Quote from JohnnyK:
snip....
I will now attempt to drill down on these *boolean asymetric choices* concepts by providing a visual. Think of it as a white board that can be altered to fit the concepts you are trying to convey.
This is a kind of - what was said vs. what was heard - test. How close am I to getting the fail-to-travers/flaw/choices concept? Better yet, what would be your thought process at point 2, and what would you look for/anticipate next?
Thanks,
JohnnyK
I couldn't bring up the picture on my machine, sorry.
If you wish to label it according to what I am trying to communicate, you can call point 1 failure to traverse and call point 2 BO (break out). The two choices at your point 2 are BO and FBO.
I reserve the terms point 1, 2, 3, and new point 3 to define channels.
I have advocated several practices that will tangibly improve any method of trading. Generally, I am unable to communicate these practices easily. All of them are processes that can enable and focus a person on what is going on and what is very important.
These practices precipitate doubling of money velocity each, roughly speaking. So a person has to make the effort necessary to get stuff down pat.
You point out Failure to Traverse in the graphic and you put it in the wrong place. So I need to go back a few steps to try to get an understanding of channels and their value regarding making money.
For some reason, channels work. While I prefer a semi logarithmic graph for several reasons, it turns out that making money is so simple that even this consideration is not needed. The basic reason is that the range of values is so small that there is not a statistically significant difference in the analysisone way or the other.
Look at the daily potential of the market to deliver money to your account. This gives you a H/L range to look at. In the next level of consideration, look at how price moves about in that H/L range of consideration.
I have a glossary of terms that I have adopted to describe all of this. I will use ES for discussion purposes.
H/L range means determining a range of price values that mark to upper and lower extremes of price. Usually these values occur uniquely once a day. So they are not trading values but they are just boundaries. I trade using market entry as a tool. Therefore, I cannot get these values to show on my print because I have to "buy the spread". The spread is a cost of doing business. On Friday I "bought the spread" 34 times with multiple contract orders. I disregard this as a determinent for making money. Think simply, how does 34 ticks (8.2 points) compare to the H/L spread.
Doing those 34 actions, involved 13 holds or completed turns. Thisgives me a repreave from the 34 ticks. I scale, exit or reverse, etc. For each turn, I see profits or losses "locked in": 7 profits and 2 losses and two "washes".
Ordinarily I do about what is described above to make money as a consequence of price change in a range of prices during the day.
What can anyone do to scope out what is available to make money? What actions are necessary to take money out of the market? Channels, it turns out, are the most helpful thing to deal with this basic fundamental opportunity set of Q's. As it stands, I am unable to convey that to you (lets be clear, you have a fine chance to "get it").
I use a simple precept to make money. I feel change in price is where money can be made. Anyone can look at what they do. Whether they make money or lose it, they are "in' the market while the price is changing. If people want to test this precept out, they can paper trade with random entries and hold until they do not make any more money or until they do not lose money anymore. The place they get to, in either case, is where exiting is correct in market "timing". All of these points in time relate very simply to one market phenomena. The phenomena is "channels".
By doing random entries and optimum exits, any person can learn how to use channels for exits.
This type work by a person can be enhanced in two ways. First, choosing the random entry direction in a way to eliminate it's being incorrect. Thus, you always make money instead of loosing sometimes. Second, by timing the entry to take advantage of being in the trade from beginning to end. Channels supply the solution to both of these needs.
This gets us fairly far in making money by using one precept, channels, to get the job done.
If a person prints 100 daily charts for 100 different days using a 5 min bar duration and puts them in a three ring binder, he has a very good chance of being a millionaire. I draw every channel of everyday. If the person copied the 100 charts 10 times each and collated them and put them in separate "study" files, I can say that person's chance of being a millionaire is tripled. You can use such sets to learn about channels.
Write down 30 times that occur in a day. Use these as "times" to random entry. You can shift these specific times by adding or subtracting small amounts of time for the set of 30.
Think of ten drills you can do to shape up your thinking.
To complicate life, we can study channels to learn about them. They are describable by their characterisitcs. Channel characteristics are important because, if known, they can be used to make money.
Everything comes down to making money during times of price change. I use SCT for that because it represents a rational and objective basic approach for dealing with just how and when money can be made.
. 