The PV Relation Synopsis In technical analysis, the investor deals with a variety of information where the emphasis is placed on data. Clarity for decision making is paramount. And time is important, both when the market is open and when data is being processed. Price (P) and Volume (V) represent two of the three of the most important variables. Their relationship is examined in the context of time. There is one basic principle, therefore, technical analysis is not complex. For the most part, however, the emphasis of technical analysis has been misplaced. Consider a time context that fits with your lifestyle. This document is written with a viewpoint that emphasizes one trading cycle. This is the best vantage point from which to thoroughly understand the P, V relation. ` Thus one trading cycle may be considered in your time context. You may trade in any format or strategy you desire (This takes into consideration your time context), and coupled with the principle embodied in the P, V relation, you will be able to make the appropriate decisions quickly, accurately and simply. The Principle: If the Volume trend is UP, then the Price trend will CONTINUE or If the Volume trend is DOWN, then the Price trend will CHANGE Trends are the focus: time to time. You choose the time: minutes, hours, days, weeks, months, quarters, years, decades, centuries, and/or millenniums. My three favorites in order of importance are: daily, hourly and meal. Understanding this principle is very easy once you have practiced using it to make money. Until this occurs however, the principle will be somewhat vague and useless. The best way to gain practice which will lead to understanding is to pair up with someone who can check your progress by learning with you or working with a successful user.* Write down your analysis near your data. Use letters and trend arrows. *From my experience watching others co-learn, one will learn faster so it is important to always stress that both must become competent and that there not be dependencies which stymie subsequent building on fundamentals. A Few More Looks at the P, V Relation To make the transition to using the P, V relation as part of the investment process, several messages are presented below to help you capture the idea through a variety of mechanisms. Hopefully, one or more will appeal to you and in some manner reinforce your understanding. In any event, as you work on data, take the time to: Write down your P, V analysis near your data. Use letters and trend arrows.
pv3 Of the three renditions I have no preference, but I use again the Jokari window approach to illustrate how the P, V relation is the determinant in each of the three key investment decisions to: Buy, Hold and Sell.
2. Channels Channels, is the name given to the boundary of price movement. As explained in the PV relationship price moves in conjunction with its leading indicator volume. All of this happens within the boundary of a channel. For details see the paper entitled channels (Folder name âChannelsâ). In the process of learning to trade, a person goes through two levels of understanding: AH HA and the religious experience. Ah haâs come in two sizes: Ah ha and AH HA. The uppercase AH HA is the standard level of revelation. It is an occurrence where the learner goes from not knowing to knowing that what is on the table is true. Several aspects of channels are AH HAâs and when the pieces of the channel puzzle fit together it is a defining religious experience. The bottom line for channels is this: Channels work. âTo get itâ, you have to understand that as the future moves into the present, price bars move about within channels creating short term formations that are bounded by one or the other of the channel lines (left and right) which contain price movement. No one gets to have AH HAâs until they start using channels for anticipation. To do even this is a challenge for most. In fact, most people do not have the software to make use of channels in an anticipatory manner. Currently it is possible that a person reading this paper could have known about channels for 5 months and still be using software that does not allow the person to project the channel into the future which is to the right of the present, on the chart. To learn to make use of channels, to make money, it is necessary that channels be drawn into the space where price is going to be going in the future. By reading the above paragraph you have the picture of the chart on your screen and a portion of the chart on the right is blank. Letting the right portion of the screen that is blank be about 1/3 of the screen is a good idea. Obviously, achieving this is difficult. Ordinarily the forming bar is displayed at the very right of the screen. An effort must be made to move that forming bar to the left until the unused part of the screen on the right gets as large as 1/3 of the screen. Once this is achieved the future may be seen. It is there on the right and the space on the right may be used for annotations. How this is done takes a little effort and it is the basis of one of the 8 doublings, so it is very worthwhile to do. Channels may be drawn to show the markets Long Term (LT), Intermediate Term (IT), and Short Term (ST) activity. The STâs are contained in ITâs and ITâs are contained in the LT. This is a representation of a series of envelopes each having differing durations and scopes. Seven fractals may be used to characterize various durations of the market. These seven include: Quarterly, monthly, weekly, daily, sixty minute, thirty or fifteen minute, and five minute. These seven fractals are set off from one another by multiples of time that range from three to five. Thus they are like the crystals that form a snowflake. The whole snowflakeâs form appears in more and more miniature form as