Revisiting 'Price Action'

This is a discussion on Revisiting 'Price Action' within the First Steps forums, part of the Reception category; Originally Posted by pttrader How can big money come into the market and NOT create volume?? Hi pttrader, The answer ...

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Old Dec 26, 2010, 2:21pm   #71
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Re: Revisiting 'Price Action'

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Originally Posted by pttrader View Post
How can big money come into the market and NOT create volume??
Hi pttrader,
The answer to your question is that they're crafty sods!

If you try and sell 75.000 ES contracts in 20 minutes - you'll move the market big time as we witnessed on flash crash day last May. Apparently, that size of the sell order isn't a problem and had it been executed over the course of the day in dribs and drabs rather than all in one hit - then the flash crash would never have happened.
Tim.
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Old Dec 26, 2010, 6:57pm   #72
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Re: Revisiting 'Price Action'

Nunrrguy, you have been giving away gold here for xmass. Thanks i will take it to the bank.

On volume have this to say, it is mostly misleading and one must really take more notice of the time of day. Volume relates to potential market moving events like news, or when new participants will step in like the opening of the us session etc. So if you see a huge spike in volume 10 min before the news out of the us it means nothing other than that a lot of money wants to be out before the news / or in.

When the us opens or Europe opens it is the same thing, some big spikes in volume will most likely just give you a false bias as many players step in and reposition themselves at that time. The volume can not give you any clue as to where the market will be going next. Only my opinion as I know a lot of people like to trade volume. Volume traded on a certain price can only give you some idea of a support or resistance level. Volume traded at a certain time means nothing that you can use.

Great thread!!!!
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Old Dec 26, 2010, 9:11pm   #73
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Re: Revisiting 'Price Action'

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Originally Posted by timsk View Post
Hi pttrader,
The answer to your question is that they're crafty sods!

If you try and sell 75.000 ES contracts in 20 minutes - you'll move the market big time as we witnessed on flash crash day last May. Apparently, that size of the sell order isn't a problem and had it been executed over the course of the day in dribs and drabs rather than all in one hit - then the flash crash would never have happened.
Tim.
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Old Dec 26, 2010, 10:50pm   #74
Joined May 2004
Re: Revisiting 'Price Action'

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Originally Posted by timsk View Post
If you try and sell 75.000 ES contracts in 20 minutes - you'll move the market big time as we witnessed on flash crash day last May. Apparently, that size of the sell order isn't a problem and had it been executed over the course of the day in dribs and drabs rather than all in one hit - then the flash crash would never have happened.
Tim.
Here is another perspective on the flash crash. I don't necessarily agree with it but it is another way of looking at it. I am attaching the chart he refers to in the article as I am not sure the article gives the link for the chart.

http://www.tradingadvantage.com/blog/?p=340
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flash-crash.png  
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Old Dec 26, 2010, 11:02pm   #75
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Re: Revisiting 'Price Action'

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Originally Posted by Splitlink View Post
I don't doubt that volume moves the market. What I am not sure of is whether the volume figures are "published" at the time of the price action. If not, the figures could be worse than trading without volume-- price action,alone, and could be downright misleading.

It is a matter of trust and I don't have it in intraday trading. EOD may be more accurate.
You may have a valid point there however, volume is a fact and it seems to me it should be taken into account even if it is skewed. Who is to say that prices aren't also not messed with?? Richard Arms Jr says "price tells us what is happening, while volume tells us how it is happening. To look at either factor alone, not taking the other into consideration, gives an incomplete, and often erroneous, picture of the market." He goes on to say "To ignore volume is to disgard a valuable piece of information" and "Why then would we buy into a stock market without an indication as to whether it had the horsepower to make us some money. Volume is a measure of that horsepower." Source The ARMS INDEX (TRIN) by Richard Arms Jr. pg 1
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Old Dec 26, 2010, 11:10pm   #76
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Re: Revisiting 'Price Action'

I realize this is a thread on price action so I don't want to stir things up but couldn't help but notice that volume wasn't even mentioned in what is called "fact". Without volume there would be no market. Period. Why would we want to ignore that?? Isn't volume also valuable in detecting when the stops are being run? Can't volume action indicate to some degree when tops and bottoms are made. The old classic tape readers relied very much on correlating volume action with price action. Anyway, I'll hush up. I have said enough to insert my point. I do think this a great thread.
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Old Dec 26, 2010, 11:25pm   #77
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Re: Revisiting 'Price Action'

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Originally Posted by ian23 View Post
The volume can not give you any clue as to where the market will be going next.
If volume can't give you any clue then neither can price give you any clue. We are simply back to endless exercises of analizing price and volume for nothing. Volume is a fact in the markets just like price action is a fact. If we aren't searching for clues then what are we searching for? What is this thread about? I for one will be first to say that I don't analize markets just for the fun of it. I am trying to detect what MAY happen next. I am trying to anticipate. I am trying to put the probabilities in my favor. Present price action/volume action means nothing to me in terms of profit if I have no money in the markets. I have to get in BEFORE the next price action takes place and becomes the present price action. It is the only way to make money. I have to be anticipating and searching for clues. Aren't we trying to anticipate how "smart money" will run the stops in the thread and where they will take the market to? Don't these conclusions lead us to clues about probable market action in the near future? Don't we want to try and capitalize on that probable price action? Or are we just analizing for the sake of analizing with no view to anticipation of future market action? I will hush up.
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Old Dec 27, 2010, 9:54am   #78
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Re: Revisiting 'Price Action'

I have to be anticipating and searching for clues. Aren't we trying to anticipate how "smart money" will run the stops in the thread and where they will take the market to? Don't these conclusions lead us to clues about probable market action in the near future? Don't we want to try and capitalize on that probable price action?

