UrmaBlume

JD, Here is a hint - you are talking about counting contracts and I am talking about measuring force. cheers UB

Thanks for the kind words. So much work to develop such a simple expression of a prime market force. Almost all of our work is about order flow as at its very base - money is the fuel that drives the motivation of price. This is part of what we learned from spending time with Peter Steidlmayer almost thirty years ago. In this post we discuss our concept of "The Technical Evolution of Market Profile Theory" and demonstrate several indicators that are part of our technical expression of that concept. Thanks again for the kind words. Cheers UB

My small group endeavors to explore what we call the physics of market information. The harmonic of trade flow we have shown is designed as a leading indicator of price without any inputs from price. The net of order flow as shown in the graphic is the force and price is the particle or object. As buying and selling displace each other in harmony (the graphic) so is price displaced. The definition of simple harmonic motion is simply that the acceleration causing the motion a of the particle or object is proportional and in opposition to its displacement x from its equilibrium position. The geometric representations of price you referenced measure result and not cause. Our work attempts to measure the motivator/force and thus predict result. That's the difference. cheers UrmaBlume

When one component of the harmonic does the exact opposite of the other component and does it in the same amount then you have a balanced harmonic. In this case it is a balanced harmonic of order flow or the balance of trade. You will note that when selling is increasing, the red line moving up, that buying is decreasing, blue line moving down, by the same amount = a balanced true harmonic - one component is a harmonic of the other. In the work you showed there was only one component, price, and we operate under the belief that one of the lest effective predictors of price is price itself. cheers UrmaBlume

The Harmonic setups and the site you reference use price only inputs and are not true harmonics. The actual harmonic of real-time buying and selling can be much more useful. Below are shots of two different algorithms that produce true harmonics of buying and selling volumes that, as the graphs show, often lead price. cheers UrmaBlume

Long term trading success is not about instinct, divine inspiration or spontaneous intellectual combustion. It is about intelligent data processing and sound method. If you are adept at handling, exporting and normalizing data there are a wide range of tools that can provide precise answers to questions such as those posed here - these are the tools the big boys use. The right tools for the right job can make a lot of difference. There are many tools that can intelligently process huge amounts of data to discover precise rules, correlations and feasibilities in minutes that would take a manual processor decades to uncover. In this case the most appropriate tool might be a rules generator, a decision tree or a Bayesian network. By the same token, given data and sample space, a genetically optimized neural network might produce a more effective, more granular output. The practical application of such tools is discussed here, here and here. Those posts provide the names and sources of specific tools that may be of use and a discussion of how they are usually applied. In the markets as in many games Information = Equity and in the markets the guy with the best information is the guy who makes the most money and he is also the guy who knows how to best process raw data into useful information. If you are not processing at this level then you are not really competing at any level. It's not so much a question of whether you are using these exact same tools it is a question of whether your processing includes this depth of design. cheers UrmaBlume

A loss is the result of a single trade. Drawdown is the difference between a high and a low in the cumulative results of a series of trades. UrmaBlume

it counts ticks in a tick chart and volume in volume bars. Our view of time/tick/volume charts is that the passage of time does nothing to motivate price, so we don't use them for trading. Rather it is the occurrence of trade that motivates price movement and more specifically it is an imbalance in that trade that moves price directionally. A tick chart treats all transaction equally so that a buy of a 1 lot carries the same weight as a buy of a 1,000 lot so we use volume charts which let us measure the imbalance and hence have an idea of the strength of the motivation behind price movements. Where we do use time charts is in the serial normalization of financial market data so that absolute values of volume and price volatility can be normalized to the degree that they can be compared instrument to instrument. Below is a scan of popular US Futures contracts for both relative trade volumes and local price volatilities and below that is a scan of some forex pairs for relative local price volatilities. The percentages are percentages of what is normal for that instrument normalized for volume, price volatility and time of day. Times are PST so these shots are about 40 minutes old as I post. This application runs in the TradeStation Radar Screen, updates every minute and includes 400 stocks and ETFs. From these charts we try and play where the action is so we are mostly trading what is hot and not trading what is not. cheers UrmaBlume

Certainly they have the mind for it. I think it would boil down to a matter of tools and training. Given the right tools and training there are several dynamics that make intra-session trading easier than poker and certainly it can be a much bigger game. In the markets, unlike in poker, someone will always call when you have the nut hand, you can bet any amount and always be called and if the circumstances warrant you can even raise yourself and still be called. In addition you can always protect your pot equity and are almost never all in. Also, unlike poker, the game doesn't get tougher as you move up in stakes. If fact because of reduced juice etc it actually gets easier as you trade higher. cheers UrmaBlume

The graphic below is of a volume bar chart The 7.9% shows that the bar is 7.9 percent complete with 52.3% selling in that 7.9% and 47.7% buying in that bar so far The percentages are updated with every tick. Runs on volume/tick bars in TradeStation.

