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Hello guys,
Was wondering when we have a BO going for say 3 bars, then a PB for another 3 bars, and then a new BO for 3 more bars - are we in the channel or the count resets with each consecutive BO and channel only begins after PB of the 2nd BO? Thank you!
The count only resets if one of the BOs is very strong compared with the others. But...
If you have a BO and then another BO the first BO can be the spike and the second BO the channel, or both of them be the spike, the second BO can be the last if it is at the top of a TR (second leg trap) or it can have another leg up... As you see, when we talk about PA in abstract terms, everything is possible depending on the context and the strength of the BOs!
Thank you Ludopuig!
I guess it would be easier to continue our conversation if I attach a sample screenshot. Here we have Orange TR, first red BO, second blue BO and then a huge green BO and finally the last pink BO. There were other BOs along the way that I've omitted.
So obviously the trend began back up in the range with first red BO and it kept going down. At some point we've got a huge green BO and it was after 30+ bars in the trend so more likely it was an exhaustion instead of measuring gap. Instead it had a follow through, so does this huge BO reset the count AND NEW TREND STARTS FROM GREEN BO? Because if it does, then the pink BO isn't a late in the trend BO and we should be looking to short the top part of the channel instead of waiting of conversion to the TR.
Thank you!
Ok, much better with the example: Refer to my picture, please...
Thank you! The question is when does the trend bar count ("...late in the trend, after 20+ bars") begin? At point 1 or 2?
I think the green BO reset everything but don't put too much weight in the 20 bars, sometimes can be 30, 40 or 10, depending on other PA factors taking place (see attached).
Thank you Ludopuig!
I do understand that it doesn't really matter whether it's 20 or 50 bars, it's just important to know where the count resets.
From what I understand so far there are two instances where trend resets:
1) After long TR (20+ bars) prior trend loses it's influence (although next BO is more likely to be in the prior direction)
2) After a big BO that is much bigger than prior BOs. THIS IS VERY IMPORTANT because in a lot of the videos Al keeps saying that "the biggest BO late in a trend is exhaustion" but if it's really big then it changes a lot a becomes a measuring gap so knowing this difference is crucial
3) When TL get broken and then trend doesn't resume with the wider version of it (tight > broad channel)
Please correct me if I'm wrong, thank you!
1) After long TR (20+ bars) prior trend loses it's influence (although next BO is more likely to be in the prior direction)
Yes but once it is a TR the next BO is 50%, the last trend's influence is finished. If the TR spends more time below the EMA I lean to think it is more likely it will BO lower but, still, probabilities are very close to 50/50.
2) After a big BO that is much bigger than prior BOs. THIS IS VERY IMPORTANT because in a lot of the videos Al keeps saying that "the biggest BO late in a trend is exhaustion" but if it's really big then it changes a lot a becomes a measuring gap so knowing this difference is crucial
Yes, a strong BO resets everything, and after 20 bars the probability of an Exhaustion Gap goes higher but still, as always, the BO strength is the clue. Be aware that if the BO's strength is too much it can become a climax and the still become an Exhaustion Gap.
@richardhkbtc-com I haven't gone thru the forex course. In the emini, a 20 bar trend is well overdone, but forex charts have many more bars and broad channels can go on for many days, while in the emini is rare. Could you tell us if Al maintains this number of 20 bars or does he makes any puntualization about it in the forex course? I am wondering if it could be that the 20 bars should be counted on the higher time frame where the channel is clearly present...
3) When TL get broken and then trend doesn't resume with the wider version of it (tight > broad channel)
I guess saying if "trend doesn't resume with the wider version of it" means it is in a TR so this is the same than point 1 above.
Dear Ludopuig,
I hated TR, many times as you said when trading the BO, it fail and make you very frustrated. In your example,
- in the 1st FBO, I learned not to enter until the bar is finished.
- however on the 3rd FBO, I would had enter due to consecutive 2 bear bars closing near low and would had sell on the opening of the third bar. (If you wait it may miss a strong bear BO if this BO was successful. Then you may be scar to enter.) Should I put in a wide stop over the 2nd FBO (as Al's sometimes recommended) and enter on the third FBO?
I would like to ask how to manage this BO trade. What is your suggestion on trading the TR?
Danny, you can't sell the BO at the bottom of a TR unless you get a clear clear BO. Please, refer to the attached, where BOs labeled "a" and "b" (in red) are small and the FT is bad, this is TR PA (they are forming an expanding triangle bottom, ET, and the bull bar at "b" is a strong reversal after a break below a parabolic wedge).
With a clear BO I mean it is something like "c": huge bar well below everything and with good FT. Anything less than that will not make bulls give-up on their premise (TR, ET, FBO below PW).
So you are proposing to sell at 3 (in red) and put your stop at 1. Risk is big and probility at the bottom of a TR is low, therefore you get your answer: you can't do it.
