Price & Volume & Other Things (possibly indicators too at some stage...)

[pttrader]

Hi pttrader,

On behalf of all the dumbos who are trying to follow your posts but can't quite keep up with the pace, any chance of posting an annotated chart illustrating the points you're making? I'd really appreciate it and I'm sure others would too.
Cheers,
Tim.

I may do this a little later on but will wait and see first how this discussion turns out. But, as an aid simply draw 2 daily bars side by side with open and close ticks and apply what has been said thus far. I think it will become quite visually obvious. I do understand that there are visually oriented learners. I learn better with just facts and numbers..etc but at the appropriate time I will possibly attempt to make the concepts visual. But I wish for this to develop a little more first, if in fact there is enough interest to keep it going.There are many things that can be measured....

PT

 

[cas54]

Yes, I had thought about looking into intra day price movement patterns. I know that in the bond market you sometimes get recurring patterns.
e.g. the US-Germany yield spread has in the past shown widening pressure at the same time each day for about a week. It makes no sense given that the large funds/real money accounts should avoid doing things at the same time each day so as to avoid being front-run. But regardless, they tend to have their meetings and hence do most of their execution at similar times each day and given that they will normally scale into positions over a few days, you can sometimes spot a pattern developing.
Again, this is only a small part of the whole price movement generation...

 

[pttrader]

After all, you never know what you don't know....

Bramble
A good statment for any trader to keep in mind!

PT

 

[ducati998]

Bram,
What are your thoughts relating to your thread so far?
Are you any closer to a definition that will improve your returns?

What I'm looking for is an explanation for why my successful trades are successful. I've narrowed it down to these factors (I think) and find myself a little exasperated that I can't empirically define what it is I'm doing in these instances. I'm willing to accept it is a culmination and accumulation of everything I've done, read, traded, thought, talked about, watched etc. - but to set it out in plain language is rather difficult to do.

Speculation = 50% + X% +Y% - Z% = 100%
Where "X" = probability of setup historically tested, to a statistical relevance.
And ...."Y" = stoploss ( the further the stop from price the lower # times it will be hit, the closer, the more frequently it will be hit)
And "Z" = unknown factors that may be introduced during the holding period viz, news.

Therefore, "Y" will show a low % when the probability % is high, and conversely the opposite when the "X" probability is low, "Y" will be higher. Both will be affected by a larger or smaller "Z" factor accordingly.

By analysing your trades in some form of quantitative form, you will come a few steps closer to understanding the elements that form the basis of your trading decision, thus start to eliminate the riskier trades, or at least your money management can be adjusted to show the management of risk appropriate to the risk you have assumed.

cheers d998

 

[TheBramble]

Bram,
What are your thoughts relating to your thread so far?
Are you any closer to a definition that will improve your returns?

My thoughts? Well, I never have any expectations of things like this - more like a 'see how it turns out'.

I'm not trying to improve my returns (well, of course I am, but that's not the direct purpose of this thread). The purpose was an attempt to analyse what it is I do (and others presumably) in relation to those price factors, qualities, whatever you want to call them.

I really should have been putting more of my own input up for discussion as it was my idea, but I've been really so busy. I will remedy that later. What I have in mind is a 'This is what the price typically looks like when I do this and then this happens and then this is what the price characteristic THEN looks like'.

It actually sounds a lot more complex than it will be.

 

[barjon]

Tony

I'm finding this quite difficult given the primacy of my few rules. i suppose if it came to a contest of which entry to take then I'd favour the one that looked most like the idealised thumbnail and associated likes.

You might ask why I don't more thoroughly research each of those factors on past trades. Well, I don't want to scrutinise the engine too much and/or try to tune it up. 40mph is ok for me and I don't want to risk it dropping to 30mph in an attempt to get 50mph. Or is that just an excuse for laziness

As I've said in the thumbnail, a lot of it is pretty standard stuff and I suppose it's a moot point whether my "like it" feelings come from knowledge of the standards or from trading experience. Bit of both I guess.

good trading

jon

 

[cas54]

Jon - in order to keep things "clean" and not "bobbing about", do you make it a rule for your entry bar to immediately succeed the low bar (as in your diagram)?

