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The market constantly changes. BUT What stays the same??


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The market constantly changes. BUT What stays the same??

  #41 (permalink)
 DbPhoenix 
Phoenix AZ
 
Posts: 470 since Dec 2012


FABRICATORX View Post
I just reread this today. Amazing how it clicked a week later, in a random place.

I was watching an episode of cutthroat kitchen, where the chefs auction for pranks to play on other chefs during the competition. Anyways, one auction was a hot item. Alton Brown said " I'll start the auction at $200" and immediately, the first bid was $3000, and was bid higher from there. What clicked for me was seeing the first offer price blow right past the starting bid. That was a gap. If that was a candle, you would've thought it traded all the way up. If you saw the tick chart, you'd see the mile wide gap.

Someone recently mentioned that charts were a creation of ours, not a requirement of the market. Charts are not a natural market output and are therefore limited to however we designed them. Now were trying to trade around what we think is happening, when were very much misunderstanding the reality, all thanks to a graphical interface that we designed, that doesn't represent the truth in its entirety.

If you look at p. 7 of that "Plan" pdf you downloaded, you'll see an example of what I'm talking about.

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  #42 (permalink)
 
ChocLab's Avatar
 ChocLab 
canada
 
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I'm backtesting some strategies with a friend and what is working in the last 3 months for us did not work before May. Market structure is changing.

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  #43 (permalink)
 DbPhoenix 
Phoenix AZ
 
Posts: 470 since Dec 2012



ChocLab View Post
I'm backtesting some strategies with a friend and what is working in the last 3 months for us did not work before May. Market structure is changing.

And it'll change again in September.

The key is to come up with an approach that is self-adapting and self-correcting, like trading price. By doing so, one follows the market whatever it does and wherever it goes. If one tries to force the market into a particular pattern of behavior, it'll respond pretty much the way a cat would.

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  #44 (permalink)
 
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 Blash 
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DbPhoenix View Post
And it'll change again in September.

The key is to come up with an approach that is self-adapting and self-correcting, like trading price. By doing so, one follows the market whatever it does and wherever it goes. If one tries to force the market into a particular pattern of behavior, it'll respond pretty much the way a cat would.

I would add and what I look for is trading Value. To me price must have a volume component as an integral part. How much business is being conducted at said price tells me a great deal. If not much volume is coming into certain prices no real value is being created.

Like the retail store that puts on a sale for a handful of days with per-person limits and limited quantities to get you into the store in general so you "might" purchase other non-sale items. Or even a lost leader meaning the store take a controlled or small hit just to get you in the door.

Market does the same thing and you can spot it with volume and volume at price. Meaning volume and price and volume at price or a volume profile. Or on the tape or in the DOM or in a "Foot Print" chart, (starting to sound a bit like Dr Seuss....lol.....) which I don't personally use.

Price is an advertising mechanism and sales are for short time periods. Sales don't last long and stores do not sell great volumes on sale. They sale relatively small volumes at sale price. Just makes good business sense.

So use volume in trading to assist in a more fuller understanding of the market auctioning on the chart. If your market goes "on sale" buy it ride it back to value and flip it out. If the market just gets too expensive sell it and ride it back to value and flip it out. Trick as I see it is catching it because .......At these price extremes time is short to act and volume limited.

Ron

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  #45 (permalink)
 DbPhoenix 
Phoenix AZ
 
Posts: 470 since Dec 2012


Blash View Post
I would add and what I look for is trading Value. To me price must have a volume component as an integral part. How much business is being conducted at said price tells me a great deal. If not much volume is coming into certain prices no real value is being created.

Like the retail store that puts on a sale for a handful of days with per-person limits and limited quantities to get you into the store in general so you "might" purchase other non-sale items. Or even a lost leader meaning the store take a controlled or small hit just to get you in the door.

Market does the same thing and you can spot it with volume and volume at price. Meaning volume and price and volume at price or a volume profile. Or on the tape or in the DOM or in a "Foot Print" chart, (starting to sound a bit like Dr Seuss....lol.....) which I don't personally use.