a person looks within the whole snowflake. The pattern, (fractal) is repeated using different scales. So it is with the market. By looking at the market from the slowest (quarterly), to the fastest (five minute), you get to see the long term, intermediate term and short term channels that are present and nested one level within the other level. It is always possible to draw these boundaries as pairs of parallel lines. A channel is simply a pair of parallel lines. When you do this you are doing this after the fact, primarily (for the LT and IT). But it is also possible to extend the lines you have drawn when you are looking at your trading screen (fractal). Simply extend all channels into the space that is visible to the right of the forming bar on your trading fractal. There is one other step after you have extended these lines. That is, draw in the forming channel. Three points are needed to do this. Number the available peaks and troughs going back from the rightmost with the numbers 3, 2, and 1. One and three form the trend line and drawing a parallel line through point two completes the chain. If you are trading traverses of the short term trend then this channel is the trading channel that moves within the boundaries of the short term channel. Often people trade just the short term. The whole conceptual set up of IBD (Investors Business Daily) is based upon the intermediate term trend and its associated channel. Where the Ah haâs and religious experiences come from is the realization that the price formations within the channels commonly occur at one side or the other of the channel you have projected into the future. At some point you get the payoff of knowing that channels work as a direct consequence of seeing price change direction (trend) within the boundary that you have annotated on the right side of your screen. When you âget itâ you have garnered a major truth of how markets operate. At this time you have achieved the basis for being able to see this by meeting the criteria of having some blank space on the right side of your screen, fully annotated. Until you fully annotate the future so that the future can move into the present, you cannot attain this perception. Once you are able to perceive you are able to build into your mind the set of truths associated with the operation of channels. It is a myth of the market place that channels can only be drawn after the fact and therefore they have little or no value. Let us deal with effectiveness and efficiency as depicted by channels. To trade a channel which is in the form of a parallelogram you trade from the first bar to the last bar which represents a diagonal line within the parallelogram that is the longest diagonal of the two diagonals. This means that you enter on the first bar which touches the right line of the channel and you exit on the last bar which touches the left line of the channel. Being able to perceive this description is an ah ha. A lower case ah ha is not a big deal but in terms of effectiveness and efficiency trading the long diagonal means that you have dropped another myth of the market, that of exiting on the trend line on the price breakout of the trend line. Exiting on break outs of trend lines is one of the most common ineffective and inefficient trading rules used by the vast majority of investors. It is an example of a too late and too little rule. To make money you trade the long diagonal and not the short diagonal of the channel parallelogram. This brings up a major key with respect to how channels follow one another. It is an AH HA as well. This time you can grant it a level of importance even bigger than trading the long diagonal. The AH HA is: Channels overlap. Effective and efficient trading revolves around always being in the market. Because channels overlap to be efficient and effective you always have to enter at the beginning of the channel which occurs before the final breakout, on the trend line, of the former channel. It begins on the existing left channel line. By operating in this manner you always preclude using the myth of the market of ending a trade when the price breaks out on the trend line. As a footnote you will probably notice by now that this text is presented with a neutral bias meaning that the information can be applied to either long or short trades.
jack, can you explain wmcn during ve, when bar close to left of ltl versus bar clost to right of ltl, jack calls the first case, closing in the zone. i am not able to see any consistent pattern after a ve bar. sometimes there is m1-m2 sequence, but sometimes not. thanks
Sorry to be so tardy in responding. I'll try to be thorough with my comments. These comments will remove the "sometimes" aspect of what you re sensing and processing. Very good use of terminology. The terminology goes a long ways toward having a consistent logging process. During any time you are using three nested fractals. The middle fractal is the trading fractal. Anytime you are in trades and using MADA and annotating and logging. you deal with the fastest fractal first (FFF was the term used for shorthand). Your comments concern the apparent lack of consistency after ve's. You also comment on WMCN during a ve. This being the case, I will go thorough the order of events on the table and in doing so, I will remove the "sometimes" by drilling down to give you a "tree" that handles all the branches. Let me give you the short answer first. I apologize for past posts that may not have been clear to you. I have difficulty covering all the bases for everyone in any given post. 1. IF you see a VE test it for the zone which is a close on or beyond the original ltl. 2. Examine the next faster fractal pattern and see, if during the bar, the pattern completed. You know you know how to handle a completing pattern on a