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General Market questions

  • #1
  • First Post: Dec 10, 2008 12:12am Dec 10, 2008 12:12am
The Idea for this thread came to me while looking for a suitable place to throw my own '1 liner question'. There are alot of threads started in the factory that only require a quick answer because that will be sufficient for the OPs needs, it seems pointless to start a thread concerning the issue.

This would work best if posters always quote the question being answered.

Answers can be opinion or fact, obviously depending on the question being asked.

Leon
Living the adventure in my head.
  • #2
  • Dec 10, 2008 12:17am Dec 10, 2008 12:17am
If any chosen market moves say... 100pips down, do you think it is more likely that the market will move another 100pips down than 100pips up? (very dumbed down just for simplicities sake)

If you think yes, isnt that already a tiny edge? It may not make you profitable on its own but its a start.

I know it sounds like a very silly and newbish question, but im looking at the market from a numbers perspective at the moment, hopefully it will bear some fruit.

Leon
Living the adventure in my head.
  • #3
  • Dec 10, 2008 12:39am Dec 10, 2008 12:39am
While not specific to your question. Check the pdf's in this thread. They may be of some assistance. Be warned they most likely will result in more questions.
http://www.forexfactory.com/showthread.php?t=82041

Quoting Leonlorenzo
If any chosen market moves say... 100pips down, do you think it is more likely that the market will move another 100pips down than 100pips up? (very dumbed down just for simplicities sake)

If you think yes, isnt that already a tiny edge? It may not make you profitable on its own but its a start.

I know it sounds like a very silly and newbish question, but im looking at the market from a numbers perspective at the moment, hopefully it will bear some fruit.

Leon
In trading, there is no bullshit. You either make money or you don't.
  • #4
  • Dec 10, 2008 1:00am Dec 10, 2008 1:00am
I think its depend on the market condition. If you're in ranging market, the downmove of 100pips might be followed by 100pips of upmove. If you're in downmove market, the probabilities of another 100pips of downmove is much higher. Market follows the path of least resistance. Now, I talked like a philosopher LOL
  • #5
  • Dec 10, 2008 12:03pm Dec 10, 2008 12:03pm
I think that depends of what actually cause that 100 pips move. If you are able to identify a key fundamental behind that move you can easily anticipate what could be the next move.
But if that factor is missing and the event it’s unusual I have seen that the market tends to move until old supports and resistances.
Also, markets are unpredictable moving 100 pips after a 100 pips downtrend can be relative and it would depend of so many issues that it won’t really matter if it’s 100 or 400 pips. The key is the ability you have to read the market in that particular situation.
  • #6
  • Apr 7, 2009 8:13am Apr 7, 2009 8:13am
Quoting Leonlorenzo
If any chosen market moves say... 100pips down, do you think it is more likely that the market will move another 100pips down than 100pips up? (very dumbed down just for simplicities sake)

If you think yes, isnt that already a tiny edge? It may not make you profitable on its own but its a start.

I know it sounds like a very silly and newbish question, but im looking at the market from a numbers perspective at the moment, hopefully it will bear some fruit.

Leon
Since I asked this question I came to the conclusion that moves tend to perpetuate their own continuation, the larger they are... the higher the chance they will continue.

Thanks to everyone who replied.
Living the adventure in my head.
  • #7
  • Edited 8:51am Apr 7, 2009 8:18am | Edited 8:51am
Ok, I have another question......

How would you identify a 'trend' without a chart? The best I can come up with so far Is If the price Is above yesterdays high then we are In an uptrend and V.V. for downtrend.

Any other idea's guys?
Living the adventure in my head.
  • #8
  • Apr 7, 2009 10:32am Apr 7, 2009 10:32am
It depends on the time frame. An uptrend on the 5m chart is quite different from a downtrend on the daily chart.

Higher highs and lower highs = in an uptrend
  • #9
  • Apr 7, 2009 11:56pm Apr 7, 2009 11:56pm
Quoting Leonlorenzo
Ok, I have another question......

How would you identify a 'trend' without a chart? The best I can come up with so far Is If the price Is above yesterdays high then we are In an uptrend and V.V. for downtrend.

Any other idea's guys?
I would define a 'trend' as the price moving beyond a certain number of deviations from the mean then continuing to do so. It is hard to 'define' a trend per se, but it is easy to define a point where the price is statistically unlikely to reach if there were no tendency to trend.
The breaking of a wave cannot explain the whole sea.
  • #10
  • Apr 7, 2009 11:59pm Apr 7, 2009 11:59pm
Quoting Leonlorenzo
If any chosen market moves say... 100pips down, do you think it is more likely that the market will move another 100pips down than 100pips up? (very dumbed down just for simplicities sake)

If you think yes, isnt that already a tiny edge? It may not make you profitable on its own but its a start.

I know it sounds like a very silly and newbish question, but im looking at the market from a numbers perspective at the moment, hopefully it will bear some fruit.

