Making of a method

[llIHeroic]

Quote from game:

If my understanding is correct, you take positions in anticipation of the turn. So you are not trading the immediate momentum. And you are relying on various markers to signal Reversal. Volume seems to be quite important in your framework, being the independent variable that dictates price movement.

But even if volume influences price, does not price also dictate volume. What about low volume breaks/continuation moves that eventually become high volume cascades as traders rush in to join the move or capitulate out of it?

I'll do my best to explain my perception of your questions. Your understanding is correct, that anticipation is applied and volume is the independent variable.

In regards to price dictating volume, let me quote a very successful trader I know. Imagine working in a grocery store where all transactions are bartered. If a customer walks in and offers $10,000 for a single turkey, volume will not be significantly impacted. If he walks in and bids to buy 10,000 turkeys, price will always be significantly affected.

If you have specific examples, we can delve deeper into this. It is difficult to answer your other questions. Imagine a long sentiment channel. After the all-time high, price could recede to the right trend line on low volume, then break through it on increasing volume. We would have been short since the low volume non-dominant move directly off the high.

If instead continuation happened after the non-dominant move, and increased volume occurred with price improvement, we would have reversed again immediately to remain on the right side of the market. The market will likely be signaling to us which outcome is forming before it actually happens, so we will already be anticipating the correct response to it.

Part of the key here is keeping track of which direction the sentiment is, whether it is non-dominant or dominant, and which type of trend is occurring. We classify trends into four types, so for instance, in a Type D trend, we know we will never have a non-dominant move turn into a dominant move. Type D trends only end with dominant to dominant price turns.

Edit: Added more detail

 

[game]

Quote from llIHeroic:

I'll do my best to explain my perception of your questions. Your understanding is correct, that anticipation is applied and volume is the independent variable.

In regards to price dictating volume, let me quote a very successful trader I know. Imagine working in a grocery store where all transactions are bartered. If a customer walks in and offers $10,000 for a single turkey, volume will not be significantly impacted. If he walks in and bids to buy 10,000 turkeys, price will always be significantly affected.

If you have specific examples, we can delve deeper into this. It is difficult to answer your other questions. Imagine a long sentiment channel. After the all-time high, price could recede to the right trend line on low volume, then break through it on increasing volume. We would have been short since the low volume non-dominant move directly off the high.

If instead continuation happened after the non-dominant move, and increased volume occurred with price improvement, we would have reversed again immediately to remain on the right side of the market. The market will likely be signaling to us which outcome is forming before it actually happens, so we will already be anticipating the correct response to it.

Part of the key here is keeping track of which direction the sentiment is, whether it is non-dominant or dominant, and which type of trend is occurring. We classify trends into four types, so for instance, in a Type D trend, we know we will never have a non-dominant move turn into a dominant move. Type D trends only end with dominant to dominant price turns.

Edit: Added more detail

Thanks for the offer to explain this. Using today's NQ as an example: Price made a high at 1024 and then fell all the way to OL. Could you use this sequence to explain what you mean by dominant and non dominant sentiment? Also, what is the principle behind the classification of trends? What is the basis for classifying a trend a particular way?

 

[llIHeroic]

Quote from game:

Thanks for the offer to explain this. Using today's NQ as an example: Price made a high at 1024 and then fell all the way to OL. Could you use this sequence to explain what you mean by dominant and non dominant sentiment? Also, what is the principle behind the classification of trends? What is the basis for classifying a trend a particular way?

The basis is the progression of price turns that have occurred so far. The principal is to know exactly how and when they end.

At 10:25 a dominant up to dominant down turn occurred [Dom to Dom turns are called 'c turns']. The up-trend that started at 9:45 just ended, and a down-trend began. At 10:50 we had a dominant to non-dominant turn up, and then at 11:00 a non-dominant to dominant turn down. These can be anticipated, but are always locked in at the end of each 5m Bar which was at the times I listed.

