Discussion in 'Risk Management' started by traitor786, Jan 15, 2013.

  1. Ok so I have noticed this since I started trading and always found it interesting. When I draw a trend line when it is hit their usually is alot of volume keep price action within the trend. So others are entering the market when I am entering.

    Since this is usually the biggest volume bars one must assume that we should follow this volume.

    The question on what came firts volume or price is not the right question to ask, but it would be wiser to ask why did volume come in a certain time. What are the majority of people trading? what indicator or what trend line.

    Is the volume coming in on a MA crossover ? or a trend line or what ever.

    Then go back in history a bit and see if it is consistent.

    Is the volume at these key times still holding up, or have people lost interest or accomplished their goal.

    I was watching Warren Buffet and when he was asked when he sold a certain stock. me responded by saying it was over 6 months.

    I imagine that every time he sold it would show some volume on the chart of the stock he sold. this would create traceable volume increases and one should be able to get an idea if he was selling at the same price each time (support resistance) or if he was doing so at increasing price levels (trend line)

    Also if we look carefully at high volume wide range bars we can see that these bars are very important as they represent selling or buying price initiation and limits. If some one is willing to buy in that range only, we may be able to back test and see if they will still buy at that level down the line. At worst it would be a good pace to put a stop.
  2. I am reminded of something I read a while ago. McDonald sells the Mc rib at different times. But the claim was that Mc Donalds seemed to have a great way of introducing the Mcrib when prok prices were low.

    But maybe that is not the case, Maybe they just have a buy at a certain price. Maybe pork prices are supposed to be low but when ever they start pass a key level MC D's puts in massive buying pressure.

    So they are not buying when it is low, they are actually stopping it from going down. This would mean that we would see MC D's volume kick in and see what price they are willing to go up to ( or how high the bars is)

    I havent looked in to this yet and I will. But I am wondering if you think major big buyers can be followed by big orders (volume) and if we can detect the pattern or price they are willing to buy up until. Also we may be able to see if they buying a pattern by connecting high volume bars. And onnce a price or pattern is detected, could we see the lack of volume indicating that the missinon is done?
  3. Price and volume are related.

    Hypotheses are based on volume leading price.

    The parametric measures of hypotheses are orthogonal (vector units).

    None of the above is known or used in the OODA routine of CW oriented traders.

    To succeed in trading, you have to think in a deductive manner. Your post is a collection of inductive thoughts instead.
  4. God help me,

    I appreciate your help in the matter. It is impressive that you mention this. But I have learnt not to be impressed on forums in general as anyone has access to ones soul from previous posts they have made. But still, impressed.

    Your vector you presented, to me, can be taken figuratively or protratuarilly. Both have opposite meanings and it doesn't really matter today.

    You present a very fundamental problem. I have even gone more fundamental.

    Unfortunately, not all have been dealt a fare deck of cards. Sure many have had bad things happen, but their future is unknown and life is a gamble. Others may have a defective oo in their odda that lingers.

    I think you tried to direct me somewhere, Im not really sure. I'll glance over just cause of your post.

    Every thread, every post, especially in this forum, for one of two reasons, has a second string of thoughts behind it. Unfortunately, I am open to them as I am yours as I am open to squirrels.

    To deduce, the need to test would be needed. To test not only different systems but even if one needs a such a system.

    Testing is not in my cards it seems. I mean, sure I could but it would mean deducing everything else Forever.

    Chances that by choosing I stumble upon an answer in my first few attempts is slim (much less then 5%). To others it just means to pick up and try another path. This option has not been made available to me.

    I'm forced to use what makes most sense in a world of marketing that for the first time I wonder if I cant detect a pitch (that was my strength)

    I blindly use stats as it is the only thing that I trust over people.
    Without knowing if I am on the right track it is hard to proceed. Again once a path is taken if it is wrong there is no starting from scratches again, only optimization, which can cost too much if my chosen path was wrong.

    So yes, there is a lack of conviction, actually I am using the forum as an outlet of ideas that do not even matter right now. It is a distraction... indicators,,, volume,,, price ect.

    That is not stats. Stats is nothing but +1 and -1
    manual back tests are greatly limiting, and with out the conviction its hard to give it the all in that is needed. Maybe better to fish in a sea of hope and find that magic indicator that always works.

