NDX

[dmedin]

9 minutes ago, HMB said:

 

or you meant I do in your opinion?  yea. you're absolutely right.  maybe the "outing" here helps me to be more conscious about it.  but I think it's simply weakness of character at this stage.  probably taking a break, quitting smoking, losing weight, getting into a regular exercise routine etc. would be necessary.  I'm kinda exhausted from the frustration, but on the other hand used to it by now.  strange journey...  

No, I was referring to myself on 15 min timeframe  

OH yes, it is like an addiction - break free if you are able to...

[HMB]

Just now, dmedin said:

if you are able to

nail on the head

[HMB]

th

Edited September 8, 2020 by HMB

[HMB]

39 minutes ago, dmedin said:

No, I was referring to myself on 15 min timeframe  

OH yes, it is like an addiction - break free if you are able to...

Think you mentioned that in another post - about the mental exhaustion that comes from waiting for opportunities...  think that's very true , in particular when one trades a lot intraday ...  thinking about ways to avoid that, e.g. only short scheduled sessions... think I'll try that - being logged into the trading account only 2-4 pm EST/EDT

[HMB]

...funny how one gets conditioned by the market...  exorbitant valuations in NDX were obvious, barely explainable by low rates and massive Fed printing...  yes more profitable than 1990, but still obviously extremely highly priced...  now that was before Covid...  then the Covid crash, then the Fed prints more...  and all recovers till June 8...  but Dax, RTY, NKY etc. stop then, move sideways and eventually slightly higher, but NDX adds another 30%...  because Apple has suddenly invented the iphone?  and Microsoft released Windows?  Or Tesla built an electric car..?  Oh yes, Amazon - we all buy a second kindle now and order every book twice because of the pandemic..

But no, I didn't get it.  The conditioning had already happened.  NDX must rebound after a 5% drop...  because then it would have only outperformed the rest of the world by 20% in two months.... exactly the amount of  time it took me to believe the craziness... 

Edited September 8, 2020 by HMB

[HMB]

...started wondering if it was hedge funds catipulating and starting to reduce their NDX shorts last week somehow played a role...  probably nonsense..:

[HMB]

given that 23.6% fib breakthrough worked so well indicating the end of the correction... looking forward to initial "stabilization" above the new 23.6% fib today (don't mind if I round this to 25%, do you...?), and major sell-off later..:  (not trading this, though, just looking forward to watching only for a change...;)

 

 

[Caseynotes]

Hi, just skimming through this but realise what I would deem to be a problem in that there is no real technical plan behind the trades but rather relies on rationalisations, the problem there being is that the markets are not often all that rational.

I try to dissuade people from having a bias and instead just follow the charts. If you have a bias then look for a trade and then look to rationalise/justify it you are going to be right just often enough to keep you playing but mostly losing, because after deciding you want to trade you can rationalise anything if you set your mind to it.

I prefer to just look for a chart setup that repeats itself and don't tend to worry about the whys and wherefores.

NAS just rejected the daily pivot (same as Dow) but found temp support at the old resistance level from the weekly chart.

 

[HMB]

11 hours ago, Caseynotes said:

Hi, just skimming through this but realise what I would deem to be a problem in that there is no real technical plan behind the trades but rather relies on rationalisations, the problem there being is that the markets are not often all that rational.

I try to dissuade people from having a bias and instead just follow the charts. If you have a bias then look for a trade and then look to rationalise/justify it you are going to be right just often enough to keep you playing but mostly losing, because after deciding you want to trade you can rationalise anything if you set your mind to it.

I prefer to just look for a chart setup that repeats itself and don't tend to worry about the whys and wherefores.

NAS just rejected the daily pivot (same as Dow) but found temp support at the old resistance level from the weekly chart.

 

Thank you!  Yes, I thought something similar today, but wasn't able to express it as clearly as you did!  Indeed, once I have an idea about what's going on, I also am more likely to spot "patterns" that "confirm" this idea...

