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TheNegotiator

Harmonic Trading

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Do any of you guys use 'harmonic' type trading setups? The Gartley 222 is one I believe and there are others. This website seems to have some good information (although it is about the author selling products).

 

http://harmonictrader.com

 

Nonetheless, there is plenty of free info provided.

 

I was wondering which markets this is effective in if any and whether traders find the setups easy to spot or if they need to comb multiple markets looking for these setups.

 

Would be interested to hear any thoughts on this.

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The Harmonic setups and the site you reference use price only inputs and are not true harmonics. The actual harmonic of real-time buying and selling can be much more useful.

 

Below are shots of two different algorithms that produce true harmonics of buying and selling volumes that, as the graphs show, often lead price.

 

tpt107.jpg

 

 

harmonic1a.jpg

 

cheers

 

UrmaBlume

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In what way are these displaying 'real' harmonics and the site I posted doesn't? Would they be more realistic if they based the candles on volume/ticks rather than time?

 

When one component of the harmonic does the exact opposite of the other component and does it in the same amount then you have a balanced harmonic. In this case it is a balanced harmonic of order flow or the balance of trade.

 

You will note that when selling is increasing, the red line moving up, that buying is decreasing, blue line moving down, by the same amount = a balanced true harmonic - one component is a harmonic of the other.

 

In the work you showed there was only one component, price, and we operate under the belief that one of the lest effective predictors of price is price itself.

 

 

cheers

 

UrmaBlume

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Either I have misunderstood what it is you are saying or you have a different definition of harmonic oscillation. Or perhaps you have just not revealed the nature of your oscillator. As I understand it, harmonics are based on geometric patterns which tend to repeat over time. Are your indicators geometric but based on volume and/or other variables? From what you have said so far, I am far from understanding you clearly. Also, why couldn't these patterns be good predictors on a volume based chart for example? That would factor in volume geometrically. Or even delta could be used...

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My small group endeavors to explore what we call the physics of market information. The harmonic of trade flow we have shown is designed as a leading indicator of price without any inputs from price. The net of order flow as shown in the graphic is the force and price is the particle or object.

 

As buying and selling displace each other in harmony (the graphic) so is price displaced.

 

The definition of simple harmonic motion is simply that the acceleration causing the motion a of the particle or object is proportional and in opposition to its displacement x from its equilibrium position.

 

The geometric representations of price you referenced measure result and not cause. Our work attempts to measure the motivator/force and thus predict result. That's the difference.

 

cheers

 

UrmaBlume

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i use HamFon's HamRadar01-1 to pick them up in tradestation as i'm not that good at picking them up visually. Metatrader 4 has some good indicators to identify bats and butterflies etc WRR_ZUP_INFO_V02.mq4 and ZUP_V92.mq4. You need to check different timeframes on each market. Hope this helps.

cheers

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Wow, those are indeed very impressive charts UrmaBlume. Kudos to your talented team!

I agree that there is a cause effect relation in market dynamics and last trade price

is part of the composite result but not the dominant cause of the market physics you

describe. It's really just an extension of supply and demand theory. There is just one

small clarification I am seeking in reference to your comment about "net order flow".

Strictly speaking the volume size of a last trade at a given price is technically past

tense history, even though it may have occurred just microseconds ago. Likewise quotes,

whether level 1, level 2, or montage orderbook depth all refer to a future event. The

reality is we can take action in the future but not in the past. Therefore it would be

interesting to know how much of a purist approach your research has taken. Do the charts

showing bipolar balanced harmonics use last trade price/size info, or are they derived

from quote price/size info?

 

 

All the Best,

JDevron

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Wow, those are indeed very impressive charts UrmaBlume. Kudos to your talented team!...........................................Do the charts showing bipolar balanced harmonics use last trade price/size info, or are they derived from quote price/size info?

All the Best,

JDevron

 

Thanks for the kind words. So much work to develop such a simple expression of a prime market force.

 

Almost all of our work is about order flow as at its very base - money is the fuel that drives the motivation of price. This is part of what we learned from spending time with Peter Steidlmayer almost thirty years ago. In this post we discuss our concept of "The Technical Evolution of Market Profile Theory" and demonstrate several indicators that are part of our technical expression of that concept.

 

Thanks again for the kind words.

 

Cheers

 

UB

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Oh I see UrmaBlume, thanks for the link. Yes I have done some work in the market profile

area, and also in the cash flow area. My understanding is that a market volume profile

reports volumes at various prices levels, while cash flow inspects the price that a last

trade executed at and catagorizes it as either a bullish or bearish volume. It is easy to

extract bipolar volume data from the cash flow formula ...

(where last price * last size is < or > the midpoint of inside quotes).

But I'm wondering how to get bipolar volume data from the market profile. If I had to

guess it would be that the volume above the point of control (POC) volume price is

bullish and the volume below the POC is bearish. Is this assumption correct?

Purhaps you can tell me where I am going wrong in my thinking?

 

Thanks,

JDevron

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On second thought, the graphs you show indicate bipolar volume data that is symetrical or "balanced".

However, the data above and below the POC is usually not symetrical. Therefore, it seems unlikely that the bipolar volume data was derived from simply being above/below the POC. Now I'm wondering what basic concept I am missing. Any insights would be appreciated...

 

 

JDevron

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On second thought, the graphs you show indicate bipolar volume data that is symetrical or "balanced".However, the data above and below the POC is usually not symetrical. Therefore, it seems unlikely that the bipolar volume data was derived from simply being above/below the POC. Now I'm wondering what basic concept I am missing. Any insights would be appreciated...JDevron

 

JD,

 

Here is a hint - you are talking about counting contracts and I am talking about measuring force.

