Exact Science
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1992 was 18 years ago. At that time chips were considered planar; the layering limitations were more severe at that time. One of the chip equipment making corps was a Hughes outfit. They created a layering machine that could treat a chip as a potato chip like surface and, thus, many more layers could, more acccurately, be layered on. Check the names on the patents.
Elswhere, a discussion involving how a trader grows is the topic. See:
http://www.elitetrader.com/vb/showt...530&perpage=6&highlight=hershey&pagenumber=10
There a cycle 1 circumstance came up.
Whipsaw and antiwhipsaw.
In yet another thread there is a contention that some ama based indicators can create a perfect whipsaw signalling condition. That is true even when an adjustment is made for stretching and squeezing the indicator (power thories are often used).
In cycle 1, the binary vector ten cases of adjacent bars and laterals are used to head off getting inot whipsaw inadvertantly.
People get caught in whipsaw after making a decision to enter or reverse using poor timing or inappropriate timing.
Timing decisions are best made at the beginning of bars, all based upon volume.
Thus, Price Action (PA) trading precludes being able to make timely decisiions to stay out of whipsaw.
As seen in cycle 1, entering only happens on dominance. Whipsaw does not begin on dominance, fortunately.
Where whipsaw is encountered most often is on reversals. PA may not recognize a reversal unless it is a DOJI where sentiment changes.
The N node is the DOJI box on all the cycles. DOJI's in PA trading are just another bar type occurance.
In cycle 1 you can get to a DOJI in several ways BUT NOT WHEN A BAR IS A SECOND BAR OF AN INTERNAL.
Many internals have second bars that are DOJI's. A few are syms, FTP's, FBP's, Stitches and OB's. By recognizing that any internal is to be treated as ONE BAR, you immediately take a second bar DOJI off the table. The second bar has NO OPEN against which to form a DOJI except the prior open on the first bar. You will discover through observation that an internal two bar DOJI rarely comes up AND you will NOT be in a dominance (volume measured) situation in cycle 1 on any internal except one (the OB).
Look at the two bar internals and see how many times doing the above keeps you from commencing a reversal on a IBGS which then in the same bar returns to the former price movement direction.
Instead, during an internal second bar you may go to the sidelines if and when the volume signals a J or K circumstance. Thus, you return to A and "look for" a B or C.
The N node is part of cycle 1 and only gets used when a two bar internal is properly compressed and the open of the first bar becomes the DOJI reference.
By removing the possibility of being "upsidedown" on any pseudo sentiment change, you eliminate all the situations where trades breakout against your sentiment determined hold positions.
In PA trading the two major handicaps are a result of not having an N node, not entering based upon volume (late entries most of the time) and not perceiving the continue to hold on a second bar DOJI (this is known in PA trading a the "early" exit).
By holding through and not reversing on a second bar internal, you get to see the dominace return in the former price direction. This is an identity with trading ftt to ftt on the faster fractal relative to your trading fractal detemined by volume bars.
This is the first major step towards trading like driving a car.
Next i will post on the differentiation of retraces from reversals AT THE BEGINNING of either.
Not getting whipsawed and being able to differentiate between retrace nd reversal are two key ingredients for precluding any losses on the daily P&L. This, in turn engenders feelings of support, comfort and confidence as the alternative to fear, anxiety and anger.
http://www.elitetrader.com/vb/showt...530&perpage=6&highlight=hershey&pagenumber=10
There a cycle 1 circumstance came up.
Whipsaw and antiwhipsaw.
In yet another thread there is a contention that some ama based indicators can create a perfect whipsaw signalling condition. That is true even when an adjustment is made for stretching and squeezing the indicator (power thories are often used).
In cycle 1, the binary vector ten cases of adjacent bars and laterals are used to head off getting inot whipsaw inadvertantly.
People get caught in whipsaw after making a decision to enter or reverse using poor timing or inappropriate timing.
Timing decisions are best made at the beginning of bars, all based upon volume.
Thus, Price Action (PA) trading precludes being able to make timely decisiions to stay out of whipsaw.
As seen in cycle 1, entering only happens on dominance. Whipsaw does not begin on dominance, fortunately.
Where whipsaw is encountered most often is on reversals. PA may not recognize a reversal unless it is a DOJI where sentiment changes.
The N node is the DOJI box on all the cycles. DOJI's in PA trading are just another bar type occurance.
