When to sell

During uptrend, what are the signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Below is some points I can think of to kick off..

1) Healthy sign: increase in price with increasing ( vol) trading activity

2) Healthy sign: a price pullback with decreasing volume

3) Warning sign: Bar of decreasing length -> suggesting equilbrium reaching with either further upside or downside??

Any comment?
Any other signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

I don't know. The way I think about it, the relationship between price direction, volume direction and bar length could be simple (say, undergraduate level) in which case I'd guess it would be well known and wouldn't exist, complex (say, post-doc level) in which case maybe the institutions know it but you and I probably don't and won't, or intractable (say, like chaotic natural systems) in which case there's no point looking for relationships in what you observe if you're trying to model probablistic outcomes.

Alternatively, price and/or volume could be significantly manipulated, but I'll ignore that for now. (Maybe a fatal mistake, who knows?)

It's simplistic, but it may be something to think about. Do you think the relationships are simple, complex or intractable?

also remember that near the end of a move, up or down, a BIG increase in volume may signal the end of the move...capitulation of buyers or sellers.

why not just use a simple 2 MA crossover system?

charcoalstick said:

During uptrend, what are the signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Below is some points I can think of to kick off..

1) Healthy sign: increase in price with increasing ( vol) trading activity

2) Healthy sign: a price pullback with decreasing volume

3) Warning sign: Bar of decreasing length -> suggesting equilbrium reaching with either further upside or downside??

Any comment?
Any other signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Click to expand...

Hi,

A market top can often be spotted when you see an increase in volume during an uptrend without further increase in price, or at least a stalling action in the price itself.

This can often be a sign that sellers are starting to gain control.



Thanks

Damian

damianoakley said:

Hi,

A market top can often be spotted when you see an increase in volume during an uptrend without further increase in price, or at least a stalling action in the price itself.

This can often be a sign that sellers are starting to gain control.



Thanks

Damian

Click to expand...

I used to think that increading length of upper shadow of candlestick usually indicate increasing probability nearing the top, but I read that DECREASING length of upper shadow of candlestick usually indicate increasing probability nearing the top....any comment?

Hi,

One of the problems with candlestick patterns is that they can leave themselves open to subjective interpretation.

If you want to study candlestick patterns, I would suggest you read one of the books on the subject by Steve Nison.


Thanks

Damian

candlestick is more of a hindrance than a help

catracho said:

also remember that near the end of a move, up or down, a BIG increase in volume may signal the end of the move...capitulation of buyers or sellers.

Click to expand...

For volume I use a 250 day average. That gives a fairly straight line. Your definition of BIG increase would be 50%, or 100%
or......? above that? If you don't like that average, what would you suggest?

Regards

Split

your statistics on that matter r welcome your assumptions r worthless

check for it and tell us about your results

charcoalstick said:

I used to think that increading length of upper shadow of candlestick usually indicate increasing probability nearing the top, but I read that DECREASING length of upper shadow of candlestick usually indicate increasing probability nearing the top....any comment?

Click to expand...

Spotting tops is not easy but a shadow has warned me lots of times to get out. Not to open, though. I think the safest way to open is to catch the failed high after the top.

Split

charcoalstick said:

During uptrend, what are the signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Below is some points I can think of to kick off..

1) Healthy sign: increase in price with increasing ( vol) trading activity

2) Healthy sign: a price pullback with decreasing volume

3) Warning sign: Bar of decreasing length -> suggesting equilbrium reaching with either further upside or downside??

Any comment?
Any other signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Click to expand...

I would actually be considering a bar of increasing length (with volume accordingly high) as a warning signal, opposed to a bar of decreasing length. Keep in mind that those who are accumulating stocks (or whatever instrument) want to do this without anybody noticing. When the public jumps along (and prices can turn into a parabolic rise in this phase), the buying climax usually is not so far away, and the smart money is already unloading.

When to sell?

Without the use of indicators, using just price the following are to be considered as warning signals:

- a breach of the uptrend (trendline)
- a head and shoulder formation where the right shoulder usually has less volume than the head
- volume does not confirm price action (meaning it should rise on breakouts and decline on retracements or consolidations)
- price is unable to make a higher high
- volume has dried up completely on the last move up and each swing higher is losing momentum

These should be considered as clear selling signals (imo):
- the neckline of the H&S pattern breaks
- price, after failing to make a higher high, now breaks the prior low

charcoalstick said:

Any other signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Click to expand...

Perhaps too obvious which is why it hasn't been mentioned, but for the record, I'd be looking for higher highs and higher lows for the degree of trend being traded.

Connie Brown said:

Perhaps too obvious which is why it hasn't been mentioned, but for the record, I'd be looking for higher highs and higher lows for the degree of trend being traded.

Click to expand...

Any thoughts on the chart attached? There's a pattern of HrH's and HrL's but then a head & shoulder's formation becomes visible... Afterwards price returns to the trendline and the next day we are drifting sideways in anticipation of another swing higher... So, "for the degree of the trend being traded", wouldn't you be out at the right end of the chart after price already moved significantly lower?

I prefer to exit on those wide range bars on high volume... they don't necessary mean it's time to short, but it seems like sellers are already coming in, in what looks like a potential buying climax...

charcoalstick said:

During uptrend, what are the signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Below is some points I can think of to kick off..

1) Healthy sign: increase in price with increasing ( vol) trading activity

2) Healthy sign: a price pullback with decreasing volume

3) Warning sign: Bar of decreasing length -> suggesting equilbrium reaching with either further upside or downside??

