momentum trading education since 1997  
  HOME  ||  
   
 
MTrader Class - January 11, 2010


Support and Resistance  

 

**********************************************
MTrader Class (C) copyright MTrader  2010

**********************************************
by Gimmie

 [12:51] Gimmie : for now.. lets go over.. support and resistance...
[12:51] cp ..: darn
[12:51] Gimmie : let me tell you... why this is important
[12:52] Gimmie : sorry.. I didnt really know any cheerleaders though.. other than my sister
[12:52] jhils ..: cheerleaders are important
[12:52] cp ..: indeed
[12:52] jhils ..: I lill be quiet
[12:53] Gimmie : instead... I will tell you the story about the marble track
[12:54] Gimmie : on thursdays.. for 2 hours.. I work at this little kindergarden with my friend Tracy.. then we go walking together
[12:55] Gimmie : I teach them songs and stuff in english.. and we play games and I ramble on in english.. and slowly they are starting to understand me
[12:55] Gimmie : its one of my favorite times of the week..
[12:57] Gimmie : and we have this marble track thing we build
[12:58] Gimmie : you put the marble in the top.. and it loops around a couple times.. then goes down to the track.. with these hills
[12:58] Gimmie : its kind of like.. steffis wooden car track I used to tell you about.. but its faster
[12:59] Gimmie : once you drop the marble in the top.. thats the biggest push of momentum its going to get... so it usually makes it around the first couple loops no problem
[12:59] Gimmie : then down at the track.. is starts slowing down some...
[13:00] Gimmie : as it starts to lose momentum.. it reaches a hill.. and slows
[13:01] Gimmie : but... if the marble can manage to make it to the top of the hill.. pushing over the hill is usually enough to give it another little whoose of momentum.. at least enough to get it to the next hill
[13:01] Gimmie : but by the third or fourth hill.. it usually falls flat..
[13:02] Gimmie : its always a hill that stops it.. it doesnt usually just die at the bottom of the hill.. it usually dies approaching a hill
[13:02] Gimmie : you picturing this`
[13:02] Gimmie : ?
[13:03] Gimmie : because... this is EXACTLY the way stocks react to support / resistance levels
[13:03] cp ..: yep
[13:03] jerry lichen: yes
[13:04] Gimmie : the intial push of momentum... usually comes in at open
[13:05] Gimmie : sometimes it comes from news. or helped by news...
[13:05] Gimmie : like EXXI today
[13:05] Gimmie : sometimes its just the normal push from the market direction
[13:06] Gimmie : the stronger the initial push... the more easily it is going to fly over the first couple hills...
[13:06] Gimmie : the slower the push.. the more likely it is.. that even the very first hill might stall it
[13:07] jerry lichen: very good
[13:08] Gimmie : but.. pushing over a hill..(if its truly pushing over) very often.. gives it ast least enough momentum.. to get it to the next hill
[13:09] Gimmie : I am tellin you this.. for a reason
[13:10] Gimmie : the reason is... Catman has started going over microscalps.. live trading... in the afternoons
[13:11] Gimmie : and I noticed a bit of confusion.. because.. even though we are looking at "basically" the same charts.. and using the same system...
[13:12] Gimmie : his entries and exits wont be exactly like what I have taught
[13:12] Gimmie : I am very focused on %D being in top territory / bottom territory... which doesnt concern him nearly as much
[13:13] Gimmie : so let me tell you why I started that.. top territory.. bottom territory thing
[13:14] Gimmie : when we started using this system.. I was more focused on the general direction..
[13:15] Gimmie : then I noticed people making very random entries.. because mid-stream.. judging that direction seemed to become very subjective..
[13:17] Gimmie : what I mean is.. in their mind they would decide.. oh.. things look pointed down.. so they would jump in short at totally random points.. and pile up stops.. because they werent looking for trends with follow-through.. and it was often against the general trend
[13:18] Gimmie : they would form an opinion..things are down I want to short.. then anytime anything pointed down they jumped
[13:18] Gimmie : their criteria was.. too unstructured
[13:19] Gimmie : so I decided to make that 20/80 rule.. so that they had to pick marbles that were being dropped from the top.. so it would be more likely that it would at least make it through the first loop.. hopefully more... a bit of a larger trend
[13:20] Gimmie : also.. by "looking ahead".. to a 20/80 set up.. it gives you a bit of time to prepare.. and muster up courage if need be... figure out whats going on.. follow a bit more slowly
[13:21] Gimmie : but that whole 20/80 thing.. was something I added
[13:21] Gimmie : so it might confuse you to watch catman and think.. hey.. why are you entering when 1 min is in top territory?
[13:22] Gimmie : he is looking for the direction.. not the top / bottom..
[13:22] Gimmie : what he is in essence doing.. is waiting until they drop the marble.. and it may have gotten over a couple loops already even
[13:23] Gimmie : but he is only riding it.. along the way down... from one little hill to the next.. not the entire track