In cycle 1 you can get to a DOJI in several ways BUT NOT WHEN A BAR IS A SECOND BAR OF AN INTERNAL.
Many internals have second bars that are DOJI's. A few are syms, FTP's, FBP's, Stitches and OB's. By recognizing that any internal is to be treated as ONE BAR, you immediately take a second bar DOJI off the table. The second bar has NO OPEN against which to form a DOJI except the prior open on the first bar. You will discover through observation that an internal two bar DOJI rarely comes up AND you will NOT be in a dominance (volume measured) situation in cycle 1 on any internal except one (the OB).
Look at the two bar internals and see how many times doing the above keeps you from commencing a reversal on a IBGS which then in the same bar returns to the former price movement direction.
Instead, during an internal second bar you may go to the sidelines if and when the volume signals a J or K circumstance. Thus, you return to A and "look for" a B or C.
The N node is part of cycle 1 and only gets used when a two bar internal is properly compressed and the open of the first bar becomes the DOJI reference.
By removing the possibility of being "upsidedown" on any pseudo sentiment change, you eliminate all the situations where trades breakout against your sentiment determined hold positions.
In PA trading the two major handicaps are a result of not having an N node, not entering based upon volume (late entries most of the time) and not perceiving the continue to hold on a second bar DOJI (this is known in PA trading a the "early" exit).
By holding through and not reversing on a second bar internal, you get to see the dominace return in the former price direction. This is an identity with trading ftt to ftt on the faster fractal relative to your trading fractal detemined by volume bars.
This is the first major step towards trading like driving a car.
Next i will post on the differentiation of retraces from reversals AT THE BEGINNING of either.
Not getting whipsawed and being able to differentiate between retrace nd reversal are two key ingredients for precluding any losses on the daily P&L. This, in turn engenders feelings of support, comfort and confidence as the alternative to fear, anxiety and anger.
Retraces and Reversals
Above we "cured" whipsaws. this was the "freakout" trading problem that does most beginners in.
Seeing a DOJI as part of a prior bar was the clue. Not being able to use the N node was the solution.
Retraces and reversals can be differentiated right at their beginning moments. PA trading does not have this capability, unfortunately.
holding in cycle 1 always comes to an end at the end of dominance. There are no cycle 1 trades in retrace or reversals EXCEPT when the volume is greater than the trough and you are @ node S.
All retraces and reversals begin at the beginng of the bar after the end of a dominant movement and profit taking. Both begin right after you have just taken profits by hitting node J OR by hitting node N on a DOJI while coming from S node.
Plain and simple, you always know that you know when a retrace or a reversal begins. In both cases, you just took a profit.
This is a place of great comfort, support and confidence AND perfect CERTAINTY.
We are coooking with DYn-O-MITE.
J takes you to wait @ A on cycle 1.
Reversing on a DOJI can only be done coming from an S!!!!!!!! You HAVE TO HAVE THE MOMENTUM OF VOLUME AS INDICATED BUY BEING ABOVE THE TROUGH THAT BEGAN THE FORMER DOMINANT HOLD. You pass out of N to Z and go through P to get to another bar.
Volume keeps you making money after the change of sentiment.
At this skill level either you are going to take the retrace (non dom) profits or you are in a reversal that becomes dominant on the next bar.
Worst case, the DOJI is a DOJI @ bar end and you go back into the prior dom with no color (sentiment) change.
Remember in high school you could make it to school every day. You learned to navigate anything that came along by going from node to node using the links.
For me it was either a '34 Chevy coupe with a rumble seat and cut out or an older Pachard straight eight convertible (with rumble seat) no cut out. Complete school bus avoidance.
Is it too hard to learn to navigate cycle 1. Yes, for most people it is.
In annotating fractals and using cycle 1, you are home free on all trades. You are using the P, V relationship and the patterns.
All moves from point 2 are retraces going right to point 3. Volume is non dome after the N node DOJI sentiment reversal. this lets you carve the turn. Cycle 6 polishes it by using YM as a leading indicator of ES. cycle 7 lets you SEE the switch in the sentiment as you SEE the sum of the ladder go nondominant. Cyle 8 lets you see the DOM wall price where this occurs. cycle 9 shows you 30 seconds or more ahead how the smart money "works" off the PREM. On cycle 10 you get to see the OTR bars change color on both the YM and ES OTR charts.