Any comment?
Any other signs of healthy uptrend and "warning signals" to note for adjustment to trading plan?

Click to expand...

At the moment I seem to be getting it EXACTLY wrong. :| If I swapped my BUY and SELL buttons I'd be rich but the ironic (annoying, confounding) thing is, when I do the opposite to what I would have done, the market also does the opposite...I am only trading a simulation program with historical data...but I am NOT doing well at all. I seem to be banging my head against a glass wall.

I am not trading with charts, I am using nothing but price and volume....a wannabe Tape Reader.

new_trader said:

At the moment I seem to be getting it EXACTLY wrong. :| If I swapped my BUY and SELL buttons I'd be rich but the ironic (annoying, confounding) thing is, when I do the opposite to what I would have done, the market also does the opposite...I am only trading a simulation program with historical data...but I am NOT doing well at all. I seem to be banging my head against a glass wall.

I am not trading with charts, I am using nothing but price and volume....a wannabe Tape Reader.

Click to expand...

Hi new_trader, what you're saying there is EXACTLY what I said 8 months ago. I remember thinking exactly the same, that I should do the opposite of what I did and that would solve the issue. But I didn't define "exactly" the same way, doing EVERYTHING opposite, means reversing your risk/reward, stop/target strategy and that does NOT imply that all the money you lost is the amount you would have gained. It's a common trap and I fell for it too. Anyway, best thing is to clear your head and write everything down, analyze each trade along the way.

Why did you enter? What happened and why did the trade turn out to be a loser? Was it because your stop got hit before your target? Did the market go against you straight away? Did it travel in the right direction but not far enough to hit your target? You might have a profitable strategy on your hands without knowing it.

But if you say you are trading without charts, I think you are going on intuition and that could cost you a lot of money. Good for you you are only simulating things. But I think you are making it yourself very hard by leaving out any charts. You have to identify certain price levels that have a specific meaning to you.

I don't know much about you, so it's hard to give specific advice on something, because you haven't exactly asked a specific question... but if you could give some examples of trades, I'm sure people will try and help you along the way.

Edit: I just noticed you already opened a journal in here, so that's a good path to walk... I hope you can progress by that way, it might be slow at the beginning, but rewarding in the end.

firewalker99 said:

Any thoughts on the chart attached? There's a pattern of HrH's and HrL's but then a head & shoulder's formation becomes visible... Afterwards price returns to the trendline and the next day we are drifting sideways in anticipation of another swing higher... So, "for the degree of the trend being traded", wouldn't you be out at the right end of the chart after price already moved significantly lower?

Click to expand...

I was adding a further criteria to charcoalstick's request for "signs of healthy uptrend".

What you are asking me is how I woul d trade a departure from the trend. In the case of the specific chart you post firewalker99, the Head & Shoulders (which although it does have textbook volume distribution for a H&S, the formation is not definitive and it could just as easily be considered a Double Top) takes the trend on a gradient greater than 45 degrees. At this level of acceleration it's not necessarily a reversal, but with the frenzied participation (volume) and unsustainable slope, it indicates to me it would be time to be flat if I had been long.

I would monitor ther price and volume action on the return to the trendline and depending on cicumstances would then reassess my position with regard to taking another trade. In this specific case, the up trendline, as is often the case, now potentially appears to be acting as Resistance.

One to add then to the 'warning signals' on trends then is the sudden gradient increase above 45 degrees - regardless of volume.

Connie Brown said:

I was adding a further criteria to charcoalstick's request for "signs of healthy uptrend".

What you are asking me is how I woul d trade a departure from the trend. In the case of the specific chart you post firewalker99, the Head & Shoulders (which although it does have textbook volume distribution for a H&S, the formation is not definitive and it could just as easily be considered a Double Top) takes the trend on a gradient greater than 45 degrees. At this level of acceleration it's not necessarily a reversal, but with the frenzied participation (volume) and unsustainable slope, it indicates to me it would be time to be flat if I had been long.

I would monitor ther price and volume action on the return to the trendline and depending on cicumstances would then reassess my position with regard to taking another trade. In this specific case, the up trendline, as is often the case, now potentially appears to be acting as Resistance.

One to add then to the 'warning signals' on trends then is the sudden gradient increase above 45 degrees - regardless of volume.

Click to expand...

I agree, a sudden increase usually coincides with euphoria or capitulation reaction (often accompanied with the typical parabolic rise in price). However, why do you say "above 45 degrees"? Do you give special meaning to trends that move with a gradient higher than that? Like on the attached chart (ER2), where price going steadily higher, without any real retracement... In this particular example the end of the move would be hard to time imo... volume doesn't give much clues away.

firewalker99 said:

I agree, a sudden increase usually coincides with euphoria or capitulation reaction (often accompanied with the typical parabolic rise in price). However, why do you say "above 45 degrees"? Do you give special meaning to trends that move with a gradient higher than that? Like on the attached chart (ER2), where price going steadily higher, without any real retracement... In this particular example the end of the move would be hard to time imo... volume doesn't give much clues away.

Click to expand...

Hi Connie Brown and Firewalker99,

I was interested in the 45º, as well. There are several factors to take into consideration with a 45º increase. i.e. 45º on a daily chart would not be the same on any other time frame, would it? In addition there is the price range. Perhaps a %age change would be better if using the same angle as a norm. Apart from that, an exceptionally steep increase in trend looks like a good warning, as you say.

Split