Characterizing Markets

Discussion in 'Technical Analysis' started by luxor, Aug 16, 2006.

  1. luxor


    I'm beginning to think that there are only a limited number of trading day "types". For example, the choppy day, the one- direction-day, the reversal day etc.

    The last two days seemed fairly similar. There was a rapid jump at the open, and then a steady rise upward at a gentle slope. The issue is, I got creamed yesterday but made money today. I'm trying to figure out what the difference was. Here is the Dow today. If anyone had a similar experience, would like to hear it!

  2. Just a quick opinion

    I think you are right on.

    There are only a limited number of "types" of market days.

    If you successfully characterize them, Trendup, down, and consolidation (or whatever protocol you use), then you can start to tailor your trading screen to those situations.

    Ask yourself the following questions

    1. What indicators work best in a trending market
    2. What indicators work best in a choppy market
    3. Is there a way to combine them so that I can "see" what kind of day it is early and adapt to either situation?

    Good luck
  3. Pabst


    Well there's reversals. Monday started out the same as yesterday and today. Gap open higher, fade, new highs, then collapse. Yesterday had a 5pt rotation off the highs and later a 4. Today a couple of 3's. So at what point did Monday become a reversal while yesterday and today were trend days up despite several decent inter-day failures.
  4. Pekelo


    I tend to agree. There are basicly 3 type of days (up, down, sideways) and even if we allow for a little variation, there aren't more than let's say 6-8.

    For example today looks like an ADU (all day upper) so far, although because of the low volume there is a good chance that it will melt down after 2 pm... Then it becomes a failed ADU...
  5. Albert


    Characterizing days is useful. I think that "all day upper" is useful only in retrospect. What I do is label the day as it progresses into various poker hands. Double bottom is two of a kind, triple is three of a kind. Rising bottoms or falling is a straight. If it does it with velocity it is a straight flush, etc. It is kinda fun because it seems to work if I am in and out of the office and trading sporadically. Also, I am meetaphorically playing my hand against the market. If I am more intense and in front of the screen all day, then I seem to lose the forest from the trees.