Bottom Up or Top Down?

This is a discussion on Bottom Up or Top Down? within the General Trading Chat forums, part of the Reception category; Originally Posted by robster970 Both DT. Bottom up for the trade, top down for context you are operating in. Bit ...

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Old Apr 6, 2012, 4:26pm   #11
 
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Re: Bottom Up or Top Down?

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Originally Posted by robster970 View Post
Both DT. Bottom up for the trade, top down for context you are operating in. Bit like going out in a boat - you always know what the weather is supposed to be doing.
I am not talking about where you are now Mr Ster, I am talking about how a newbie should go about things.

Are you saying that throwing it all in the pot right from the start is the best approach?
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Old Apr 6, 2012, 4:32pm   #12
 
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Re: Bottom Up or Top Down?

I think this is simply an exercise you should try to do as you're learning. It may be how that guy operates, but all you really need is to work with the market. Just move as the market does.

That said, here's a link to some useful exercises if you want to practice getting better, courtesy of Mr. Rob himself: http://www.prop-traders.net/second-month-of-training/

Practice makes perfect, and in trading the best practice is to understand how price moves.
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Old Apr 6, 2012, 4:40pm   #13
 
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Re: Bottom Up or Top Down?

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Originally Posted by VielGeld View Post
I think this is simply an exercise you should try to do as you're learning. It may be how that guy operates, but all you really need is to work with the market. Just move as the market does.

That said, here's a link to some useful exercises if you want to practice getting better, courtesy of Mr. Rob himself: http://www.prop-traders.net/second-month-of-training/

Practice makes perfect, and in trading the best practice is to understand how price moves.
Good link....

I like this bit...

Quote:
Try scalping off of the order flow without watching the charts at all. Turn your charts off and try to see support and resistance on the ladder alone.

Many prop firms ask new recruits to initially start to trade without access to any charts; that is to say no indicators, no trend lines, no patterns and, as a result, no temptation to seek the technical analysis holy grail that does not exist. You need to be comfortable executing trades with nothing more than the market depth at your disposal. It is this ability, developed as a result of many hours of intelligent observation and interaction with the market, which actually enables you to employ technical analysis effectively! Technical analysis is a decision support tool for traders. The charts themselves represent a very small percentage of the total, available information upon which elite traders make their decisions.
Hurrah!!!!
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Old Apr 6, 2012, 4:43pm   #14
Joined Mar 2012
Re: Bottom Up or Top Down?

Just something to think about (also posted on another thread) and have a nice healthy break, because without that there is nothing to profit about:

A Trading Fairy Tale...

"Once upon a time there was an enchanted land called Marketland where a fascinating game called 'The Market was played most days. And the thing about this game was that it would go up or down every day and the players would make bets about the outcome -- very simple game.

But there were complications, which had to do with the fact that all the players in Marketland had opinions about which way the market would go.

And not only opinions: The players had systems, methods, evidence and analysis to back up their opinions. They had Dactyl numbers and Pdontiff waves, Xandom lines and Zigdar harmonics. They had the legacies of the old masters, Oerbot and Caljen. They had inventories and earnings, money-flow studies, astrology charts and the benefits of 4th-order spectrum analysis, all of which was extremely fascinating. Yes indeed, the players had many marvelous things.

The problem, though, was that sometimes the methods called for the markets to go one way and it would go the other way. This never failed to astonish everyone concerned, and there were many long discussions about how or why the market could be so perverse. However, it was usually agreed that this had just been a temporary aberration by the market and that the methods and analyses were as good as ever.

But one afternoon something happened to one of the players, a man named Mr. Beright. And he was never the same again. Mr. Beright had made a detailed study of Azerhof numbers, becoming one of Marketland's recognized experts on the subject. And the Azerhof numbers were now quite plainly stating that the market needed to go up, so Mr. Beright had taken a solid long position.

Unfortunately, quite soon after Mr. Beright had gone massively long, the market started down. This did not worry Mr. Beright excessively, since he realized the market had to go up. But the market (strange creature that it is) wouldn't pay any attention. It kept going down. And down. And down. And Mr. Beright (understandably, since we've all lived through these moments) got quite anxious and depressed. But he knew it would all get better very soon, just as soon as the market turned around and went the way it was supposed to go.

Now all good fairy tales have children in them and this one is no exception. Mr. Beright, it turns out, had a beautiful five year-old-daughter named Herenow, and just as he was contemplating his sad fate, Herenow walked into the room. Sensing that something was wrong, she asked, "what is the matter daddy?"

"Oh nothing, darling, you wouldn't understand. It's just that the market is supposed to go up and it hasn't yet."

"Is this the market daddy? This line on the screen here?"

"Yes." Little Herenow went over and peered intently at the jagged line on the screen. And the she said:

"Well daddy, I don't know anything about the market. But it certainly seems to be going down."

Well dear, that's why you don't understand. You see, the Azerhof numbers say that absolutely, positively the market has to go up here."

"I know, daddy, but right now it seems to be going down."

"Not only that Herenow, but the Melinxar frequencies state unequivocally that the market has got to go up here."

"I know, daddy, but right now it seems to be going down."

"You don't understand, darling. When the Azerhof numbers and the Melinxar frequencies agree, the market has got to go in that direction."

Little Herenow looked puzzled. She went over and peered at the screen once more.

"I don't understand all those things you're talking about, daddy, and I don't understand the market, but right now it seems to be going down. Doesn't it?

Mr. Beright paused and looked carefully at his five year-old daughter. "Would you say that again, Herenow?"

