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The skinny on tape reading and trading
- Thread starter Big Game Hunter
- Start date
Quote from pismo10:
For 1 min EURUSD over the past year it works sort of. For one year on the ES it loses huge. You can play and optimize the rest of your life and get nowhere. Works great on 15m ES but not at all on 5 min ES, how good is that? Is that ESZ08 or @ES (which isn't real)?? Maybe 23 trades over the last year on an hourly chart, so watch it for 15 years to see if it really works....This is the story of mechanical systems more often than not. Nonsense.
Fundamentally, this is a one-minute breakout system. That sort of system is quite robust when used with markets that trend more often than not.
An index market is primarily mean-reverting due to hedging activities, using a trend-following system there is suicide.
Just got back to the office... The ES is one instrument that I know to be so choppy that I wrote it off as a viable investment vehicle a long time ago. Ditto most other futures. Although theres a lot of liquidity I would never go anywhere near that thing. Its just not trendy enough to overcome the massive overheads...
Chop is an inevitable part of the market and to my mind cant be avoided. Im really interested in just setting and forgetting this system and seeing if I can make consistent money. The old axiom KISS definitely applies to trading as much as it ever did. Seriously the biggest question with this system is how low you can get your round trips down to. If you made 0.4 pips consistently round trip thats 80 pips per day on 200+ transactions, 400 pips per week, 20000 per year. So it could be huge. But clearly the margin between success and failure is very small indeed. Still its hard to imagine a banker being able to resist stretching the tape so thin that 8 minutes can mean an eternity and make a profit so large it exceeds a mans typical annual salary. Basically I think it warrants more attention is all im saying...
Chop is an inevitable part of the market and to my mind cant be avoided. Im really interested in just setting and forgetting this system and seeing if I can make consistent money. The old axiom KISS definitely applies to trading as much as it ever did. Seriously the biggest question with this system is how low you can get your round trips down to. If you made 0.4 pips consistently round trip thats 80 pips per day on 200+ transactions, 400 pips per week, 20000 per year. So it could be huge. But clearly the margin between success and failure is very small indeed. Still its hard to imagine a banker being able to resist stretching the tape so thin that 8 minutes can mean an eternity and make a profit so large it exceeds a mans typical annual salary. Basically I think it warrants more attention is all im saying...
Quote from Big Game Hunter:
....... Im really interested in just setting and forgetting this system and seeing if I can make consistent money....
"seeing if I can make consistent money"?....so you're not actually making money with it?
This system is pure conjecture?
I think you should have at least mentioned that this system is only your idea and that you don't actually trade it.
Quote from Big Game Hunter:
The old axiom KISS definitely applies to trading as much as it ever did.
Simplicity does not guarantee robustness.
Basically I think it warrants more attention is all im saying...
This system, as it stands, is simply not within reach of the majority of retail traders.
That said, there's still good value here since you've provided strong evidence that backs up the assertion of how well an FX market trends.
Why does some one not just put it to use on Oanda with 100 units - your trading a penny and have nothing to lose!
The OP has stated and backed up his goals for letting a system make money for him as he does other things.
Two others have commented on how it is from their point of view:
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Quote from pismo10:
For 1 min EURUSD over the past year it works sort of. For one year on the ES it loses huge. You can play and optimize the rest of your life and get nowhere. Works great on 15m ES but not at all on 5 min ES, how good is that? Is that ESZ08 or @ES (which isn't real)?? Maybe 23 trades over the last year on an hourly chart, so watch it for 15 years to see if it really works....This is the story of mechanical systems more often than not. Nonsense.
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and j:
Fundamentally, this is a one-minute breakout system. That sort of system is quite robust when used with markets that trend more often than not.
An index market is primarily mean-reverting due to hedging activities, using a trend-following system there is suicide.
The OP is probably out of luck at the PA level he is considering. For FX as cited there is more than less trending (the condition for the OP's notion to work)
As others felt and have expressed, I thought the thread was dealing with an actual retail apporach instead of just a notion.
I practice, meaning trading, a trend following system in an index market. I do notice that there are players who use mean-reverting systems. I monitor market drift since it relates to the mean- reversion "tells" I front run. From these factors I conclude that mean reversion strategies are played on index trends. The relative size of change in price (where money is made) is larger for trends than it is for mean reversion.
What would idealized waveforms of trends and mean reversion look like? The trend waveform is the carrier of the mean reversion. So money is made in different ways for each endeavor. Trend following is just a matter of trading price movement; mean-reversion is more sophisticated and pairs of instruments are used.
A key question is how money is made all the time in either approach. Mean-reversion does employ one of the OP's principles: being in the market all the time. Big capital cannot lay idle.
