The Price / Volume Relationship

[Ezzy 10]

You do not have this 100% correct.

 

- Spydertrader

 

Ok, the 1st green circle doesn't start with a sym pennant as the ones in the drill and follow up drill. The 2nd green and both orange start as syms, - but since it was said some of them are in a different category, that a can only be one factor in this drill.

 

In the first drill the doji either sets or tests the lateral boundary within 3 or 4 bars. In the follow up drill 3rd or 4th bars sets or tests the boundary, sort of making a FTP or FBP looking lateral.

 

The 1st green lateral starts as a FBP with a doji and the 3rd bar set the boundary. So I would say it is different from the drill laterals, as it doesn't start with a Sym, though it does have a doji setting the bottom boundary.

 

15:35 Lateral on Wednesday, tests the boundary on the 3rd bar, and the 16:05 lateral has the 4th bar (Thursday's open bar gap adjusted) test and penetrate the boundary temporarily and then goes the other way forming a spike bar - not unlike the doji's.

 

They all seem to have different locations in the sequences, so it would seem we're just differentiating the object for this drill? Trying to keep this simple and look at the similarities, but can see dozens of differences that probably aren't significant.

 

Have I already missed the lesson here, or at least, what have I got right?

 

Thanks - EZ

[Spydertrader 10]

Have I already missed the lesson here, or at least, what have I got right?

 

Hopefully, the following analogy can help you to see where you need to focus ...

 

If I asked you to tell me the differences between two different types of tools - a claw hammer and a hand saw - you might begin to point out that one uses a hammer to pound nails into wood, but one uses a saw to cut wood. If I then picked up a ball peen hammer and said to you, "Well this doesn't look like a tool used for cutting wood, but its made by Craftsman (just like the claw hammer and the hand saw), so I dunno what to think." How quickly would you smack your forehead?

 

Now, let's lok at what you wrote ....

 

Ok, the 1st green circle doesn't start with a sym pennant as the ones in the drill and follow up drill. The 2nd green and both orange start as syms, - but since it was said some of them are in a different category, that a can only be one factor in this drill.

 

O.K. So you do see that each of the examples in The Lateral Formation Drill (and follow up) begin with a Sym Pennant. Perfect.

 

In the first drill the doji either sets or tests the lateral boundary within 3 or 4 bars. In the follow up drill 3rd or 4th bars sets or tests the boundary, sort of making a FTP or FBP looking lateral.

 

Now. Read the above quoted lines a few times. You appear to be noting, in once sentence, the observation that the lateral requires a doji. Yet, in the next sentence, you indicate 'a bar' is all that is needed. Which do you think the answer to be?

 

The 1st green lateral starts as a FBP with a doji and the 3rd bar set the boundary. So I would say it is different from the drill laterals, as it doesn't start with a Sym, though it does have a doji setting the bottom boundary.

 

The above paragraphs looks to me like you picked up a ball peen hammer and decided you might not be able to tell the difference between this hammer and a hand saw because they are both made by Craftsman.

 

15:35 Lateral on Wednesday, tests the boundary on the 3rd bar, and the 16:05 lateral has the 4th bar (Thursday's open bar gap adjusted) test and penetrate the boundary temporarily and then goes the other way forming a spike bar - not unlike the doji's.

 

Look closer. You have not described the same things here. 14:05 and 15:35 conform to the examples provided by The Lateral Formation Drill (and follow up). Whereas, the (gap adjusted) 4:05 to 9:35 does not. You wrote (earlier in your post) about 'testing or setting' the boundary. Perhaps, you should look carefully to see which one of these two observations provies correct.

 

They all seem to have different locations in the sequences, so it would seem we're just differentiating the object for this drill? Trying to keep this simple and look at the similarities, but can see dozens of differences that probably aren't significant.

 

For now, I wanted to focus on the different things in an effort to motivate people to 'see' that which actually exists, and not, simply what they believe is there. How one annotates these different things first depends on context, and then depends on where they fall within the order of events.

 

HTH.

