Depends on the human, I suppose. It's just a graphic form of T&S.
Question about spikes...
- Thread starter k p
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Depends on the human, I suppose. It's just a graphic form of T&S.
To make sense of a dot chart out minds have to go through a process of connecting the dots to detect if there is a pattern in the dots. Even if we are not looking for a pattern, our mind will still try to find one. It always tries to find patterns. Lines to represent trends, choppy price ranging as it bottoms or tops, etc...
Using lines skips the entire need to process the dots into shape patterns. Of course, not everyone is a visual thinker. I am extremely slanted toward the visual.
Oh, and to the OP...
Why does it matter? Big seller panicked or stops got hit because the market started to drop... Market got shellshocked, started chopping as it found support, and then moved higher.
Either a big long position panicked, stop cluster got hit, or someone tried to spook the market to accumulate at good prices... The bottom line is... That scenario would have played out pretty much the exact same way in any of those cases. Knowing "why" it happened wouldn't help your trading results that day, so I don't see the point.
In my opinion it was either a big long position, or a stop cluster. Odds toward stop cluster IMO.
Using lines skips the entire need to process the dots into shape patterns. Of course, not everyone is a visual thinker. I am extremely slanted toward the visual.
Oh, and to the OP...
Why does it matter? Big seller panicked or stops got hit because the market started to drop... Market got shellshocked, started chopping as it found support, and then moved higher.
Either a big long position panicked, stop cluster got hit, or someone tried to spook the market to accumulate at good prices... The bottom line is... That scenario would have played out pretty much the exact same way in any of those cases. Knowing "why" it happened wouldn't help your trading results that day, so I don't see the point.
In my opinion it was either a big long position, or a stop cluster. Odds toward stop cluster IMO.
On the other hand, a T&S display has no lines, nor do the cells in a spreadsheet.
Not that I have anything against lines. But if one wants lines, there's no purpose in using a tick chart. Use a 15s.
And in case kut2k2 happens across this, this is why the "open" of a given bar is unlikely to be the same as the "close" of the previous bar.
Oh, and as for why I say stop cluster... I have an objective technical reason for saying that. It occurred at a price level where there was a high likelihood of trailing stops. (Note, this is a SPX 5m chart, not ES.)
Edit: LoL... I just realized I was looking at the wrong index on my charts. Doesn't matter though. ES and NQ are well correlated right now. Same difference!
Edit: Ok, here is the NQ... Same scenario. However, the NQ looks more like a plain long position panic during a weak downtrend. But, bottom line... It doesn't matter what it was! Same result...
Edit: LoL... I just realized I was looking at the wrong index on my charts. Doesn't matter though. ES and NQ are well correlated right now. Same difference!
Edit: Ok, here is the NQ... Same scenario. However, the NQ looks more like a plain long position panic during a weak downtrend. But, bottom line... It doesn't matter what it was! Same result...
Kudos! 
That is a nice simple way to explain it.
Now, find a good image for him for when he asks about an upward spike. The short capitulation!
That is a nice simple way to explain it. Now, find a good image for him for when he asks about an upward spike. The short capitulation!
---I am curious about what is going on behind a spike.---
Yes, I absolutely agree that why it happens doesn't matter. But I was just curious about the implication for what it means. If there is no support, not enough people buying at the levels below to have such a drastic drop, does this say anything about where price was at or where it might go in the near future. That is all I was really after, but of course it is fun to theorize as well.
The price action after the move does tell you a lot. If the market continues to steadily sell off... People on the sidelines are starting to come in and sell and/or buyers are getting scared off.
If price doesn't continue to steadily sell off, it's bullish and a good time to look for a long setup.
The move itself doesn't really tell you anything that you can use to help make a good trading decision, however... The price action after something like that tells you a lot.
Price action leading upto that event was pretty much unpredictable and untradable, but once that move got peoples emotions worked up there was opportunity. The best opportunities always occur when people are getting emotional. Without emotion, there is just chaos. Chaos can be traded with certain range/median return strategies, but it's hard...
If price doesn't continue to steadily sell off, it's bullish and a good time to look for a long setup.
The move itself doesn't really tell you anything that you can use to help make a good trading decision, however... The price action after something like that tells you a lot.
Price action leading upto that event was pretty much unpredictable and untradable, but once that move got peoples emotions worked up there was opportunity. The best opportunities always occur when people are getting emotional. Without emotion, there is just chaos. Chaos can be traded with certain range/median return strategies, but it's hard...
---I am curious about what is going on behind a spike.---
mega dump. WFT is going on anyway?