The results of each approach is generally not known to the public and especially retail traders. Several graphs were presented that centered on the OP's notions. They proved that money can be made in trending markets and money is lost in non trending markets (for which the OP made no provisions).
Mean-reversion does not depend upon trends since the pairing that is done eliminates trends but not drift, basically. Drift is the variation in the index and its underlying. When the drift hits 4 units (smallest trading variation, tics) usually BOTs (and in the past floor traders) kick in activily and tug the drift back to 0 and overshoot it momentarily.
I really appreciated ironfist's contribution on how he approaches his PA trading and how it related to the OP's difficulties in "non trending" situations as non trending was defined by the OP's system performance.
What this brought out was that on various fractals (three were mentioned) there were 8 combinations of trending possible. This is what makes trend trading so much more rewarding than mean-reversion trading. It is also what makes it possible for a retail trader to use an ATS that does not require attention and which is operating in the market all the time during RTH when liquidity exists. More than PA is required, however. That is more or less OT in this thread.
I slowed down the OP's trading turns (reversals) by a factor of about 5 by going to one fractal slower and that fractal was contained in the slowest fractal envelope. Slowing it further by at least one third more would have just yeilded 1 trade over the duration examined. pismo 10 points out the same aspects occur by just using the OP's approach on slower and slower fractals.
By slowing any approach down more and more, more of the places where losses occur are eliminated as we see. This is a good path to follow for the potential learning trader.
We also saw that this was not possible for the potential learning trader. We all can agree on that. This line in the sand that occurs where differentiated beliefs do not allow a person to explore any more is difficult to address because it is automatically and permenantly kept off the table.
I feel the OP made a good objective first pass on a huge opportunity. And anyone can be oriented to want an unattended system that makes money based on not wanting to spend time at a display. It looks like going out and purchasing such a solution would be the thing to do.
Also it is not difficult to see why a purchase isn't possible: no one here has one(See sponsors) and those who do (See expert traders), do not have them for sale.
If the OP can make the start he and others did, then how would such a person proceed to finish the job. Add the necessary parts is the answer.
One of the most exciting things in the world is to go through that process. I hope the OP does and I hope others do, too. It turns out to be a very counterintuitive process. At every choice along the way, journal the choice and when you proceed to a dead end, retrace your steps back to the place you made the wrong choice and take the counterintuitive path.
Draw out the answer first as ironfist did roughly. Maybe refine the rough out a little. That is the answer: all profitable trades one after another. You know, collectively they are being done; the T&S says so. How does one entity (person or ATS) do these trades in the market and be in the market all the time? In the limit, all exits are entries in the opposite direction at that moment.
Why do people look at the axis they do? Why can't people look at the other axis instead? Price doesn't matter. Time is what matters. Price measures value. What measures timing? People are what is measured; the other time based variable.
A person comes to a fork in the path. He choses Price instead of people or both Price and people. He goes to the Price dead end. He will not come back to that decision, ever, which he made at that fork.
Two others have commented on how it is from their point of view:
--------------------------------------------------------------------------------
Quote from pismo10:
For 1 min EURUSD over the past year it works sort of. For one year on the ES it loses huge. You can play and optimize the rest of your life and get nowhere. Works great on 15m ES but not at all on 5 min ES, how good is that? Is that ESZ08 or @ES (which isn't real)?? Maybe 23 trades over the last year on an hourly chart, so watch it for 15 years to see if it really works....This is the story of mechanical systems more often than not. Nonsense.
--------------------------------------------------------------------------------
and j:
Fundamentally, this is a one-minute breakout system. That sort of system is quite robust when used with markets that trend more often than not.
An index market is primarily mean-reverting due to hedging activities, using a trend-following system there is suicide.
The OP is probably out of luck at the PA level he is considering. For FX as cited there is more than less trending (the condition for the OP's notion to work)
As others felt and have expressed, I thought the thread was dealing with an actual retail apporach instead of just a notion.
I practice, meaning trading, a trend following system in an index market. I do notice that there are players who use mean-reverting systems. I monitor market drift since it relates to the mean- reversion "tells" I front run. From these factors I conclude that mean reversion strategies are played on index trends. The relative size of change in price (where money is made) is larger for trends than it is for mean reversion.
What would idealized waveforms of trends and mean reversion look like? The trend waveform is the carrier of the mean reversion. So money is made in different ways for each endeavor. Trend following is just a matter of trading price movement; mean-reversion is more sophisticated and pairs of instruments are used.
A key question is how money is made all the time in either approach. Mean-reversion does employ one of the OP's principles: being in the market all the time. Big capital cannot lay idle.
The results of each approach is generally not known to the public and especially retail traders. Several graphs were presented that centered on the OP's notions. They proved that money can be made in trending markets and money is lost in non trending markets (for which the OP made no provisions).