    I can understand the idea behind programming very well. the actual language too I can learn that, but to be able to write it... well take a look at my posts that I have tried so hard to edit. language is not my thing.

    under this situation (Well under 5 % chance of success), to decide is wrong.

    Chances of lingering around for another year in hopes that my own lifes luck begins to average out is more probable then making the right choice. The number of people that choose sats over god knows what is too high for the low success rate. And even at that, the tails of their tails will one day eat them up.

    But its nice to have the reality of the situation at the forefront of my head. Just without other options a dead end presents its self.
    And its interesting to see what is in a dead end.
  5. continuing on volume just for today.

    I have also realised that a bar with a wide rang that has high volume seems to indicate the point at which a big buyer or a group of small buyers) represents either a range or a high that buyers or sellers are wiling to purchase.

    That means that the buyer may still have some buying to do but he will not do it as the price has gone to high. Instead he will wait for short term traders to realize that there really is not much holding up the market and let price come back down to his target and start repurchasing again.

    I seen this today. Price reverse around a previous pivot. The key word was around.

    Around ! how can you trade around? what is that ? am i supposed to be seeing that a line fits better here or right at he top ? No, there's nothing. Its not tradable I concluded as I took a quick look at the volume that i hated for so long.

    Boom the actual line was right at the top of the big range high volume bar! not the actual top.

    makes sence, the buyer is willing to buy at that price so when we come back down to it he starts to buy again

    As a matter of fact, looking that the chart again, all i saw was a bunch of scalpers with there small bars and hoping a trend would last all feeding off one another thinking the other is the one that will interest our big buyer.

    So we have a huge high vol bar long in range with a bunch of cheap doji hammerish type scalping.

    I can see the frustration in the eyes of our big buyer. not that there was any harm caused by the scalpers. but just the annoyance of having to wait for scalpers to realize they are just feeding off one another and the market to come back in range.

    The buyer ate up the orders as they entered in to his buying area.
    and may have caused more scalping ( i forget)

    Anyways moving ahead, i noticed that some times I got a feeling if the big buyers were still buying . I forget what it was that told me this

    For now I will say a combination of :

    1. price coming back in the zone and lingering around with uncertain candles in the buying area. Looked like buying pressure from scalpers not our big buyer, he must of been absent

    2. a lack in volume again , he must of been absent.
    now the lack of volume bit maybe tricky.

    If teh buyer is only buying at 1650 and he is aggressive, when price comes there he will take any and all orders.

    But what if there are no orders?
    This is very possible, TA traders may have their live right where the last low was (1650) (not actual number) it is in there backtesting to assume that the big buyer will strike back every once in a while.

    so every one is buying as soon as it reaches the buyers last buying price.

    We will see sell orders disappear, or for that matter, all orders may be waiting for a good looking candle before entering. leading to no liquidity.

    On a side note, If this is right, I can walk in at this point and buy and a few traders who find it is better just buy then wait will follow every tick is being watched but the close. If I get a good close enter more traders, and more and more.

    But all of us are looking for a few pips and the we get out. Price falls back in our buyers range and no one is picking it up.

    So i go back , and look at the big volume days,

    Not many that stand out really. most are naturally in the morning.

    I recall working at my propshop, I remember every once in a while right after i enter my order I hear the guy on the squwack box announce that paper enters the market and then i put another trade based on the same strategy and paper is absent ?

    Wish I could have that data now.

    So we are assuming that there are 2 distinctive players paper and locals.

    there is a need to know when paper is buying and selling. I know buying at the same time as paper will not yield profit, I would of noticed that, Besides there is more then 1 paper.

    Still have to separate the data. Maybe if I look for high volume days and zoom in to a 5 min chart I can see if threat extra volume was in a days span or a 5 min span .

    Problem is there will be some low volume days that have a 5min bar within them with huge volume and is not seen in daily volume.

    Now just to be clear, I have been down this path before, I have always noticed that my entrys tend to line up with volume. Now I will see if failure of having volume on board means that a failure will occure.

    but previous strategies that were not back tested looked like they governed the markets. so better to stay on track and try to back test.
  6. The minority is what causes price movement.

    The minority is easily measured BEFORE price begins to move.

    Each time the minority is used up, price seeks a new adjacent level.

    A trend begins, continues and ends because of this single principle.

    What is said above is a deduction where reasoning was used.

    The public and the financial industry does not use this nor think like this.

