3 thoughts about behavior

jack hershey · Sep 27, 2010

Quote from charts:

the volume events are identical on both A and B.

A represents the trap of Dunnigan which is a point 1 to point 2 in the PEP paradigm. the trough occurs, roughly, @ the BO of the prior RTL.

In B on a similar fractal (during the same amount of information flow), you are looking at points 2 to 3 to ftt. This moment is the end of that pattern's order of events.

For anyone wanting to see the whole short cycle of those two parts, could just superimpose point 2 of B upon point 2 of A.

A complete long cycle is an identity with the complete short cycle.

Joining the long to the short would be done by suprimposing point 1 of the long on the ftt of the short.

Basically, this is in deep contrst to the down/up and entry/exit philosophy of CW.

There is no way to explain a down/up strategy if the terms sentiment and dominance are used.

When you look at the ten patterns of A. Lo, you get the rude awakening that he used a smoothing function improperly. I do not believe that either the quant community nor the TA community could explain that to him.

BF correctly explains events and that events can be misjudged.

Taken at face value, he illustrates simulated bar formations that have two events per bar 17 times in 77 bars. See cases of adjacent bars to find the case OB (outside bar).

Thanks for your annotation.

In both A and B the links represent non dominance going to dominance. A represents a reversal and B represents a retrace coming and going.

It is impossible for me to understand how a product like A. Lo's could have slipped past a panel of the Journal of Finance. I don't understand why NSF didn't ask for its money back either.

FreeMarketRider · Sep 27, 2010

This is a killer thread

Quote from FreeMarketRider:

... In trading most never assemble a reliable perspective. Trouble (and memory of past trades) impair decision making ability. This is why so much of what goes into an individuals rules is really about decision support (or decision removal).

Quote from TradeWrecker:

For me this is a very important concept. Few traders understand how to train for improved decision making, but it is a must. Once you understand the approach all you need then are the years to learn from it and then turn that information into an edge... Which, if you're smart, you will never disclose until it no longer works.

Jack - Thanks so much for illuminating a working model for those who have the time to read and think on it. In my first career (marine engineering) I was face to face with learning via OODA. I locked down all that was worth knowing in about a year or so. For the next 22 years in dealing with transients requiring mission critical decision making I found:

A: I was rarely wrong at D & A
B: When I was wrong, my awareness allowed me to recognize and pivot to the correct action.
C: Fears / Emotions were completely gone from my process.

The transition in approach / thinking you describe below, is not for everyone. It represents OODA carried to it's best end.

Quote from Jack Hershy:
...An exit is an identity with an entry. In five stages, atrader can examine the end of continuation, the beginning of change, optiimum change, the end of change and the beginning of continuation. This casan keep atrader IN the market ALL the time and ON THE CORRECT SIDE OF THE MARKET ALL THE TIME.

There are many ways to skin the market cat. A lot of long term folks here do really well with the basic identity. As you say its really about keeping an open mind. Exogenous shocks hover over all markets which can take most participants by surprise.

This is where the OODA learning holds a real edge. Stops (properly set) along with other protections are also great insurance. (For a price)

ammo · Sep 28, 2010

all of science is based on a guess,"we are not sure so we will try hypothesis A,B,C,D ,,etc ,how many times did edison attempt the lite bulb,trial and error, the main premise is the guess is only one of 1000 tries because we are guessing and until the results come in ,many more times than once,we have failed, so the thing to take away from that is humility, you never really know,science is based on "if this is true"( a guess), "then this would be the outcome"...a lot of if's and ...so to be so bold as to say this happens all the time,you have diminished your edge of knowing that it was only an if to start with,and as the market dynamics change, so do the results on said sure things,if you can always keep ,"it's only an if" foremost in your mind, in other words protect your self from straying away from the truth"humility",you won't get burnt to big on a loss,and being humble,and recognizing all maybe's,you will be better prepared when the higher percentage scenario shows up,be it divergence or just blatant fundamental half truths...jsut refering to the title of the thread, one of those 3 thoughts about behavior has to be thinking outside the box, which would mean that you never except present sentiment as the truth,and try to spot the apex'es

jinxu · Sep 28, 2010

Quote from ammo:

all of science is based on a guess,"we are not sure so we will try hypothesis A,B,C,D ,,etc

Not entirely true. There's a difference between making a blind guess and making an educated guess (assumption).

