can price action predict market moves

Laissez Faire said:
Yes, you posted it before the fact, but you didn't explicitly say it was a sell.

What I'm saying is that it's very easy to annotate charts after the fact compared to actually successfully trading charts day after day. That's when the rubber meets the road.

Identifying a level may be important. Knowing how to trade that level (or choose not to trade it) is more important.
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I did say in one of the past posts that I sell likely resistance and buy support levels. But hey, you don't have to credit me with any call validity. I don't have anything to sell ;)
 
Master Pu said:
I did say in one of the past posts that I sell likely resistance and buy support levels. But hey, you don't have to credit me with any call validity. I don't have anything to sell ;)
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You are posting multiple charts in this thread - so one can only assume you're trying to demonstrate something.

My reply to that is that charts are easily annotated after the fact. Trading them in real time at the right edge of the chart while risking $$$ is very different.
 
Laissez Faire said:
You are posting multiple charts in this thread - so one can only assume you're trying to demonstrate something.

My reply to that is that charts are easily annotated after the fact. Trading them in real time at the right edge of the chart while risking $$$ is very different.
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For sure.
 
Laissez Faire said:
That would be true assuming an equal (random) distribution of the size of winners and losers.

Successful trading systems with a lower win rate typically have average winners which are many multiples of the average loser, i.e., risk 1 to gain 10.

In the end it's as simple as dollars gained minus dollars lost.

Systems which NEED a very high win rate are not very robust as you'll quickly end up losing money as soon as your win rate goes down.

The best is a higher win rate and high average win, but the two are usually inversely correlated. Even the famous Medallion fund have been said to have a win rate not much above 50 %.
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Finding a subset of trades that can give you an asymmetrical payoff is an edge. Ex-ante you do not know what your return will be. What creates a positive expectation of a return is your edge.

Medallion Fund and other HFTs are low edge (51-52%) but high volume and tight risk limits. The greater the edge the higher your risk limit. As a trader you will have an "average edge" though per trade your edge may be higher or lower.

Having been a trader on both the buy side and sell side, I can tell you that risk departments allocate capital using gambling theory (Kelly criteria and monte carlo simulation), which all use edge as an input.
 
themickey said:
The problem imo, unknown forces pushing (manipulating).
How does one calculate that?
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I have no idea. Whatever is meant to be, will be, we can only be either on the right side or the wrong side. I just know if I'm wrong, then I'm out! If it looks like I'm right ill hold on till next barrier.
 
longandshort said:
Finding a subset of trades that can give you an asymmetrical payoff is an edge. Ex-ante you do not know what your return will be. What creates a positive expectation of a return is your edge.

Medallion Fund and other HFTs are low edge (51-52%) but high volume and tight risk limits. The greater the edge the higher your risk limit. As a trader you will have an "average edge" though per trade your edge may be higher or lower.

Having been a trader on both the buy side and sell side, I can tell you that risk departments allocate capital using gambling theory (Kelly criteria and monte carlo simulation), which all use edge as an input.
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Not quite sure what you're trying to communicate here to be honest, but thanks anyway.

Master Pu said:
Who else thinks indexes are gonna tank here? Certainly reward looks way higher than risk (stop).
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Great trend day UP with the R/R greatly skewed to the long side. :)

Generally, the probability of the indices (ES) tanking on any given day are very low. Given today's Open - even lower.
 
Laissez Faire said:
Not quite sure what you're trying to communicate here to be honest, but thanks anyway.



Great trend day UP with the R/R greatly skewed to the long side. :)

Generally, the probability of the indices (ES) tanking on any given day are very low. Given today's Open - even lower.
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What I’m saying is that all of the trades you make are actually 1:1. That you arbitrarily set an expected return that is greater than your expected loss is not a real measure of the risk/reward in a trade lol.
 
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