Menu
Sister Sites

Options

Bookmark Thread

First Page First Unread Last Page Last Post

Print Thread

Similar Threads

Money management: Capital needed per 0.07 USD per microlot 0 replies

The Volume Detective 411 replies

Attachments: (binned per thread starter’s request) MM (Money Maker) Detective
Exit Attachments

(binned per thread starter’s request) MM (Money Maker) Detective

And if you look at the wicks profile there is no volume in it, not a strong biter
Attached Image (click to enlarge)
Click to Enlarge Name: NoVolinWicks.png Size: 39 KB
Attached Image (click to enlarge)
Click to Enlarge Name: next.png Size: 78 KB
Quoting robots4me
{quote} @aaven, @iwjw -- another thing to notice. In the case of a Bullish liquidity gap, the MM needs to push the price downward to begin filling the liquidity gap. As pent-up, unfilled BUY orders get transacted what do you think happens to the price? It moves back up. I've seen that many times now. In the case of a Bearish liquidity gap, the MM needs to push the price upward to begin filling the liquidity gap. As pent-up, unfilled SELL orders get transacted then the price moves back down. In the case that @aaven circled, that's a Bullish liquidity...
Thank You Steve for taking the time to respond and sharing your insights. Yes, your theory about price skipping over the Liquidity Zone/Gap makes sense...
Quoting rosalieone
{quote} I'm sorry for my fuzzy explanations but if you look a little bit closer you see that they go allover like sharks after the meat (LG body) and it seems thats the reason for many moves. Look at the following picture. {image} Point 1. If we use the wicks the LG stops here, but with only the close the LG should continue to point 2. (reason for the next moves to finish the meat) Point 3. With the wicks LG meat stops here, but with the close line it should in fact continue to point 5 (first bite point 4. and finishing bite point 5.) Point 5. over...
Hello @rosalieone -- no need to apologize for fuzzy explanations. This is all good stuff. And it's difficult to carry on a discussion like this with pictures and posts. That is one reason why @George preferred chatting in person. What he could communicate via Skype would take hours posting text and pictures on a FF thread.

You've brought up a good issue and forced me to think about it a bit more. And now I'm even more sure that using wicks (Highs, Lows) is the correct thing to do -- and I'll explain why below.

Though I'm a rookie when it comes to actual trading, I ain't a rookie when it comes to data. What I'll explain below is not rocket science, but many traders seem to have lost sight of it.

Okay -- here goes -- and this is going to ruffle a few feathers, so I expect some sniping in the aftermath -- but that's all good, it's part of the process.

When it comes to forex all there is is tick data -- nothing more. Tick data is a sequence of numbers representing the current price of a particular instrument. Tick data arrives at your broker's server in the form of a data feed. Your broker adds a spread and then sends the data feed -- the tick data -- along to your MT4 application.

There is no such thing as bars, candlesticks, OHLC -- these are artificial constructs that condense the tick data to make it easier for humans to use and visualize patterns. If not for MT4 and other applications that construct bars and candlesticks from the tick data then none of us here would be trading. Ticks are analogous to how electronic data is transformed and rendered as a web page -- like the one you are currently reading. There really is no such thing as a web page -- it's actually a sequence of bits (i.e. numbers) sent over a wire from one program to another. The rendering program -- your browser -- takes the numbers and reformats them into something easier for us to visualize. If it weren't for browsers you would be reading this post as a sequence of numbers.

Just like in real-life everything comes down to trade-offs, that is also the way it goes in forex -- everything comes down to trade-offs. There are advantages / disadvantages to thinking of forex data as ticks. There are advantages / disadvantages to thinking of forex data as OHLC, bars or candlesticks.

