Its similar to what Prof said and I quote - You only trade instruments that give you enough liquidity & volatility to be able to see strength (up or down), price direction (up or down), consolidation (at a top) or consolidation (at a bottom). Once you can easily see those 6 specific areas of direction and strength you can easily make the decision to trade that chart on that particular day or find another instrument that IS easy to ready. - End of quote. The difference is there is no complicated mathematics in my approach.
I can't exactly say the nuts and bolts - I don't day trade intraday no more- I gave up that treasure hunt method, not saying that it does not work just not my style. Read again what Prof says he makes a lot of sense except for the mathematical jargon.
Of course the volume of each market changes. It changes every second of every day but if the volume weight of the bars is a constant then as volume increases, the charts simple creates its bars faster. Then as volume decreases, the chart simple creates it's bars slower. The oscillations that CVB chart creates are perfectly consistent because the bar weight value never changes. I don't understand why individuals think that by eliminating the variable aspect of a problem is curve fitting when in fact the exact opposite is true. Let me see if I can explain this a little simpler. Let's say I have an orchard that has 100 apple trees. Last year I had a high school kid come in to pick apples and told him I needed know the yield of the orchard but I was willing to pay him $2 a bushel for what he picked. He ended up picking 80 bushels in 8 hours but I could see some of the baskets were lighter in volume than others. The only way to get an accurate volume count (yield) was to empty the baskets and count each apple but that would take too long so I took an average but knew in advance it wouldn't be exact. I estimated I had 2400 apples. When the store bought the apples I found I had even less. This year I hired the same lad and told him I would pay him $2.50 a bushel but he had to put 50 apples into each bushel basket. When he finished he had 80 bushels again and again he did it in 8 hours but I had an accurate count of the yield. I had a better crop of apples this year than last, I had an accurate yield count, the lad made more money for basically the same work. It is not curve fitting to count each apple picked in each basket and to make sure the same amount of apples are in each basket, that is called accuracy and consistency. Now I know this is a simple problem but it is exactly the problem with the charts. Above we now have production set exactly at 50 apples per bushel (an exact amount of volume per bar) the greater the production and pickers the more bushels are produced per hour. The less production and less pickers the less bushels are produced per hour but the constant is the bushels ALWAYS contains the exact same number of apples. Now multiple this problem by thousands of orchards not just my single orchard and you can see how it relates to a market that is highly liquid. The local Honda plant doesn't pay their piece-work production employees for the number of containers they ship from the plant each day or the number of containers they produce each 8 hour day, they pay them for the number of cars IN the containers. They could easily short the containers. It is not curve fitting to count each car packed into each container each day, that is called accuracy. These are simple business math problems that are taught in colleges throughout the world. Once I made the comparison of chart volume to a physical product in the field or in a factory and the math guys had their "light bulbs" go off. I've traded Sugar for years and as volume increased I simply went to a slower chart. The way I read the chart was identical. I've traded the YM for years and as volume increased I simply went to a slower chart. The way I read the chart was identical. There is no such thing in what I do as a "false signal". If the chart goes into consolidation I simply go trade another market that isn't consolidating. It must have been fun trading 100 years ago during the Sherman Anti-Trust Act. What was that like? If you were a farmer or a businessman and traded based on "time" (sub daily increments) or "transactions" back then someone would have forcibly escorted you to the nearest ship heading east back toward good old England. Technical analysis began with the Dutch in the 17th century and in Asia in the 18th century by using daily bars for the Dutch and candlesticks in Asia based on daily ranges. We have come a long way since then and now have the ability to be more accurate in our analysis. Why should be be less accurate simply because "that is the way we've done it for a hundred years". That is like Fortune's comment about his grandmother refusing to use a microwave or my father-in-law refusing to use a cell phone. Their comments have a familiar ring, "We didn't need them 50 years ago why should I use them now?".
Prof - let me rephrase - using your argument In terms of volume weighting per bar for you say 50 apples per bar is optimum number one has to carry out infinite iterations to arrive at that number that gives the maximum profit in that market. 50 apples might be OK now based on current data but next month it maybe 55 or 60 or 200 or 10. Unless ofcourse your mathematical models are always carrying the iterations to keep up with volume changes - which is curve fitting, then I give up.
You have already alluded that you do not like math but what I do isn't as much math based as it is common sense based. 50 apples isn't the optimum number, 50 apples is what I chose to put in the basket. The main point is that the number of apples in all of the baskets are a constant number. It could have been 40 or 30 or 20 or 60 or 101 as long as the number stays the same it is an easy an accurate way to assess total flow. I guess this is easy for me to understand because I grew up in an (ag) producer environment where exact measurements were a necessity not a choice. From there I taught problem solving, hardware integration, software integration and logic at a corporate and college level so exact calculations again were a necessity not a choice. This is why when I started researching the markets and trying to make sense out of chart structure, over 16 years ago, I couldn't figure out why charts were based on inconsistencies and variables instead of exact measurements. If any other industry tried that it would be laughed at but traders accept it & take it for granted that it is acceptable. Not because it makes sense but because that is the only way they have ever done it. Shagi, stop taking offense to what I do. I'm not saying what I do is better than what you do. I'm not saying I make more money than you do. I'm simply saying the structure of my charting environment, using constant volume bars is a more accurate display of natural price action, nothing more. It doesn't matter what the structure is, one can either trade or not. I know plenty of people using volume bars that couldn't trade themselves out of wet paper bag. You are fixated on the term "curve fitted" and need to have someone that is a business math professor or teacher (that you would actually believe) explain to you that using volume bars isn't curve fitting.
+1 Why Shagi, I would say your scientific thinking is definitely out of place on ET - a place where pseudoscience, charlatanism and market-voodoo are the norm. A place of never ending comedy!
Let us not overlook the obvious. Bars [candles] are a synthetic added by Traders in order to help them read price which simply tics up or tics down