Lower Time Frame Follows The Trend Of Higher Time Frame!
It's completely technical. It's completely logical. But why do people think that the lower time frame can do the unthinkable is beyond my comprehension. Perhaps all the pre-conditioning of hearing about false pops and drops but people who read this blog still do the same thing. The problem when I listen intently to what the issue is, is they completely lack the understanding of the basic concepts of what technical trading is. Seems pretty harsh but that is what it boils down to.
Sure they have bits and pieces. Sure they can identify what certain things are. But when you press them to explain it from one time frame to another...the simplicity that they know. The simplicity that allows them to do what they already can turns into mental diarrhea. It becomes completely obvious that the thinking employed to read the chart is really gimmick based not by clear concise thought. If your thinking is not in the infantile gimmick phase, you would be able to see the momentum, see where you are in the price action phase as momentum shifts and know based on the leg where you are and how is progression building up or down momentum. Sure they can regurgitate the content from blog to help them along but the full meaning fails to register when they go from one time frame to another. The thinking process goes from simple to insane complexity in 3 seconds.
Momentum, Price Action And The Leg ... And Brain Damage
Where they fail is at points of consolidation. Ironically these are the points where accumulation and distribution occurs. The place where a leg start is. The place where they know momentum shifts as liquidity changes the price action from moving singularly in one direction up or down to sideways. So you ask them, here is the leg start in the 15 min chart, what should price do when we reach this previous area of support or resistance? Should it bounce back or run through on the first attempt? They will answer correctly that the price should repel. Then you ask them, where should you see this change in momentum happen? They will then correctly say in the lower time frame. Ask them why. They will say .. Change happens first in the lower time frame. So they go to the lower time frame and that is where the "brain damage" (say it the Bill Cosby way) occurs.
It's been accumulating but the price continues to go lower. Did it reach the leg start yet you ask them. No answer. Then they say well its been sideways and been choppy. It just keeps going up and down. I think it will go lower. Then the price pops up and kills them.
It's been distributing forever but the price keeps going up? Did it reach the leg start yet? I just told you its been distributing but the price keeps going up. It isn't doing what it should to go to the leg start. So they go long and the price drops and kills them.
Then they say...
How the hell did it just pop or drop that hard when all it was doing were these little pops and drops?
Major Freaking Brain Damage!
What is going on? Why so brain damaged? It really is quite an annoying problem. From my perspective, the lesson has been taught in many ways. Biggest clue is how a 2bar reversal can look like a head and shoulders in a lower time frame. It was a huge paradigm shift for me when i realize the significance of that notion. This is a huge hang up if you really don't put two and two together. While price action is producing this huge distribution or accumulation pattern as the price action goes sideways in the lower time frame, and probably 1or 2 candles in the higher time frame,
3 things happen:
- They forget the higher time frame 1st touch
- And in forgetting, they think the move will bust through that higher time frame level.
- This happens because they forgot that they are moving sideways from the original leg.