Unholy Grail to Success

[saliva]

Quote from investwthme:

Can you compare pmt to macd (w/histogram)?
You got momentum, price and time.

No, for the simple reason that PMT is based on realtime PA and MACD is, by design, a lagging indicator. As you might have already guessed, we'll be concerned solely with market timing. Well, then, would you mind explaining how you could possibly time your entry and exit using a lagging indicator?

 

[riskfreetrading]

I read this thread from first post to last post. The OP spent time to give things piece by piece (good from an educational point of view). There some correct things in this thread, but many ideas/statement are completely wrong, and some of them are dangerous to a trader (especially a new trader--if I were to teach you I would have to erase all what this thread put in your head even if I would have to erase the good things as bad things are encapsulated (not intentionally of course) in good things).

I am giving a warning to those who think they got right. You have also eaten some poison which will devour you later.

I am not writing this to lower or insult Mr. Saliva, but I am writing it out of moral caring for the readers.

Let me give just some examples (not the dangerous ones):

1. Take a parabolic move. When is the momentum at its maximum? Answer at the exact top!

2. Take point 1., when is momentum (as defined by the author) maximum in the opposite move after a parabolic move.

Anwer: The momentum is maximum at the beginning!

3. Points 1. and 2. show that in stock price you can have a sharp discontinuity in price change. From +infinity one instant to -infinity the next instant.

4. If the analogy of momentum/etc of running through a barrier with a car is correct, and given the fact that momentum is infinite (or extremely high), why does the stock stop moving up? It is not lack of momentum that stop it, but rather that momentum and all the other terms do not explain correctly (or cannot explain adequately) the price dynamics. So do not let your feeling good about your understanding fool you.

The reason is that price stops moving up not because of momentum, or its analogy to car speeds. It is because of something else. You need to understand the fundamentals of kinematics waves, and their dynamics.

5. You should understand from above points that something else is behind price dynamics that does not exist in the theory/explanations presented here.

6. Price is a derivative (in the sense of derived, not in mathematical sense).

7. If you want to understand price dynamics, I suggest that you sit on a brige next to a place where congestion on roads form, and watch the dynamics of points where speeds change (the most abvious ones you will observe are free flowing cars after a stoppage, and cars landing on the back of a queue). Check the speeds at which those points move along the road. They can move up and down, and may even stay constant (just like stocks on a vertical axis).

8. He made statement about other things such as efficient market hypothesis. Forget the word efficient, because it can be misleading as it may have a different meaning in your mind than what academics mean by it.

You should understand that the efficient hypothesis is true, and is the reason why there are WINNERS and LOSERs in trading. This may sound strange to you. The moment you understand why the market can be efficient and yet there are losers and winners (and the majority are losers) then you will start understanding markets.

9. A name of the game is to find the T (the duration), and not to fix it. If you use the same T all the time in your trading, I would like to tell you that your chance to lose are increasing exponentially.

 

[saliva]

Does anybody else want to add to RFT's 95 (minus 86) long-winded theses? Personally, I don't think he read this thread in its entirety because none of the things he wrote actually bear any resemblance to the things I discussed in this thread. Consider his first and sixth examples:

• 1. Take a parabolic move. When is the momentum at its maximum? Answer at the exact top!

This is completely wrong. I've already stated earlier that momentum is like a fuel that propels the car. That is, momentum is the strength that fuels the rally. The momentum is at its maximum not at the top. On the contrary, it's at the bottom. Think in terms of a rocket. You need the biggest boost at the time of the liftoff. Once it's in outer space, the rocket no longer requires a boost to sustain itself.

• 6. Price is a derivative (in the sense of derived, not in mathematical sense).

Derived from what?! This makes no friggin' sense.

Despite our differences, I'll extend RFT the same benefit of doubt as I do with everyone else. However, if you slip one more time, I just might need to recruit your detractors from Rennie's thread.

As a disclaimer, please note that I welcome your input in any way, shape, or form. I only ask that you stay on topic.






[edit]
Important note: Allow me to be blunt. I don't like to bitch anymore than I have to but there's a good reason why this thread was written in a chronological order. If you're new to this thread, start from page 1 and don't skimp on details!

 

[9999]

You've got a great thread saliva, just ignore the trolls and keep it going.
And by all means, please be blunt.

 

[investwthme]

Quote from saliva:

No, for the simple reason that PMT is based on realtime PA and MACD is, by design, a lagging indicator. As you might have already guessed, we'll be concerned solely with market timing. Well, then, would you mind explaining how you could possibly time your entry and exit using a lagging indicator?

