Data's predictive power isn't based on its age; its based on your target time frame and your chosen technique. *** On this we can agree, and to make a trading decision (either Buy, Sell, Close, Hold or Do Not Trade) one must focus on what price is currently doing ... i.e., price action. This is true regardless of what are derivative tools you are using to analyze it (Anything that is NOT the current price is a derivative, btw).
Price action is exhaust to contract exchange. You could argue that PA is just indication. You need to be able to understand what prices are in play, this is the cycle.
Price likes to mark it's territory, just like a dog taking a "piss" in different areas. When price is marking its territory it places an S for Support and an R for resistance depending if the mark was situated on the south or the north, then it just goes on and plays between the two territories, most of the time, mindlessly. When it gets bored of the playing it goes back to any of the two closest previous marked territories and thinks, sometimes for a second, sometimes for a longer duration of time, if it's going to keep the same label or change it to the opposite one. Many times the doggy is confused and changes his mind after the recent change and changes its back again to its previous state or label, and then it goes on to the next territory and so the circle lasts perpetually. That, is price action.
Yep, that's about it. The market will always facilitate the best exchanges. You are either in on this,....or you are out.
I view PA as a commonly espoused "modus" or "technique". Thus PA is a "system" by which the espousee's make money. The OODA , adopted by Steenbarger from it originator, John Boyd, a famous fighter pilot instructor, introduces most of the nuances and baggage of PA "traders". "differentiation" occurs as a consequence and the OP refers to this "differentiation" with many terms to tell his story. PositScience's Brain Fitness Program in a well conceived way deals with inducing Thinking Faster, Focusing Better and Remembering More... This seems to be the definition of improving PA skills and the intrinsic knowledge upon which it is based. As OODA shows, there is an inductive aspect (a sort of curve fitting common mistake) in the D and A portions. All PA traders recognized fully this is where "they do their thing". I won't characterize it with "my words" but it is uniformly characterized by several (3 major ones) ancillary things that go with and are made part of PA trading to deal with the inherent problem of being inductive in one's work and orientation. The consequences of the mind building that occurs and the way it affects perception is stark and revealing. The OP is making the case as we see. The elephant in the room is a dilemma. Induction in PA trading creates a perception that the human emotionally and continually finds deep needs to deal with. (The anxiety, fear and anger of PA trading). Steenbarger makes a living remediating this with his client population. As for the ATS's of PA trading, they unremarkably, are spoken of as things that come and go as the market continually changes (they say, by no longer fitting the original curves). Three things are apparent: 1. Using an inductively based feedback system for trading is a no no. 2. Perception is 90% inference from the mind's feedback that is merged with sensory (and emotion creating) 10% PA observations. (Inference is described by the OP using the word "instinct") 3. Differentiating the mind through repeated PA inductively derived drills (the act of trading daily) is a no win proposition, mentally and emotionally speaking. What does Steenbarger do to affect repairs? LTD.
Here is the feedback loop involved in perception. Sensing (10%) is merged with inference (90%) to form preception (100%) The OP's "instinct" is what neuro scientist's refer to as inference. (see Doidge for a collection of interesting successful repair projects and programs.)
So how do so many PA traders fail to look at the other two boundaries you didn't mention in your analogy? would you add those two boundaries to your analogy, please? I particularly liked how you discussed the dog changing his mind. you mentioned the mindless times of the dog too. What to you thing about the remaining time the dog spends?
Jack, firstly, let me say i really do enjoy your posts, and i mean that. Let's break away from the norm, the noobs, the wanabees. Two traders are separated by order entry strats around a given price or prices. The actual action and exchanges are for everyone to see, surely a profficient use of orders is key in the trading game? Bog standard works, but can bog standard move size?
As I see it, the OP is questioning whether or which came first, the chicken or the egg, and has come to the conclusion, (erroneously, I may add), that neither of the two, the chicken nor the egg, even exist! Bravo!