Going with the flow

barjon · Aug 20, 2011

I find it quite interesting that most amateurs I know tend towards looking for turning points (maybe in the buy low, sell high camp) whereas the few professionals I know tend towards looking for momentum and going with the flow (maybe in the buy high, sell higher camp).

Whether or not my experience is truly reflective of a professional vs amateur difference I don't know - I wish I did

jon

0007 · Aug 20, 2011

barjon said:
I find it quite interesting that most amateurs I know tend towards looking for turning points (maybe in the buy low, sell high camp) whereas the few professionals I know tend towards looking for momentum and going with the flow (maybe in the buy high, sell higher camp).

Whether or not my experience is truly reflective of a professional vs amateur difference I don't know - I wish I did

jon

That's an interesting way of looking at things. I don't know any other traders and what they do -- maybe that's a help! The point that occurs to me is timeframe -- as a swing trader I like to "look for momentum and go with the flow" after a turning point. But of course, you don't know the turning point has occurred until sometime after, and there has been a bit of momentum and flow. I've found that getting in immediately after "a turning point" doesn't suit me because you always have to summon up the psychological courage to make an early exit if it turns out that it wasn't really a turning point.

I suppose it's all very different if you live in the world of short-term daytrading and your "hair is on fire" culture. Perhaps I would like to think of myself as a "professional amateur".

the hare · Aug 20, 2011

Turning points dont happen very often, so assuming you knew absolutely nothing at all about the business of trading (or if markets where random), then the chances of correctly locating a turning point by random chance is much less than the chances of incorrectly locating a turning point.

Although most wont acknowlege it, price action or TA is no better than random chance, so as a strategy, its a bit of an understatement to say its flawed

I'd probably go one further and say that the whole concept of prediction is what seperates those that make money from those that dont. Probably not what anyone wants to hear on a trading site, but its true.

counter_violent · Aug 20, 2011

I must stop looking at tic charts ...more turns than a twisty turny thing !

barjon · Aug 20, 2011

0007 said:
That's an interesting way of looking at things. I don't know any other traders and what they do -- maybe that's a help! The point that occurs to me is timeframe -- as a swing trader I like to "look for momentum and go with the flow" after a turning point. But of course, you don't know the turning point has occurred until sometime after, and there has been a bit of momentum and flow. I've found that getting in immediately after "a turning point" doesn't suit me because you always have to summon up the psychological courage to make an early exit if it turns out that it wasn't really a turning point.

I suppose it's all very different if you live in the world of short-term daytrading and your "hair is on fire" culture. Perhaps I would like to think of myself as a "professional amateur".

I suppose you could describe what I do with my retracement thing as looking to get back into the momentum flow after a pause. Strictly amateur me (although I like to think with a professional approach - I'll add the laughs before hare does

)

barjon · Aug 20, 2011

the hare said:
Turning points dont happen very often, so assuming you knew absolutely nothing at all about the business of trading (or if markets where random), then the chances of correctly locating a turning point by random chance is much less than the chances of incorrectly locating a turning point.

Although most wont acknowlege it, price action or TA is no better than random chance, so as a strategy, its a bit of an understatement to say its flawed

I'd probably go one further and say that the whole concept of prediction is what seperates those that make money from those that dont. Probably not what anyone wants to hear on a trading site, but its true.

doesn't necessarily have to be via TA, hare. Maybe "going with the flow" is not about predicting but about reacting.

the hare · Aug 20, 2011

counter_violent said:
I must stop looking at tic charts ...more turns than a twisty turny thing !

Indeed there are, although I'd probably argue that in order to identify "turning points" its necessary to impose a level of abstraction, and as such, even on a tick chart, the number of periods between points A and B at which tradable turning points could have potentially occured but didnt, are far greater in number than the 2 places at which turning points did actually occur.

DionysusToast · Aug 21, 2011

I think what you are describing may be an optical illusion.

I will comment from a short term traders perspective only.

In order to go with the flow, you actually need to know where the last turning point WAS. The thing is - you only know if the market has actually turned in hindsight.

Let's say a market is putting in 20 tick swings. The price decends 20 ticks, so we know it is going down. Now it moves up 5 ticks.

Can we now say this is going up? I don't think so - at this point you won't know. So, at this point, a continuation trade up or down is a tough call unless you have other information to add to the equation.

On the hard right edge of the chart, this is never clear. So - if it moves up 5 ticks, I take a long and am right - did I trade a continuation or a reversal?

barjon · Aug 21, 2011

DionysusToast said:
I think what you are describing may be an optical illusion.

I will comment from a short term traders perspective only.

In order to go with the flow, you actually need to know where the last turning point WAS. The thing is - you only know if the market has actually turned in hindsight.

Let's say a market is putting in 20 tick swings. The price decends 20 ticks, so we know it is going down. Now it moves up 5 ticks.

Can we now say this is going up? I don't think so - at this point you won't know. So, at this point, a continuation trade up or down is a tough call unless you have other information to add to the equation.

On the hard right edge of the chart, this is never clear. So - if it moves up 5 ticks, I take a long and am right - did I trade a continuation or a reversal?

I suppose that depends on your time frame, DT.

'Course if you're looking for strong directional momentum and and jumping in with the flow without reference to a chart you might find when someone stuck a chart in front of you that you had traded a reversal, a continuation, or some significant charge in no-mans-land.

jon

DionysusToast · Aug 21, 2011

barjon said:
I suppose that depends on your time frame, DT.

'Course if you're looking for strong directional momentum and and jumping in with the flow without reference to a chart you might find when someone stuck a chart in front of you that you had traded a reversal, a continuation, or some significant charge in no-mans-land.

jon

Timeframe is irrelevant.

Here's a chart without a timeframe. Is the continuation trade up or down here?

FarQuinnell · Aug 21, 2011

barjon said:
I find it quite interesting that most amateurs I know tend towards looking for turning points (maybe in the buy low, sell high camp) whereas the few professionals I know tend towards looking for momentum and going with the flow (maybe in the buy high, sell higher camp).

Whether or not my experience is truly reflective of a professional vs amateur difference I don't know - I wish I did

jon

Most professionals I know do away with the notion of "High" and "Low" altogether.

bedsit · Aug 21, 2011

DionysusToast said:
Timeframe is irrelevant.

Here's a chart without a timeframe. Is the continuation trade up or down here?

It depends DT. If I was to choose trend following trading system I wouldn't enter at this point. I would wait for the price to either break the low (marked with the red line at the bottom) without breaking LH in the meantime. If that was to happen, I would see it as a downtrend. On the other hand if the price broke up through the LH without breaking the HL before that, I would see it as an uptrend.

At that point there is a choice how to enter: some traders like to jump in straight away, others wait for the price to come back to enter at a better price.

So I would say they are continuation trades whichever way one chooses so far as one is trying to apply some sort of trend following system - going with the flow.

Vernacular · Aug 31, 2011

I'd say it's completely dependent on the market that day. Is it more liable to be trending or to be ranging? Also, watching the way it moves up and down can easily determine which way it wants to go based off support & resistance. The trend is your friend, but you need to know when it's trending. Summary: get a good feel for the market you trade and where you enter trades won't be much of an issue. It's really where you exit that matters the most anyway!

Going with the flow

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