Two bars do leave room for some amibiguities. Adding a bar most always quashes these. I advocate for using bars ASAP to make projections into the future. Abitrarily, the right third of a screen is a sufficient future to have available for the projection. Leaf your most recent copy of Futures and find that no ad, no illustration and no words deal with any future space that I have above described. Do the same with Forbes, Business Week and any newsletter you subscribe to. In this thread there is a universal comfirmation as well by ommision and by words that state dealing with this issue can only be done after the fact. This is a perfection of being in the minority by any standards of probability. The space to the right of the active bar is the future which moves, successively to the present (NOW) and then to the past where statisticians live and operate. As a casual comment, I suggest that it is possible to examine the future on seven time frames. The realations of the time frames can be determined either exponentially or linearly. The "good enough" appraoch is to just go with a common multiple of separation (linearly). Use a range of values like 3, 4, and/or 5 for convenience. You now have a space to the right of the present that has seven pairs of lines one pair for each fof the seven fractals. depending upon which fractal you are viewing you see a more or less messy scene. For me one thing is for sure, price will fill the interior of this messy scene. From this we can confirm what Columbus and Magellan's crew discerned: "You can't fall off the edge". I use this construct, also, to put to rest the concept of applying probabilities to making money. Choose a fractal where you can see ticks and draw horizontal lines through all ticks in the zone of the three bar constructed boundary lines. Tabulate a frequency histogram of price repeatedly hitting this range of ticks. You have the "reversion to the mean" histogram after a while. You can make these histograms according to a period of existance as well. So you can see that buying and selling on the most popular prices doesn't make much money and you see that there is a higher and higher probability of making money the less money you make per trade. We must escape this profound dilemma at all costs. So you raise the two key questions for making money in one straight forward post. 1. How do you stay on the right side of the market? and 2. How do you chose the right timeframe for keeping up with the market while trading? Answers: 1. I recommend annotaing with geometry and knowing at all times how the price cycle is unfolding according to the P, V relationship (Boolean algebra). 2. I made an excel spread sheet of the compound interest formula where the seven fractals are depicted. For given trading entities, I listed the market potential of each fractal and the facets of effectiveness and efficiency for a trader. I have posted the excel spread sheet partially completed for ES. I called the sheet "the yellow brick road". Results for people following my recommendations. For stock trading: In ET as a starting effort, spytrader ran for a year and did 100% oncapital. In contrast, if it is programmed in C language and done mechanically it produces for the initial six months an average yield of 11.1% every 6.6 days; the first refinement increased the net by 20%. For intraday on ES the leverage results in about 50 times the stock results. The chart to use for stocks if you are not monitoring is the EOD chart. The chart to use if you are monitoring is the 15 or 30 minute chart. For intraday trading use the five minute chart on ES and observe on YM the front running on the 2 minute chart. To be on the right side of the market through the day about 20 to 40 actions are required. The general envelope of concerns for making money evolves around continuity of thought. As a sensory based consideration it is like being able to appreciate music, primarily. There is one exception. Music is "given" to you to appreciate. It comes to you. For making money, you must step into the picture as a participating musician would. And it is necessary to create a market monitoring device to allow the senses to be able to monitor. Further annotating the monitoring device in the "future" part of the display is a requirement. The seven interelated fractals may be deemed as a set of instruments that are capable of contributing to the harmony of the composition. The existing and impending theme for each is derived from the near term and projected into the future periodically. All parts are seeable and the monitoring focus is on maximizing money velocity with the given potential that is unfolding. You choose the fractals (see above) to extract with greatest effectiveness and efficiency. So you see geometric annotations that the price comes to as the future moves to the present. These are limits where, if you do histograms of given periodicities, you see that where you reverse to stay on the right side of the market is, if fact, the lowest probability points on the histograms. You see that you are NOT trading where the most frequent trades are done and you ARE trading where the smallest minority(who control the markets) trade. By annotating nd projecting boundaries, you are putting a plan of action on your screen and you front run the market by holding as the maximum rate of transactions drives more and more profits into your account. Being on the right side of the market is a "holding" strategy. Others you see by the distribution and corrsponding probabilities of doing trades are playing the entry and exit game and have W/L and R/R ratios to match and suite. you are fostering an annotation system that allows you to see the P, V relationship go on and on, and give you the turning points in the relationship well in advance of their occurance. As in music when a theme comes to an end, another movement commences. The composer sets up the listener for these occurrances. Because of comments in this thread related to music, I suggested Savion join in. Actually for any composition to be better approeciated savion should be on the floor to prjoect an essence in another language to pring out the values in the piece. Here in making money we can do that very thing and in advance of price. By being in the minority and having the future always in view and watching it move to the present (as a scoping and bounding in contrast to periodic updates on reversion to the mean (the principle of probabilities as used here in W/L stuff), we get to deal with optimising money velocity through effectiveness and efficiency. The fractals form shells of future price movement; concurrent multiple trends are in effect. This is the scene that determines the frequency of extraction of profits and whether concurrent independant accounts are at play or are occasionally converged when concurrent turning points come from the future to NOW (the proverbial home runs are hit at these times (usually unknowingly)). It is not easy to leave the herd mentality. The herd is always observable and you can see its actions build and mount right in the middle of things. At some point it does become more clear how all the quant efforts glean anomolies from the macro data pools. Look at the Prop shops mantras in the data flow. Low money velocity is inherent in these monthly results postings. Thanks for gleening the most pertinent stuff from what you read. As you can see, you are the key to making money. You are building your mind so it contains the truths with which to compare for making the right decisions at the right times. Always check yourself to see if you are doing the dopamine thing rather that the adrenaline or cortisol thing.
