a question concerning price strategy

Discussion in 'Strategy Development' started by fearless9, Oct 9, 2007.

  1. For all those traders watching HIGHS and LOWS forming on bars.

    Are you concerned with the volume of activity at the HIGH or LOW of a bar.

    Remember that you ( the trader) arbitrarily set the bar, not the market.
     

  2. What specifically determines the high or low of the forming bar.

    From a brief thought of what is possible for a forming low of the bar, I can see 2 options.

    For the low of a bar.
    a. Bid limit continually refreshes with more size until the selling market orders are exhausted and then people start to cover and price starts to retrace.

    b. Price is going down until it hits a level where tons or market orders come in and take the supply on the offer and starts pushing price back up.

    There are probably other options but I wanted to put this basic stuff on the table.

    I am all ears and would like to see where this thread goes. I briefly perused a couple of your prior posts and noticed that time bars are not what you suggest to SEE the market.

    jc
     
  3. I do not consider volume when trading.

    I do not understand what you mean by "you ( the trader) arbitrarily set the bar, not the market." I wait until I observe the closing price, then I know the high value and low value for the interval.
     
  4. mmrreedd

    mmrreedd

    Short-time reader (lurker), first time poster.

    I am not specifically concerned with the volume at the highs and lows, more concerned with the volume activity on the bar as a whole (talking about time-based bars here, eg. 5-minute bar, 15-minute bar, daily bar etc…) and would also like to see the volume distribution along the bar itself (if I could). Having said this, if the high (or low) of the bar is the session’s high (or low) so far, I am more likely to pay attention to the volume trading at or very close to the high (or low). There are some other instances, too, where I would pay more attention to the volume at the high or low – for instance if it was a case of the price retracing up to a former support that I now expected to be resistance.

    Now, given that I set the bar interval I am looking at (like you said I arbitrarily set the bar, not the market) I am aware that each bar is only a representation of the market, not the market itself. What this means is that if I look at one price in the bar, for example the high, the low, or the “close” then I am restricting the sample even further, lets say I run an indicator that used the “close” of a 15-minute bar, then I am sampling the market every 15 minutes for this indicator – this is a very small sample and while it may not invalidate the usefulness of the indicator, it is something to be very aware of. Similarly, paying close attention to the volume at the high or low of my arbitrarily selected time bar is not necessarily of much value, better to pay attention to the areas of especially high or low volume wherever they happen to occur.

    Enough of a ramble for a first post….

    ES
     
  5. evsloth

    evsloth

    Just a thought....

    I know for a lot of people who trade price action, the fact that a bar closes above a certain level is an important factor. While I agree in theory, I just think it's more important to understand that the *reason* this matters is because it shows that price has actually broken that support/resistance level and remained there. (Meaning it's not just a quick bounce past a support/resistance that will more likely rebound and reverse, because if that were the case, it would more likely show up as a wick and not close past the S/R level)

    As an example, if you see a formation like a double bottom and then a bar that closes above the middle swing, many people would consider this a confirmation of a trend continuing upward. If you think about it, all that means is that the price has managed to break the short-term resistance (the one that the middle swing of the double-bottom bounced off of) and actually managed to stay above it.

    I agree that it's pretty arbitrary if you take the chart literally, especially since whether you use tick-based bars or time-based bars will show a different picture, but the important information about price action should still be represented either way.

    (For ex. if this was a high-volume move that happened quickly, if you use a small volume-based chart, you may see a progression of small candles closing above a resistance; meanwhile, a trader with a 1-min time-based chart would just see one long bar that closes above the same resistance price. They look different on the screen but they confirm the exact same thing: the resistance was broken and price is staying above it, so whatever you prefer.... I know some people prefer volume-based charts for more clarity but I actually don't think time-based ones are horrible as long as you understand what it represents).