I'm still looking for ways to combine technical and fundamental considerations better.  Your observation and recent days suggest that starting with the technical part might be the superior approach.

One could have asked weeks ago, why the NDX is outperforming that much.  Maybe one would have concluded that it's not only Robinhood and stay-at-home narrative, but also some large investor(s) buying calls en masse and forcing delta-hedging dealers to create a "vicious spiral"... admittedly, probably a long shot, but I think the general lesson is that it might be useful to question the "mainstream" narratives and consider alternative explanations, when it seems a stretch for the former to fully explain market moves... 

 

[HMB]

went short NDX (DFB) earlier - at 11429.7, stop at 11485.  minimum size, so like 30 quid at risk...  probably a mistake given the weekly loss limit is already hit - however new risk is less than 10% of that...  also logged in half an hour earlier than planned - and the only reason I managed to wait that long was because I decided to drive through rush hour traffic first to practice managing emotions...  seems driving occupies my mind enough to mitigate the trading urge...  in summary I guess progressing towards minimum targets with some way yet to go..

Edited September 9, 2020 by HMB

[HMB]

1 hour ago, HMB said:

short NDX (DFB) earlier - at 11429.7, stop at 11485.  minimum size

raising the stop to 11515

[HMB]

30 minutes ago, HMB said:

raising the stop to 11515

closed at 11366 

[dmedin]

This isn't relating to Nasdaq but it shows a nice combination of 'fundamental and technical' https://www.babypips.com/news/daily-london-watchlist-20200909

Also, according to the same website, only 1 - 5% of forex traders make money.  Hurrah!

[HMB]

Chart looks to me like there is some probability that NDX entered a down-trend.  "Fundamental" Narrative supporting that would be easy to construct...  Bearish price action in last 30 minutes before cash close yesterday looked interesting to me.  Also absence of stop hunting above the 1pm EDT high (maybe Wall Street scared of more Softbank unwinding...)

ECB today.  Will try again to wait till NY afternoon and if there's no major break through or other dramatic change of conditions  go short with stop above that level.  Before that will do absolutely nothing. Exit criteria to be determined around time of entry, depending on the situation then.

At around 18.5% below ATH we'll probably get Wall Street increasing efforts to prevent a "bear market"...  but that's for later consideration

[THT]

Remember trading is not 100% certain - we are working on probabilities

People massively misuse Indicators - If you use Indicators properly they can serve a few purposes

1 of which is that they can identify cycle tops and bottoms 

The BIG question is, is this cycle bottom a swing low to a continuing uptrend or a temporary swing low followed by a LOWER swing high which then goes on to form a new swing low?

The answer to that NO-ONE knows - hence why you have to trade smart, to a plan and execute everything to that plan/strategy

Because of all the Ifs/buts and maybes you HAVE to trade according to your outlook

This could be the start of a new bear phase, or it could be simply a correction in the uptrend and continue onwards

My analysis is its mixed - the highest probability is that this is just a correction though - What we need to SEE is price action over the next few days as taking out the swing low is bearish if closed below

The Indicators "IF" they do a full cycle (OS up to OB zones) should see price rises - If the Indicators do that but price is flat then that is bearish

the chart is the DAILY chart

[THT]

Also WD Gann said over 100 years ago - "watch for corrections greater in price and time than any correction in the preceding trend - as it indicates a potential change of trend"

As we can see, the recent correction is greater in price but not time

So we have another mixed message!

Also this analysis is not 100% accurate as I've found over the years that sometimes its spot on, other times way off - so we are back to our personal outlook and the law of probabilistic returns 

Then if we look at the WEEKLY chart the picture becomes even more blurred!

"IF" the Indicators run their full cycle to the OS zone then price HAS to fall or flat line at best

This gives you an idea of what price could do - It's not certain that price will oblige though, this is the problem with using Indicators 

That being said using an Indicator when price plunged in march down into the 50-75% retracement zone became a very high probability trading opportunity on the weekly chart and the Indicators confirmed the result

[HMB]

Very interesting THT.  Just went short, stop at 11425.  In this case, my hypothesis is mainly narrative-driven, supported by my interpretation of recent price action.  

