Quote from dtrader98: The problem with this argument is that you are cherry picking one chart window from a universe of millions and constructing your version of what happened behind the scenes. It is a simple matter for me to cherry pick a few charts of my own, with clearly defined support and resistance levels in hindsight, then request that you tell me what the future inflection points will be (and we can say that the inflection points must have a minimum +/-% deviation from both sides of the trough or peak to be considered an inflection point). I doubt your results would be much better than determining the output of a random coin toss (notice I don't include volume and price velocity/momentum since I think these variable add significant weight to intraday guesstimates). At best you are using support/resistance levels as a "guess" based upon your prior experience to determine where the future turning points will lie. What's important is to determine when to get out when you are wrong in your guess. Because I can assure you from experience, that you will be wrong plenty of times. ---------------------------------------------- I've said it a dozen times, and I wish the OP would change his thesis, since it deviates from the useful argument on the trap of subjective visual interpretation of real chart patterns vs. randomly generated patterns. Markets DO NOT follow a random walk in the Gaussian sense, this has been shot down by lo, Mandelbrot and others ad nauseam. In some ways they are better, in others worse. Better because the mean of the distribution is greater than zero (upward drift/ edge bias), worse because fat tails and large sigma variations can occur and are occasionally worse than gaussian random models predict. Anyone who looks over my prior threads will notice I use plenty of TA in my arguments and beliefs, but I will be the first to concede that every one of those boils down to a guess whereby I believe the overall argument (TA/fund/history/probability/experience) is weighted in my favor. I believe that's the best any of us (outside of market makers with client order flow/ that's a whole nother world/debate) can do, aside from managing how we will risk our bets, and determining how we will respond to the outcome in advance. ___________________________________________ There is no hindsight here dtrader98, the snapshot of the 1st chart was taken several days before the market opened. The key support & resistance zones noted days before had a an undeniable impact on how the market moved days later, so it was not after the fact as you claim either, so get that straight. It's not what my version of what happened behind the scenes that's important, it's what the market was telling us. What was the market telling us before the market opened? that buyers & sellers had a historical past, albeit several days that was very significant, what was clear was that buyers were unwilling to concede to the sellers below support(11,720) & the sellers were unwilling to concede to the buyers above resistance(11,800). What was undeniable was how the market visibly moved upwards from 11,720 & down from 11,800. This observation validated that buyers & sellers were in fact exerting great influence above & below these influential zones. I have a number of before & after examples that clearly demonstrate that this phenomenon occurs with great regularity & great accuracy. But of what value would that be to you anyway? you're probably to stubborn to even acknowledge how utilizing support & resistance works very well. What I will not do is expend energy in trying to convince incredulous traders that it works wonders, either you see it or you don't. I disagree with mu200411's theory of markets being random in their movements because it does not have a foundation or it can easily be disproven, but what all traders can agree on is that all trading methods are correct if it helps you to become profitable, there are many paths leading to the same road. And just one more thing, your assurance that I will be wrong plenty of times in my "guess" is extremely rare when one understands what the dominant theme is of the market, if the market is rising, buyers possess greater authority while the sellers are countering against that strong influence & vice versa, thus exploiting the bigger picture or trends means that I will not play that cat & mouse game of going toe to toe with the markets all day long, the trading to break even scenario that many new traders are drawn to that lead many to call it quits & your experience does not insinuate that I will be wrong many times before I get it right, get that straight as well. Your experience has value to you perhaps, but to me it means nothing.
Likewise. Your chart proves absolutely nothing. And notice how a telling description of the past has absolutely no guaranteed bearing of the future. I can go backward at every inflection and say, see how the bulls bought, see how the bears sold, which will be an obvious explanation for every turning point that worked --- in retrospect. Here's a testimony from the markets the past few weeks. <img src="http://elitetrader.com/vb/attachment.php?s=&postid=1699957" border="0" alt=""><br /></font></p></font></p></font></p></font></p>
fwiw here is my take on random walk...it is a little like not being able to see the trees for the forest. As an example, I trade the mini's and at times (not recently) when the market is in a grinding uptrend I see this pattern in prices. On a 5 minute chart I have fib levels of the previous day (not because I believe there is anything magical about them but enough people do that it is a point of interest for me) with 1.0 and 0 at the hi and lo, and extensions above and below the range. Sometimes 1.38 will be either the high for today or a retracement level that is significant enough for a bankable fade. This might happen four days in a row, miss the next two days and then resume for two days and disappear for two weeks before occurring again. Of course grinding uptrends are only apparent in hindsight but being aware of the possibility that the setup could result in a trade is supporting evidence if other things I watch are pointing to a good fade. The point is that the market is randomly predictable and how confident can I be that I can profit from it, ie. what might the probability be?
