Daytrading- Big Picture and Volume Analysis

[EMC2Trader]

Quote from fearless9:

But is'nt the much bigger picture derived from price movement.

How can you even have a picture big or small if you don't have price movement.

Perhaps I am going quietly mad from reading your thread.

regards
f9

Fearless

You may not be the only one Im driving mad from this thread...lol.

But Ill try to at least make the main point simple. All Im saying if that if you daytrade, it helps in many ways to keep the bigger picture in mind.

For instance, if you are an intraday, with the trend trader, like me, and price has moved straight up to a clear swing resistance point, and you have had nice gains on trades so far with this intraday trend, the probabaility is simply lower that your next with the trade with the trend will succeed...Maybe this is common sense for many of you, maybe not, I dont know....

Next it is the volume relationship of patient buyer and pateint anxiety levels that sets up these points.

So, all Im trying to say, is you can observe this continuing cycle over and over again in a very simple fashion, to put your specific trading plan into a context to see both high probabailty areas and low probability areas to trade.

 

[EMC2Trader]

An Excellent Review- I had never heard of Chick Goslin before Billy mentioned him in a prior post. After checking out a review of his book, I can unequivocally recommend this book, because it is a review that could have been written for the exact way I look to trade too--in fact, so much so, that its almost scary!

The only difference seems to be that he advocates anticipating indicators to enter a trade, where as I use price action only.

What I have done is apply the very core of this type of approach into a very specific way to trade the ES market, track every trade day after day, and post a continuing series of educational charts and explanations on an ongoing basis.

So I would not only recommend this book to anyone site unseen, but I think just from reading this review you can get an idea of what one good form of good trading is about, and apply these principles to your own trading plan as well.

=========================================

"Chick Goslin propounds the cogent idea that, while the past is a fact and the present is observable, it is not possible to predict the future. It follows that a trader must reject any tendency to predict a market's future activity since this would fall in the category of prophecy. The author logically concludes that such predictions are not only of no use, but are actually detrimental to the trading process.

What then should be used? Goslin lays out simple rules that essentially involve the interplay of current market action and historical data in order to make an "intelligent guess" at market activity in the immediate future. It can be argued that Goslin minces words and that, in reality, we are always attempting to predict the future when we enter the market. Otherwise, how would we know when to buy or sell? But it is clear that Goslin differentiates between predictions of relatively distant market positions and those of the next day or the next moment. He contends that a sufficiently intelligent guess can be made in this shorter time frame to indicate when a reliable trade is likely.

It would be difficult to argue this point with the author, who has distinguished himself as an outstanding successful trader. In the present book he purportedly reveals the principle method by which he made more than a million dollars in one year. It is a straightforward, simple approach that employs three indicators and price structure. The author recommends that paper charts be used; particularly those supplied by one company which also sells the recommended indicators, two of which are proprietary. However, he explains that these can be approximated adequately with common graphical tools, for which the indicator values are given.

This book is more than a procedural description of a simple trading method. It is an exposition of a proven way of successfully viewing the trading process. Its critical construct is the differentiation of the mental elements of the procedure from the actualization of it. The idea is not new. Several authors have remarked about "analysis paralysis." But Goslin states the problem succinctly and instructs the reader in the gathering of the information that precedes a trade as well as in the subsequent actions required to establish a viable entry. The experienced trader will find it to be a back-to-the-basics reminder of the elements of short-term trading. The part of the book that does not deal with the mechanics of trading is at least as important as the part that does. The "thinking phase" sets the stage properly so that the entry techniques which follow (the "action phase") have an enhanced chance for profit. The author leans on the critical concept that one must not confuse the two phases. More specifically, analysis is not action and it is only knowledge-based, timely action that breeds successful trading.

As for the entry technique, it would be difficult to contest Goslin's simple approach. If, as alluded to on the dust cover, his considerable success in the markets was accomplished "almost exclusively" by means of the momentum techniques in this book, the author has certainly proven their efficacy, at least in his hands. The intent is to enter a trend at its inception or after a retracement, the entry to be determined essentially by the agreement of momentum indicators in several time frames. And therein lies a slight rub. One must possess the discipline to anticipate the movements of the indicators, a skill that we are assured can be learned and for which some scant instructions are provided. This is not the kind of approach that gives a new trader a warm, comfortable feeling as he enters the foray. But it is well known that some of the best trades feel the worst at entry. The warmth and fuzziness develop as a natural consequence of numerous profitable results.

The book is divided into four main segments: 1) understanding the nature of trading and predictive processes, 2) knowing one's self and where he fits in the various trading time frames, 3) the operational techniques, 4) annotated charts. The charts deserve special mention. They encompass thirteen markets over two weeks and are generously annotated with tips as well as illustrations and expansions of the proceeding content. Without them the explanation would be virtually impossible, with them, easily understandable.

