Trading with Market Statistics XI. HUP

[jperl 11]

This is the Market Statistics thread that some of you advanced traders have been waiting for. This is the "how to trade anywhere, anytime" thread otherwise called the "when not to trade thread", but not for NEWBIES. If you are a NEWBIE, back off and read the first ten threads on this topic starting [thread=1962]here[/thread].

 

One of the properties of most markets is the up and down motion that price action displays on virtually all time frames. Some traders call this the market volatility, others call it the natural market rotation. Newbie traders don't like this motion, because when they enter a trade they want the market to continue moving in their direction. Newbies fear volatility. Advanced traders love it. What ever you wish to call it, it is this motion that is tradeable. In the words of Nihabaashi, "To fear volatility is to fear profits".

 

The main purpose of this thread will be to show how you can use market statistics to determine the most probable times when the market will rotate and when it will not. Once you know this, you can then enter a trade either in the same direction that the market is moving or take a contertrend trade in the opposite direction. If you have read the previous market statistics threads, you already know how to do this. Here I want to start to put this all together in terms of a generalized concept which I call HUP.

 

HUP stands for Hold Up Prices. As the name implies, HUP are those prices where the price action tends to hold up, that is where the market slows down, pauses, then either reverses (read rotates) or continues in the same direction.

 

There are two kinds of HUP, static and dynamic. Static HUP are those prices which are fixed for the day. They don't change with market development. In contrast dynamic HUP change as the day progresses. As new data is added, dynamic HUP will readjust to reflect the new data.

 

Below are some examples of HUP that can be used in daily trading

 

 

STATIC HUP

 

Yesterdays High,Low,Close

Overnight High,Low

Any computations based on these

such as classic pivot points

 

 

DYNAMIC HUP

 

Yesterdays PVP,VWAP and SD's

2 day PVP, VWAP and SD's

1 week(5day) PVP, VWAP and SD's

2 week PVP, VWAP and SD's

1 month(4 week) PVP, VWAP and SD's

2 month PVP, VWAP and SD's

1 year PVP, VWAP and SD's

 

You can of course come up with other examples of HUP, such as previous bars highs and lows, or 2 day or longer static HUP, or dynamic HUP that are in between the ones I have listed. It really doesn't matter. More important is to realize that these HUP points are prices where the market will tend to hold up.

What HUP doesn't tell you of course, is how long the market will hold up and/or how far it will continue in the same direction or if it reverses, how large the reversal will be. Getting the direction correct doesn't mean you can sit back and do nothing. You still have to manage the trade.

In the video that follows you will see a 15 second chart with HUP lines drawn on it..

Green lines are SD's above a VWAP. Red lines are SD's below a VWAP. VWAP are dotted blue. PVP are purple lines

 

Now watch this video to see where these HUP lines come from and how the market reacts to them.

ER2HUPlinesOct24

Edited February 18, 2008 by jperl

[BlowFish 10]

Thank you!

[darthtrader 10]

excellent. I went and looked more at ensign after this, I see why you use it now. Thats really cool how it works with the previous time frame chart data.

 

Are you able to backfill data for the monthly/yearly vwap/pvp with IB/ensign?

I was thinking I would need software that can archive data and then get one of those new terrabyte drives but it seems I've made this much more complex than need be.

 

I found this on their site

http://ensign.editme.com/StdDev

Have they pretty much knocked off this stuff that I wouldn't have to program my own? I notice they mention this site in the response.

[jperl 11]

Are you able to backfill data for the monthly/yearly vwap/pvp with IB/ensign?

 

Yes, no problem

 

 

I found this on their site

http://ensign.editme.com/StdDev

Have they pretty much knocked off this stuff that I wouldn't have to program my own? I notice they mention this site in the response.

 

Interesting....didn't know they were working on it. You should see the post by mp_trader whose has been working on this too. I don't know if he has completed it though.