FreeMarketRider · Sep 28, 2010

Quote from ammo:

all of science is based on a guess,"we are not sure so we will try hypothesis A,B,C,D ,,etc ,how many times did edison attempt the lite bulb,trial and error, the main premise is the guess is only one of 1000 tries because we are guessing and until the results come in ,many more times than once,we have failed, so the thing to take away from that is humility, you never really know,science is based on "if this is true"( a guess), "then this would be the outcome"...a lot of if's and ...so to be so bold as to say this happens all the time,you have diminished your edge of knowing that it was only an if to start with,and as the market dynamics change, so do the results on said sure things,if you can always keep ,"it's only an if" foremost in your mind, in other words protect your self from straying away from the truth"humility",you won't get burnt to big on a loss,and being humble,and recognizing all maybe's,you will be better prepared when the higher percentage scenario shows up,be it divergence or just blatant fundamental half truths...jsut refering to the title of the thread, one of those 3 thoughts about behavior has to be thinking outside the box, which would mean that you never except present sentiment as the truth,and try to spot the apex'es

Ammo - Nicely put, I like your take on this.

In CL Redux you and the others are showing off your OODA learning. I can't help but be impressed with whats there and the advice that shows up there on a daily basis. Thanks you for that.

Emotions (not carefully understood / harnessed) and market bias (IMAO) can tie the hands of traders (been there experienced that). As you say, humility is really about understanding the uncertainty - i.e. as Jack Hershy (and many others) say, "To know what can be known".

I've always been fascinated with Soro's outline of "reflexitivity". Broadly he differentiates market processes from physical processes by acknowledging that any process involving "thinking participants" is fundamentally different. His belief is that because market processes involve thinking participants, their underlying dynamic is chaotic (ie path dependent and unsteady). He is critical of the underlying reliance in economics on equilibrium based models. While they work as approximations, they fail to recognize / consider black swan events. Black swans and other examples of model failure have littered the landscape for the past 15 years at least. More than anything else, this should help us all stay humble.

OODA learning is so easy in a world based on physical processes (engineering ops). What I've learned in this thread is that BF can show a better way of building those skills / knowledge in markets. We all stare at the hard right edge of the chart wondering what to do. What differentiates us is our actions.

TradeWrecker · Sep 28, 2010

Quote from ammo:

all of science is based on a guess,"we are not sure so we will try hypothesis A,B,C,D ,,etc ,how many times did edison attempt the lite bulb,trial and error, the main premise is the guess is only one of 1000 tries because we are guessing and until the results come in ,many more times than once,we have failed, so the thing to take away from that is humility, you never really know,science is based on "if this is true"( a guess), "then this would be the outcome"...a lot of if's and ...so to be so bold as to say this happens all the time,you have diminished your edge of knowing that it was only an if to start with,and as the market dynamics change, so do the results on said sure things,if you can always keep ,"it's only an if" foremost in your mind, in other words protect your self from straying away from the truth"humility",you won't get burnt to big on a loss,and being humble,and recognizing all maybe's,you will be better prepared when the higher percentage scenario shows up,be it divergence or just blatant fundamental half truths...jsut refering to the title of the thread, one of those 3 thoughts about behavior has to be thinking outside the box, which would mean that you never except present sentiment as the truth,and try to spot the apex'es

you don't understand how science works... A guess in the scientific world is much different than the guess you might make as to which way the market will move.

when a scientist publishes a guess it will be based on extremely rigorous testing and truck-loads of data. The reason it always remains a "theory" is because they never assume (like most traders) that they have it right or that no other answer is possible.

Even when a theory has been proven to work time and time again it still remains just a theory...

There is nothing in the original post to suggest thinking outside the box is required. What I've detailed there (no. 3) is how most professional money mangers handle their business - you can't get much more in the box than that.

I always find it amusing when someone comes out against things like science and math... It never applies to them or the situation they're in, even when they are trying to be "financial" professionals.