[13:23] Gimmie : and remember how I told you.. about when the marble is pausing.. at a hill... if it can get over that hill.. it will give it enough momentum.. another little extra whoosh.. to get to the next hill?
[13:24] Gimmie : he will often wait for it to get over the hill.. wait for the whoosh.. and jump on as its heading down the hill
[13:24] Gimmie : now.. couple things...
[13:24] Gimmie : A. what are the hills ?
[13:25] jerry lichen: support and resistence
[13:25] cp ..: resistence levels?
[13:25] Gimmie : there are a lot of different hills
[13:25] Gimmie : pivots.. for one
[13:25] Gimmie : central pivot.. S1.. S2.. R1.. R2...
[13:25] Gimmie : those are pretty big hills
[13:26] Gimmie : have you ever watched phils breakout plays?
[13:26] Raynice Shrestha: yes ma'am
[13:26] Gimmie : he is simply jumpin on.. when one of those pivot hills breaks.. riding it to the next hill
[13:26] Gimmie : http://www.mtrader.com/StuffOnPivots.htm
[13:27] Gimmie : When prices move away from the CPP there are zones of support and resistance that define the expected value area of the market. Because these zones are known, penetration and market moves beyond these support and resistance levels bring new players into the market who give further momentum to the buying or selling pressure.
[13:27] Gimmie : in other words.. riding one hill to the next
[13:27] Gimmie : more hills are...
[13:27] Gimmie : previous days close.. high.. and low...
[13:28] Gimmie : like shorting a break to a new low?.. thats simply jumping on when a hill breaks.. because it usually has enough momentum then to get to the next hill
[13:28] Gimmie : 50 ma.. and 200 ma... are also hills...
[13:29] Gimmie : you know the funnel break?
[13:29] Gimmie : my entry.. is usually triggered by a funnel break in the fastest chart I am looking at
[13:29] Gimmie : 15 tick for AMZN.. 120 tick for SPY
[13:29] Gimmie : why do I wait for that?
[13:30] Gimmie : because I want to make sure at least one hill breaks.. to give it momentum to get to the next hill
[13:30] Gimmie : Ken is more... sitting and waiting for the marble to be dropped and jumping on immediately... so he will always get a better entry.. and the entire ride
[13:31] Gimmie : I like it to get around the first loop.. so I know that someone really truly dropped the marble.. not that I just imagined it
[13:31] Gimmie : or wanted it
[13:32] Gimmie : and thats what the whole funnel break is about... waiting for the breakdown of the 50 ma
[13:32] Gimmie : I might also.. short a breakdown of the 50 ma in the 120 tick or 1 min... if I can read the entry...
[13:32] Gimmie : because that is also.. riding one hill to the next...
[13:33] Gimmie : jumping as it breaks down.. as the selling comes in
[13:33] Gimmie : and you will see catmans trades based often on that principle
[13:34] Gimmie : B. How do you know how strong the push is? How many hills will break?
[13:35] cp ..: by how many charts are lining up?
[13:35] Gimmie : my direction charts.. 3 min and 1 min... are like an overview looking at the track from above
[13:36] Gimmie : if the track is tipped one way or the other.. I know that the marble will either easily glide over a few hills.. or have a much harder time and might not even get over the first hill.... depending on which way its tipped
[13:36] Gimmie : yep
[13:37] Gimmie : and that is the entire purpose of those charts
[13:37] Gimmie : Im standing up above.. dropping the marbles..looking at the bigger picture.. so that gives me a bit of an advantage
[13:38] Gimmie : the little kids though.. they are usually sitting on the floor.. with their little faces right smack next to the track.. looking up the tube to see if the marbles are coming...
[13:39] Gimmie : and they are always trying to grab them as they come by
[13:40] Gimmie : if they sit and look.. totally intensely focused on their one little hill... they can "trade" just fine.. based on that one hill..
[13:41] Gimmie : does it help to be able to see everything from above?... sure.. because I can see more generally where its heading.. so I can walk over to the end of the track
[13:41] Gimmie : but they are sitting there with their little quick fingers.. ready to grab it
[13:42] Gimmie : that is why.... the "predictable target".. is always the very next hill... and why that is alway the conservative exit
[13:44] cp ..: excellent visuals
[13:44] Gimmie : the idea is that.. the longer you hold.. the more wiggle room you have to give something.. because they never move in straight lines for long
[13:44] Gimmie : whether you are willing to give it wiggle room.. to catch the longer trend.. walk over to the end of the track...
[13:45] Gimmie : or whether you just want to grab the marble as its running by
[13:45] Gimmie : is a matter of style.. not a matter of system
[13:45] Gimmie : its all the same track
[13:45] Gimmie : you see?
[13:45] Gimmie : the end
[13:45] Gimmie : thoughts?.. questions?
[13:46] cp ..: excellent class gimmie
[13:46] Raynice Shrestha: First class..
[13:46] Gimmie : thanks cp!
[13:46] Gimmie : nooo.. that wasnt the first class!
[13:46] Gimmie : I did classes last week.. about new years resolutions
[13:46] Gimmie : I think
[13:47] Raynice Shrestha: first class as in First class in a airliner...sigh
[13:47] Gimmie : oh
[13:47] Gimmie : lol
   

 


 

 

 

 
   
     

Copyright 1997-2010 MTrader.com All rights reserved.

Privacy Policy | Disclaimer | Terms of Use