I'm not at all sure that I follow some of the reasoning on this thread.
why do you need an 'exhaustion' model if trading either momentum or the trend ?
it's not necessary to make a profit out of the whole of a trend.
its the big bit in the middle that's important.
why do you need an 'exhaustion' model if trading either momentum or the trend ?
it's not necessary to make a profit out of the whole of a trend.
its the big bit in the middle that's important.
Grey1
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City ,,
Angry ,, Not at all.. I am interested to be shown the light by floor traders.
Birth of trend:-- ( IMHO of course )
Trend is born when instruments gets OB or OS.. ( death is made by continuation of life .. LOL.. In another word by living we make our own death .. )
Trend is the same.. When instruments get OB or OS relative to a bench mark ( extreme vaue theory ) they are getting ready to trend.. Hence , those who are buying into weakness are automatically getting into trend and should later be selling into strength (we should be selling to users of ADX, trend index, MA cross overs and so on ..) ..
Most conventional trend followers get into the trend far far too late when the trend has actually over and my post was addressing this issue..
PS:-- I really mean no disrespect to any one who uses any kind of TA indicator .. ALL I can say is IF IT WORKS FOR YOU THEN USE IT..
Angry ,, Not at all.. I am interested to be shown the light by floor traders.
Birth of trend:-- ( IMHO of course )
Trend is born when instruments gets OB or OS.. ( death is made by continuation of life .. LOL.. In another word by living we make our own death .. )
Trend is the same.. When instruments get OB or OS relative to a bench mark ( extreme vaue theory ) they are getting ready to trend.. Hence , those who are buying into weakness are automatically getting into trend and should later be selling into strength (we should be selling to users of ADX, trend index, MA cross overs and so on ..) ..
Most conventional trend followers get into the trend far far too late when the trend has actually over and my post was addressing this issue..
PS:-- I really mean no disrespect to any one who uses any kind of TA indicator .. ALL I can say is IF IT WORKS FOR YOU THEN USE IT..
Grey1
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Bonsai,
We need to make sure we are not late arrivals.. This is why we need to know where we stand with trend..
We need to objectively calculate our reward/risk factor if you are getting into an established trend ..
The point I am trying tomake is this :--
When a trend is clear to the eyes of mass participants, then that trend is already over... those who take a positon are exposing themselves to huge risk ..
We need to make sure we are not late arrivals.. This is why we need to know where we stand with trend..
We need to objectively calculate our reward/risk factor if you are getting into an established trend ..
The point I am trying tomake is this :--
When a trend is clear to the eyes of mass participants, then that trend is already over... those who take a positon are exposing themselves to huge risk ..
I think that there is some misunderstanding between identifying
the beginning of a trend and the end of a trend.
"we dont want to be late arrivals" is surely about the beginning
and "exhaustion models" about the end
and why are we talking about a trend that is clear to the
"mass of participants" ?
I would hope that as traders we are onto a trend before the
mass arrives ? As that is probably what makes the trend.
i.e when they all dive in ?
the beginning of a trend and the end of a trend.
"we dont want to be late arrivals" is surely about the beginning
and "exhaustion models" about the end
and why are we talking about a trend that is clear to the
"mass of participants" ?
I would hope that as traders we are onto a trend before the
mass arrives ? As that is probably what makes the trend.
i.e when they all dive in ?
Trader333
you dont have to prove anything to anyone - least of all me
my point was just to say that anyone trading for profit needs a quantifiable and explainable mathematical edge - as opposed to a gut feeling - since gut feelings are for gamblers - and as you have a real and explainable edge - well done and enjoy!
you dont have to prove anything to anyone - least of all me
my point was just to say that anyone trading for profit needs a quantifiable and explainable mathematical edge - as opposed to a gut feeling - since gut feelings are for gamblers - and as you have a real and explainable edge - well done and enjoy!
CityTrader
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Grey1, sorry if I misread your emotions from the post. I wouldn't be so presumptious to think I could show anyone the light. I trade in my own instinctive manner. I speak to dozens of market participants each day to try and get a feel for order flows, I don;t trust TA. I just go with my gut instinct.
W
W
CityTrader
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I trade Equities & Index futures I speak to Hedge fund dealers, Centralised dealers, Individual traders , brokers and a few prop traders. I get the (limited) IOI's off of Bloomberg which are invaluable. No one piece of information ever stands out, but it always helps to get the market flows and a feel for sentiment.
trader333 - having a look at my performance over last 3 weeks, not sure I can do it either!
trader333 - having a look at my performance over last 3 weeks, not sure I can do it either!
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Grey1
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Market Opened strong to day but YHOO falls below it VWAP as shown in the chart by the yellow line.. The VWAP is the price paid by the average trader.. Joe Blogg with his trend following indicator is sitting to ride the trend . All he sees is $$$.. He does not have time to analyse the risk of the trade so hell with the risk and jumps in the market..
