Let’s call things for what they are – a Scarabaeus is a dung bug – ins Achilles.
It’s been a great month, so why not post some more rather educational stuff here?
Lesson numero uno
Why shorting today could had turned out to be a disaster.
I posted this image over the weekend:
then I played around with the quarter lines, changed the displacement to 15% and drew some conclusions.
see, one of the big lessons of trading is that the large / violent moves come from price losing the overbought / oversold status, for it may not stop until the other end of the stochastics
to appreciate what is at risk here, take a look at what can happen when the last week”s range gets exceeded by 50% (navy line) and simultaneously the overbought/oversold status gets lost:
what sample stochastics? On the hourly I swear by the Crack Ho, which is 60 sample simple D with 3 delay, and has been embedded on the upside for days
but on the weekly I use 18-sample
I don’t set indicators on closing prices, only on high low halves
to me 14-sample is amateur hour, and so is for instance an RSI2 over closing prices (do not tell Romulus)
How to time those ill fated shorts?
- You would ideally like to see the Crack Ho lose its embedding first
- The order of things as follows: measuring leg – divergent leg – soft or hard reset and a beat would follow in case of a soft reset [M-D-R (+B)]
- The beat itself would be made up of the same sequence
- Beats can be repeated until a hard reset comes along
The market has to make a call for a reset after lack of selling / buying between two highs / lows.
The plot is an “h” for upright and “u” (no upside down h in the font) and a pink shade to remind you of the “got pink?” Trivia(l) question.
Nick Rhodes, the indicator plots colored squares out of the scoring system classified RSI2 readings.
Pink is music with chairs, and the only thing that matters is when it ends.
The exclamation mark is supposed to bring attention to a possible counter trend motion being in progress after 2 hours of spinning (when the pink music stops).
It is always helpful to be conscious of where the usual suspects lay, aka the beat ticker. Since this is a secondary beat sequence following a soft reset, the beat should come to a stop somewhere before the re -hedge level, and likely closer than 36 more pips: scale in with your shorts.
As for target, you know that the hard reset can be found starting at the closer end of E67 & print a Zero (thanks to my previous blog entry). So all you need to do is put Code 7 for stop loss to have the target value be adjusted automatically by my Trail Stop Only Modified LT EA.
See how easy this whole thing is?!
I know, this one was more like 10 lessons in one breath.
For those that put me on ignore – good luck trying to obtain knowledge on market mechanics, nobody’s teaching it and nobody’s researching it consciously, but me.
Trading is not about drawing random lines on a chart or calling a 50% retracement a Fibonacci wrongly, not even about paying a self proclaimed guru on YouTube.
Trading is about knowing with great accuracy, what is happening, what is going to happen next and aligning your holdings / trades as best as you can.