tntneo may I ask you a question about predicting volatility. Is it like stock analysis. are you looking for low vol then breakout. Can you apply adx to vol. Are you looking for vol compression like connors 6/10 historical or bb squeeze. can you look for a pullback to the 20 day vol ave. I am tantalized by options software and option spreads but then when the program asks me to predict either price on a certain data or the level of volaltility I realize I have lost my edge before I begin. Is the study of volitility and its application to the options charting programs a worthwhile endeavor for someone who day trades because he does not enjoy overnight risk. thanks
thanks so much for your thoughts. first let me clarify a few things i may have miscommunicated. I'm talking NDX here, strictly NDX. I said this week would make new lows and it would be a bottom for a multi week rally, not the bottom of the bottom of the market. The 500 points thing wasn't a prediction, it was a maybe, as in the market rallied over 500 points off September lows. a week or 2 ago, I said i couldn't be sure on the exact day because the September 11 thing messed up my charts. I said it would be the 19 or 20, turns out it's the 21st. But regardless of which one, it would be this week. The name of the thread was just catchy, I didn't mean to proclaim the exact second the market bottomed. So the fact the market went down after i started the thread today isn't really important. I said this week would be the bottom, and today I said it would be today because we made new lows on the NDX. I just wanted to clear that up for most of the people that don't read my journal or some of the other related threads like "is the dow crashing" etc. Darkhorse, I must say I disagree with you about the possibilities of prediction long term. A chart is a chart is a chart. If you read candlestick charts or bar charts, or use fibonacci, elliot wave, or gann, you should know that those types of ta can be applied to all timeframes. I am a chart reader only. I don't watch level 2 or time and sales. As far as whether this has to do with day trading or just trading, it doesn't really matter. Theres nothing different about daytraders, swing traders, or position traders. I do all three and more. This particular thread is obviously geared toward swing trading. If all you do is short the rallies, be careful what time frame you play in. Make sure you are doing it with the trend. (and kiss your ass good buy if you short my rally ) I'm just trying to make money just like you guys, I thought i'd share what I'm doing and what I think.
I appreciate your views, if anything they have provoked some thoughtful discussion. It takes opinions to make a market. I personally don't think fibonacci / gann / elliott have true validity in any time frame, but that's another debate entirely. In a nutshell I will say that all three are too close to coinflip in terms of accuracy, and all three create patterns that seem spottable in hindsight but are more likely just part of normal chaos distribution. With all the bounces and reversals a market exhibits over a given period, a chunk of them will visually conform to any guru measurement theory simply by default. But my real problem with long term chart prediction is not in the predictive abilities of the chart itself, but rather the rare event exposure and paradigm shift exposure that comes with larger time scale. It only takes one or two bars to throw a trend out of whack. The farther you stretch your time horizon, the greater the possibility that your trend could be disrupted or reversed by an unknown event or series of events. You expose yourself to paradigm shifts by the same reasoning also. For example: chart wrecking events like the crash of '87 and the crash of '29 are rare, BUT the longer your time frame, the higher the probability that you will be exposed to a rare event. The more thunderstorms you expose yourself to, the higher the chances of a lightning strike. Examples of positive rare events or paradigm shifts might be something like the capturing of Osama Bin Laden, or the partial privatization of social security, or a major reduction in the capital gains tax. Thus, a short term chart can be "predicted" with far more confidence simply because the probability of a rare event or paradigm shift occurring within that shorter time space is exponentially smaller. Much less likelihood of a surprise between here and there. This is why looking too far ahead is folly, in trading and in life. 'Boast not thyself of tomorrow; for thou knowest not what a day may bring forth.' -Proverbs 27:1
Very nice post Lundy ... and thanks for sharing your thoughts ... and I truly think your thoughts needed further clarification ... and now that it's done ... let's see what happens next week ... Good Trading !
OK Lundy. Swing trading it is, and yes traders and investors and day traders : all the same. Unless you invest like Buffet you are a trader [when you buy knowing you will sell later... it does not matter if it is 2 mn, 2 weeks, 2 months or 2 years or even 2 decades]. If you are trying to catch a reaction similar to the one after Sept 11, your comments make more sense. I disagree with the plan, but hey ! it's your trade. I can disagree and make money, you can disagree and also make money with your plan. there is no right way. We are in different time frames too. tntneo
Just like stocks and futures the goal is not to predict really. But to know what is happening. You can apply indicators to volatility charts etc.. However, just like for stocks, the less is the better. The chart tells you a lot. Also, there are all kind of strategies to handle of this. What I like is diversification, because I too, dislike overnight risk (who does ?). So market making on one side and index trading and hedging.. You can't be wrong on all sides at the same time. It smoothes your equity curve. Nothing is perfect. But you can choose methods compatible with your personality and style. I mean, I respect and am impressed very much P2's style and GNP. Probably because it is so different than what I can do. Maybe he would hate my style. But the truth of the market is both can make money. tntneo
The DJIA met retest of last Fridayâs low, and the Market would be back to bullish now. For good measure, the market threw in an Arms Index reading of 2.35, and a CBOE Put/Call Volume Ratio of 1.04, both of which are high enough to be considered oversold readings. It is still possible that a China Syndrome could be in effect and the market is going to melt its way all the way through every floor it encounters, but this sure does look like a bottom. Guys if you decide to go long always protect yourself with some puts.