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MRW
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These charts are inversions of the price action in the charts that accompany Determining The Trend of the Market by the Daily Vertical Chart in the post DB put up. I had, for some time, asked myself how the opposite price pattern would look with the same volume as so many times during the trading day I would see things that looked like the opposite of these price patterns. Interested in any and all insghts and comments! Full page fax print.pdf
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For those who think the T&S tape can be read consistantly to trade these days, with the advent of the NYSE Hybrid, I'd suggest you give it a try. If you've not done this before, and think the approaches used prior to the Hybrid will work on anything more than a random basis, you're in for an unpleasant surprise. Yes, I'm sure there are a few people who did this before and managed to adjust, but a great many more have found this approach to not work anymore. Bids stepping up, offers stepping down, looking at Level II and OpenBook to view market depth, reading the specialist in a given stock - this is all misleading at best now with iceburg orders, and people breaking huge orders up and continually entering them. Most of the T&S tape readers have either switched to longer timeframes or been unable to trade. I traded prop in the days of T&S tape reading, and am still adjusting to longer timeframes. Most of the complaints about Graifer's book seem to come from those with no perspective upon which to judge it. If you've traded for awhile, and especially if you've had to adjust to the big changes of the last few years, you'll appreciate what this book has to say.
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DB, while reading Wyckoff's Determining the Trend of the Market by the Daily Vertical Chart, he mentions putting a ruler between price points to gauge the rate of price ascent, and compare it with other rises. I know you've written about supply/deamnd lines extensively, but did Wyckoff make any other direct refences to constructing and/or using trendlines? Probably due to a lack of experience on my part, I've been leery of trendlines as they seem to be a sort of "artifact" created by the chart at times, and not as substantial as support and resistance areas/levels. Perhaps there's a thread elsewhere that addresses this? Thanks once again!
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DB, I may have read and thought about this post of yours more than any other. It certainly helped today. I've been watching the 1 minute charts on the SPY, and over and over we've seen climactic action, yet prices fall to new lows after brief rally, or perhaps supporting attempts. It's interesting to think of waves and climatic action, rather than individaual bars - and, as you say, easier. Thanks for a great post!
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Another thought, if you'd like to comment, DB, or anyone else...this applies to U.S. equities (and the SPY and ETF's), which is all I trade right now. It seems as if these waves can easliy cross time periods such that the beginning of a wave at, say, 2 PM, might run until the close and then continue with the next days open and morning (or longer). I'm also noticing that areas or levels of support and resistance can be from prior days or even weeks. I guess the point is that the daily close means less then people might think; it's just an arbitrary line in the sand that we draw, not necessarily one the market draws. Thoughts?
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THanks, OAC - interesting!
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Thank you, OAC and Nic!
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Thanks for the reply, Nic - just curious, who is Barros? I wasn't trying to quantify this, just saying that one way to sort of organize my thoughts was to think of 100% retracement as sideways price action and things less than 100% to be increasingly indicative of a trend, perhaps. How did Barros come up with 78.6%, I wonder?
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When reading the Market Technique excerpt from the Wyckoff Course that DB posted, Wyckoff talked about rallies and reactions as indicators. Wyckoff said: "...when a stock declines 10 points, a normal rally would be approximately one-half, or about 5 points. A smaller rally would indicate technical weakness and a rally greater than one-half would indicate technical strength." It occured to me that this one-half might apply to price movement in a trend, and that the stronger the trend, the less the retracement. It also occured to me that one could put retracements on a sort of "scale" by putting a 100% retracement into the category of a sideways move on one end of the scale, and the less the retracement, the stronger the trend right up to the point of vertical moves illustrating buying/selling climaxes on the other end of the scale. Probably a blinding glimpse of the obvious, but it seemed like a revelation of sorts when the idea popped into my head.
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I've always been more than a little suspicious of the FX market. If the "brokers" are your counter party, isn't this the same as the old-time bucket shops? Not actually buying or selling in the market, but making a bet on direction that the broker takes the other side of or matches with a bet on the opposite direction (less the few pip spread, of course)?
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Thanks, Head - interesting to hear someone else is thinking along very similar lines!
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Just some observations - it seemed like this was the place to post them perhaps. It would seem, based upon my learning curve so far, that one of the most important things in trading is the way one thinks about the market. For example, does a price move mean something to you about supply/demand pressures or is price movement a function, say, of your mathematical model? It would also seem that a progression in learning might go from first getting one's thoughts in order, to practicing seeing the way various supply/ demand pressures work themselves, to practice one's observations by taking small, low-risk raes, to gradually working up in size as judgement becomes better. The first step then being to know what you're looking for/at, then gainig experience spotting these things, then working out some guidelines for actually trading them. Sorry for the somewhat rambling, semi-coherent thought process here - I'm just starting to get this straight (assuming I'm not way off base), I think. Would love to hear the thoughts of others!
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Thank you once again, DB - and thanks to you all as well, Head2k, BlowFish, and Gringo!
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Ok, with apologies again to Gringo, DB, would these line charts be then just a line of closing price for, say, a 5 or 30 or whatever time period? Or would these be like a tick chart with every trade shown? Perhaps something like the dot/scatter chart you had up? Come to think of it, this is probably an unimportnt question to ask - all that would matter, as you've just said, is the flow of prices, so the chart could be constructed any way you'd like. Having said that, it would be nice to see an example if you'd like to post one!
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Thank you, DB! I'm still learning to break myself of the bar emphasis. Didn't mean to hijack your thread, Gringo - sorry.