The fact that you are expecting a BO and trend resumption is not enough to sell at the bottom of a TR, because it can easily go up again before going down until the bulls give-up (if they give-up!). So if you didn't sell at the high of the TR (point 1, in red), which had no stop entry good signal, or at point d, which is better, you need to wait for the BO PB at 2 (in red) or a strong BO like "c", which didn't happen here.
Bar 2 is a great signal for trend resumption: it is a DT PB at EMA, a BO PB of the orange TR and it has a great SB (so lower risk with a stop just above). Because of that, it resulted with all the bulls headed quickly to the doors.
This is the trade you should be looking for and skip all the others!
@ludopuig, Thank you very much!
So, if I understand you correctly BO B is equal to the BO A in size hence we are in the bull channel now, right and BO B doesn't reset the count?
I can't just look at BO B (say at 2nd bull candle of it) and trade it as BTC because it means I'm buying in the middle/top part of the channel, right?
Thank you!
So, if I understand you correctly BO B is equal to the BO A in size hence we are in the bull channel now, right and BO B doesn't reset the count?
One precision here from my side: for a BO to reset the count over it has to be strong, not necessarirly stronger than others. Of course, the stronger it is compared with the others the more likely the count will be reset over. So here you have two strong BOs, the second even stronger but also climatic, so it could reset the count or be the start of a reversal, you don't know yet (the following PA will tell you).
So you can't think "we are in a bull channel" because the move 11-16 (refer to the attached) can be climatic and be followed by a TR or even a reversal to test 8L (start of channel 8-16) or 11 (bottom of buy climax). What can tell you? The BO test 4H around EMA will: does the gap stays open? Can the bulls create a H2 above the EMA? Good for the bulls and probably one more push up, at least. Rather, can the bears create consecutive trend bars closing on the low? then TR more likely and MKT will search for the bottom of it at supports (4H, 8L, 11L, EMA), so as you see PA analysis is bar-by-bar and therefore you can't think in advance of the price action and assume, in this case, that there will be a channel up.
I can't just look at BO B (say at 2nd bull candle of it) and trade it as BTC because it means I'm buying in the middle/top part of the channel, right?
Then, regarding the channel, you drew it but it can be there or not… you simply won't know until the MKT PBs from 16 and see what happens at the trend line. Waiting for this to happen you will lose all the trading opportunities along the way, therefore you can't base any of your decisions on it yet.
Not sure which bar you are referring to for buying, but if you agree with me, you skip the channel an can BTC 1, 2, 3, maybe 11 and 12 to 15. And the trade you should be looking to take yes or yes is 8H H1 BO test after a wonderful BO of a TR (exit below 16).
Thank you!
You are welcome and hope it helps!
@ludopuig Thank you very much for your replies, I do appreciate them a lot!
I guess my problem is that I'm trying to predict things that haven't happened yet, f.e. @16 we may or may not have a channel... yet.... correct? And until it's not a channel I should trade as a BTC trend, correct?
When 16 becomes a top of the channel? When price PB to TL at 8 low and reverses from it? Or when it goes back from 8 to 16 and reverses to the downside and only them we can call the whole thing as a channel and trade like a channel?
Thank you!
I guess my problem is that I'm trying to predict things that haven't happened yet, f.e. @16 we may or may not have a channel... yet.... correct?
For a channel line to be confirmed you need 3 points, two to draw it (1 and 8) and another touch to confirm it. In the emini, when this third touch happens most of the time the trend is over, so I use channel lines very sparingly. In forex and CL is different, with protracted trends so you can have your line there to see what happens when the market reach it. Yet, swing highs and EMA supports are there from the beginning of the move so you can and should base your trading on them.
And until it's not a channel I should trade as a BTC trend, correct?
Don't focus on the channel, focus on each new bar coming. I don't know if you have tried the webinar, there you learn the analysis Al does "in every bar" and you will see he is taking trades from the outset, not waiting for relatively big patterns, like channels, to develop.
When 16 becomes a top of the channel? When price PB to TL at 8 low and reverses from it? Or when it goes back from 8 to 16 and reverses to the downside and only them we can call the whole thing as a channel and trade like a channel?
If you draw the 1-8 trend line and drag it up at 3, and then you see 16 is reacting and turning down at that point, this is good for the channel premise but you still need the MKT to confirm the 1-8 trendline when it PBs. Most of the time, it doesn't because something else is taking place. Here 16 is a bear bar so 15 BTC bulls will get dissapointed and, if they exit, they will cause the PB down... but if they don't the MKT can still go up!
If it PBs, you don't know yet if it is going to be another H1 (not likely after a buy climax), a H2 or Wedge at EMA, or a reversal down to lower supports forming a TR or a bear reversal. This is what the bar-by-bar analysis will tell you.
As I said before, try the webinar (there is a 2 day trial), I think it will be an eye opener to the way PA analysis has to be done.