Few minutes after YHOO crashes well below its VWAP.. Now this looks interesting .. Now we are talking business..
I took a positon based on L2 support level for my entry .. I sold with 39C profit.. ( Good news ) , I missed the longer trend ( bad news )
conclusion :-- At no stage in this trade I knew if the trend would continue or would reverse but I knew I had bought it cheapr than average trader..WHILE MARKET WAS STRONG ... ( DOW IN POSITIVE )
I also had enough time to analyse the risk of the trade...
I traded 3 times all long with no pair trades...
Few minutes after YHOO crashes well below its VWAP.. Now this looks interesting .. Now we are talking business..
I took a positon based on L2 support level for my entry .. I sold with 39C profit.. ( Good news ) , I missed the longer trend ( bad news )
conclusion :-- At no stage in this trade I knew if the trend would continue or would reverse but I knew I had bought it cheapr than average trader..WHILE MARKET WAS STRONG ... ( DOW IN POSITIVE )
I also had enough time to analyse the risk of the trade...
I traded 3 times all long with no pair trades...
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madasafish
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Well I think this thread is in danger of total confusion..
What is a trend? A movemnet in 1 direction in 1 timeframe.
What is a trend in 1 timeframe can be an oscillation in another.
What is an uptrend in 5 hours can consist of 5 waves, 3 up 2 down ..
etc etc.
So provided you can identify the start and end of the trend in YOUR GIVEN TIMEFRAME, it's totally irrelevant - imo of course - whether it's exhausted, reverses or not ,. The key is to exit with a profit as near to the end of the trend in the timeframe you are looking at. Leave too early and leave £s on the table, too late and you lose profits.
I only trade momentum in the timeframe best suited to measuring it.. in DAX 1 minute or 20 ticks, on ES 2 minutes. My suystems enable me to see short term tops and bottoms to within a few points.. so what if the DAX move is 15 from top to bottom and I only take 10.. ? Fra better than having +15 and closing +7 when it reverses.
Modern TA means you should and can identify safe trading opportunities.. and avoiding losses does mean running profits BUT I prefer to exit and re-enter rather than have 25 points and then lose 8 on the retracements..
Some trade 30 minute charts with wide stops.. each to their own...
The only fundamental analysis I do when daytrading is look at yesterday's Value Area, trend s, pivot points and key support and resistance..
I am familiar with VWAP but it's irrelevant when you are looking to exploit SHORT TERM market inefficiencies which is what daytrading is all about.. If a trend is close to exhaustion it is usually easy to spot:
Tops often end in near vertical climbs followed by rejetcion of resistance and sideways movement .. volume spikes are a giveaway.
Bottoms usually end with a series of increasing rallies as shorters close out.. or a straight fall through resistance and then a pullback to and then above.. all accompanied by volume spikes, widening Bollinger Bands etc..
No case is the same but they are all subtly similar.
I've given up predicting changes: I expect they may happen and jump on them when they do or if not sure wait for confirmation..
Geometry is the key.. combine with momentum and it's a giveaway..
Momentum on its own can be misleading (sell spikes or buy them? ) Each day is different: each trend is different.. But they all obey the same geometrical and momentum rules.. If the price is above the 3 ema and the 9 ema and both are rising above 20 ema the trend continues. If price is below 3 but above 9 we may have a pullback. If price is below 3 and 9 and both are falling and below 20 which is falling it's a downtrend..
And all the various other combinations.. in any timeframe...
After all we are in a gigantic bullmarket from 1929, or 1960. A bear market from 2000 and a bull from March 2003. Name your timeframe and chose your trend: momentum works in them all.. fundamentals do not...
What is a trend? A movemnet in 1 direction in 1 timeframe.
What is a trend in 1 timeframe can be an oscillation in another.
What is an uptrend in 5 hours can consist of 5 waves, 3 up 2 down ..
etc etc.
So provided you can identify the start and end of the trend in YOUR GIVEN TIMEFRAME, it's totally irrelevant - imo of course - whether it's exhausted, reverses or not ,. The key is to exit with a profit as near to the end of the trend in the timeframe you are looking at. Leave too early and leave £s on the table, too late and you lose profits.
I only trade momentum in the timeframe best suited to measuring it.. in DAX 1 minute or 20 ticks, on ES 2 minutes. My suystems enable me to see short term tops and bottoms to within a few points.. so what if the DAX move is 15 from top to bottom and I only take 10.. ? Fra better than having +15 and closing +7 when it reverses.
Modern TA means you should and can identify safe trading opportunities.. and avoiding losses does mean running profits BUT I prefer to exit and re-enter rather than have 25 points and then lose 8 on the retracements..
Some trade 30 minute charts with wide stops.. each to their own...
The only fundamental analysis I do when daytrading is look at yesterday's Value Area, trend s, pivot points and key support and resistance..
