Real Time Price Action- Clue to Puzzle?

[smwinc 20]

I've also found that there is no noise in the market. I could even say that longer term price movements are more random than short term price changes since long term price movements are just a function of all this 'noise' in the short-term. Each trade is significant and can change all trades following it (like the bufferfly effect). Imagine one contract changing the best/bid ask price because there is only 1 contract left in the limit order book on one side. This price change could trigger buy/selling by other traders which could trigger even more orders. All of the sudden, the market is going down/up hard while you're still waiting for your bar to close.

 

Exactly. It is much easier to predict the next 10 seconds than the next day. If I had to recommend ONE thing to new traders, they need to understand this.

 

SMW

[DbPhoenix 42]

Pre day snapshot that I look at.....

erie

 

Into MP now, eh? I find it interesting how MP tidies up some of the more important concepts that Dow and Hamilton and Wyckoff first articulated. I wish it hadn't gone so far into jargon and software, but that seems to be the way of it these days.

 

In any case, it's pushed me to focus more deeply on what support and resistance and the tendency toward a mean are all about. I'm also finding that stuff I sloughed off years ago I'm now re-evaluating in terms of what I've learned in the meantime. Like the TICK. You'd think that after all this time I'd have it all nailed, but I don't suppose that's possible with a market that's continuously and forever evolving.

 

The trick is to get past the jargon and the software and the ranting (much of which sounds exactly like I've accepted Jesus as my Personal Savior only substituting the name of whatever system or method it is for Jesus) and get to those subatomic nuggets that contain the real stuff.

 

Edit: for example, I suppose software could show you at what levels trades are clustering, but is it really that difficult to do oneself? It's certainly cheaper.

 

 

Note also where those "pivot points" are pointing . . .

 

Further edit before my time runs out: Note that 70 was reconfirmed overnight.

 

 

 

.

Edited March 6, 2008 by DbPhoenix

[Nvesta81 10]

The pivots do seem to "work", but they are so far off the actual turning points that they can be used only as a guide. I suppose they are most useful for those who have no idea how to located S/R. What I'd suggest for those who want to learn, though, is to plot the points, then extend those lines to the left to find those levels that have been repeatedly tested, then focus on those levels themselves, using pivot points as training wheels.

 

I'll keep that in mind. I also plan on posting a chart after today's trading to illustrate what I mean. All my pivots are already plotted on my chart. I'm curious to see if those levels will work as effectively as they did yesterday to look for as turning points. They seem to work more often than not, for me at least. I usually get my numbers from this site: http://www.mypivots.com/dn/?symbol=63

[tune 10]

Would you mind putting the TICK aside a chart at the end of the day Db. Be interesting to see.

[DbPhoenix 42]

Would you mind putting the TICK aside a chart at the end of the day Db. Be interesting to see.

 

Now that's something that most definitely does not lend itself to a static presentation. It's too easy to cherry-pick examples. Try plotting it in a little window somewhere, not as part of your primary chart display, and glance at it now and then, especially when price gets to the outer reaches of whatever zone you're looking at. It doesn't take up much space. Doesn't require anything but itself: no indicators, no volume.

[DbPhoenix 42]

I usually get my numbers from this site: http://www.mypivots.com/dn/?symbol=63

 

Yes, you have to admire Guy. He's one of the few people who continues to do this stuff for free.

[erierambler 10]

Into MP now, eh? I find it interesting how MP tidies up some of the more important concepts that Dow and Hamilton and Wyckoff first articulated. I wish it hadn't gone so far into jargon and software, but that seems to be the way of it these days.

 

In any case, it's pushed me to focus more deeply on what support and resistance and the tendency toward a mean are all about. I'm also finding that stuff I sloughed off years ago I'm now re-evaluating in terms of what I've learned in the meantime. Like the TICK. You'd think that after all this time I'd have it all nailed, but I don't suppose that's possible with a market that's continuously and forever evolving.

 

The trick is to get past the jargon and the software and the ranting

Note also where those "pivot points" are pointing . . .

 

Actually Esignal has a tidy efs called price profile, it's free. It gives me 3 days worth and I print it out every night and save it so i can go back weeks if I have to. It is surprising in congestion how accurate it works. And yes one has to get past the jargon , it's only the concepts that give one something to build on. As far as the $Tick is concerned I've noticed a difference ever since the divergence with the $Transports in Oct/07. I'm not sure I understand what you mean about "tendency toward the mean."

erie

[DbPhoenix 42]

I'm not sure I understand what you mean about "tendency toward the mean."

erie

 

That the business of trading is trading, and professional traders have to go where they can find trades. And given the quantities they're dealing with, they drift toward those prices where they are most likely to find the most takers. That is the central zone of whatever range one finds himself in (the mean itself is purely mathematical; practically one looks at a range, tight though it may be, around that mean).

