Search results

It seems by now we can all agree that there are several ways of defining a trend (successive bars being higher/lower, moving averages, slope of trend channels etc.). The gaping question now seems to be how to measure the likelihood of the trend continuing given that we have established that...

I think I have the answer to #2. The straight-line approach is basically drawing a trend line through the last few swing lows (which indicate support). This is the demand line. The only simplification is to draw the supply line by drawing a parallel line on swing highs, presumably to ease the...

Thanks for linking the document. It was a very interesting read. It packs in a lot of info. I am jotting down my current understanding below. Would be great if you could answer the questions I raise. How To Determine Support And Resistance Levels Using AMT Inside-Out Heuristic (using market...

OK. Your post inspired me to go and read up some of the free sources online for Auction Market Theory. Here are my thoughts. Still trying to digest it all. A market or an exchange helps with price discovery. Nobody really knows what the fair value of an asset is. Different consensus emerge at...

The principle regarding buy (demand) vs sell (supply) pressure determining price movement is pretty well accepted. But shouldn't this be evident in the price action chart? A price action chart shows open, high, low, close and volume plotted against time. Is the information required to determine...

Can you point to some references?

In case of an uptrend, the faster EMA (9-period in your example) will always be higher than the slower EMA (20-period). So you are saying that, in case of uptrend, if price exceeds the faster EMA, then the uptrend is strong? In this case, both EMA are indicating an uptrend (or downtrend), and...

What indicators of strength do you use?

Mathematically, you can define a trend as "auto-correlation" in the "returns" time series. For example, consider day-to-day time series of a stock. The difference in daily prices (today's price minus yesterday's price) is defined as "return" on this stock. If there exists correlation among...

I agree that the loose definition of "fractal" does not yield any obvious trading strategies. The only thing relevant to trading that I can think of is the subject line: If markets indeed display a fractal nature, shouldn't trading on all time-frames be equally profitable?

I agree that my hypothesis regarding daytrading MAY BE bullshit. I am skeptical too. Hence my request for others' opinions. But you are disagreeing with a lot of empirical research if you think the fractal hypothesis is bullshit. Refer to the book if you don't believe me.

I am very interested. Can you link to it?

The number of opportunities increase, but the scale decreases. For example, there will be more peaks and valleys on a minute-chart compared to a daily chart, but the difference between peaks and valleys on a minute-chart will be much less than the daily chart. So shouldn't they balance out?

I have read the book Misbehavior of Markets and the whole fractal hypothesis has gotten me thinking. Basically, most of the mathematical finance theory does not really stand up to empirical testing, and even the hallowed bell curve is a total nonsense in context of the markets. There is...

Yes. I think it will take a lot of money to make it work. Not to mention the real need for automation, hence coding. For example, suppose the ratio (regression coefficients) for the pair of assets came out to be 1:1.4. Ideally, your mean reverting portfolio should mimic this as closely as...

Interesting. Any particular reason why you choose interval of N/2?

I don't really see how the above points are connected to the question I asked, but I will bite anyway. So here are my thoughts. Data used for analysis/optimization should obviously be limited what is observable in the PAST, since that is all we can see really. That is not the issue being...

If not Normal distribution, then what? Can't really give a definitive answer, since no one really knows. But you can look to history for clues. As an example, options trading has existed in various forms long before the Merton-Black-Scholes model came into being. How did those options...

(1) Statistical arbitrage is based on the premise that two assets' prices can be correlated, and that this correlation persists over time. (2) Momentum trading is based on the premise that prices of a single asset can be auto-correlated (price tomorrow is correlated with price today), and...

Here is an example to better explain my dilemma. Consider a really simple long-only strategy wherein you buy when prices start trending up and sell when they start trending down. Say you use a simple moving average to determine the trend. That is, if the slope of the moving average is...