One of the Best Trading Tips I ever Got

[bone]

What does it do? Does it indicate which spreads to watch for possible entry?

It’s a proprietary technical indicator coded for use with the eSignal or CQG charting platforms. A few clients have adapted it for the Bloomberg Professional Terminal. As I mentioned previously - the indicator has to agree with four other rules-based conditions in order to take a buy or sell entry.

Clients will track hundreds - even thousands of various spread combinations across every electronic exchange.

 

[S-Trader]

I can appreciate your point and agree, though that is not how the other poster, I referred to, laid it out.

Gotcha. And btw, in re-reading my post, I realize that my tone was unintentionally poor -- it definitely wasn't meant that way. My apologies!

I've actually heard a number of traders suggest something along the lines of "trends tend to persist," or "once something's in a trend, you should assume the trend will continue until proven otherwise." Maybe that's not really meant as a statistical fact... but rather a practical assumption and useful guideline when trading -- i.e., "you're better off not considering going countertrend unless and until the prevailing trend has clearly been broken... as evidenced by a failure to establish HHs/HLs (for an uptrend)."

Just as I continue to suspect that a lot of the debates here in ET stem from semantics... I also feel that another source of contention arises between more "discretionary" traders vs. more "algorithmic" traders. The majority of discretionary approaches, tools, patterns, indicators, etc. -- even TA itself -- cannot be "proven" to work from a rigorous, statistical standpoint, imo. Most that I'm aware of cannot be applied successfully in a vacuum... and so there's simply too many other variables and too much underlying context to perform that type of proof.

I'm not even sure that a simple, widely used concept like "support & resistance" can be properly modeled -- much less, "strong" or "weak" S/R. Sure, you can use something like pivots, find various ways to approximate S/R, define certain cases mathematically, etc. -- but any resultant code would likely be very constrained and inflexible vs. what our eyes can see. Probably can't be "proven" to "work" -- but a lot of traders seem to find value in using it as one "tool" of many.

 

[GRULSTMRNN]

The last thing you need to do or should do is apologize for your tone if logic and facts are on your side. I for one, have a very thick skin regarding tone as long as someone argues logically and coherently. And you did, so zero apology needed. I appreciate people like you who argue with reason and make points. We can all get things wrong at times and that requires an apology (which you rarely see on this site) and that is something that often rubs me the wrong way.

Re trend, I believe there are time where making assumptions about trend continuation makes sense. But it has to be fact based and statistically sound. Most people who argue for or against trend continuations argue out of their emotions without any facts on their side. Trading is all about probabilities. It's a 100% probability based game. Same as with poker. And one has to be precise with definitions. What's a trend? There can be a long term trend but it is often irrelevant when in the time frame one trades in there are stronger mean reverting properties exhibited than trending ones. So one has to be precise in the definition of trend and the time frame that definition is stated in. Statistically most of the times trending properties vanish the shorter the time frame gets. Intraday historically asset prices trend much less than they mean revert. The main reason is the large amount of noise and also there are fundamental reasons for that. Execution traders for large funds often accumulate or offload over many days/weeks to minimize market impact. They don't keep on buying or selling throughout entire trading sessions. It does happen but rather rarely. Then you have algorithms that over 90% of the times are market making type of algorithms and hence by nature attempt to capture ranges (90% relative to total executed notional by algorithms, I read that somewhere in a quite credible journal).

My entire point was that trading based on "trends" sounds very wishy washy when some retail punter neither defines what he exactly means with trend, nor clearly outlines the time frame he is trading in, nor having any statistical tests and results to back up his claims. I clearly stated there are times when assets are trending and the edge is in properly defining the assets and times early on when that happens.

Gotcha. And btw, in re-reading my post, I realize that my tone was unintentionally poor -- it definitely wasn't meant that way. My apologies!

I've actually heard a number of traders suggest something along the lines of "trends tend to persist," or "once something's in a trend, you should assume the trend will continue until proven otherwise." Maybe that's not really meant as a statistical fact... but rather a practical assumption and useful guideline when trading -- i.e., "you're better off not considering going countertrend unless and until the prevailing trend has clearly been broken... as evidenced by a failure to establish HHs/HLs (for an uptrend)."

