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Sexy Idea...
- Thread starter sunseeker
- Start date
Sorry but this is incorrect.Quote from sunseeker:
I just believe that in a trend there is a point where all the money, that market participants in a certain market have, is in the market. So at that point there is no new money that can support the trend... except for the short-people changing positions.. but also at a certain point shorts go out of breath. In this case the only possible scenario for the market is to turn. I just ask myself if it is possible to see some sort of pattern in adding the volume that is traded at the offer and the volume that is traded at the bid.
As I can see so far, none has tried that. I will put some more thinking in it and I'm sure that i will be able to find some way to translate this idea into a usable tool.
To assume that there "is a point where all the money participants have is in the market" or "there is no new money to support the trend", is one of the greatest, most obvious and yet most common fallacies.
It is simply not just untrue, but actually the opposite is the case.
In fact it is easy to judge who is "in the market", by the past volume - But that counts not nearly as much as who could be in the market in 10s, 1 minute, 10 minutes. And this is actually the most important point.
Remember: Most (edge) traders are flat most of the time and only enter when their very particular setup occurs. The rest of the time they're just watching, so you have no idea what effect they have or will have on the market - at least not if you think that those who have a position actually rule the market - which is complete misleading nonsense.
The reality is that the very best traders in the world neither fear long traders nor short traders. If any, it's the neutral traders they fear. Because they haven't made a commitment yet and can do so anytime. The bulls and bears however have long committed themselves and are monitored and "trapped" in their decision. Truth is that most of the time, only a tiny fraction of people's liquidity is actually committed to the market. Even more often, no liquidity is committed at all. The money can burst in the door any moment.
So there are a couple of rules that need to be fundamentally understood:
1) There are 3 positions: Long, Short and Neutral.
2) Neutral is the "most dangerous" position of all. Learn to use this to your advantage.
3) NEVER ever think again that the market only consists of positioned participants. If you do, you'll get scalped - eventually.
Best Regards,
Scientist
Quote from Scientist:
2) Neutral is the "most dangerous" position of all. Learn to use
My thought is not about forecasting price action.. it's about defining a pattern in the accumulation volume during a certain trend period. This thought is directly directed to the above statement of Scientist, who says that the most dangerous position is the neutral... well I know this and that's exactly what I aim for. I aim for a pattern that gives me some additional information.
Scientist, you say in pt. 3 that the most important element is to know about the neutral positions. What is your approach for that?
Micro version of float analysis???
Fair enough. I wish you good luck with your endeavours. You could probably search the many databases on eSignal central for experiments of this kind. It might have already been done (you might be surprised). Just an idea.Quote from sunseeker:
My thought is not about forecasting price action.. it's about defining a pattern in the accumulation volume during a certain trend period. This thought is directly directed to the above statement of Scientist, who says that the most dangerous position is the neutral... well I know this and that's exactly what I aim for. I aim for a pattern that gives me some additional information.
*Sigh* What I mean with using the knowledge to your advantage is that you need to understand how neutral market participants will react on certain market events.Scientist, you say in pt. 3 that the most important element is to know about the neutral positions. What is your approach for that?
You need to be aware of the impact that new, uncommitted incoming volume can have on the market. I.e. in this particular situation - What kind of volume would do what to the market? This is what need to always be aware of.
Again, not-yet committed volume is in fact most of what counts. If you're in a situation like playing a breakout - What are the people that are short or long going to do? Nothing much. What you're waiting for is for a crowd of new (and until then neutral) market participants to enter the arena. If you get a lot of sellers onto the stage, the breakout could fail. If you get a lot of buyers, it could skyrocket. But those already in the market ain't gonna make much of a difference other than with exiting their already taken positions - Which in either case generally isn't enough to cause either a breakout or a failure. You will really ideally need new volume for the setup to move in either direction. So you should know what people with a neutral position are looking for and when they're looking to enter.
