Blank Box™ trading a technique that I’ve developed over my career. It is very simple, as is everything that I do. Basically, it’s adding space for the next day (or days/weeks) to estimate a stock’s future anticipated time frame and move. It will help you make quick decisions on breakouts and help you “hold the line” during times of consolidation. This method works for all time frames and all stocks and markets. It also works with all technical patterns, such as neutral channels, symmetrical/ascending/descending triangles, flags, pennants, wedges, tops, bottoms, etc. I will cover long-only patterns in this article.
Some people say that technical analysis is “hindsight”, and that my blog posts are also “hindsight”. Bullshit. Those people are the dumbest box of Pet Rocks (le Duc, et. al.) that obviously have no trading foresight whatsoever. This kind of thinking also demonstrates a lack of experience and tactical strategy. True, technical analysis looks at past price performance to determine future movement, but why do patterns work and why are they so reliable and repetitive?
The answer is because the markets are driven by human behavior, so as long as humans are still trading, it won’t change. Humans are emotional creatures. It is not about hindsight, it’s about looking into the future. After all, aren’t all styles of trading about looking into the future and attempting to get in prior to a move? Take a look into my crystal ball:
The Purposes of the Blank Box™:
1) Determine low-risk, high-probability entry and exit points
2) Predict bounces and pullbacks intra-day
3) Psychological self-control
Let’s take a look at a real-time, and not a “hindsight” example, of PCU, currently trading at $19.46:
Below is a 45-day of PCU. I have also added 2 weeks of “blank days” to nearly complete the apex of the symmetrical triangle. It is important to note that the box remains constant, but price does not. If a breakout were to occur on Tuesday, I would be looking at the gap up to start at around ~$20.70. Likewise, a breakdown would be indicated by a gap down below ~$18.30. If the consolidation continues, the box becomes more narrow as each day passes and may morph from a ~$2.50 range to a ~$1.25 range.
Let’s look at my early morning Friday post on the SPX. The first chart is the 3-day chart with Friday being the “blank day”. The chart below the first one is what actually happened on Friday.
I wonder why people make trading so complicated with pages of fundamentals, zillions of technical indicators, spreadsheets with time-consuming data, and everything else that is completely unnecessary, when in fact, trading is so simple. Keep it simple folks. My 10-year old cousin, my protégé, is up over 20% this year, putting most institutions to shame. FYI – she starts middle school in the Fall.
Creating the Box
How do you make one? The boxes are dependent on two (three) important factors:
1) Time – what is the time frame?
2) Pattern – what kind of pattern is it?
3) Your drawing skills and knowledge of basic Geometry.
I laid out examples of the SPX and PCU for a reason. The SPX was forming a neutral range and therefore, it needed only one blank day. PCU is currently forming a symmetrical triangle and the apex is farther away. The time aspect depends entirely on pattern, and more importantly, the pattern aspect determines the time. Once you get this down perfectly, you’ll be able to win so much that people will think you are a goat-sacrificing devil worshiper.
Let’s take a look at a two more real-time, non-hindsight, examples below:
1) HBAN, $4.24, pennant-down sloping
2) CEG, $25.62, triangle-symmetrical
Caveats
Too good to be true? Sometimes. Why? Because nothing is perfect. The most common reason for loss is if the move outside of the box is a false breakout (or breakdown) which pulls back (or throws back) into the box. This is an immediate cause to exit the trade without any hesitation. You will take small losses along the way, but your gains should outstrip your losses. Cut the losses quickly, because if you are right about it, then you will have saved yourself a headache, and if you are wrong, then you can always re-enter anyway.
I believe that the second most common reason is pattern failure. Sometimes, patterns just don’t work out the way the textbook states. You just simply get out and move on.
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Trading is about making money, not about how smart you look or sound. Remember to keep things simple. Trading is hard if you make it hard. Likewise, trading is easy if you make it easy.
Hope you had a great Memorial Day Weekend. As always, I will answer any questions below.
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MY MAN MY MAN~~!! 1 + 1 = 2 indeed!! Here is MY crystal Ball http://is.gd/DWEI!
if you ever want to test how good your blackbox trading is. Set up your gameplan prior to the market. Then look at only prices and not the chart and see whether your long or short intentions are good
Hi CA,
I’m trying to figure out why you are able to draw the SPY on the 10 min not 60 min? It makes more sense to me to connect the lows and highs on 60 min So a break below 88.26 and break above 92 ish area is breakout. Or do you assume 88.26 will hold and shorten time frame to focus on intraday price action until the larger box is broken. Great stuff thanks.
CA — technical question. I have been using stockcharts for a long time but never realized you could set “time ahead” like that.
How is it done exactly?
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lol all I can do is laugh. I feel like slapping myself and saying “Doh”. So simple and it makes so much sense. Who would have thought to sell bread sliced when everyone was selling it whole. The simplest things make the biggest difference sometimes. Great job CA!!!
^^^^^
and, is anyone able to project empty time with their trading platform/software?
Josh,
NO SHIT. I’ve been doing this almost every morning for years, well before you even started trading. As for looking at only prices and not the chart, the box doesn’t work like that. Why are you going to intentionally handicap yourself?
