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Scattered thoughts...
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Created: by Lornz Attachments:26

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Scattered thoughts...

  #11 (permalink)
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Well, well, well... Look what the cat dragged in!

I apologize, @Surly! I started writing a reply, but then I got distracted and forgot all about this thread. I think my unconscious mind tried to prevent me from diluting my source of income.

The concept is hard to grasp, both due to the complex/confusing nature of the subject, but also because he is a sub-par presenter. I spent several days trying to understand it all, and had lengthy discussions with @zer0 about it. He has already shared our combined understanding and, seemingly, hijacked my very own thread. I guess that is how it goes when one has assholes for friends!

This "invasion'" has inspired me to get this thread back on track... I will do so over the next couple of days...

 
  #12 (permalink)
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Looked in a few other places and a lot of people seem to say similiar things about the confusing part of it.

My idea of what it sounded like to me was opposite of what fading the edge of a profile area. But to wait for some distribution to be broken and look to trade to the next distribution area.

 
  #13 (permalink)
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It is all very new and more information will come to light in time. For now, it simply is an interesting topic. I have little doubt that within a year or so, there will be a book (or books) that will make things much clearer. Until then....


forrestang View Post
Looked in a few other places and a lot of people seem to say similiar things about the confusing part of it.

My idea of what it sounded like to me was opposite of what fading the edge of a profile area. But to wait for some distribution to be broken and look to trade to the next distribution area.


 
  #14 (permalink)
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You know what they say.... Keep your friends close and your asshole friends closer!


Lornz View Post
Well, well, well... Look what the cat dragged in!

I apologize, @Surly! I started writing a reply, but then I got distracted and forgot all about this thread. I think my unconscious mind tried to prevent me from diluting my source of income.

The concept is hard to grasp, both due to the complex/confusing nature of the subject, but also because he is a sub-par presenter. I spent several days trying to understand it all, and had lengthy discussions with @zer0 about it. He has already shared our combined understanding and, seemingly, hijacked my very own thread. I guess that is how it goes when one has assholes for friends!

This "invasion'" has inspired me to get this thread back on track... I will do so over the next couple of days...


The following user says Thank You to zer0 for this post:
 
  #15 (permalink)
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zer0 View Post
In extreme reductionist mode, the idea goes something like this:

1) A statistically significantly-sized island of volume accumulates at a price or in a tight range (traders have made a collective set of bets in this case)

2) Sooner than later, price will drift from that censensus price, and those that are 'wrong', will need to close their positions.

3) Given the lack of 'service', or liquidity in between island volume distributions, price will move fast and will self-generate as new orders pile on and create momentum.

4) Profits come from transacting near the island distributions and riding the ensuing momentum through to the next distribution.

Again, there is more to it than that, but this is the underlying idea.

This sums it up nicely, I think.

I don't want to spend too much time on this before we hear what comes of @zer0 's meeting with Steidlmayer. As this is still in its infancy, it would be interesting to use the collective wisdom of this thread's readers and dissect it further. I guess we will have to wait for his report.

But, I want to add a couple of thoughts. Keep in mind that they are only assumptions based on my attempted deciphering of his less-than straightforward presentation.

First of all, he talks a lot about "price discovery", which simply means recent accumulated volume at a certain level/interval. One has to decide what is considered "significant". The less volume at the level, the more price discovery risk one puts on. When trading new prices, one usually takes on a 100% price discovery risk. One needs to lessen that burden as much as possible by trading new orders/volume instead. He equates this to how the (successful) floor traders could see the order flow and trade with size.

He also speaks of "timeframes". This means various-length buyers/sellers. People willing to suffer a little pain now for future gain. The, first, and best, example of a timeframe is the seasonal. Market Profile assumes a price/time database, where the timeframes would bridge the gap between supply and demand. This coincides with the principles of Auction Market Theory.
The floor traders would often try to establish a range, the IB, and then trade rotations within that range. Many would then fade those extremes and the market would have to "overcome" that pressure in order to break out. The better the locals could "sniff out" the timeframes' presence, the "prettier" the distribution would be.

Now he speaks of waiting for price-discovery to be made and hold the trade until the next distribution. He calls them "barbell distributions", where both extremes have the most volume and it's thinner in between. As you don't have floor traders and timeframes to trade "through", you get swifter movements and more "leverage" (because there is less resistance between distribution points).
I guess you can say that it's essentially trend trading between areas of plurality.

The main difference between Volume Strips and Market Profile is that he now views markets as short-term and supply-driven, i.e. a supply/price database. There are virtually no timeframes present. This is how it was before the exchange was formed, when farmers would grow crops and "dump" it on the cash market. In this kind of market -- supply dictates price. Unlike MP, where one usually had only one distribution (except for the occasional double distribution), he now asserts that distributions occur all the time. The markets, he claims, are now disconnected from fundamentals and therefore self-generating.

