gabfly: your post reads like a koan, unfortunatly I am too dumb to fully understand it. 'balance of probability' is a new phrase for me. so balance of probability vs high probability. If I understand you correctly, you seem to be saying that in real time as price action unfolds you 'weigh' the evidence and if it tips in your favor you take the trade? high probability in your mind is more final, like a on/off condition?
Yes, this is the way I see the price behave, there are two components. The setup IMO can only be coded so far and in itself is a rather dumb animal. Try coding it too far and you will take it into the territory that I refer to as Market Mood which is changing day to day, but which contains common elements. It is beyond my capacity and desire to code Market Moods even though over the years I have taught myself to read it sufficiently to take my Setup probability significantly closer to 1. Obviously the number of usable Setups is reduced greatly from the number which triggers the alarm and I reject some good Setups along the way. But please bear in mind that "good setups" are only determined after the fact. In the end, on a liquid instrument such as ES, the Setup and the screening by Market Mood only provide a platform to which trade size can be applied. Consistency can be a nominal outcome each and every day, but it comes from our brain and as such the manner in which we trap and release price. You can call it an artform, you can call it an edge, it does not matter. The only thing that is important IMO is the manner in which I train my brain to accept/ reject information and the order in which I assemble it. Always, always price leads and I follow. That is not to say I cannot trap price but I never ever trade a breakout because my setup does not provide for such an animal.
No, sorry, you misunderstood. Perhaps I was not sufficiently clear. The nature of my own setups, such as they are, allows me to crudely grade their "quality" before taking the trade. Not that I know how the trade will work out, because I don't believe in numeric probabilities insofar as future price action is concerned. (I think such specificity is imaginary at best, and dangerous at worst.) A more crude reading is a balance of probabilities: http://www.answers.com/topic/balance-of-probabilities This means that I don't attach too much confidence to any setup, which is why I exit quickly if it goes against me regardless of how good it looked before the fact. However, against this background, some setups nevertheless manage to line up more nicely than others. Let me give you an example totally unrelated to my own trading since I don't wish to get into the specifics of my own trading. I only use price action for my trading. I do not use indicators of any kind whatsoever. However, let us consider an example using indicators for illustrative purposes. Let us suppose that your trading method requires that at least, say, 2 out of 5 indicator conditions are met to give you a valid setup. Therefore, when 2 indicators give you a green light for entry, then your minimum setup standards are met. However, and assuming that the other 3 indicators have some independent value of their own, if you get a total of 3 or 4 or even 5 indicator conditions giving you the go-ahead, then you ostensibly have a stronger setup. That is the point I was trying to make. Again, I am not a proponent of indicators, and especially the use of multiple indicators. The example was presented solely for illustrative purposes to highlight a distinction in setup quality. And, as I noted in an earlier post, I rely on such distinctions from time to time.
================== Sounds like you hit the bullseye,A...8.; plenty of smaller circles, targets within small bullseyes! Olympic champion skeet shooting, high percentage to be sure; =========================================== only requires one [1]pellet from shotshell [that contains MORE than hundreds of lead pellets per shell] to break target/Win Olympics Australian Trader Mr Guppy[who got river flooded out, once in his trading office ]said it excellant ; ''Never confuse high probability with infallibilty'' Lot$ of money made with sets up that had ''less'' than 50% probibility ............................................................ Notice in Mr Guppys comp, high pro... differs from infallibility ========================================= Merry Christmas/hanukkah/thanksgiving.
Very good post, has done much to further my understanding. In my case, market delta or footprint charts which measure bid-ask pressure go a long way for me to measure as you call market mood. Also thank you gabfly, your indicator example hit home.
bid-ask footprints have their validity distorted on intraday trading to a point where I can't use them. I imagine it is caused by the effects of market orders, but there are other people here on ET better versed to comment on this issue. One more point while I am rambling on. "The devil is in the details" is a phrase widely used. Perhaps it fits for most people when their plans blow up in their face. But I am more inclined to believe "that the devil lies in the macro thinking" If you get the big picture wrong at the beginning , then the devil will always follow you wherever you go.
================== You are welcome, Bear Mountains. And also while i think discretion is very important[remember when oil company stocks were being sold/gapped up, took those gaps huge amouint of time to close[come down] Therfore price only, traders were at a horrible disadvantage... since oil price stocks, according to the oil companys buying them, were cheap, even with ''gap ups'', not a good short @ that time. If you can get a computer [mechanical]drawn ma, much better to use that; even if you want to do the moving average math yourself. Also your stream illustration -usually is a good place to cath a fish; wildlife meangers call a convergence of timber & grass''edge''They also call deer creatures of the ''edge''............................: Good place to harvest a deer @ the edge cool:
The test for high probability trades is: "What you see is what you get." The OP has probably (lol) figured out that no one can "see" probability. All posters have said this implicitly as a matter of fact. Guessing a value has also happened and the guess was incorrect. Either you "get it" or you do not. So lets look at What you see is what you get. Take a bar close as the reference. The chances for each possibility are 33.3% to three significant figures. Check and see if you get it. Your guessing works out to be 1 of three possibilities. Now lets look at the 100% probability of a price movement ending or starting. Thank you. "What you see is what you get" can be improved, as suggested, by looking at two points in time one after another. The suggestion was that two events come in an order. It was suggested that the order was important for various reasons: on balance, tipping point, etc etc..... One person suggested that five things could be having events and sometimes they all worked together. They fell into place, so to speak, and that signified "goodness" or something like goodness. The opposite of goodness would be badness like chaos or randomness. I use on/off signals only. At any time, I have a collection of them. Gabfly explained that for five things as an example. What happened was I learned to read them. Thus as event to event happens, I always have a reading and I always am in a place where what I see is what I get. As events happen one by one, any resulting condition is "what you see is what you get". Doing turns in trading comes when one of two possible conditions changes to the other. This is the 50/50, tipping point event. Since PA trading "lags" it is possible to do "confirmation" trading after the fact. This is Small sacrifice for anyone to make. So lets learn to make the sacrifice and all be winning traders who have no losses. The smallest collection of things to watch is two. Maybe a person can watch four and no be overwhelmed. just two would be opens and closes on one bar. just four would be the tops and bottoms of two adjacent bars. Only watch for trends. test 1. The trend is in the direction of the open compared to the close. Test 2. Do the H and L related test for trends. If long be long; if short be short. Now the eight other H and L possibilities: if you are in stay in; if you are out stay out. One Enter rule: if you see a trend, Enter. One Exit rule: If you go through a DOJI, Exit because the trend is over. Note the Hershey Hinge is a two bar DOJI. (See DOJI sheets 8 and 9 (throw in the text on page 10 and the exit page 11 as well.(recently posted in exact science thread)). What are the two mutually exclusive conditions of markets? Continuation (trends) and Change (DOJI reversals of trends). Who can't do this? freak out people. What do freak out people do mostly. They trade DOJI's in non trending formations (8). What are the 8 non trending formations (all are two bar but two; one is a one bar and the other is multi bar) How did Darvas trade? He box traded using the rules above. This was way back in the late 50's and 60's.