 

cheers

 

UB

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Do any of you guys use 'harmonic' type trading setups? The Gartley 222 is one I believe and there are others. This website seems to have some good information (although it is about the author selling products).

 

Welcome to Harmonic Trader

 

Nonetheless, there is plenty of free info provided.

 

I was wondering which markets this is effective in if any and whether traders find the setups easy to spot or if they need to comb multiple markets looking for these setups

 

Would be interested to hear any thoughts on this.

 

You never heard of the "30 Pips a Day Keeps your Money at bay" thread at Babypips? It has to be one of the best threads about Harmonic Trading. It is what got me started. Patterns on 1min or 5 min are not that reliable. 15min, 30hr, 1hr, 4hr are better.

 

Supposely it works in any market, but my experience is only in FX. At first it takes longer to find setups, but then its easy.

 

Also the guy that has the harmonictrader.com website also wrote some books which are the best on the subject. He is like Peter Steidlmayer and Market Profile.

 

I really enjoyed finding Harmonic patterns. But I gave up on them because I didnt have access to order flow to confirm entry. I would love to start looking at it again with Tape reading for confirmation...:)

 

If you cant find the thread at babypips Pm me for link.

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Traditionally the discussion about harmonics and trading has been about geometric drawings of price with no reference to volume or the balance of trade.

 

The Harmonic we use has price as NO part of its calculation and is a representation of the force that drives price - the cause instead of the result as per:

 

"One definition of simple harmonic motion is simply that the acceleration causing the motion a of the particle or object is proportional and in opposition to its displacement x from its equilibrium position. As buying and selling displace each other in harmony (the graphic) so is price displaced."

 

tpt374.jpg

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pbylina, thanks for the info. I will take a look. Urma, I definitely see your point about using balance of trade in regards to harmonics. However, many people do still trade by price and price patterns. Maybe this isn't optimal but there are some who suggest that actually, entry isn't even the most critical part to making money trading. So does it even matter being that precise anyway? All you need is some sort of edge and strong money/trade management and you should come out on top right? As a discretionary trader anyway. I am interested with the idea presented though. However, I am not sure I understand the explanation in principle at all. Are you talking about acceleration of price movement or buying/selling displacement(or delta) or something else? Is this indicator based purely off executed market orders or is there an additional variable guiding the outcome?

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pbylina, thanks for the info. I will take a look. Urma, I definitely see your point about using balance of trade in regards to harmonics. However, many people do still trade by price and price patterns. Maybe this isn't optimal but there are some who suggest that actually, entry isn't even the most critical part to making money trading. So does it even matter being that precise anyway? All you need is some sort of edge and strong money/trade management and you should come out on top right? As a discretionary trader anyway. I am interested with the idea presented though. However, I am not sure I understand the explanation in principle at all. Are you talking about acceleration of price movement or buying/selling displacement(or delta) or something else? Is this indicator based purely off executed market orders or is there an additional variable guiding the outcome?

 

Of course there are additional variables, but none of them have anything to do with price.

 

From time in the pits and time studying under Peter Steidlmayer almost 30 years ago, I learned and believe to this day that order flow and the balance of trade are key to anticipating change in the market.

 

Now while the pits are no more and there are no outstretched hands to define order flow, there are certain sets of indicators that can provide the same information.

 

Almost all of our software development is about what we call the "Technical Evolution of Market Profile Theory." In the graph above you can see that regime change came to the harmonic BEFORE it came to price and without non-linear processing and intelligent agents that is virtually impossible with only price as inputs.

 

"As buying and selling displace each other in harmony (the graphic) so is price displaced.

 

The definition of simple harmonic motion is simply that the acceleration causing the motion a of the particle or object is proportional and in opposition to its displacement x from its equilibrium position.

 

The geometric representations of price you referenced measure result and not cause. Our work attempts to measure the motivator/force and thus predict result. That's the difference."

 

If trade was always in balance then price would never change. The movement of price is almost always a response to an imbalance in trade.

 

 

cheers

 

UrmaBlume

Edited by UrmaBlume

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Urma, please explain your indicator in more depth. This is not a thread for marketing and I am sure if people are interested they can read exactly the same material on your indicator website.

 

lol that's exactly the same output as an excel momentum model I built once. You make it sound like it's quantum physics. Post the math not the argument, everyone else can test it.

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lol that's exactly the same output as an excel momentum model I built once. You make it sound like it's quantum physics. Post the math not the argument, everyone else can test it.

 

Very interesting silentDUD,

 

If, as you say, it is "exactly the same output" as your work, then you have no need to see mine and you can just post yours for us all to test- lol.

 

UrmaBlume

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The market changes velocity during different times of the day.

For illustration of this concept let's say during the first hour a 10 minute

moving average may work best, while a 30 minute moving average may be

the best around lunch time, and a 20 minute moving average may work best

during the last hour.

 

I'm interested in the mechanism used to switch between the most appropriate

period. Obviously I can simply hard code in some periodic interval assigned to

a certain time of day based on historical averages of movements during those

times of day. What I'm really interested in is using an algorythm that is flexible

enough to assign the appropriate interval based on current conditions. I have

tried comparing current envelope heights to the historical averages of envelope

heights, but so far the results have been less than amaizing.

 

Any suggestions to improve the interval selection mechanism would be

greatly appreciated.

 

Thanks,

John

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