Iterative Refinement

[Spydertrader]

Quote from dkm:

With the limitation of acting only on the close of each ES bar, the next action is long at the close of 10:00.

Those individuals who take action at the close of an ES bar have done so in an effort to take action whaen the market has 'locked in' its signal for continuation, or its signal for change. The point in time where the market 'locks in' its signal (referred to in previous posts as 'at some point') differs for each and every bar. For example, one might not know until seconds before the close of the 13:34 [close of] bar (All times Eastern) on the YM (6-13-2008) that the market has shown decreasing volume until almost the very end of the bar (perhaps, only seconds before the close of the bar). However, quite early in the 13:40 [close of] bar (All times Eastern) on the YM (6-13-2008), one has certainty with respect to increasing volume. Due to the 'moving target' nature of this 'at some point' where the market 'locks in' its signal, waiting until the close of the bar avoids making a decision before the market has provided certainty with respect to its signals of continuation or change.

In addition to Volume, Price also plays a role in when the market has 'locked in' its signal. Hence, the term Price-Volume Relationship.

As such, in this specific example, anyone who reached a decision based on information from a specific Price Bar which had not yet 'locked in' its signal did so prematurely. Note, however, the market does 'lock in' its signal, quite frequently, well in advance of the close of the Price Bar. It simply did not do so, in this specific case.

To put it more clearly, at (the actual time) of 9:55 AM Eastern Time, it most assuridly appeared as if the market was dropping (and doing so on a boatload if increasing red Volume). Within 60 seconds (at the close of the 9:56 AM eastern Time YM bar), one could no longer assume the validity of the previous observation. Something had changed (market sentiment) sending the close higher, off its low and back inside the previous bar.

At minimum this represents the market's attempt to signal, "Go find more information," and at best, it represents a signal for change - in the opposite direction.

HTH

- Spydertrader

 

[romanus]

Similar situations have been discussed here, and here.

 

[romanus]

It appears that #1 from the Top Ten list has been pointed out much earlier

 

[romanus]

This is like deja vu all over again.

 

[tobbe]

Quote from romanus:
It appears that #1 from the Top Ten list has been pointed out much earlier

The image from Spydertrader you quoted shows a down channel being 'steepened', not 'fanned'. The 'steep' up channel is then 'fanned'. Or with other words, 'slow-fast' followed by 'fast-slow'. Not an uncommon sequence, but also not really what your 'rule' states?

Just trying to follow your thoughts.

 

[romanus]

Quote from tobbe:

The image from Spydertrader you quoted shows a down channel being 'steepened', not 'fanned'. The 'steep' up channel is then 'fanned'.

Fanning inward - accelerating the channel, fanning outward (channel deceleration) is the mirror opposite action. Since fanned outward channel always contains steeper, 'fanned inward' channel, the order of the sequence can be interchangeable. While I have not figured it out yet, I suspect it has to do with 'seeing' the market in terms of 'rolling through' various points instead of starting and stopping on those points of change.

 

[romanus]

Quote from tobbe:

...not really what your 'rule' states?

I would not call it a rule, but based on Spydertrader's observations I would attempt to generalize it in a following fashion: When market transitions from one trend to another by means of decelleration
(fanning outward), the opposite trend will develop by means of decelleration as well (first forming accelerated channel, which will be fanned outward).
This is exactly what the picture shows.

 

[ticktrade]

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Quote from guavaman:

But I had to make a decision at 9:55. What did I do so very wrong there?
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my view at the open Friday:
CO=1-2 up move on a stronger blk gaus than last red gaus
9:35 bar, my forest had changed to up but pt3 dn still possible at some resolution, pt 2 of up channel in.
9:45 irv pt3 dn
9:50 drv and tape/dn chnl ve, get long, anticipate pt3 up
9:55 ibv pt3 up

monitoring the ym 9:56 bar I failed to see the close inside the prior bar and viewed it as irv. Since it was an outside bar I knew I needed more information so I used the 1 min es. If one chose to do this they would need to stay with that until confirmation of a siganal. IMHO
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quote dkm
ES 09:55 is HH incr blk vol but closes back inside previous bar = short.
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I must be missing something here. I saw it as IBV and pt3 up of CO so lateral would mean hold long. Please advise.

I took 3 screenshots from the replay of the time in question. Don't know how to post them all so will have to make 3 posts.
The YM bar in question here went through several signals of change in very short order. It only closed inside the previous bar in the last 3 seconds according to my replay. Not sure how accurate the replay is.

 

[ticktrade]

next pic.

 

[ticktrade]

and the last one.