One very powerful way of reading near-neutral volume is to read the depth levels. If the ask cumulative (sellers) is extremely heavy, then chances are very high the market will in fact go up. Many people don't understand this, but this is actually the market reality. Lots of ask pressure = bullish energy. Lots of bid pressure = bearish energy. This is a major trading wisdom to understand. This is because markets and exhchanges chase the path of the highest volume - Not that of the best price. Price only matters to small traders - But essentially price discovery is about find the path of the highest volume - always. So if there's lots of selling volume, the market will go up. Have a look at the bid/ask tomorrow. This happens all day long. There are still dreamers out there who think when the cum bid is heavy price must go up! LOL!
This is just one way of getting closer to using "neutral" volume. Put it all together, and it should give you an idea. If you have any questions - feel free to ask me.
Best Regards,
Scientist
Quote from Scientist:
Again, not-yet committed volume is in fact most of what counts. If you're in a situation like playing a breakout - What are the people that are short or long going to do? Nothing much. What you're waiting for is for a crowd of new (and until then neutral) market participants to enter the arena. If you get a lot of sellers onto the stage, the breakout could fail. If you get a lot of buyers, it could skyrocket. But those already in the market ain't gonna make much of a difference other than with exiting their already taken positions - Which in either case generally isn't enough to cause either a breakout or a failure. You will really ideally need new volume for the setup to move in either direction. So you should know what people with a neutral position are looking for and when they're looking to enter.
Your idea here implies that the majority of market participants use a strategy and a time frame you are familiar with. Just in my group of trading-friends most trade futures and stocks... but i.e. for the futures - everyone uses a totally different method and timeframe - one goes for spreads another one trades the future against a basket of stocks an third one trades index futures and holds them for 5 to 20 days.. and one is a scalper that never holds a position for more than 10 minutes. The only way your idea could have some impact is when the majority i.e. in the ES mini are 5-min breakout traders... then you could really go after that.
The second thing you said relating to the volume on the bid and ask... I use that information every day... it can be a valuable info at certain times.
I'll check out the .efs
Quote from Scientist:
Fair enough. I wish you good luck with your endeavours. You could probably search the many databases on eSignal central for experiments of this kind. It might have already been done (you might be surprised). Just an idea.
*Sigh* What I mean with using the knowledge to your advantage is that you need to understand how neutral market participants will react on certain market events.
You need to be aware of the impact that new, uncommitted incoming volume can have on the market. I.e. in this particular situation - What kind of volume would do what to the market? This is what need to always be aware of.
Again, not-yet committed volume is in fact most of what counts. If you're in a situation like playing a breakout - What are the people that are short or long going to do? Nothing much. What you're waiting for is for a crowd of new (and until then neutral) market participants to enter the arena. If you get a lot of sellers onto the stage, the breakout could fail. If you get a lot of buyers, it could skyrocket. But those already in the market ain't gonna make much of a difference other than with exiting their already taken positions - Which in either case generally isn't enough to cause either a breakout or a failure. You will really ideally need new volume for the setup to move in either direction. So you should know what people with a neutral position are looking for and when they're looking to enter.
One very powerful way of reading near-neutral volume is to read the depth levels. If the ask cumulative (sellers) is extremely heavy, then chances are very high the market will in fact go up. Many people don't understand this, but this is actually the market reality. Lots of ask pressure = bullish energy. Lots of bid pressure = bearish energy. This is a major trading wisdom to understand. This is because markets and exchanges chase the path of the highest volume - Not that of the best price. Price only matters to small traders - But essentially price discovery is about find the path of the highest volume - always. So if there's lots of selling volume, the market will go up. Have a look at the bid/ask tomorrow. This happens all day long. There are still dreamers out there who think when the cum bid is heavy price must go up! LOL!
This is just one way of getting closer to using "neutral" volume. Put it all together, and it should give you an idea. If you have any questions - feel free to ask me.
Best Regards,
Scientist
Great post.
Your comments on "edgers" and neutral volume are extremely important when it comes to really extracting every drop of profits that a market offers.
In the most detailed and final analysis of the price and volume relationship, there are times when small amounts of increased volume over the ambient "noise only" level have great impact on price movement. This anomaly shows up in both the above cases. The false or failures to breakout in price are usually related to this anomaly as well. The other "edger" phenomena, not in the low volume range, are the periods of high volatility stalls. Consistent longer bars (up to two points in ES) stacked side by side on the 5 min chart demonstrate how edgers get upside down and give up tons of points for many bars at times. The bar volume is almost constant as this ensues.