 

The farther one gets away from that "central tendency", the fewer the trades. And when one gets to the extremes, the trading ops virtually evaporate, and you get your turning point. "Resistance", therefore, becomes not just resistance found at a previous trading level but also resistance to further movement.

[shreem 10]

Hello DbPheonix, the above post about the mean and its explanation is really interesting.

 

For me, the concept of price going to extremes and retreating back toward its mean is really the kind of trades that I am looking at and I do consider them to be the most high probability trade setups.

 

As price, and for that matter, anything in life, is always in constant motion to find a perpetual moving equilibrium, looking for a trade going back to the mean (equilibrium) really does make sens.

 

That is where Market Profile can be handy with the mean (POC) and previous naked means (naked POC or untouched previous POC) can be the center line in one own target.

 

Of course, how one calculate and decide which support and resistence zone to use is a different matter. However, by reading your book and your different posts, it make sens a lot to me how you calculate and find those S and R zones, levels and points and the means associated with them.

 

That is why looking and studying the core of all great traders of the past as Dow, Whycoff and others, is really the way to go.

 

Again, thank a lot for your valuable contribution to this forum

 

Sincerely

 

Shreem:)

[jperl 11]

That is where Market Profile can be handy with the mean (POC) and previous naked means (naked POC or untouched previous POC) can be the center line in one own target.

Be careful here on how you define the mean. The POC is the mean only if the distribution function is symmetric (as in a Normal Distribution). On most days it is not symmetric, in which case the mean is defined by the volume weighted average price, the VWAP, which can be quite far from the POC. For a complete discussion of the VWAP and how to trade it see the 11 threads on "Trading with Market Statistics" which starts [thread=1962] here [/thread]

 

Of course, how one calculate and decide which support and resistence zone to use is a different matter. However, by reading your book and your different posts, it make sens a lot to me how you calculate and find those S and R zones, levels and points and the means associated with them.

There are many types of computations for so called "support and resistance". Unfortunately this term has been very much over used and misused. A so called "support" point for instance is only a support point if the market actually reverses at that point. Similarly for resistance. A better interpretation would be to call such points Holdup Price Points which I call HUP. These are price regions where the price action slows down before either continuing on in the same direction or reversing. The "Trading with Market Statistics" threads describe these point in some detail.

[Nvesta81 10]

Ok, here's a 1 min chart of today's price action in the YM using classic pivot formula and mid points between pivots. These were plotted before the open. Although arbitrary, it's apparent to me that price reacts to these levels in a significant way, more-so than S/R lines drawn from previous sessions (I've tried... believe me). I just find it interesting that many traders think they are useless....

 

note: the vwap also had a lot of influence today, I'm guessing there was a lot of Fund activity selling at that price level.

 

[mister ed 10]

Into MP now, eh? I find it interesting how MP tidies up some of the more important concepts that Dow and Hamilton and Wyckoff first articulated.

 

Db, can you elaborate on your opinion that MP tidies up important concepts Wyckoff first articulated? What concepts etc.?

[DbPhoenix 42]

Db, can you elaborate on your opinion that MP tidies up important concepts Wyckoff first articulated? What concepts etc.?

 

That markets shift between balancing and trending, that the balancing phases represent a search for equilibrium, that support and resistance will be found where trading activity is at its busiest. Auction market stuff.

[DbPhoenix 42]

Going back to the chart I posted this morning (#52) before the open, let's look at how it played out.

 

Here's a blown-up version of that chart. The outlined portion will be expanded further.

 

 

.

 

 

.

Let's assume that one overlooks the "swing point" denoted by the red dot.

 

 

.

 

 

.

When price reaches its first swing point after the open, the trader will of course look to the left to see if and where this fits in to previous action. That's when he'll notice the red dot swing point.

 

 

.

Looking further to the left, he'll look for the midpoint or equilibrium level of the "resistance zone".

 

 

.

 

 

.

This midpoint is consistent with where price has been and appears to be finding resistance (the resistance zone is, after all, a zone, not a take-it-or-leave-it line). So he draws a tentative supply line.

 

 

.

 

 

.

When price starts forming swing points on the downside, he can draw a tentative demand line.

 

 

.

 

 

.

After price drops below the demand line, he rides the trend. He can continue to ride it all the way to support at 1710 (refer back to the first chart) or until the market closes.

 

 

.

 

 

 

.

