Dislikedhmm you seem to really be missing some key understandings... charts are bad representations of price action in that they obscure the data....Ignored
- #64
- Dec 31, 2009 7:33am Dec 31, 2009 7:33am
- Joined Oct 2009 | Status: . | 4,038 Posts
Congratulations ScalaFX for coming out of the closet!
- #65
- Dec 31, 2009 5:31pm Dec 31, 2009 5:31pm
hmm you seem to really be missing some key understandings... charts are bad representations of price action in that they obscure the data.
First, thanks for the reply. Perhaps I should have elaborated a little more however, I'm only about 48 hrs into my P&F journey.
To start, I understand how data is calculated on the charts I use (Bar, occasionally candlestick (preemptively, I understand bar and candle charts display the same data. The difference is visual interpretation)). I understand the difference between looking at a 1 min chart vs. 1 hour vs. 1 day vs. 1 week, etc, etc. I understand that they are a summaries of price action as related to specified periods of time.
Price action however, is not my only interest with regard to my current trading method. So, I am not concerned with the most accurate representation of price action over time when analyzing a bar/candle chart
So, although bar/candle charts are not a pure representation of price action. That's also not their purpose. Time is part of the equation for a reason. I could elaborate more however, my bar strategy is efficient, and I'm here to create a P&F strategy.
on 1min chart a bar has 4 pieces of data... open high low close... and on a 1millenium chart a bar still only has 4 pieces of data.... open high low close.think about how much information has been lost. in a millenium a lot has surely happened. the same is possible for a 1min chart. tick data is the true data of exactly what is happening and everything away from that is purely a vague summary.
Remember nubcake, summaries have a purpose, and although a summary does not display every piece of data... That's the inherent point of summarizing! To
communicate the general point/direction of something.
I think part of the miscommunication here is due to perspective. You infer that a 1millennium bar has lost a lot of information. Well, that's not correct. A 1millennium bar has summarized data for that time period, and although it would be utterly useless for any practical trading, it would have value when analyzing an Age (1,000 millennia). After all, studying a 1 minute chart to analyze an Age would be just as useless as studying a 1millennium bar to analyze present price action.
But, I digress. Back to P&F speak!
your question is exactly the same question as "why do my candles change when i change timeframes?". so, why do they change? what are they showing you? when you understand this then you can apply your understanding of what a p&f chart represents along with this understanding of different timeframe candles and you will have your answer!
1) Candles/Bars, represent price action within a specified time frame.
2) P&F's in theory, represent price action in movement of "X units" regardless of time. (Obviously the theory is not entirely efficient.)
The two questions are quite different because, one measurement includes time as a variable while the other measurement attempts to exclude time as a variable.
So, learning how time frame change on a P&F chart affects data is not accomplished by understanding how time frame change on a Candle chart affects data. They may be related, but they are not the same.
remember, p&f charts are usually created from candle charts because that is the easiest and most available information. candles are vague. if you go up a timeframe then of course the p&f chart is now using a different vague representation of price action OVER TIME which it now must use to try to take out the time factor... hopefully you see the self-defeating aspect of p&f based on higher timeframe charts.
Please correct me if I am wrong but, I think the answers I was looking for are as follows...
1) Closing price is the data used to calculate the P&F chart (at least the chart I'm using).
This makes sense of why the changes happen when time frames change. Even though the changes are not major with regard to price. (I'll post a chart comparison)
2) Smaller time frames lack historical data and skew the chart view (depending of course on Box size).
This explains, when I change from day to 30 min P&F. There is less historical data, and less price action within the lower time frame. (based on box size and the specific market at the time.) Perhaps this is only an issue with GFT's P&F.
some things to think about...
1. why would you even use a higher timeframe than the very lowest (aka most accurate) chart to base your p&f from? with the most accurate data you can get (usually 1min, unless you somehow have access to tick data outside of actual live charts) you are able to set your p&f to represent whatever box and reversal size you like.
having a p&f of any higher timeframes is to me like taking a picture, lowering the resolution, zipping it, encrypting it, zipping it again... and still expecting to be able to see accurate...
I understand your "resolution analogy" however, I'm guessing that you are a much shorter term trader than I. Again the misunderstanding comes down to perspective.
Let, me explain my perspective with an analogy...
I trade the market much like a surfer rides a wave. When you look at a wave, it is very obvious that it is a wave however, you can look closer (zoom in) and see a lot of smaller waves on the main wave. Even though the smaller waves exist, surfers do not try to ride the small waves on the main waves. The surfer knows that the larger waves will influence his movement through the ocean much more than the smaller waves. The smaller waves are considered choppiness, and have no real influence on the movement of the main wave.