One more time please.
I am convinced that everything you see on a chart is a lagging indicator why? bec. it already happened. So when I see you converge a few bars into one bar to visualize momentum, well that happened already therefore its lagging.
To (hypothesize and) say the market turns up before the economy does, that is what I call a leading indicator.
This is just a thought, if I'm mistaken please explain why.
And how do I time myself with macd? Easy when momentum is dying out or building up you can figure out the next phase and trade accordingly. (Although sometimes the macd starts to go in one direction and then countertrends-meaning the histogram starts to go downwards and then pops back upwards.
I have to admit I never used channels until I read your thread.
And one more thing I am a believer of certain support a resistance based on price. (867,853, 875)

 

[Anna K.]

Quote from riskfreetrading:

...
The reason is that price stops moving up not because of momentum, or its analogy to car speeds. It is because of something else. You need to understand the fundamentals of kinematics waves, and their dynamics.

5. You should understand from above points that something else is behind price dynamics that does not exist in the theory/explanations presented here.

At least Saliva is trying to explain something, can you do the same? what do you mean by something else?Do I need to get a phD in physics to understand you? What are you trying to say?

6. Price is a derivative (in the sense of derived, not in mathematical sense).

derived from what???

8. He made statement about other things such as efficient market hypothesis. Forget the word efficient, because it can be misleading as it may have a different meaning in your mind than what academics mean by it.

You should understand that the efficient hypothesis is true, and is the reason why there are WINNERS and LOSERs in trading. This may sound strange to you. The moment you understand why the market can be efficient and yet there are losers and winners (and the majority are losers) then you will start understanding markets.

the moment I can understand is the moment you can try to explain, or point in the direction of where to find an explanations. just saying that he is wrong and you are right doesn't help my understanding.

thank you for trying...

 

[saliva]

Quote from investwthme:

One more time please.
I am convinced that everything you see on a chart is a lagging indicator why? bec. it already happened. So when I see you converge a few bars into one bar to visualize momentum, well that happened already therefore its lagging.

To (hypothesize and) say the market turns up before the economy does, that is what I call a leading indicator.
This is just a thought, if I'm mistaken please explain why.

Let's me start by replying to the second statement first. What I reveal in this thread is not a crystal ball. If that is what you have in mind, then you're gonna be sorely disappointed. Needless to say, there's no 100% certainty in the market. But you can "hypothesize" and predict with a reasonable degree of certainty should you know how to correctly digest and interpret the information you have. Call me a pompous ass but a lot of traders don't possess this skill. I know this all too well because I used to be one of them.

So now we're concerned with the question of lagging indicator. I call MACD a lagging indicator for a very simple reason. MACD (or Moving Average Convergence Divergence), is calculated from the difference of two moving averages, typically EMA(12) and EMA(26), which themselves are derived from price. Hence, it turns out that MACD is two steps removed from price. Plus it says nothing about MOMENTUM or TIME.

But you have raised a valid point about candle blending when you wrote "So when I see you converge a few bars into one bar to visualize momentum, well that happened already therefore its lagging." That's true to a certain extent. I will further address this issue in the future, but for now let me just say that with the candle blending we're allow to actually see and measure the strength of the rally. For instance, if the S&P runs from 860 to 900 within the previous two hours, we can palpably gauge prices in that rally. But this is clearly not the case with MACD—or any other indicators for that matter. Although we can see that the MACD also moved higher while S&P ran up 40 points, there's no way to interpret all the nuances involved in that rally by looking solely at MACD. For example, if the MACD went from -1 to +1, all we can conclude is that the underlying instrument moved up. But it doesn't tell us by how much nor how significant the rally was. Another major bone of contention is that the reading of -1 to +1 is ambiguous. Whereas prices are specifically pegged to a 40-point rally from 860 to 900, the MACD can yield the same exact result at other prices. You could technically have only a 10-point rally but the MACD could still move from -1 to +1. This is due to the fact that it depends on moving averages rather than prices. This makes it downright problematic and wholly unacceptable in my view.

I hope that clears up any misunderstanding.

 

[investwthme]

So now we're concerned with the question of lagging indicator. I call MACD a lagging indicator for a very simple reason. MACD (or Moving Average Convergence Divergence), is calculated from the difference of two moving averages, typically EMA(12) and EMA(26), which themselves are derived from price. Hence, it turns out that MACD is two steps removed from price. Plus it says nothing about MOMENTUM or TIME.

