I just thought I'd share with you this weekend some of the stuff I have learnt over the past couple of weeks with regard to trend trading and counter trend trading. When I started out (4yrs ago) I was trading blind just looking for a chart was that going up and buying because it looked good. I won a bit and lost a bit. Then I came across Trader_Dante's thread Making Money Trading over on T2W which I found to be a revelation. I had never considered Fibs and SR levels or even individual candle patterns and I was amazed that some good soul had taken the time to show new traders how and what the market did and why. That thread and the J16 thread really got me interested in the markets and trading, but I STILL thought I knew best and tried 'fitting' many silly indicators and lines to my charts thinking I could get the march on the markets. I have a shelf full of trading books all about RSI, MACD, Force Index, Convergence, Divergence etc and I filled my head with all that senseless crap. So then I started to 'give' the markets my cash as I found my little systems never stood up in the live market. Great in hindsight but crap in practise. So, then I went back to 'pin bars' (hammers and shooting stars) and re-read Tom's thread over on T2W. I had some success but I still didn't seem to be making it as a trader because I was programmed to be a counter trend trader without having any real idea what a trend was in the first place and when that trend was broken. To me, this is the BIG danger with learning some of these formations unless you RIGIDLY stick to taking them as fades (ie reversals back INTO the main underlying trend). This was my big undoing as I was trying to trade every hammer and shooting star always looking for those 1000pip plus moves at the top or bottom of a big trend break. So then, in Jan of this year I came across another 'thread' and some pro's down in Spain who had set up a live room with a special chart set up. Now, although I couldn't trade in their way, I did learn am few things from them guys like the importance of the 20 and 50 mas (I'd never used them before) and the ability to set MT4 up showing some of that info across the charts (ie Boss MAs on the worker charts). Their system was not for me as they used 'averaging' candles that HID the PA from traders. This seemed odd to me; why would you 'hide' the PA? I also found that the heiken ashi candles were only good after the event and didn't trade well live. And as for the 15min TF - Well, we all know how stressful that is!! But, I did meet some good people there and I'm still in contact with a few of them today, so there are many positives to that experience including my friend introducing me to this thread back in April 09. Since coming across this thread and Strat's instruction I feel I have learnt much more about trading etc in the past few months than the previous 3 yrs! The odd thing is, I already knew a lot of it and debunked it because I wouldn't believe that trading could be that simple. Well, I can save you a few years and a good few thousand pounds/dollars etc and tell you that the only way to trade and mix it with the pro's is with PRICE ACTION. This is the 'grail' to the markets. Why don't many people learn this stuff? Well, I reckon some see it as too hard to bother with and would rather have an EA tell them when to trade. It could be that some people think it is a lot harder than this (I did) and look for complex systems. Learning PA may seem like a hard slog but believe me, once you start to see the PASR you can have a little chuckle when you read a chart because you can see what may be about to unfold (I say MAY as there are no certainties in this business). Lets looks at the chart below to illustrate the point. The chart is the FTSE Fut chart As you can see the FTSE is in a strong up trend since Mar 2003 and if you wanted to make money all you had to do was buy on every dip to that Trend Line(TL). All the MAs are in the right order too, so we would never consider shorting this market. The key to making money is identifying a trend early on and the sticking with it. Once you have a low then a high then a higher low its time to jump on board. Trends often go on a lot longer than people think. As you can see at Point A, the market broke that UP TL; this was our first warning that the bulls were running out of steam and a trend change could be in the offing. Now, most TL break need confirming with a test and sometimes these tests will result in a higher high (Point B) or a lower low (in a down trend). What we look for here is a reversal pattern (we are now looking for a short because of the TL break) and in 14 Oct 2007 we had a BEOB. Now aggressive traders may take this setup as their short. The more conservative amongst you may wish to see the test of the break of that TL from underneath before you traded. As you can see at Point C we had a test of the TL break from underneath with an Inside Bar. IBs are dangerous but they are best if they trade in the way you expect them to go. So, if you are looking for a short you would not take a green or bullish IB break. But that's not being taught on Strat's thread so I'll zip it!) So, we have now had effectively a 1-2-3 set up. We have had a major TL break, a new high back into that TL and now we are looking for the 123 to get us in. We had this with this double top, (1) the back down thru the TL and 20ema (2) then back up to underneath the TL with a lower high (3). [B]This is a text book short set up trend reversal. [/B] We then had another TL test (the final UP TL) drawn from the March 2003 lows to the Aug 2004 lows and beyond. Look at how that TL break in Jan 2008 was tested from underneath in May 2008. This time we had a BEOB. This was also a 'Low 2 Short' (ie the 2nd lower high after the peak) and this gave rise to the best short of the lot with 2 large pushes down to the MAJOR yearly up TL at 3700 region. Point D is the down trend line from the peak thru the Low 2 high and beyond. Until this TL is broken we are still, really, in a down trend and this current thrust could yet be a retrace back into that TL. The current chart is showing a steeply rising wedge pattern and the current rate of ascent is unsustainable in my opinion and a test of the monthly 20ema. I think once Sept Oct starts we could see this rally peak at about the 5000-5100 level before starting a new leg down. Again, wait for the micro TL break (ie the lower part of the wedge pattern) and the retest of that break before going short. Al says in his book that most market moves involve 2 pushes down and 3 pushes up. If this is the case then we may see some corrective action this week or next before a final small 3rd push up into that descending TL and the 5100 region before the resumption of the down trend. Hope I've not got above my station here or explained this well enough for people to understand; I would invite comments to the contrary for learning of course!