Where do I start?

This is a discussion on Where do I start? within the First Steps forums, part of the Reception category; Originally Posted by Bint_Crusher And "once" I "Do" this then all I have to do is place 1 trade per ...

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Old Jan 9, 2012, 12:08pm   #46
 
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Re: Where do I start?

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And "once" I "Do" this then all I have to do is place 1 trade per week and I can put my feet up and spend my days researching dial a flooze or 2 or 3.:lo l::cool :
You're my kinda guy.

There is no secret to making a cup of tea but if you had to write down every single operation then we would be here forever.

I can keep going if you want.
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Old Jan 9, 2012, 2:15pm   #47
 
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Re: Where do I start?

Is it safe to come back in? I've just joined and straight away the cheeky monkeys are about.

Also googled 'bint'. You tease.

Anyway, now that I've taken out the trash for today, I can show you how to wipe the flaws.

It seems that the gauntlet has been laid down. You have asked, so here it is. Are we sitting comfortably?

This is a long story, so please be patient.

You can think of any market as a singer, which sings the most beautiful melody you could ever imagine possible. Every moment of this melody is unique and spontaneous.

As a trader you are looking to harmonize with the market's melody. You need to learn the typical patterns (the tune), make your instrument (the indicators), and then play your part in the live game.

So. First off, let's learn the tune. You may have heard of the Elliott wave and Hurst's cyclic analysis. Start there and read as much as you can. This will give you a good grounding.


... Tune in next time for part two of I don't know how many ...
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Old Jan 9, 2012, 5:10pm   #48
 
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Re: Where do I start?

Okay, I know this seems quite accelerated learning, but once I've got my thoughts down here you can read them at your own pace.

Now, conventional wisdom and chart watching can become hypnotic. Hopefully, if you are a beginner you have not been drawn into this trance as yet, but either way, to move away from this to a bigger picture, begin to think of the sine waves used in Hurst's model in three dimensions rather than the usual 2d chart, ie as spirals moving around spirals moving around spirals ... ad infinitum.

To explain this further, if you pull out a slinky (you know, like Slinky Dog in the Toy Story movies) and look at it from the side then it looks like a sine wave. But if you move around you can see it's a spiral. If you can use AutoCAD at all you can recreate this 'spiral around a spiral' image for two wavelengths (although after that, the 3d co-ordinates become very difficult to calculate).

Another thought early on is that it's a good idea to read as many books as possible several times over throughout this whole process (I come on to the reading list below). This gives your mind the best chance to fuse everything together, sifting the information into its 'common' sense. This 'sifting' and 'fusing' process is what will be making your trading knowledge become second nature. A knowing if you like, rather than a knowledge.

For the moment, the books on the reading list are the Elliott Wave Principle by Frost & Prechter, and The Profit Magic of Stock Transaction Timing by James Hurst. Hurst's book can be difficult to find, but have a good google and see what's out there, even if it's second hand. I think the ISBN is 9780130950758. (I've just had a quick look and I think it's currently out of print, so used ones have high price tags. It's not priority so if it's difficult to get hold of then forget it until it's back in print. I'll think of an alternative for my next post.)

Also remember, you are reading the Elliott and Hurst books to first learn about different models of market behaviour, and not for any associated trading methods. Learning the melody of market comes first, then you can think of how to trade it.


That's it for now ... tune in next time for part three ...

Last edited by PollyM; Jan 9, 2012 at 9:55pm.
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Old Jan 10, 2012, 9:54am   #49
 
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Re: Where do I start?

Now, I've had a rummage around in the loft.

This one didn't cross my mind yesterday ... Technical Analysis of the Financial Markets by John J Murphy. This is essentially an encyclopedia for basic trading concepts, including the (Elliott) wave and (Hurst's) cyclic models. This is a well written book which is certainly worth it's weight. Again, check the cost of new and used, even if it means having a book shipped from abroad to find the best value.