All moves from the ftt to BO of the RTL and to point 2 are reversals. Here you know you know right @ the DOJI that you have an FTT. Cyxles6 through 10 are as above AND you hit the RTL and the dominance chances from nondominance WITHOUT A COLOR CHANGE. NO WALL IMPEDES AT THIS LATER TIME. VOLUME SCREAMS IN AND THE OVERLAP OF TRENDS ENDS.
You are no longer an advanced beginner. you can drive the car and you have cycle 1 nodes down cold.
You turn 5K into 15K and you get to go to cycle 2 and trade with 10 contracts. 3 points increases your P%L by one contract margin and you DO NOY increase by one contract. You sit at 10 contracts and spend 12 days accumulating ppoints so you can go to cycle 3 and have 47K left over to sweep into your PVT account.
In Tucson, we built the "board" to show cycles 1, 2 and 3. What do you know? An artist saw it and she is going to replace all the vinyl lines with painted lines. everyone has lasers and we can point to either the board or the 52 inch screen to coordinate the trading calls while we log.
So annotating and using cycle 1 gets antiwhipsaw set up and differentiating retraces from reversals is in the bag.
We trade dominant trending and robust non doms. Abou 12 trades a day and several are more than 2 points. We are exceeding the P&L by a great deal.
The 12 days in cycle 1 are for gaining "facility". Facility is like driving to high school. Take out the rumble seat floorboards and use the cut out to create total flames under the rumble seat when you turn the ignition back on going into the student parking lot. LOL.... Anyone want a ride home?????
Above we "cured" whipsaws. this was the "freakout" trading problem that does most beginners in.
Seeing a DOJI as part of a prior bar was the clue. Not being able to use the N node was the solution.
Retraces and reversals can be differentiated right at their beginning moments. PA trading does not have this capability, unfortunately.
holding in cycle 1 always comes to an end at the end of dominance. There are no cycle 1 trades in retrace or reversals EXCEPT when the volume is greater than the trough and you are @ node S.
All retraces and reversals begin at the beginng of the bar after the end of a dominant movement and profit taking. Both begin right after you have just taken profits by hitting node J OR by hitting node N on a DOJI while coming from S node.
Plain and simple, you always know that you know when a retrace or a reversal begins. In both cases, you just took a profit.
This is a place of great comfort, support and confidence AND perfect CERTAINTY.
We are coooking with DYn-O-MITE.
J takes you to wait @ A on cycle 1.
Reversing on a DOJI can only be done coming from an S!!!!!!!! You HAVE TO HAVE THE MOMENTUM OF VOLUME AS INDICATED BUY BEING ABOVE THE TROUGH THAT BEGAN THE FORMER DOMINANT HOLD. You pass out of N to Z and go through P to get to another bar.
Volume keeps you making money after the change of sentiment.
At this skill level either you are going to take the retrace (non dom) profits or you are in a reversal that becomes dominant on the next bar.
Worst case, the DOJI is a DOJI @ bar end and you go back into the prior dom with no color (sentiment) change.
Remember in high school you could make it to school every day. You learned to navigate anything that came along by going from node to node using the links.
For me it was either a '34 Chevy coupe with a rumble seat and cut out or an older Pachard straight eight convertible (with rumble seat) no cut out. Complete school bus avoidance.
Is it too hard to learn to navigate cycle 1. Yes, for most people it is.
In annotating fractals and using cycle 1, you are home free on all trades. You are using the P, V relationship and the patterns.
All moves from point 2 are retraces going right to point 3. Volume is non dome after the N node DOJI sentiment reversal. this lets you carve the turn. Cycle 6 polishes it by using YM as a leading indicator of ES. cycle 7 lets you SEE the switch in the sentiment as you SEE the sum of the ladder go nondominant. Cyle 8 lets you see the DOM wall price where this occurs. cycle 9 shows you 30 seconds or more ahead how the smart money "works" off the PREM. On cycle 10 you get to see the OTR bars change color on both the YM and ES OTR charts.
All moves from the ftt to BO of the RTL and to point 2 are reversals. Here you know you know right @ the DOJI that you have an FTT. Cyxles6 through 10 are as above AND you hit the RTL and the dominance chances from nondominance WITHOUT A COLOR CHANGE. NO WALL IMPEDES AT THIS LATER TIME. VOLUME SCREAMS IN AND THE OVERLAP OF TRENDS ENDS.
