Mind the Gap

[Atilla]

I think timeframes are important depending on ones trading style/system.

If one uses common candle stick formations to identify repeating patterns of psychology in the market place then the formations can only be compared in pre-determined time-frames.

Simply put - one can't compare, 1Hr, 1D & 1W formations in a three candle pattern to reach any meaningful view of market.

If you think candlesticks are waste of time and offer not much then fair cop. Otherwise time-frames essential for determining candle formation patterns in set time-frames.

 

[PieterSteidelmayer]

All this stuff about "higher timerfame trends" is nonsense if it zips up 10 points, zips down 10 points and ends up where we started.

Not sure it's all nonsense sir. All depends on over what period of time it does the zipping up and down.

If that 10 point move up and down occurred over a few minutes or even hours, a trader using a daily chart will not have been able to gain advantage from the move, but one trading the shorter timeframes may well have been able to.

 

[tar]

The problem is Tar...

You already presumed there is validity in considering market in "timeframes".

You argue about which timeframes are better but that's based on the presumption that timeframes are relevant in the first place.

I dont think they are.

George Soros and Warren watch levels totally different than yours , and scalpers/algos look at another sort of levels as well , some hold trades for seconds or minutes and some may hold their positions for a year or 2 , so definitely there are different ways to approach the markets , different levels and dimensions and different holding times ...

 

[PieterSteidelmayer]

George Soros and Warren watch levels ...

I doubt it very much.

 

[timsk]

I doubt it very much.

Hi PS,
I may be wrong, but my interpretation of tar's post was merely that both men have some idea when they'll take action. After all, great as they are (as speculators), they still have to enter and exit positions somewhere. When they press the button - or instruct their minions to do it for them - there must be some catalyst. I don't know about Soros, but Buffett is a value investor. Therefore, it's reasonable to presume that he has an idea - i.e 'a level' at which the price of a company he's interested in looks cheap, no?
Tim.

 

[Atilla]

Hi PS,
I may be wrong, but my interpretation of tar's post was merely that both men have some idea when they'll take action. After all, great as they are (as speculators), they still have to enter and exit positions somewhere. When they press the button - or instruct their minions to do it for them - there must be some catalyst. I don't know about Soros, but Buffett is a value investor. Therefore, it's reasonable to presume that he has an idea - i.e 'a level' at which the price of a company he's interested in looks cheap, no?
Tim.

This article in the fortune magazine gives a good insight into the value investors mind.

Here is an extract from the link.

When Charlie Munger and I buy stocks -- which we think of as small portions of businesses -- our analysis is very similar to that which we use in buying entire businesses. We first have to decide whether we can sensibly estimate an earnings range for five years out or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects. In the 54 years we have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.

http://finance.fortune.cnn.com/2014/02/24/warren-buffett-berkshire-letter/

 

[teflon142]

but if you simply can’t get comfortable with a longer timeframe and are willing to pay through the nose, at least LOOK at the higher timeframes before placing your trades. Would you be taking that same trade in that higher timeframe?

Markets do not have timeframes.

 

[teflon142]

All this talk about a professional trader "working the hourlies" etc is ********.

 

[teflon142]

Maximizing Opportunities
Pro traders tend not to have set views on which direction an asset is going to move. Sure there’ll be a fundamental element to price development in the physicals and on the predominantly speculatively traded assets there will be an underlying directional pressure, but these are treated as meta-trends, a general indication of probable price development around which the actual price will gravitate.

You can eyeball the slope of any asset and get an immediate sense of that meta-trend. What many retail traders do though is only trade when the price is moving in the direction of that meta-trend. That’s very cautious and nothing wrong with being cautious. But they pay a price.

If you’re able to visualize or even calculate the median around which an asset is exhibiting directional characteristics, you’ll note the overshoots in favour of the meta-trend are larger than the under-shoots against that meta-trend so don’t try and be too clever fitting your median as it’s supposed to be asymmetric – that’s the whole point.

To give a more tangible example:- you’ve got an asset that is exhibiting clear downward price trend. The troughs tend to be deeper than the peaks. You come down hard against one or more technical resistance levels and price stalls, and then starts to rise. Depending on where the price is in relation to its median you have a number of options. Sit tight on your short or close part or all of it and wait for downward pressure to resume. That’s safe. However, if you’ve deduced the price has undershot the median by a statistically significant deviation, there is a reasonable trade off on taking a long position up to at least the next area of potential resistance.

