Trading Proverb #8. Be at home on the range.
I assume you have heard many times that the trend is your friend. There is another expression tied to it declaring you have hit a home run. If you think about it just a little, it also means buy and hold and trade one direction. Of course it also depends on what chart you are looking at.
Okay, there are definitions, and there are guru courses dedicated to patterns of markets. This is my simple view of it all. A trend trade is an extended range trade. If there occurs a moment in trading where price is continuing in one direction and its reversals do not constitute a signal to trade in the opposite direction, then I consider it a trend. However, if the signal for the reverse does come, and profit is made, I consider it a range. I trade ranges. I also trade extended ranges, or trends.
When you trade on smaller time frames you can take advantage of reversals on higher time frames. Sometimes the reversal of a higher time frame can look like a trend on a lower time frame. In essence then, it is all perception. Even a range trade on a higher time frame can appear as a trend trade on a lower time frame. Confused? Me too. So, I just consider everything a range trade. No matter what time frame you are trading, price still moves away from some value before it returns to that value. Everything then, is a range. Ha, but what you must understand, and believe, is that "value" is moving. It is not a set data point on your graph. It is a dynamic value that adjusts as the sample size increases. Side note: That is why people who scoff at repainting indicators are funny to me. Everything repaints as new data is created, LOL, even a trend line. DUH. Maybe the expression should be repainting is your friend?? After all, isn't a trend repainting? Okay, back to the topic. Ever study Calculus? Isn't it awesome to define the formula for a line that curves? Rather than construct all those calculations to define the moving line, I just eyeball it. After all, the formula cannot be produced because the samples that make up the line are random. You can bring control to the chaos, but it is only probability, not reality. Consider your chart as being a moving range and you will begin to understand the concept of my trading style. If you are from the classically trained Forex school, then when you use Fibonacci you are defining the predicted range based on the previous range. Did you realize that was what you were doing? LOL. Yes, Fibonacci trading is also range trading, but it uses "fixed" values rather than "moving" values. Personally, I have tried to trade Fibonacci but I never knew what line price will actually stop on until after price had stopped and moved the other way. For me, it is not predictable in live trading. I can only guess, and so I am constantly in a state of human decision-making and not mathematically defined decision-making. Okay, sure, math defines the Fibonacci lines, but can you tell me, right now, which line price is going to bounce off of on Monday morning? No? Neither can I. So it is useless to me. Nice to look at after-the-fact, but useless in the moment. That is just my opinion. And then you also have the bounce between 50 and 23 and back to 50 or whatever it is. How can I possibly know whether price will bounce or break a Fibonacci line? Exactly. Nothing against those of you who have figured out how to trade it, or those of you who think you know how to trade it and are actually just analyzing historical data and not using it forward. Well, enough about that.
Hmm, perhaps I have just stumbled on another key to success? If you are a person who is more prone to be resistant to change, then you will probably not be a good trader. You have to embrace change as your friend and go with the flow.
A range on a price chart and a range on your indicator should be as equal as possible. If price is going up, your indicator should be showing price going up. And vice versa. That is a little bit of an open statement. To be more specific, if price is going up on your chart, and that movement warrants opening a trade, then your indicator should show the movement as being substantial enough to open the trade. Sure, it is Trading Your Indicator 101, but perhaps it makes sense reading the words instead of reading the lines of the indicator. If you have indicators that show divergence, wow, get them off your chart...now. The market makers spend enough time head faking you. You don't need your indicators head faking you too. It is self destructive.
On the other hand though, lol, if you have an indicator that divergences during consolidation periods...keep it. I have one such indicator. Everything can show buy, except it, and it should because it is set to destroy small moves in the market, but if it disagrees...guess what? The market goes flat until it lines back up with my other primary indicators. In this case though, I am not looking at divergence as method of trading, but rather as a method of NOT trading. Too cool.
The majority of people learn visually. This trait can be easily shown by asking you a few questions. What was the last movie you saw? What happened in the movie? What were the lines the actors said? You can probably tell me a lot more about what you saw than what you heard.
