at a lower fractal than daily, four hour etc.

So really, this is a difficult time to be trading, not impossible, mind you, just challenging.

So I suggest you watch, sooner or later there will be a shift back, or you could take the time to learn a short term tactic, remember flexibility and improvisation are two important traits that traders need.

The Ever Improvising On The Fly VIPER

MA cross-overs are clear and objective, and I think they’re worth trying when you start out. They occur near the start of trends, which I like, but not so close as to be just random noise. Assuming you pick a sensible pair of values.

After watching Rayner Teo on Youtube I’m using 20 and 50EMA’s. Basically if price is above the 50 and the 20EMA is above the 50 and the 50EMA is sloping upwards, that’s an uptrend that’s worth a look for a trade. Not too far back in time the 20 will have crossed above the 50 so that’s a convenient signal but also risky. Its always possible to get in later. I never try to get in earlier.

Take a look at what the weekly bars are doing against the 50 (day) EMA too. Its high-risk to go against a long-term trend.

As for trading style, there’s no evidence a greater % of day-traders win or that they make more profit than longer term trading. I hear traders saying that long-term, the long-term traders always make more money.

Anyway, you might be able to give your day job eventually, but that might just mean you are free to take a day job you like. But plenty of people would give their eye teeth for that so its not the worst thing in the world.

I concur with Ethan! You do not want to jump into the lion’s den right away. You need to test your strategy on a demo account first.

Thanks! Although your reply brings me to more questions…

Why? Is it that there is too much noise on the 5 min for establishing a trend?

I have no idea what this means. I will need to do some Googling on that.

So trend based trades should be taken primarily when they follow the same trend on the higher time frame, such as 4hr or daily charts? Is there a better way to identify trends other than visually?

Not opposed to this, just don’t know what short term tactics to learn. Can you point me in a direction on this?

Thanks again!

Thanks! I will check out the trader on YouTube that you mentioned.

Everything I have read up to now has always said that it doesn’t matter how you trade, as long as you have a positive expectancy and execute consistently. Have you read or seen anything to suggest that day trades are less profitable than swing trades?

Hey J, answers we have, money, not so much. :wink:

No Problem

The Ever Someone Should Pay Me For This VIPER :laughing:

Thanks so much!

Since you are so generous with answers, I am going to toss a few more questions at you. These are going to be primarily opinion based though :slight_smile:

I am at a spot where I am stuck. There is so much information and so many possible different ways to trade that I feel I just need to pick one and go. What strategy would you recommend to a new trader who has a hard time spotting harmonic patterns?

I really want to be successful at trading, and I am not married to any particular idea or strategy or method. I just want to get some opinions on getting started and making some visible forward progress. Judging from your responses, I get the impression that you are a swing trader as opposed to a day trader, or do you do both styles? Which one would you point a new trader at that has 3 hours a day to spend in front of charts?

Finally, do you have any good book recommendations that I can add to my library? I have been studying this stuff for about 2 years now and don’t feel any closer to putting any real skin in the game.

Thanks so much! If I ever get to be too much of a pest, just tell me to go away :slight_smile:

I will meet you at your journal.

The Ever Organized VIPER