OK, I'll bite. Here's my ET story...
I first opened an account here a few years ago. I asked one novice question and was shot down in flames by people who were more interested in self-aggrandizement rather welcoming a newcomer. As a result, I didn't bother posting again until recently. I simply churned through a lot of the material on the site and drew up a shortlist of some 15 quality contributors to read.
I have been a net positive trader for a couple of years now and was prompted the other day to post once more to request some information. It appears that my old account has been inactive for so long I'm unable to post using it so I've had to set up this new one.
I'm not too proud to ask questions of someone with more developed market analysis skills than myself. So here goes nothing...
Quote from Blotto:I'll give some pointers on this. First, it would be helpful to know what has happened in the past in a similar condition. I would suggest creating a historical database of intraday market data for the instrument you trade, and sorting it according to various parameters. You need to obtain the data, and create a way of sorting and organising it logically. You can then start to see similar conditions, and compare like with like.
Cheese prescribes the use of this method and I've read the material he has posted on it. Would you say developing such a database is essential to your approach?
Quote from Blotto:-is price action alone sufficient to predict future prices to a high degree of accuracy?
I would say not. Whilst price action can reveal a lot it does not indicate the amount of business being done at a particular price and time which is essential if the market condition is to be understood.
Quote from Blotto:-how do we consider time, if at all?
I know that in my personal trading, time is of critical importance. I have time horizons that I work to and I expect that every other market participant does too (whether it be concious or unconcious). I have expectations about how long price should take to get somewhere and manage my positions accordingly. Time can also be used to determine exhaustion and apathy in the market.
A fast move on high volume with little follow through is often indicative of a final exhaustive push. Just a small retracement will send any new positions underwater and it only takes a few people to puke for a cascade of popping stops to provide liquidity for those better informed participants to take an opposing position.
A slow move on low volume can be indicative of apathy. If a market isn't getting any business done at a particular price it will be taken back the other way in an effort to get things moving. Nobody wins if the market is dead and it is in the interests of everyone (especially non-directional participants such as market makers) to get people transacting again. If that involves having to move price to a region where stops can be found then so be it.
Quote from Blotto:-do we consider volume to be relevant? why? what does it represent?
Absolutely, it represents business being done. That's the lifeblood of the market.
Quote from Blotto:-could there be benefit in organising and categorising prior market data to look for repeating conditions?
I have not done it myself but I'm now very seriously considering putting in the immense amount of effort I know it will take to prepare such a catalog.
Quote from Blotto:-do we need more information than just what we can see visually - time and sales data either in raw form or presented in a chart - ie should we be doing some sort of analysis based on how traders are positioned etc, and how can we quantify that?
Obviously T&S data is critical to understanding the dynamics of the market. However, I am unable to follow it visually (one of the reasons I am looking into recruiting some technical talent to help me automate my strategy). I am interested in how you determine which way traders are positioned. There are two sides to every trade and I don't fully understand how to tell whether trades represent participants entering or exiting the market.
Quote from Blotto:-how players are positioned - to what degree does this influence how the market will progress next? is there predictive value here?
The positioning of large players is critical. Their main concern is finding liquidity to enter and exit positions. For instance, if large players are long they are going to be examining the market to establish where the liquidity lies to enable them to exit their position. One option for them is to sell into strength. Another is to take price to an area where they know shorts will be squeezed out of their positions providing them with the liquidity to exit (and possibly reverse). I am very interested in being able to identify these conditions more consistently and predict the price areas where the market is likely to be taken. I assuming that logic of this kind forms a part of your methodology?
Quote from Blotto:-are some players "more equal" than others due to size, access to information, etc and if so should we respect their participation (to follow perhaps but not trade against)?
For sure. But, as you say, identifying how those players are positioned is the key.
Quote from Blotto:-do some players make predictable decisions and can we exploit this for profit?
I find identifying where people are likely to take profits very tricky. Much easier to concentrate on where they will be forced out at a loss. However, I feel that by only concentrating on 50% of the equation I am missing out on a lot.
Quote from Blotto:There are reasons for the time I mentioned, and the 8 point rally.
Was this done using the Cheese method or were their other contributing factors that were more important?
Quote from Blotto:Happy to discuss further if there is interest and some feedback / interesting questions.
I'm always interested in learning from others. However, I fear the usual suspects will try to derail things. Hopefully not though as I'm too old to indulge in all the mud slinging.
