The Close of a Bar is Meaningless

[SunTrader 10]

  johnw said:

It is all to do with waiting for momentum to washout before taking a position.

If you are trading ES from say a 5 minute chart you really don't have a chance of seeing it.

5 minute bars, other than during fast, news related moves, don't give high point trades.

 

Unless your idea of high point amounts are 2-3 points. My idea is 10-20 pts which isn't obtainable in short timeframes.

 

But to say a high win/loss ratio plus high win amounts can be done in the same strategy defies all that I have ever seen myself as well as everyone I have ever traded with or read about in the past decade and a half of trading.

[fxdummie 10]

  SunTrader said:

5 minute bars, other than during fast, news related moves, don't give high point trades.

 

Unless your idea of high point amounts are 2-3 points. My idea is 10-20 pts which isn't obtainable in short timeframes.

 

But to say a high win/loss ratio plus high win amounts can be done in the same strategy defies all that I have ever seen myself as well as everyone I have ever traded with or read about in the past decade and a half of trading.

 

ST,

Would you specify when win/loss ratio and high win probability become high in your opinion, please!

 

Thanks

[onesmith 10]

As someone who writes code, I know the value of c is priceless. I know things about other concepts with the same certainity. I have facts that are the result of experience. I would enjoy proving these statements. I could learn a lot by a back and forth discussion as I revealed facts but as a coder, I'm limited in what I can say. I can say with certainty that coder's are tight lipped.

 

the value of c? ....to a coder?

 

priceless.

[BlueHorseshoe 10]

  SunTrader said:

Been there, done that.

 

And in the end didn't amount to much difference.

 

Thanks for the reply. It's been on my long list of 'things to look into'. It just went to the bottom of the list! I think my assumption was less to do with how it might impact theoretical strategy performance, and more about whether it would improve execution - obviously several of you have tried this in live trading and found no substantial improvement though.

 

On a fairly closely related topic, has anyone experimented with or becktested swing trading strategies using (obviously very large) range bars, as opposed to daily?

[SunTrader 10]

  BlueHorseshoe said:

......

On a fairly closely related topic, has anyone experimented with or becktested swing trading strategies using (obviously very large) range bars, as opposed to daily?

Although I was interested when momentum/range/kase bars came along years back I reverted back to time and tick based (mostly time) because nothing beats the real thing. Everything else is a guessing game.

[TheRumpledOne 14]

Didn't I post a YouTube link in my reply?

 

Are YouTube videos not allowed at TradersLaboratory? Funny, there is a YouTube tag.

 

[ame=http://www.youtube.com/watch?v=IFJFuJ6-tQY&feature=plcp&context=C3f06e6bUDOEgsToPDskK_keMjudxPO30pqKckQ1vk]All You Need To Trade Is A Horizontal Line - YouTube[/ame]

[joshdance 10]

  TheRumpledOne said:

Didn't I post a YouTube link in my reply?

 

Are YouTube videos not allowed at TradersLaboratory? Funny, there is a YouTube tag.

 

Dare I ask:

1) Is the placement of the line arbitrary?

2) The premise of your idea is based only on price it seems: if price is moving up, we want to buy, and vice versa. So, why do you need a line at all?

 

While your video is off topic here, I do appreciate the simplicity of the premise, and generally try to trade the same way: go with the intraday trend. If buying is strong, don't try to pick the top, and vice versa.

 

So to relate this to the topic at hand, look at the 5 minute ES chart attached. Four consecutive bars close near their lows. Does this mean the market is weak? Not in my view of things; if we shifted phase to have the bars start at say :03 instead of :00, :05, etc., we would have different closes, perhaps near the highs.

[SunTrader 10]

When looking at 5 min bars more than a close comparision are needed, most of the time. That chart is a prime example. It was strickly a consolidation zone with narrow range bars and tight open/closes signifying indecision or a pause in trend and not a reason by itself to exit a long and definitely not to short.

[SunTrader 10]

  fxdummie said:

ST,

Would you specify when win/loss ratio and high win probability become high in your opinion, please!

 

Thanks

I'm not saying they can't be high or "too high". I'm saying they can't both be high within the same strat. It is an either or situation.

 

High win/loss ratio with small win amounts or Low win/loss ratio with high win amounts.

That is just how math works whether it is trading or sports or music or .......

