Higher Edge within a Single Candlestick

To be successful at predicting rain, the forecast does better during the regular rainy season. If this forecast is done every single day of the year, the accuracy drops.

Many assume AMVT is some sort of fancy TA strategy/system. That could be farther from the truth………the fundamental differences between the two is profound.

Technical Analysis is a search for "indicators", indications of the direction of price, in an attempt to "predict" the direction of price. they often use indicators to remove themselves, from the decision making process, Rather than think logically about the markets.

Most technical analysis works off an underlying, belief that the market is "day to day" serial correlated therefore, you should be able use previous days prices (candlestick) to "predict" the current day's prices. There are many TA strategies, however they all subscribe to and have the same notion that price changes in period A have something to tell traders about price changes in period B.

"Serial correlation, also known as autocorrelation, describes the relationship between observations on the same variable over different periods of time. This is different from traditional correlation, which compares multiple variables over one period of time. Technical analysts and investors use serial correlation to measure how well past price movements can predict future movements for the same asset, a crucial concept in technical stock market analysis. Because serial correlation is largely dependent on the time interval used, common examples of serial correlation are difficult to qualify. …….

"Serial correlation is a function of mean and variance; it can never be absolute and relies heavily on circumstance and interpretation. Even if there was 100% positive correlation, or mean aversion, or 100% negative correlation, or mean reverting, between an asset's price action over time, there is still no law dictating any such correlation must continue. Countless studies have been performed by financial analysts and econometricians to discover serial correlation among price changes in markets, stocks or portfolios, but these have generally yielded insignificant insights…….

Serial correlation suggests the returns distributed across observations are not strictly random. Even if the notion that price changes in period A have something to tell traders about price changes in period B is deeply ingrained in the framework of technical analysis, the actual existence and nature of any such correlation is debated among serious statisticians……….."
Pasted from <http://www.investopedia.com/ask/answ...gl=rira-layout>

So, You could say there is a lack of sufficient empirical evidence…….

Many technical analyst stubbornly believe they can predict the market. They are buoyed by their trading successes, believing these derive from their knowledge or methodology. Losses to them just means they have more work to do. In reality, a noise trader with a fifty - fifty chance of winning on each trade can have a string of successes strictly from the statistics. In the long run most uninformed traders lose, and are replaced by new recruits. A small percentage continue to survive because they have developed a good knowledge of the market and follow good trading habits.


A hypothesis is either a suggested explanation for an observable phenomenon, or a reasoned prediction of a possible causal correlation among multiple phenomena. In science, a theory is a tested, well-substantiated, unifying explanation for a set of verified, proven factors. A theory is always backed by evidence; a hypothesis is only a suggested possible outcome, and is testable and falsifiable.
Pasted from <http://www.diffen.com/difference/Hypothesis_vs_Theory>

One of the tenets of Auction Market Value Theory is that it precludes prediction. It is easy to see why. Think of a market that has just experienced a jump in price. Each trader responds in his own way, in his own time frame. This response also appears to all as a change in market behavior, collectively maybe up, maybe down or maybe no change. Each of us individually cannot know what is going to happen because those who are effecting the change by trading are just making up their minds. Until they make up their minds, we cannot know which way it will go. That 'time for the market to make up its mind' is called the relaxation time…………….

Theories are often thought to be incomplete without the ability to make predictions. This is not so. At base, a theory is an explanation of a phenomenon. A thorough understanding of the phenomenon may well lead to the ability to predict at some level. However, the feedback nature of a complex market may preclude an ability to develop lasting predictions. For example, if the theory were found to predict tomorrow's price, everyone would soon learn and the feedback would adjust the market to make the prediction fail. This is obvious in futures markets which are essentially zero sum (in the absence of transaction costs).