faster tractal. If there was completion, do the usual regarding the trading fractal which had the VE. That was the short answer. And it is telling you to trade point to point on the trading fractal from now on. You earned the right by your awareness of doing steps 1 and 2 above. Lets work further into the scene of WMCN coming into a VE and what happens after a VE. As usual, volume leads price and this is how "sometimes" gets eliminated. All VE's or ve's occur after point 3. This means volume has been dominant for a while and it (volume) is telling you something about how all three nested fractals are behaving. Look at you log and size up WMCN on each fractal, particularly with regard to volume and the P's and T's on those three fractals. You are looking at arriving at a P or going further towards a P in the next few bars. Get the context by looking at the page number of your log. Look at the bar number of your log. Look at the market PACE and determine the contemporary PACE shift going on. This is just my "tuning" you up a little here and there. Context is where "sometimes" came from for you. Look at the pattern and consider the five volume signals: P, T, P, T, P. Steps 1 and 2 handles the last P only. That is the next faster fractal was "completing". The LTL is where peaks occur or where VE's occur or soon a peak will occur. So increasing volume is a context for coming to an ltl , going through an ltl and completing a faster fractal pattern. 3. If the volume is peaking at less than the max volume from pt 1 to pt 2 and the volume difference going from the minimum trough @ pt 3 then the trading fractal has also completed its pattern concurrently with the nest faster fractal. So now you have context and 3 steps for consideration. We now look at the players and who is whom. Spyder has emphasized interbar gausian shifts and they are named IBGS. Here the intrabar context is examined. As you saw, the zone was examined and you know that you know the prior bar WAS NOT IN THAT ZONE for the first VE occurance. What about when price is operating to make another VE or price is staying in the zone for more than one bar. Look to volume more closely and look at either side of the market: the dominant or the non dominant. You will be surprised, I believe. The "tells" are in how each side is behaving and just who is in the majority and minority. This is tough to deal with at first but soon the intellect takes charge and "sometimes" goes away simply because you are in one or the other branch of a tree. I am taking you there to the branches so you can then, through experience, take the correct branch on each occasion of branching. 4. If the faster fractal did not complete, then you have to deal with a non dominant leg followed by a dominant leg to get to completion. 5. Toss in a bookmark at the extreme of the VE and watch volume and price work. 6. If you have 4. in play then treat the VE as a new point 2 and the FTT of M1 as the new point 3. 7. Your reversal on the extreme of the VE let you go through the IBGS, if any, on the correct side of the market. A IBGS is a good piece in terms of WMCN to complete a nondominant leg. In point to point trading, you trade M1 and M2. In FTT to FTT trading you sit through M1 and M2 to get the two legs of the faster fractal completed. In this point I am asking you to get sharpe on volume and how it leads price. I am also asking you to get sharpe on the relative nature of either non dominant or dominant volume. What you are reading is me going to where you are and opening door after door for you to begin to look through. As you do, you are satisfying a NEED that your mind has notified you that the NEED exists. So several new pieces, for you, have appeared. you mind is calling each piece a "what". all of these "whats" have places to go to in your mind. They are goi9ng to "where" they want to reside. They will make friends with the pieces already there. They will begin to fit into your already orderly mind. All this collection of pieces is forming a spectrum all orderly according to the work the pieces do for you. The spectrum is called "differentiation". You have accomplished a lot. Your mind is asking for more pieces so "sometimes" goes away and more "consistency" results from having a tree of paths that contain all the orders of events that can occur according to the system of MADA, the pattern and the interconnections of the nested fractals. As all these "whats" find "where" the mind will be keeping them, you will notice there is an assembly line going on to build your mind into a differentiated organization. You are, thus, approaching unconscious competence. Coherence, which you have, is a requirement for building the mind. In contrast, betting, prediction and money and risk management, are incoherent and the mind does not get built. All it does instead is the OODA loop of being like a fighter pilot in a death struggle. Congratulations. Trading simply becomes like driving a car when your mind becomes more or less differentiated.
Ok I completely understand the first part of this quote: If the volume is peaking at less than the max volume from pt 1 to pt 2 this I am not sure if I understand : and the volume difference going from the minimum trough @ pt 3 ------------------------------------------------------------------------------------ Is it correct to understand this as, if the volume is peaking . . . at less than the max volume from pt 1 to pt 2 and if that peaking volume is the volume that began from the pt 3 trough on, and has finished with a difference less than the first peak of volume . . . then the trading fractal has also completed its pattern concurrently with the next faster fractal ? Is the second part highlighted in red above interpreted correctly or is there another meaning to this ? Thanks Jack for any feedback.