This book is well written by a professional trader. It is suitable for neophytes and offers the seasoned trader a view that he may have forgotten or perhaps never had...that of trading on the basis of observable, current market action, unfettered by biased predilection. Goslin's way is only one of many ways to skin the market cat. But, if is probably a valid way and the author has depicted it in compelling style."

 

[EMC2Trader]

Quote from fearless9:

But is'nt the much bigger picture derived from price movement.

How can you even have a picture big or small if you don't have price movement.

Perhaps I am going quietly mad from reading your thread.

regards
f9

Fearless,

Maybe this midday update clarifies things a bit more - tying in the bigger picture with your trading plan that is.

Here is the same chart as before with updated price action.

From big picture analysis, you should have seen the gap up was at major macro inflection point in the market, therefore it is no surprise when price cant get through this area, at least on the first attempt.

Then look where the retrace goes- to the next obvious pullback to swing point which was drawn on the charts ahead of time too.

Now where are we - In chop, or consolidation, at a key macro inflection point in the market.......Clearly a break of this consolidation will provide meaningful information to observe and follow.

Again, I have no idea if this very obvious to you or anyone, and I obviosuly have no idea how everyone looks to trade, or if this big picture information is even meaninful realtive to your trading timeframe, but I do think for many, the big picture viewed in this way can be very helpful with certain types of trading decisions relative to your tradfing plan.

 

[fearless9]

EMC2Trader

Are you selling or have an interest in selling any form of volume analysis.

regards
f9

 

[EMC2Trader]

Quote from fearless9:

EMC2Trader

Are you selling or have an interest in selling any form of volume analysis.

regards
f9

Fearless,

The volume analysis is all tied in with the trading method I use, but I am tring to share the basics here for those with other timeframes and approaches etc...(im not sure everyone here appreciates that but thats another story)

In other words, use your trading timeframe with volume share bar charts, and then plot a measure of up/down volume below.. I use Volume Ratio.

Then use an input for volume ratio that is a little longer term, because you are trying to get a bigger picture view of what volume is telling you...............As has been stated earlier the benefit of this is that it is after the fact...

I recieved so much heat that volume is such nonsense because it is after the fact, and price means everything, etc.....The funny thing is that this is precisly the use for volume- after the fact.....

Anyway, the key is too look for the extremes that form..These points represent the patient buyers and selllers I have mentioned so often.

When volume reaches these extremes...lets say up, that means the pateint buyer is either totally incontrol (uptrend), or has stepped in to stop the downtrend (balance enters the market)

So an extreme can repsresnt two condtions depending upon price action at the time.

Then once you know either who is in control, or if there is balance in the market, this can help you with making the PRICE entires (yes all i use is price for entries) in a higher probability way depending upon what is taking place in the market.

 

[EMC2Trader]

Quote from fearless9:

But is'nt the much bigger picture derived from price movement.
How can you even have a picture big or small if you don't have price movement.

Perhaps I am going quietly mad from reading your thread.

regards
f9

Fearless,

As we all know "price movement" is derived from human behavior, so the bigger picture, or small picture is human behavior=price movement, not the other way around as some would suggest.

We discussed that if a handbag was too high priced, it was the human behavior, or "lack of sales at that price," that brought price down....Volume viewed in the right way describes human behavior!

Volume viewed in the right way shows anxious and patient buyers and sellers, and shows how a given trend will continue as long as one side remains patient and the other side remains anxious at the same time.

We all know human behavior works the same in all markets- from futures markets, to housing markets, to car markets, to even the market of posting threads here on Elite.

This thread is a perfect exmaple.

I come on here very calm and patient explaining how I have an effective way to work with volume in my trading.. I start out as a "patient buyer" explaining the concept, what I look for, etc..

Then I am immediately "attacked" by the "anxious sellers" on the other side - Trueliquidity, BigHog, BatterUp, etc."

I remain very pateint explaining to them what I do and why it works, but they continue to attack, and they remain very anxious, so the patient buyer/anxious seller trend continues.

I remain patient, and in control of the trend of posts, and they continue to remain anxious and attack... This is just like a down move in the market - the patient buyers are in control, and the sellers remain anxious as price moves lower.

Finally, my patient responses make so much sense, that the anxious attackers, turn into patient attackers, and everything comes into balance, and they go away, and that trend is over.

Everything consoldidates and stays quiet for awhile, just like a market pausing after a long down move.

Then BillyBob 543 enters the picture.... He starts out very anxious attacking me in a slightly more subtle way, disrupts the balance, and the downtrend starts moving again.

I continue to remain pateint with my explanations to control the trend of discussion....He continues with his anxiety because he doesnt really know me at all, the livley discussion ensues.

I continue with patient replies, and this trend will only end when he turns from an anxious participant to a patient participant.

At the moment it seems like my patient responses have been so logical to him that he possibly has gone away, and turned into a just another patient participant in the sea of continuing people who will anxiously "attack" without having a logical patient discussion first, but we shall see.

