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I get this email telling me that this amazing piece of software has just identified this frikkin awesome setup today:
Its just amazing isnt it? this blue coloured triangle that lets me know price could go either way! The scary part about this is that someone will buy into this. These kinds of emails are ongoing because people continue to fall for it. I dont know why I bothered looking at it just boredom I guess, but the thing is they dont even pick a direction. How desperate would a person have to be...
What is the difference between these two potential hypothesis and what FT71 does everyday with his traderbites using volume profiles to define various hypothesis to the upside/downside?
Agree with trendisyourfriend, it seems perfectly reasonable to me.
They are not saying price will go either way, they are suggesting that price is coiling in a tight range and if it breaks out I guess they are recommending one could enter with an entry stop just above or below the triangle, with an exit stop say back in the middle of the triangle, or tighter up to just back inside the triangle. And with this trade setup there should be enough momentum after a break from trapped traders so that if price does go there is a good risk/reward ratio to the first main resistance level or support levels at the recent spike high top or blue triangle low.
You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
No difference I guess and thats the absurdity of it. The market can do only one of two things ie. Go up or down so there is no hypothesising when you all you end up stating is the obvious that price can go either way (with arrows on a chart showing how clever you are)
Nice try @matthew28 but they are not inferring any of that. You did that all by yourself simply by looking at the chart. They draw a picture on a chart and your imagination does the rest . Thats the hook my friend. You think its them that can read the market but its actually you
Let me add some nuanced perspective on this issue. First, when I started predicting the markets, I made it critically important that my predictions would be falsifiable. Every prediction I made was a real falsifiable prediction. I was influenced by Quantitative Technical Analysis. However, I was unconvinced that all non falsifiable statements didn't contain any information. As an aside, when you convert an open ended/generalized prediction into a specific form then you introduce randomness in the form of arbitrary decisions unless you diversify your prediction across all arbitrary possibilities which is theoretically possible but practically unfeasible.
As an aside, I do generally think this example is ridiculous. But, I have found some value in laying out different probabilities and possibilities in my own trading. I have also seen successful traders try to keep an open mind. Back to the point, what is the real information contained in this outlook?
The real information or prediction is that volatility is set to increase. So, that's basically what the chart shows: an increase in volatility. There is also the suggestion that path the market takes, whether it goes up or down, won't return to the range. So, there is a directional component.
In this case, what looks like a non informational infographic can actually be tested. If prices enters either of the red boxes then it should not return to the prior range before making a much bigger move up or down first. I haven't looked to see what actually happened. There is an implicit suggestion that the price entering the red box will tend to make a much bigger move up or down to offset the losses of when it returns to the prior range.
In this case though a very astute technician can infer that the price will most likely enter the higher red box and continue, regardless. For one thing, the price is already much closer to the higher red box making it far more likely and there are some other hints as well. Notice, I haven't looked yet to see if that is what happened.
How is this any different than "order flow" trading? Just because you see large or hi-vol trades hitting the bid or offer, it tells you nothing about the future direction. Because you never know how much is left behind to execute... Is it a institutional spread trade? Is it.... the alternative scenarios are numerous.
I see it everyday in /ZB. I think it was just Thursday, NYC AM session... cum volume down, bid getting hit starting at 143.03. 143.00 bids. +700 block trade hits the 43 bid. Market didn't budge. That was more than what was on the book, 3 deep. Nothing.
Now, shouldn't that "order flow" setup "predict" a 3-6 tick drop? My experience is it's still basically a coin flip with "order flow" no matter the "flow."
btw... I traded the above scenario anticipating the Market going .00 bid, selling 3s and 4s. Partial exit on .01 and as soon the Market absorbed the block with no follow through I scratched the remainder.
I think what grantx was trying to emphasize was that there wasn't even a direction, let alone a trade with a stop loss and profit target called, and the graphic is ambiguous. In other words, the first question is whether or not a trade or prediction is made and the second is the profitability.
Now what I suggested and it is something I have thought about for years is a way to compute returns for ambiguous statements and one way to do that statistically is to take every possible trade that might make sense and then compute the total return. This is a general form of generalization and diversification. On this trade, this looks to be something that can be computer generated though, so it could clearly be tested. What is interesting is that we can even compute the actual average perceptual value by sampling a set of traders and having them give us their "probabilities" of what makes sense. We could do this for each trader, example asking what is the most reasonable stop/target or we could ask each trader to provide probabilities of reasonableness for a range of possibilities.
Exactly, trendisyourfriend make a good point that when traders talk about trying to define a game plan that lay out different possibilities then it can seen very similar to making a non prediction. However, the implicit assumption must be there is some information contained in those statements if they have value.
Let's take the common breakout trade which basically says to go long or short if we're above or below a recent high or low. Now, I could apply that as a forecast or toward my trading plan/prep instead of a trade. I could say look for longs above X and shorts below Y. It is true it is not a prediction. But, it is still testable in the sense that we could test every possible long or short above X and below Y and compute the return. If there was any information then we should find something of use -- though it might take a bit of work to figure out where the real value was. So, trendisyourfriend, I suspect that's what advanced traders are doing. If they are able to make use of the "prior", then they may also be able to use some sort of Bayesian inference. For example, if a trader were to give a forecast that seems nonsensical such as "focus on longs unless we start to lose then we will focus on shorts". It sounds information-less. But, it is still possible there is real information contained. For example, if this trader's trades tend to be dependent then it could still make sense.
@tehuff
As for order flow trading or tape reading, first it was always difficult but I agree it is more difficult today. But, if what you are saying is really the case for you then it might make sense for you to drop the order flow trading and/or work harder to make it more useful. I think there is value in eliminating anything that doesn't provide real value. (I do find value in the tape though.)
. Thats the hook my friend. You think its them that can read the market but its actually you