Sorry about the fuzziness of my comment. The end of a pattern has a volume. the size of the volume is important. It is easy to look back and see how this volume compares to other volume in the pattern. There is a non stationarity consideration and it is expressed in the duration of the pattern and the volumes within the pattern. I divided the things to look at.... into two comparisons. One was easy to grasp. This was the ending peak volume to the maximum volume in the pattern (which occured near the beginning of the pattern) The second comparison dealt with a volume difference measured from the trough at point 3. This is a difference that does not get measured from zero volume. The first trough to peak measure occurred in the leg from point 1 to point 2. This was the first dominant volume difference (and accumulation over time in some bars) in the pattern. The second trough to peak measure is something I pointed out regarding the VE. The "sometimes" issue was raised and I wanted the reader to consider what is going on as "completion" takes place or "completion is not yet taking place". I am trying to get "pieces" on the table. As they appear, the mind is chugging away. The mind "gets" the pieces. With coherence being in existance, the mind is supremely capable of dealing with each piece and putting it where it belongs in relation ot other established pieces. To put a fine point on it; the mind is not this simple. "Pieces" actually have many mental parts. The differentiated mind is so complex and sufficient that a person is NOT conscious of it operations nor is the person giving his mind step by step instructions to operate successfully. Consider "reading"; we do it all the time. We read successfully. Consider markets. Markets are VERY readable. Look about in ET. There is little or no chance that many members will ever be able to read a market. Almost all members continually explain that they cannot do any market reading. Here, briefly, we looked at the reading time (process) around a VE or ve and VE and so on. People who can read markets, have a bar vocabulary (V and P), a spatial voabulary, a pattern vocabulary, and a movement vocabulary. Imagine it all as learning to watch movies or watch TV. Children watch cartoons. Adults watch other more involved subjects and stories. Traders who are coherent and have differentiated minds only watch reruns in red and black with backgrounds. PEP and its applications: PVT, SCT and SSR are binary vector reruns based on deductive reasoning. What is cool about binary vectors is that they have no uncertainty. This fits in very well with how a child advances in looking at cartoons and going into the more difficult "run dick run" level of stories. Pool extraction. One pattern....nested fractals...one routine.....MADA.... closure each cycle of MADA. Small vocabularies. One order of events. An interlocking structure. Here is what I am saying. We are reading using a binary vector orientation. Lets say our channel only does African animals living in a defined neighborhood in a small African community. How mentally developed do we have to be to get Little Black Sambo straight after seeing it 50 times. We all know by now that butter is made out of very tired tigers. Read Andrew W. Lo's, November 13, 2008, comments to the house.34 pages with hilarious graphs). He explains the financial crisis is partial caused by not graduating enough PhD's in financial engineeering so the the financial industry can keep up with the products the industry is creating that have caused the present Depression. Get real To get rich you need a vocabulary and a differentiated mind like someone who gets that tired tigers turn into butter. B2B 2R 2B Peaks and troughs. VE's, extension and fanning occur and ONLY occur AFTER POINT 3. The pattern is a V, P pattern. Because fractals are nestd and each fractal has patterns going through an order of events, in time it is possible to read each bar of the market relative to the prior bar. To beat everyone who is trading the markets is simple. Why was the bookshelf filled with torn and tattered children's books? Why did children get to know every word of every book? They annotated and they did logs. They could fill in the log BEFORE the day happened. VE's cross the ltl going from right to left. Faster fractals either complete or not. This is known by annotation of volume and price. ve's and VE's happening concurrently are even more fun. Trending days keep you in a slower fractal for a day or days. But the beat goes on and on in the order of events. Take the torn book off the shelf and see the same words on each page as you turn the pages one more time. Kids are coherent and they don't bet. They know they know the tiger turns into butter. Fanning it a new point 3 just like a VE could be a new point 2. (not always as was pointed out. (If so a nw point 3 will occur at the end of M1.) 4 out of 5 people reject all of this. It is tough to learn the vocabulary of the markets in a binary vector language. To gain certainty is a small price to pay to not be gambling, betting or predicting. The Committee on Oversight and Reform listened to Lo and a lot of others. So, will hedging sliced and diced stuff be limited to just ten times the underlying? Who cares. PEP and its applications provide immunity. Going across one half a day on the ES is the annual income of the hedger's corporation. PEP EXTRACTS from the pool. By doing MADA, which includes annotating and logging, you get to have a vocabulary that lets you always "know you know". Read the prints in the Expert thread. In two days with one contract the guy made 1/3 of tha value of a contract. Count the minutes he was in the market. Don't worry that the print is incomplete. In six days he could double his money. What would it be like if he used MADA, annotated and had a vocabulary to run a log? What is it like to always "know that you know? Take a log and fill in the three rightmost columns with the interlocking order of events on the three fractals. Do it 5 times and see how fast you get. Do it 10 times and see how your vocabulary improves. Always put in the P's and T's on the volume column. Do the log in real time giving yourself 4 to 6 rows for each five minute bar. Watch what you write in the YM and ES column. Notice you write the same thing in the ES column after you write it in the YM column. notice the S/S changes color BEFORE you fill it in on the YM column. How long does it take to print your first logging sheet? How long does it take to annotate your first day? How long does it take to memorize Little Black Sambo? How long does it take to sand down (440 wet and dry) the hull of your sloop? What does two gallons of anti barnicle paint cost? How many refills is that on your sprayer or did you get a supply tube? lol....
Hi Jack The attached chart was taken from your 12-14-09 02:02 PM post. I slightly edited it to make 5 min chart portion bigger. Could you kindly mark your Comparison one and Comparison two in the chart? TIA