If you’re following a number of assets than you probably won’t want to consider this extra workload, but in quiet markets or if you’re only tracking a few assets, then it keeps your head in the game and doing the work. One of the biggest threats to any trader is boredom and lack of focus.

Bull**** doesn't always baffle brains.

 

[ffsear]

Buffet and Soros have got sweet FA on me when it comes to retail success. They play a different different ballgame.

You're worshiping the wrong gods!

 

[teflon142]

Allegory of the Cave, innit.

If you only ever see mkts through charts, that's all you'll assume them to be.

 

[ffsear]

People see the markets in 100000000 different ways. That's why they work!

If the markets were that simple they would cease to exist.

Difference of opinion is what powers the markets.


edit: I've had a couple of drinks tonight¬ :clap:

 

[Atilla]

People see the markets in 100000000 different ways. That's why they work!

If the markets were that simple they would cease to exist.

Difference of opinion is what powers the markets.


edit: I've had a couple of drinks tonight¬ :clap:

I always think when someone starts talking in ****** you know they are talking *******!

Just another big EGO who knows it all telling it like it is.

 

[DionysusToast]

DT,

You posted:


and later also posted:



You didn't explain why so doesn't that also become a non valid counterpoint ?

The market is a collection of participants trading in an instrument for various reasons.

Time based charts split that information into chunks representing periods of activity.

That's OK in itself, it is just after all a way to display the data. The way people assign importance to specific timeframes e.g. "1 minute timefame is noise" or "1 hour timeframe needs bigger stops". etc is giving too much validity to the data format.

So 1 minute charts, 1 second charts, 1 hour charts - doesn't make a bit of difference.

The "tail" or "whick" on a candlestick is also pretty meaningless as it will exist on one timeframe and not on another.

Has anyone actually done anything to validate the importance they assign to these timeframes? It's just taken as a given that this way of thinking is somehow valid.

 

[Atilla]

The market is a collection of participants trading in an instrument for various reasons.

Time based charts split that information into chunks representing periods of activity.

That's OK in itself, it is just after all a way to display the data. The way people assign importance to specific timeframes e.g. "1 minute timefame is noise" or "1 hour timeframe needs bigger stops". etc is giving too much validity to the data format.

So 1 minute charts, 1 second charts, 1 hour charts - doesn't make a bit of difference.

The "tail" or "whick" on a candlestick is also pretty meaningless as it will exist on one timeframe and not on another.

Has anyone actually done anything to validate the importance they assign to these timeframes? It's just taken as a given that this way of thinking is somehow valid.

DT sounds to me like you very well know the relevance of time based on your post above.

Pretty obvious whether one is a swing trader or day trader they'll use/switch one set of TF charts to another. ATR obviously various widely between 1m and 1h and 1d, 1w charts.

MAKES A BIG DIFFERENCE to entry, stops and exit. YOU KNOW IT TOO so stop knocking other peoples system and trumpeting how fabulously fantastic you are (which we already know).

 

[PieterSteidelmayer]

Hi PS,
I may be wrong, but my interpretation of tar's post was merely that both men have some idea when they'll take action. After all, great as they are (as speculators), they still have to enter and exit positions somewhere. When they press the button - or instruct their minions to do it for them - there must be some catalyst. I don't know about Soros, but Buffett is a value investor. Therefore, it's reasonable to presume that he has an idea - i.e 'a level' at which the price of a company he's interested in looks cheap, no?
Tim.

That was my point.

 

[DionysusToast]

DT sounds to me like you very well know the relevance of time based on your post above.

Pretty obvious whether one is a swing trader or day trader they'll use/switch one set of TF charts to another. ATR obviously various widely between 1m and 1h and 1d, 1w charts.

MAKES A BIG DIFFERENCE to entry, stops and exit. YOU KNOW IT TOO so stop knocking other peoples system and trumpeting how fabulously fantastic you are (which we already know).

"It's pretty obvious" - but you cannot explain why. You are just knocking me, accusing me of blowing my own trumpet without adding any meat to the bone of you own argument. Attack the post, not the poster...

We use charts to see where a market has been. Whether you use a 30 minute or 60 minute chart is quite irrelevant.

"Tails" that appear on a 60 minute and not on a 30 minute chart help to show the futility of reading anything into any individual bar or even a series of bars.

A 1 second chart shows the same information as a 60 minute chart. The only benefit of a 60 minute chart is that you see more history on the screen than the 1 second chart shows.