[zdo 20]

Have only skimmed a couple pages of the thread so maybe someone already made similar comments. God I hope so…

 

The close of a bar is meaningless

AND

The close of a bar is meaningful

 

It’s individual representational system dependent! But herein we have a bunch of ‘thoughts’ posted without much grounding in the individual’s perceptual framework behind it – and if there are ~20 posters and 1000 readers then, by golly, there are 1020 different perceptual frameworks, yet more than half the posts ignore or assume that everyone just automatically understands or even worse, assume that those differences don’t matter, or even more worser, assume that those differences don’t even exist! – Now, that is meaningless. Peeps, if we continue to be so ‘bias’ blind and so blatantly non-specific, TL will become just a mini ET…

 

Then we have a bunch of impressions of the value of the close in systems and coding, again and similarily, without much grounding in the underlying systems. The close of a bar, on ANY timeframe or bar type does remain what it is at base – just another price point. But, the ‘close’ is not useless in a system that needs discreet, scheduled ‘snap-shot’ measurements instead of continuous stream. Coded systems ‘prefer’ those discreet, scheduled ‘snap-shot’ measurements, so continuing with that thinking, the ‘close’ is not meaningless or useless in a system where the close can somehow acceptably proxy for or complete the effects/outcomes of the whole previous period that just ‘closed’. Conversely, the close is meaningless or at least no more meaningful than any other price print if other intrabar data points are actionable in the system.

 

All the bar types, doms, time and sales, profile ‘distributions’ are our own best personal representational systems for the ‘auctions’. Ie the map is not the thing mapped! Hopefully most of the thousand readers are doing serious inner work aligning their representational system to their own perceptual type/profile, instead of assuming, the standard consensus charting methods, the bars, etc. really are the market…

Hopefully, we haven’t influenced anyone to come to discount the close if it actually should be ‘meaningful’ in their world

… And vv ...Hopefully, we haven’t influenced anyone to come to represent the close as something more than it really is if it should be just another price print in their world. … either of those would be worse than meaningless and useless…

[humble 10]

  SunTrader said:

I'm not saying they can't be high or "too high". I'm saying they can't both be high within the same strat. It is an either or situation.

 

High win/loss ratio with small win amounts or Low win/loss ratio with high win amounts.

That is just how math works whether it is trading or sports or music or .......

 

I don't think that this is true at all. I believe it is very possible to have a high win/loss ratio with high win amounts. In fact, it is the one thing that I continually strive for on an ongoing basis. Have I achieved it yet with total consistency? No. Do I believe that I will get there eventually? Absolutely!

 

I'm curious what math you are using to arrive at this self-limiting conclusion?

[joshdance 10]

  zdo said:

Hopefully most of the thousand readers are doing serious inner work aligning their representational system to their own perceptual type/profile, instead of assuming, the standard consensus charting methods, the bars, etc. really are the market…

 

I started this thread to accomplish that very purpose, because you may "hope" all you want, but I'm sure you would doubt that this is the case for the general trading community. As with everything in trading and most things in life, there is no right or wrong, clear cut answer. The title of this thread itself challenges one of the many assumptions that most traders hold.

 

  zdo said:

Hopefully, we haven’t influenced anyone to come to discount the close if it actually should be ‘meaningful’ in their world

 

If they are doing well, then I hope not too; but the "world" of many traders is a world that they might be okay with if it were 'shaken up' a bit. Just look at youtube videos of trading, and you will see what the average trader learns from. Realize that this is the food they are eating and the air they are breathing, and then it may not seem so bad to introduce some conflict into their minds, and jump start the engines of critical thought. My ideas are no better than anyone else's. But when we all exchange ideas in a relatively civil way, and when we stimulate each other's thought process, then we have accomplished the purpose of coming together in a forum format to begin with.

[SIUYA 11]

  joshdance said:

..... to introduce some conflict into their minds, and jump start the engines of critical thought. My ideas are no better than anyone else's. But when we all exchange ideas in a relatively civil way, and when we stimulate each other's thought process, then we have accomplished the purpose of coming together in a forum format to begin with.

 

on this vein, if you dont think the close has meaning then what does? (system specific for Zdo)

or is the point as others have touched on, the close of a 5 min, v 6 min v 241 tick bar is largely irrelevant, its just a means of triggering a trade based on taking the snapshot at that timeframe?