 

- Spydertrader

[rs5 10]

Thursday 14 January 2010

Edited January 15, 2010 by rs5

[rs5 10]

Hi rs5

 

I am wondering why you didn't mark Bar55, 67 and 79 respectively as the first bar of each SYM Lateral. Could you explain it?

 

 

Bar 55 formation (13:05 on my chart) should have been marked - my bad.

 

Bar 67 formation (14:05 on my chart) starts with a SYM but does not test the boundaries before completion of this formation thus not within our current study.

 

Bar 79 formation (15:05 on my chart) is an incomplete formation thus not marked.

 

But you probably have figured that out from Spydertrader posts above

 

Happy MADA!

 

rs

Edited January 15, 2010 by rs5

[Ezzy 10]

If I asked you to tell me the differences between two different types of tools - a claw hammer and a hand saw - you might begin to point out that one uses a hammer to pound nails into wood, but one uses a saw to cut wood. If I then picked up a ball peen hammer and said to you, "Well this doesn't look like a tool used for cutting wood, but its made by Craftsman (just like the claw hammer and the hand saw), so I dunno what to think." How quickly would you smack your forehead?

 

Now, let's lok at what you wrote ....

 

So the hammers are Syms, the saw is the FBP starting laterals. The ball peen getting to the differences from that point. Like the formation drill, first 2 bars to separate them, SYM vs. the FTP and FBP (which share obvious similarities), and the EH.

 

O.K. So you do see that each of the examples in The Lateral Formation Drill (and follow up) begin with a Sym Pennant. Perfect.

 

Originally Posted by Ezzy

In the first drill the doji either sets or tests the lateral boundary within 3 or 4 bars. In the follow up drill 3rd or 4th bars sets or tests the boundary, sort of making a FTP or FBP looking lateral.

 

Now. Read the above quoted lines a few times. You appear to be noting, in once sentence, the observation that the lateral requires a doji. Yet, in the next sentence, you indicate 'a bar' is all that is needed. Which do you think the answer to be?

Just a bar to set or test the boundary, regardless of type.

 

Originally Posted by Ezzy

The 1st green lateral starts as a FBP with a doji and the 3rd bar set the boundary. So I would say it is different from the drill laterals, as it doesn't start with a Sym, though it does have a doji setting the bottom boundary.

 

The above paragraphs looks to me like you picked up a ball peen hammer and decided you might not be able to tell the difference between this hammer and a hand saw because they are both made by Craftsman.

 

I've lost the plot here, (which one was the saw) but yeah, that one is different, not a sym start.

 

Originally Posted by Ezzy

15:35 Lateral on Wednesday, tests the boundary on the 3rd bar, and the 16:05 lateral has the 4th bar (Thursday's open bar gap adjusted) test and penetrate the boundary temporarily and then goes the other way forming a spike bar - not unlike the doji's.

 

Look closer. You have not described the same things here. 14:05 and 15:35 conform to the examples provided by The Lateral Formation Drill (and follow up). Whereas, the (gap adjusted) 4:05 to 9:35 does not. You wrote (earlier in your post) about 'testing or setting' the boundary. Perhaps, you should look carefully to see which one of these two observations provies correct.

I see, the gap adjusted bar went lateral movement, it's not the same. That bar didn't make the clip here - the TN "clone" tool broke so I can't show it properly.

 

Originally Posted by Ezzy

They all seem to have different locations in the sequences, so it would seem we're just differentiating the object for this drill? Trying to keep this simple and look at the similarities, but can see dozens of differences that probably aren't significant.

 

For now, I wanted to focus on the different things in an effort to motivate people to 'see' that which actually exists, and not, simply what they believe is there. How one annotates these different things first depends on context, and then depends on where they fall within the order of events.

 

HTH.

 

- Spydertrader

 

Did you say differences? How much time do you have? :o

Edited January 15, 2010 by Ezzy

[gucci 10]

These represent the types of Lateral Formations which need differentiation first. Then, and only then, should one move onto other types of laterals.

 

- Spydertrader

 

Spyder, why do think those Laterals are of utmost importance? What is special about them? TIA.