Leon
This isn't a stupid question, these are exactly the sort of questions you should be asking as finding a market where something like this is true would constitute an edge (for the amount of time the effect lasted).
The breaking of a wave cannot explain the whole sea.
  • #11
  • Apr 8, 2009 1:52am Apr 8, 2009 1:52am
Quoting Leonlorenzo
Ok, I have another question......

How would you identify a 'trend' without a chart? The best I can come up with so far Is If the price Is above yesterdays high then we are In an uptrend and V.V. for downtrend.

Any other idea's guys?
Trend is fractals in nature.

If price auctioned above current day open. Then today's trend is up.
If price auctioned above current week open. then current week's trend is up.
If price auctioned above current futures contract period. then current quarter's trend is up.

Today's trend and current week's trend does not have to be the same. Previous week trend vs current week trend does not have to be continued.

Any fractral trend is tested on previous highest / lowest price point on equal timeframe. If broke: it still prevail (higher high or lower low), if not: its consolidating or indecision phase (inside bar), if both broken: its _I don't know the english word for it_ (outside bar).
  • #12
  • Apr 8, 2009 4:10am Apr 8, 2009 4:10am
Quoting Craig
I would define a 'trend' as the price moving beyond a certain number of deviations from the mean then continuing to do so. It is hard to 'define' a trend per se, but it is easy to define a point where the price is statistically unlikely to reach if there were no tendency to trend.
So does that meen you dont use the 40 EMA crossing the 50 EMA then Craig? Lol

Basically your talking about Identifying when price movement Is outside of the brackets of what you have defined as random price movement? While I understand the aim of this kind of analysis, getting started In doing something like this myself would be difficult, allthough simple for people of your background.

I made a post In the rookie forum earlier today about how I often feel stupid on this forum, It seems that the people who's logic regarding trading I respect and sits well with me, are all much more educated/knowledgable than I am.

Im back In college (after 5 years) this september, give me a chance to catch up with you all. The problem is that the amount of subjects I want to learn Is growing by the day( stats, comp sci, microecon, LOL)

Thanks for the post.
Living the adventure in my head.
  • #13
  • Apr 8, 2009 4:16am Apr 8, 2009 4:16am
Quoting newborn
Trend is fractals in nature.

If price auctioned above current day open. Then today's trend is up.
If price auctioned above current week open. then current week's trend is up.
If price auctioned above current futures contract period. then current quarter's trend is up.

Today's trend and current week's trend does not have to be the same. Previous week trend vs current week trend does not have to be continued.

Any fractral trend is tested on previous highest / lowest price point on equal timeframe. If broke: it still prevail (higher high or lower...
This is the kind of trend analysis I think may sit well with trading the available orderflow, thanks newborn.

(Bold above) Was the word you were looking for Volatile?

Cheers, Leon
Living the adventure in my head.
  • #14
  • Edited 1:05pm Apr 8, 2009 12:44pm | Edited 1:05pm
Quoting Leonlorenzo
So does that meen you dont use the 40 EMA crossing the 50 EMA then Craig? Lol
If it worked, I'd use it

Quoting Leonlorenzo
Basically your talking about Identifying when price movement Is outside of the brackets of what you have defined as random price movement?
Yep.

Quoting Leonlorenzo
While I understand the aim of this kind of analysis, getting started In doing something like this myself would be difficult, allthough simple for people of your background.
This stuff is easy, means & standard deviations, didn't you do this stuff at school?

Edit: What is important with stuff like this is not so much to understand everything in detail (e.g. the derivation of standard deviation) but to have a grasp of what the concept means physically and know how to apply it (i.e. use the formula). I don't use any complex math, people get too caught up in the details of analysis, I think a really smart person is able to cut though all that to the underlying principals and apply them. So don't be put off, you don't need a PhD in math, unless you want to do the AI thing.
The breaking of a wave cannot explain the whole sea.
  • #15
  • Apr 8, 2009 1:24pm Apr 8, 2009 1:24pm
Quoting Leonlorenzo
If any chosen market moves say... 100pips down, do you think it is more likely that the market will move another 100pips down than 100pips up? (very dumbed down just for simplicities sake)

If you think yes, isnt that already a tiny edge? It may not make you profitable on its own but its a start.

I know it sounds like a very silly and newbish question, but im looking at the market from a numbers perspective at the moment, hopefully it will bear some fruit.

Leon
yes, so now I think it's so foolish of me (just for me) to find 10pips move out of random walk if not pros sitting 10hr a day in front of charts, and not 10yrs experience with trend and not getting a big enough account and not running on compound ROI...

there are tons of oppotunity to arbitrage, to harvest in hidden value by market unefficiency, to hedge econ risk, to network, to gain trust & ability, and to beat inflation, even to gain health... why try to gamble out of random walks? sounds so foolish of me...

not sure if I am the only guy thinking this...

just saw some shakes followers back to high timeframe tradings after all the myth and feel...
  • #16
  • Apr 9, 2009 7:46pm Apr 9, 2009 7:46pm
Quoting Craig
If it worked, I'd use it


Yep.


This stuff is easy, means & standard deviations, didn't you do this stuff at school?