Here's the part where we ruffle some feathers -- OHLC, bars, candlesticks are indicators, just like MA, envelopes, RSI, MMDetective, you name it. Any code that reformats the underlying raw (tick) to create a new representation is an indicator. The new representation allows our brain to process larger chunks of the raw data -- which allow us to better look for patterns and make discretionary trading decisions. Why the bashing of indicators? Why the necessity to proclaim indicators as useless? I don't know. Actually, I do know. What the "indicators are useless" fellows really want to say is that it is important to pay attention to details. But by bashing the use of indicators or saying "yes, we use indicators but they are different than the ones we're bashing", then that simply muddies the water. But I get it.

Back to OHLC data -- Open, High, Low, Close -- again, no such thing. All there is is raw tick data. The tick data arrives as a sequence of prices via a data feed. Furthermore, there is no guarantee when a tick will arrive. There could be many ticks per second or once an hour. It depends on the symbol and time of day. Furthermore, with one minor exception, ALL time frames receive the exact same ticks. I'll repeat it -- ALL time frames receive the exact same ticks. Furthermore, all ticks are created equal. Again -- all ticks are created equal. There is no special "Open" tick or "Close" tick. They are all equal.

Here's an example -- consider an H1 chart and 3 consecutive ticks (i.e. prices). There is the tick that arrives exactly at 12:00, there is the tick that arrived just prior to 12:00, and there is the tick that arrives just after 12:00. And let's say the ticks arrived within seconds or milliseconds of one another. The one that arrived exactly at 12:00 becomes the "Open" -- and we treat it special. The one that arrived a few milliseconds prior is the "Close" -- and we treat that one special, as well. The poor tick that arrived a few milliseconds after 12:00 does not get a special name and becomes a faceless tick in the crowd. The 3 ticks all arrived within milliseconds of one another -- is the one that arrived a few milliseconds before noon (i.e. the Close tick) really more significant than the tick that arrives a few milliseconds after noon? Of course not.

Similarly with Highs and Lows (i.e. wicks) -- no such thing. They are simply ticks -- no better or worse than any other tick. Furthermore, we don't even know which came first -- the High or the Low. In the case of a Bullish candle our brain has been trained to think the Low occurred before the High (since it's a bullish candle moving up). But that's not necessarily the case. It could be the lowest tick for that H1 candle is the second to last tick to arrive.

Back to the issue at hand -- whether or not to use wicks to fill gaps. Since all ticks are created equal and there is no such thing as OHLC or wicks, Then I think it is correct to use all ticks to fill a gap. It may make gap-filling look better if wicks were not used, but then you'd be ignoring the reality of the underlying price data.

I hope this makes sense. And please feel free to disagree. This is an important point to understand. We should reach a consensus on how to treat tick data.
Quoting robots4me
{quote} Hello @rosalieone -- no need to apologize for fuzzy explanations. This is all good stuff. And it's difficult to carry on a discussion like this with pictures and posts. That is one reason why @George preferred chatting in person. What he could communicate via Skype would take hours posting text and pictures on a FF thread. You've brought up a good issue and forced me to think about it a bit more. And now I'm even more sure that using wicks (Highs, Lows) is the correct thing to do -- and I'll explain why below. Though I'm a rookie when it...
Thank You Steve for the knowledge on the price data from a technical point of view...

I just had a thought and I want to run this by you:

From what i understand based on your inputs, The basic premise of the price revisiting the liquidity gap is to fulfill the remaining orders. Let's say there are 100 orders left over to be filled; so if a wick does penetrate and complete the gap.

If we are considering that the liquidity gap has been filled due to the wick, we have to assume that all the 100 orders have been filled during the wick which may not be true as the wick itself represent that orders did push the price down and do you think perhaps a close over/within the liquidity gap may be a better indication that all the unfilled orders have been met?