[HMB]

58 minutes ago, HMB said:

Just went short, stop at 11425.

lowered stop to 11240 (70 points below entry) 

[HMB]

12 hours ago, THT said:

Remember trading is not 100% certain - we are working on probabilities

People massively misuse Indicators - If you use Indicators properly they can serve a few purposes

1 of which is that they can identify cycle tops and bottoms 

The BIG question is, is this cycle bottom a swing low to a continuing uptrend or a temporary swing low followed by a LOWER swing high which then goes on to form a new swing low?

The answer to that NO-ONE knows - hence why you have to trade smart, to a plan and execute everything to that plan/strategy

Because of all the Ifs/buts and maybes you HAVE to trade according to your outlook

This could be the start of a new bear phase, or it could be simply a correction in the uptrend and continue onwards

My analysis is its mixed - the highest probability is that this is just a correction though - What we need to SEE is price action over the next few days as taking out the swing low is bearish if closed below

The Indicators "IF" they do a full cycle (OS up to OB zones) should see price rises - If the Indicators do that but price is flat then that is bearish

the chart is the DAILY chart

sorry for being brief earlier, THT.  After opening the trade I was glued to the tape and 1 min. chart.  There's a lot of interesting stuff in both your posts.  And I will come back in more detail after having recovered.

[HMB]

1 hour ago, HMB said:

lowered stop to 11240 (70 points below entry) 

closed at 11184.7.  for me personally a relatively successful trade.  If you ask me why it worked (and if you don't, I post it here anyway, for my own records...):  can't tell you anything objective at this stage.  will have to think about that more.  my current hypothesis is that I was lucky - and given the tight stop: very lucky.  however I can say I avoided one mistake I used to do frequently: I didn't increase exposure as soon as it looked like it goes my way.  typically that would have come with moving the stop even closer - and then of course getting stopped out on the larger size. 

not sure if it was right ex ante not to wait for a better entry level - I think it was, I believe I sensed the market signaling the chance for a better level had faded.  this likely sounds funny, and I'm not sure if it would stand closer scientific examination - however at least I was thinking quite a bit about Denise Shull's work while staring at the screen, constantly contemplating to close the trade earlier...

[HMB]

13 hours ago, THT said:

Remember trading is not 100% certain - we are working on probabilities

and those probabilities are typically subjective, IMHO

[HMB]

22 minutes ago, HMB said:

People massively misuse Indicators - If you use Indicators properly they can serve a few purposes

1 of which is that they can identify cycle tops and bottoms 

The BIG question is, is this cycle bottom a swing low to a continuing uptrend or a temporary swing low followed by a LOWER swing high which then goes on to form a new swing low?

I haven't studied indicators in as much depth as you apparently have.  today I looked at MFI 14 and VWMA10 on a minute chart while my trade was open, and the only thing I noticed it that it made me feel better when they confirmed what I was expecting (not to say hoping for...) - guess that's a good example for the misuse you refer to.

[HMB]

26 minutes ago, HMB said:

The answer to that NO-ONE knows - hence why you have to trade smart, to a plan and execute everything to that plan/strategy

I absolutely agree - however, about how a plan looks precisely, which components, etc.,  I may have at this stage not (yet?) exactly the same idea as most participants in this forum who shared their views on this (for which I am very grateful - I believe one learns a lot from discussions, guess Dalio would call that "thoughtful disagreement").  I need to plan better what to do when a trade doesn't work - which I think in my case should always mean an immediate, extensive break to become aware of my emotional state and then make conscious decisions about if/how to react (again loosely quoting Shull).  Also, at this stage, I need to find more/better ways to avoid behaviors that impede my abilities (if any...).  I can't every day deliberately drive in rush hour traffic for hours just to distract my urge to trade before my planned/scheduled trading time...

