The Price / Volume Relationship

[ljyoung 10]

From Spydertrader's post #233:

While certainly, additional trading fractals (beyond skinny, medium and thick)

do

exist, they reside not 'in between' skinny and medium, but rather, below (or faster than) a skinny line.

 

As a result, we

rarely

see them. However, when we

do

see these faster (than skinny line) fractals, they operate in the

exact same

fashion as all other fractals (skinny, medium and thick) which we see each and every day.

 

As I attempted to clarify earlier and will do so again now, the use of the terminology 'in between' has less to do the with the speed of the fractal and more to do with the functional (read visual) position of the fractal. There was not then nor is there now any argument about the internal structure of the fractal. If others do not see the situation like this then they are most welcome to construct their own way of describing what is before them.

[romanus 10]

Monday, September 14, 2009.

[romanus 10]

And from my notes from NYC, one bar of decelleration does not equal decelleration. If anybody has anything to add, please do.

It seems to me that this statement doesn't appear to accurately cover all types of contexts.

E.g. 2nd blue up traverse - 11/25/08, last pink down traverse - 02/03/09.

[Ezzy 10]

A danger exists with using older charts to find one's way. First, depending on the discussion (at the specific point in time of the chart's creation) annotation convention may differ in an effort to highlight the specific area under discussion. In other words, a discussion with respect to a 'faster fractal traverse' would see those areas highlighted in the annotated chart, {reference to 10-21-08 chart} and possibly, very few (if any 'actual' tapes), whereas currently, this discussion only considers three fractals - tape, traverse and channel (or if you prefer, skinny, medium and thick; L1, L2 & L3). Second (as is the case with this specific chart), the previous annotation convention may not apply to the current discussion at all. For example, note the Gaussians on the chart you attached. They only show two levels. Moving forward, we want to focus on 'seeing' all three levels of Gaussian activity and only three levels.

 

Again, I don't want to discourage the use of older charts. I just want to caustion everyone to view these artifacts as intended at the time of their creation, and not, from the vantage point of an improved knowledge plateau.

 

HTH.

 

- Spydertrader

Three choices exist, and we call these three choices tapes, traverses and channels (skinny, medium and thick; or L1, L2 & L3 if you prefer different nomenclature).

 

No more 'Chubby' tapes.

No more 'Faster Fractal' Traverses.

No more Lateral 'Movement.'

 

Tapes build Traverses and Traverses Build Channels.

 

Just a reminder for those going over the older charts to consider the discussion at the time for context. For example on the 11-25-08 posted by Romanus, faster fractal traverse was still a common term. The orange and olive channels being of that type. Also all the gaussains were not broken out per fractal, only some. The first orange has several within it, but the orange now might be considered only a tape. - EZ

[rs5 10]

Tuesday 15 September 2009

Edited September 15, 2009 by rs5

[romanus 10]

Tuesday, September 15, 2009.

[ehorn 10]

A neighbor of mine lost his job (upper mgmt with a tech firm) in the beginning of the economic fallout last year. He decided to give some attention to these techniques. He is a modest fellow, but he just emailed me a snapshot of his equity curve from 9/1 - present day with a quick note.

 

I asked for his permission to share.

 

He mentioned in his note that he does not think he will be looking for another job anytime soon. lol!

 

I believe this brief snapshot equity curve demonstrates someone who is becoming Operational.

[rs5 10]

I believe this brief snapshot equity curve demonstrates someone who is becoming Operational.

 

Wow, How did he get proficient so quickly? Thank you for sharing!

Edited September 16, 2009 by rs5

[ehorn 10]

Wow, How did he get proficient so quickly? Thank you for sharing!

 

The curve averages out to about 5 points/day (roughly 30-50% ATR for the last 2 weeks) @ 5 contracts.

 

We spoke about how he is applying the techniques and, to paraphrase, he says he uses these principles to help him identify the trend (volume). He then looks for an FTT and once he thinks he has spotted one he makes and entry with a small stop and then tries to sit on his hands. He also draws in an anticipated higher fractal TL (one less steep) to help him hold longer which he says eases his emotions as price retraces from PT2 to PT3. Once he is in a developed trend he waits for price to break the TL and exits.

[sscott 10]

It seems to me that this statement doesn't appear to accurately cover all types of contexts.

E.g. 2nd blue up traverse - 11/25/08, last pink down traverse - 02/03/09.

 

Thanks Romanus, I was out of town today and just reviewed your post. In both your examples there was accelleration, then two bars of decelleration (non-dominant movement) before accelleration of dominant movent in the direction of the traverse. I'll give you a more specific example of what I saw tomorrow, It's too late to think clearly tonight.