Edit: What is important with stuff like this is not so much to understand everything in detail (e.g. the derivation of standard deviation) but to have a grasp of what the concept means physically and know how to apply it (i.e. use the formula). I don't use any complex math, people get too caught up in the details of analysis, I think a really smart person is able to cut though all that to the underlying principals and apply...
Im pretty sure that I didnt learn about Standard deviations in school, I suppose its possible I did but have forgoten about it though. Im going to have a read tomorrow and see If I can work something out.

Ps. I found the post where you mentioned the posters on ET to read, Interesting stuff, and way too much to read in one sitting, lol.

Cheers, Leon
Living the adventure in my head.
  • #17
  • Apr 10, 2009 5:53am Apr 10, 2009 5:53am
Hi Leon,
You asked how to determine a trend without a chart.
Why do you then beat yourself up that you do not have the mathematical ability to work it out like the others you mention. They may have a superior education or grasp of further maths and physics but do those same people apply all that knowledge to trading or simply use whats in front of them.
We have all these charts for nothing so my question is why try to beat or reinvent the charting process.
From reading your threads you put yourself down for not having the required knowledge to succeed in this game yet. I myself have had to tame the impatient one within me who wishes to trade everyday like I am at my manual job and work hard. It seems to me that those doing well at this and I include myself have learnt to take the simple rules and stick to them. Absolute discipline. It has taken me 3 years now to fully understand that I can process and understand every indi and calculation I come across but it won't help me as much as following my rules. I have found my edge within me.
Hope you find yours
Andy
  • #18
  • Apr 10, 2009 6:28am Apr 10, 2009 6:28am
Leon dude,

We had conversations before and I gather that you are still looking to 'build' or identify that 'edge'.

Let me put it this way: an 'edge' (for no better term) can be derived/constructed on the basis of many things. Things that leave you the choice in actual fact not having to build it on something you don't undestand or you are simply not used to - like std. dev. for example.

You don't need to be a rockest scientist or hold any other degree from a university for that matter in order to make money (lots of it) in the financial markets. In fact, history shows that complicated mathematical constructs to tame the markets have failed in a spectacular manner over and over again - see LTCM, Soc-Gen, one dude who lost $6bln in energy derivatives and the recent sub-prime crisis - all based on formulae 23 pages long and including unforseen risk factors even the guys who invented them didn't know about.

Markets change and whatever you aim to construct needs to be simple enough (in my opinion) to highlight straight away if underlying market paradigms start to shift - and in turn making your edge disappear. Most of the so called more 'sophisticated' models let you pile up losses before you actually know that they are not working any longer in current market conditions - when I say current, I mean 6mth and longer.

Anyway, to cut a short story long: build your own 'edge' on something you understand - like time-price ratio or other phenomena you can observe over long periods of time (backward or forward) and draw your conclusions from it.

The basic question is: can you find repeating patterns (irrespective and excluding indicators)?

regards
daytrading
Enter Signature
  • #19
  • Apr 13, 2009 2:09pm Apr 13, 2009 2:09pm
Quoting daytrading
Leon dude,

We had conversations before and I gather that you are still looking to 'build' or identify that 'edge'.

Let me put it this way: an 'edge' (for no better term) can be derived/constructed on the basis of many things. Things that leave you the choice in actual fact not having to build it on something you don't undestand or you are simply not used to - like std. dev. for example.

You don't need to be a rockest scientist or hold any other degree from a university for that matter in order to make money (lots of it) in the financial markets....
Hey DT,

You always make alot of sence. I have two lists that I keep, one of these lists is for related info/idea's I pick up for what Im currently working on and another for things that I may one day need/use.

Craigs idea of using Std.dev will most likely be something I will look at in the future If what im currently working on doesnt ever come together. Tdion said it best to me In a PM once, that each trader needs to find something they feel comfortable with and learn all they can in that one area, looking at many things at once will likely not be very productive.

Another poster said something that I had also been considering to define trend, current price relative to the days/weeks open, I think this will fit what I am doing best, but I may decide that the concept of trend Isnt needed to make it work, we will see.

I cant remember If I ever asked you, but is all info you use to trade by contained In the chart of the market you are trading? Im just trying to work out when you say 'patterns' what you are actually talking about. On the forums it usualy means head and sholders, double top ect.

Nice to read your posts.

Leon
Living the adventure in my head.
  • #20
  • Apr 13, 2009 2:33pm Apr 13, 2009 2:33pm
Quoting daytrading

In fact, history shows that complicated mathematical constructs to tame the markets have failed in a spectacular manner over and over again - see LTCM, Soc-Gen, one dude who lost $6bln in energy derivatives and the recent sub-prime crisis - all based on formulae 23 pages long and including unforseen risk factors even the guys who invented them didn't know about.
I never understand these situations, how can someone lose everything when some market tendency dissapears? Craig has spoken to me before about measuring an edge, and how to decide when it is no longer valid statistically.

In these situations where an edge becomes worthless Id expect a sizeable DD before its detection, its magnitude depending on how much was being risked, but not a Margin-call.

The blow-ups just sound like negligence to me.
Living the adventure in my head.
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