Thanks
Quoting robots4me
{quote} Hello @rosalieone -- no need to apologize for fuzzy explanations. This is all good stuff. And it's difficult to carry on a discussion like this with pictures and posts. That is one reason why @George preferred chatting in person. What he could communicate via Skype would take hours posting text and pictures on a FF thread. You've brought up a good issue and forced me to think about it a bit more. And now I'm even more sure that using wicks (Highs, Lows) is the correct thing to do -- and I'll explain why below. Though I'm a rookie when it...
This a brilliantly written peice, very well constructed and thank you for taking the time and effort to do this. I understand what you mean and agree with you, all parts of the signal are eqaully important. I would always pay attention to the wicks as they are a part of the whole. I find this whole subject so interesting. For the last two years I have been trying to understand how the end points of a move were found, how do they know the target, when to finish the trade, this just adds a lot to this thread.
Just trying to put a kiss on the cheek of success
Quoting aaven
{quote} Thank You Steve for the knowledge on the price data from a technical point of view... I just had a thought and I want to run this by you: From what i understand based on your inputs, The basic premise of the price revisiting the liquidity gap is to fulfill the remaining orders. Let's say there are 100 orders left over to be filled; so if a wick does penetrate and complete the gap. If we are considering that the liquidity gap has been filled due to the wick, we have to assume that all the 100 orders have been filled during the wick...
I was agreing with you before seeing price action after movement on places previously hit by wicks. Wicks don't seem to take away the main meat. That's why it seems price revisit these places by the close. Sorry to repeat myself but it seems it has an effect. I will show tomorrow since on my phone now. Have a nice evening
Quoting rosalieone
{quote} I was agreing with you before seeing price action after movement on places previously hit by wicks. Wicks don't seem to take away the main meat. That's why it seems price revisit these places by the close. Sorry to repeat myself but it seems it has an effect. I will show tomorrow since on my phone now. Have a nice evening
Rosalieone,

I think you meant to reply to Steve and not me...

Thanks
Quoting aaven
{quote} Thank You Steve for the knowledge on the price data from a technical point of view... I just had a thought and I want to run this by you: From what i understand based on your inputs, The basic premise of the price revisiting the liquidity gap is to fulfill the remaining orders. Let's say there are 100 orders left over to be filled; so if a wick does penetrate and complete the gap. If we are considering that the liquidity gap has been filled due to the wick, we have to assume that all the 100 orders have been filled during the wick...
Hello @aaven -- good question. I can't say for sure, but I would answer 'no' -- for the following reasons:

1. There is no such thing as 'Close'. There is no official 'Close' price. 'Close' is the name given to the last tick prior to the beginning of the next time frame. An M15 'Close' becomes just another "one of the guys" in the M15 time frame.

2. All ticks are created equal.

3. There are a fixed number of units of currency at a particular price. When a price gets visited then some orders get filled -- but, maybe not all. For example, maybe there is an order for 100 units EURUSD at 1.12071. And maybe the price does visit 1.12071, but only 82 units are available -- that would leave some remaining. It might be the MM's algorithm is sufficiently robust that when it fills orders at a particular price it knows in advance there will be sufficient units available. Or, maybe, its algorithm is designed to revisit 1.12071 at some later time -- i.e. after shaking the tree a bit more to create additional liquidity at 1.12071.

Again -- I'm not sure. But until someone comes up with a better story, this helps me better understand the price movement. I still don't know yet the best way to trade it -- but at least I feel I'm beginning to pay attention to the right things. And all the credit goes to @George -- for shining the light...

I just re-read your post and perhaps there is another point I should emphasize. There are two important points about unfilled orders (maybe more):
1. They have a price
2. They have a quantity

