Iterative Refinement

[Spydertrader]

Quote from gucci:

1)Three ways exist for Price to move from Point Two to Point Three.

The above quote refers to the 'sequences' of price and Volume and how Price can move between these two points. Three ways exist (three 'pathways' if you will) for Price to accomplish this goal.

Quote from gucci:

2)OK, so right here you either override the market signal and hold from Point Two to Point Three, or the trader reverses.

One bar later on the ES, we see increasing black. Anybody holding short through increasing black isn't thinking clearly.

The market provides signals for continuation or change on each and every bar. Between points Two and Three, a trader may choose to override these change signals (ignore them), and instead, choose to hold throughout the sequences which develop.

In the specific example from today, should a trader have chosen to hold through points two and three, the increasing black volume bar indicated that the sequence of events required for Price to move between Points Two and Three, was not going to materialize as previously expected.

Hence, anyone holding 'short' through increasing black Volume wasn't 'thinking clearly' - meaning the market had signaled for the trader to 'get back on the right side of the market' by eliminating any possibility of a Point Two to Point Three sequence.

Quote from gucci:

What are the three existing ways for the price to travel from point two to point three?

I suspect the answer to this question can be found in the charts.

- Spydertrader

 

[cnms2]

Per Spydertrader: "'Chubby' Tape = Minimum of Three Price Bars with Point One and Point Two on the same Price Bar with Point Three located minimum two Price Bars into the future."

I think that this bar sequence satisfies the above definition, so there was a pt3 already.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1928782>

Quote from ivob:

Sure, but change doesn't have to be change for me if I decide to hold for point 3 if I expect one. The discussion was not if we had change or not.

Ivo

 

[ivob]

Sure. You signalled change.

Still the question remains: Since we had a breakout on increasing red volume (regardless of the chubby tape before that) can a point 3 down be expect? (either a steeper one or a fanned out chubby tape = channel)

I saw the chubby tape and I saw the VE, I saw the decreasing volatility and I saw the change. I just decided to hold short. That was okay, but not okay after increasing black.

Ivo

Quote from cnms2:

Per Spydertrader: "'Chubby' Tape = Minimum of Three Price Bars with Point One and Point Two on the same Price Bar with Point Three located minimum two Price Bars into the future."

I think that this bar sequence satisfies the above definition, so there was a pt3 already.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1928782>

 

[gucci]

Quote from Spydertrader:

________________________
should a trader have chosen to hold through points two and three, the increasing black volume bar indicated that the sequence of events required for Price to move between Points Two and Three, was not going to materialize as previously expected.
____________________________
get back on the right side of the market' by eliminating any possibility of a Point Two to Point Three sequence.

- Spydertrader [/B]

:
Thank you for your response, but I'm still puzzled.. What are then the three ways for the price to get to the point three??? Or to be more precise: how does the third way look like???
I must be dumb

 

[cnms2]

I don't trade the 1 minute resolution ... The chart I've posted was meant to help in understanding that the 5 minute resolution is just a conventional way of looking at the market. It is convenient, but we have to understand its limitations.

Some signals may be approximated with the end of the bars, others may not without giving up points. If you use a coarser resolution your profit expectations need to be scaled down.

You have to try to see all the change signals. then you can trade whatever you decide. Any sign of price beginnin to struggle to advance further is a signal of change, but you may decide to wait for a stronger signal before taking action.

Even if the volume of the bar in discussion were a little lower, it should've still be seen as sign of change, just weaker.

Quote from ivob:

Sure but we trade the 5 minute fractal.

While expecting a point 3 down it is completely acceptable for the chubby tape to be broken right before the point 3 is formed. Can you imagine if I would try to trade every chubby tape break...

However, increasing black is not acceptable of course.

regards,
Ivo

 

[Spydertrader]

Quote from gucci:

:
Thank you for your response, but I'm still puzzled.. What are then the three ways for the price to get to the point three???
I must be dumb

Again, I suspect one can locate the answer to this question by performing a thorough review of some Price charts. If you review my posting history, you'll find that I often have a very good reason for how I choose to provide answers to questions. Perhaps, the process of learning the sequences of Price and Volume provides more benefits than one might expect.

- Spydertrader

 

[cnms2]

Spydertrader

05-19-08 08:51 AM



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Quote from R/R:

thanks, but I thought that part was clear.
The three scenarios are 1) RTL BO, 2) Formation BO, and 3) a Spike bar.
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Great. You have this part clear.

EDIT: Sorry, maybe I shouldn't have posted this. I've reviewed the last few posts after I posted the above quote.

 

[gucci]

________

Quote from Spydertrader:

learning the sequences of Price and Volume provides more benefits than one might expect.

- Spydertrader [/B]

_________________________________
You must be right but somehow i have a kind of mental block hier. The only two ways for the price to get to the point three in a down trend I'm capable to dissect are:

1) P up and V down
2) P lateral and V down

The only one remaining (provided the rigoros restriction on the V being down) alternative SEEMS to me to be logically inconsistent:

3) P down V down => expect change of the price trend => expect P to move either lateral or up => do not anticipate point three since only one way exists for the price to go from point 3 into the channel and that means increasing volume AND P down in our case...

What is the third way????

If we add (in the first two cases)the permutation with constant volume we will get four possibilities but not three???
_

 

[Padawan]

Quote from gucci:

________

_________________________________
You must be right but somehow i have a kind of mental block hier. The only two ways for the price to get to the point three in a down trend I'm capable to dissect are:

1) P up and V down
2) P lateral and V down

The only one remaining (provided the rigoros restriction on the V being down) alternative SEEMS to me to be logically inconsistent:

3) P down V down => expect change of the price trend => expect P to move either lateral or up => do not anticipate point three since only one way exists for the price to go from point 3 into the channel and that means increasing volume AND P down in our case...

What is the third way????

If we add (in the first two cases)the permutation with constant volume we will get four possibilities but not three???
_

Third way = P+, V+

That's just what I thought, at least (so beware ). Although I recognized change at 1540 (close of), I was still considering the possibility of a pt3 down until the 1555 bar, which wasn't correct.

 

[gucci]

Quote from Padawan:

Third way = P+, V+

That's just what I thought, at least (so beware ). Although I recognized change at 1540 (close of), I was still considering the possibility of a pt3 down until the 1555 bar, which wasn't correct.

__________________________________

Thanks Padawan, but this possibility isn't a possibility per se due to " Anybody holding short through increasing black isn't thinking clearly." That would mean, that if one is finding oneself holding through the point 2 to 3 sequence accompanyed by increasing volume and rising price then one is exposing oneself to a situation where one has to be nervous ??? It just doesn't fit to the following assertion by MAK"If you are nervous, you do not know what is going on."
http://www.elitetrader.com/vb/showt...ight=if+you+are+nervous#post1359838:confused:
I'm lost