This is my perspective of the market. Let's just say, that once you learn how to surf the market, it becomes easier, and gets harder to stop.
I do understand that scalping can be profitable however, I do not have any sort of scalping strategy to use at the moment. When I create one, or find one that works nicely I will automate it and use it to trade a separate account. From my perspective, it is much less stressful and enjoyable to surf the market.
P&F can be leveraged with any style of trading. Obviously if I'm holding trades longer, it becomes less efficient, to analyze the small time frames.
To counter your example. It would be like trying to appreciate the size of the Grand Canyon by looking through a microscope.
2. tick data is already p&f, but at it's maximum zoomed resolution. a tick chart does not move based on time, it moves when the price moves. is this not the whole point of p&f? again, why would anyone degrade their p&f chart further than they are forced to by using anything but the lowest timeframe they are able to?
I do see the value of using tick data however, there are some problems.
1) The P&F chart (the GFT one) will not interpret tick data
2) The amount of tick data (historically) is not enough for my strategy. It would be fine for scalping however, I'm not a scalper.
If there is a P&F charting application that can be used with tick data I would be interested in hearing about it. It is not necessary to use tick data though, unless you enter and exit based on extremely small differences in price. Which I do not.
So for now, I will use at the smallest, a 1 Hour time frame but more realistically a 4H, 8H, or Day time frame. Assuming I continue to use GFT's P&F chart.
I just realized how long this post was!
Well, writing it definitely accelerated my understanding of P&F.
Thanks,
Mark
- #66
- Dec 31, 2009 6:04pm Dec 31, 2009 6:04pm
what bigger picture? does events from a year or more ago really influence the present price action? serious question as I do not know one way or the other. i have doubts that any past data influences the present / future, but i'm not one to suggest this is fact.
It's not that past data influences present/future data. It's that patterns occur within data and can be used to estimate a continuation, or shift in data.
A P&F chart is made up entirely of "past data". Unless there is some P&F chart that is based off future numbers?
Let's put it this way. Take a batting average of 300.
It is a known fact that once an average is established it tends to repeat itself. Will the average stay exactly the same? No, it will change but, it will stay within a tolerance.
Does the average cause the batter to hit 3 out of 10 at bats? Of course not, it's just a number. However, can you estimate how many hits a player will have based on At Bats with reasonable certainty? Yes.
The point is that historical data paints a picture of how something has acted (performace), which appears in various patterns graphically.
Using a P&F chart on a big time frame is really no different in principal then using a P&F to trade now. ALL of the information you view on your chart is HISTORICAL data. One second ago is now history, and one minute from now will be history as soon as that moment occurs.
All trades occur now, and they all become instant history. All technical analysis is historical. The difference is only perception.
The market itself is history.
So, what came first? The chicken or the egg?
- #67
- Dec 31, 2009 11:09pm Dec 31, 2009 11:09pm
- Joined Oct 2009 | Status: . | 4,038 Posts
So, although bar/candle charts are not a pure representation of price action. That's also not their purpose. Time is part of the equation for a reason. I could elaborate more however, my bar strategy is efficient, and I'm here to create a P&F strategy.
I'll have to disagree with you here. Information lost? Or, do you mean information summarized?
Remember nubcake, summaries have a purpose, and although a summary does not display every piece of data... That's the inherent point of summarizing! To
communicate the general point/direction of something.
you seem to understand far better than your original question suggested in which case my reply is mostly unhelpful...
I think part of the miscommunication here is due to perspective. You infer that a 1millennium bar has lost a lot of information. Well, that's not correct. A 1millennium bar has summarized data for that time period, and although it would be utterly useless for any practical trading, it would have value when analyzing an Age (1,000 millennia). After all, studying a 1 minute chart to analyze an Age would be just as useless as studying a 1millennium bar to analyze present price action.
The questions may be similar, but they are not "exactly the same question".
1) Candles/Bars, represent price action within a specified time frame.
2) P&F's in theory, represent price action in movement of "X units" regardless of time. (Obviously the theory is not entirely efficient.)
The two questions are quite different because, one measurement includes time as a variable while the other measurement attempts to exclude time as a variable.
they are similar questions because you need to understand the charts before you can understand how p and f are generated from them. think back to the volatility point i made above. p and f are usually generated from candlesticks, as though candlesticks are the skeleton of the p and f body. if the candlesticks are skewed and lose information then the p and f generated around this will also shift... this is why i suggest p and f should be generated from the most accurate data possible (1min / tick). from there you have the most price-action accurate data available before the time summarisation created by the candlesticks removes too much potentially important information. this is also why i suggest tick data is like p and f at its most zoomed potential. if you had a box size of 1 pip and a reversal of 1 pip, would this not be tick data?
