Increase the difficulty level on yourself. Often, traders like to make things a lot harder for themselves than they need to. Everyone is seeking a silver bullet, truth is "less is actually more".
Dow Theory is actually the Grandfather of technical analysis.
If you have never heard of this, or even if you have and brushed over it, you are missing out.
Some people will say things like "it's over 100 years old it can't work in today's market"
Yet, humans have changed very little in those last 100+ years. Sentiment driven by fear and greed is where the secret is hidden.
Let me explain by saying Dow theory has 6 "rules" (tenets).
1) Market Moves in Trends Markets have three types of movements: primary trends (long-term trends that last for years), secondary trends (medium-term trends that retrace parts of the primary trend), and minor trends (short-term trends that are typically noise).
You will notice I used the weekly for the larger and the daily for the second.
When I journal my trade setups; I simply use a traffic light system red lines size 4 for primary, then orange line 3 for secondary and green size 2 for the trigger phase. In addition to that, I mark the trends with 3 boxes and arrows pointing up down or sideways.
The second rule;
Each trend has three phases:
Accumulation Phase. In this phase, informed investors start buying or selling, counter to the general market opinion.
Public Participation Phase, more investors notice the trend after it is already underway, and media coverage expands, driving the trend further. (Wyckoff called this a mark-up or mark-down phase)
Excess Phase (or Distribution): At this point, speculation is rampant and detached from actual value, leading informed investors to prepare an exit.
This is where a lot of Wyckoff, Elliott and other tools such as Smart money concepts all overlap.
Then, the 3rd rule.
The market reflects all available information, such as economic conditions and sentiment. Therefore, movement in the market averages considers and reflects this information. (in simple terms, discount the news).
4) For a trend to be validated, different market averages must confirm each other. For example, the trend in the Dow Jones Industrial Average should be confirmed by the Dow Jones Transportation Average. If one index moves to a new high or low, the other should follow suit to confirm the trend.
(I like this one less, but in some instances it can make the next move very obvious.)
Rule 5) The trend is your friend, until the end. Until you see a clear change in the direction, a market shift. The trend is still in play. This one, I feel most just can't comprehend.
As you can see below, I have marked up the extreme high and low, I know both my primary and secondary trends are down. So now, I can use my EW bias or start looking for a Wyckoff schematic. (if I believe we are about to see a shift in the trend.)
You can start to look for information for areas of interest, look into volume and volume profiles.
The last rule. Confirming the trend volume expanding in the direction of the primary trend. For an uptrend, volume should increase as prices rise and decrease during corrections. In a downtrend, volume should increase as prices fall.
In this example, the Fibonacci levels line up, the volume is slowing, the EW count makes some sense and zoomed out you can see a shift.
Now, with all of this info - we could look at "areas of interest"
We are in a demand zone on the higher time frame.
At this stage, there is no trade entry, but if we were to view a change in the character we could simply take a trade as a pullback on the primary trend down.
Something like this;
You see, all you are doing is following the trend and taking a look at other tools, auction areas, fib extensions, an EW bias, and hints of a Wyckoff schematic. But under the hood, the 3 trend principle is a simple-to-follow process.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years' experience in stocks, ETF's, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Winningwithwallstreet
Smart Money and the why behind it
I have used @TradingView for near enough 10 years now. What I like about the platform is the simplicity and the tools.
I often get asked about things like strategy or other people's techniques - "What do you think of SMC or this guy or that guy"
Look, when it comes to trading - Liquidity is something very little people understand. Gurus talk about it and draw pretty lines but still fail to break it down as to why it's there in the first place.
"Ah it's where the big boys buy or sell"
so to help visualise this lets use some of these tools here on Tradingview.
Look at my first chart here;
What I have done is jumped up a timeframe and placed a volume profile tool on my chart, then simply used the drawing tool to draw a squiggle around the relevant nodes.
I then dropped back to the smaller timeframe and switched on a couple of indicators to help visualise where the liquidity is.
if you look at the lines 15minutes and 30minutes both in green and cast your eyes to the right, can you see they sit just below (as price is coming from above) to those higher volume nodes from that higher timeframe?
Let's use another tool here on TradingView;
This one is called a fixed range volume profile.
the two blue lines extended out are known as the value area high and low. Often this is set to around 70-75% but I like to reduce that a little. The red line is called a PoC or point of control. This basically means the highest transactional point of the range you fixed.
However, if you look over to the left this time you will see two higher volume nodes (mountains) and therefore look at the 15m and 30m lines again with fresh eyes.
In this next image I have increased the range and dragged it over to include more data. I could write full strategies on this tool alone.
The first thing you should notice is the PoC has now jumped up higher. Think logically about this for a second.
We are seeking lower timeframe liquidity down low and the area of interest and value is showing price was accepted up high.
So, after grabbing liquidity, would we anticipate the price to continue down lower or come back to play in the accepted zone?