Don't get wrapped up in strict definitions and even the suggestions that you need a chart for every market condition. Think of it like religion. Most people believe in God. Along the way, in the history of man, someone wanted to put their own little twist on God, most likely for monetary reasons, though some might have had personal reasons. Now, thousands of years later, we have hundreds of different styles of religion, yet most of them pertain to the same God. Everyone has their own agenda to make their own twist. I suppose you could say me too. My twist is that despite the market being random, there is control, though it is not precise. It is sloppy. But, it is precise enough to predict with decent success. Perhaps the HFT guys figured out how to make it precise, but my logic dictates it is still some kind of edge and not a prediction. In only my opinion, I would think you first need to be your own broker so you can avoid spreads, and then you merely pump large sums in at once to trigger enough movement to then cash out with profit. Hey, it is just my opinion, and if it would work that way, I would do it too.
Personal twists are the same here in Forex. We all trade the same data, but we each have our own little twist on how we do it. So definitions of things become slang and lost through marketing techniques or laziness or ignorance. We are all guilty. I don't want this to be like Fox News where conservatives offer an opinion and then the liberal dissects their sentence word by word and makes accusations. It is the spirit of the communication that is more important. So, if anyone has to provide the Webster version of any errors I make, fine, but please don't provide me John Forex Trader's version, okay? I have purposely avoided guru traders because the vast majority all promote the same thing, it is contrary to my design, and therefore I am biased against it. Money talks.
All that said, if I can identify when price stops moving away from the point of equilibrium, when price returns to equilibrium, and when price moves away from it again, then do I really care whether a trend is my friend? On my chart, that would mean price reversed to equilibrium, and then bounced off of it rather than breaking through it. If it bounces, it trended. If it breaks through, it ranged. Terminology...big deal. It seems to me that if you learn how to trade the range, you will also be trading the trend. Hmm. You might have to just loosen up a little.
I prefer to be at home on the range. If my friend, the trend, stops by...cool.
I assume you have heard many times that the trend is your friend. There is another expression tied to it declaring you have hit a home run. If you think about it just a little, it also means buy and hold and trade one direction. Of course it also depends on what chart you are looking at.
Okay, there are definitions, and there are guru courses dedicated to patterns of markets. This is my simple view of it all. A trend trade is an extended range trade. If there occurs a moment in trading where price is continuing in one direction and its reversals do not constitute a signal to trade in the opposite direction, then I consider it a trend. However, if the signal for the reverse does come, and profit is made, I consider it a range. I trade ranges. I also trade extended ranges, or trends.
When you trade on smaller time frames you can take advantage of reversals on higher time frames. Sometimes the reversal of a higher time frame can look like a trend on a lower time frame. In essence then, it is all perception. Even a range trade on a higher time frame can appear as a trend trade on a lower time frame. Confused? Me too. So, I just consider everything a range trade. No matter what time frame you are trading, price still moves away from some value before it returns to that value. Everything then, is a range. Ha, but what you must understand, and believe, is that "value" is moving. It is not a set data point on your graph. It is a dynamic value that adjusts as the sample size increases. Side note: That is why people who scoff at repainting indicators are funny to me. Everything repaints as new data is created, LOL, even a trend line. DUH. Maybe the expression should be repainting is your friend?? After all, isn't a trend repainting? Okay, back to the topic. Ever study Calculus? Isn't it awesome to define the formula for a line that curves? Rather than construct all those calculations to define the moving line, I just eyeball it. After all, the formula cannot be produced because the samples that make up the line are random. You can bring control to the chaos, but it is only probability, not reality. Consider your chart as being a moving range and you will begin to understand the concept of my trading style. If you are from the classically trained Forex school, then when you use Fibonacci you are defining the predicted range based on the previous range. Did you realize that was what you were doing? LOL. Yes, Fibonacci trading is also range trading, but it uses "fixed" values rather than "moving" values. Personally, I have tried to trade Fibonacci but I never knew what line price will actually stop on until after price had stopped and moved the other way. For me, it is not predictable in live trading. I can only guess, and so I am constantly in a state of human decision-making and not mathematically defined decision-making. Okay, sure, math defines the Fibonacci lines, but can you tell me, right now, which line price is going to bounce off of on Monday morning? No? Neither can I. So it is useless to me. Nice to look at after-the-fact, but useless in the moment. That is just my opinion. And then you also have the bounce between 50 and 23 and back to 50 or whatever it is. How can I possibly know whether price will bounce or break a Fibonacci line? Exactly. Nothing against those of you who have figured out how to trade it, or those of you who think you know how to trade it and are actually just analyzing historical data and not using it forward. Well, enough about that.
