Your Thoughts on TradeMaven 3-2-1 Approach

[BlowFish 10]

To be fair it (time@price) does seem like a pretty good proxy. Often as not the peak volume will coincide or at least be close. I was wondering about its usefulness in spot forex for example. Jerry (Jperl) raises what seemed like very valid points about VAH VAL which are really somewhat arbitrary. They do seem to provide pretty relevant 'lines' which only fuels my suspicion that the market is prone to be self fullfiling. So in short I think it is significant because it is watched by many market participants.

[AgeKay 10]

Yes, I absolutely agree. I argued this in another thread some time ago, but it was basically me against everybody else because they did not want to understand that much of what is taught about the MP is arbitrary like the value area pivots.

[drupada 10]

low volume areas work like suport and recistence, I see it so many time in MP in the form of single prints and if price dont stop and pause at this levels market will continue the same direction (like a any levels (pivots,previus highs/low etc.)) they only work when they work. that why you need to use this sup/res levels to see what buyers and sellers will do at this levels.

[sdoma 10]

  AgeKay said:

The margin requirement does not change when the price goes up (unlike sweaters), so the actual prices of a futures contract does not matter to anyone. When you enter a trade, do you care that it's now so much more 'expensive' since it is 100 points higher than last week? No, you don't. The only people that care are those that have a position in that market because they are account is currently up or down based on that price change.

 

You are suffering from trading anthropomorphism. Your focus is short term, so everybody's is, right? Wrong. The elephants in a given market, the big funds, banks, and central banks, are not flat at the end of every given day like most of the people who post here. Their perception of value is what controls long term price action, hence the term VALUE INVESTING. Your most famous proponents of value investing are Benjamin Graham and Warren Buffett, both of whose philosophies are oriented on the long term.

 

There has to be lasting demand to move prices. People have to buy and then want to keep whatever security you are trading. They have to be able to justify their positions to the board of directors when they do their quarterly and annual reports.

 

Saying "it's going up, so I'm long" is a good start, but not enough justification. They have to back up their perception of the value of that security. So, for example, if they think that their current position in the overall stock market is a good value and should increase, they have to justify that with economic projections and the like. Remember, these people take HUGE positions and can't just get out at the click of a mouse without dramatic consequences.

 

So, if prices move out of where traders have found value for some time, and there aren't compelling enough reasons to shift the big boys' perception of value with it, they will stop buying and might even sell some of their position in a bull move or start buying a bear move. Once day traders and short term traders realize this, they liquidate and many reverse, moving prices back into that value zone.

[rsi77 10]

I subscribed to TradeMaven for 1 month just to check out their method. I quit the service after several weeks because I found their special "inside edge" indicators weren't very helpful for me. However, I did notice that their 180-day volume histograms were extremely useful to predict turning points in the market over and over again. Before my subscription ran out I took a bunch of screen shots of the ES volume historgram covering prices from from 1250 to 1400. I have watched the appropriate screen shot each day while observing the more standard value areas and POC's. On a number of occassion I noted that when MP theory would have predicted the market should "tag" a certain level, if a low volume area on the volume historgram was in the way it would pretty much always take precendence, and the price would turn at the low volume point rather than get to the MP target on the other side. I'm seriously considering rejoining TradeMaven, or at least try to get hold of that larger timeframe volume historgram (maybe write an indicator in TS?). In any case these guys do seem to have some useful insight to share (imho).

[AgeKay 10]

Thanking very much for sharing your experience with their software. It is much appreciated! Especially since you pointed the weak and strong points of their software/methodology.

 

Do you know whether the 180-day volume histogram is based on the continuous contract or the front-month contract only?

 

What you pointed out regarding the volume histogram taking precedence over MP is because MP is just an approximation of the volume histogram. I think MP was only used as a proxy to determine the volume traded based on constant trading activity over time (which everybody knows is not necessarily true) because they did not have the real time data we have today back then. I don't see why anybody would still use MP when they can just use the real volume histogram. The concepts probably still apply, but the volume histogram just offers you more accurate data for that.

[rsi77 10]

I'm not sure how they derive their historgram, but the MP points I was referring to were the value area high and value area lows which are often tagged if the market is in a "range bound day". Those value areas are simply 1 standard deviation from the "point of control", which means they aren't purporting to have anything to do with low volume. They certainly do act as support and resistance as can be observed if you draw them on an intra-day chart. (But as mentioned earlier in this thread this could likely be due more to the number of people watching those areas than to their statistical significance.) However, as I mentioned they are not as strong resistance and support as are these multi-month low volume areas.

