Lesson 25

[Trader ???]

Lesson 25, video 1.2, screen 24, second paragraph says "since we are likely now going to put in the week's lows, in or off of strong nearby weekly support, we anticipate that the daily block to be weak and expand downwards" My question is: if we are in strong nearby weekly support, why are we anticipating daily block support to be weak? We should anticipate it to be strong and not weak. What gives? H.B.

[pldot]

You are right of course, should be the exact opposite, as you suggest. One of our editing glitches.

[Trader ???]

Another Q.: Lesson 25, video 1.2, screen 36, on this week we anticipated weekly nearby resistance to be strong. But on Monday, prices jumped over weekly nearby resistance which shows that it is a NO pattern. Why we did not close our shorts and reverse long or stand aside? Traders have been short from last week as shows in screen 35. H.B.

[pldot]

Key is the concept of "money management" which says hold enough cash in reserve to be able to let price run against you to the next level of resistance and short more.....not an easy way to trade, and runs counter to much conventional trading advice, as it can be stressful, and some what dangerous if your discipline is not strong. However, with proper management and understanding it can be excellent and yield superior returns. On the final day of that screen the risk position undertaken starts to show great promise due to tots rolling over; also, one would have had firmly in minkd the very significant distance away from the pldot that price is/was.....

[Trader ???]

In real life it's hard to do that, tendency and conventional advice is to get out, reassess and then re-enter. This may actually give better entry as in this example. What do you think? H.B.

[pldot]

I find that the answer to this has a lot to do with how well capitalized one is, and with the degree of trading experience. If you have done this for years and have very deep pockets, then Charlie's style makes a lot of sense and can work well. One takes very occasional large hits but more often comes out ahead. Getting out and reassessing is fine, as long as one is disciplined about getting back in at a better level. The danger is that the small loss will inhibit action on the next trade when it is important to take action. As in all trading styles, discipline and emotional control (actually the elimination of emotion) is important.

[Trader ???]

Another Q.: In Lesson 25, video 1.4, screen 55, "on Monday our traders take a position, selling one contract on CLOSE, as nearby resistance holds" Why short on close, and why not in nearby daily resistance? H.B.

[pldot]

It's a question of when and how you determine that resistance is "holding". Generally, absent hourly charts in support of this, we would say holding means holding on close. If you're close to the market you might make that determination intraday.

[Trader ???]

My understanding from previous lessons and examples was like this, for shorts: you enter short in lower 1/3 of nearby resistance resistance or under close of previous day if that close was near to the resistance. In this particular example, last Friday was an exhaust, so Monday nearby resistance was anticipated to be strong, so entry should be at the resistance. H.B.

[pldot]

Again, depends on if you can monitor market intraday or not. With exhausts one wants to enter short as high as can be safely done, and that depends on how well one can recognize the exhaust; can occasionally hit it to the tick of the high, if that high occurs into well-recognized and definitive HTP resistance that is pretty convinceingly anticipated to be strong (eg HTP pldot in a downtrend). Your stated rules for entry are fine, and that is what we teach, but they can be improved upon somewhat as one's skill increases especially if one is close to the market. What one is looking for in exhaust situations is 1) has the upmove stopped and 2) is ther any evidence of retracement underway, and if so, then hit it.