 

plus, the meaning part can simply be that it forms a part of a more complex system, it is merely the ignition to start an engine, so in terms of being system specific, it is crucial however its meaning by itself is only a minute part of the overall system - so maybe it is more a question of how meaningful is the close of a bar to your system/method?

[SunTrader 10]

  humble said:

I'm curious what math you are using to arrive at this self-limiting conclusion?

The math of reality.

 

Knock 'em dead kiddo. Own the world when you are done.

 

In the meantime google terms like: probabilty theory, bell curve, statistical analysis etc.

[MightyMouse 12]

  joshdance said:

 

... Just look at youtube videos of trading, and you will see what the average trader learns from. Realize that this is the food they are eating and the air they are breathing, and then it may not seem so bad to introduce some conflict into their minds, and jump start the engines of critical thought...

 

Similarly, I cringe when people say" google it" to find an answer, as if the right answers are just a few keystrokes away. There are certainly answers, but they are not right by virtue of the fact that they have been put on a website. Most people will accept an answer as truth when they read or see threads that have similar or consistent answers. Research takes patience but it has turned into an .A.D.D. event

 

We only wish it was so easy.

 

Just a thought

[joshdance 10]

  SIUYA said:

or is the point as others have touched on, the close of a 5 min, v 6 min v 241 tick bar is largely irrelevant, its just a means of triggering a trade based on taking the snapshot at that timeframe?

 

It's the "triggering a trade" part that mostly concerns me. I've had conversations with traders who were looking to enter a trade, and heard them practically praying that the 5 or 3 minute bar would close at the price they wanted, so their R:R would be better -- in other words, they were looking to buy, but per their "rules" they could not enter before the close of the bar, and they were hoping that it wouldn't go up until the bar closed, so that they could get in, and so that the bar would be smaller, because they would place their stop on the other side of the bar.

 

Many times we will wait to see if the market will support a price before buying before blindly jumping in, allowing others to engage in price discovery first so that we can piggyback. We can either wait a certain amount of time, until a certain number of shares or contracts have traded, or use some other criteria, to have a greater degree of confidence that we are with the side of the market that is stronger. But why should how long we wait, be it time, or activity, be predetermined by a bar periodicity? Why not say "I will buy if it stays above X for Y minutes," rather than the trigger always happening or not happening at 1:15, 1:30, and every other 15 minute interval, for example? What if the price trades that you want at 1:14 -- is 1 minute really enough to verify for you? Or what if it trades at 1:16? You then have to wait 14 minutes?

 

I've attached 5 minute charts of ES for today, each starting at one minute offsets from each other. The beauty is that the market's intention and direction is very clear--up. Do you need to see where each bar opens and closes? The range of price movement continues up.

 

What does each closing price of the bar, or opening price of the bar, tell you that you cannot see without them? Look at the other two charts. One is a 5 minute, the other is volume based for smoothness, but neither shows the open or close. When I look at these, my eye is drawn to the direction of the market, and particular areas. On the other charts, you see red and green (again, based on open/close), bodies and wicks, and more data to interpret. I might add, data that is NOT generated by the market, but imposed by the structure shown. We all must impose a structure on top of the market's free flowing, continuous nature. The question is, does the structure you impose help you? If the answer is yes, then that's all you need to know. If it is "maybe" or "no" then it may be good to reconsider how you view the market.

Edited February 16, 2012 by joshdance

[humble 10]

  SunTrader said:

The math of reality.

 

Your reality or mine? To each our own, I presume.

 

Cheers

[SIUYA 11]

  joshdance said:

It's the "triggering a trade" part that mostly concerns me. I've had conversations with traders who were looking to enter a trade, and heard them practically praying that the 5 or 3 minute bar would close at the price they wanted, so their R:R would be better -- in other words, they were looking to buy, but per their "rules" they could not enter before the close of the bar, and they were hoping that it wouldn't go up until the bar closed, so that they could get in, and so that the bar would be smaller, because they would place their stop on the other side of the bar.

 

............

What does each closing price of the bar, or opening price of the bar, tell you that you cannot see without them? ........

We all must impose a structure on top of the market's free flowing, continuous nature. The question is, does the structure you impose help you? If the answer is yes, then that's all you need to know. If it is "maybe" or "no" then it may be good to reconsider how you view the market.

