Non-regular bars ?

Discussion in 'Technical Analysis' started by Swarm, Nov 30, 2010.

  1. Swarm


    It seems to me that creating bars on arbitrary time periods like 1min, 5min, 1 hour etc. is missing most of the action.

    I have a strategy that trades off hourly bars and takes decisions every 3 hours whiich works to some extent but I can't help thinking that the time delays are reducing the effectiveness of the strategy.

    Have other schemes for creating bars been considered and are they used e.g. :-

    - Constant volume bars, create a new bar when a volume target has been acheived rather than a time threshold,

    - Continuously updated time bars, e.g. 5 minute bars but updated every tick so last bar is T-5 mins, last but one is T-10 to T-5 mins etc. The last bar is always a complete 5 minute bar rather than a partial one - if that makes sense.

    - Log scale time bars - bars get fatter (i.e. more time) as they get older.

    Also, it seems to me that far too much emphasis is placed on open and close as this is used to color the bar, but the open and close is purely arbitrary based on where the price happened to be at bar open and close rather than truly reflecting where it spent most of it's time - seems high and low are far more significant, so perhaps using the midpoint as close would be better or better still the VWA for that bar.

    On a similar theme, I thought about 'density' bars where they are colored based on where the price has spent most of it's time, so around the high and low it's likely to be pale but getting brighter where most of the price action has been.

    What do you think ?
  2. 1) The shorter the time frame, the more "information" you have and also the temptation to overtrade.
    2) You have to make up your mind and start with "something", then modify it if it's not to your liking.
    3) Avoid the trap of wanting to learn "everything about everything" and then ending where you started originally.
    4) If your time horizon is shrinking, you may have a craving for excitement in the market. Be careful. :eek: :cool:
  3. 1) I agree with nazzdack here, "the shorter the time frame, the more "information" you have and also the temptation to over trade".
    2) I agree again with nazzdack here ("You have to make up your mind and start with "something", then modify it if it's not to your liking.") but I want to elaborate by saying that hourly bars are every bit arbitrary as minute bars, just slower.
    3) Constant Volume Bars eliminate the arbitrary nature of price action because it makes news and other spike generating actions immaterial and irrelevant. These are the only bars that do not require over-analysis or interpretation. This in itself it a huge benefit when it comes to making real time decisions.
    4) You are correct that the open/close is worthless to non arbitrary bars (constant volume bars) but the high and low of each of those constant volume bars is extremely important because they aren't arbitrary.
    5) I can see where a "density" would be a benefit to a volume bar only.

  4. ==================
    partly- 5 minutes could rightly be considered noise.End of day or end of year is important.Sure, look/study midpoint...averages...

    Wouldnt minimize averages, asking price/selling price...;
    last price is important also.:cool:
  5. Your plight seems to be focussed on the display of market information in real time.

    Bars in themselves inpart less visual information than do comparisions of adjacent bars.

    The smallest most frequently appearing on a display are OTR price bars and their companion the corresponding volume bar.

    To analyze information why not start small?

    Of course, monitoring comes before analysis but it is probably worth considering setting up monitoring in order that analysis is most streamlined.

    If you prioritize "what you want to know", then you can work back to know how to have the market give you that information.

    What I most husband is the market giving me 'tells' for just two types of events: continuation and change. I get those in advance of the time when I need them to be able to complete analysis and decide.

    Bar-to-bar there are only 10 cases when timeframe bars are used.

    Relatively speaking, there are only two measures: overlap and relative volatility. The distributions are normal without kurtosis or skewing. The matrix has as independent variable, the volume distribution.

    Coninuation, which I use to make money, is an inter-bar function for me. Change is an intra-bar function as I see it. Change occurs at extremes of bars and not their beginnings nor ends.

    To retain the most information, it is necessary to keep volume and price separate and of equal importance. The reason being that volume leads price. Signals come from volume and not only price.

    By knowing in advance of a price bar's formation that it IS a bar upon which an extreme trending price will occur, it is then possible to have precison with respect to carving turns.

    The leading indicator for this is to display the total volume of the bar at the beginning of the bar and throughout the duration of the bar. I use a colored shadow behind the actual accumulating volume.

    In any ordinary trend there are three price moves. The first move goes peak to peak with an intervening trough. The second move is peak to trough. The fInal move is trough to peak.

    The source of the trough in the first move is when price passes through the Right Trend Line of the prior three part trend.

    Using and knowing all of these things changes how a trader makes money. It is also the basis of how all fractals in markets are interlocked in a 3:1 ratio.