So, for the moment it's Murphy's encyclopedia and Frost & Prechter's (F&P's) that's on the reading list. F&P's is still good to have even though the Elliott Wave is in Murphy's book, as it discusses the natural characteristics of the fractal patterns which markets trace. This is important, as once your mind processes this information, you no longer see yourself as separate to the markets, and the fear and myths that are generated about the markets begin to fall away. You no longer see trading as a fight (as the fear and myths propagate), but a good ol' sing-song.

... Tune in later for part four...

Last edited by PollyM; Jan 10, 2012 at 10:08am.
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Old Jan 10, 2012, 2:55pm   #50
 
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Re: Where do I start?

Onwards and inwards ...

While you're waiting for the books to arrive, here are some analogies to help your understanding. If you do a bit of googling in the mean time on the Elliott wave and any other new words I mention this will help put things into context.

The 'perfect' Elliott wave is made up of 8 sub-waves, which fit together like jigsaw pieces to form a larger construction of self-similar appearance. This pattern is repeated as you look at even larger Elliott waves (ie telescopically), and also as you examine the smaller waves in greater detail (ie microscopically). It maps out a fractal pattern, one that has been 'perfectly' produced to reflect what is observed in nature (eg coastlines, mountain ranges, price charts, etc).

Now, going back to the spiral formation I mentioned in an earlier post, try to think of the Elliott wave in 3d. Hurst did actually also draw an Elliott wave early on in his book as a model, possibly without realising it at the time, although he later went on to consider the factor between two wavelengths as half that of the Elliott wave. Fusing then the Elliott wave and Hurst's sine wave models together, each up and down of a sine wave can be thought of as one revolution or season. Each one of those revolutions or seasons contains within it a series of smaller revolutions or seasons, and so on.

I use the word seasons because it helps to define different stages of progression. So, the first/second waves are spring, the third/fourth waves are summer, the fifth and sixth waves are autumn/fall, and the seventh/eighth waves are winter.

Please do not misunderstand, I am not saying here that the financial markets follow the timeline of the physical seasons we experience in the weather outside. I am using the word seasons in an abstract form, as an analogy, for each chart has its own unique timeline. It is no different to me talking about 'four seasons in one day', or 'eight days a week'.

That's it for the moment ... I'll have to think about how to get the odd file attached to my posts. I've one I did quite a while ago which sums together individual sine waves and allows you to moves around the variables to see how the combined waveform looks. I'll also dig around and see what other little ditties I have.

Please also be patient, there's plenty of time to go where you are wanting to get to. I'll be moving into trading methods before you know it, where even more fun can be had.

Bye for now ...
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Old Jan 10, 2012, 5:58pm   #51
 
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Re: Where do I start?

Just seen Keith Fit on Gigglebiz doing pole-vaulting. Classic.

I've been pulling up some excel files, including the wave generator I mentioned earlier. Should be posting tomorrow, weather permitting. Also been thinking of doing some screen recordings for when we come onto the trading methods. First one may be showing how to calculate up the relative strength index and producing some charts from it. I'll do some practice runs and post when ready.

I'm used to working in Excel for the spreadsheets, but will switch to OpenOffice for the screen recordings so everyone can try it out.

See you tomorrow ...
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Old Jan 11, 2012, 12:05pm   #52
 
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Re: Where do I start?

Reading the news this morning it's encouraging to see that computer science and programming is coming back onto the curriculum. I remember in my early teens sitting at a BBC computer in computer class learning how to program in BASIC and COMAL. I don't know why this was later dropped in favour of teaching how to use software alone, especially when most children can run rings around the grown ups when it comes to using packages. To also include lessons on how to build and program computers from the bottom up can be very inspiring for anyone looking to progress in these directions. Good to hear.

Back to the wave generator, I've attached an Excel sheet. If you don't have Excel you can try opening in OpenOffice. I've tried to do this and it generally seems to work okay, although be aware of a few seconds delay between changing the two variables (in green cells, white type) and the chart altering its position. It also seems to create default macros on the conversion which the Excel file doesn't contain. Your OpenOffice settings will likely disable macros in the first instance; this is fine as the calculations do not use any. Having said that, I'd rather it open without involving any reference to macros, so I'll have a further look at the coding and will post in OpenOffice format at a later date if I find a way.