[rs5 10]

The curve averages out to about 5 points/day (roughly 30-50% ATR for the last 2 weeks) @ 5 contracts.

 

We spoke about how he is applying the techniques and, to paraphrase, he says he uses these principles to help him identify the trend (volume). He then looks for an FTT and once he thinks he has spotted one he makes and entry with a small stop and then tries to sit on his hands. He also draws in an anticipated higher fractal TL (one less steep) to help him hold longer which he says eases his emotions as price retraces from PT2 to PT3. Once he is in a developed trend he waits for price to break the TL and exits.

 

Thank you so much! I am still at the stage of trying to figure out which gaussian formations goes with which price formations, so still a ways before getting to the second A. This example is a wonderful inspiration and glimpse into what is to come in the next stages of development, which is very timely indeed. Thank you!

[innersky 10]

September 15th, after debrief...

[rs5 10]

Wednesday 16 September 2009

[rightbyleft 10]

terminated with two closes outside the Lateral boundaries (created from the High / Low of Bar 1) - except where the 'two closes' form a 'flaw.' In such a case, we require a 'third' close outside the lateral boundary in order to have reached 'termination' of the previous lateral.

 

- Spydertrader

 

what defines a 'flaw'?

[TIKITRADER 10]

ES Long term Daily chart. This spans from August 2006 to present. The October 2007 FTT. is clear. ( FTT . . . old school lol )

 

 

 

[TIKITRADER 10]

what defines a 'flaw'?

 

 

Greatest definition of a flaw and market internals Spydertrader September 1 2007

 

Flaws and Internal Formations

 

Before we proceed toward a discussion regarding Internal Formations and Flaws, let's try to clear a few items off the table.

 

First, one cannot expect to know immediately upon the open of the bar whether or not one sees an FTT or a Flaw. Almost all Flaws start out looking exactly like an FTT. Only with the passage of time can we see the subtle differences which tell us, "What wasn't that?"

 

Second, forgotten among the many discussions and side debates of this Journal is the fundamental concept which drives all trading of these methods: Volume and Price are inexorably linked to one another. The methods both graphically and literally show the changes in market sentiment over time. While channels do provide context, and Gaussians show the ebb and flow of volume Pace, everyone needs to evaluate every post, every tool, and every bar through a lens which differentiates between continuation and change.

 

With that said, we can now begin.

 

We need to understand at a fundamental level just what 'flaws' represent. To the Beginning Level Trader, flaws provide an opportunity to hold through periods of uncertainty. To the more advanced level trader, 'flaws' provide additional opportunity for profit.

 

Why the disparity? The answer is simple: Time. Beginning Level traders have not yet had enough Time in front of a computer screen to 'see' the opportunities presented by 'flaws' and view these areas as confusing. I do not mean to suggest a certain quantity of Time flips a switch allowing all a great insight into the inner workings of market microstructure - far from it. What I am saying to you is, lost in all the sound and fury is the meaning behind the bar formations - continuation or change? It should not matter if the change is an FTT, flaw or formation. Can you not see how using Price and Volume in combination alerts you to what must come next?

 

None of this is new stuff. It's all been posted before, in one form or another, on one web site (or USENET Group) or another since 1998. But let's see if we can't try to look at these things from a different point of view.

 

Fundamentally, Flaws represent a minority opinion in the market place. Depending on the size of the trading accounts involved, and the conviction of the traders controlling those accounts, the market will react in several, ways.

 

The Hitch represents only a handful (compared to the entire market) of traders who have decided, on their own or in collusion, that the current trend has run its course. This small (again in relation to the overall market) throw their weight, influence and money head first into the current trend. This activity (and it does not matter at this point of the trades represent a counter trend [reverse] move or simply an exit from the market itself), briefly stops the current trend (temporarily), but this particular group of traders doesn't have the numbers (or economic clout) to bring about a trend reversal on their own. They need others to follow their lead. Since nobody follows, we see very little range in price and significantly less volume than the previous bar. The result: a temporary shift in market sentiment and a very small range with respect to Price. Since nobody followed, the temporary trend stop (or small reversal) ends, and the dominant trend resumes along its previous pathway.

 

The Stall, on the other hand, has a few more people behind the move. A few larger accounts, a little more weight, increased clout and cash, by the use of which, this group hopes to influence the market. While the stall group does manage to push Price a little further than The Hitch Group, they too find nobody willing to follow just yet. As a result, we see a little larger Price move (when compared to the Hitch), but very little volume (normally) when compared to the previous bar. Of course, just like the Hitch, the market resumes its previous course.