You are no longer an advanced beginner. you can drive the car and you have cycle 1 nodes down cold.
You turn 5K into 15K and you get to go to cycle 2 and trade with 10 contracts. 3 points increases your P%L by one contract margin and you DO NOY increase by one contract. You sit at 10 contracts and spend 12 days accumulating ppoints so you can go to cycle 3 and have 47K left over to sweep into your PVT account.
In Tucson, we built the "board" to show cycles 1, 2 and 3. What do you know? An artist saw it and she is going to replace all the vinyl lines with painted lines. everyone has lasers and we can point to either the board or the 52 inch screen to coordinate the trading calls while we log.
So annotating and using cycle 1 gets antiwhipsaw set up and differentiating retraces from reversals is in the bag.
We trade dominant trending and robust non doms. Abou 12 trades a day and several are more than 2 points. We are exceeding the P&L by a great deal.
The 12 days in cycle 1 are for gaining "facility". Facility is like driving to high school. Take out the rumble seat floorboards and use the cut out to create total flames under the rumble seat when you turn the ignition back on going into the student parking lot. LOL.... Anyone want a ride home?????
Between posts, as you say, is my most brilliant period.
It will take you a little while to figure out the answer.
Without controlled experiments you can't get even close to an exact science. What you have is informed but tentative judgement, nothing more. Hence the general uselessness of much social science, and its poor prediction record. Even in hard sciences, many areas are not amenable to prediction.
Also, thanks to induction and some principles of physics, even hard sciences can never be exact.
IMO this quest for absolute empirical knowledge is unsound. We should admit that we are at the mercy of uncertain sense data, and simply accept that "science" is just a more robust and testable - but not certain or infallible - pragmatic method for trying to forecast reality, which has a good track record compared to the alternatives.
The guiding principle of scientific knowledge is "as long as it works, keep using it; once it stops working, modify or replace it". That's a good principle and it is the very opposite of "exact" knowledge. It's better to think like a repairman than a perfectionist.
Also, thanks to induction and some principles of physics, even hard sciences can never be exact.
IMO this quest for absolute empirical knowledge is unsound. We should admit that we are at the mercy of uncertain sense data, and simply accept that "science" is just a more robust and testable - but not certain or infallible - pragmatic method for trying to forecast reality, which has a good track record compared to the alternatives.
The guiding principle of scientific knowledge is "as long as it works, keep using it; once it stops working, modify or replace it". That's a good principle and it is the very opposite of "exact" knowledge. It's better to think like a repairman than a perfectionist.
Personally, I believe your succinct and purposeful statement is where the expertise of the mainstream Conventional Wisdom resides.
I didn't take that path after being trained in Engineering and Theoretical Physics.
We both have strong reasons for following different paths.
At first I sat there bemoaning that I could not use continuous functions to deal with markets. I started from total ignorance.
I chose to not take an empirical route either since it was not necessary.
It was like being between a rock and a soft place. Continuous functions was the hard place and the soft place was "going empirical".
You chose the empirical route and found statisitics to be the "science" of empricicism.
For whatver reason, I liked organic chemistry since before having a year of it in high school. The tempering of decayed past living things with heat seemed so cool to me.
Money first appeared in my life as I began to work at IBM dealing with bytes and bits. I put 300 bucks in an account and added 50% of my salary.
I had no sense of anything related to prediction; not why I would do prediction for anything.
My quest turned out to be to find the pieces and put them together. It was just serendipity.
It was as if Sister Montessori had dropped in to explain everything is made of ticks.
The markets are binary where granularity hangs out.
My experience in thinking critically, fairly quickly, took me a no noice no anomally status for a system. granularity was crude then but nothing has changed since the inventions of new markets and new market participation rules.
Basically, most people believe in noise and in anomalies. I think that they let these things determine what pragmatic mathematics to apply to markets.
Conclusion.
My conclusion was to follow the dictates of finding the pieces; laying an exact foundation; and building the system by putting the pieces together.
It is a "one pager". When we sent the two probes out of the solar system, we put plaques on them. "One pagers" so to speak. Sagan made each one up.
The result is, my mind is fully differentiated and I trade as if I'm driving a car.
I have seen fifth graders go through two one hour sessions a week apart and then just take their WSJ subscriptions and trade their hearts out. Their parents could not believe it. 7 -10 pieces and four gerunds.