Experiment with changing the two variables mentioned above (Factor, Start) and see how they affect the overall waveform. The current settings of these variables near enough produce Elliott wave characteristics.

There is also a green vertical line to the side of the charts which you can move across with your mouse or cursor to help see how each wavelength 'interacts' with the others.

Please post if you have any queries with it.

I'll post later today with some words on trading methods ...
Attached Files
File Type: xls Wave Generator.xls (696.0 KB, 350 views)
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Old Jan 11, 2012, 12:23pm   #53
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Re: Where do I start?

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Reading the news this morning it's encouraging to see that computer science and programming is coming back onto the curriculum. I remember in my early teens sitting at a BBC computer in computer class learning how to program in BASIC and COMAL. I don't know why this was later dropped in favour of teaching how to use software alone, especially when most children can run rings around the grown ups when it comes to using packages. ...
Because it's easier for teachers and students, and they can get a piece of paper that says they are computer experts. In other words - Dumbing down. Tony and Gordon's NewLab in its essence.
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Old Jan 11, 2012, 2:09pm   #54
 
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Re: Where do I start?

You really are a boring bunt.
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Old Jan 11, 2012, 3:02pm   #55
 
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Re: Where do I start?

A word on price data in anticipation of the coming section on trading methods.

Any output is only as 'complete' as its input. Within any given timeframe, be it yearly, monthly, weekly, daily, hourly, minutely, secondly, tickly, you are presented with four basic aspects of price data: Open, High, Low, Close (OHLC). Volume (V) is also a related matter, but for the moment we are focussing on the ball which is price.

Now, if you have looked at my earlier posts about 3d charts you will begin to realise that high and low prices are relatively more pertinent than the open and close prices. I know it's obvious but the open and close prices are simply where price bars begin-end-begin-end-begin-end and so on. In a large non-stop market with sound data collection they should be around the same position as each other when one bar ends and another one begins. You can therefore think of the open-close relationship then as simply a 'connector' from one time-bar to another. I am not saying they do not have value, but simply that they are secondary to the primary status of high and low prices.

In any given timeframe, the high and low prices show the full range of the spiral orbits, as best you can, that is, in 2d. To therefore construct a complete picture of how the market is moving, it is very prudent to include the high and low prices in your price data. I will explain further why this is so when we come to trading methods.

Whenever you therefore study a chart, make sure it is first properly framed. Include the high and low prices by using bars or candlesticks, rather than just showing the close prices on a line graph.

Another aspect to consider is to show charts which cover a wide price range in a logarithmic format on the y-axis. Price movement is a natural event and so in 2d moves geometrically and not in a linear fashion. The logarithmic format helps to show price movement in more 'real' terms, relatively speaking.

Will post again soon ...
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Old Jan 11, 2012, 4:09pm   #56
 
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Re: Where do I start?

Here's a one I've just thought of. I give these analogies to help move thoughts away from the 'heaviness' of the market myths which are ever abounding.

Imagine any market chart as a huger than huge loaf of bread that you're looking at sideways on. You are very close up to it, so you cannot exactly tell where it begins and ends. The timeframes of, for example, yearly, monthly, daily, minutely, secondly, are like asking for how you would like your bread sliced, thick, medium, thin, and anywhere in between.

You can see that as the timeframes get smaller (or quicker if you like), there is only so far you slice before you arrive at particles which, in the case of market charts, are the individual ticks.

(I think this analogy has a bit more mileage in it, and may use it again in a later section.)

Will post again later to close out the day ...
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Old Jan 11, 2012, 6:25pm   #57
 
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Re: Where do I start?

My post above outlines an analogy of some of the different timeframes available for trading, which I'll expand upon in the coming section on trading methods.