He is mostly concerned with newer volume and constantly parses the range. He does this by applying a "99 program". This is simply to view the relative strength of the high-volume node with the surrounding volume. He brackets the range and trades the break out in either direction. I view it as S/R-areas emerging out of chaos and trading those as they occur. Trying to understand the markets on a deeper level is not possible...

Keep in mind that this is just what I got out of the presentation and not necessarily my sentiment on the validity of the content. The basic philosophy approaches some of my own thoughts and techniques, but, for obvious reasons, I will not go into deeper detail about that.

I guess we have to wait for @zer0 's meeting with Steidlmayer before we can further advance the discourse. I, at least, very much look forward to it!

I also want to make clear that I was just kidding around in the earlier post, and I welcome any and all questions; The best way to learn is through healthy debate...

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  #16 (permalink)
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zer0 View Post
You know what they say.... Keep your friends close and your asshole friends closer!

Haha, I was just mad because you forced me to write the monster of a post I just did. I was trying to break free from the shackles of this virtual prison!

 
  #17 (permalink)
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forrestang View Post
Looked in a few other places and a lot of people seem to say similiar things about the confusing part of it.

My idea of what it sounded like to me was opposite of what fading the edge of a profile area. But to wait for some distribution to be broken and look to trade to the next distribution area.

Pretty much. It's basically based on waiting for distribution intervals to occur and trading the breakouts (in either direction)... Fading can still occur, though...

 
  #18 (permalink)
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Excellent @Lornz and @zer0 - thanks for bringing your discussion (and the general discussion of Peter's ideas) into the forum. I look forward to your comments after your meeting Zer0.

I do have one question about Peter himself (and I don't really expect a definitive answer - just a discussion if warranted). Peter seems to me to be someone who likes to see his ideas adopted into the mainstream. Obviously there is a financial incentive - if adopted generally there will be a demand for his (patent pending I assume) products/ideas. However I wonder if his deeper motivation is that of intellectual pride (and I don't actually mean this derogatorily at all). He seems to easily discount prior models of market theory and take it as a forgone conclusion that graphical/statistical representation of volume strips will become de rigueur. I guess none of my commentary here really matters because one needs to take his ideas on their own merit but, at least for me, it does give me a way to weight some of his conclusions and statements.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
 
  #19 (permalink)
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Surly View Post
Excellent @Lornz and @zer0 - thanks for bringing your discussion (and the general discussion of Peter's ideas) into the forum. I look forward to your comments after your meeting Zer0.

I do have one question about Peter himself (and I don't really expect a definitive answer - just a discussion if warranted). Peter seems to me to be someone who likes to see his ideas adopted into the mainstream. Obviously there is a financial incentive - if adopted generally there will be a demand for his (patent pending I assume) products/ideas.

Right. He sold Market Profile to the CBOT and a whole lot of books as well. Can you blame him? One thing is clear, while he is technically a vendor, he is no run-of-the-mill vendor. He is highly respected as a trader here in Chicago and presumably the world.

However I wonder if his deeper motivation is that of intellectual pride (and I don't actually mean this derogatorily at all).

If you read about his background, he is an academic as much as he is a trader; maybe more so. Anyway, this is of little surprise to me.

He seems to easily discount prior models of market theory and take it as a forgone conclusion that graphical/statistical representation of volume strips will become de rigueur.

I cannot agree with the assertion that he 'easily discounts' models. He created Market Profile in the 80's and has advocated it until only recently. However, I do not know every concept he has ever proposed, so perhaps I'm wrong about that. Do you have examples? Maybe I simply misinterpreted your concern, so please feel free to clarify if I'm off base.

I guess none of my commentary here really matters because one needs to take his ideas on their own merit but, at least for me, it does give me a way to weight some of his conclusions and statements.

Ultimately it comes down to utility. Do you make money with Market Profile? If Volume Strips make you more than Market Profile, we then have all we need to know. Of course the issue that remains is the precise applicability of the methodology. Many questions remain as this is only the beginning.


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  #20 (permalink)
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Thanks @zer0! Your comments were perfect - just what I was curious about. I guess my post came across as a slight to Peter - which was not my intention. My examples are just the impression I got from the presentation and the active trader article that I think Lornz posted. And, no, I don't blame him one bit - I think its great that he has received notoriety and financial rewards for his ideas - he's obviously a genius. I, for one, do fall into the trap of taking the pronouncements of genius at face value so was just curious about how to weight some of his statements (given that he came across as very confident of his conclusions and methods).

Anyway, I guess I've derailed the thread again. I'll shut up for now.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert

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