Quote from dtrader98: Likewise. Your chart proves absolutely nothing. And notice how a telling description of the past has absolutely no guaranteed bearing of the future. I can go backward at every inflection and say, see how the bulls bought, see how the bears sold, which will be an obvious explanation for every turning point that worked --- in retrospect. _________________ For those traders that are seeing these recent exchanges between me & dtrader98, notice the appeal to reason & logic that I'm making on why markets are moving while dtrader98 is making it appear as though I see the market better than anyone else & everyone else is wrong, that was never the claim by me. What I made clear is that in all markets buyers & sellers exert great influence below or above certain areas or zones & how a person understanding this can exploit this for profit. He also claims that I'm some kind of "visionary", that's not my intent, nor do I aspire to be one. I suppose what angers dtrader98 is when I mentioned that some traders are astute while others lack this quality, well it's true to a degree, for example, a trader who has 15 years experience tends to have a greater understanding or insight than a trader who started his trading career 2 weeks ago. The experienced trader sees & understands the market in a manner that a struggling or new trader cannot see or comprehend, the perception of an experienced trader is typically better, experience has to count for something. A trader who has experience trades in a manner that is advantageous while many new traders trade in a manner that is not advantageous, this is common sense. Notice his S&P 500 chart below, the bottom one, the market was visibly moving down from it's historic highs, common sense again, the sellers were pushing the market down while the buyers were countering against the sellers strong influence, until the buyers regrouped at a more profound area of support, now the S&P 500 is rising back up again from support, this market is in a trading range in the daily picture, even a blind man can see this. What's happening is that a fight for control of market direction is taking place, neither buyers nor sellers are willing to concede or yield to the opposing side below or above certain points, thus support & resistance, buyers in large numbers prevented the sellers from pushing the market lower because it's not in their interest, buyers make money if they move markets higher while they forfeit money if sellers move markets down, the sellers influence begins to weaken above support zones or is not as strong that's the reason that the S&P 500 is rising again in the immediate picture. It's not in my interest or motive to cause divisions between Elite Trader members, my aim is to inform & up build, what I did not look forward to was the typical you're wrong & I'm right notion that is so pervasive here on Elite Trader. Many hotly debated subjects within Elite Trader turn slanderous rather than being intellectually stimulating lately. It's a sad commentary that dtrader98 has now resorted to defamation in his charts to get his point across to me instead of using his charts as constructive commentary on why markets are moving. As I stated earlier, other trading methods are commendable provided that it makes the trader money consistently. What I did not agree with was the assertion that all markets were random, that was all.
mayo367, I have to assume from your descriptions that you are using Market Profile in your trading. I am a firm believer in MP and a large part of the way I look at the markets comes from my study of that discipline. The best charting method I have found is Point & Figure. Nothing filters out the noise better. If you can't see a pattern there you can't see!
Thanks for being civil. I too am against slanderous debates. Sounded a bit contentious on both sides, and I appreciate your viewpoints. No offense meant. I respect your viewpoints, and hopefully others can benefit from views on both sides. My main argument to you was to show that bulls and bears will always battle to gain direction at support/resistance points (not arguing that), but the visual description doesn't guarantee the future output. Peace.
I don't use market profile nevadan, however I do understand it's premise. On numerous occasions I have noticed that MP very consistently validates what i'm seeing without the need for it. What is utterly clear to me is that when the market is rising, bulls have greater authority & vice versa. Just knowing wether the market is rising, falling or in a trading range in the bigger picture gives tremendous insight on how to trade any market. The P&F charts have X's & O's, I suppose those symbols represent buyers & sellers correct? It reminds me how football coaches have these symbols to better inform their players of what the opposition is up to.
mayo367, you are right in your surmise that the X's and O's are buyers and sellers but I will quote a paragraph from Jeremy du Plessis's excellent book The Definitive Guide to Point and Figure to illustrate a bit more. One other great feature of P&F is that time is not shown on the chart so it builds only from price action. This basically filters out the noise in the market.
Not my cult. Chaotic seems a reasonable description. 75% (I am pretty sure it was higher) is statistically significant. I really don't care if they are random or not as they exhibit observable tendencies. I will repeat -with random volume added in you would be able to spot the real series from the fake. I do have a problems with some of the assumptions people make without providing any sort of evidence or even reasoned argument why that might be the case. 3 for example... the 'markets are random so "TA" dosen't work argument'. Why? who's to say "TA" doesn't "work" on random (or chaotic phenomena). Red herring as far as proof goes anyway. a looks like b so they must enjoy identical characteristics. Hardly a proof. It is necessary to predict to make money from the market. Many use the markets repeatable tendencies without a hint of prediction. If something is not predictable it must be random. Yup if its not a blueberry it must be a strawberry. I just thought the OP's "proof" (lol) was rather lacking. This should be in chit chat. Cheers