Another Auction Market Value Theory tenet is based on empirical testing/evidence, that there is no "day to day" serial correlation,
https://www.forexfactory.com/showthread.php?p=9852201#post9852201 that the market is a complex environment, self regulating and driven by feedback, not price. Feedback is what we get from our ticker. It works like this: A pulse, say a 20 point/pip jump in the instrument we are trading, shows up on our quoter. Everyone sees it at the same time. But not everyone reacts the same way or at the same speed. One trader might respond with an immediate buy order. Another may think about it for awhile and ultimately decide to sell, and so forth for the whole body of traders. The cumulative reaction of the market takes some time for everyone to get their vote in. That may seem like a lifetime to the trader chasing ticks. But the market is going to respond at its own pace, in its own time. The point is that the market is going to act at it's own speed, not at the pace you may wish

The characteristic of auction markets is a time delay in a market's response to a pulse of activity.Feedback from the widely scattered agents/traders takes time: each trader acts within his/her own interpretation of the market action and within his own timeframe. In a market driven by feedback the time to respond is variable depending on the impetus, but there is a norm, an average. A relaxation time, on average, can be found. but that obviously can change with market phase and local conditions.

A difficulty not present in the physical sciences is that auction market data has a strong psychological component. Price varies with the trader's perceptions. Those perceptions are reflected in the market feedback; volume, the tick flow or other short timeframe measures. Decoding the market activity reads the collective trader's mind. That mind may change, often not depending on (real) value but on fear and greed. A trader who can understand the market's feedback is in a far better position than one who cannot.

The differences between AMVT and TA are like night & day.......

TA analysis isn't what you would call "theory". Despite evidence to the contrary, there's this unspoken, not often thought about belief that market are "day to day" serial correlated therefore, you should be able use previous days prices (candlestick) to "predict" the current day's prices…….

If you think about it logically, If TA was a "theory" what empirical evidence is used as a foundation to support the basic principles behind "day to day" serial correlation used in the notion that price changes in period A have something to tell traders about price changes in period B? You need to first examine & prove such a correlation exists first, before you can develop an edge…..

From an AMVT perspective, the market is a complex environment, self regulating and driven by feedback, not price.
There is no "day to day" serial correlation, that each new day traders respond to each day with a fresh set of facts and local conditions,

AMVT is not some fancy TA strategy, two completely different animals………..
AMVT is somewhat more restrictive , it's analysis is limited to methods that you can prove………….

Many people spend years searching for the perfect combination of indicators, the jump from one TA strategy to another so they can better "predict" the direction of price………until after nothing seems to work, you might stop & ask yourself if maybe you misunderstood the underlying principles of TA? Before you spend an enormous time looking for an edge, first examine & prove such a correlation exists first, before you take on the task of developing an edge…..

My point is you have to ask yourself exactly what do you believe about the market, and most importantly WHY do you believe what you do? It's not about trading what you believe, it's about trading what you can prove. You can't predict something with out first proving such a correlation exists first …..

Anyway just a little food for thought…………….

Nice mate....so we probably could say that the prediction quality increases with a knowledge of the season....or alternatively that there is a correlated relationship between rainfall and season....or something like that. If we keep posing the questions to solve the train of logic...we can probably get very deep into the puzzle before we even need to defer to statistics to validate. :-)

PS What is critical however is that in this short dialogue on the weather and the markets is that we disregard the 'nouns' of rain and 'season' and focus on the process, namely the different properties that exist between different system conditions, or the degree of correlation between them. We are therefore focussing on processes common to both complex but different systems....namely the weather and financial markets. We can look for our nouns in the financial markets later.

The former distinction requires a lag before it can be identified and the latter doesn't. In this very simple dialogue talking about another complex system....we have gone very far in capturing an edge in a complex system with our forecasts without any programming or mathematics required.