Here is a shot of my desk and below that is a shot of my living room

Most fears come from a lack of complete understanding. In trading most retail traders operate methods or systems without a complete knowledge of true expectation. In poker an understanding of pot odds and implied odds removes fear. In a situation where it is 5 to 1 against a player making his hand he will lose 5 of 6 attempts but if the pot contains 10 to 1 money the play carries a positive expectation and he welcomes as many of those situations as he can find even though he will lose over 80% of the times he tries. When the money/pot/implied odds are greater than the drawing odds he KNOWS to go for it and over time he will win. The same is applicable to trading. The issue is that most, especially retail, traders don't know either their TRUE pot/money odds or their TRUE drawing odds. In point of fact most don't even know how to calculate either odds or expectation and that is why so many have "fear" issues. If you know with certainty that your trade will work 70% of the time and that the average loss will be <= the average win then how can there be fear? Information = Equity At the poker table everybody has access to the same raw data - each player can see the community cards, the amount of money in the pot, the size of the stack in front of each player and observe the actions and reactions of every player. The player who best processes this raw data into actionable information is the favorite. In trading it all starts with the data and the data starts with the tick/transaction and most everybody has access to tick data. Long term trading success is not about instinct, divine inspiration or spontaneous intellectual combustion. It is about intelligent data processing and sound method. Information = Equity and Understanding eliminates fear - of course knowing the TRUE odds is part of all that. cheers UrmaBlume

IntERday is between days, in other words a time frame that spans more than one day. IntRAday is during the day or a time frame that happens within one or the same day. There are an infinite number of time frames. Some traders make a couple of trades a year. Some other traders can make more than one trade in a second. Most of the trade discussed here is intraday/session, that is the trades are both opened and closed during the same trading session. Good Luck UrmaBlume

While most systems of any kind don't work in real-money, real-time trading, certainly there are systems that make hundreds or even thousands of transactions per session that do work and make a lot of money for the operators. It is called HFT. These systems not only work they do well over half of the trade in almost every liquid stock/future.

Look in your course material for C++ for material on how to create a Dynamic-link library (DLL). What might also do the trick is to use the new PSPs in TS 9.0 and excel. cheers UrmaBlume

The only way I know to semi-reliably test a system in TradeStation without using real money is to automate it with market entry and exit orders, write the stops so that they are conditional and when the condition is met a market order is placed and then run it in the simulator in real time. The main weakness here is when a single transaction is much bigger than the bar size. cheers UrmaBlume

The problem with the EL Collections/ADE toolset is that TradeStation still has a 1 minute time stamp so that collecting data, even in real-time from other time frame charts is useless and even sometimes "peeks ahead" for any time consideration less than 1 minute. This problem is still relevant in TS 9.0 even with their new PSP (Price Series Providers) objects. I don't know what is wrong with TS so that they bring strategy network when the tools they offer are deficient for strategy development and then bring these great data provider objects and smart order placement tickets and yet still operate in a 1 minute time frame in a millisecond world. cheers UrmaBlume

In the simulator and in back testing it will fill on the first bar that touches the limit price, in real life there is no telling which bar it will fill on as that is dependent on both price and your position in the queue. In both the simulator and real life the order will remain in place until it is filled, canceled or the market closes. I have tested such models that when automated and run on the simulator made well over 20-30 points per day, every day - but when run for real money - lost their ass. The people that do this successfully don't use TradeStation, they are co-located and have the ability and capital to constantly "stuff" and cancel orders at size at several levels both above and below the last. This kind of model is a very fast example of mean reversion trading and while a lot of people don't like the fact of it, it is what keeps our spreads so tight and benefits the retail trader. cheers UrmaBlume