 

absolutely - if you are a trader waiting in hope then you have other issues. You do need the context and the trigger be it a 5 min, 1 min, 30 min is a RELATIVE measure. Your context in terms of something is going up has to be based on what you are looking at. Trying to tell the trend of a daily chart by looking at the 5 min is next to impossible, but using a 5min chart to try and time daily entries makes sense......and its in the timing that makes the difference, as this can be linked to how much you want to stop yourself out for.

 

eg; do you want to take a $1000 risk once, or ten trades at $100 risk to try and achieve the same result. (now while the brokers may want you to take the 10x) I would rather take more trades with less loss.

 

So thinking something is going up and just buying might work, trying to improve the timing should help, the key will be in the trade management afterward - ie; if you are right, how long you run it for v the losses, and how small your losses are relative to how long you expect to be able to run it for......similar themes arise - cut losses, run profits - no matter the time frame, or the trigger.

[fxdummie 10]

  joshdance said:

We all must impose a structure on top of the market's free flowing, continuous nature. The question is, does the structure you impose help you? If the answer is yes, then that's all you need to know. If it is "maybe" or "no" then it may be good to reconsider how you view the market.

 

Spot on! Not the entry is important but the direction.

 

I shifted to volume and tick based charts - and it's working for me. As long as you are using a chart you need to deal with closes. In your case you don't display them but they are there.

 

The bar close is what it is - a dead sentence. Now that the bar is done and over we can assess it's life - high, low, volume, speed of formation (for tick and volume charts) and, yes, if this helps you make right decisions - bar open and close.

 

I appreciate this thread because many gurus out there put too much importance on candle types and bodies and wicks... At best you can break even without having the bigger picture and the direction in mind.

[fxdummie 10]

  SunTrader said:

I'm not saying they can't be high or "too high". I'm saying they can't both be high within the same strat. It is an either or situation.

 

High win/loss ratio with small win amounts or Low win/loss ratio with high win amounts.

That is just how math works whether it is trading or sports or music or .......

 

ST,

 

again what do you consider "high".

 

Since math is involved we need to deal with numbers to asses your statement.

50% win probability and 1:1 win/loss ratio will give you a flat curve.

 

At what point for you see these two (yes, both of them) become too "high" mathematically?

60% and 2:1? Or 90% and 5:1? Or in between?

 

Thanks!

[xkr1962 10]

The open, high, low and close are critical to my trading strategy. It is about belief and backtesting.

 

Don't close your mind to any of them is my advice.

[SunTrader 10]

  humble said:

Your reality or mine? To each our own, I presume.

 

Cheers

Then I guess we are living in parallel worlds? Spooking.

[SunTrader 10]

  fxdummie said:

ST,

 

again what do you consider "high".

 

Since math is involved we need to deal with numbers to asses your statement.

50% win probability and 1:1 win/loss ratio will give you a flat curve.

 

At what point for you see these two (yes, both of them) become too "high" mathematically?

60% and 2:1? Or 90% and 5:1? Or in between?

 

Thanks!

At the risk of repeating myself - over and over. :doh:

 

No overall win rate (other than can't go over 100%) or winning individual trade is too high(depending on how long trade is held).

 

It is the combination. Repeat combination of the two.

 

High win rate with high winners.

 

Horse racing like trading is another form of gambling. Life is a gamble. Everything is so don't misunderstand my use of the word gamble. Doesn't bother me in the least.

 

At the track you can bet on the favorite or on the long shot. Favorites win more often but pay out less, longshots rarely win but when they do they pay big.

 

Now why is that? Might it have something to do with the math involved, i.e. how much the track takes in and can afford to pay out but still make a profit? Hmmm.

[fxdummie 10]

  SunTrader said:

It is the combination. Repeat combination of the two.

 

High win rate with high winners.

 

 

With risk to bore my self - I am kindly asking for numbers, SunTrader. We can talk in general as much as we want about math and probabilities.

 

Fortunately, math uses numbers! Show me the numbers, please!

[SunTrader 10]

  fxdummie said:

With risk to bore my self - I am kindly asking for numbers, SunTrader. We can talk in general as much as we want about math and probabilities.

 

Fortunately, math uses numbers! Show me the numbers, please!

Start with 1+1 then and let me know when you are done.

 

Because I sure am.