http://www.riskbook.com/link/rachev_menn_fabozzi_(2005).htm That one seems like it's good for heavy quants. Here's one more that's a little more informal http://perso.wanadoo.fr/pgreenfinch/bfglo/bfglo.fat_tails.htm "It has long been recognized that time series of asset returns exhibit positive sample excess kurtosisâthey have "fat tails." This means that extreme market moves occur more frequently than would be expected with a normal distribution." I too have started to wonder if we are all assuming the same definition of random.
This is all hypothetical. Or do you actually use this normal distribution model for your trading decisions? In that case we have nothing to discuss about, because I believe in an abnormal distribution for the reality of the stockmarket.
I am now going to reveal my ignorance for all to see. Aren't there literally hundreds of examples of markets wherein profit/loss outcomes eventually showed a non-normal distribution? If you approach trading with the assumption that "all possible future profit/loss outcomes fall into a normal distribution, and... the center of the distribution (i.e., expected value) equals zero", does that fit with what we have actually observed about markets? Didn't Neiderhoffer blow up because all possible future profit/loss outcomes did not fall into the normal distribution? That is to say, didn't he blow up because the markets turned out to be decidedly non-random? I must be missing something here.
In ET, we all know by the polls that I do not attract others to my views. When and if a person takes note of what I have posted, they most often do not agree nor go any further regards my opinions and practices. So I am unimportant and just a side issue, if that, regarding my views. So there are no secrets or cynical calculations or anything else for you to continue to speculate about. It has just been my custom for about fifty years to make money and to iteratively refine what I do, think and believe. It turns out that I do not start threads in ET; why would I? Rarely are threads started that relate to me. These threads seem to be initiated by those at inquiry and along the way to realizing their potential. Threads do grow longer and longer as time passes(What else could they do but stop and die). The flaming ratio has subsided from a ratio of 4:1 to what it is today. The B people have pooped out it seems. It may be that gaining experience and adding knowledge and skills as a consequence is the cause of these sustained efforts by those who participate. As well, it may come under the heading of iterative refinement of principles. A description of a tunnel and light at the end does relate to a process that has goals. Who can determine whether or not the tunnel is traversed and an operational understanding is reached? For me it is the person doing the work that can do it and not the bystander, usually. You are a 39 as you tell us so certainly you have the power to compare and contrast from where you stand as a successful trader and mentor of those who come to you for your demonstrated expertise. I do not perform at the level you enjoy. Here, you make one comment that relates, substantively. My views on the brain's biochemical production and operation are conventional. The particular detail I mentioned is accepted as part of the themes of the Harvard Negotiation Project as well as the planning and development of the U. S. Peace Academy whose plan is to address issues ranging from child abuse, to gangs, to prison rehabilitation to a full range of national and international matters as an alternative to war, etc. It is never a matter for me to pass along anything that is not deeply understood by the relevant professionals in those fields of practice. I do not deal in theory as a matter of practical concern. With respect to the above, I agree with the theme of these professionals; they suggest: "If people resolve the personal, they will change the social." So, I put a lot of time in in understanding how a person works and operates and relates to others; I find it is very helpful for creating, carrying out and achieving money making goals. It doesn't lead me to comment or quote others on scrounging stuff from dead bodies on beaches like has been the case for you. Instead, I just quoted a person who spends time fixing things that have been busted by insensitivity and ignorance. This is pure nonsense to you. Too bad for you.
Jack, my conclusion is based on being stunned by the nonsense content of some of your past postings where in my understanding you make an attempt to deal with mathematical concepts as related to speculation strategies. I have re-quoted these a couple of times already. I'm simply fed up of doing this over and over again. PS: I don't believe I brought up the quote by J.Swift in any of my postings related to you. For your information, this timeless poetry is quoted by McKay in his: "Extraordinary Popular Delusions or the Madness of Crowds", this in the context of his chapters on speculation craziness. This is long before they "discovered" NLP or other "I am very pro dopamine and anti adrenaline and cortisol in relationships" stuff - coming from Harvard(says Jack ?) or not. This Swift quote will still stand for a long time, after that stuff will have been completely forgotten as perfectly useless. It represents the triumph of sanity over insanity.
Many people (such as nik and yourself) recognize this "abnormal" distribution. What is the cause of this? For sure it is related to experience, knowledge and skills. The term "smart money" is what I feel best describes it. There are two distortions which form a postiive feedback loop in the capital system. Knowing and money use are the distortions. Principles come from knowing and those who are in the know keep to themselves as they use the power that increasing (in the money velocity sense) wealth gives them. You can look at the lives of corporations to see this best and you can also look at how plain money is used as a commodity to make money. Luckily it is possible for anyone of any level of wealth to participate directly (and passively) with those who know and with those who use money as a commodity to create the "abnormality" in the distribution. It is particularly strange to see that so many chose to compete rather than join.