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Trading the SLA/AMT Intraday
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Trading the SLA/AMT Intraday

  #131 (permalink)
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Another dusty, tattered scrap from the attic:

Why do people get excited about volume spikes? Greed or fear. Amateur traders see volume spiking and think Oh God I'm Missing Something, and they try to jump on -- or out of -- a speeding train. Sometimes that volume can propel traders to a new level. Sometimes, at least in an upmove, it's pure distribution, and when new buyers find they have no one to sell to, price can plummet just as fast as it rose.

Part of the problem with regard to discussing price and volume is that not everybody is talking about the same thing. And some people think that definitions don't matter. But they do. And if one is going to think clearly about what's happening in front of him, he needs also to be clear about the language he uses to describe it, even if that language is purely internal.

Some people will say, for example, that they don't use volume, that volume is not important, even that volume is useless. But without volume, that is, trading activity, there would be no transactions and hence no price movement. That in itself makes volume important. What is often meant by statements like these is volume as an indicator, particularly a color-coded indicator, and those who feel that this sort of volume is pretty useless may have a point.

There is also the matter of volume as trading activity (which is how Wyckoff looked at it) and volume as "intent", which is essentially what bid and ask "volume" are about. But the trader who trades according to what people intend to do may not make the same decisions as one who trades according to the transactions that people are actually making. I may intend to sell the strawberries in my refrigerator for $100 a pint, but nobody's going to give a damn unless somebody actually meets my price and we conclude a transaction. That then becomes the price.

But is it the correct value? And mixing price with value is another area where traders tend to trip themselves up. Going back to your first post, a trader may have shares that he thinks are worth $10. But he can't find a buyer who thinks they're worth more than $5. The seller's price is $10 because that's where he's placed their value. The buyer's price is $5 because he's placed their value at that level. But that doesn't make either $5 or $10 the "price". The price is determined through negotiation until there is an agreed-upon amount, maybe $7.50. And if the two parties conclude their negotiation, the transaction takes place and $7.50 becomes the price, even if only for a few seconds.

Therefore, if intent matters to you and you believe that bid and ask "volume" truly reflect intent, then the bid and ask volume may be useful to you. But none of this has anything to do with the volume that is trading activity which in turn is the result of actual transactions which in turn result in prices that are printed on the "tape".

If there is no transaction, there is no volume, and everybody just stands around holding hands. Once a transaction takes place, then you've got something concrete, a benchmark to go by, and some clue as to the action you should take.

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  #132 (permalink)
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https://futures.io/index-futures-trading/34908-trading-sla-amt-intraday-7.html#post500029

https://futures.io/index-futures-trading/34908-trading-sla-amt-intraday-7.html#post500063


CME:

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Last edited by DbPhoenix; June 22nd, 2015 at 08:36 AM.
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  #133 (permalink)
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Another:

Beginners often want to know how to determine in advance whether or not they are going to be in chop, or at least to be able to detect the chop before it grabs them by the neck and drags them into the barn.

First, show Hope the door and tell it to find someplace else to hang out.

Second, expect nothing. Assume nothing. If you are not yet at the point where you can engage the market without expectations, then assume that the day after a trend day is going to be choppy. They nearly always are. And look instead for signs that it won't be.

Third, if you do not yet have specific criteria for detecting and trading continuations and reversals, then go to the zoo. Or the library. Or the movies. Don't even watch it, much less paper-trade it, because you'll be tempted to do something with it. Or about it. And you're not ready for this yet.

Fourth, if you do have the aforementioned criteria, take great care not to sink too deeply into the micro. If the downside has been rejected by the sellers, and the upside has been rejected by the buyers, a bell should ring, or a light flash. After all, if both the upside and downside have been rejected, that puts you back into the range with a bunch of traders who have lost their way and don't have the power to push price either one way or the other out of that range. If you're going to hitchhike, you don't want to thumb a ride with somebody who's lost. And if you start making lower highs and higher lows, then you're in even bigger trouble.

It's easier than this. Take some time off. Get a good night's sleep. Try again tomorrow.

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  #134 (permalink)
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I hope I don't insult anyone by posting stuff that appears to be so simple that one wonders why it's posted at all. But this is what I see when I first open my platform.

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Once upon a time I took a drawing class. One of the instructor's chief goals was to teach us how to see. Not just look, but see. So she placed an apple on a pedestal and told us to draw it while studying it: the shape, the color, the way it reflected light, and so on.