Edited January 15, 2010 by gucci

[double eagle 10]

Hi Ezzy and Spyder. I am going to throw my opinion into the mix here. I think what Spyder is trying to get at is that there are different types of laterals that can be grouped based on how the boundaries are formed. I am not saying that this is the only way that laterals should be grouped, I am just saying that it seems Spyder is pointing us there as a one of the focuses of the discussion.

 

This is much like how pennants are grouped. For pennants we have FTPs which have a boundary at the top (second bar high equal to the first bar high), FBPs which have a boundary at the bottom, SYMs which do not have a boundary formed by the 2nd bar, and EHs which have boundaries at both the top and bottom. The FTPs and FBPs have directional components to it (you can draw a trend line), the SYMs don't, and the EHs have a lateral trend associated.

 

I am thinking that Spyder is saying let's look at laterals that have the boundaries at the top (like a FTP) or bottom (like a FBP) and differentiate them first. Then we can move on to ones that don't have a bar that set the boundaries (like a SYM pennant) or boundaries at both (like an EH).

 

Laterals that have a boundary at the bottom can form in 2 ways. One way is for it to begin as a SYM and then have a subsequent bar set the boundary. The other way is for the lateral to begin as a FBP. Those are the only two ways that are possible. The way that they accomplish the task is different, but the function is the same. This is like having two different kinds of hammers. In the end, the function is to pound a nail into wood even though there are other differences between them. The same logic applies to laterals that have a boundary at the top.

 

There are other laterals that do not have a boundary setting bar (equal high or low of a subsequent bar compared to the first bar). They start out as SYM pennants. The subsequent bars don't set a boundary. Eventually one of the bars BOs of the high or low of the first bar (no bar closes with an equal high/low to the first bar). So we see a difference. It's like the difference between a FTP that BOs on the third bar and a SYM that BOs on the third bar. One had a boundary, the other didn't prior to BO.

 

Finally, there are laterals that have boundaries on the top and bottom. They start out as a SYM pennant, some bar later sets one side of the boundary, and then some bar later sets the other side of the boundary. This is like an EH.

 

I am going to throw a wild off the cuff thing out there and say that if you broke down a pennant by looking at a smaller time frame chart (whatever that might be) you would see a lateral that forms in the same ways as described above. For example, you would see a FBP form as a lateral on the smaller time frame with either the second bar or a subsequent bar creating the boundary (the two types of hammers I described above). I don't want to go too far down the rabbit hole. This is just an observation that I thought about.

 

So our job is to first look at context, then at the sequences, and then at the "thing". Just as not all FTPs are alike (volume can be increasing or decreasing, the open can be higher or lower than the close, etc.), not all FTP-like laterals are alike. We need to differentiate all the permutations.

 

With all this being said, I am trying my hardest to go through this process of differentiation and hoped that my post would spur some further discussion. I humbly must admit that all that I just typed could be rubbish... or there could be something to it. If there is something to it, I'm trying to figure out what is the market "tell" in each situation, how does that affect WMCN, which side of the lateral will price break out, does it create pt. 2 to pt. 3 of "something" or are we still on our way to pt. 2 of "something" as we exit the lateral, etc.

 

Sorry for the long post. I just wanted to get some of my late night/early morning thoughts out there to see what people thought.

[ptunic 10]

Some other lateral observations to add (with the disclaimer that this is purely brainstorming, laterals confuse me probably more than anything!):

 

First, one thing I noticed about the laterals that are in the Lateral Drill: the bar that starts the lateral has a greater range than the bar before it.

 

On a related topic, I haven't figured out when laterals end yet. I am aware of the 2 outside closes (or 3 if in a flaw) guideline, but there might be other cases that end a lateral:

- ibgs on increasing volume with either close or open outside a boundary

- spike bar with higher range than the previous bar on increased volume with high and low both outside the boundaries

- peak volume bar with open or close outside a boundary

 

Then in some cases laterals seem to end but immediately start another lateral. I haven't determined what to do here, in terms of are these potentially another part of the sequence or are they better though of expansions of the previous lateral.

Edited January 15, 2010 by ptunic
typo

[rs5 10]

Thank you all for this interesting discussion on laterals (the thread is awake - Yippie!)

