Kane Trading - Education for Serious Traders

					February 17, 2004 Commentary- The intraday trading was just terrible today, in my opinion. Hence, for today's commentary I'm going to go back in time a little, and stay with the context theme. I think this is a critical area to look at, and, as I mentioned, a very important part of what I am trying to teach. I just see way too many people trying to trade the 5-point patterns without context. I'll start with a nice looking 5-point pattern that set up awhile back in AVP. I went out a bit further on my chart for some context, and lo and behold, look what I spotted. This nice looking 5-point pattern was set up as a test of another, much larger 5-point pattern. That earlier pattern gave quite a nice reaction at its completion point, and now we have a set up testing that point. This is looking very, very good. What's the next step? Take a look at the weekly, and cross our fingers that we don't see anything to kill the deal, since this is looking great. And what does that show us? Another 'lo and behold', that's what it shows us. Take a look at this weekly chart! It turns out that the larger daily pattern was a test to an even larger weekly 5-point pattern. This is too good to be true. This is just a monster setup, with three patterns stacking up in the same spot as a triple pattern convergence area. This has to be a sure fire trade if I've ever seen one. There's only one thing missing. This weekly pattern has no context. I have to go up one more timeframe and see what that tells me. I need to switch chart formats so I can show the monthly in log scale. Let's see how that looks. Wow! No way am I going to try to call the end of that uptrend. I don't care how many patterns are saying this is the end of the trend, this context tells me the trend is up. Pass. Some traders might look at this as a multiple top type of a topping formation and figure the patterns are a good bet. As I've said many, many times, I'm not going to pick the end of a major trend unless there is context from a higher timeframe directing me to do so. Let's go back to the weekly chart and see what happened here. Look at that. It blew out all three converging patterns like they weren't even there. Like I keep saying: "Without context, you have nothing." Too many traders are using these patterns to try to call tops. My approach is totally the opposite. As I said last time, read Kane Trading on: Advanced Fibonacci Trading Concepts and Kane Trading on: Trading ABCD Patterns and you will see exactly what I mean and how I do it differently. I suggest that you experiment with this concept in your trade planning and see if it can help you out as much as it has helped me. One more note, here. I'm spending a lot of time on the daily commentary and the website duties, as well as shipping books, answering e-mails, and such. Throw in some mentorships, and the time commitment is getting pretty large. It's now large enough to interfere with my trading. My original intention with the free commentary was to introduce the readers to my methods, and for three months now I've been doing that. The time has now come for me to cut back a bit. I am going to scale the free commentary back to either two times per week, or three. I think I will start with three times per week and see how that goes, and if it is still too large of a time commitment, I will go to twice a week. Right now I'm thinking of having the commentary on Tuesdays, Thursdays and the weekend. If I switch to twice per week I will do Wednesdays and the weekend. I will let you know. I'll likely start this new schedule next week. As always, feel free to send me any positive or constructive feedback on this topic.


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