Going back to the wavelengths featured in the Elliott and Hurst models, you can also think about these in different ways by using analogies.

For example, you can think of a market as a book, which has chapters, paragraphs, sentences, words, all of ever decreasing sizes, nestled within each other, until eventually you have the individual letters (corresponding to the market ticks).

For reasons I'll explain later about market rhythms, to get the most balanced result out of a market you should be 'trading' it for every moment that it's open. This does not mean that you have to stay by the computer looking at the chart all the time, or be always 'in' the market stopping and reversing (as a good proportion of the time you will be 'out', holding no 'active' position), but at prescribed intervals you will be taking a mathematical note of its movement and adjusting your order/stop to suit.

When we come on to trading methods, we will be looking at creating a general purpose vehicle, one which will perform on all terrains and in all weathers. It will not specialise in any one particular aspect, but will be somewhere in between, benefiting from the robustness of having a bit of everything. It will tip the balance in your favour. Once this is done, you can then specialise and explore different fields.

Will post again tomorrow, and then may need to take a little break while I work out the ins and outs of doing the screen recordings for the trading methods section ...
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Old Jan 11, 2012, 7:07pm   #58
 
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Re: Where do I start?

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Originally Posted by PollyM View Post
A word on price data in anticipation of the coming section on trading methods.

Any output is only as 'complete' as its input. Within any given timeframe, be it yearly, monthly, weekly, daily, hourly, minutely, secondly, tickly, you are presented with four basic aspects of price data: Open, High, Low, Close (OHLC). Volume (V) is also a related matter, but for the moment we are focussing on the ball which is price.

Now, if you have looked at my earlier posts about 3d charts you will begin to realise that high and low prices are relatively more pertinent than the open and close prices. I know it's obvious but the open and close prices are simply where price bars begin-end-begin-end-begin-end and so on. In a large non-stop market with sound data collection they should be around the same position as each other when one bar ends and another one begins. You can therefore think of the open-close relationship then as simply a 'connector' from one time-bar to another. I am not saying they do not have value, but simply that they are secondary to the primary status of high and low prices.

In any given timeframe, the high and low prices show the full range of the spiral orbits, as best you can, that is, in 2d. To therefore construct a complete picture of how the market is moving, it is very prudent to include the high and low prices in your price data. I will explain further why this is so when we come to trading methods.

Whenever you therefore study a chart, make sure it is first properly framed. Include the high and low prices by using bars or candlesticks, rather than just showing the close prices on a line graph.

Another aspect to consider is to show charts which cover a wide price range in a logarithmic format on the y-axis. Price movement is a natural event and so in 2d moves geometrically and not in a linear fashion. The logarithmic format helps to show price movement in more 'real' terms, relatively speaking.

Will post again soon ...
Very seriously disagree here. A CLOSE above or below a previous swing high or low means the difference between taking a trade or no. Fork the Cornting opening maybe but the CLOSE>>>>>> VERY VERY VERY VERY relevent.
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Old Jan 11, 2012, 9:41pm   #59
 
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Re: Where do I start?

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Very seriously disagree here. A CLOSE above or below a previous swing high or low means the difference between taking a trade or no. Fork the Cornting opening maybe but the CLOSE>>>>>> VERY VERY VERY VERY relevent.
Do you mean you take the trade when the bar closes out and not the moment when the price pushes beyond the previous high/low (ie when it is in itself a high or low)?
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Old Jan 11, 2012, 11:51pm   #60
 
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Re: Where do I start?

Take a daily chart draw classic support and resistance lines extending to the right taking the high and low of both respective candles drawing another 2 lines extending to the right then you have both the price ranges that have been unviolated call these rprice extremities the candles in control I trade reversals so when the price retraces to this area I consider taking a trade PROVODED THAT THE PRICE DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES< DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<DOES NOT CLOSE OUTSIDE THESE SUPPLY AND DEMAND CONTROL ZONES<Iput my trade plan into operation and take that trade considering all the factors within my predetermined trade plan:sl y:
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