The problem appears to be that people have a fixation on candlestick patterns and "markets being fractal" - they try to come up with a "one size fits all" approach to analyzing a price chart and apply the same techniques on all of these "timeframes".

There is no rule that says your stop size will be any different because you are using a different timeframe chart UNLESS you are using mechanical candle patterns that "occur in all timeframes" to set your stops - which Is something I don't agree with.

On Futures markets like Eurex & CME, there are days where it can be demonstrated that 90% of the traders that got in, also got out. That on an intraday basis there was almost nothing but pure speculation occurring. It is very specific activity related to intraday trading.

It also goes to follow that this intraday activity is unique to day trading. That alone makes this whole "fractal charts" theory problematic. The stuff you see intraday is specific to intraday. The stuff you see at the end of the day is specific to people getting out of dodge. This does not repeat itself "fractally" on higher timeframes.

 

[tar]

While a daily chart may be showing a strong uptrend a 1 min chart may show a strong downtrend , so each time frame shows different data its a case of zooming-in or out , therefore trading decisions will differ depending on which time-frame has been used .
And surely your stop will be different if you are going to follow a trend on a daily chart compared to your stop if you followed a trend in a 1 minute chart , your stops will never be the same .

 

[Atilla]

"It's pretty obvious" - but you cannot explain why. You are just knocking me, accusing me of blowing my own trumpet without adding any meat to the bone of you own argument. Attack the post, not the poster...

We use charts to see where a market has been. Whether you use a 30 minute or 60 minute chart is quite irrelevant.

"Tails" that appear on a 60 minute and not on a 30 minute chart help to show the futility of reading anything into any individual bar or even a series of bars.

A 1 second chart shows the same information as a 60 minute chart. The only benefit of a 60 minute chart is that you see more history on the screen than the 1 second chart shows.

The problem appears to be that people have a fixation on candlestick patterns and "markets being fractal" - they try to come up with a "one size fits all" approach to analyzing a price chart and apply the same techniques on all of these "timeframes".

There is no rule that says your stop size will be any different because you are using a different timeframe chart UNLESS you are using mechanical candle patterns that "occur in all timeframes" to set your stops - which Is something I don't agree with.

On Futures markets like Eurex & CME, there are days where it can be demonstrated that 90% of the traders that got in, also got out. That on an intraday basis there was almost nothing but pure speculation occurring. It is very specific activity related to intraday trading.

It also goes to follow that this intraday activity is unique to day trading. That alone makes this whole "fractal charts" theory problematic. The stuff you see intraday is specific to intraday. The stuff you see at the end of the day is specific to people getting out of dodge. This does not repeat itself "fractally" on higher timeframes.

Not knocking you at all, simply knocking back and I am a fan of your posts too. Also agree with a lot of what you say.

I can not use short time frames to place limit orders, identify SRs, PPoints or Fib retrace levels. I usually set them up over the weekend or evenings as I work.

before big news days I also use BB breakouts with OCO trades on very short TF before the news.

As systems go I think time is a big deal depending on trading style n system in use.


Theoretically yes markets don't have time but so does nothing else including the hurtling light particle. Everything is a construct of man to aid our interpretation and understanding.

 

[Splitlink]

While a daily chart may be showing a strong uptrend a 1 min chart may show a strong downtrend , so each time frame shows different data its a case of zooming-in or out , therefore trading decisions will differ depending on which time-frame has been used .
And surely your stop will be different if you are going to follow a trend on a daily chart compared to your stop if you followed a trend in a 1 minute chart , your stops will never be the same .

That's how it seems, to me.

In thread after thread, it returns to the same topic. The stop, or point of exit. Anyone who has taken advice, often discussed, as well, will be careful with his risk as a porcentage to his account. Someone, with a low budget, will tend to trade on the smaller TFs. That is, probably, why the majority, ie. The losers, are small TF traders.

We keep on going around and around this same problem and there is no answer to it, except from one's own philosophy on how to work the trade.

Because I can, I am, currently using the 15 min TF and, for right or wrong, I am using that TF because I calculate my risk better.

Another subject seems to be the merits of using a chart, or not. I make no apologies for stating that I am unable to visualise which direction to take, or whether the price is overbought/sold, without one. Those who use orderflow and other tools, successfully, without the use of charts, have my admiration and I will. always read their posts in the hope that they will knock something into my thick head.

I hope that that last will show my lack of ego