One can choose to hold the dominant direction at all times, or trade each turn of the sub-fractal that composes these trends. At 11:05 the down-trend that began at 10:25 ended with another 'c turn'.

 

[game]

Quote from llIHeroic:

The basis is the progression of price turns that have occurred so far. The principal is to know exactly how and when they end.

At 10:25 a dominant up to dominant down turn occurred [Dom to Dom turns are called 'c turns']. The up-trend that started at 9:45 just ended, and a down-trend began. At 10:50 we had a dominant to non-dominant turn up, and then at 11:00 a non-dominant to dominant turn down. These can be anticipated, but are always locked in at the end of each 5m Bar which was at the times I listed.

One can choose to hold the dominant direction at all times, or trade each turn of the sub-fractal that composes these trends. At 11:05 the down-trend that began at 10:25 ended with another 'c turn'.

How does one know that the turn at 11:05 is going to be a C turn? If I am trading only dominant to dominant, how would I know that the turn is not going to be non dominant?

Earlier you said that my read on this morning's session matched yours. However, I am using the vocabulary of S/R, Demand/Supply imbalance, etc. Did our agreement arise from a common perspective, even though the vocabulary being used is different? Or are you saying that what you are doing now is of an entirely different order?

 

[llIHeroic]

Quote from game:

How does one know that the turn at 11:05 is going to be a C turn? If I am trading only dominant to dominant, how would I know that the turn is not going to be non dominant?

Earlier you said that my read on this morning's session matched yours. However, I am using the vocabulary of S/R, Demand/Supply imbalance, etc. Did our agreement arise from a common perspective, even though the vocabulary being used is different? Or are you saying that what you are doing now is of an entirely different order?

A c turn is arrived at by a deductive process. Trend Types A and B were already impossible at that point, and the trend failed to become a Trend Type D. If you're able to differentiate price and volume to a high enough degree, there are certain pairs of sub-fractal trend endings that always result in a 'c turn' on the trading fractal.

I am not sure if our agreement arose from a common perspective, because I don't know exactly what went on in your head when you weighed the pros and cons of the situation. There are multiple ways to understand exactly what the market is doing at all times, after all.

Regardless, your assessment of the situation, and deciding to hold a long in a seemingly uncertain position, was parallel to what I observed occurring in the market. I merely wanted to validate your perspective with my own understanding.

As you continue to build your system, I hope you will be able to store situations like these in order to know what is happening at all times. I thought maybe it would help both of us to unpack this a little, since it was spot on in my opinion, where-as whatever conclusions you made during [1-15] might benefit from being re-examined or discarded.

 

[game]

It's fascinating how you bet on devoting so much of your time and energy to an approach that is not easily understood here on ET.

From your earlier contributions on the Bride thread, I know you seek to understand. I am sure you read a lot before deciding to go for this approach. You state that it is possible to understand the complete Market System of Operation. Could I ask what were the markers that led to you betting on this philosophy?

 

[Smart Money]

Quote from game:

If my understanding is correct, you take positions in anticipation of the turn. So you are not trading the immediate momentum. And you are relying on various markers to signal Reversal. Volume seems to be quite important in your framework, being the independent variable that dictates price movement.

But even if volume influences price, does not price also dictate volume. What about low volume breaks/continuation moves that eventually become high volume cascades as traders rush in to join the move or capitulate out of it?

Can I jump in here and give my perspective of volume?

Imagine comicbook conventions. At the convention, there are plenty of copies of a certain issue of Spiderman Issue #100. Say that the dealers kept lowering the price of them to sell them. As the price kept getting lower and lower, more and more people would buy them. They disagree with the price being low, and therefore consider the low price a bargain and so more and more collectors buy it. Eventually, if the price keeps dropping, even the people who aren't looking for that issue would say, "Oh heck, that's so cheap I gotta get one of those". So people rush in to buy it. Sales volume spikes. People DISAGREE on the price of the book. The sellers think that the low price is a decent price for them to sell, but the buyers think it's a bargain, so a huge number of copies are sold. The key is, the volume spikes when there is disagreement between buyers and sellers on the downside.