Most traders would do well to forget the charts, go back and brush up on their math skills from algebra to financial calculus and learn how to evaluate economic impacts and how they affect the markets they trade. When you really understand the drivers behind price action, then you can begin to look for an edge in trading.

FreeMarketRider · Sep 28, 2010

Quote from TradeWrecker:

....Most traders would do well to forget the charts, go back and brush up on their math skills from algebra to financial calculus and learn how to evaluate economic impacts and how they affect the markets they trade. When you really understand the drivers behind price action, then you can begin to look for an edge in trading.

Great Point TradeWrecker - The longer the time horizon one trades the more this really has to be part of the picture. This is a completely different skill set from what is needed to day trade / swing trade. Despite my alignment with Soros on the challenges of traditional economics, I believe basic relationships are still represent a decent frame of reference. Anyone planning to trade in the back months needs to have worked through some kind of S/D, macro review.

The biggest misnomer is really to try to apply the purest methods of science or engineering to markets. The engineering lingua franca that gets used to label aspects of market behavior really doesn't fit well (momentum, velocity, etc). Markets are a lot closer to the chaotic (fluid dynamics) than anything near the baseline kinematic or Newtonian (F=MA) terms that get thrown around. Markets are like engineering systems in that they both have control systems, they are both subject to latencies, and stability issues (depending on control design). The BF / Human component is what really makes markets so much more difficult to grasp.

PA is really just capital flow. Connecting PA back to the underlying relationships takes some thinking. Inter-market relationships help paint the canvas. I think real edge can flow from detecting shifts in inter-market relationships (or other flaws / shifts).

There are a lot of smart folks on ET, and in this thread. For all this, the ratio of posters to readersis probably closely related to the ratio of winning traders to the rest of the market....

Your OP really opened up a lot of great ideas because it has cut across a wide range of participants with different trading time lines / focus. This thread is about behavior - Lets see where it goes.

ammo · Sep 28, 2010

Quote from TradeWrecker:

/////////you don't understand how science works... A guess///// ...you just turned a guess into a fact in your mind after reading one post from this ammo handle," you might not know a lot about science" would have been a scientific assumption

There is nothing in the original post to suggest thinking outside the box is required. What I've detailed there (no. 3) is how most professional money mangers handle their business - you can't get much more in the box than that.

lehman ,bear and merrill went under in 08, professional money managers,i 'll bet they were in the box, best to trust your assumptions as just that, not facts

Redneck · Sep 28, 2010

________________________________________
Quote from Jack Hershy:
...An exit is an identity with an entry. In five stages, atrader can examine the end of continuation, the beginning of change, optiimum change, the end of change and the beginning of continuation. This casan keep atrader IN the market ALL the time and ON THE CORRECT SIDE OF THE MARKET ALL THE TIME.
________________________________________

Not beating up on Hershey here personallyâ¦ just trying to get down to brass tax

In my opinion this is an academic view of trading, and not real world experience (similar to the theory that says a perpetual motor is possible with current technology â but in real life it is not)

He says it is possible to be in the market 100% of the timeâ¦ and on the right side at all times

----------------------------------------------------------------------------------------------------------------------------------------------------

Then how does this approach (won't call it a theory) address;

Tight trading ranges â letâs say a nickel or less â with most bars being of equal size

or

WRB back to back in opposite directions â bars of equal heightâ¦

The easy answer would be to say look at a smaller time frameâ¦ (yeah I know fractal)

To which I would respond letâs say the above conditions occurred on the smallest time frame you have available to youâ¦

And/ or I would also add switching back and forth between timeframes (fractals) to trade off of is never a good ideaâ¦

Besides it would throw off the notes SCT trades are supposed to be takingâ¦

You could also say look out to longer timeframes â to which I would say for intraday go out too far there is no valueâ¦ and Iâve also seen conditions which gave no clear signals on any time frame

And again I would add switching back and forth between timeframes (fractals) to trade off of is never a good ideaâ¦ and again it would throw off the SCT traderâs notesâ¦

Another easy out would be to say well I can read a chart better than you RN â to which I really would question

And yes I can read volume as well as anyone..(the key to reading volume is have price framed up in clear context)

----------------------------------------------------------------------------------------------------------------------------------------------------------------

So would someone please explain it to meâ¦.

