Making of a method

[dbphoenix]

Been reading a lot of Market Profile lately. Was pleasantly surprised to find Steidlmayer reference Graham and Dodd's ideas as the basis for his MP synthesis.

Orienting oneself to look at trades as the buying and selling of inventory re-enforces a certain common sense to this entire process. While the VAP can be easily approximated by glancing at a chart and boxing in extremes, what I am really looking forward to is a deeper understanding of how the expectations of various 'time frames' influences the probability of price movement. A better understanding of the composite operator's character is likely to be helpful. It may help me with knowing when to sit tight.

Odd that he would reference Graham and Dodd since they have to do with investing based on the value of the company whereas Steidlmayer's approach is based on the value of the stock, or what traders judge the value of the stock to be.

I suspect there may have been more than a little Wyckoff in the mix, since Wyckoff focuses entirely on price behavior and how traders determine "value" by the trades they make.

 

[game]

I suspect there may have been more than a little Wyckoff in the mix, since Wyckoff focuses entirely on price behavior and how traders determine "value" by the trades they make.

Very likely. In his interview with Kevin Koy in 'The Big Hitters', he acknowledges that his ideas were not original, and that traders had been doing this for a while. He takes credit for bringing a lot more definition to this idea that Value is determined by Price over time.

Also, in the interview he comes across as genuine. I was quite impressed with his general take on life. Next to read on my list is 'Steidlmayer on Markets'. Perhaps he says something about the original price action traders in that book.

Odd that he would reference Graham and Dodd since they have to do with investing based on the value of the company whereas Steidlmayer's approach is based on the value of the stock, or what traders judge the value of the stock to be.

Steidlmayer's definition of value in an auction market was not just Price, but Price over time. So he was reconciling his value with Graham Dodd's value on a more abstract level - in that opportunities present themselves when price diverges from value. In an auction market value is price over time while in the longer term value is the discounted future cash flow.

 

[trip]

Next to read on my list is 'Steidlmayer on Markets'.

I haven't seen any mention of Dalton so I'll mention Dalton.

Mind Over Markets (in it's original format) and Markets In Profile are both worth reading. More so than Steidlmayer (in my very humble opinion).

This isn't an MP thread but the books could be said to be about AMT so maybe relevant. Sorry if it's too far off topic.

 

[game]

I haven't seen any mention of Dalton so I'll mention Dalton.

Mind Over Markets (in it's original format) and Markets In Profile are both worth reading. More so than Steidlmayer (in my very humble opinion).

This isn't an MP thread but the books could be said to be about AMT so maybe relevant. Sorry if it's too far off topic.

Yes the Amazon reviews for both books were very positive. Reading Markets in Profile right now.

Not off topic at all. A lot of the MP stuff that I have read thus far is something that we are already practicing under Db's guidance - this idea of first determining the state of the market (whether balancing or trending) and identifying low risk entries to take advantage of the change from one to the other.

What I am finding helpful is the way Dalton characterizes traders according to their time horizon. It is re-enforcing focusing on trader behavior and motivations. A good understanding of this dynamic would be very helpful in knowing when to take profits and when to let them run.

 

[MadeMan]

Yes the Amazon reviews for both books were very positive. Reading Markets in Profile right now.

Not off topic at all. A lot of the MP stuff that I have read thus far is something that we are already practicing under Db's guidance - this idea of first determining the state of the market (whether balancing or trending) and identifying low risk entries to take advantage of the change from one to the other.

What I am finding helpful is the way Dalton characterizes traders according to their time horizon. It is re-enforcing focusing on trader behavior and motivations. A good understanding of this dynamic would be very helpful in knowing when to take profits and when to let them run.

then read this...

Markets and Market Logic , by steidelmayer and kevin koy

nice read..

 

[game]

then read this...

Markets and Market Logic , by steidelmayer and kevin koy

nice read..

You are killing me with all this homework Mademan

 

[trip]

A lot of the MP stuff that I have read thus far is something that we are already practicing under Db's guidance - this idea of first determining the state of the market (whether balancing or trending) and identifying low risk entries to take advantage of the change from one to the other.

Yes, I think so too. Db also teaches something that's missing from the general MP approach though - the concept of a trend channel with a mean, the "non-horizontal means".

What I am finding helpful is the way Dalton characterizes traders according to their time horizon. It is re-enforcing focusing on trader behavior and motivations. A good understanding of this dynamic would be very helpful in knowing when to take profits and when to let them run.

True. I must thank you for mentioning MP here in your journal. I haven't looked at it for a few years now and at that time it was in a very different context for me. I got stuck flipping through the pages of "MOM" yesterday and I'm now starting a complete reread of both books. It makes perfect sense.

 

[game]

After reading most of Markets in Profile, I conclude that his main two points are:

1. Seek asymmetric opportunities
2. Price is not the same as Value (Price over Time)

Reading MP has deepened my appreciation for both Wyckoff and Db. There is a directness and simplicity to their work that reduces complexity to the essentials.

Case in point is this post from Db:

As I said earlier, pick your spot.

This is also a big chart. Note that the arrows "zoom in" to possible entry ops and the red dots on the last chart indicate potential shorts. If it isn't obvious, the charts are in sequence from the daily to the 60m to the 15m to the 5m to the 1m.

Before my editing window closes, I should point out that none of this has to do with multiple timeframes and multiple trends and countertrends within multiple timeframes and ups and downs and this ways and that ways. It's all the same trend, the same timeframe, the same entry, the same price movement. The only difference has to do with zooming in toward the trade entry. That can be made off the 1m, the 2m, the 7m, the 13m, the 47m, etc.



Now just got to wait and size up. Asymmetric enough for me

 

[game]

Prep

Downtrend on the Daily is intact, although price is now at the UL of the 60 Min TC. The strong Reversal off the lower limit on the 15th, followed by two smaller uptrending days suggests that the LOLR in the med term is balanced.

If these higher prices attract more selling, it will be met by the Value that has been accumulating over Thu/Fri. Thu's higher volume placed the POC zone lower, so any weakness may see price revert back to the 3512 to 3500 zone.

If the limited strength over the last two days breaks over Fri's High, it will face volume from late March at the 3555 level.

If the Opening is dull, 3521 has a better chance of being visited before 3542.

Overnight action thus far has been flat and dull.

http://www.sierrachart.com/image.php?l=1398080335591.png

 

[game]

FT Day 156 April 21st

http://www.sierrachart.com/image.php?l=1398094121288.png

Review:

1.Poor Adverse Mgmt on the 2nd short at the Open. Compounding of mistakes here. First late entry and then late exit. This is a high energy zone so I should have no reason to give the trade room here. There was no strong S/R level nearby to warrant time on this trade. Get out on stall at these zones. The opp cost of hoping in this zone is very high as well - evidenced by the missed long off the rejection at OL.

2.Best opp of the day was the short once there was rejection at the 42 level. I was thinking mean at 33/34 and it generated thoughts of balance. But these rejections often lead to price traveling through the mean and to the other side. Even if the mean stopped the trade, I had enough buffer zone from entry level to make this a low risk trade. The important marker here was the rejection off a prior high and not the mean below.

3. Awareness of the Value zone from last week gave me confidence to stay in the Reversal long. I anticipated price moving from this prior value level to today's level of 33. Good exit on slight parabolic move back to the mean.