Price is an advertising mechanism and sales are for short time periods. Sales don't last long and stores do not sell great volumes on sale. They sale relatively small volumes at sale price. Just makes good business sense.

So use volume in trading to assist in a more fuller understanding of the market auctioning on the chart. If your market goes "on sale" buy it ride it back to value and flip it out. If the market just gets too expensive sell it and ride it back to value and flip it out. Trick as I see it is catching it because .......At these price extremes time is short to act and volume limited.

Ron

I used to employ volume all the time, even to the extent of using CVBs. But as the years rolled by and I became more famiiar with AMT, I was more able to judge volume by activity, pace, and extent, and the volume bar became less useful. Plus it took up real estate that I could put to better use.

It doesn't matter to me whether three people are moving price in a given direction or three million. All that matters to me is that price is moving in that given direction. The company is nice, but not necessary. And as for value, there will be more volume at value levels as a matter of course due to the amount of time that is spent there and the amount of trading that's taking place. If volume weren't heavier there, traders would have no reason to hang out at that level.

In some respects, it's a chicken-or-egg situation. Is there a lot of volume in that area because that's where traders have found and are finding value? Or are traders finding value there because that's where the volume is and has been? The answer most likely lies in the negotiation aspect of AMT, which helps to explain why the "value area" isn't always centered between the upper and lower limits.

As for the "time is short to act" aspect, you might be interested in what I wrote in my thread about the "danger point".

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  #46 (permalink)
 Ynotfutures 
Michigan
 
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DbPhoenix View Post
I used to employ volume all the time, even to the extent of using CVBs. But as the years rolled by and I became more famiiar with AMT, I was more able to judge volume by activity, pace, and extent, and the volume bar became less useful. Plus it took up real estate that I could put to better use.

It doesn't matter to me whether three people are moving price in a given direction or three million. All that matters to me is that price is moving in that given direction. The company is nice, but not necessary. And as for value, there will be more volume at value levels as a matter of course due to the amount of time that is spent there and the amount of trading that's taking place. If volume weren't heavier there, traders would have no reason to hang out at that level.

In some respects, it's a chicken-or-egg situation. Is there a lot of volume in that area because that's where traders have found and are finding value? Or are traders finding value there because that's where the volume is and has been? The answer most likely lies in the negotiation aspect of AMT, which helps to explain why the "value area" isn't always centered between the upper and lower limits.

As for the "time is short to act" aspect, you might be interested in what I wrote in my thread about the "danger point".

Hi DBPhoenix, can you tell me what CVB and AMT stand for please? Also, can you post a link to your thread labeled "Danger Zones"

Thanks.

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  #47 (permalink)
 DbPhoenix 
Phoenix AZ
 
Posts: 470 since Dec 2012


Ynotfutures View Post
Hi DBPhoenix, can you tell me what CVB and AMT stand for please? Also, can you post a link to your thread labeled "Danger Zones"

Thanks.

Sorry. CVBs are Constant Volume Bars. I used them primarily to compress the overnight activity until I learned how to interpret it. Now I just let the clock run without futzing with it.

AMT stands for Auction Market Theory.

My thread is Trading the SLA/AMT Intraday. The Danger Zones post was made yesterday.

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  #48 (permalink)
 
FABRICATORX's Avatar
 FABRICATORX 
San Tan Valley, AZ/USA
 
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I'm starting to understand what you're saying, @DbPhoenix.

I have the paper trade Thinkorswim mobile on my phone, and whenever I have a moment, I watch the tick chart. Sure, it's a 20 minute delay, but I can still watch how price moves, when volume comes in, and how price will often move with nearly zero volume.

I went from "learning to trade" to studying the collective market behavior.

Interesting...

-Jimmy
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  #49 (permalink)
Johno1
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xylem View Post
For me I believe overbought and oversold are constants in the market. When people always talk of the market changing it feels like their saying you can never be a consistently profitable trader because the market will eventually make your trading plan invalid.

How true is this for somebody who doesnt have a mechanical trading plan?

Successful traders like me without a mechanical plan simply specialize in embracing the constant change, that is my edge, and I can guarantee that I will always be trading against the Mechanical/System traders because they are simply so far behind the curve.

Cheers John

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