Mean-reversion does not depend upon trends since the pairing that is done eliminates trends but not drift, basically. Drift is the variation in the index and its underlying. When the drift hits 4 units (smallest trading variation, tics) usually BOTs (and in the past floor traders) kick in activily and tug the drift back to 0 and overshoot it momentarily.
I really appreciated ironfist's contribution on how he approaches his PA trading and how it related to the OP's difficulties in "non trending" situations as non trending was defined by the OP's system performance.
What this brought out was that on various fractals (three were mentioned) there were 8 combinations of trending possible. This is what makes trend trading so much more rewarding than mean-reversion trading. It is also what makes it possible for a retail trader to use an ATS that does not require attention and which is operating in the market all the time during RTH when liquidity exists. More than PA is required, however. That is more or less OT in this thread.
I slowed down the OP's trading turns (reversals) by a factor of about 5 by going to one fractal slower and that fractal was contained in the slowest fractal envelope. Slowing it further by at least one third more would have just yeilded 1 trade over the duration examined. pismo 10 points out the same aspects occur by just using the OP's approach on slower and slower fractals.
By slowing any approach down more and more, more of the places where losses occur are eliminated as we see. This is a good path to follow for the potential learning trader.
We also saw that this was not possible for the potential learning trader. We all can agree on that. This line in the sand that occurs where differentiated beliefs do not allow a person to explore any more is difficult to address because it is automatically and permenantly kept off the table.
I feel the OP made a good objective first pass on a huge opportunity. And anyone can be oriented to want an unattended system that makes money based on not wanting to spend time at a display. It looks like going out and purchasing such a solution would be the thing to do.
Also it is not difficult to see why a purchase isn't possible: no one here has one(See sponsors) and those who do (See expert traders), do not have them for sale.
If the OP can make the start he and others did, then how would such a person proceed to finish the job. Add the necessary parts is the answer.
One of the most exciting things in the world is to go through that process. I hope the OP does and I hope others do, too. It turns out to be a very counterintuitive process. At every choice along the way, journal the choice and when you proceed to a dead end, retrace your steps back to the place you made the wrong choice and take the counterintuitive path.
Draw out the answer first as ironfist did roughly. Maybe refine the rough out a little. That is the answer: all profitable trades one after another. You know, collectively they are being done; the T&S says so. How does one entity (person or ATS) do these trades in the market and be in the market all the time? In the limit, all exits are entries in the opposite direction at that moment.
Why do people look at the axis they do? Why can't people look at the other axis instead? Price doesn't matter. Time is what matters. Price measures value. What measures timing? People are what is measured; the other time based variable.
A person comes to a fork in the path. He choses Price instead of people or both Price and people. He goes to the Price dead end. He will not come back to that decision, ever, which he made at that fork.
Forget about tape reading.Quote from Big Game Hunter:
Ive decided to become the traders best friend and tell all on these pages right here today.
Now I anticipate that this will cause a few elements in society to discredit me but this information IS PUBLIC DOMAIN and cant be construed in any way as a hostile act.
First tape reading....
Price is the only important constituent in trading. All other indicators dont work...
Tape reading explains price action thusly:
" A series of higher lows and lower highs."
What does this mean...
Well its a little difficult to demonstrate but as im sick of all the BS about trading on these pagesIll try and elaborate.
Lets take 1 minute euro in the spot not fuutres market as an example. This to me is one of the very best markets for scalping because it trends so well even on a one minute time frame.
To see what im talking about you should become familiar with this link :
http://www.dailyfx.com/charts/Chart.html?symbol=EUR/USD
By clicking this link and selecting one minute time frame you can use the zoom function to zero in on individual trades and see how the tape functions. Ill elaborate more on how to use theis information to tape read the price but for now Ill tell you that a cover story for what tape reading ISNT would be to say that you sit and watch the time and sales and try to get in front of big orders or some crap like that. This is wrong.
You can't profit from this, unless you work in a big brokerage and you frontrun big customer orders (which is illegal, by the way).
By the time you read the tape, it is history, and things have changed.
Quote from crgarcia:
Snip......
By the time you read the tape, it is history, and things have changed.
Of course.
I like your comments on what you, yourself, can't do.
Consider the following as a nice counterpoint to your negative orientation.
Reading the leading indicator of the tape is best placed on your display right next to the two tape displays. In this way, you can use the tape for confirmation.
Before the leading indicator of the tape, it also a good idea to have a couple of custom displays that , in advance, signal to you to glance over at the leading indicator of the tape.
These three items combine to give you the time and the price at which the turns are going to arrive on the tape.
By adding a harmonic analysis you get to see the spacing of partials fills you make to be able to exceed the capacity of the tape size by a factor of five.