Price, (Volume), Support, Resistance, Demand, Supply . . .

[Spam Man]

If the direction of prices were truly unknowable, all of this would be like a game of roulette in a casino, or like the final destination of a raindrop running down a window pane,

Totally wrong.

As for predicting prices in the future :

1) It doesn't work.
2) It isn't necessary.

Anyone who tells you otherwise is not a trader, and is probably trying to sell something.

You'll forgive me for changing the colour of the text in your quote. I was trying to make it look slightly less stupid.

 

[SOCRATES]

Now Socrates, I can not resolve your statement above, with your many admonitions to keep a tight stop. If the future price is *knowable* (that is with absolute certainty), wouldn't a stop be unnecessay? I expect that both you and DBP agree that price action will always show you what the price is doing *now*, and that strength of the current movement may give a clue about how far it might go before the run peters out, and that if a large meteor fell unexpectedly out of the sky it might spook the herd or the major players might change their minds, - and then, - well isn't that why we use stops?

Certainly some situations seem to shout their clues louder than others, but aren't we all prepared to change our positions if our reasons for entering the trade no longer exist?

JO

OK.

Now what happens is the market is divided between efficient traders and inefficient traders.

Their postures are diametrically opposite.

The inefficient trader views everything, even clearly marked opportunities from the point of view of risk, that is risk first and opportunity to follow.

The efficient trader does not think or act like this.

The efficient trader is able to recognise what is an opportunity and what is not.

Therefore the efficient trader is able to act selectively and not use a scattergun approach.

For this reason the efficient trader will commit quickly having chosen the correct entry point and sychronised the timing of entry correctly.

Because of this part of his trading armoury (which is the skill aspect) having been perfected, he is certain to be right many many more times than he is wrong.

For this reason, when he is wrong to kick off with, being wrong to kick off with will deliver to him an information shock that he has to prepare for in the event of it happening, by preparing a mental stop in advance.

If this being wrong is finite, then the stop prevents loss.

If his being wrong is only temporary, then the stop prevents loss during the period of pullback.

It allows him to re enter at a favourable re entry without having done any serious damage.

This stop must always be tight.

An inefficient trader is apt to use a wide stop instead.

Because he is inefficient, he is apt to get it wrong much more often.

Wide stops now repeatedly being hit start to accumulate really serious damage that the efficient trader is able to skilfully avoid.

It is ironic to think that the really efficient trader can afford to use wider stops but chooses a tight one instead, whereas the ineficcient trader chooses wide stops and ought to really use very tight ones.

The ultimate direction does not enter the argument from the point of view of the efficient trader because he is not gambling, but instead committing from a point of view of near certainty.

The ultimate direction by comparison is a source of worry and stress to the inefficient trader as a consequence of really not knowing what he is doing.

Having said all this, It is understandable that an inefficient trader can have great difficulty in accepting that price development in advance of the event is not difficult to suss, or the extent or the duration of the move in terms of time.

It is also understandable that an inefficient trader, because of his own frame of reference being what it is, will crave proof.

Finally, because of an inefficient trader's start point of reference being what it is, it is also understandable that whatever evidence is laid in front of him will not be sufficient to satisfy his craving for proof and that in fact as a direct consequence of his perspective, will actively try to make what is right, wrong.

This is a natural humanistic reaction in response to a contradiction that cannot be accepted as it is in direct contravention and contradiction of his own belief structure, that he now percieves as being threatened.

 

[JumpOff]

I don't formulate any expectations based on the "strength" of a movement.

--Db

Thanks for the clarification. JO

 

[JumpOff]

It is very simple really.

I am not interested in discussing these topics at your level.

I am only interested in discussing these topics with individuals who can truly match me, at my level and not yours.

You are therefore not in the category that interests me for this purpose, sorry.

Socrates, I found your earlier post about tight stops and efficient traders to be fascinating, but I'm not sure what it has to do with this thread about Price and Volume .... Would you mind if I split it off into a new thread - perhaps in the 'general trading chat' forum, where it could receive a wider audience.?

I doubt that you will be able to have much of a discussion, if you only want to speak with those who are already at your level.

And I am at a loss to explain your continual posting to this thread if you do not wish to engage DBP, or his ideas. (sniping doesn't count) Since you have made it clear that you think his methods are inefficient or inadequate, why not start your own thread (or even a private forum) where you can expound upon your own theories of how to become an efficient trader.

JO

 

[Splitlink]

Socrates, I found your earlier post about tight stops and efficient traders to be fascinating, but I'm not sure what it has to do with this thread about Price and Volume .... Would you mind if I split it off into a new thread - perhaps in the 'general trading chat' forum, where it could receive a wider audience.?