[mp_trader 10]

Jerry, I am working on it right now. To those who have downloaded that vwap_std template, the vwap is correct, but the stdev lines are off. I failed to weight the prices properly for a vwap. The stdev lines are shown with equally weighted prices, and they are different from Jerry's. My apologies to those who have tried it.

[momentom 10]

No applogies required. I appreciate your sharing!

[agon 10]

Yes mp_trader, your work is fine but can you fix this (to weight the prices properly for a vwap) ?

Thank you very much

[darthtrader 10]

I failed to weight the prices properly for a vwap. The stdev lines are shown with equally weighted prices,

 

How are you weighting the bands? I've been messing around with trying to get this going for ninjatrader but its just a mess. I've backed off and have been doing basic C# tutorials so hopefully i can get this going at some point. The nice thing with ninja is it would be free for anyone to use.

 

multiplier3 = 3

VWAPUpper3.Set(VWAPLine[0] + multiplier3 * vwapsd[0])

 

i take it thats the wrong way? The weighting would be 2nd std dev by .7 something and 3rd by .9 something?

[Karish 10]

This is the ES price action from yesterday, excellent trading day, with 1,2,5,10 Days VWAP & SD and 1 Month (this is my history depth). Nice price action next to previous SD HUPs marked in ellipses. Todays statistics are solid lines and longer period are the dash lines.

 

 

Cheers

Karish

[BlowFish 10]

How are you weighting the bands? I've been messing around with trying to get this going for ninjatrader but its just a mess. I've backed off and have been doing basic C# tutorials so hopefully i can get this going at some point. The nice thing with ninja is it would be free for anyone to use.

 

multiplier3 = 3

VWAPUpper3.Set(VWAPLine[0] + multiplier3 * vwapsd[0])

 

i take it thats the wrong way? The weighting would be 2nd std dev by .7 something and 3rd by .9 something?

 

Hi darth weightings (and the maths for that matter) where discussed in one of the earlier threads....a quick review might be worthwhile

[darthtrader 10]

hey blowfish, thanks for that tip, found it.

[BlowFish 10]

Good show, I had to run out of the door or Id have tried to find a link (well depending how lazy I was feeling!)

[darthtrader 10]

did you ever get your code done in EZ? I didn't realize you use multicharts. Any chance you could post the code up for what you have? I can probly translate stuff to c# but damn i really need to work on my innumeracy.

[BlowFish 10]

I still didn't finish stuff off...Ive been very lazy recently - Dbntinas stuff should keep you going. Excuse me going slightly off topic How do you like Ninja?

[ticks 10]

Thanks for this thread JPerl. I am unable to play the Flash presentation -- are others experiencing problems or is it my computer? Thanks for a reply.

[blindmouse 10]

Thanks for this thread JPerl. I am unable to play the Flash presentation -- are others experiencing problems or is it my computer? Thanks for a reply.

 

Hey ticks, look back through the threads and you will find a couple of links to freeware to play the videos with. I think they are in threads II or III. Hope this helps.....

[jperl 11]

Thanks for this thread JPerl. I am unable to play the Flash presentation -- are others experiencing problems or is it my computer? Thanks for a reply.

 

Ticks-

get yourself a copy of swfopener at this site:

 

http://www.browsertools.net/SWF-Opener/index.html

 

This should solve your problem

 

JERRY

[darthtrader 10]

Excuse me going slightly off topic How do you like Ninja?

 

you should check it out. I think its absolutely fantastic. To me all it needs is for more people to start using it to build up the library of stuff for it. It can basically draw anything on a chart because its just using MS .net drawing tools. I messed around with the finalg market delta demo, the guy completely knocked off the entire market delta footprint and all the ways of displaying data with the .net drawing classes. I think right now you could use any heavy duty math/stat class thats available for C# with it if you wanted to get heavy into data analysis. Maybe the only downside is its a bit heavy on resources with all the graphics anti aliased but it looks very pretty.

Another cool thing is if you learn C# it would be an easy transition to neoticker or openquant. Its just crazy they are giving away everything but the super DOM for free right now.