I am familiar with VWAP but it's irrelevant when you are looking to exploit SHORT TERM market inefficiencies which is what daytrading is all about.. If a trend is close to exhaustion it is usually easy to spot:
Tops often end in near vertical climbs followed by rejetcion of resistance and sideways movement .. volume spikes are a giveaway.
Bottoms usually end with a series of increasing rallies as shorters close out.. or a straight fall through resistance and then a pullback to and then above.. all accompanied by volume spikes, widening Bollinger Bands etc..
No case is the same but they are all subtly similar.
I've given up predicting changes: I expect they may happen and jump on them when they do or if not sure wait for confirmation..
Geometry is the key.. combine with momentum and it's a giveaway..
Momentum on its own can be misleading (sell spikes or buy them? ) Each day is different: each trend is different.. But they all obey the same geometrical and momentum rules.. If the price is above the 3 ema and the 9 ema and both are rising above 20 ema the trend continues. If price is below 3 but above 9 we may have a pullback. If price is below 3 and 9 and both are falling and below 20 which is falling it's a downtrend..
And all the various other combinations.. in any timeframe...
After all we are in a gigantic bullmarket from 1929, or 1960. A bear market from 2000 and a bull from March 2003. Name your timeframe and chose your trend: momentum works in them all.. fundamentals do not...
grey1
i have always wanted to check out your WWAP thing as i liked your pairs aspect of it - but never got round to it - in part because i always get disapointed with any new things!
but had a look at this one as you kindly presented the chart
have you ever compared the results of using WWAP with using other market technical indicators and seeing how they match up with WWAP?
i only use options to trade stocks - but had i just used stock price on its own and key price closes - i would have ended up with an entry of 52.39 - adding to the position at 52.56 - but ready to immediatly close this new total position - but not needed as price responded as would be hoped for a long position and from there is was a home run right into the close
all technical indicators will always relate to price action and signals from price action only - since technical indicators are always going to be drawn to the key areas of price action
has it been harder to find possible pairs for the WWAP methodology - i like the pairs thing far more
but hey, you are the one lining your nest nicely with your way of doing it, so keep it up
i have always wanted to check out your WWAP thing as i liked your pairs aspect of it - but never got round to it - in part because i always get disapointed with any new things!
but had a look at this one as you kindly presented the chart
have you ever compared the results of using WWAP with using other market technical indicators and seeing how they match up with WWAP?
i only use options to trade stocks - but had i just used stock price on its own and key price closes - i would have ended up with an entry of 52.39 - adding to the position at 52.56 - but ready to immediatly close this new total position - but not needed as price responded as would be hoped for a long position and from there is was a home run right into the close
all technical indicators will always relate to price action and signals from price action only - since technical indicators are always going to be drawn to the key areas of price action
has it been harder to find possible pairs for the WWAP methodology - i like the pairs thing far more
but hey, you are the one lining your nest nicely with your way of doing it, so keep it up
madasafish
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Grey1
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Stevet,,
Quote "have you ever compared the results of using WWAP with using other market technical indicators and seeing how they match up with WWAP? "
There are two kind of technical indicators as I am sure you know..
1)
Those which tell you there is a trend but can't tell you if trend will continue.. These are trend following indicators.. Like those posted in madasafish chart
2) Those which tell you there is more chance of reversal than X bar ago..
Both above ignore one simple fact and that is the price bench mark set by mass participants during the trading day ..
I no longer use TA indicators because they dont performed in real time ( they are excellent for POST EVENT ANALYSIS.. HEY LOOK AT THAT MOVING AVERAGE SIGNAL IT TELLS YOU WHEN TO GET IN AND WHEN TO EXIT ..) and this is my honest answer.. I know most people love their RSI . CCI or MA but for me the answer is NO ..
I will quote this from a pro site for your attention ..
Quote " Relative value traders and arbitragers often monitor the Money Flow chart and the VWAP chart closely and simultaneously. Both charts should move in tandem in proportions: higher positive Money Flow should drive the price and the VWAP higher, while stronger negative Money Flow should push the price and the VWAP lower. In case one sees a significant drop in VWAP accompanied by sizable positive Money Flow, one could expect that the price will quickly recover and it is a golden short term buying opportunity. The opposite is also true.
I use VWAP in slightly different manner as to above quote but with the same principle in mind.. There other researcher who use VWAP in other ways ...
http://www.traders.com/Documentation/FEEDbk_docs/Archive/052001/Abstracts_new/Reyna/Reyna.html
Use of VWAP and L2 is very suitable to my style of trading ..
Quote "have you ever compared the results of using WWAP with using other market technical indicators and seeing how they match up with WWAP? "
There are two kind of technical indicators as I am sure you know..