Hmm, perhaps I have just stumbled on another key to success? If you are a person who is more prone to be resistant to change, then you will probably not be a good trader. You have to embrace change as your friend and go with the flow.
A range on a price chart and a range on your indicator should be as equal as possible. If price is going up, your indicator should be showing price going up. And vice versa. That is a little bit of an open statement. To be more specific, if price is going up on your chart, and that movement warrants opening a trade, then your indicator should show the movement as being substantial enough to open the trade. Sure, it is Trading Your Indicator 101, but perhaps it makes sense reading the words instead of reading the lines of the indicator. If you have indicators that show divergence, wow, get them off your chart...now. The market makers spend enough time head faking you. You don't need your indicators head faking you too. It is self destructive.
On the other hand though, lol, if you have an indicator that divergences during consolidation periods...keep it. I have one such indicator. Everything can show buy, except it, and it should because it is set to destroy small moves in the market, but if it disagrees...guess what? The market goes flat until it lines back up with my other primary indicators. In this case though, I am not looking at divergence as method of trading, but rather as a method of NOT trading. Too cool.
The majority of people learn visually. This trait can be easily shown by asking you a few questions. What was the last movie you saw? What happened in the movie? What were the lines the actors said? You can probably tell me a lot more about what you saw than what you heard.
Don't get wrapped up in strict definitions and even the suggestions that you need a chart for every market condition. Think of it like religion. Most people believe in God. Along the way, in the history of man, someone wanted to put their own little twist on God, most likely for monetary reasons, though some might have had personal reasons. Now, thousands of years later, we have hundreds of different styles of religion, yet most of them pertain to the same God. Everyone has their own agenda to make their own twist. I suppose you could say me too. My twist is that despite the market being random, there is control, though it is not precise. It is sloppy. But, it is precise enough to predict with decent success. Perhaps the HFT guys figured out how to make it precise, but my logic dictates it is still some kind of edge and not a prediction. In only my opinion, I would think you first need to be your own broker so you can avoid spreads, and then you merely pump large sums in at once to trigger enough movement to then cash out with profit. Hey, it is just my opinion, and if it would work that way, I would do it too.
Personal twists are the same here in Forex. We all trade the same data, but we each have our own little twist on how we do it. So definitions of things become slang and lost through marketing techniques or laziness or ignorance. We are all guilty. I don't want this to be like Fox News where conservatives offer an opinion and then the liberal dissects their sentence word by word and makes accusations. It is the spirit of the communication that is more important. So, if anyone has to provide the Webster version of any errors I make, fine, but please don't provide me John Forex Trader's version, okay? I have purposely avoided guru traders because the vast majority all promote the same thing, it is contrary to my design, and therefore I am biased against it. Money talks.
All that said, if I can identify when price stops moving away from the point of equilibrium, when price returns to equilibrium, and when price moves away from it again, then do I really care whether a trend is my friend? On my chart, that would mean price reversed to equilibrium, and then bounced off of it rather than breaking through it. If it bounces, it trended. If it breaks through, it ranged. Terminology...big deal. It seems to me that if you learn how to trade the range, you will also be trading the trend. Hmm. You might have to just loosen up a little.
I prefer to be at home on the range. If my friend, the trend, stops by...cool.
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