 

As far as I understand it, the boundaries of the lateral is set by the high and low of Bar 1 (regardless of the two inside bars which forms subsequent to it)

[ptunic 10]

As far as I understand it, the boundaries of the lateral is set by the high and low of Bar 1 (regardless of the two inside bars which forms subsequent to it)

 

Yup totally agree that bar 1 sets the boundaries. I think what double eagle is saying is the next 2 bars (whether they are sym, FTP etc) might be one major factor that differentiates the types of laterals though in the 3 cases from the Lateral Drill (or possibly sub-cases of those )

 

I also have a feeling volume (as always!!) has a greater role in this than perhaps has been discussed so far though it eludes me. I will just say in the 1st lateral in the Lateral Drill, the volume and mode of the bars seems the "cleanest". It is just very simple compared to the other two laterals in that drill. It's almost like you can just draw a V with decreasing volume as price moves in the non-dominant direction, a slight pause, and then volume starts to increase in the dominant direction. The other two laterals are much more complex with price changing directions more than 1 time inside the lateral.

[Ezzy 10]

Thank you all for this interesting discussion on laterals (the thread is awake - Yippie!)

 

As far as I understand it, the boundaries of the lateral is set by the high and low of Bar 1 (regardless of the two inside bars which forms subsequent to it)

 

What Ptunic said is correct. For example the last lateral on Wednesday, the one Spydertrader had me look at more closely, has the 4th bar sticking out. That changes it into lateral movement. That is very different from a lateral with all the bars inside. Not all laterals will have bars "test" or bounce off the1st bars boundaries. Each point is a difference.

[gucci 10]

 

I will just say in the 1st lateral in the Lateral Drill, the volume and mode of the bars seems the "cleanest". It is just very simple compared to the other two laterals in that drill. It's almost like you can just draw a V with decreasing volume as price moves in the non-dominant direction, a slight pause, and then volume starts to increase in the dominant direction. The other two laterals are much more complex with price changing directions more than 1 time inside the lateral.

 

I think you are spot on with your observations. Here is an example from Dax. It fits (I think) into the group of laterals you found somewhat complicated.("the other two laterals in that drill"). The first rising volume points the way to the dominant direction.

[Spydertrader 10]

Spyder, why do think those Laterals are of utmost importance? What is special about them? TIA.

 

Your question provides an excellent example of the difference between transference and translation.

 

For many months, I have attempted to impress upon everyone the significant importance of learning the process of differentiation - to learn how to learn to see the differences between that which actually exists, and that which people might simply believe exists. Developing a fully differentiated mind allows a trader to see the market from a standpoint of certainty. In other words, monitoring the market involves much more than placing lines on a chart. One must know why a certain line (or a line of a certain weight) exists at a certain point in time on a chart.

 

Still, many people (even to this day) stop well short of reaching the point of certainty with respect to differentiating the market sequences and / or formations. Often, these same people 'think' or 'believe' they have arrived at a correct answer, rather than (as I have often advised) allowing the market itself provide the answers required.

 

So, here we are at yet another drill (a drill designed to force the process of differentiation onto anyone up to the challenge). The rules were very simple: One cannot move forard, one cannot pass 'Go,' One cannot 'collect $200.00 Dollars,' one cannot even think about any other types of laterals until a trader correctly (and completely) differentiates The Lateral Formation Drill (and follow up). It's a very simple drill (please note, I did not say 'easy'). Look at the examples and the locate other examples (as time moves forward) in an effort to 'see' how the market operates in an effort to know what must come next with respect to the market's formation of any Lateral.

 

Already the discussion has glean one very important characteristic: Each of these specific laterals start with a Sym Pennant. But, is this the only characteristic of these specific types of Laterals? Surely, something else must set them apart from all other things which appear similar. In other words, why (on my own chart) have I annotated yesterday's midday period (1-14-2010 @ 12:35) as an example of these specific types of Laterals, but at EOD (1-14-2010 @ 15:15) I have not?

 

You see. I haven't placed a greater importance on these specific types of Laterals, as much as I am forcing people to learn the process of differentiation - correctly and completely - before moving forward. Already (within the recent posts), we have questions and concerns surrounding a whole range of sub-topics, rather than, focusing on the step by step process of learning to see that which the market has provided.