This is where a lot of newer traders fail, especially when trading smart money concepts "SMC" for short. They fail to understand the bigger picture.
Another little tool in the same box-set is the Timeprice indicator.
Much like session volume this gives a pretty clean view and of course settings can be adjusted. I like the look on this one, it's very modern. But the real value isn't until you zoom in and zoom in and you see why it's called Time - Price. I'll leave that for another post.
But continuing the theme of this post; look at the clusters of the time price indicator and note where the PoC sits on the 15m liquidity level. Then below the 30m liquidity is the lower side of the value area. Are you starting to see a theme?
In this last image; I have simply highlighted liquidity to keep my chart clean.
You will see candles showing the last buys before the selloff. Then a consolidation under the liquidity - this is basically a Wyckoff structure prior to a mark down move.
We then drop into the liquidity pocket and here is where most SMC traders would be jumping long. We see a very nice little rally, then a large fast drop through the liquidity, this hitting many stops and triggering new short positions.
which is why as these shorts get triggered, you anticipate the pullback - to what level? Well look left and the charts will tell you.
I hope this has opened a few eyes - go away and have a play with these indicators on @TradingView and feel free to aks if you have any questions.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years' experience in stocks, ETF's, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
New Volume Footprint option on TradingViewHi all,
This is the first (stream replacement) educational video with a very quick overview of volume. Tradingview just released the new Footprint Beta tool. It's something I asked them for a long time ago, so I am glad it's finally here!
In this video I cover the time-price-opportunity tool as well as visible and fixed range. Leading into footprint.
This is not a deep dive, it's more an intro to and how these things come together. If there is enough interest in this idea I will create a sequence based on trading volume in depth.
Thanks for watching! See you on the next stream/idea.
Making your first million is the hardestAfter that, it's leverage.
The issue for me as a long-time trader, is people these days don't seem to have time, patience or the ability to absorb information.
They read an article or watch a few seconds of a stream and assume they know!
I am not just talking crypto, I mean in general. The attention span of a fish.
I read a pretty decent article by this guy @holeyprofit
He talked about Bitcoin Mania with a lot of truth, most people won't want to hear.
Article here
The issue is the whole market right now are currently hinging on or near their all-time highs, Gold, Bitcoin, SPX (S&P500) stocks such as Meta, NVIDIA and loads of others.
Instead of shouting for even greater highs, the question should be "what is sustaining the rally?"
For the majority of retail traders, they assume it's different this time. Gamestop was up until it was not.
The issue is that they never learn. They have no concept of time factors and the assumption that markets only ever go up is the very reason the majority of traders stay broke.
Crypto is a really interesting space, when I first got involved in 2011, it was a punt. I got lucky, but buying cheap and selling high is what most people strive for. Yet, reading posts and social media content - nobody sells, they all buy low, stacking sats when the price drops. So where is the profit? Well paper gains I assume.
Game stop...
Not to focus on Crypto; the markets as a whole can be profitable and just like Kenny Rogers said - "if you're going to play the game boy, you got to learn to play it right. know when to hold, know when to fold, know when to walk away and know when to run"
Every hand's a winner - every hand's a loser.
Key message there!!!
Trading vs investments - if you are looking to make it big on one deal, that's different than profiting from the market every week, every month and every year.
Risk management is key, scaling your account, cutting losers quickly and adding to winners. Many won't understand this concept. Markets go up and everyone is a genius in a bull market.
Once you start scaling an account, the trade percentages in terms of rewards you seek don't matter the same. You don't need 10x returns on your thousand dollars.
A 3% win on your million-dollar account is a different game.
Back in 2021; I wrote this educational post about the psychology of the markets. I used the Simpsons as a way to get the message over.
Markets breathe and the rise and fall, rise and fall.
Once you realise you can take from the market consistently, you will see the stress disappear, and the care of price up or down matters less. Your investment criteria changes and the scope gets wider. This is how you scale from that first million, into the second and third. Not having all eggs in one basket and hope it goes up forever.
What if gold drops 10% and you are long? can you afford a 5 year spell on the investment you have? These are the kinds of questions you need to be asking yourself.
What if Bitcoin's halving is a buy the rumour, sell the news and we take another 3 years to get back to a new ATH?
"ah it's different this time" - yeah I heard all that in 2021 when certain influencers were calling for $135,000 worse case within a month. We are 2024 and still roughly half of the way to 135k??
I know for you guys who want to learn and progress you would have read this far; for those who "already know" they have stopped reading about 4 lines in and seeing a picture or 2. They leave a comment due to their keyboard warrior mindset and fish-like capacity for thinking.
The point is to ensure you deploy proper risk management, especially here near the tops of a lot of these markets, trail your stop losses, and don't forget to cash out your profits. Paper gains can quickly become paper losses. If you're serious about money making, be prepared to diversify, be prepared to sit on your hands, keep cash in your pocket as well as be prepared to take calculated risks.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