 

I'll continue with this post tomorrow, but for now, look at the last chart posted. Study it long enough and you should be able to see differences (compared to what you already know about adjacent price bars) which allow for the differentiation between continuation and change.

 

Good Weekend all.

 

- Spydertrader

Edited September 17, 2009 by TIKITRADER

[TIKITRADER 10]

continued flaws and internals Spydertrader September 2 2007

 

 

09-02-07 11:40 AM

 

Continued Flaws and Internal Formations

 

With Hitch and Stall understood, we move to the next example of temporary change - The Dip. Again (as with Hitch and Stall) a minority of market participants think, feel, believe they know, the current trend has run its course, and the time has come for the market to head in the opposite direction. This group of traders has more money, economic clout, and influence (due to their relative larger numbers) than either Hitch or stall (Hitch < Stall < Dip), but not yet do they have the needed influence to motivate enough 'others' to follow. As a result, The Dip group effects change for a longer period of time than either Hitch or Stall, but The Dip Group does not yet have enough economic clout to 'change' the minds of enough individuals just yet and alter (longer term) market sentiment. Because their influence is greater than either Hitch or Stall, we see in the charts a longer period of influence (often 3 to 5 bars). Price pulls back forming a 'hat' or 'bowl' (depending on direction) and Volume drops off significantly as well (usually across several bars). If a Dip last long enough, one can often see a Dip end with an FTT - especially when watching a small traverse (limb or small tree).

 

As you can see with these three types of flaws, each represents an ever increasing number of market participants who feel the time has come for a change in sentiment. It does not matter at this point if an individual participant chooses a reversal or an exit to articulate their respective view.

 

The HVS, on the other hand, represents a dynamic slightly different than the previous three examples. With the HVS, you have a near 50 / 50 split with respect to how the market participants view the current trend. Support / Resistance, Long / Short, Bull / Bear, Up / Down, Good / Bad or Dog / Cat - it does not matter what terms one uses to describe the environment. What we see during the HVS is a battle between the two groups. "Things are great!" / "No, they suck!" "The market is gonna' make new highs!" / No, its going to crash worse than 1987!" "Less filling!" / "Tastes Great!"

 

Back and forth, back and forth until one side capitulates deciding neither their opinion nor their capital can overwhelm the opposing group. Occasionally, one side gets a bit tricky and raises the white flag, regroups and comes roaring back a few tics later in the game. We have no need to worry about this trick as we see it play out in advance on the DOM (at the large walls). The important take home message here is we can spot an HVS by the decreasing levels of oscillating volume (red, black, red etc.). Price sometimes creates a lateral, but other times does not. One can trade through an HVS situation using expert level tools.

 

CCC brings about another type of situation that differs entirely from the previous 4 examples. During periods of CCC, the market participants have chosen to not participate. They head to lunch, they leave for The Hamptons or they simply decide to wait until some scheduled News Event takes place (Fed Day). This lack of participation by the key players creates a scenario whereby noise has a far greater impact on each individual bar than during any other periods of the day. Risk has increased to the individual trader, and we, as students of these methods, often choose to exit this type of environment. We see this scenario manifested in the charts by flatlined price combined with super low (DU or VDU) level volume.

 

More later .....

 

- Spydertrader

[TIKITRADER 10]

continued Spydertrader September 2 2007

 

 

09-02-07 04:33 PM

 

Continued Flaws and Internal Formations

 

Alrighty then, we have laid out the various types of flaws which pop up from time to time. We also see how Price and Volume play a role in differenciating a flaw from an FTT. In addition, we already know that flaws manefest themselves across dominant traverses, and they do so when a certain number (or contracts traded) decide the current trend has moved far enough. Lastly, we can determine what type of flaw with the passage of time using differencial analysis as to what the 'thing' cannot be and eliminating choices until we are left with the only thing it can be.

 

Now, we do have other 'things' which crop up from time to time. These are not 'flaws' as we know them. They represent 'formations' of Price (and Volume) bars. These also provide the trader with instructions as to what must come next. Examples of these 'formations' include: Laterals and Pennents. The Pennents should be easy to spot (Flat Top, Flat Bottom and Sym). They begin with a two bar formation (but could last longer), and then Price Breaks Out in one direction or another. Now, we do not associate any sort of probability with respect to direction on a Pennent. We simply see the Pennent Formation as a momentary pause - a place in time at which the market has chosen to 'reset' and start again.

