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Many a trading guru has written and talked about reading a price chart bar by bar. They talk about buying and selling tails/wicks (hammer, shooting star, pin bar), dojis, shaved bars, the importance of the close of the bar and what not. There is a whole industry making good money with this kind of pseudo science.
It's interesting to compare a price chart where the bars have a slightly different time stamp (by using a small offset).
Below is a 5m chart of the ES from today (RTH) with a 1m offset.
The first chart at the top starts at 09:30 ET. Below that the second chart which starts at 09:31. The third starts at 09:32, the fourth at 09:33 and the last chart at the bottom starts at 09:34.
It's the exact same price action plotted but notice the differences between the individual bars at the turning points.
"The problem with technical analysis is that practitioners and advocates
fail to follow standard scientific procedure in presenting and evaluating its
techniques. Scientific procedure in this case would include an exact definition
of an event, a test of the accuracy and uncertainty of the predictions
based on the event, a method for entering and exiting trades based on the
event, and a method for communicating and repeating the experiment so
that it can be verified and improved on."
Using a range is a way to structure the market / price development.
A range is made of an upper boundary which acts as resistance and a lower boundary which acts as support and can be used to structure a market.
Structure is just a way to define the playing field. Without structure you won't have a frame of reference. Without structure price is just floating mid-air.
There are other ways to structure the market like pivots, moving averages, trend lines & -channels, Market Profile, Volume Profile, Fibonacci, Harmonic patterns, Swings/Waves or Cycles. Accumulation and distribution are also ways to structure a market. Indicators too are a way to structure the market.
Price development is random. We have no way in predicting future price movement. It's unstructured. We need some kind of structure in order to be able to make profitable trades consistently. Now it may be impossible to add structure to an unstructured environment but the value in using some kind of structure lies therein that it helps us executing the right behavior. Structure makes it possible for us to behave in a consistent way, and as soon as our behavior is consistent our trading will be consistent.
It's the behavior of our chosen structure that forces us to do the same thing all of the time. Trading becomes routinely and automatic. In that way it also helps us dealing with our emotions (the monkey brain).
Once in a while, before the session begins, it would be cool if you'd share your individual opinion, observation, or understanding of the structure. You can also update it during the session to help us devise a strategic plan based on those valuable insights. Personally, I like to use VWAP (Volume Weighted Average Price) to develop a plan based on its fluctuating lines.
Ah yes, VWAP, how could I forget this one. A very useful combination of price and volume, the two most important and pure objects we have to observe and determine market behavior.
As for the challenge, it's indeed a challenge, the forecasting business. I am not in it. I know it's widely accepted to make a plan and act accordingly to the plan, as it is widely accepted to stick to your chosen method. Maybe I will write more about my thoughts on that matter later.
I trade the moment and change my mind in seconds. I think it's dangerous to make a plan. It's going to make you (your ego) want to defend it. Next step is you're going to prove you're right which often times ends in disaster. I just trade what I see based on some kind of structure I chose in the moment. I like to be flexible at al times, nothing to prove, always going with the flow.
"We have to be careful about what we project out into the future, because nothing else has the potential to create more unhappiness and emotional misery than an unfulfilled expectation."
'Managing Expectations', page 113 of 'Trading in the Zone' by Mark Douglas.