1)
Those which tell you there is a trend but can't tell you if trend will continue.. These are trend following indicators.. Like those posted in madasafish chart
2) Those which tell you there is more chance of reversal than X bar ago..
Both above ignore one simple fact and that is the price bench mark set by mass participants during the trading day ..
I no longer use TA indicators because they dont performed in real time ( they are excellent for POST EVENT ANALYSIS.. HEY LOOK AT THAT MOVING AVERAGE SIGNAL IT TELLS YOU WHEN TO GET IN AND WHEN TO EXIT ..) and this is my honest answer.. I know most people love their RSI . CCI or MA but for me the answer is NO ..
I will quote this from a pro site for your attention ..
Quote " Relative value traders and arbitragers often monitor the Money Flow chart and the VWAP chart closely and simultaneously. Both charts should move in tandem in proportions: higher positive Money Flow should drive the price and the VWAP higher, while stronger negative Money Flow should push the price and the VWAP lower. In case one sees a significant drop in VWAP accompanied by sizable positive Money Flow, one could expect that the price will quickly recover and it is a golden short term buying opportunity. The opposite is also true.
I use VWAP in slightly different manner as to above quote but with the same principle in mind.. There other researcher who use VWAP in other ways ...
http://www.traders.com/Documentation/FEEDbk_docs/Archive/052001/Abstracts_new/Reyna/Reyna.html
Use of VWAP and L2 is very suitable to my style of trading ..
Grey1
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Stevet,
Sorry forgot to address ur Pair trade question..
In a strong trending day such as to day where market does not oscialltes around its VWAP then there wont be any point to pair trade.. of course if I did have a signal I could take the signal but I would then need to increase my position size to make the trade worth while and that in turn would increase my money managment risk and on top of that would not get the fill any way ..
Sorry forgot to address ur Pair trade question..
In a strong trending day such as to day where market does not oscialltes around its VWAP then there wont be any point to pair trade.. of course if I did have a signal I could take the signal but I would then need to increase my position size to make the trade worth while and that in turn would increase my money managment risk and on top of that would not get the fill any way ..
Grey1
the point of my prior post was not to say that i thought TA was better than WWAP - but i just found that when i checked some real TA indicators that can be used for trading, against the WWAP set up - at least on that particular graph - the TA would have got you into the move and kept you into it right until the close, even giving a chance to add to the position
i guess my point is that i am an expert at TA, but the more i got into it and the more expertise i got, the more i frustratingly found that i could achieve the same results by just using price without bothering with any sort of indicators and in fact by cutting out the TA, you kinda cut out the noise which affects trading decision making speed -althouhg stocks are more sensitive to TA than indicies
the point of my prior post was not to say that i thought TA was better than WWAP - but i just found that when i checked some real TA indicators that can be used for trading, against the WWAP set up - at least on that particular graph - the TA would have got you into the move and kept you into it right until the close, even giving a chance to add to the position
i guess my point is that i am an expert at TA, but the more i got into it and the more expertise i got, the more i frustratingly found that i could achieve the same results by just using price without bothering with any sort of indicators and in fact by cutting out the TA, you kinda cut out the noise which affects trading decision making speed -althouhg stocks are more sensitive to TA than indicies
cassiopeia
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Trader333
You said
"What I mean is that during the trading day there are a number of trading opportunities that come about because the instrument is either overvalued or undervalued when compared to a method I use to measure it. "
I am amazed that anyone can use 'value' for daytrading, surely you don't mean fundamentals? perhaps your definition of value is different than the traditional ones used by long term traders/investors. It is widely believed that price action in the short term (say less than 1 month) is dominated by technical factors.
I see myself as a medium term momentum trader (holding about 1 week to a month) but as with most methods it requires the application of money management to work. It is difficult to isolate the methodologies, the strategy has to be viewed holistically.
I don't see why a combination of value on one hand and TA/price action on the other cannot be made into a viable strategy, however one would have to use the former as a filter for the latter and not try to analyse the two methods simultaneously. The value investing would find the long term effect and the TA/price action would deal with the shorter term fluctuations.
You said
"What I mean is that during the trading day there are a number of trading opportunities that come about because the instrument is either overvalued or undervalued when compared to a method I use to measure it. "
I am amazed that anyone can use 'value' for daytrading, surely you don't mean fundamentals? perhaps your definition of value is different than the traditional ones used by long term traders/investors. It is widely believed that price action in the short term (say less than 1 month) is dominated by technical factors.
I see myself as a medium term momentum trader (holding about 1 week to a month) but as with most methods it requires the application of money management to work. It is difficult to isolate the methodologies, the strategy has to be viewed holistically.
I don't see why a combination of value on one hand and TA/price action on the other cannot be made into a viable strategy, however one would have to use the former as a filter for the latter and not try to analyse the two methods simultaneously. The value investing would find the long term effect and the TA/price action would deal with the shorter term fluctuations.
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