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Markets are constantly changing and are never exactly the same


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Markets are constantly changing and are never exactly the same

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  #1 (permalink)
Market Wizard
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We often hear/read about this idea that 'Markets are constantly changing and are never exactly the same' (i took this passage in a thread somewhere).

What does it mean or imply? What changes are we talking about? Does it mean we need to change our system every now and then?

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trendisyourfriend View Post
We often hear/read about this idea that 'Markets are constantly changing and are never exactly the same' (i took this passage in a thread somewhere).

What does it mean or imply? What changes are we talking about? Does it mean we need to change our system every now and then?

My take is this:

One year, 3 months, and 11 days ago (made up), we had a string of 14 higher days on the SP500, where the intraday price moved below the open but rallied back to close above the open by the end of the session.

(insert any other kind of historical chart analysis here)

This in no way means that you can look at this pattern to repeat itself. Any pattern. Head and Shoulders, Elliott Wave, CCI cross over, Zero line Rejection, Moving average Death Cross, you name it...

That is because for each of those past scenarios, there was an infinite amount of data that goes well, WELL beyond the Open High Low Close data presented to you on a chart. And yes, well beyond volume. Was there a war? Was there a new Apple product launched? Was there a financial conspiracy and cover-up? Was there an election? Was there a dictatorship overthrown? Was there a terrorist attack? Was there a republican in office? Was there a democrat in office? Was there a bailout? Was there massive layoffs?

The list goes on forever. All of the reasons price moved a year ago were relative to the events of the world at that time, and not simply static based on a combination of price action alone.

So we can only look "left" (historical) for trade ideas, or for rough guesses on what price may do, based on these prior patterns. Which is why trading is far more about discretion (for me) than it is about some methodical or analytical way to try and define the market as "X+Y+Z = long".

Mike

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Markets never change. They move up, they move down, they move sideways and always, the Market Manipulators take our money.

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trendisyourfriend View Post
We often hear/read about this idea that 'Markets are constantly changing and are never exactly the same' (i took this passage in a thread somewhere).

What does it mean or imply? What changes are we talking about? Does it mean we need to change our system every now and then?

I agree with Mike pretty much but would like to add that depending on your system/methodology you might have to change in my opinion.

I tried a lot of stuff with indicators back in the "old days" before I figured that simple PA stuff gets you through all conditions and environments.

Have you noticed that so and so's method works great today and sucks ass a month from now with whatever indicator package they have ...I think you know what I mean, you've been around long enough.

That being said even simple PA guys like me have to make adjustments too but it's more along the line of changing entrys or stops a little kind of thing....we don't have to abandon our methodology because it doesn't work anymore.

I would also note without rambling on to much about it that things have changed in terms of volume (I know quite a few disagree with me) the past few years...intraday speaking there aren't as many trades as there was and it has made it different.

That's something I KNOW....All I have to do is look at the charts to prove it....I don't care what others say about volume and them pulling out stats and so forth.
Maybe it's because of darkpools or something, I don't know the reasons why but I do know what my charts show me.

Sorry for the rambling/ranting, I hope some of it makes sense.

Edit: forgot to mention as another exmple of how things change look at the 6E it's absolutely worthless now....

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I think that Carl swenlin sums it up best and sometimes it's easy to forget what market you are in and how this may affect the outcomes and expectations ....

Decision Point®: Chart Spotlight 9/18/2009 Bull Market Rules Still Apply

BEAR MARKET RULES APPLY - ChartWatchers - StockCharts.com BlogsSeptember 04, 2011

adjusting rules to current market conditions ...

any indicator or chart pattern will be more effective if you are also using according to the current market you are in...

in a bull , the buy signals will be more effective

in a bear the sell signals

The encyclopedia of chart patterns has all 4 outcomes listed for each pattern and stats

break up / Bull
break down / bull

break up / bear
break down / bear

this applies even to smaller time-frames

then you have a difference of opinion in defining a bull and bear , when it started, how long it should last etc... etc...

I forgot this recently and paid for the error ....

but I think you will find that if you look at your usual setups with this perspective it makes a difference JMO

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"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
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Thanks for your feedbacks and interesting angles presented.

But what about someone that makes a semi-automatic strategy tested over an extended period of time and giving an expectation of 65%. Given any strategy can show some fluctuations around its mean, how could we possibly react in a timely manner to so called changing conditions? I mean since we expect some fluctuations, how could we differentiate between a normal fluctuation and real changes in the markets? At first sight, it seems a herculean task in the same league as looking for a needle in a haystack.

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kbit View Post
.

Have you noticed that so and so's method works great today and sucks ass a month from now with whatever indicator package they have ...I think you know what I mean, you've been around long enough.

That being said even simple PA guys like me have to make adjustments too but it's more along the line of changing entrys or stops a little kind of thing....we don't have to abandon our methodology because it doesn't work anymore.

But isn't it true that IF a method is based on a market phenomemon with is relatively timeless, the method if based on indictors can survive if the parameters of the indicators are adjusted to the changing environment. ( and in some form it is discretionary then :-) )

For example, trendfollowing and mean reversion strategies are very old and still working, yet the form they take changes over time due to new market participants and conditions.

So if a method with indicators is based on such a phenomenon it can survive, if the user adapts the parameters to the environment. When a method is based on some arbitratry collection of indicators which do not support/measure a good concept, the method will likely fail. At least, this is what I think within my limited experience.

One of my worst enemies are my own false assumptions
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trendisyourfriend View Post
Thanks for your feedbacks and interesting angles presented.

But what about someone that makes a semi-automatic strategy tested over an extended period of time and giving an expectation of 65%. Given any strategy can show some fluctuations around its mean, how could we possibly react in a timely manner to so called changing conditions? I mean since we expect some fluctuations, how could we differentiate between a normal fluctuation and real changes in the markets? At first sight, it seems a herculean task in the same league as looking for a needle in a haystack.

I don't know anything about automation but if I did , I think I would try adding a 20 dma as a filter above and below, also not sure I would leave it running as spring/summer doldrums kick in

the seasonal players will leave soon and won't be back for six months ....

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