 

If one looks on a 60 minute chart and goes back over the same time period from which the data for the histogram was taken, you will notice that the low volume areas correspond to inflection points in the market--which makes sense. You will also notice that the high volume areas (which can also act is R/S) are areas of consolidation. Thus understanding the high/low volume areas as support or resistance makes intuitive sense to me, while 1 standard deviation from the POC does not. But the the latter still does give you tradeable information--though probably is simply self-fulfilling (imo).

 

Some examples:

A relative low volume area which came into play on Friday was the 1292.5 level. The market opened close to this area and after this level showed some support I had confidence to take a long shortly after the open. This worked for a 5-point bounce (though I only took 2 of them). The next low-volume area on the histogram was 1287... this also corresponded to a Value Area Low from 8/22 (on week prior). This level also gave a tradeable bounce (3 points) within a tick of the low value level (the low prior to the bounce was 1286.75). Some other levels which may come into play in the next week are:

(going down) 1280.50, 1275.50, 1270.50...and (going up) 1302, 1311.75, 1311.75. Watch them yourself and see if you notice any tradeble support or resistance at these levels. (NOTE--the data I'm looking at has not been updated for a couple weeks, so the data lower may not be as good since there has been volume traded in that area and the low or high volume areas will have changed--however since the historgram is for several months worth of data the numbers a likely still valid. To the upside the numbers are valid because no volume has traded there since the histogram was formed.)

 

One more thing I should mention is that I may not have given the TradeMaven indicators a sufficiently good try to know whether or not they are good for trading. I had a lot of other ideas I was working on at the time and may have been a bit impatient with them. I think they may be worth another try (and certainly worth a first try for somebody else). As mentioned I am seriously considering renewing my subscription.

 

Hope this helps.

[AgeKay 10]

  rsi77 said:

Thus understanding the high/low volume areas as support or resistance makes intuitive sense to me, while 1 standard deviation from the POC does not.

 

Same here. High/low volume areas as support or resistance make a lot more sense to me than 1 standard deviation or some other arbitrary range or prices level.

 

Thank you for the examples which I found very helpful to understand how you can trade these high/low volume areas.

 

Let me us know when you notice something else after signing up for their software again.

[gg80108 10]

Josh the main marketeer of the system, admits he doesn't trade at all but is studying to be a lawyer,, why trade an 8-5 job for one that ends up paying minimum wage with the hours required?? Charles who is the brains behind the organization, has some good observations. Their software presentation is misleading, since only 1 of the indicators "sticks" to a bar when closed but the rest can and do move to the next bar (s). A real annoyance, since you don't know if all those indicators really lined up on that bar in real time. So any historical and non real-time evaluation just isn't real.

[sdoma 10]

  AgeKay said:

Same here. High/low volume areas as support or resistance make a lot more sense to me than 1 standard deviation or some other arbitrary range or prices level.

 

How do you define high and low volume areas?

 

  AgeKay said:

The margin requirement does not change when the price goes up (unlike sweaters), so the actual prices of a futures contract does not matter to anyone. When you enter a trade, do you care that it's now so much more 'expensive' since it is 100 points higher than last week? No, you don't. The only people that care are those that have a position in that market because they are account is currently up or down based on that price change.

 

If all this were true, why do you see such a buy the dips mentality, especially in swing and longer term trading? Maybe it's just not a part of your psychology, but many traders are generally afraid of paying too much or selling for too little when they initiate a position in the direction of the current market move, whatever their time frame.

[gg80108 10]

The difference in volume at price levels are easy to see on the Market Profile charts, bell shaped curve representation greatest volume at price in middle of bell.. The trick is when the time comes ,, did this area/price level cause a reaction.. Buying on dips is usually seen on the profile as the trade at the far end of the low volume (aka: unfair low) and playing the rotation back to the middle of bell, high volume (the accepted price).. Now this rotation occurs till it doesn't thats when you give back all your profits. The standard deviation comes into place since MP is based on a statistical bell shaped curve and one std deviation has some meaning where 80% of the trading takes place..

 

Course the market can rotate against you longer then you can stay solvent.

[brownsfan019 17]

  gg80108 said:

Josh the main marketeer of the system, admits he doesn't trade at all but is studying to be a lawyer,, why trade an 8-5 job for one that ends up paying minimum wage with the hours required?? Charles who is the brains behind the organization, has some good observations. Their software presentation is misleading, since only 1 of the indicators "sticks" to a bar when closed but the rest can and do move to the next bar (s). A real annoyance, since you don't know if all those indicators really lined up on that bar in real time. So any historical and non real-time evaluation just isn't real.

 

If that's true, then enough said about this piece of junk.

 

Marketeer doesn't trade it. Why? B/c it doesn't work.

 

Looks great in hindsight, but not real-time. Again, doesn't work.