My experience says â when price moves to the above conditions, quickly or not

Tight trading range = sit out till I get a read on a breakout... if the range is too tight to trade profitably...

(Factoring in false breakouts, trapped traders, the preceding trend, volume, and the direction of strength/ weakness reflected in the price bars)

or

WRBâs in opposite direction â wait for NRBâs then fade them â âifâ they occur at the extremes of the range set by the WRBâs â otherwise wait for /on a better read of PA

--------------------------------------------------------------------------

Just looking for a straight up explanation how 100% in, and always on the right side is possible in the real worldâ¦

I would also ask you (whoever responds) how do you know two WRBâs in opposite direction will form â before they form... or a tight range for that matter

And I would ask someone other than hersehy to explain it â as we definitely donât see eye to eye

Iâll address the use no stop issue later (as this one just drives me nuts)

Thank You

RN

ammo · Sep 28, 2010

Quote from Redneck:

________________________________________
Quote from Jack Hershy:
...An exit is an identity with an entry. In five stages, atrader can examine the end of continuation, the beginning of change, optiimum change, the end of change and the beginning of continuation. This casan keep atrader IN the market ALL the time and ON THE CORRECT SIDE OF THE MARKET ALL THE TIME.
________________________________________

Not beating up on Hershey here personallyâ¦ just trying to get down to brass tax

In my opinion this is an academic view of trading, and not real world experience (similar to the theory that says a perpetual motor is possible with current technology â but in real life it is not)

He says it is possible to be in the market 100% of the timeâ¦ and on the right side at all times

----------------------------------------------------------------------------------------------------------------------------------------------------

Then how does this approach (won't call it a theory) address;

Tight trading ranges â letâs say a nickel or less â with most bars being of equal size

or

WRB back to back in opposite directions â bars of equal heightâ¦

The easy answer would be to say look at a smaller time frameâ¦ (yeah I know fractal)

To which I would respond letâs say the above conditions occurred on the smallest time frame you have available to youâ¦

And/ or I would also add switching back and forth between timeframes (fractals) to trade off of is never a good ideaâ¦

Besides it would throw off the notes SCT trades are supposed to be takingâ¦

You could also say look out to longer timeframes â to which I would say for intraday go out too far there is no valueâ¦ and Iâve also seen conditions which gave no clear signals on any time frame

And again I would add switching back and forth between timeframes (fractals) to trade off of is never a good ideaâ¦ and again it would throw off the SCT traderâs notesâ¦

Another easy out would be to say well I can read a chart better than you RN â to which I really would question

And yes I can read volume as well as anyone..(the key to reading volume is have price framed up in clear context)

----------------------------------------------------------------------------------------------------------------------------------------------------------------

So would someone please explain it to meâ¦.

My experience says â when price moves to the above conditions, quickly or not

Tight trading range = sit out till I get a read on a breakout... if the range is too tight to trade profitably...

(Factoring in false breakouts, trapped traders, the preceding trend, volume, and the direction of strength/ weakness reflected in the price bars)

or

WRBâs in opposite direction â wait for NRBâs then fade them â âifâ they occur at the extremes of the range set by the WRBâs â otherwise wait for /on a better read of PA

--------------------------------------------------------------------------

Just looking for a straight up explanation how 100% in, and always on the right side is possible in the real worldâ¦

I would also ask you (whoever responds) how do you know two WRBâs in opposite direction will form â before they form... or a tight range for that matter

And I would ask someone other than hersehy to explain it â as we definitely donât see eye to eye

Iâll address the use no stop issue later (as this one just drives me nuts)

Thank You

RN

wide range bars can be expected on fed announcements and employment numbers,today it was rimms new phone and aapl's reaction, the hi .lows are usually mp numbers,narrow range bars are expected on pre holiday trading,i'm sure jack used mp at one time and elliot wave and fibs,and probably every system out there,so trying to explain it using just his and spyders methods probably leaves a lot of stuff out,making it hard to get it with just the one method...not much of an answer, i know

3 thoughts about behavior

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