Yes i agree that it is what we are trying to do here, as for price action and volume and chart reading it is just part of the process of working on a trade plan. There are more important things than them however that will move the markets past s/r and do not care about patterns and things Like news events or rumors or market history. Consider seasonality or santa rallies etc.

I am just saying that this here thread about having another look at where you have your stops placed is a very helpful one as you have probably in your trading experience had a patch where you just got stopped out every bloody time and could not for the live of you figure out why. This thread helps people understand more about that.

As for anticipating great moves and market direction to form a trading plan for a trade, i think volume plays a lessor role than other things. As i have stated it is useful to spot a s/r area but as far as what we can expect in direction it can be misleading. Here I consider market sentiment and news far more important than volume or price action of the recent past. While there is not much going on in the market it is good to look at charts and patterns and things and imagine future possible movements. It is when you can look at where you think people got in and will want to get out etc. Games are being played and stops are being hunted etc. This is because in theory the big money do not want to take too many people with them when the news brake or the market rushes to a new level. Games may be to give a false idea of the market looking weak or strong and people will be looking to get long or short, then the market suddenly goes 180.

These churning times burns many a stop and many people trying to predict the market or the news.
So to be sure if you think you can predict the news or how the market will react to the news you are gambling in a very real sense. It is better to stay out. When there is something going on and the price makes its swift move to a new level you just better be ready to be with it for a short ride, this is best to anticipate when news is released. Note that unexpected events can happen at any time so you best be ready to cut out of a position as soon as you see something move fast in the wrong direction of your trade.

I know trading stocks and indexes sentiment and seasonal bias and things like that can have it move slowly higher and ever so higher when there is no real market moving events and you can easily just hang on and go with it. In currencies it seems to be different because you have a zero sum on another level. If the euro gains against the us there is a clear winner and loser. In a stock or a index it is not the case.
So there is no such easy rides like seasonal bias etc. News, expected and anticipated is what accounts for the moves and thats where you must make your profit.

Ok that was a bit more than i intended to say and as always it is just my opinion and i know everybody has their own theory of how things work and how to trade it etc, thats good otherwise we wont be able to trade.

And yes i am all for scalping while the market is waiting on the next move. Here you can use volume to determine where the s/r areas are and so where the possible stops are. You have to be flexible when the market makes its move though.
Cheers

Last edited by ian23; Dec 27, 2010 at 10:09am.
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Old Dec 27, 2010, 1:50pm   #79
 
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Re: Revisiting 'Price Action'

nice thread. just a thought to add about assumptions on which we model the market. what should a model take into account?

one shouldn't assume the big money is trading outrights . nor that they are worried about their stops. banks don't give a sht. if trading outright they just keep buying if price goes down and keep selling if it goes up and if they have to sit on it for two years so what. they have the cash to do it.

Same if they are doing spreads. Price can move all over the place but a spread limits the risk and they have till expiry to make money [or not]. ie they are not worried about volatility of price only the spread between two contracts. Then there is all that alpha and delta stuff that people have to balance that give more 'reasons ' why people buy and sell stuff. Then margin clerks dump stuff at set times of the day. One might even believe some volume doesn't even go through the markets but is traded outside so big positions can be taken without it even appearing on the 'official charts'? So lots of reasons why orders could enter the market and not because its here or there.

like hotch shows with his flip a coin method if you have no stops and a few bill in the bank and just wait it always comes back to a point they can exit.

we trade outrights on other people's momentum either because we have no option or don't know about other methods. spread trading is little demonstrated. try searching for it. and wonder why its not talked of much but all the TA outright stuff is? Often its brokers teaching people to trade outrights with all their handy free TA info/free seminars? mmm.

imagine you had a risk manager [as pros do] and you said you wanted to only trade outrights based on TA ? or if you like imagine going to the local bank and saying you want to borrow 20k to trade outrights. The TV show millionaire traders didn't let them trade outrights but a book.

if over 60% of the market is robots how does that change things? Quants who programme these things don't believe in any TA. they see it as believing in santa. So what do they believe in?

so we have to bear in mind in any model the market is dominated by quants who program machines and banks who don't give a sht about stops and stuff. So any model of the market has to incorporate those two and their models of trading? The CB's can 'lose' billions with their interventions.

imagine trading with no cash worries. how would you trade?
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Old Dec 28, 2010, 3:48am   #80
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Re: Revisiting 'Price Action'

maybe you folks should all be writing novels...
It does not very much matter if you know where the stops are because stops are everywhere and you are not floor traders...
So in my opinion this thread misses the point.
Would you rather direct me to the thread on trader's Discipline ?
thanks
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