Philly, I do the shorter time frame because my time frame is short (avg. holding period is 1-3 days). If my intentions were to hold anything longer, I would expand into the 30-min or 60-min 2-4 week time frame. It all depends on your holding period.
Here, I added 16-days + 200 spaces for the SPY 60-min: http://i587.photobucket.com/albums/ss311/chartaddict1/spy.png
Jake – In the first section, “Chart Attributes”, after years, months, days, you see a box for “Extra Spaces”. Each time frame requires a different number of blank spaces. Play around with it.
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I forgot to add another caveat: this method does not work when gov’t fuckery is present.
CA, You have given good examples of what you call “blankbox” trading and no offense or anything but that’s not exactly a new idea is it?
project empty time AND draw on charts at http://www.freestockcharts.com
LetsRoll – Right, and it is also rare and underused. I use other stuff with this method, but they are proprietary. Consider this post as a primer. Play with it.
whose trademark is that?
CA, Sounds good! I have allways followed this type of trading wether a channel, wedge or triangle…buy at suppport, sell at resistance unless a breakout looks immenant and when those breakouts fail only to come back into the range it is frustrating.
Additional foresight on this type of traing would be very helpful.
Mine. Already applied with the Maryland Trademark Office. Others as well.
“Gov’t Fuckery”
Can’t help but laugh!Your quite the wordsmith.Great stuff.
Did you apply for a Trademark on that term as well.lol
loved it.!!specially this..
“Keep it simple folks. My 10-year old cousin, my protégé, is up over 20% this year, putting most institutions to shame. FYI – she starts middle school in the Fall.”
all your posts are gold!
lol such hatred. That comment was not intended for you CA, but rather other readers….. about drawing the blackbox for forecasting. I personally always leave some extra bars so I know what the trendline shows over the next few days
And why handicap yourself. Sometimes the less you look at charts the more you learn. You realize after the day that I did not draw the trendline correctly, or could have drawn it like this.
And you have no idea how long ago, I have traded. My trading certainly has changed tremendously over the past years though….
Josh– if your comment was intended for other readers, then it was even more rude.
Post your suggestions in the PG, and let them stand on their own merits there. People come here to read CA’s suggestions and discussions, not yours.
_______________
I apologize for the misunderstanding.
Josh, tell me about your trading experience, strategy, methods, etc, so I, and everyone else, can get to know where you’re coming from.
Colombian Guy – she’s a swing trader, because of school in the day time. She was also the ring leader of the water gun squad at the family gathering yesterday. 4 of “Them” vs. me. I still won.
LetsRoll – I don’t want to find out if I can do that.
CA — one of my comments got caught in your spam filter, I think. I think you can release it from your end, though, so I don’t have to strangle Jeremy.
Don’t have time yet to go all into depth(that’s for PG when market is sub 800). For starters i was all about TA indicators like MACD, RSI, Stochastics etc. I have transitioned to only use divergences in them if that. I rarely use to see if things are overbought or oversold as they can become more and more overbought/oversold. My holding period is typically longer than 1-3 days, but sometimes it is that. I consider myself a swing trader. I use trendlines mostly and like to see same picture or idea on daily and weekly and hopefully on shorter time frames as well. use shorter time frames for better entries(1 hour and less).i also use EW(still mastering) and try to use pitchforks. like to trade chart patterns and trendlines. Hope that helps for starters
How long have you been trading? Be honest, because I can tell a person’s experience level by the way they trade.
Jake – released you from the spam pile of porn offers.
my trading experience is seven years. first three years really dont count though in my eyes as trading as I used little TA. Whether you believe that or not is up to you
“how long have you traded” is an interesting question; what would you consider your “start” of trading? the first time you started paper trading? The first trade you made? the first time you started studying trading?
The point is the definition of “trading”. I consider “trading” to be the whole business, not just the action or buying & selling a couple shares of something. For myself then, I made my first trades in ’07, but really started studying and paying attention in early ’08. Started journaling and getting smart in early ’09.
I’m still learning though. I guess that part never stops.
thats a good point.and by trading does that take away long term investments.
CA,
Where do you recommend a beginner in TA look to learn more? What is your 10-year old cousin reading? Btw, that is very impressive. You must be a great teacher. Thanks and much appreciated.
Josh, your hard work is appreciated. I know how long it takes to annotate as many charts as you do. I would advise against calling tops and bottoms unless you are absolutely certain.
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Hammy, you’re doing fine, keep it up.
On another note, did you ever receive an “Outstanding Unit” ribbon for “Outstanding performance of duty in support of Operation Noble Eagle”? I got one yesterday for 1 JAN 03 – 30 JAN 04, and don’t remember doing shit at the time.
…maybe it was just a Maryland thing: Order: 050-374 MD-STARC-ARP.
yeah that is pretty impressive.
by “the textbook” good traders often refer to “technical analysis of stock trends” by edwards & magee. Danny recommended that in the PPT.