"Just that right now, daddy, the market seems to be going down. That's all. Did I say something wrong?"

"No dear...not at all."

And at that precise moment something snapped in Mr. Beright. All those years of studying Azerhof numbers and Melinxar frequencies and everything else swam in front of his eyes. Then he looked at his little daughter again, picked up the phone and sold out his long position. And what's more, he went very, very short.

Now Mr. Beright is a changed man. Because all that time that he used to spend studying Azerhof numbers and so on he now spends playing golf and enjoying his family. And his friends think he has become very strange, because he has no interest in all those fascinating systems and methods and indicators and statistics about the markets anymore.

But Mr. Beright doesn't care because he's making money. Lots and lots of it."

--From the book "The Adam theory of markets?What matters is profit", by J. Wells Wilder, Chapter one.
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Old Apr 6, 2012, 4:52pm   #15
 
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Re: Bottom Up or Top Down?

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Originally Posted by DionysusToast View Post
Hurrah!!!!
I sense vindication!
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Old Apr 6, 2012, 5:07pm   #16
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Re: Bottom Up or Top Down?

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Originally Posted by DionysusToast View Post
I've been chatting recently to a prop trader that has an interesting philosophy when it comes to day trading.

Basically, it is his view that unless you can just sit down and trade in and out of a market with a co-equal stop & target, just based on the rhythm of that market - you might as well forget adding in anything else to your day trading strategy.

Now - he's not saying that you should be able to make a ton of money doing this. On a market like the ES for instance, take 6 tick target and stop and trade in and out based on the flow of the market. If you can't make a profit doing that, then your chances of day trading with the addition of other analysis techniques are slim.

I hear other people saying a top down approach is better, to refine those higher level methods of analysis before looking at the lower level ones.

Any thoughts?
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Old Apr 6, 2012, 5:11pm   #17
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Re: Bottom Up or Top Down?

Quote:
Originally Posted by DionysusToast View Post
Good link....

I like this bit...
I agree.

Quote:
Try scalping off of the order flow without watching the charts at all. Turn your charts off and try to see support and resistance on the ladder alone.

Many prop firms ask new recruits to initially start to trade without access to any charts; that is to say no indicators, no trend lines, no patterns and, as a result, no temptation to seek the technical analysis holy grail that does not exist. You need to be comfortable executing trades with nothing more than the market depth at your disposal. It is this ability, developed as a result of many hours of intelligent observation and interaction with the market, which actually enables you to employ technical analysis effectively! Technical analysis is a decision support tool for traders. The charts themselves represent a very small percentage of the total, available information upon which elite traders make their decisions.
What do you think about this bit?
Quote:
6. On a real-time chart flip a coin to take a short or long entry when the latest bar is half formed (eg: half an hour into a one hour bar or five minutes into a ten minute bar etc etc). Once you’re in, manage the trade to gain the best result over the next 10 bars.

This exercise gives you with a chart-full of info, but takes away any entry consideration making you focus on the relatively short term action from a given point in the context of managing what you’ve got to best advantage (or least dis-advantage) utilising the info you have in the chart.
BTW, I still don't know why you don't just sell your software outright to ninja,
or negotiate a royalty deal.
Correct me if I'm wrong, but 3rd party plugins are pretty rare in this area aren't they?
Could be putting people off with the machine ID transfer problem if you decide to knock it on the head?
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Old Apr 6, 2012, 6:11pm   #18
 
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Re: Bottom Up or Top Down?

Quote:
Originally Posted by DionysusToast View Post
I've been chatting recently to a prop trader that has an interesting philosophy when it comes to day trading.

Basically, it is his view that unless you can just sit down and trade in and out of a market with a co-equal stop & target, just based on the rhythm of that market - you might as well forget adding in anything else to your day trading strategy.

Now - he's not saying that you should be able to make a ton of money doing this. On a market like the ES for instance, take 6 tick target and stop and trade in and out based on the flow of the market. If you can't make a profit doing that, then your chances of day trading with the addition of other analysis techniques are slim.

I hear other people saying a top down approach is better, to refine those higher level methods of analysis before looking at the lower level ones.

Any thoughts?
Basically what this says to me is that if you don't have an edge on entry that's sufficient to overcome costs and spread, then you won't make it. I disagree with this. There are two parts to the trade, the entry and then the exit. If you have a good edge on entry, you could make money with fixed stop and target same size, like the prop trader suggests. If you have a good edge on exit then you can make money from a random entry system. If you have both, then you can make a lot of money.

However, I suppose he has a point, in that if you can't find an edge with entry, you're unlikely to find one with exit, since that's harder imo.
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Old Apr 6, 2012, 6:27pm   #19
 
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Re: Bottom Up or Top Down?

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Originally Posted by DionysusToast View Post
Are you saying that throwing it all in the pot right from the start is the best approach?
I think so, Lord Toast although I would probably err on the bottom first if I was doing it all over again.
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Old Apr 7, 2012, 1:15am   #20
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Re: Bottom Up or Top Down?

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Originally Posted by Shakone View Post
Basically what this says to me is that if you don't have an edge on entry that's sufficient to overcome costs and spread, then you won't make it. I disagree with this. There are two parts to the trade, the entry and then the exit. If you have a good edge on entry, you could make money with fixed stop and target same size, like the prop trader suggests. If you have a good edge on exit then you can make money from a random entry system. If you have both, then you can make a lot of money.

However, I suppose he has a point, in that if you can't find an edge with entry, you're unlikely to find one with exit, since that's harder imo.
Well said.
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