Graham shows us that the trend is our friend. - TradingApples.com : Trading Courses, Coaches, and Mentors

Graham · February 26th, 2010, 10:46 AM

Beautiful trade in JPM. The trend is your friend. If anyone has any questions let me know.

Foxtrot · February 26th, 2010, 06:48 PM

That's a nice simple strategy.

Graham · February 26th, 2010, 07:00 PM

Quote:

Originally Posted by Foxtrot

That's a nice simple strategy.

Simplicity is the key to making good trades. Glad you understand the concept.

Shootanappleoffmyhead · February 26th, 2010, 07:21 PM

Hi Graham, wht I like best about this play is the volume on the beginning of the upmove. I don't think green candles alone convey a commitment of bullish activity.

Nice trade though, how much did you walk away with?

Graham · February 27th, 2010, 10:36 AM

I entered on the first pullback at 41 and added on the second pull back so I got about a point on this trade.

As far as the green candles go, I see no other conclusion you can come to besides committed direction to the upside. No matter if they are the educated ones or uneducated ones who are paying the offer to produce the wider range candles. I would say however the fact that it held the top 30% of that move would be the confirmation that it was a confirmed up move and therefore a good entry for another leg up with defined risk.

I have been working with this concept of expansion and contraction. One comes after the other. So contraction is a tug-a-war and as soon as that is settled by whichever side there is then expansion to whichever direction. That expansion to me shows one side is more committed then the other otherwise it would still be in a contraction stage.

Overall, I have come to see that:

Contraction= Hard money
Expansion= Easy money

It is making trading a much more visually recognizable process and therefore more simple also.

.

Foxtrot · February 27th, 2010, 12:37 PM

Quote:

Originally Posted by Graham

I entered on the first pullback at 41 and added on the second pull back so I got about a point on this trade.

As far as the green candles go, I see no other conclusion you can come to besides committed direction to the upside. No matter if they are the educated ones or uneducated ones who are paying the offer to produce the wider range candles. I would say however the fact that it held the top 30% of that move would be the confirmation that it was a confirmed up move and therefore a good entry for another leg up with defined risk.

I have been working with this concept of expansion and contraction. One comes after the other. So contraction is a tug-a-war and as soon as that is settled by whichever side there is then expansion to whichever direction. That expansion to me shows one side is more committed then the other otherwise it would still be in a contraction stage.

Overall, I have come to see that:

Contraction= Hard money
Expansion= Easy money

It is making trading a much more visually recognizable process and therefore more simple also.

.

With this strategy if the trade does go against you and your stop loss is hit could you have another entry price to get you in the opposite direction right after your stop loss.
So in this case if the trade went a little past the low of the candle and volume started to pick up you could say the bears are taking over and flip your position to go short.

Graham · February 27th, 2010, 12:47 PM

Quote:

Originally Posted by Foxtrot

With this strategy if the trade does go against you and your stop loss is hit could you have another entry price to get you in the opposite direction right after your stop loss.
So in this case if the trade went a little past the low of the candle and volume started to pick up you could say the bears are taking over and flip your position to go short.

You could do that Foxtrot, but to be honest I would not look to flip. I would have to wait for committed direction to the short side first. The fact that the low was taken out was to me just a negated long trade and would have to wait for more information. I would just call it a bullish set up that did not work and I would just have to stay away and look for a better short in a different stock.

Shootanappleoffmyhead · February 27th, 2010, 05:59 PM

Quote:

As far as the green candles go, I see no other conclusion you can come to besides committed direction to the upside. No matter if they are the educated ones or uneducated ones who are paying the offer to produce the wider range candles. I would say however the fact that it held the top 30% of that move would be the confirmation that it was a confirmed up move and therefore a good entry for another leg up with defined risk.

Green candles alone don't mean anything. The movement of price is based on an imbalance between supply and demand so if volume is very low on an up move much like this one we cant assume that the bulls are committed to anything because there aren't enough of them to offer a good enough picture of that. This is where volume comes in and let's us know that there was a significant increase in bullish participants for one reason or another. As you'll notice, the pullback where you saw lower highs and smaller candle spread after the initial run up was on lower volume as well, and then when the bullish move continued after that we saw high volume again for the most part. I often play against candles that look identical to this without the volume to back it up, with much success. I only say this because I'd hate to see just look at green candles and assume that equals a bullish commitment. I think you would get slaughtered soon enough as the weak bulls ran out of steam and the bears played the failed up move with no follow through.

chewwy · March 3rd, 2010, 04:44 PM

Quote:

Originally Posted by Shootanappleoffmyhead

Green candles alone don't mean anything. The movement of price is based on an imbalance between supply and demand so if volume is very low on an up move much like this one we cant assume that the bulls are committed to anything because there aren't enough of them to offer a good enough picture of that. This is where volume comes in and let's us know that there was a significant increase in bullish participants for one reason or another. As you'll notice, the pullback where you saw lower highs and smaller candle spread after the initial run up was on lower volume as well, and then when the bullish move continued after that we saw high volume again for the most part. I often play against candles that look identical to this without the volume to back it up, with much success. I only say this because I'd hate to see just look at green candles and assume that equals a bullish commitment. I think you would get slaughtered soon enough as the weak bulls ran out of steam and the bears played the failed up move with no follow through.

hey hey,

so at the pullback after the intial up move which was accompanied by small candle spread and low volume, and then relatively larger volume.. wouldnt that mean the bulls are offseting againsting the bears ???
if so in this scenario do you just go in with the anticipation that bulls will take over or do u wait for the break of the high of the previous candle as shown in the original example????

thx heaps,

Shootanappleoffmyhead · March 4th, 2010, 04:20 AM

Quote:

Originally Posted by chewwy

hey hey,

so at the pullback after the intial up move which was accompanied by small candle spread and low volume, and then relatively larger volume.. wouldnt that mean the bulls are offseting againsting the bears ???
if so in this scenario do you just go in with the anticipation that bulls will take over or do u wait for the break of the high of the previous candle as shown in the original example????

thx heaps,

Hi Chewwy,

the low volume/small spread red candles after the initial larger volume/large spread green candles simply means that the bears are not showing up to the party when it was their chance to do so. So if this were to happen yes you do want to be looking for further upside with a confirmation above the high much like graham mentioned. Alternatively you could get into the position with your stop below the low of the consolidation group, but that is more risky.

Shoot