More general:  one big issue of mine (among many others) is the inability to execute even the simplest plan - I need a plan to improve that...

[HMB]

13 hours ago, THT said:

Also WD Gann said over 100 years ago - "watch for corrections greater in price and time than any correction in the preceding trend - as it indicates a potential change of trend"

very interesting!  -  the time aspect contradicts somewhat a saying which I believe to have seen confirmed repeatedly:  "stocks go up on the escalator, and down in the elevator" (don't know the source) - think for cryptos it's the opposite...

[HMB]

40 minutes ago, HMB said:

My analysis is its mixed - the highest probability is that this is just a correction though - What we need to SEE is price action over the next few days as taking out the swing low is bearish if closed below

today I haven't seen anything that could reject  the hypothesis that NDX has yet to go lower - and likely turns higher again as soon as CNBC/Bloomberg TV call it a bear market (or maybe a bit before...)... yes watching price action tomorrow will give us a additional data points..

also one could think a bit more about the alternative hypothesis...:  back to highest-since-tech-bubble valuations/exponential rise...?  what could trigger that..?  Fed buying equities?  Trump election win and immediate tax cut and reconciliation with China..?  ...where would NDX then end the year...?

 

[THT]

10 hours ago, HMB said:

very interesting!  -  the time aspect contradicts somewhat a saying which I believe to have seen confirmed repeatedly:  "stocks go up on the escalator, and down in the elevator" (don't know the source) - think for cryptos it's the opposite...

Yeah thats in reference to a gradual bull climb such as 2003-07 and then 2 years to retrace it back to starting level (taking the elevator) - Think is originated in the fund management industry

During a bull climb you'll get varying price corrections along the route, as you can see in the chart, those corrections won't be severe, until it ends - that's what Gann was referring to and to be fair 100 years ago price movements were a bit more clearer and crisper than today, but today's markets still work on the exact same lines as back then, just at a higher energy

Take the 2018 correction - that ended the previous up bull climb, corrected at a higher price % level and time zone that any of the minor corrections in the uptrend, that signalled the next up bull phase, then we had the 2020 correction followed by another bull section, now its correcting - the question is - Is it the start of a new correction or a temp pullback

Trying to predict the next move is futile, you'll win some, lose others and you then through yourself into the prediction game and once you make a call your mind moves into prove it mode, which causes total irrational thinking if the move fails to support that mindset and is detrimental to a trader

 

 

[THT]

On 08/09/2020 at 21:36, HMB said:

...funny how one gets conditioned by the market...  exorbitant valuations in NDX were obvious, barely explainable by low rates and massive Fed printing...  yes more profitable than 1990, but still obviously extremely highly priced...  now that was before Covid...  then the Covid crash, then the Fed prints more...  and all recovers till June 8...  but Dax, RTY, NKY etc. stop then, move sideways and eventually slightly higher, but NDX adds another 30%...  because Apple has suddenly invented the iphone?  and Microsoft released Windows?  Or Tesla built an electric car..?  Oh yes, Amazon - we all buy a second kindle now and order every book twice because of the pandemic..

But no, I didn't get it.  The conditioning had already happened.  NDX must rebound after a 5% drop...  because then it would have only outperformed the rest of the world by 20% in two months.... exactly the amount of  time it took me to believe the craziness... 

