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It's All Noise - Right?

  • #21
  • Nov 16, 2008 2:45pm Nov 16, 2008 2:45pm
Quoting capitalist88
The common wisdom seems to be that there is no discernible difference between time frames, but the data tells a different story. Back in January I did a research project, part of which investigated this question. The link to the entire set of research notes is here:

http://market-geeks.com/research/archive2008_01_17.doc

However, the information pertinent to this discussion is just on pages 5, 11, and 13, so I'll just paste it here.

If you divide the total range of any sequence of bars by the minumum cumulative distance that price...
Now this is research, IMO. Did you find any repeatable patterns (of any kind) when price finally trended ?
Measure twice, cut once
  • #22
  • Nov 16, 2008 2:52pm Nov 16, 2008 2:52pm
rofl...
  • #23
  • Nov 16, 2008 3:41pm Nov 16, 2008 3:41pm
Quoting Pro
waves are built up from smaller timeframes and they become the obvious on the large timeframe......
I like this way of looking at things!
  • #24
  • Nov 16, 2008 4:38pm Nov 16, 2008 4:38pm
Quoting aediaz1
Now this is research, IMO. Did you find any repeatable patterns (of any kind) when price finally trended ?
There were some higher level structures that seemed to repeat. For example when a trend (the way I defined it in the study) ended, it would end in one of two ways; either with a failure leg that couldn't extend the trend, or with a sudden strong reversal leg. These two modes of "trend interruption" tended to alternate, but there's no logical reason why they should. It may have been just a weird statistical artifact, but I found a few things like that.
  • #25
  • Nov 16, 2008 6:18pm Nov 16, 2008 6:18pm
One man’s noise can be another man’s trade signal. There are recognizable patterns on lower timeframes that scalpers take advantage of. Even fibs, MA’s, and short term areas of S/R. As above, so below. Use what works best for your system, personality, and lifestyle.

  • #26
  • Nov 16, 2008 6:40pm Nov 16, 2008 6:40pm
Quoting capitalist88
There were some higher level structures that seemed to repeat. For example when a trend (the way I defined it in the study) ended, it would end in one of two ways; either with a failure leg that couldn't extend the trend, or with a sudden strong reversal leg. These two modes of "trend interruption" tended to alternate, but there's no logical reason why they should. It may have been just a weird statistical artifact, but I found a few things like that.
Did your research give any (new) ideas regarding exits ? What you refer as sudden strong reversal leg often have a V-shape on the chart which in many cases lead to the famous candle-stick pattern hammer (more known as pin-bar here on FF) if I understood your terms correctly

Seems like you've done some interesting research here.
Measure twice, cut once
  • #27
  • Nov 16, 2008 9:44pm Nov 16, 2008 9:44pm
Quoting FXSurfer
It would be a good discussion. Let's start it here.

I personally can't distinguish what TF chart I'm
looking at if it isn't labeled.

Do different TF's really vary in terms of:

Trending?

Randomness?

Noise?

Volatility?



Below: Name the TF.

1. Sure, two charts from different TFs look similar but what does this really tell you? How did they come to be? Hindsight is always 20/20. This says nothing about the strength of the R/S that formed them, etc. Let's assume that you could tell a difference. What would this tell you then? That one is more volatile than the other? The comparison serves no purpose

2. What does matter is one's long term equity curve. (Yes, this once you scalpers have to think long term). I am making the assumption that all of us intend to stay in this game as long as possible
Now, assuming that you are indeed a profitable scalper, at one point in the future, a profitable long term trader will always beat a scalper's equity curve. The reason is simple: spreads. This comes from the fact that scalping is only scalable up to a certain order size and that the spread loss will be compounded into your equity curve over the long haul.

3. The point has also been made that most traders lose in forex since they don't scalp. I cannot agree with this at all. Most traders start out not having the patience to wait for a good entry or they can't let their profits run. In other words, they start scalping and end up losing.
I guarantee you that most traders would have more success taking only a few position trades a year in the direction of the major trend than scalping on the 1 sec chart.

Yes, scalping does have some immediate advantages (no long term exposure). But over the long term there is A LOT that speaks against it.
Just because you are doing more in the short term does not mean you are making more in the long term.
  • #28
  • Nov 16, 2008 9:57pm Nov 16, 2008 9:57pm
Quoting aediaz1
Did your research give any (new) ideas regarding exits ? What you refer as sudden strong reversal leg often have a V-shape on the chart which in many cases lead to the famous candle-stick pattern hammer (more known as pin-bar here on FF) if I understood your terms correctly

Seems like you've done some interesting research here.
I was using a zig-zag approach with a certain reversal threshold value; for example I would consider a price leg intact on the daily until it reversed by at least 250 pips. So a leg might consist of dozens of bars. A strong reversal on a lower TF could show up as a pin-bar on a higher TF as you mentioned.