No, I believe that TradeStation is plenty fast for almost any human operated system and completely inadequate for anything approaching an automated high frequency system. The condition only applies to back testing and the simulator. It has to do with the programming because in both the simulator and in back testing the software has no way of knowing your position in the queue for fills so it simply fills the order when the limit price is touched. In TradeStation back testing and in their simulator your limit order is always first in the queue for fills. If that were true in real life anybody could kill the markets. To verify what I am saying simply open the simulator place a limit order and you will see that the moment your price is touched you are filled. Place a real-money limit order and you will soon see that such "first touch" fills almost never happen and when it does is is usually because price ran through your limit price and in the wrong direction. Another little know point about TradeStation back testing is that while minute and higher time frames can show fills inside the bar in back testing, tick, volume and range bars only store 4 prices, HLOC, so the software, during back testing can only see those four prices during testing. The ten tick bar you reference is, on average, for less than 100 contracts which means there will be almost 1 bar per second during the average session, very fast for a human operated method. Another caveat to your method is that you must achieve a very high hit rate when your profit target is less than half your risk/stop loss and even more so when you are paying retail juice. Again none of this means your method is wrong but some years ago me and a couple of pals paid a hefty price to discover what I have mentioned here. good luck cheers UrmaBlume

The one big weakness with either back testing in TradeStation or using the TradeStation simulator is that with limit orders - if the price is hit you get a fill which is far from the reality in real-time, real-money trading. If price just touches your limit order price once for a brief second your limit order will be filled and you will quickly learn that is hardly the case in real life. I know one beginner that was training on the simulator, making well over 100 round trips per session and always netting more than the daily range. Real time the same approach was a disaster. The results from limit order back testing or limit order simulator trade in TradeStation are not only unreliable they can be very misleading. None of this means your approach won't work but please be aware of the above and be careful. cheers UrmaBlume

Don't forget that there are situations in poker where you can hold the absolute best possible hand and still lose money. In Omaha H/L you can hold either the best possible high or low hand and if another player holds the same hand you can be "quartered" or worse and lose money in the hand. In trading there are indeed certain situations where you are guaranteed a win with even greater certainty than inside information. Two are described below. As you say even inside information doesn't work all the time and I know of no technical indicator for spec trades that does either, however there are some that work with very high rates of success. On the other hand there are certain trading situations involving premium arbitrage where you absolutely know not only that you will win but exactly how much you will win. Two such situations are: 1. Long S&P basket, short the future with big premium - will capture without risk the premium and any dividends in the stocks during the hold period. 2. Options Conversion - Long Stock, Short Call, Long put - captures without risk the difference between the call premium and put premium plus any dividend. In poker and in trading it always holds true that: Information = Equity At the poker table everybody can see the community cards, the money in the pot, the size of the other players' stacks and can see the actions and reactions of their opponents. The player who best processes that raw data is the favorite. The same is true with the markets. UrmaBlume

In Holdem there are four rounds of betting and a player can go all in on any of them. Certainly there are situations of positive expectation to go in before the flop (with just your hole cards) and certainly there are many, many situations where there might be a positive expectation to go all in on subsequent rounds. An example of positive expectation to go all in with just hole cards is if you are on the button with pocket aces and everybody has folded to you, leaving only the blinds. While this move carries a big positive expectation long run it is probably not the optimal play. may the flop be with you UrmaBlume

What you miss here is that expert practitioners can often posses technical information that equals inside information or a nut poker holding. The issue with many traders is the inability to calculate hand ranking, pot odds and/or implied odds as relates to their entry price, trade location, time frame, method, expectation and risk metrics. UrmaBlume

Below is a results page from one of the small stakes tournaments I play several times a week. This took pace a week ago on 2/10/2011 From the screen capture you can see that there were 857 entrants, entry fee was $5.50 and UrmaBlume won $985.55 for first place. The tournament took 6 hours and boy was I shitfaced by the the time it was over. These small stakes tournaments are great entertainment, you can't get hurt financially and sometimes you get lucky and win a few bucks. cheers UrmaBlume

It is called the Dealer Button. The deal rotates around the table and the button designates who the dealer is for that hand. Cards are dealt and bets are placed beginning with the first place to the left of the dealer. The rotation negates constant positional advantage by any one player over the other. There is really not more than procedure that can be learned from play money games. The good news is that most of the major online sites offer stakes as low as nickel/dime and lower for beginners with baby bankrolls. One young lady from Scandinavia named Annette started with these uber low stakes games and over the last few years has won millions in the big buy-in tournament circuit. Twenty plus years ago I played professionally. These days I am a recreational low stakes player. All of my play is online. I play at Poker Stars and Full Tilt, play mostly Pot and No-Limit Omaha H/L tournaments except for the Rush tables at Full Tilt and am usually in the company of Jose Cuervo when I play. Acquiring expertise in poker is a great way to develop an instinct for risk/reward and odds based positive or negative expectation. cheers UB