So, it's not just 100 units of EURUSD -- rather, its 100 units of EURUSD at 1.12071. And 105 units EURUSD at 1.12073. And 57 units of EURUSD at 1.12066, etc. Do you know what I mean?
Quoting pet3250
{quote} This a brilliantly written peice, very well constructed and thank you for taking the time and effort to do this. I understand what you mean and agree with you, all parts of the signal are eqaully important. I would always pay attention to the wicks as they are a part of the whole. I find this whole subject so interesting. For the last two years I have been trying to understand how the end points of a move were found, how do they know the target, when to finish the trade, this just adds a lot to this thread.
@pet3250 -- thanks for the good word. Yes -- very interesting. And I wish to always give credit to @George. If it wasn't for his thread and his willingness to chat with me (even after my insults) I would still be muddling around. Actually, I'm still muddling around because I'm not yet sure how to best to trade with this new understanding -- but I'm pretty sure that part will become more clear with time and experience.
Quoting rosalieone
{quote} I was agreing with you before seeing price action after movement on places previously hit by wicks. Wicks don't seem to take away the main meat. That's why it seems price revisit these places by the close. Sorry to repeat myself but it seems it has an effect. I will show tomorrow since on my phone now. Have a nice evening
Hello @rosalieone -- the wicks (i.e. high and low ticks) do take away from the meat. However, the line chart shows only the Close tick at a particular timestamp. So, visually it may appear there is meat left behind when there really isn't.
Quoting robots4me
{quote} Hello @aaven -- good question. I can't say for sure, but I would answer 'no' -- for the following reasons: 1. There is no such thing as 'Close'. There is no official 'Close' price. 'Close' is the name given to the last tick prior to the beginning of the next time frame. An M15 'Close' becomes just another "one of the guys" in the M15 time frame. 2. All ticks are created equal. 3. There are a fixed number of units of currency at a particular price. When a price gets visited then some orders get filled -- but, maybe not all. For example, maybe...
Thank You Steve for the explanation...
Quoting robots4me
{quote} @pet3250 -- thanks for the good word. Yes -- very interesting. And I wish to always give credit to @George. If it wasn't for his thread and his willingness to chat with me (even after my insults) I would still be muddling around. Actually, I'm still muddling around because I'm not yet sure how to best to trade with this new understanding -- but I'm pretty sure that part will become more clear with time and experience.
Just a thought, if we are looking at the H1 or H4 TF for instance and there is a patch of un filled orders in the same direction, ie up or down then I wonder if by looking at the global trend as in daily weekly monthly we would have a better sense of where to trade? MM seems more than capable of going wherever they want so it would not garuantee anything but it may be worth monitoring to check if this gives results.
Just trying to put a kiss on the cheek of success
Quoting robots4me
{quote} Hello @rosalieone -- no need to apologize for fuzzy explanations. This is all good stuff. And it's difficult to carry on a discussion like this with pictures and posts. That is one reason why @George preferred chatting in person. What he could communicate via Skype would take hours posting text and pictures on a FF thread. You've brought up a good issue and forced me to think about it a bit more. And now I'm even more sure that using wicks (Highs, Lows) is the correct thing to do -- and I'll explain why below. Though I'm a rookie when it...
“Here's an example -- consider an H1 chart and 3 consecutive ticks (i.e. prices). There is the tick that arrives exactly at 12:00, there is the tick that arrived just prior to 12:00, and there is the tick that arrives just after 12:00. And let's say the ticks arrived within seconds or milliseconds of one another. The one that arrived exactly at 12:00 becomes the "Open" -- and we treat it special. The one that arrived a few milliseconds prior is the "Close" -- and we treat that one special, as well. The poor tick that arrived a few milliseconds after 12:00 does not get a special name and becomes a faceless tick in the crowd. The 3 ticks all arrived within milliseconds of one another -- is the one that arrived a few milliseconds before noon (i.e. the Close tick) really more significant than the tick that arrives a few milliseconds after noon? Of course not.”

I am not sure if you have written this to see if people actually read what you have wrote, but TIME is the important factor in OHLC so in your example the Tick that arrived prior to 12:00 can't be the close, it simply belongs to the one minute OHLC candle before the clock struck 12:00
Some people say I'm lucky, but the more I practice the luckier I get
Quoting pet3250
{quote} Just a thought, if we are looking at the H1 or H4 TF for instance and there is a patch of un filled orders in the same direction, ie up or down then I wonder if by looking at the global trend as in daily weekly monthly we would have a better sense of where to trade? MM seems more than capable of going wherever they want so it would not garuantee anything but it may be worth monitoring to check if this gives results.
@pet3250 -- interesting. I've been focused on coding the indicator and haven't given much thought as to trading implications. With the indicator now in hand, it should be fun to experiment a bit. As you suggest, some interesting observations may shake out.