 

The same holds true with Lateral formations. A wide range bar followed by multiple bars - all of which remain inside the Price range of the wide range bar - creates a lateral formation. The wide range bar casts its 'shadow' until Price breaks free of the lateral formation.

 

Both Pennants and Lateral formations almost always show decreasing volume from beginning to end of the respective 'formation.' Jack has lumped all these sorts of 'things' into what he calls - Internals (short for Internal Formations). Both Flaws and Formations comprise the group Jack calls Internals.

 

If we look at the combination of Price and Volume and how each interacts with the specific 'Internals' examples. we can 'see' how one could view a flaw or an internal formation as a signal for change. with flaws, the signal is not of very long duration - a few bars at most. With formations, the signal is forthcoming. We have no movement now, but expect to have price change occur shortly. The only exception 9off the top of my head) is when Price leaves the formation boundary, but then returns. This is sort of like when Price exits the channel and then returns. With a channel exit and return, we call the event an FBO. A similar example occurs with formations. although we do not want to call the event an FBO (in an effort to avoid confusion with the channel FBO), a similar mindset needs to be applied.

 

"Well we broke out but came right back in, now what?" Simply wait until the next bar and look for what we always look for - Price direction on increasing volume.

 

More Later ...

 

- Spydertrader

[TIKITRADER 10]

I will finish with this you get the idea, but google Spydertrader September 2 2007 and you should find what you need

 

 

09-02-07 08:56 PM

 

Continued Flaws and Internal Formations

 

We know that most flaws form when volume significantly differs from the previous bar. I have often discussed how this significant difference in Volume at end of bar has a 'tipping point' around the 40% to 60% level when compared to the previous bar. In other words, if the current bar Volume has somewhere around 90% (or so) of the previous bar then we think, "This bar has all the markings of an FTT." If, on the other hand, we see only 10% of the Volume of the previous bar, we think, "This bar has all the markings of a flaw." The 40% to 60% of the previous Volume bar marks the point at which we distinguish between the two.

 

Since the beginning of this Journal, we have all had a tool, that on many bars, allows us to know, within the bar itself, that we cannot possibly end up with an FTT on this current bar. The tool to which I refer is PRV. Note the flaws on the examples I have shown. Note The Volume Levels. Is it possible that at some point within the bar itself, one should know exactly what we see because Volume cannot make it to a level where it signals an FTT? or better yet, Volume cannot make it to continuation? Of course it is. Look at those Volume bars. Can you not see how one can most definitely know before the close of the bar?

 

If I say, we must see a certain Volume level by end of bar, what must occur within the bar for the result at the end of the bar to occur?

 

So yes, I did not specifically spell out in step by step fashion, complete with road map and atlas, exactly how one can arrive at knowing intra-bar. But I did most definitely, on more than one occasion, spell out exactly what was needed at end of bar.

 

I apologize for assuming everyone could make the connection between the two.

 

- Spydertrader

[TIKITRADER 10]

I had to step out and did not finish.

 

If you google flaws and internal formations Spydertrader you will find. great info on this topic

 

To point out as someone has mentioned, Spyder no longer uses these terms, above information is for researching where the term flaws and formations did originate from.

Edited September 17, 2009 by TIKITRADER

[rs5 10]

Thursday 17 September 2009

[cnms2 10]

Thursday 17 September 2009

Paraphrasing rs3 (Rod Stewart's 3rd album): Every peak tells a story

[rs5 10]

Paraphrasing rs3 (Rod Stewart's 3rd album): Every peak tells a story

 

Thank you for your input!

 

On the down channel, do you mean keep the original point3? And let the break out be in a new chanel?

 

Hmmm, I am still working understanding the story of each peak. The peaks circled are forces pushing in the direction of the 2nd fractal gaussians? The forces are stronger in the dominant direction and weaker in retrace (shown by the height of the volume bars)? Should the vol peaks coincide with gaussian nodes (point of slope change in gaussian)?

[sscott 10]

My chart for the 17th.

[sscott 10]

Thursday 17 September 2009

 

I compare my guassians to yours and they are tracking the same points of change as to color, but are exactly opposite each other in the direction of slope of the dominant down channel along with the traverses contained within the channel. I use the color for price movement and increasing or decreasing slope for dominant or non-dominant movement. From the volume pane it appears the dominant price trend in the channel is down, so an upslope thick guassian to show dominance with a red color to show price direction would be the proper annotation. Unless of course you believe that todays channel represents a non-dominant retrace of a dominant up channel from yesterday. Context???