[email 10]

Ok, here's a 1 min chart of today's price action in the YM using classic pivot formula and mid points between pivots. These were plotted before the open. Although arbitrary, it's apparent to me that price reacts to these levels in a significant way, more-so than S/R lines drawn from previous sessions (I've tried... believe me). I just find it interesting that many traders think they are useless....

 

note: the vwap also had a lot of influence today, I'm guessing there was a lot of Fund activity selling at that price level.

 

 

 

Nvesta81,

 

I agree with you a 100% about the pivots and the mid-points, also very interesting that you mention the Vwap, I trade the ES and I actually shorted twice at the Vwap.

Regards,

email

[shreem 10]

Hello Dear Jperl, thank a lot about the reminder about how you see these S and R through your great threads on market statistics. I have look and studied all your threads and videos and right now I am trying to devise a sound approach to my trading incorporating your valuable ideas that I learned in your threads with a combination about how DbPhoenix view and define S and R zones, levels and points which arevery interesting and logical to see how he use them.

 

So, as I see it, both of your trading style, eventhough having a different methodology to approach the market, are very compatible and can certainely be merged together to create my own style.

 

Learning from great traders ideas is an excellent step in the right direction. However, until one can take all that he learn and mixed it to make its own so that he has the confidence to follow it with a strick discipline is even more important.

 

Saying that, if my path would not have crossed both You (Jperl), DbPheonix, Soultrader, Walterw and some others, I would not even be in a position to be able to begin thinking about devising a sound approach.

 

So, I feel very humbled and grateful to be able to learn from all of you.

 

Sincerely

 

Shreem:)

Be careful here on how you define the mean. The POC is the mean only if the distribution function is symmetric (as in a Normal Distribution). On most days it is not symmetric, in which case the mean is defined by the volume weighted average price, the VWAP, which can be quite far from the POC. For a complete discussion of the VWAP and how to trade it see the 11 threads on "Trading with Market Statistics" which starts [thread=1962] here [/thread]

 

 

There are many types of computations for so called "support and resistance". Unfortunately this term has been very much over used and misused. A so called "support" point for instance is only a support point if the market actually reverses at that point. Similarly for resistance. A better interpretation would be to call such points Holdup Price Points which I call HUP. These are price regions where the price action slows down before either continuing on in the same direction or reversing. The "Trading with Market Statistics" threads describe these point in some detail.

[mister ed 10]

Db,

 

I appreciate you may not want to answer my question, thats fine. But since you brought it up I had to ask. I can't say I agree with your description of Wyckoff's concepts at all though, but I am no expert. If I may derail your thread on real-time price action for a moment I will just clarify some of the concepts, as I don't want those unfamiliar with Wyckoff to get the wrong idea.

 

That markets shift between balancing and trending

True, obviously so, but not a Wyckoff concept (too obvious to state). I doubt the word 'balance' was in Wyckoff's trading vocabulary. If you mean 'trading range' in place of balance, then getting warmer. A better way of phrasing this, in terms of concepts that may be applicable to Wyckoff would be to say that markets are shifted between balancing (not the right word) and trending.

 

 

 

that the balancing phases represent a search for equilibrium

If, by balancing phases, you mean trading ranges, I believe Wyckoff's concept is that a trading range represents a time and price range where the transfer of ownership from weak to strong hands (or vice-versa) prior to a mark-up (or mark-down) is the objective. Very different to a search for equilibrium.

 

 

 

that support and resistance will be found where trading activity is at its busiest.

Sometimes. However, near the beginning of the mark-up (and mark-down) phases there are many points of support (and resistance in the case of the mark-down) characterised by low volume, where trading activity is not at its busiest.

 

 

 

Auction market stuff.

Lost me completely on this one sorry.

 

 

Sorry for the tangent, back to the thread's subject!

[erierambler 10]

. If I may derail your thread on real-time price action for a moment I will just clarify some of the concepts, as I don't want those unfamiliar with Wyckoff to get the wrong idea.

I doubt the word 'balance' was in Wyckoff's trading vocabulary. If you mean 'trading range' in place of balance, then getting warmer. A better way of phrasing this, in terms of concepts that may be applicable to Wyckoff would be to say that markets are shifted between balancing (not the right word) and trending.

If, by balancing phases, you mean trading ranges, I believe Wyckoff's concept is that a trading range represents a time and price range where the transfer of ownership from weak to strong hands (or vice-versa) prior to a mark-up (or mark-down) is the objective. Very different to a search for equilibrium.

 

)

 

Well Wyckoff wrote his course in the 30's. As a student ( I have taken the course ). A lot has changed since then, his course was more specific towards stock trading, but his principles apply today. His main thrust was to understand and study the market. He was adamant that one should learn the "position and probable future trend of the market" ( his words ). It is well known that the market moves from equilibrium to trend. My own humble opinion of course.......

erie

[DbPhoenix 42]

Sorry for the tangent, back to the thread's subject!