Sort of related -- I haven't confirmed this is always the case -- but a gap that appears at a higher TF should be visible at a lower TF, but not the converse. One consequence is that when viewing higher TF's you won't see many of the gaps that are visible at lower TF's. I don't think this is a big deal -- so what if you miss some targets. As a result, my thinking now is that analyzing liquidity gaps doesn't really lend itself well to MTF analysis.

@moodybot had mentioned it may be easier to use H1 to spot liquidity gaps -- so, that's my preferred TF right now.
Quoting Robot Trader
{quote} “Here's an example -- consider an H1 chart and 3 consecutive ticks (i.e. prices). There is the tick that arrives exactly at 12:00, there is the tick that arrived just prior to 12:00, and there is the tick that arrives just after 12:00. And let's say the ticks arrived within seconds or milliseconds of one another. The one that arrived exactly at 12:00 becomes the "Open" -- and we treat it special. The one that arrived a few milliseconds prior is the "Close" -- and we treat that one special, as well. The poor tick that arrived a few milliseconds...
[/quote]

Quote
but TIME is the important factor in OHLC so in your example the Tick that arrived prior to 12:00 can't be the close, it simply belongs to the one minute OHLC candle before the clock struck 12:00

This is great -- I love the challenge. I don't know about other platforms -- but I am familiar with MT4.

"Open" is the tick that arrives at the beginning of a new time frame -- i.e. a new bar. MT4 (or your broker) guarantees the arrival of this tick. That tick may be a new price or it may be the last good price the broker has -- regardless, you will get a tick at 12:00.

"Close" is different. There is no guarantee you will receive a tick at 11:59:999. In fact, you don't even know which tick is the Close tick until after the fact. In MT4 the Close tick is the last tick that arrived prior to the Open tick. The last tick may have arrived just milliseconds prior or minutes prior -- depending on the symbol and time of day. You only know Close price after you've received the Open tick. So, in this context, time is NOT important. There are only a few milliseconds that separate adjacent ticks. We've been trained to conceptualize that everything has a beginning and an end -- but not in forex. It's just a continuous feed of prices. It's the human brain that wants to insert arbitrary "first" and "last" fences -- and that's what MT4 does for you. The data feed has no concept of Open and Close ticks -- all ticks are created equal.

Another point worth mentioning -- that "Close" tick you received at the end of an H1 bar becomes just another "one of the guys" in H4. In other words, it was "big man on campus" on the H1 chart, but on an H4 chart it becomes just one of many ticks in a crowd. What does that tell you? It means that assigning OHLC designations is an artificial construct to help humans visualize what would otherwise be impossible to process. I'm not knocking OHLC -- I mean, obviously I rely on it -- just that once you buy into price action and are attempting to analyze it a bit deeper than what appears on the surface -- then it is important to distinguish between ticks and bars.

