Just a few. I know that there are certain methods to determine a lot movements but this will require the use of an algo, which I have not used.
can price action predict market moves
- Thread starter geth03
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Just a few. I know that there are certain methods to determine a lot movements but this will require the use of an algo, which I have not used.
- You can group stocks by similar characteristics to see if your pattern works
- Sure there are lots of things that have correlation, but correlation does not imply causation, and if you cannot provide a theory behind causal drivers then you do not know if you’re trading randomness or something real
- I’m not sure if your use of Markov and Poisson distributions is warranted here considering you are simplifying outcomes — yes if a, b, or c can happen then describing a change from c to a is markov, which actually illustrates the uselessness of historical information (that’s the whole point of markov)
- I agree that the day traders concept of r:r is not meaningful but conceptually your expected return should be profit x probability
-Similar characteristics is possibly a misnomer. Certain events happen across stocks that are dissimilar. Eg AMD and CAT exhibit similar characteristics, but not CAT and DE. Their correlations and fundamentals may be similar but technically, no. Imagine mirrors; some convex, some concave. The correlation may show a similar picture (both convex) but the event types not. This is the great key to solving the market riddle; event types along levels which determine future possibilities.
-The pattern determines reality. Eg overextension (standard deviation) on X which does not hit a level may simultaneously hit a level on Y at which point X can be entered, although no pattern exists, but only its correlation.
-Simplification of outcomes is exactly what is needed, and can be done. Eg, a is most expected with 60%, and b and c with 20% each, yet if only 1 outcome is expected to lose, it needs to be b or c (unless a great enough profit is expected from b or c to make it worthwhile).
-yes
I think you are confusing the return of liquidity provisioning with a chart pattern. No one is denying that there can be returns from buying low and selling high, and vice versa. What I’m saying is that chart patterns are random and are not useful at predicting subsequent returns.
With that being said, there are people that do make money trading these patterns, and if you compared them with the total population, it would fit around your expected error (luck). Some people have made a fortune trading using zodiac signs, but this is not a replicable or tractable trading strategy.
I don't normally do this, but I'll bite here on a trade I made this morning.
First circle is the long signal based on a pattern, Event A. Expected movement did not occur, held into drawdown. Because A did not occur then, probability of B increased. What is B? The subsequent 2 circles. When A fails, it allows one to get out at breakeven; this is what Jesse Livermore says when you could have gotten out at breakeven, known as pattern B. We all have own names for them. The market broke above and allowed reentry on the final, tiny circle. However, the probability had been reduced at that point due to correlations among other vehicles. This is how one can trade with a high probability of a win or breakeven. The TSLA trade also did this, yet we can see it worked out AH because the trade occurred later; I expect a gap down on TSLA tomorrow or a red day. If it gaps above, it should test the aforementioned 668.43 level as an event type.
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I don’t follow. 1. How are you defining these events 2. How have you determined the probability of subsequent events occurring
this is exactly what I mean when I say you’re being fooled by randomness. I can see numerous patterns in any chart, but none of them tell me the subsequent return.
What is the probability of there being 3 up bars after an excess single red bar? This is measurable. It does not mean you generate a profit. If you can’t generate a positive return more than 50% of the time using your signal, then it is not helpful. Better off using a coin toss.
this is exactly what I mean when I say you’re being fooled by randomness. I can see numerous patterns in any chart, but none of them tell me the subsequent return.
What is the probability of there being 3 up bars after an excess single red bar? This is measurable. It does not mean you generate a profit. If you can’t generate a positive return more than 50% of the time using your signal, then it is not helpful. Better off using a coin toss.
1. Local Max/Min.
2. Historical
Each trade is different. For a long time, I had been struggling to determine adequate subsequent return. I use 'statistically significant move', that is, if the level is indeed more than just randomness, it should generate a move that is greater than average with the timeframe that is being analyzed. AMD short is an example, which I took today too:
Should I have closed the trade at breakeven as soon as it went a bar against me? No. Should I have taken profit after the first red bar in my favor? No. Why? Because the moves have to be bigger than the day's fluctuations. This is just part of it, but it is the main part.
The probability of the signals of generating a profit or breakeven is close to 100%. Profit is expected ~80% of the time (anecdotal) but seems to be that it is closer to 9X% in reality
2. Historical
Each trade is different. For a long time, I had been struggling to determine adequate subsequent return. I use 'statistically significant move', that is, if the level is indeed more than just randomness, it should generate a move that is greater than average with the timeframe that is being analyzed. AMD short is an example, which I took today too:
Should I have closed the trade at breakeven as soon as it went a bar against me? No. Should I have taken profit after the first red bar in my favor? No. Why? Because the moves have to be bigger than the day's fluctuations. This is just part of it, but it is the main part.
The probability of the signals of generating a profit or breakeven is close to 100%. Profit is expected ~80% of the time (anecdotal) but seems to be that it is closer to 9X% in reality
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Mr. Al Brooks himself:
I need to prove absolutely nothing. I claimed something and you can talk to as many people as you like and derive at a balanced conclusion. Take my experience or not, entirely your choice.
so you're saying if you see a 5min bar that's 4stds..you expect subsequent 4std moves?