    A giant step can be taken. List the activities of the markets in order of the activity level. Observe how far down the list you find buying and selling.
  7. Each statement has too many quetsions, to give an idea...

    Does the minority mean the minority of the money, or a minority of people with the majority of money. etc....

    Dropping volume in to excel and sorting by 5 min charts would be a really good idea ! (thanks for the idea if it is what you suggested or not)

    I trust you understand why I cant yet commit to your thread(s) right now.

    Can't we say that you look at price action or candles/vol and based on current candle formation and current price, or both combined, you have a system that decides how good each additional bar/volume/speed is and are only willing to stay in the market if the trend presented is one that is proven profitable?

    From there we have a system. Complicated but still a system that has good back testing and is based on stats.

    Maybe a MA with a fork and some Bollinger will also have good back testing ?

    Further, I can't back test your system to see how it preforms in different markets.

    (I assume you use stats and back testing) If not, you may have spark an interest !! :)

    I really like your guidance and skim through alot of your stuff. Please don't take this as an insult. It takes time and that is where my day went.

    I am not looking for a short cut to make money. In the end what needs to me learnt will need to be learnt. I am looking for an approach that gives smaller rewards but more often. (like trying to reduce daily losses) So there is feedback. That I can chart and understand why things slowed down. Nothing wrong with plateaus or small dips based on learning experience. (just a fear of not having decided my thoughts on back testing vs actually trading)

    Do you see this alternet approach as something that will slow me down more then being behind by 1 step.. (step one being break even, and step 2 being profitable).

    That is a delay I can afford.

    If you understand , thank you for your understanding.

    But either way thank you for your time!
  8. Paddler


    Hey OP,

    Say the property market in where you live is booming. It is commonly called a seller market. Who is the minority? Who is in control of the market?

    Same thing, same questions in a buyer market.

    HTH. :D
  9. "Each statement has too many quetsions, to give an idea..."

    This is a big topic, in your post you accomplish a lot by dealing with the concepts you read.

    In intellectual exploration, your focus could be seeing the big conceptual picture first. Concepts and princples describe the subject. They are NOT stepping stones for invention.

    The statments envelop regions of the system space. Markets owner's have rules of operation. Particpant behave to successfully relate to the oppotunities. So participants problem solve by using the information and to extend themselves they create more information by using bona fide tools.

    Markets are simple because of their owner's operating rules and the fact that participants are constrained to behave.

    Two kinds of factual information flow: the history unfolds and the new future is "telegraphed". Now segway to minority.
  10. "Does the minority mean the minority of the money, or a minority of people with the majority of money. etc...."

    Two groups of participants play according to the market rules. They are on opposites sides of the market, which only has two sides.

    At a given time one group or the other is the minority. The unit of measure is contract orders (or lots as in stocks) that are unfilled but in a FIFO line. The smallest side is the minority.

    A trader who is in the majority is not going to be well served for making money.

    Some of us who trade can see the FIFO arrangement is a money making limitation so we do not use FIFO and do participation from the fast lane.

    We watch the FIFO unfilled contracts orders. We see who is in control. And we stay on the correct side of the market at all times.

    Big money has a bad habit. THey get into the FIFO lines and do not look at how many others are in front of them. This majority piles up higher and higher until more are there than orders will be filled. So the last FIFO positions never get acted upon.

    Peple who trade from the fast lane are facing the minority. They get a trade and then the minority is less and less.

    The fast lane people keep showing up in the fast lane and as a minority group is used up they go to the next minority group that forms the trend forard movement.

    As you can guess, after a while the price has moves several steps to a greater extreme.

    Then alot of people are will ing to give up their position and so they pile into the minority side and the minority FIFO becomes the majority and the market then changes sentiment and leaves all these orders unfilled as the markeet goes the other way.

    What is to be learned from this is that you always trade using the fast lane and you never do the getting in the FIFO lines. The market oprating rule for this is the "market type order".

    Your ATS generates market orders from signals from the two information flows: the history of market operations and the planned future market orders. Between these to information flow groups is a place called the Present. The Present is where some people DO things and other people plan things.

    ATS's have a portion of coding that takes information and produces leading indicators of price. One of the nicest of these just watches the smart and big money and is 20 to 30 seconds ahead of the Present in when it "announces" coming sentiment change. This is a trader tool that extends the thinking of a traders and makes him more profitable.
    #10     Jan 16, 2013