In terms of exits, one of the things I studied was the length of each price leg relative to the last one in order to determine when a leg was nearing "exhaustion." That could have applications in determining an exit strategy.
  • #29
  • Nov 16, 2008 10:06pm Nov 16, 2008 10:06pm
Quoting fxRichard
lol there is no difference, I have tried to point this out in the past to people that liked to say anything under 1hour is noise. The market trends on a 1sec chart just as it does on a 1day chart the only difference is the movements you see are for more pips on a 1day chart. Take price and timeline away and you cannot tell the difference. Too many people aim for 50, 100, 150 pips etc for small money, try aiming for 5,10,15 pips etc with big money. Now ask yourself how often the market moves 5,10,15 pips vs 50,100,150 pips?????
The trend on the daily is much more visible than on the 1 sec.
  • #30
  • Nov 17, 2008 2:06am Nov 17, 2008 2:06am
Quoting fxterrapin
The trend on the daily is much more visible than on the 1 sec.

Not so.

That is only the case if you want to exploit the daily trend.

If it is your aim to exploit the 1sec trend, it makes no sense to look
at the daily [chart/trend] and vice versa.

Trend is independent of time frame; it is the movement of a variable [here: price] throughout a period of time. [period can be a second, minute, day or year]

regards
daytrading
Enter Signature
  • #31
  • Nov 17, 2008 2:36am Nov 17, 2008 2:36am
Quoting daytrading
Not so.

That is only the case if you want to exploit the daily trend.

If it is your aim to exploit the 1sec trend, it makes no sense to look
at the daily [chart/trend] and vice versa.

Trend is independent of time frame; it is the movement of a variable [here: price] throughout a period of time. [period can be a second, minute, day or year]

regards
daytrading
Yes, I intended to exploit the daily trend.
  • #32
  • Nov 17, 2008 3:00am Nov 17, 2008 3:00am
Quoting daytrading
Trend is independent of time frame; it is the movement of a variable [here: price] throughout a period of time. [period can be a second, minute, day or year]
Or even, for that matter, independent of time.
For example:

Range Bars, Tick and P&F.
  • #33
  • Nov 17, 2008 6:54am Nov 17, 2008 6:54am
Technical systems are like looking at white noise on a TV screen and determining which pixels are going to turn black and which ones are going to be white. There is simply no pattern unless you can figure out how to filter the noise correctly, and that is extremely hard.
forexflash
  • #34
  • Edited 7:23am Nov 17, 2008 7:20am | Edited 7:23am
Price and time are inextricably linked.

The price cannot move without time passing - which in turn can produce
some simple research. (I like capitalists approach)

Wether one looks at tick data, or bars of any length, certain observations become the basis of trade stuctures.

If one for example measures the average amount of tick-movement in 1 minute intervalls compared to the average amount of tick-movement of 15 minute intervalls. The results will give you enough evidence to create simple
rules.

One can derive from such research for example the avg. price movement in ticks for any period. That in itself is not the holy grail, but it can put both, extraordinary large, as well as unusual small price movements of specific time periods in a larger context, so to not expect from a 1 week backtest in a highly volatile market a reliable test result in terms of overall structure
of price movements during a whole year or longer.

regards
daytrading
Enter Signature
  • #35
  • Nov 17, 2008 3:01pm Nov 17, 2008 3:01pm
Quoting daytrading
The price cannot move without time passing
True, but time can pass without range bars moving or,
in the case of ticks, without many ticks being generated.

As you mentioned, watching the flow of trading wax and
wane using ticks is a great tool. Something that I'm surprised
such a high percentage of traders choose not to look at
when they select a TF... in other words a chart in which
time is a part of the calculation. Which is really all I meant
with my previous "independent of time" post.

I always like your posts DT.
Good Trading!
  • #36
  • Edited 7:12am Nov 19, 2008 6:57am | Edited 7:12am
Quoting capitalist88
If you divide the total range of any sequence of bars by the minumum cumulative distance that price must travel in all of the bars TR/(avg. bar height x #bars) you get a measure of how much of the price action contributed to the "trend" and how much of the price action was lost to "chop." The bottom line is that the "trendiness" drops by orders of magnitude as we drop down in time frames.
Just dropped to thank you about this document, I have thought about doing about the same type of research but I just haven't had time. Now it's already done so I don't have to

Huge thanks!
  • #37
  • Nov 19, 2008 5:22pm Nov 19, 2008 5:22pm
Quoting mikkom
Just dropped to thank you about this document, I have thought about doing about the same type of research but I just haven't had time. Now it's already done so I don't have to

Huge thanks!

Huge You're welcome!
  • #38
  • Nov 24, 2008 10:36pm Nov 24, 2008 10:36pm
i don't know about lower timeframes. don't like them too much. never heard of a bank scalper or pro scalper either. i want to follow what banks and pros do. 30 mins and longer is better to me.
  • #39
  • Nov 25, 2008 12:34am Nov 25, 2008 12:34am
It's not about one time frame being better than another in general, it's about which one has a characteristic you can exploit, even noise has characteristics.
The breaking of a wave cannot explain the whole sea.
  • #40
  • Nov 25, 2008 12:46am Nov 25, 2008 12:46am
Hey your not supposed to be giving away all the secrets...LOL

Quoting Craig
It's not about one time frame being better than another in general, it's about which one has a characteristic you can exploit, even noise has characteristics.
It's me...
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