 

While much of your reply is inaccurate, this really isn't the place to debate Wyckoff v Evans v SMI v VSA v MP. I'll stick with Wyckoff's own concepts and explain them the best I can.

[mister ed 10]

While much of your reply is inaccurate, this really isn't the place to debate Wyckoff v Evans v SMI v VSA v MP. I'll stick with Wyckoff's own concepts and explain them the best I can.

 

Like I said Db, I am no expert, just didn't see your answer/explanation to the question as any sort of answer/explanation at all. Don't want to derail your thread any further.

[marcj 10]

What do you guys and gals think of this explanation of VSA.

 

Volume spread analysis (VSA) seeks to establish the cause of price movements. The "cause" is quite simply the imbalance between supply and demand in the market, which is created by the activity of professional operators (smart money). The activity of these professional operators, and more important, their true intentions, are clearly shown on a price chart if the trader knows how to read them.

 

You must realize that the professional operators make their money buying long during the down bars. They try to hide their activity so they do not drive the price up. Analyzing Volume and Price to find when and what they are trading is VSA. This is a hard concept to understand and see, but once you do; look out world.

 

So in a Price and Volume chart, look for this signs of VSA;

 

1.Very small Price bars with volume.

2.Large Price bars with volume.

VSA is not well defined; if you look it up you will find many definitions. I have just summarized them.

 

 

*Note the volume and price at 3:50. This was my signal this was going up.

 

http://www.trading-seminar.com/index.php?menutopic=Volume%20Spread%20Analysis&submenu=Volume%20Spread%20Analysis&hmenustr=Trading

[zeon 10]

.

After price drops below the demand line, he rides the trend. He can continue to ride it all the way to support at 1710 (refer back to the first chart) or until the market closes.

 

Thank you for a very informative post. Now you've made it clear that there is S/R all around the place on different timeframes. But this morning (and I don't know how much attention you give to premarket action) the Nasdaq has dropped below 1710. If I look back to the left of my chart, I don't find much support now... how do you determine targets for intraday trading when there is nothing but -how shall I put it- "air" in between here and much lower?

[erierambler 10]

Going back to the chart I posted this morning (#52) before the open, let's look at how it played out.

 

Let's assume that one overlooks the "swing point" denoted by the red dot.

 

When price reaches its first swing point after the open, the trader will of course look to the left to see if and where this fits in to previous action. That's when he'll notice the red dot swing point.

Looking further to the left, he'll look for the midpoint or equilibrium level of the "resistance zone".

 

This midpoint is consistent with where price has been and appears to be finding resistance (the resistance zone is, after all, a zone, not a take-it-or-leave-it line). So he draws a tentative supply line.

 

When price starts forming swing points on the downside, he can draw a tentative demand line.

 

After price drops below the demand line, he rides the trend. He can continue to ride it all the way to support at 1710 (refer back to the first chart) or until the market closes.

 

 

 

That's all very nice on the NQ, which I realise is your choice to trade. This scenario did not pan out on the YM, or ES. I was waiting for a test of R and price didn't even come close after the open. ( my problem of course ) But that's the way it goes............. Thanks for your detailed charts.

erie

[email 10]

Hi Guys,

 

Great thread, very educating. I look at the bid/Ask volume on my charts all time and what I have noticed more than usual is the amount of volume I see in the opposite direction. What I mean is, if there is a down bar the lines on the Bid/Ask indicator will be green by double and for some bars three times more volume on the Ask (green) than the bid. Someone is really trying to prop up this market or really accumulating on the way down.

Your comments would be greatly appreciated,

Cheers, email

[mister ed 10]

Hi Guys,

 

Great thread, very educating. I look at the bid/Ask volume on my charts all time and what I have noticed more than usual is the amount of volume I see in the opposite direction. What I mean is, if there is a down bar the lines on the Bid/Ask indicator will be green by double and for some bars three times more volume on the Ask (green) than the bid. Someone is really trying to prop up this market or really accumulating on the way down.

Your comments would be greatly appreciated,

Cheers, email

 

Hi email, I don't think this is the right thread to be asking about bid/ask volume, so far at least it hasn't been a topic for discussion here. I will have a go at addressing your question but if posters on this thread prefer we can move the topic to a more appropriate thread OK?

 

Firstly, can I ask what instrument you are trading that is showing this behaviour, and what software platform and data feed you are using? Sometimes the data feed especially can provide suspect information. This is a starting point for looking at your question.