The last phenomena that is common is the low volume "dip" (short) or monetary "zip" (long) that quickly turns into a "stop cascade". Because of the bias of Edge set ups to the long side, most cascades are seen as short falling cascades (hence the name as well).
By understanding all the volume implications, both of us, get to trade on the "right" side of edgers and high risk neutral situations. By being there in position first, we get to be pushed.
The three conditional groups what I call "monitoring search" each apply to different price, volume settings. The points you raise deal with the setting that has the shortest time span. The choice is to deal with it on the "trading" fractal or go to the next faster fractal just momentarily and then scurry back to the trading fractal. For some reason ,you see most traders here go to the fastest fractal and just sit on it and lose the opportunity for continuing to make money under the more routine trading fractal monitoring.
If you handle it on the trading fractal, you just apply one simple rule and the rule applies simply to retracement on that bar only. If you go to the next faster fractal, you simply take your routine trading rules there, make a a decision , and scurry back to the trading fractal. Failing to scurry back and slow back down, is certain death because of the excessive rapid fire signals that alarm and disorient any trader. What is lost on the faster fractal is the continuing synthesis that the trading fractal does for you to give you what the originator of the thread is looking for. It is the ebb and flow of the "active" trader groups that you must be in front of, not the individual trades that occur.
Going to the faster fractal momentarily is just what a surfer does to "see" a wave materialize at the correct moment. Then he gets busy to get a head of the wave to ride it. No wave no ride; but you have to look at the right moment or it passes you by.
Money is made by being on time and skillfully doing the routine of taking the wave to the beach.
I call the detailed "monitoring search" on the third most detailed level of monitoring "Additional Protection Action". About 7 times a day it comes up; the two things you mention, edgers screwing up and neutral very low volume getting a hit, are always on the table at that time. The usual amount of capital that is affected is preventing a loss and turning it to a gain in the 3 to 5 tick range. A way to see the impact of the "Additional Protection Action" is to look at your trading log. You will see the conditions scientist notes at places you currently lose 3 to 5 ticks on a duration of 1 or 2 bar holds (5 min). This is not discernable on 1 min trading logs because these logs are not the kind that can show market action, they are only good for scalping and edge trading with R/R less than 7 or so(i.e., marginal breakeven or loosing set ups). If there are fewer than 7 or so a day, it is simply that parts of the person's trading day is mandatory sidelining. (This is the "I only trade in the am" kind of stuff; it is generally called: skill limited trading).
My posts are highly informative posts about making money. They are not criticisms of others. Often I use examples that need correcting. These examples are usually very common ones on ET.
How these examples come about is because of the usual processes people go through. I do not expect anyone to identify with any of them. Who cares. Anyone could, perhaps. If a person "sees" themselves in my examples, they can just do as 4 out of 5 people do. The other person will do something about what they have become conscious of.
I shall point out one specific example, though: scientist. His posts, I find thoughtful, infrequent, worthwhile to read and thought provoking. I do not start stuff. I enjoy reinforcing stuff, however. I like to corroborate, with my experience things scientist introduces, because they are worth learning about.
On Friday, I used the APA 8 times in 32 trades. I had different but some what overlappping loosing trades as well: 8 of one or two ticks (washes in my parlance; they were losses never the less). In making a net of 12.3 points, I had only 5 trades in the range of 2 to 3 points. The H/L of the day was 8.0 points.
Quote from sunseeker:
Your idea here implies that the majority of market participants use a strategy and a time frame you are familiar with. Just in my group of trading-friends most trade futures and stocks... but i.e. for the futures - everyone uses a totally different method and timeframe - one goes for spreads another one trades the future against a basket of stocks an third one trades index futures and holds them for 5 to 20 days.. and one is a scalper that never holds a position for more than 10 minutes. The only way your idea could have some impact is when the majority i.e. in the ES mini are 5-min breakout traders... then you could really go after that.
The second thing you said relating to the volume on the bid and ask... I use that information every day... it can be a valuable info at certain times.
I'll check out the .efs