[mmaker 10]

I just found Jerry's threads after watching him post his daily p&l for about the last year. Talk about an epiphany.

 

I read about 5 threads last night (many posts and 7 videos of newbie) and then watched the es bounce off the vwap about 7 times this am.

 

I have an 8 line dyo that calculates the vwap in ensign and i am looking for the standard deviation calc from a fellow ensign user if i can't figure it out.

 

I have written a 2600 line ensign espl program for backtesting a retrace setup but i don't find espl too stable for intraday signals.

 

Anyways i am really happy to have found a whole nests of posts by Jerry and even happier he has shared his knowledge.

 

Thanks Jerry.

[mmaker 10]

Jerry - what time do you start your vwap from for intraday?

 

Ensign currently starts from midnight, but that is not good for comparing to a market profile or pvp that starts at 9:30 est..

 

I think most market profilers/volume studies start or restart at mkt open

 

On the other hand i see some of your trading was already green by 9:30am meaning you must have done some trading during pre-market.

 

Questions like these would be good to address in voice.

 

I currently have done it both ways till Howard fixes it.

[jperl 11]

Jerry - what time do you start your vwap from for intraday?

 

Ensign currently starts from midnight, but that is not good for comparing to a market profile or pvp that starts at 9:30 est..

 

I start my VWAP computation for today at the 9:30 open. But even if you start it at the beginning of the overnight session, it usually won't make much difference. Remember, VWAP is volume weighted and there is not much volume overnight compared to the 9:30 open.

 

On the other hand i see some of your trading was already green by 9:30am meaning you must have done some trading during pre-market.

Occaisionally, I will enter a trade premarket open using VWAP data from the previous day, but not too often.

[Râlex 10]

Hi, Jerry and the other traders.

I trade the Bund with the market profile and want more understand.

Too, sorry for my bad english language, sorry.

Someone can write a summary of the main lines of your method for a French newbie trader (to this fantastic method), advanced trader to the MP of steidlmayer.

i understand the vwap, the skew, the pvp, the trend, the SD but not exactly for the symetric distribution (rejection or acceptance of the 1SD, reverse or scale or ok) and when a normal distribution, the price close to 1SD and countertrend of the skew. (skew>0 and price < vwap).

A summary of all the posts of Jerry, will be the hightlight for me.

Best regards.

Alexandre.

[Karish 10]

Hi Jerry,

In previous threads you mentioned that HUPs play an important role in the momentum of the trade and also offsetting the entry point for a trade from SD. Now that we are in the HUP business can you please explain it in more details.

Thx,

Karish

[jperl 11]

Hi Jerry,

In previous threads you mentioned that HUPs play an important role in the momentum of the trade and also offsetting the entry point for a trade from SD. Now that we are in the HUP business can you please explain it in more details.

Thx,

Karish

 

Karish,

If you think of the HUP lines as pivot points, you will understand what I am referring to in the previous threads.

For example suppose you are thinking about entering a short trade at the 1st SD below the VWAP. As the price action approaches the 1st SD from below, you notice there is a HUP point just below the SD. What do you do? It would seem to me the only thing you should do is pull the short trigger at the HUP rather than wait to see if the SD is touched.

Similarly on trade exit. If you enter a long trade say at the VWAP with the intent of exiting at the 1st SD, but you notice there is a HUP line just below the SD, you should exit your trade at the HUP or at least remove some contracts at the HUP rather than wait to see if the SD will be touched.

These are just two examples that I use every day.

There is a rich variety of other things you can do at HUP lines, but I will leave it to you to discover these on your own.

[jperl 11]

Hi, Jerry and the other traders.

I trade the Bund with the market profile and want more understand.

Too, sorry for my bad english language, sorry.

Someone can write a summary of the main lines of your method for a French newbie trader (to this fantastic method), advanced trader to the MP of steidlmayer.

iA summary of all the posts of Jerry, will be the hightlight for me.

Best regards.

Alexandre.

 

Alexamder.

This may help you;

Tale a look at the post by Blowfish and my response here