If he, or the first group, or any new anxious participants step up to the plate, then the trend of a patient particpant on one side and an anxious participant on the other side continues.

As I read very early on-- a market, is a market, is a market, and in the end. it is always human behavior that starts the drive of price and trends, not the other way around. Then price movement leads to varying forms of human behavior repsonses, and the cycle continues over and over again.

 

[bighog]

Many years ago i was taught a lesson that holds true through time and will continue through time.

The lesson was quite simple: When someone has something of value for you .................it is EXTREMLY easy for them to explain what the value is.

Well, correct, when the person is trying to stroke you with his rubbish it is EXTREMLY difficult to conyey the message of value without constant over and over explanations that have zero substance. if the substance was there there would be no need to keep repeating it.

In life one must decide early if one is to be the "FUCKEE or the FUCKOR" As we grow and learn we can spot who is who in a heartbeat.

<a href="http://www.sweetim.com/s.asp?im=gen&ref=11" target="_blank"><img src="http://content.sweetim.com/sim/cpie/emoticons/00020073.gif" border=0 ></a>

 

[fseitun]

Hi

Thanks for taking time to discuss such an important variable of trading as volume.

I honestly don't care about the fact you are also trying to sell something.

You sound legit and real, I wish all vendors took the same amount of time to sell their products/theories/etc.

Anyways, I have one simple question related to volume. I am no volume expert - actually far from it - so my question may sound silly, please don't flame me.

I've always read about the old cliche of a market sustaining a healthy rally when new highs are made on high volume.

This cliche somehow totally differs from what you preach.

If we think in terms of patient buyers-sellers, a market making new highs on high volume could denote three things:

1) most of that volume is made of anxious buyers who frantically jump on the bulls bandwagon

2) most of that volume is made of patient sellers

3) patient sellers selling to anxious buyers

IMO, when we are trying to analyse extreme levels - new highs, new lows - volume can be an early clue that something is going on, yet the following price action is key to tell us the complete story.

This is why it's hard to trade at price extreme levels, simply because the amount of information we have access to is not enough to make a reliable high-probability trade.

On the other hand, wouldn't a market making new highs on low volume signal that patient sellers hold their limit sell orders above current highs, hence indicating a potential continuation of the upmove?

Thanks in advance for your reply.

 

[EMC2Trader]

Quote from bighog:

Many years ago i was taught a lesson that holds true through time and will continue through time.

The lesson was quite simple: When someone has something of value for you .................it is EXTREMLY easy for them to explain what the value is.

Well, correct, when the person is trying to stroke you with his rubbish it is EXTREMLY difficult to conyey the message of value without constant over and over explanations that have zero substance. if the substance was there there would be no need to keep repeating it.

In life one must decide early if one is to be the "FUCKEE or the FUCKOR" As we grow and learn we can spot who is who in a heartbeat.

<a href="http://www.sweetim.com/s.asp?im=gen&ref=11" target="_blank"><img src="http://content.sweetim.com/sim/cpie/emoticons/00020073.gif" border=0 ></a>

BigHog,

Here is where I respectfully disagree with you again. In this industry there is so much average and bad information out there- some of it may be well intentioned but it is still of little value in the end.. We both know that.. You have seen it, and I have seen it.

Therefore, it actually makes it very diffuicult, not extremely easy as you say, for someone to convey real value when it is there.

In the end, though this helps the person with real value, because with enough bad experiences out there, there is a reference to sense if something may be different or not....

 

[Billybob543]

Quote from EMC2Trader:

.....Then BillyBob 543 enters the picture.... He starts out very anxious attacking me in a slightly more subtle way, disrupts the balance, and the downtrend starts moving again.

I continue to remain pateint with my explanations to control the trend of discussion....He continues with his anxiety because he doesnt really know me at all, the livley discussion ensues.

I continue with patient replies, and this trend will only end when he turns from an anxious participant to a patient participant.

At the moment it seems like my patient responses have been so logical to him that he possibly has gone away, and turned into a just another patient participant in the sea of continuing people who will anxiously "attack" without having a logical patient discussion first, but we shall see.

If he, or the first group, or any new anxious participants step up to the plate, then the trend of a patient particpant on one side and an anxious participant on the other side continues.....

Have you taken your meds today?....Do they know that you escaped away to a computer at the hospital? :eek:

What was that diatribe about?

I simply asked you a simple question...Can you prove with account statements that you can actually reproduce the performance results touted on your website?...and at the end of my question, I added: "P.S. I think I already know what your response will be"....

Just like all the other self-proclaimed guru's and snake-oil salesman, you refuse to answer the question because you and I know that you can't really trade worth a shit.....

That's why you're pathetically trying to peddle your $495 system on Elitetrader...

Come on...shut me up...post your trades taken today in the Trader P/L thread...