Trading with price action

Discussion in 'Strategy Building' started by inandlong, Feb 14, 2003.

  1. There is a free stochastic model based on garch-like stochastic approach available here:

    But prediction based on stochastic is very different from model based on deterministic model with a causal reasoning. I mean stochastic use a black box approach a sort of structure fitting approach similar to curve fitting whereas a true model used abstract reasoning with CAUSALITY hypothesis and deduct a set of equations that are afterwards confronted to realities. So there can be no structure fitting and the probability that realities coïncide with the model by pure hasard is very low and repeating hundred and thousands of time the confrontation if it stays true then the probabilty lower to 1 on the number of stars in all galaxies of the Universe :D

    #21     Feb 15, 2003
  2. A Former mentor of mine was able to take money from the market like it was an ATM machine using nothing but fibonacci retracements and extensions (approx. numbers) with a 5 min . 30 min and daily chart of the ES. Personally i couldnt make it my trading style but yessir there is something to price action filtered by fibonacci.
    #22     Feb 15, 2003
  3. You can trade exclusively from price action on the tape and do well, but you need a good memory of the critical levels for your stocks. For the mental midgets like myself, I need to complement price action with charts to determine these levels. I don't find stochastics useful since it just repeats what the tape tells you anyway.
    #23     Feb 15, 2003
  4. Using just price or price and volume is best done by following the P,V relation since it takes into account the different market paces a person runs into.

    If a person uses a matrix of paces and price data indicators, it is more productive since the migration through the cells has a very high probability for the possible paths (the market operating point never jumps around either).

    I read the series of posts and it is very surprizing to see that most people do not use a comprehensive set of signals vis a vis price or price/volume..
    #24     Feb 15, 2003
  5. Can you repeat this in layman's terms for me? It sounds like chaos theory mumbo jumbo!

    I think you are describing basic tape reading using scientific terms. Matrix of paces? Cells migrating through paths and market operating points? Can't you just say that when you sense an order imbalance where buyers outnumber sellers, as dictated by the tape, then a stock will most probably appreciate in price?

    #25     Feb 15, 2003
  6. Maverick1


    Focusing purely on price and volume is probably the most objective analysis and method of trading

    If you keep things simple in your analysis that doesn't necessarily mean that you are being simplistic. I guess like Einstein said, you've got to make things simple but not any simpler. There's no need to worry about those who use rocket science in their quest for an edge. While I love math/statistics, I think it's important to know where its power stops.

    If there ever was one area where it pays to get fancy I would say that's money management and position sizing. Using improvements on the fixed fractional method will generate better returns.

    Other than that, for me it's all about learning to read and interpret individual price bars and their relation to each other. Here all four standard variables are crucial, OHLC. For ex, where the market closed relative to the open, that shows real buying or selling pressure. Larry Williams and Demark have done a lot of work in that area. The action in the first 30 mins of trading around the opening price also has much significance. Then there's volatility and expansion/contraction in range. Like Paul Tudor Jones put it, when a market wants to go somewhere, it will tell you through an expansion of range

    Then you can throw in the time tested technical setups, pullbacks and W and M formations. Couple that with a good understanding of the geometry of the market and fibonacci work and you're well on your way.

    No need for all those worthless indicators, they are all a derivative of price. It's all right there in the price and volume. Take the clutter out and that will lead to more consistency and better results.
    #26     Feb 15, 2003
  7. nitro


    Even traders that trade "pure" price action, the pit traders, are always aware of S/R lines on at least the daily/weekly/monthly time frame.

    #27     Feb 15, 2003
  8. OPC


    Would anyone mind to sum up the basics of expansion/contraction in range, as related to market trend forecasting? Actually my question is: how did Paul Tudor Jones put it? :)

    #28     Feb 15, 2003
  9. My model take in account price and volume. Now what I can affirm is that volume has practically no impact on price level so that I can just eliminate the volume because it increased the time of calculation. This is very surprising and one cannot expect it without the model. That's why many techniques of pivots and Fibonacci like just use prices. Volume is then used as a confirmation factor.

    #29     Feb 15, 2003
  10. Maverick1


    Trading price action doesn't imply ignoring the critical 'alert zones' if you will, R1, S1, fib retracements, extensions. Rather it makes the latter, together with other elements such as pattern recognition, the backbone of the analysis.
    #30     Feb 15, 2003