So, learning how time frame change on a P&F chart affects data is not accomplished by understanding how time frame change on a Candle chart affects data. They may be related, but they are not the same.
1) Closing price is the data used to calculate the P&F chart (at least the chart I'm using).
This makes sense of why the changes happen when time frames change. Even though the changes are not major with regard to price. (I'll post a chart comparison)
2) Smaller time frames lack historical data and skew the chart view (depending of course on Box size).
This explains, when I change from day to 30 min P&F. There is less historical data, and less price action within the lower time frame. (based on box size and the specific market at the time.) Perhaps this is only an issue with GFT's P&F.
I understand your "resolution analogy" however, I'm guessing that you are a much shorter term trader than I. Again the misunderstanding comes down to perspective.
Let, me explain my perspective with an analogy...
I trade the market much like a surfer rides a wave. When you look at a wave, it is very obvious that it is a wave however, you can look closer (zoom in) and see a lot of smaller waves on the main wave. Even though the smaller waves exist, surfers do not try to ride the small waves on the main waves. The surfer knows that the larger waves will influence his movement through the ocean much more than the smaller waves. The smaller waves are considered choppiness, and have no real influence on the movement...
I do understand that scalping can be profitable however, I do not have any sort of scalping strategy to use at the moment. When I create one, or find one that works nicely I will automate it and use it to trade a separate account. From my perspective, it is much less stressful and enjoyable to surf the market.
P&F can be leveraged with any style of trading. Obviously if I'm holding trades longer, it becomes less efficient, to analyze the small time frames.
To counter your example. It would be like trying to appreciate the size of the Grand Canyon by looking through a microscope.
Tick data is not P&F. Tick data is extremely noisy, and does not take into account reversals. Every change is recorded with tick data. P&F ignores price volatility proportionately to the Box setting. That's one of the original purposes of P&F. To get a better general picture of the direction of a specific market.
I do see the value of using tick data however, there are some problems.
1) The P&F chart (the GFT one) will not interpret tick data
2) The amount of tick data (historically) is not enough for my strategy. It would be fine for scalping however, I'm not a scalper.
yeah, as previously mentioned you can, for the most past, get away with using higher-timeframe charts to generate your p and f as you are looking at quite large movements in your strategy. again, there will be mistakes in the chart though but this is the case with everyone not on tick data. can't explain why, just trust me (and give me your money, heh)
If there is a P&F charting application that can be used with tick data I would be interested in hearing about it. It is not necessary to use tick data though, unless you enter and exit based on extremely small differences in price. Which I do not.
So for now, I will use at the smallest, a 1 Hour time frame but more realistically a 4H, 8H, or Day time frame. Assuming I continue to use GFT's P&F chart.
I just realized how long this post was!
Well, writing it definitely accelerated my understanding of P&F.
Thanks,
Mark
Congratulations ScalaFX for coming out of the closet!
- #68
- Edited 11:54pm Dec 31, 2009 11:14pm | Edited 11:54pm
- Joined Oct 2009 | Status: . | 4,038 Posts
Congratulations ScalaFX for coming out of the closet!
- #69
- Dec 31, 2009 11:49pm Dec 31, 2009 11:49pm
- Joined Oct 2009 | Status: . | 4,038 Posts
A most excellent post, my friend!
thanks Keanu
Congratulations ScalaFX for coming out of the closet!
- #72
- May 23, 2010 8:46pm May 23, 2010 8:46pm
- Joined Oct 2009 | Status: . | 4,038 Posts
Congratulations ScalaFX for coming out of the closet!
- #74
- May 23, 2010 10:48pm May 23, 2010 10:48pm
- Joined Oct 2009 | Status: . | 4,038 Posts
Congratulations ScalaFX for coming out of the closet!
- #77
- Jun 7, 2010 8:04pm Jun 7, 2010 8:04pm
- Joined Oct 2009 | Status: . | 4,038 Posts
Point and figure is not lagging because there is only price level.. there is no time, so the lagging is also unincluded
my personal p and f indi is always on when my charts are up. but then again, i'm using it in a different way mostly nowadays anyway due to a small feature i put in that i find to be of use lately. p and f is great for reference instead of having to zoom all the way out to see the bigger picture of where price has been since the time-factor drags-out the most mundane of action.
Congratulations ScalaFX for coming out of the closet!