Just as I continue to suspect that a lot of the debates here in ET stem from semantics... I also feel that another source of contention arises between more "discretionary" traders vs. more "algorithmic" traders. The majority of discretionary approaches, tools, patterns, indicators, etc. -- even TA itself -- cannot be "proven" to work from a rigorous, statistical standpoint, imo. Most that I'm aware of cannot be applied successfully in a vacuum... and so there's simply too many other variables and too much underlying context to perform that type of proof.

I'm not even sure that a simple, widely used concept like "support & resistance" can be properly modeled -- much less, "strong" or "weak" S/R. Sure, you can use something like pivots, find various ways to approximate S/R, define certain cases mathematically, etc. -- but any resultant code would likely be very constrained and inflexible vs. what our eyes can see. Probably can't be "proven" to "work" -- but a lot of traders seem to find value in using it as one "tool" of many.

 

[ESgambler]

It took me years and many losing trades to realize this...

Re trend, I believe there are time where making assumptions about trend continuation makes sense. But it has to be fact based and statistically sound. Most people who argue for or against trend continuations argue out of their emotions without any facts on their side. Trading is all about probabilities. It's a 100% probability based game. Same as with poker.

 

[CharlesS]

... Statistically most of the times trending properties vanish the shorter the time frame gets. Intraday historically asset prices trend much less than they mean revert. The main reason is the large amount of noise and also there are fundamental reasons for that. ...

Another angle on the same idea --

What is experienced intraday as random is greatly due to the multiplely overlayed higher time frames -- a MIN01 chart is produced by all the deliberate, non-random price action decisions of those discretely trading it and MIN02, ..., MIN10, MIN15, MIN20, MIN30, H01, ... YEAR, and DECADE(?) charts, including all the alternative price representations like TICK, RENKO, VOLUME, etc. And money flows are greater the higher the TF. All the TFs are following the same mechanics of price action whose expressions get cumulatively more complex the lower the TF.

Since a DAY chart has fewer higher time frames overlays, DAY price action is relatively autonomous, so seems more logical, less noisy.

Per greater mean reversion the lower the TF, quicker exits and aggressive fades apply -- and thus sense can be made of the shortest TFs. Whether a manual trader's nervous system is up to operating there it is a different matter.

 

[GRULSTMRNN]

Sorry I totally did not get what you are talking about

Another angle on the same idea --

What is experienced intraday as random is greatly due to the multiplely overlayed higher time frames -- a MIN01 chart is produced by all the deliberate, non-random price action decisions of those discretely trading it and MIN02, ..., MIN10, MIN15, MIN20, MIN30, H01, ... YEAR, and DECADE(?) charts, including all the alternative price representations like TICK, RENKO, VOLUME, etc. And money flows are greater the higher the TF. All the TFs are following the same mechanics of price action whose expressions get cumulatively more complex the lower the TF.

Since a DAY chart has fewer higher time frames overlays, DAY price action is relatively autonomous, so seems more logical, less noisy.

Per greater mean reversion the lower the TF, quicker exits and aggressive fades apply -- and thus sense can be made of the shortest TFs. Whether a manual trader's nervous system is up to operating there it is a different matter.

 

[CharlesS]

There's more money flow w/ each successively higher TF,
so the higher "tides" turn the smaller flows;
nevertheless all the flows regardless of their size follow the same physics of motion
and can thus be assessed w/ the same methods
though it gets more complicated the smaller the flow

 

[Pkay]

Be confident with yourself and the market !!

Trade with huge quantity, and have huge stop loss !!

Do not behave like a timid mouse !!

______________________________________

You need a huge bank roll to trade like this.

 

[qlai]

Intraday historically asset prices trend much less than they mean revert. The main reason is the large amount of noise and also there are fundamental reasons for that. Execution traders for large funds often accumulate or offload over many days/weeks to minimize market impact. They don't keep on buying or selling throughout entire trading sessions.

Very good insight, imo. I would like to add something that Linda Raschke said that stuck in my mind - Markets have a tendency to be mean reverting around the open, but trending afterwards.
So time of day/session is important to take into consideration.

 

[GRULSTMRNN]

I can assure you with absolute certainty that this is not true. What I can assure you also with absolute certainty that markets NEVER do anything in the same ways as always because there is no always. Markets are dynamic in nature. One morning the open sees a stock trading with a strong trend, another morning it mean reverts. Which one happens on which day is as random as the farts of squirrels.

Very good insight, imo. I would like to add something that Linda Raschke said that stuck in my mind - Markets have a tendency to be mean reverting around the open, but trending afterwards.
So time of day/session is important to take into consideration.