I doubt that you will be able to have much of a discussion, if you only want to speak with those who are already at your level.

And I am at a loss to explain your continual posting to this thread if you do not wish to engage DBP, or his ideas. (sniping doesn't count) Since you have made it clear that you think his methods are inefficient or inadequate, why not start your own thread (or even a private forum) where you can expound upon your own theories of how to become an efficient trader.

JO

Out of sympathy for dbPhoenix, who seems to continually find his thread degenerating into another free-for-all, I suggest that you start by deleting my post 540, which I thought was a simple observation on whether this method works or not. However, it seems that posts of that kind are not welcome if it criticises and, frankly, if I cannot criticise I have not desire to continue. It is not that I do so frequently and if every new guy coming on here only finds posts that are favourable then, I am afraid, many are going to come to disappointment. Neither do I wish to feel responsible for the kind of rubbish that has been posted since then. Let me say, then, that
criticisms and opinions should be made on another thread so that those followers,here, can be left to enjoy themselves in peace.

Split

 

[barjon]

Out of sympathy for dbPhoenix, who seems to continually find his thread degenerating into another free-for-all, I suggest that you start by deleting my post 540, which I thought was a simple observation on whether this method works or not. However, it seems that posts of that kind are not welcome if it criticises and, frankly, if I cannot criticise I have not desire to continue. It is not that I do so frequently and if every new guy coming on here only finds posts that are favourable then, I am afraid, many are going to come to disappointment. Neither do I wish to feel responsible for the kind of rubbish that has been posted since then. Let me say, then, that
criticisms and opinions should be made on another thread so that those followers,here, can be left to enjoy themselves in peace.

Split

Split et al

Ok, I have tried to clear the thread of the week-end knock-a-bout (again!!). As I have said before, critical posts are entirely valid so long as they are reasoned and constructive to the debate. Criticisms that merely declaim "rubbish" without explanation or those that are merely "sniping" are objectionable and will continue to be removed.

jon

 

[dbphoenix]

Out of sympathy for dbPhoenix, who seems to continually find his thread degenerating into another free-for-all, I suggest that you start by deleting my post 540, which I thought was a simple observation on whether this method works or not. However, it seems that posts of that kind are not welcome if it criticises and, frankly, if I cannot criticise I have not desire to continue.

Split

There are plenty of critical posts in this thread and plenty of questions, most of which I've tried to answer, though I also try to give interested others the opportunity to respond as well. That's part of how one learns.

However, you keep referring to "this method" and my "theory" without providing any explanation of what you mean. Since I have no idea what you're talking about, I can't respond to your "criticisms". If you don't know what you mean by "volume", then that's a place to start. If you can't explain what "method" it is that you're criticizing, then how are you in a position to criticize it? To do so is no different than criticizing "violins" on television.

If you want to engage in a discussion, much less a debate, then do so and stick with it. If instead you start something then disappear for several weeks, anyone who wants to participate has to go back and read your previous posts and pick up the loose ends. Either that or start all over again. This is not a reasonable expectation.

I'm willing to meet my responsibilities in this. However, you have to be just as willing. Define your terms. Present a well-reasoned argument. If you can't or won't do that, then, no, there's no reason for you to continue.

--Db

 

[Splitlink]

Db,

In your first post you mentioned that you were not interested in any indicators. That is where you and I are on common ground. I believe that volume is the only reasonable "extra" to price that is acceptable in TA.
The rest are based on averages over a specific period of time, changeable according to the current whim of the trader.

Having said that, I have not succeeded in fitting volume efficiently into my trading plan, either, and therefore I use price, pretty much, by itself.

Obviously, I have not been satisfied on this thread but there is always hope, which is why I come back.

Let's go back to your remark about there being no "buying" or "selling" volume. I am going to question that.
If we put the market maker on neutral ground, a trader buys or sells from him. If he is short of stock he may "shake the tree" to frighten traders into selling or he may make the price more attractive. Whatever he does traders unloading stock are selling to him. Whoever receives stock buys from him. I'm not sure that the argument that every seller has a buyer is quite true. If the MM has too much stock, that he wants to dispose of, he moves the price down until it is more attractive. If we make him a neutral participant, only interested in making a market, then there is buying and selling volume, isn't there?

 

[OpenMind]

I must admit you are not alone there. I also never fully understood the statement that for every seller there us a buyer. The way I understand it, the market makkers make the market. So if someone wants to sell their holding worth £100m, the MMs will have to buy it from that person, regardless of whether someone else wants those stocks or not. If most people want to sell, the MMs will be sitting on piles of unwanted stocks that they would want to get rid of. They will try to get rid of them buy lowering the price, but that may encourage further panic selling.