But you have raised a valid point about candle blending when you wrote "So when I see you converge a few bars into one bar to visualize momentum, well that happened already therefore its lagging." That's true to a certain extent. I will further address this issue in the future, but for now let me just say that with the candle blending we're allow to actually see and measure the strength of the rally. For instance, if the S&P runs from 860 to 900 within the previous two hours, we can palpably gauge prices in that rally. But this is clearly not the case with MACD�or any other indicators for that matter. Although we can see that the MACD also moved higher while S&P ran up 40 points, there's no way to interpret all the nuances involved in that rally by looking solely at MACD. For example, if the MACD went from -1 to +1, all we can conclude is that the underlying instrument moved up. But it doesn't tell us by how much nor how significant the rally was. Another major bone of contention is that the reading of -1 to +1 is ambiguous. Whereas prices are specifically pegged to a 40-point rally from 860 to 900, the MACD can yield the same exact result at other prices. You could technically have only a 10-point rally but the MACD could still move from -1 to +1. This is due to the fact that it depends on moving averages rather than prices. This makes it downright problematic and wholly unacceptable in my view.

I hope that clears up any misunderstanding.

• 

[/B]

I was a bit unclear of the use of the macd (actually the way I use it).
It's the histogram that I mainly use it for and not the crossovers of the ma's.
If you look in the graph where you pointed out the histogram shows a negative divergence. The momentum part is how high/low the histogram moves. I am not saying macd is the best indicator either I just wanted to see if there was any similarities between pmt and macd (histogram).

 

[riskfreetrading]

Quote from Anna K.:

At least Saliva is trying to explain something, can you do the same? what do you mean by something else?Do I need to get a phD in physics to understand you? What are you trying to say?



derived from what???



the moment I can understand is the moment you can try to explain, or point in the direction of where to find an explanations. just saying that he is wrong and you are right doesn't help my understanding.

thank you for trying...

why are you attacking because I warned readers? Also I am not required to answer any post. I do it out of benevolency. Pls. ask politely. If you do I will explain things to the best I can given the limitations on what I can assume on educational background.

PS:

1. actually understanding kinematic waves is not an easy problem. Multiple nobel prize winners were on instances of this problem.

2. Read about the Monkey Trading Problem in one of my posts on trading (check recent history, in thread on trading mentors). Please report the thread link in here.

 

[riskfreetrading]

Quote from saliva:

Does anybody else want to add to RFT's 95 (minus 86) long-winded theses? Personally, I don't think he read this thread in its entirety because none of the things he wrote actually bear any resemblance to the things I discussed in this thread. Consider his first and sixth examples:

• 1. Take a parabolic move. When is the momentum at its maximum? Answer at the exact top!

This is completely wrong. I've already stated earlier that momentum is like a fuel that propels the car. That is, momentum is the strength that fuels the rally. The momentum is at its maximum not at the top. On the contrary, it's at the bottom. Think in terms of a rocket. You need the biggest boost at the time of the liftoff. Once it's in outer space, the rocket no longer requires a boost to sustain itself.

• 6. Price is a derivative (in the sense of derived, not in mathematical sense).

Derived from what?! This makes no friggin' sense.

Despite our differences, I'll extend RFT the same benefit of doubt as I do with everyone else. However, if you slip one more time, I just might need to recruit your detractors from Rennie's thread.

As a disclaimer, please note that I welcome your input in any way, shape, or form. I only ask that you stay on topic.






[edit]
Important note: Allow me to be blunt. I don't like to bitch anymore than I have to but there's a good reason why this thread was written in a chronological order. If you're new to this thread, start from page 1 and don't skimp on details!

Let us first clear this: "However, if you slip one more time, I just might need to recruit your detractors from Rennie's thread. " My answer is ""However, if you slip one more time, .... (YOU KNOW WHAT I AM CAPABLE OF "

Now back to the intellectual stuff:

1. Let me be clear. I am not attacking you. I am responding because you stated that you would like people to answer, and also because it my damn right to write what I think, when I think, and anywhere I please. Now the important stuff.

2. The part in your posts that I find original is the B. Bands and K. bands signal. That is the part you should focus on.

3. With respect to momentum. what you wrote is absolutely wrong, because it is inconsistent. Here is a proof by contradiction. If momentum were to be always high at the beginning, it means it would be low at the end. But the momentum at the end of a parabolic move is the same momentum, but in opposite direction, at the beginning of the retreat from top to bottom (by symmetry). This a contradiction, because on the reversal from top to bottom it would mean that momentum was low at the top.

The only case where there would be no contradiction is if momentum were to be constant during the entire move up, and down.

So whatever your meaning of momentum is, writing that it is high at the bottom is just in your imagination and covers only certain cases.

4. The truth is that momentum can be high at the beginning or high at the end.

Therefore tops and bottom are associated with extreme in momentum (high or low, but one does not know which is which in general).

To understand it, make the parallel to volume (I am not saying they are the same, I am just making the example to show what I mean). Extremes in price are associated with extremes in volume, but one cannot say that it will be high volume or low volume, as both cases can arise. Similar things happen to volume.

Does this make a bit more sense?