Now the price of the comics start rising. The prices go up and up. At first, nobody is buying them because everyone who wanted one just bought one, but eventually, as the price keeps rising, some people start trying to buy more BECAUSE THE PRICE IS RISING. They are jumping on the train. So...to review, the sales volume spiked when the price hit bottom, then went low as the price started to climb...but eventually started to rise somewhat as more people piled into that comicbook. After the speculators bought theirs, the volume of sales drops back again.

After a while, as the price continues to rise, and nobody sells, the dealers start offering more and more money for them. Eventually, the offers get so high, that some of the speculators and owners start selling. The volumes of sales start to climb because the sellers DISAGREE with the outlandish offers the buyers are willing to pay. As price continues to climb, more and more sellers say, "The heck with this, that's good money..I'm cashing out". Eventually, as the price rises high enough, all of the buyers DISAGREE with the sellers buying price, and they offer up their books for sale. Eventually, its a stampede to sell at the high prices, and volume spikes.

Then with no more books shaking out of the woodwork, the price starts dropping, which also quashes demand. Who wants to buy something today that they can buy cheaper tomorrow? Sales volume begins to drop as the price begins to drop.

So here's the moral of the story. With the exception of the small puff of volume that occurs when prices first start rising...in general...the volume is a gauge of DISAGREEMENT. Spiking volume signals a price turn-around, to the upside and downside. Decreasing volume indicates that the crowd agrees with the direction of price. So if the volume is dropping as the price of a stock is rising, it means people generally are in agreement that the price should rise. But eventually, as the price continues to go up, the volume will start to climb as some begin to disagree with the ever climbing price.

SM

 

[llIHeroic]

Quote from game:

It's fascinating how you bet on devoting so much of your time and energy to an approach that is not easily understood here on ET.

From your earlier contributions on the Bride thread, I know you seek to understand. I am sure you read a lot before deciding to go for this approach. You state that it is possible to understand the complete Market System of Operation. Could I ask what were the markers that led to you betting on this philosophy?

Hmm, I will try to stick to your specific question without too much digression. However, I don't really think of it as a bet, seeing as it would not be a negative experience for me personally to devote a large amount of time and energy to something that turned out not to be do-able. There was no foreseeable downside for me to pursue this course, and limitless upside. This is why I decided to become a Catholic as well. Call me an optimizer.

However, putting that aside, it was a combination of personal observation, logic, desire for continuing to advance my knowledge, along the personal experiences and character of various others involved in learning and teaching this process over the years that prompted me to act. Both the journey and the fruits of such have been well worth my efforts. The only unfortunate aspect of the situation is that disbelievers will continue to disbelieve.

---

Also, Smart Money, thank you for taking the time to weigh in to our discussion and freely impart your perceptions to us. We may not agree regarding the variable nature of volume, but I am grateful that we are able to dialogue the matter. In my opinion, your conclusion makes deductive sense only in a simple, closed system.

I will admit that I don't fully understand the theory behind the concept in regards to an open, fractal market, but I have consistently experienced that increasing volume signals a continuance of price in a given direction. That momentum must recede before price makes a significant movement in another direction. Thus, I am of the opinion that decreasing volume is an indicator of potential change.

 

[game]

Quote from Smart Money:



So here's the moral of the story. With the exception of the small puff of volume that occurs when prices first start rising...in general...the volume is a gauge of DISAGREEMENT. Spiking volume signals a price turn-around, to the upside and downside. Decreasing volume indicates that the crowd agrees with the direction of price. So if the volume is dropping as the price of a stock is rising, it means people generally are in agreement that the price should rise. But eventually, as the price continues to go up, the volume will start to climb as some begin to disagree with the ever climbing price.

SM

Thanks for the perspective SM.

 

[game]

Quote from llIHeroic:

Thanks for taking the time to answer all these questions today. I appreciate your openness. Looking forward to unpacking together