The markets aren't doing what you've been taught, learned / conditioned to think - They are doing something and until that point balances out they will defy all logic, analysis and common opinion

I might do a post on this, If you're looking rationally at the markets, it WILL make sense to you, If your mind is not open to seeing things in a new light then you'll not get it or see it clearly

Back in 2010 I went on a quest to work out why no one knew what the hell the markets were doing and most importantly were markets predictable

I said in a public forum way back in 2015 that the stock markets events over the next 20 years will cause people to question its logic - It's going much higher in terms of price over the next 14 years, all that is happening now is the building phase - markets do this in a UP, correct, pause, UP, pause, correct, UP sequence and as most people only look at the last 12 months price data on a chart, they fail to see the journey over 15 years or so and it's by analysing these long term sections that you see the bigger picture

[THT]

11 hours ago, HMB said:

and those probabilities are typically subjective, IMHO

Depends on your trading style/method

you never ever know for certain what return you're going to make on any 1 trade hence the need for exacting rules

All my methods have exact rules, target levels - if the market fails to meet those target levels then its up to me to have a back-up plan to get some profit out rather than none 

[THT]

11 hours ago, HMB said:

I absolutely agree - however, about how a plan looks precisely, which components, etc.,  I may have at this stage not (yet?) exactly the same idea as most participants in this forum who shared their views on this (for which I am very grateful - I believe one learns a lot from discussions, guess Dalio would call that "thoughtful disagreement").  I need to plan better what to do when a trade doesn't work - which I think in my case should always mean an immediate, extensive break to become aware of my emotional state and then make conscious decisions about if/how to react (again loosely quoting Shull).  Also, at this stage, I need to find more/better ways to avoid behaviors that impede my abilities (if any...).  I can't every day deliberately drive in rush hour traffic for hours just to distract my urge to trade before my planned/scheduled trading time...

More general:  one big issue of mine (among many others) is the inability to execute even the simplest plan - I need a plan to improve that...

Plan to write a plan! 

It's not easy, but its also not hard once you have clarity of mind and know what the market is likely to give

for example - a lot of my trade plan is

1. Trade EVERY opportunity - If opportunity does not show do not trade!
2. Risk 2% of my account per trade
3. Enter at X - determined by method
4. Stop will be X pts
5. Target is X pts - determined by method
6. Once up X pts move stop to breakeven + 1pt
7. Then once up 50% of the range from entry to target protect x% of open profits
8. Accept most of the time this will work out perfectly but there will be times when it doesn't and 

the hard part is working out the X parts - because we'd love 1000000000 points from the market, but if it only gives 100 points building a method/strategy for 1000000000 pts ain't going to be much good

 

 

[HMB]

Dear THT,

Many thanks for your clear, comprehensive and detailed answers.  Very thoughtful - I highly appreciate, you gave me a lot to consider.  Will read more on Gann.  Great, concise trading plan template!  Yes, please, I would be most interested in your definition of rationally looking at markets.  Will check your profile frequently to not miss that post.  Our exchange covers some of what I believe are core issues  - would maybe be also useful in the general strategy forum. Below some thoughts on your responses:

Form your posts and what I've read from other traders here and elsewhere, I conclude that many traders take historical relative frequencies as good proxies for probabilities.  Personally, I find it very important to stay aware of that, so I would like to emphasize one of my core "investment beliefs" here:  true probability distributions are unknown.  (I would even say the concept of probability touches the boundaries of human imagination, like "infinity", or "nothing" - but that is probably not the most practically relevant discussion...).

Working based on historical relative frequencies is hence also a prediction - the prediction that nothing has changed fundamentally enough to significantly lower the quality of relative frequencies as probability proxies which are relevant for your current portfolio and the time frame of interest.

That being said, I do certainly believe the growing number of market participants and technological progress (in particular so called AI) likely improved the accuracy of this prediction in recent years - because of the corresponding growing importance of technical strategies, and hence their influence on markets - i.e. the well-known self-fulfilling prophecy narrative also shapes my belief set.

Nevertheless, I'm convinced that if you trade, you can't avoid explicitly or implicitly making predictions.  And all apparently very technically focused traders I conversed with, have actually a very strong understanding of current non-technical narratives - see e.g. @Caseynotes highlighting the Reuters story on Softbank in a response to my response to his dashboard post a few days ago - although maybe here the line is blurred or depends on how you define technical.

I'll stop here, and wait for your post on rationally looking at markets!

 

Best

 

HMB