Hello Luc. First of all thanks for getting back :). I subscribed to your new channel and I watch your videos multiple times. I do have a question for you in regards to deciding where/what is the "base". In some cases i see that you draw your bases at the bottom of the candles while other times it seems that your base will be at the bottom of the candle "stick"
Can you please clarify the following :
When the base is at the bottom of the candles and when it`s at the bottom of the candle stick ?
Is there a way to determine when the candle stick will be "the base" as opposed to the bottom of the candles?
Please have a look at the image below -it
s a random chart i picked where i tried to make the base. Can you please let me know which one is the real base and if its ok to send you some images with "bases" for my first trades till i will get used to it ?
- Just to clarify -in order to consider something a base it`s is absolutely needed to see a bounce back right after the crack of the base ?
I understand your question.. Heres the problem, its not as clear cut as you might like.. You can guestimate where the base is.. maybe its near the bottom of the wick, or maybe its closer to the body, but it depends on where the buyers came in.. in this chart it looks like it was nearer to the body, but not anymore.. You have to see it from the perspective of market reaction.. you need panic to buy in.. without panic, if you buy, you could be buying a grind lower.. thats why you want a large bounce, to show you strong buyers and to help you identify a base, and then, later when it cracks, you need to see a panic drop.. then you know your getting in at the right place.. so in the chart above, the bounces are starting to get smaller and smaller off that support and therefor disqualifies it as a base, because the coming crack is getting obvious to everyone..
Thanks for the reply Luc. While i think i
m starting to understand several things (like for example the need of a good bounce back in order to qualify something as a base) i think since bases are crucial in order to trade like you it would be useful for me and others which are following you if you can create another video talking just about bases in more details and maybe even showing examples of the different ones (bottom of the candles or the stick so to speak). I think having a "dedicated" video teaching just how to determine bases will be super helpful since if we dont determine the right one we can get stuck on a trade longer than we want. I recognize that determining the base is my biggest drawback currently as it `s not as easy as i thought so and help in this regard from you will be much appreciatedI also want to ask you about timeframes. For example if i
m working on an one hour chart -what if the base wont be "cracked" so i can buy? Unless im missing something -which i think i do :) my concern will be thati will draw my bases set up my buying spots and then realizing that if the bases wont get cracked the day can easily go off without any trades. Can you please explain how those timeframes work ?I'm sure Luc could step in and crush me with his decade of trader experience, but a "true" base requires a bounce and some volume. I see you're looking at amp here, but what we can't see is the numbers to see the actual % of that bounce. Was it a 12% bounce from the bottom of the stick? That's not bad.
Ignoring if the chart will/did eventually bounce back to the level at the first part of the chart, and just considering if where you put the yellow line is your base, I think a few key questions come out of this:
If a candlestick has a realllllly long lower shadow (the line below the body of the stick), is the bottom of that shadow where we start our base?
What kind of bounce, % wise, at minimum, are we looking at before we are calling things bases. 5%? 12%?
I'm sure Luc has this down in his brain as second nature, but how far beyond the base do you start buying in? Should we be afraid of buying at the top of the "safe zone" (thanks for the new term, Luc). This question kind of answers itself because there are generally (except in the case of really bad news) 2 outcomes:
1 - the price finds resistance slightly below the base and doesn't break, but you read it as a break, and you buy in, but the price goes up and you make money.
2 - the price does break and you end up buying more in down in the drop, and should only about break even with what you bought at the top of the "safe zone", but made money on what you bought throughout it.
What's nice about both of these outcomes? You make money every time.
As for questions 1 and 2, Luc may have some insight, but it may simple just be a feel for the market and experience. Was the bounce decent, but volume was enough to justify it being a base? The answer to those questions might just be trader nuance and not hard rules.