 

[barjon]

cas

Mostly, yes, but it's not absolute. One or two narrow range inside days I happily ignore.

jon

 

[TheBramble]

You might ask why I don't more thoroughly research each of those factors on past trades. Well, I don't want to scrutinise the engine too much and/or try to tune it up. 40mph is ok for me and I don't want to risk it dropping to 30mph in an attempt to get 50mph. Or is that just an excuse for laziness

Dunno about laziness Jon, possibly - more likely fear?

But have you genuinely never noticed your swing low trigger is preceded (mostly) by bars with a close toward the top of the range and your pre-trigger bar has the close dropping much lower in the range?

 

[barjon]

Dunno about laziness Jon, possibly - more likely fear?

But have you genuinely never noticed your swing low trigger is preceded (mostly) by bars with a close toward the top of the range and your pre-trigger bar has the close dropping much lower in the range?

Tony

Fear? Maybe - but I do know how to drive at 40mph, I might get carried away at 50 and come to a sticky end

Yes, I have looked at where the closes come but, aside from the swing low bar itself, I've not found anything sufficiently convincing to include in my plan as a preferred condition, let alone a rule. As I said before that's probably more to do with my interpretive nous than anything else.

good trading

jon

 

[TheBramble]

=Fear? Maybe - but I do know how to drive at 40mph, I might get carried away at 50 and come to a sticky end

No, what I meant was fear of 'fixing' something that ain't broke / Golden Goose and all that rather than physical fear.

. As I said before that's probably more to do with my interpretive nous than anything else.

Yep. Me too. And that's what I'm attempting to de-nous...

 

[barjon]

No, what I meant was fear of 'fixing' something that ain't broke / Golden Goose and all that rather than physical fear...

Oh, that fear - yes, you're spot on .

 

[TheBramble]

I've just deleted a post I made last night which was a stab at further defining what the hell I'm trying to do with this thread. I looked at just one type of 'Action' together with Volume...and spent the best part of the last 7 (sleepless) hours worrying about what I was suggesting.

Came to the conclusion it was worse than useless - hence its deletion.

The Thing Is - When you isolate any subset of factors from the entire Universe of information you use to trade, it becomes worthless. Or worse than. It suggests that by looking at 'just these factors' you can make trading decisions in the market. I have a growing feeling that any attempt I make to reverse engineer what I do in order to empirically define my strategies is doomed to failure.

This failure may simply be my personal inability to articulate a process that may or may not be largely Unconscious - or it may be the general impossibility of the proposed operation itself. Which would mean any attempt by anyone to do so would be similarly doomed. Can't quite bring myself to accept the latter as none of us would be any further forward in our trading development than when we first started.

Perhaps this is why there never has and possibly never will be any book/seminar/post on trading which 'explains' the entire basis of the phenomenal aspects of any market scenario and optimum approach to take based on that scenario. There are simply too may factors which have to be Unconsciously taken on board - and we are largely unaware of what these factors were/are consciously. Which might also explain the apparently wide difference in opinion and style evident among any given group of traders.

It might also explain the seemingly endless round of posts on this and other trading sites which quite literally, go round in circles. Chasing the tail of a dog which doesn't exist.

In spite of valiant efforts and good intent from many, I am coming to the conclusion that trading skills can not be defined, taught, described or discussed - sensibly. Only exposure and experience to markets, information and yes, books and boards, can bring about (in some but not all) the gestalt that is successful trading ability.

(Maybe I'm just tired. I reserve the right to be pointlessly optimistic again shortly.)

 

[Splitlink]

Tony,

I have been trading for many years and have come round full circle so many times that I have permanent dejá vu sindrome. Basically, the KISS method is the best. Add that to consistency and the rest is a waste of time, although it is nice to expound opinions on these threads.