 

1. What makes all the examples provided by The Lateral Formation Drill (and follow up) exactly the same (meaning different from all other types of Laterals).

 

2. Once you have the above answer, then you can determine the differences between the examples provided in The Lateral Formation Drill (and follow up). It is these subtle differences (when combined with Context and Order of Events) that provide the correct annotation required for your chart.

 

How does this relate to the differences between translation and transference?

 

While attempting to transfer to everyone how to go about learning the process of differentation, some have translated my efforts into placing an 'importance' level upon certain types of laterals (or even onto other areas totally unintended). Now, this doesn't make anyone a bad person. It's simply human nature. How we perceive things is colored by our own mental filters derived from our individual life experiences. I've done it many times myself.

 

The point of all this?

 

Always endeavor to understand the intended meaning of the information being conveyed. In such a fashion, you'll forever ensure you continue to head in the right direction.

 

HTH.

 

- Spydertrader

 

P.S. (All times Eastern and [close of] ES [bar])

Edited January 15, 2010 by Spydertrader
formatting errors

[Ezzy 10]

Current laterals under discussion for you lazy folks . (the clone tool re-appeared)

[saturo 10]

Spyder - without giving too much away... I have a question about two of the lateral drill laterals. On 1/6/10 ...

 

1) is the 12:15 lateral part of a trend that begins at 11:40 and ends at 14:00 ?

 

2) is the 14:40 lateral part of a trend that begins at 14:00 and ends at 15:40 ?

[saturo 10]

Spyder - without giving too much away... I have a question about two of the lateral drill laterals. On 1/6/10 ...

 

1) is the 12:15 lateral part of a trend that begins at 11:40 and ends at 14:00 ?

 

2) is the 14:40 lateral part of a trend that begins at 14:00 and ends at 15:40 ?

[frenchfry 10]

Hi Spyder,

 

in your lateral drill, is there a reason why removed volume and only showed price? Was volume not important for those three specific laterals? Not important in general when you look at laterals?

 

Could you have removed the bars before the lateral began and still make your point? Could you have removed the bars that followed after the lateral ended and still make your point? In other words if you only showed the first and the last bar of the lateral would that still be enough information?

 

Thanks.

[romanus 10]

... Was volume not important for those three specific laterals? ....

 

========================================================= post #1137

 

....But to clarify, do you mean only the differences visible in this snippet as posted ....

 

No.

 

I intended the information previously posted to included ensuring everyone focused exclusively on the three Laterals Highlighted in Blue, and (for the purposes of this specific excercise) ignore any and all other Laterals which devloped during the day. I did not intend for those working through the exercise to focus solely on Price.

HTH.

 

- Spydertrader

 

http://www.traderslaboratory.com/forums/34/price-volume-relationship-6320-29.html#post84507

[Spydertrader 10]

On 1/6/10 ...

 

is the 12:15 lateral part of a trend that begins at 11:40 and ends at 14:00?

 

Yes.

 

is the 14:40 lateral part of a trend that begins at 14:00 and ends at 15:40 ?

 

No.

 

- Spydertrader

[Spydertrader 10]

In other words if you only showed the first and the last bar of the lateral would that still be enough information?

 

No. Doing so omits Context and Order of Events - equally important as differentiating 'the thing' in order for differentiation to produce the correct chart annotations.

 

- Spydertrader

[MKTr 10]

Reattack on Spyder’s Lateral Formation Drill from 21 Dec 2009

 

How are the three lateral formations the same? They all begin with a SYM that is followed by a failure to break out of the SYM (first attempt). The failure to break out occurs only once in each case.

 

How are they different? After the SYM forms the important way they are different appears to be what happens when price tests the boundaries of the Lateral Formation:

 

Lat form #1: After the SYM forms, price tests a low but fails to break out. This test is done via a spike bar that would be identifiable as a sign for change (to long translation).

 

Lat form #2: After the SYM forms, price tests a low but fails to break out. This test is done via a spike bar that would be identifiable as a sign for change (to long translation).