    The above is a good place to begin to learn about how bars play a role in trading. you may see by the above how you usurped a role left to the market. You can't use 3 hrs as a signal for doing anything. By usinh hourly bars you probably notice that they contain several fractal levels that play out the three moves of each trend.

    Sometimes you may notice that trends speed up or slow down. volume tells you the time of occurance of both. A VE occurs on a peak and a fanning occurs on a trough , all after the container of the trend is established.

    In my opinion, the first two comments of Nazzdack are erroneous. 3. is the beginning of the path to advanced expertise. While I am only dealing with beginner issues, it is true that there is a great deal more. the human mind is capable of trading as an expert just like anyone drives a car. Building the mind to do that follows having a display whereby the market may be "seen". "Seeing" the market happens for very few people. egarding 4,your time horizon MUST shrink. What you learn to know instinctively is the OTR chart's machinations. One of the most intersting things is comaring OTR charts. I hope you take the trouble to do this sometime.

    This post contains some information. working through it is not possible for most people. That is just the way it is. If a person is just beginning, "doing the work" of understanding it does save a few years of going through the 10,000 hour myth that is so popular. All of my comments have been proven scientifically using only deductive means.
  6. Jack, did you ever notice how everyone on this site, when responding to a poster, does so in a relatively concise manner? The normal human brain processes information more efficiently in reasonably sized chunks. (I already know this comment makes absolutely no sense to you but I had to say it anyway.)

    If you every offered a class at the college level it would be absolutely packed on the first day with everyone anxious with anticipation and by the end of the week you would be all alone in the class with the furniture. The sad part is you wouldn't understand why.

    To say you don't agree with nazzdack's comment that the smaller the time frame the more information one processes is interesting since it is a common problem with a majority of traders to "over-trade" faster charts.

    Another human normality is to build on one's validated successes, though you constantly see that as an abnormality or weakness.
  7. I read the thread before I posted.

    It occurred to me that the poster was thinking and exploring.

    The topic is "being able to see the markets".

    I use paragraphs to deal with points so my posts turn out to be laid out to get from A to N as carefully as possible.

    It is complicated for anyone to get to have first glimpses of how markets work let alone devise an approach to trade them.

    Probably the most significant of my university teaching experiences resulted in the grad students really getting their act together. It became a book (short and sweet). The main focus, from my viewpoint was "iterative refinement". The horizontal format of the book allowed for a center fold illustration of the seven part loop of itierative refinement.

    Certainly, as you say, there was a student type of rebellion. They took my first assignment right up to the Dean of Students and the Dean of Faculty. They DEFINITELY wanted me to change my ways back to where they were coming from. Teams were asked to design a Montessori school (in the architecture grad school). You probably discern the hitch in the assignment right off. The deans didn't, so it turned out to be a real educational experience for the university.

    They did another project as well; you can see it in parts of the movie: "The Firm".

    It may be possible that I play the role of catalyst to those who think and do work to become expert. It is a very good idea for most people to not read what I post. The reason is that they do not want to follow a critical path to discovery. They want to not come to class after the first couple of days as you say.

    I notice that most people fail to learn to trade. Probably most of them never ever saw the markets. The OP hasn't but at least he raised a couple of questions focussed on why he hasn't seen the market as yet.

    Sometimes by asking questions, a problem can be partially solved so it is turned into a different question.

    Why did you take such an aribtrary course of making fractals multiples of 7? Why wasn't it possible for you to discern the interlocking nature of fractals?
  8. It wasn't arbitrary.

    I chose to start testing chart increments in multiples using prime numbers. It was a lengthy test.

    1 was an obvious choice to omit.
    3 worked but it gave too many chart options for the beginning trader. (You know, that over trading or too many choices scenerio you say doesn't exist in the human condition.)
    5 worked but was still too fast. It also skewed fractal nature of the oscillations.
    7 worked and was seemingly perfect but I couldn't stop there if the testing were to be valid.
    11 worked as well but now was becoming too large to give an accurate representation of some intraday environments.
    13 worked as well but with each larger prime increment I moved further and further away from the purpose of finding a working multiple. That was the ability to create a visually appealing chart increments to clearly replace time based charts since time is an inefficient environment to build price bars. (regardless of your slanted position to the contrary)
  9. Would you mind explaining your thinking in choosing primes?

  10. spd


    Volume bars always intrigued me, but Ive never been able to figure out a good volume figure. When I find a number that seems to work the chart always closely resembles my old stand-by, the 5min chart, so whats the point?

    Any volume bar traders who can provide some insight, Id love to hear your thoughts.
    #10     Nov 30, 2010