To be honest with myself, as well as with you guys, I thank God that I am not more than a small time trader who is very interested in the subject. My main successes over the years have always been in my old fashioned, buy and hold long term broker portfolio and they have saved me from disaster and given me much satisfaction.

That is the built-in danger that traders face. The everyday trading opportunities that present themselves give traders the desire to chop and change, which does not happen with a portfolio of held shares.

Split

 

[BroadSword]

That's a very interesting post, Tony...

I've been thinking recently about just how complicated - or simple - a trading 'edge' has to be. We are told that (pick your exact percentage) about 5% of people consistently succeed at this. We are also told that so many make simple errors (no sytematic plan, running losses and snatching small profits, poor money management etc).

It makes me think about whether even simple ideas (e.g. just following a 1-2-3 pattern strategy) will be consistently profitable if all you do is follow simple rules that most can't or won't follow:
e.g. (1) Strictly adhered to money management
(2) following a written trading plan to the letter, once you feel it has at least some positive expectancy
(3) Not making the basic mistake of running losses in the hope they'll come round - I guess this is addressed under (2)

Afterall, what percentage of traders trade a written plan, stick to it rigidly, don't take stupid boredom trades, stand aside if appropriate, don't break the rules etc etc etc?

Would this figure also be about 5%? Or is there a lot more to it?

 

[TheBramble]

Good points guys. You're highlighting the need for sticking to a basic strategy and having a trading plan. Along with Risk and Money Management I couldn't agree more. What I am (was?) having difficulty with was defining the purely strategy-side of my game.

Since my earlier post this morning I've realised 2 things.

1. The problem I had with analysing charts to support what I was trying to do here were they essentially felt 'lifeless'. Apart from the sheer overwhelm of even just 6 primary factors and their inter-relationships, there was a sense of 'something missing' And there is. LII and T&S.

Although LII and T&S don't feature in my primary setup criteria - they do ultimately determine when and if I hit the button on a trade.

So trawling through hundreds of 'dead' EOD charts wasn't going to do it. I'd forgotten what else I use (need?) to be effective in my trading. Which brings me to my 2nd realisation.

2. I switched from EOD to intraday some time back and posted not too long ago that when other non-trading commitments impact my schedule, I simply switch to a longer timeframe and trade. Which I did. In these situations, the LII and T&S had less prominence (if any at all on many trades) and I kidded myself I was doing just as well on the longer timeframes as on my normal intraday ones. Although I do not keep detailed statistics on my trades these days, a cursory look back at my bottom-line during that EOD period shows significantly less success. Still profitable, but nowhere near my normal levels. Sure, this could be a temporal thing and I could have fared as badly during that period even trading intraday, but I somehow doubt it.

It's a classic case of not being aware consciously of market information which I have Unconsciously inculcated - i.e. my use of LII and T&S.

Which rather exacerbates the problems I mentioned earlier in any attempt to codify or systemise strategies.

It's not just the complexity of considering ALL the factors you use when trading - it's actually being aware enough of them to shake a stick at them in the first place.

It's Sunday - why am I here...?

 

[barjon]

Tony,

Well no-one said it was easy

As you say there not only so many factors, but those factors themselves are variable. I doubt anyone can find a certain a+b+c+d+e+f+g+h+i+j = x relationship. And, if they do, they better hope no-one else finds it because, as it becomes more widely known, more and more traders take contrary advantage from it until the early "certainty" becomes just a memory.

I suppose it's all like listening to a piece of music and trying to anticipate the next series of notes from what's gone before. When you can discern the underlying theme there's a good chance you can hum the next few bars and not be far out. Unfortunately we're listening to Shostakovich not Beethoven

good trading

jon

 

[barjon]

ps: it's Sunday why am I here

 

[TheBramble]

ps: it's Sunday why am I here

...becuase I am and you're been tasked with tailing me....

 

[Splitlink]

ps: it's Sunday why am I here

Because we are interesting!