 

Lat form #3: Price forms a SYM with an outside bar. The low of the formations first bar indicates a clear turning point for price. After the SYM forms, price tests the high but fails to break out. This test is NOT done via an identifiable signal for change back to short translation so the attempt to break out is still alive.

 

Lesson learned (I think): Consistent with the theme of the thread we look for signs for change but only via proper context and with respect to sequence. The context, in this case, is the high and low boundary of the Lateral Formation.

 

MKTr

 

PS Thanks for all the discussion on the Lat Form drill. Also, thanks to rs5 for all the charts.

[TIKITRADER 10]

As simple as I can be on laterals.

 

 

I could group laterals into . . .

 

The bar that initiates the lateral either

 

1) closes above the open

 

2) closes below the open

 

or possibly

3) could close at the open.

 

*Confirmation of a lateral does not occur until 2 bars form,complete, and close within the boundaries of the initiating bar

[TIKITRADER 10]

 

Already the discussion has glean one very important characteristic: Each of these specific laterals start with a Sym Pennant. But, is this the only characteristic of these specific types of Laterals? Surely, something else must set them apart from all other things which appear similar. In other words, why (on my own chart) have I annotated yesterday's midday period (1-14-2010 @ 12:35) as an example of these specific types of Laterals, but at EOD (1-14-2010 @ 15:15) I have not?

 

 

 

HTH.

 

- Spydertrader

 

P.S. (All times Eastern and [close of] ES [bar])

 

One thing that is different about these two is

 

 

12:35 lateral does not form within the boundaries of another lateral. ( Initiating lateral - bar 37 )

 

15:15 lateral forms within the boundaries of an existing lateral ( Initiating lateral - bar 69 )

Edited January 17, 2010 by TIKITRADER
added bar # for time reasons

[NYCMB 10]

The lateral formation continues until terminated with two closes outside the Lateral boundaries (created from the High / Low of Bar 1) - 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

Hi Spydertrader

 

I have been gazing at the ES 12/21/2009 Lateral Drill chart for many times. Still I find there is a conflict between the way you teminats Lateral Two and your post on 07-14-2009 05:22 PM.

 

1) Based on the rules you posted on 07-14-2009 05:22 PM, I drew the doted line in bright blue to show the Lateral which starts on Bar 16 and ends on Bar 26

 

2) Bar 16 initiats the Lateral Two; you end the Lateral ( boundaries are in plum color) on bar 21.

 

3) Bar 21 closes outside the upper boundary of the lateral (boundaries in plumcolor)

 

4) Bar 22 is SYM and its close is on the upper boundary of the lateral, in other words, Bar 22 doesn't close outside the boundary.

 

5) Bar 23 is Hitch and its close is inside the upper boundary of the lateral

 

6) Bar 24 closes inside the upper boundary of the lateral

 

7) Bar 25 is OB and its close is on the upper boundary of the lateral

8) Bar 26 is SYM and it closes outside the u[[er boundary of the Lateral. Bar 26 ends the Lateral

 

9) Bar 27 is the second bar which closes outside the Lateral and terminats the Lateral

 

Could you tell us if you updated the rules for the termination of Lateral? If you did, what's the new rules for us to follow? Or, could you point out what kind of mistakes I made in terms of interpreting bars, closes and boundaries?

 

Everyone is welcome to participate in the Lateral discussion. TIA

[Spydertrader 10]

Could you tell us if you updated the rules for the termination of Lateral?

 

I have always found it wise (when differentiating a certain 'thing') to first place one's focus upon the creation of the 'thing' before looking to see how a 'thing' might end.

 

In other words, unless (and until) a trader has the ability to see the differences between the examples provided in The lateral Formation Drill (and follow up) and all other examples of Laterals provided by the market, nothing is gained by looking for how or when (or even why) a specific type of Lateral ends.

 

The highlighted portions of The Lateral Formation Drill (and follow up) outline the locations of the individual examples (within the specific days in question) in an effort to make the examples easier to see (by avoiding 'overlap' of the examples). I did not intend the annotations to convey a location of Lateral Termination.

 

HTH.

 

- Spydertrader