I have and it came from hard work and developing over years of hard work, luck! “I’m a great believer in luck, and I find the harder I work, the more I have of it.“ – Thomas Jefferson

Good day CP

kindly forgive me if l missed the information l have questions for.l have read lots of your posts and understand the basics which are an eye opener(to the people whose eyes are open wide)but on the other posts on the other threads you mentioned your system identifies,trend and when ranging,1st question is do you only use the open as reference?or you still us envelopes,TSI?.maybe l have read too many of your posts,now confused which posts are really relevant which ones are not?2nd if still using envelopes what are settings for ranging and trending?(not expecting spoon feeding here,maybe speak in riddles and will have to think harder which l prefer or simple lets talk deviations,but as l said feel free to ignore if its too much info on a public forum)have been to most of your posts

This is nice, great result K, congratulation . I wish i can reach your best (max) result too some day ... although my best is still below yours, and i am quite happy with 7 as my worst result at the moment, i hope i can increment it soon ... i think i just need more time to train my brain and fingers, still trying ... gracias

Note that I’ve done some simulations in Python implementing the same strategy yesterday, and the results are nowhere near the ones I am achieving using the app. The simulation results are in line with the simulations done previously in the thread. So, unfortunately, I don’t think I am beating the random number generator (or else I’d beat any random number generator)... The mystery of beating the random walk continues...
k

Surely, it's not. However, I'd like to hear your opinion on the neccessity to not only compare two momenta but also each momentum with its average.

I hope folks understand this post.

"There are 24 Hours in a Day one of those Hours will contain the High of the Day another Hour will most probably contain the low (this concept can be applied to any period(s) of time)"

any period of time and/or ALL periods of time.....try it. You will be amazed in the story that the sequence/confluence of such 'constants' convey !

Edit: ignore the monthly as it is not a constant/consistent/fixed timeframe. Weekly is the only static timeframe in FX (and only the ones from brokers with 5 daily candles)

Thanks MZ. Its unfortunate such well written and thoughtful posts is not getting the discussion it deserves. Personally, I am purposely staying away from this theory to avoid conflicts in my thought peocess. Without your understanding, trading tick charts is like dropping the egg (puzzle) in a peanut butter jar. What a mess that would create with each drop/trade lol

Kudos bro!

We had a good discussion CP and i want to thank you for your time. I enjoy reading your posts...mostly the ones that connect outside world with trading. There is no need for folks to chase down what your secret sauce is. Its in between your ears :-) I hope you continue to post. Leaving FF is not easy lol

There is one question still not addressed in my list....
Total number of trades on GU at any gjven time? I think it has to be only one trade at a time due to your scalpiing style but i am more interested in whether you scale in or out. I think you don't scale in but feel you might be scaling out based on your theory of dimensions. I am also not convinced you only look at raw tick data. You are deriving HTF info (reference zones/hemisphere) from tick data.

Just my 2 cents. Back to focus on my own journey which is more important than decypering what's in your head :-)

Edit1: I also think your indicator have the ability to flip between bid and ask for long/short signals unless it is based on midpoint to negate false signals/impulses caused by spread widening.

https://www.forexfactory.com/showthr...44#post7794444

Thanks. Because of that one screen, she looks twice her age and her eyes ready to pop out of her socket. "At what cost do I want profitable trading" is the question one should ask :-)

Edit: speaking with experience from over 5years of watching bid/ask price across 28 pairs with pip distance from open being sorted in real time across all timeframes to visually gauge strength/momentum/influx using the movers and shakers indicator on FXCM's TS II platform that CP uses. He uses it on one pair and one tick chart. I did the same without looking at any charts! Pretty much the same concept but only during news time for couple of hours per event whenever i could arrive on the scene of volatility. Market is my *itch and not the other way around lol
It took me over 5 long years to recover from drawdown and account blowups. No one will admit the dark phase of their journey!!!!

Something to think about
Discipline will take you where you want to go and discipline will pay you according to what you give, GW

Interesting...only 50% strike rate

I will use this forum because I see that a lot of respectfull members discuss here, including CP. What is your opinion about 6D - 6 dimensions in trading which CP mentioned here:

https://www.forexfactory.com/showthr...27#post3660327

https://www.forexfactory.com/showthr...58#post3672458

https://www.forexfactory.com/showthr...84#post3688384

As CP wrote we could find 6 Dimension in every system. So what is your opinion about this topic?

CP maybe you could give us some additional hints. Thanks in advance!

VEEFX

thx for your answer. I wonder who completly delated your post.

Why you dont repost it?

What was here so interesting?