Ragin’ Cajun wrote this in a post on the PPT:
“Brian’s book is also a must read for those new to charts: http://www.technicalanalysisbook.com/”
Chart Addict wrote the following:
“For people interested in technical analysis, I recommend that you start off with Toni Turner’s books:
1. A Beginner’s Guide to Short-term Trading
2. Short-term Trading in the New Stock Market”
is this still true CA? i haven’t bought ’em yet–still working through Edwards & Magee
Sir,
no, i was still at school during that time period. right now all i have is a MUC from Annapolis and my national service ribbon. I’m playing the waiting game for flight school in Pensacola.
for all of those enjoying your freedom tonight, check out this video about those who shed their blood for you, our expeditionary fighting force. it gets me every time.
http://www.youtube.com/watch?v=tmqs8rYkyfc
here’s a PPT review of Brian’s book:
http://www.ibankcoin.com/peanut_gallery/index.php/2008/06/18/book-review-technical-analysis-using-multiple-timeframes/
Edwards & McGee is all you need.
_________
http://tinyurl.com/qlpksc
Preview of Edwards & McGee book here
Yes Hammy, Toni Turner’s books are great. I highly recommend her.
Edwards & McGee is one of the bibles of technical analysis.
Yes — if it were just this simple, then all 10 year olds could make 20%, adults could make 50% — and the entire country could be out of debt.
Call Geithner — I’m sure he’ll hire you to save the country with your magical “straight lines”.
Why didn’t I think of that? All this time I kept drawing curves…
Sold FRZ $1.91 and FAZ $5.53
u like DVAX here CA? looks ready to pop with an easy stop at $1.10…thoughts?
Bought AKRX $1.02
Already own DVAX
Sold QID $37.56, all hedges removed.
ha, entered 1000 QID at 36.22
Bought ACAD $1.889
Solid post CA! Love it 🙂
Keep up the good work. You still holding UXG?
CA,
Any thoughts on CBB?
It’s Looking strong today
tza @26.28
sold XTEX $3.07
Here goes AKRX!
I WIN AGAIN.
Its beautiful dude! Good pick
got it at $2.06…thanks once again CA!!…you really are the king of technical small cap day trading…
Bought AVII $1.10
Why do I even bother posting my trades here?
Fuck this shit.
Where are you going to post your trades then? Twit it?
Hey CA,
What happened?
I appreciate your posts and blog like the blank box trading strategy.
Thanks.
I too appreciate your trade posts, please continue to bother to put them here 🙂
Why won’t you post it here anymore? is it too hard? Dude you act like you’re god… (maybe you are)… but come on dude, act human!
Just please post you’re trades!!!!
bro, dont let the haters get at you..do you thing man!!
CA
Your updates are greatly appreciated. They help to provide students of TA with real-time insight into what you’re seeing.
I think most of us understand that you have little to gain by doing so, though, other than the thought that you’re helping to teach others like me. Whatever you choose to do or not do — the help that you’ve provided has been invaluable.
I agree with OpihiMan. I’m learning a lot from you. Thanks CA.
Agreed, geez, don’t let one or two haters rattle ya so easily, that’s what happens when you’re on top, a few douches try to bring ya down but that just comes with the territory of being the best…
Bought LEA $1.64.
more qid at 35.75
It’s not about the haters. I missed several breakout plays taking the time to post this shit in 4 different places.
The reason why I started posting trades was because people thought I was full of shit. Well, I don’t have to prove shit anymore. I already do it, week after week. So basically, whatever.
Nice.
Hey CA,
Keep postin. Good lookin out. You’re helpin out a lot off people trying to recognize the breakouts.
Appreciate the posts.
CA – why not use marketguru.com to do approximate buys/sells ( no options for anything other than market buys/sells) ?
It’s faster than posting here.
CA
Not sure if this is possible or not, but maybe you can have some computer genius write a macro for you that will do all 4 posts at once. Just a thought. . .
Hear, hear. Great post.
CA,
what’s your take on CHINA….nice volume today.
HEB looks like it’s going to BTFO again, what do you think CA?
CA – tomorrow’s my birthday and i’m thawing the block of ice my credit card is in so i can buy into the ppt at first light. please don’t sell out of your lucrative positions without telling us today… ctic is scaring me…
you and fly are twin gods…
I am not buying or selling anything else. I am finished for today.
Franky – happy b-day. how old? CTIC is in consolidation and barely moving.
HEB is a box of firecrackers.
CHINA – no real opinion. It has a large range on the daily, so I’m not really sure.
thirty-thirteen… great to hear ctic is still loading!!!
what the hell just happened to AKRX? guess i shoulda sold that one..
F
calm the fuck down
CA – whats your take on MRM? more to go like DDRX?
CA,how much %cash ur holding….
70% cash…..30% END(up 15% till now)…
Hey CA, where’s the link to see your old posts?
Thanks
holy shit @ MRM. It’s something I will monitor, but not “jump in” right away.
Good Ring! I am long as a motherfucker. Very little cash. I’ll have to start using margin my personal accounts.
doggy – what posts? I have links on the side for different categories.
Great Post, Thanks.
HOLY BALLS.
I had no idea you could add “extra bars” on stockcharts. I’ve been using Photoshop this whole time. Embarrassing. I don’t know how I missed that.
Learn something new every day…