Keep in mind OHLC is used to represent historical data because representing even one day of tick data would require billions of bytes to download. OHLC is a compressed representation. It serves as an "indicator". When trading live there is no OHLC -- it's a data feed of prices -- i.e. a data feed of ticks.
Throughout this great journey started by George and following on with this thread, has anyone managed to put all the pieces together into a solid tradable strategy? Would anyone like to share their system if they having something to share?
A fool learns from his mistakes. A wise man learns from the fools mistakes.
Quoting robots4me
{quote}
{quote} This is great -- I love the challenge. I don't know about other platforms -- but I am familiar with MT4. "Open" is the tick that arrives at the beginning of a new time frame -- i.e. a new bar. MT4 (or your broker) guarantees the arrival of this tick. That tick may be a new price or it may be the last good price the broker has -- regardless, you will get a tick at 12:00. "Close" is different. There is no guarantee you will receive a tick at 11:59:999. In fact, you don't even know which tick is the Close tick until after the fact. In MT4 the Close tick is the last tick that arrived prior to the Open tick. The last tick may have arrived just milliseconds prior or minutes prior -- depending on the symbol and time of day. You only know Close price after you've received the Open tick. So, in this context, time is NOT important. There are only a few milliseconds that separate adjacent ticks. We've been trained to conceptualize that everything has a beginning and an end -- but not in forex. It's just a continuous feed of prices. It's the human brain that wants to insert arbitrary "first" and "last" fences -- and that's what MT4 does for you. The data feed has no concept of Open and Close ticks -- all ticks are created equal. Another point worth mentioning -- that "Close" tick you received at the end of an H1 bar becomes just another "one of the guys" in H4. In other words, it was "big man on campus" on the H1 chart, but on an H4 chart it becomes just one of many ticks in a crowd. What does that tell you? It means that assigning OHLC designations is an artificial construct to help humans visualize what would otherwise be impossible to process. I'm not knocking OHLC -- I mean, obviously I rely on it -- just that once you buy into price action and are attempting to analyze it a bit deeper than what appears on the surface -- then it is important to distinguish between ticks and bars. Keep in mind OHLC is used to represent historical data because representing even one day of tick data would require billions of bytes to download. OHLC is a compressed representation. It serves as an "indicator". When trading live there is no OHLC -- it's a data feed of prices -- i.e. a data feed of ticks.[/quote]

Lets take 12:00 to be the start of a new candle and it's a 1 minute candle so it closes at 12:01 we have the Open Tick bang on 12:00 then we have a number (could be hundreds) of Ticks within that 1 minute these are the Ticks that form the High,Low and Close. TIME can't make a Tick that occurred prior to the 12:00 (Maybe Dr. Who could) influence the future. So in your example at best the Tick that arrived prior to 12:00 could be used as the Open price for 12:00 otherwise we have a gap.
Some people say I'm lucky, but the more I practice the luckier I get
Quoting skyway
{quote} Robots4me, excellent explanation. About paying attention to the details by the "indicators are useless" crowd. They are traders who have tried using indicators and failed to make sense of how to use them correctly. Such traders have wrongly assumed that the indicator crowd pay insufficient attention to the details. They have no idea what they are talking about. Fact is the level of detail attention paid by those who do use indicators successfully goes way beyond anyones imagination. Without doubt far beyond just ticks, reorganised into bars,...
Quote
There are some reknown posters on FF who belong to this small group.
And who might that be? I'm kidding -- let's not go there...

I get what you are saying and would tend to agree -- but I think you are too harsh on the other guys.

Granted -- they assume the indicator crowd don't pay attention to details. And, you know what, as a generalization that's true. Few people pay attention to details. For example, a few posts back when I announced the indicator I stressed that correctness was the most important thing to focus on for now and requested that feature requests and cosmetics should wait until later. And what were the next two posts? Requests to make buttons movable. I mean, what can you say...

I've touched on this concept of before of taking what someone says "seriously" vs "literally". We are all guilty of it. When you refer to the other group you are still guilty of it. I agree they send mixed messages -- but you also insist on taking them literally. I don't have a problem with what they say because I understand they are generalizing to make a point. The point is that details really, really, matter. But when you say it like that then nobody pays attention and it goes in one ear and out the other. So, they say it differently in the hope it will shock people into paying more attention to details.

Like yourself, those guys are very experienced traders. You have more in common with them than you do with me. But they've also grown cynical because there are a lot of lazy people out there. Even though lazy people are in the minority, they tend to be the most annoying and the ones we remember. Hence, generalizations are formed around the minority of lazy traders. Not paying attention to details does not equate to being lazy -- but our friends don't make that distinction.

I'm a very detailed person -- way more detailed than our friends imagine -- but I wasn't aware I needed to be even more detailed than I currently was when it came to forex. So, one of the things I learned from @George was that though I thought I was paying attention to details, I needed to look deeper. And he was right. Hence this new indicator. I could never have imagined creating such an indicator if it wasn't for @George.
0 traders viewing now