Once that stage was completed, she told us to study the apple for as long as we wished but to do no drawing whatsoever until we had turned away from it. This was, to say the least, an eye-opener (no pun intended). Most thought that they were seeing it, but it wasn't until they turned away from it and found that they had no idea what to draw that they understood that they had only been looking at it. I understand that police cadets often go through this same sort of training in order to hone their witnessing skills.

This isn't the sort of thing that one picks up and drops. When I open my platform, I see instantly the state of price. I don't draw any lines or plot any whatevers. I don't even develop an initial impression. It's just there, and requires no thought at all.

Not a bad exercise for those who continue to have difficulties with forests and trees.

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  #135 (permalink)
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Namo Gurudev. ....

Please can you help on how to determine the range to be used. Also does it depend on the platform and the amount of data visible.

I am using investing mobile app for observation and incidentally I just opened it up and found the range to be b/w 4540 - 4548....15m interval...

Any thoughts please. .

Regards,
K

 
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Yesterday's high and low are what they are whether one plots a 1t chart or an hourly chart. One can find ranges within ranges within ranges and so forth, but to what purpose?

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  #137 (permalink)
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Those who have not read the SLAB will not know that it was written with a relatively long timeframe in mind (i.e., longer than a day), using the hourly bar interval to illustrate. But given who we are, many if not most of those who became interested in it insisted on using it in daytrading. I therefore attached an appendix to the latest iteration showing how to apply it to daytrading.

With that in mind, I've pointed out once or twice (!) that the SLA is not suitable for trading ranges, the chief reason being that the SLA, given the way it's constructed, is not appropriate for scalping. "Ranges" in this context refers to the relatively narrow ranges one finds in these shorter timeframes, not to the ranges of a hundred points or more one finds in daily and weekly and monthly timeframes.

I've also pointed out once or twice (!) that the best trades are found at the extremes. This is nothing new. Livermore pointed out the same thing a hundred years ago. But "extremes" refers to those points and levels that everybody sees, or at least the more the better. If no one sees your "extreme" but you, it's not likely that anyone is going to be trading it the same time you are, and if you're all alone, who's going to help push price in the direction you want it to go?

Therefore, in reference not only to the above posts but to all the posts which seek to apply the SLA inappropriately, I'll illustrate again why the SLA isn't particularly good for trading ranges given that today and yesterday will be at least reasonably fresh in everyone's minds and given that yesterday and today provide examples of trading against an extreme and trading against nothing in particular.

This morning I posted an example of what I see when I open my platform. Today I saw a range. This range had limits. Unless and until those limits were reached and exceeded, I had no interest in trading it.

First what I posted this morning:

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And the results if one ignored the fact that we were range-bound and insisted on applying the SLA anyway:

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As can be seen, it would be extraordinarily difficult to avoid a net loss, even without including commissions, even using a 1m bar interval (anything smaller would be even worse).

Compare the above to what the trading looks like when entering against an extreme, in this case the failure to make a higher daily/weekly high, beginning with the range formed just below it:

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While one can quibble about entries and exits, the difference should be clear.

And by the by, anyone who wants to save these charts better do so. Given my experiences on various websites, one can't guarantee that these charts will be here forever.


Last edited by DbPhoenix; June 23rd, 2015 at 05:08 PM.
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  #138 (permalink)
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Or you could stand aside?

Both days I've given up soon after the open. I've been able to get a lot of extra backtesting done as a result - beats waiting for the 1 reversal trade of the day.

Didn't Wyckoff say that neutral can be a position too...?

 
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damnpenguins View Post
Or you could stand aside?

Both days I've given up soon after the open. I've been able to get a lot of extra backtesting done as a result - beats waiting for the 1 reversal trade of the day.

Didn't Wyckoff say that neutral can be a position too...?

Yes, indeed, you can very much stand aside. Especially if your bike is calling. And if one is willing to devote only so much time to this, he soon learns either to let things go or drive himself crazy (note that that nice short yesterday took place after 1100). Trend days are not shy.

And, yes, he did. He also said that "eagerness to trade supplants deliberation".

There is also the matter of the ES, which was sitting there like a wart. I'm not encouraging anyone to rely too much on the ES, if at all. But if it's not moving, odds are that the NQ won't be hopping any freights and heading out of town.

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Namo Gurudev. ...

Thanks for your reply. You also answered my next question (regarding which range to consider) in the above post..

If no one sees your "extreme" but you, it's not likely that anyone is going to be trading it the same time you are, and if you're all alone, who's going to help push price in the direction you want it to go?

And I used this in a way today when I waited for around 4 hours for breakdown of yesterday's range to trade....

And I can tell it is not easy to keep your calm intact as you tend to see trades when none exist..

Regards,
K


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