 

Save yourself the hassles.

[Kiwi 16]

  AgeKay said:

I never really like steidlemeyers examples in his books. They make sense when you read them, but they don't make much sense in the futures markets. The margin requirement does not change when the price goes up (unlike sweaters), so the actual prices of a futures contract does not matter to anyone. When you enter a trade, do you care that it's now so much more 'expensive' since it is 100 points higher than last week? No, you don't. The only people that care are those that have a position in that market because they are account is currently up or down based on that price change. Volume can show you where traders entered their position. Ammo, gave a great example in the previous post how you can interpret that volume.

 

Another difference is that when you buy a sweater in a store, you don't have to sell it back to the store, but in the futures markets you do (eventually).

 

This isn't really right/the point.

 

1. The value of a futures contract isn't the margin --- it's the price. Margin is just something we put up to be in the business so in a sweater business we'd pledge our car or part of a t-bill to show that we had credit to be in the sweater business (given the leverage you could buy a lot of sweaters if you pledged a car).

 

2. You don't have to eventually sell a futures contract back if you roll it over.

 

The issue is that a futures contract is a right to own a sweater. You put up surety (margin) to assure the vendors that you'll pay them if you stuff up. And if you want to keep "owning" the sweater at the end of a contract you rollover (sell/buy) from one contract to the next. Sure the analogies are imperfect but it is an auction market so they are not as imperfect as suggested in that post.

Edited October 7, 2008 by Kiwi

[gg80108 10]

  AgeKay said:

Same here. High/low volume areas as support or resistance make a lot more sense to me than 1 standard deviation or some other arbitrary range or prices level.

 

Thank you for the examples which I found very helpful to understand how you can trade these high/low volume areas.

 

Let me us know when you notice something else after signing up for their software again.

 

 

Charles at TM 3-2-1 system does develop his s/r reference levels from actual volume levels.. Course POC, is called the mean because it is an average but may not be the highest vol area called the mode,, and the standard deviations are figured off the mean,,,,go figure

[BlowFish 10]

  brownsfan019 said:

If that's true, then enough said about this piece of junk.

 

Marketeer doesn't trade it. Why? B/c it doesn't work.

 

Looks great in hindsight, but not real-time. Again, doesn't work.

 

Save yourself the hassles.

 

Does that make candlesticks junk? Being as Nisson doesn't trade? :) Yeah I know he just 'brought them to the west' but these guys didn't 'invent' the stuff either.

 

As you can probablly tell I am feeling mischievous .

[nick_1973 10]

good afternoon

[nick_1973 10]

i'm new member

[gg80108 10]

How about that Woodies "cci", where the creator of the cci indicator ,Lambert, never traded the indicator nor intended the indicator to be traded.. Now thats taking it to another step!!!

[marko 10]

I believe all next week the Trademaven room is open to the public, with no registration. Good time to check it out for free.

[gg80108 10]

https://admin.acrobat.com/_a830662945/r37282848/

[AgeKay 10]

  gg80108 said:

https://admin.acrobat.com/_a830662945/r37282848/

 

What is that link all about?

[gg80108 10]

check the MARKO entry,, link to open house. There is not much chat in the room , so best to be in the room before the bond opens, or before the ES opens.. Other good time is the noon update or market close recap

[marko 10]

Check it out at the top of each hour, that's when he does the audio I think. A different way of looking at the Market Profile.

[gg80108 10]

  marko said:

Check it out at the top of each hour, that's when he does the audio I think. A different way of looking at the Market Profile.

 

Seems like you have some experience with the 3-2-1 method/software and chat room?? I have the software, mainly because I have a life time license to TM so costs me $0 but they charge me $150/mo for the 3-2-1 charts + another $120 for esignal feed, since their data feed isn't accurate for volume, its like IB data. I'm back in the room to verify that my charts were working "right".. With the new volitility one or many of the software signals seem to show up on every bar and not just turning points , like when I got the the software a month ago.. Course they are teaching that you should not trade the software indicators but trade an idea based on volume and news??? and if the indicators coincide, all the better. The only success I have had was with the 10 yr note,, but still trying to see if the software indicators are worth the money.. so far not worth it for me. I've actually reversed the deceleration of buy/selling signals and seem to work better. Maybe the key is just deceleration somewhere.

[AgeKay 10]

marko, thanks for the link.

 

gg80108, I am glad that you are sharing your experience as a user of their software here. You confirmed what someone else said earlier about their indicators not being good. What I am really interested in is whether their long term volume distribution (volume histogram) on which their "rules" are based on adds value to your trading? If so, could you please elaborate on how you use them, i.e. do you use it as described in their "rules" or do you use it differently?