So as I said, I don't fully understand how it works.

Would appreciate DBPhoenix's explanation on this matter.

 

[dbphoenix]

I'm not sure that the argument that every seller has a buyer is quite true.

What constitutes a transaction?

--Db

 

[Rhody Trader]

Let me take a poke at this.

I think some folks are reading way too much in to the whole market maker thing. The MM is just like any other participant. If I go in to the market to buy XYZ and the MM takes the other side, that 's no different than were any other trader taking the other side. I am the buyer. They are the seller. There must be both to have a trade. If one or the other is absent, all you have is an order.

That said, it was suggested that the MM might have inventory or may not. If he does, that's just like any other trader who might be in the market to off-load part or all of a position. If the MM doesn't have any inventory, he will then have to go buy somewhere else to balance the book, which implies demand. The reverse, of course, is true if I were selling to the MM.

 

[barjon]

mmm, on a slightly different tack, my problem is in identifying what could be termed "sustained pressure" as against "temporary pressure". For example (and thinking of stocks particularly); aside from short covering I would guess that most people buy because they feel bullish, on the other hand people sell for all sorts of reasons and not just because they feel bearish. Am I trying to draw a meaningful distinction, or shouldn't I bother?

I appreciate that what happens to the price shows whether the pressure is being sustained but, by then, it may be too late. Like Split, I keep testing a volume factor in my swing trading but it seems to make little difference. I feel that it should and that the fact that it doesn't is down to my poor interpretation and lack of good "volume" understanding.

Good trading

jon

 

[dbphoenix]

Which is why I'm backtracking with my question regarding the meaning of "transaction".

--Db

 

[bracke]

barjon

Surely it does not matter why people are buying or selling, more to the point how much (volume) and at what price.

Regards

bracke

 

[barjon]

bracke

Maybe, but we're trying to gain clues as to whether buying/selling pressure is likely to maintain into the future or not. Someone selling just to raise the money to buy a yacht may cause a temporary surfeit of supply causing the price to fall and (if it's a big yacht like yours ) it may appear that selling pressure has come in when it hasn't.

db

Not entirely sure what you're getting at, but at the simple level a transaction is a deal between parties at a price acceptable to both at the time the deal was struck.

jon

 

[dbphoenix]

db

Not entirely sure what you're getting at, but at the simple level a transaction is a deal between parties at a price acceptable to both at the time the deal was struck.

jon

Well, the question was asked of Split since he said that he wasn't "sure that the argument that every seller has a buyer is quite true" yet argued the opposite in his post.

As I've said previously, there's little point in debating a subject unless and until the terms are defined. There are now five people involved in this but they do not all agree on what "volume" is or, apparently, what a "transaction" is. In order to take somebody someplace, one first has to start with where they are rather than drown them in a syrup of pontification.

If these points are not yet understood even though I've explained them several times, explaining them again without first determining where the derailment is occurring would be a waste of time. So, my question to Split remains.

--Db

 

[barjon]

sorry, db, thought you'd asked me as well.

btw you've covered so much in the past you must forgive us our frail memories

jon

 

[bracke]

bracke

Maybe, but we're trying to gain clues as to whether buying/selling pressure is likely to maintain into the future or not. Someone selling just to raise the money to buy a yacht may cause a temporary surfeit of supply causing the price to fall and (if it's a big yacht like yours ) it may appear that selling pressure has come in when it hasn't.



jon

But surely you are never going to know why each person is buying or selling. As to whether the pressure is going to be maintained or not must be ascertained from the chart both by analysis of volume and price.

Even if you did know why people were buying eg. good results you don't know when and what will prompt them to take their profits.

Perhaps time for a reminder - trade what you see not what you think.

Regards

bracke

 

[erierambler]

But surely you are never going to know why each person is buying or selling. As to whether the pressure is going to be maintained or not must be ascertained from the chart both by analysis of volume and price.

Even if you did know why people were buying eg. good results you don't know when and what will prompt them to take their profits.

Perhaps time for a reminder - trade what you see not what you think.

Regards

bracke

If I may interject, one may not know why each person is buying or selling, but studying the behaviour of price and volume , support and resistance , supply and demand ,will give one clues. Since the majority doesn't look at things this way , the principles will always work and apply.

erie

 

[bracke]

If I may interject, one may not know why each person is buying or selling, but studying the behaviour of price and volume , support and resistance , supply and demand ,will give one clues. Since the majority doesn't look at things this way , the principles will always work and apply.

erie

erierambler

I agree entirely that the principles will always work and apply.

As to clues why buying or selling is taking place perhaps a few chart examples would be useful?

Regards

bracke