The Essence of Trading

Quoting CrucialPoint

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A move in any direction is governed by Newtonian physics and can be calculated quantitatively. A fake bounce or a fake breakout are objectively and quantitatively significant compared to a real bounce or break.

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Quoting Pipalicious

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- In order to determine a false breakout or bounce (before 'hindsight' takes place) is there certain data required to achieve this with? i.e. the data contained within ohlc charts...is this enough or is other data required for this (ticks, volume,...)?

Most will look at it and say "it bounced of the 30ma, it bounce of supply, its a fake move due to stop hunt taking place..." Here, most of time, its hindsight taking place. I believe its possible to be 'tipped' as it is ocurring, allowing for a higher probability to go one way or the other, without...

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Quoting Pipalicious

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- In order to determine a false breakout or bounce (before 'hindsight' takes place) is there certain data required to achieve this with? i.e. the data contained within ohlc charts...is this enough or is other data required for this (ticks, volume,...)?

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Quoting Pipalicious

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- What exactly is quantitatively significant between a false/real break/bounce? Speed, Acceleration,...?

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Quoting Pipalicious

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- In order to determine a false breakout or bounce (before 'hindsight' takes place) is there certain data required to achieve this with? i.e. the data contained within ohlc charts...is this enough or is other data required for this (ticks, volume,...)?

Most will look at it and say "it bounced of the 30ma, it bounce of supply, its a fake move due to stop hunt taking place..." Here, most of time, its hindsight taking place. I believe its possible to be 'tipped' as it is ocurring, allowing for a higher probability to go one way or the other, without...

Ignored

Quoting Pipalicious

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- In order to determine a false breakout or bounce (before 'hindsight' takes place) is there certain data required to achieve this with? i.e. the data contained within ohlc charts...is this enough or is other data required for this (ticks, volume,...)?

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Quoting CrucialPoint

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Market never changes... Never have and never will. :nerd:

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Quoting GEfx

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Focus on risks first, gain second.

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Quoting the redlion

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crusial point

it is the momentum, speed, and thrust of price that determines the buy/sell pressure

orders are reflected in the chart buy selling or buying pressure,

the open of a given TF is the reference point of where orders ended up or down

and how fast where they moved

and if you look closely the chart will lean on the bull or bear, as money flows in or out.

momentum
speed
thrust
general price movement of conviction

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Quoting CrucialPoint

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[center]

Market never changes... Never have and never will. :nerd:

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THE MARKET'S PRINCIPLES 

I. A free marketplace is one in which participants are voluntarily active.

II. Required for a marketplace:
    A) product
    B) need for product

III. Purpose of the marketplace:
      A) to facilitate trade
           1) a location
           2) market-imposed timeframes

IV. Marketplace functions with:
        A) product
        B) need for product
        C) price promoting activity through excess
        D) time regulating activity

V. Marketplace advertises opportunity by offering price away from value.
     A) A response to this opportunity can be a bsent.
     B) A response can be present, taking advantage of the opportunity.
     C) A response can be opposite, overtaken by initiating activity
         unperceived by the marketplace at that moment.

I) Activity is one which goes counter to the promotion for which
the market is advertising.

VI. Marketplace is controlled and regulated through the distribution of
price and time, yielding types of natural organization which produce
balance (a "fair" area where two-sided trade takes place).

VII. The combination of all these components in an active phase is called
market activity.
     A) Market activity is composed of a range of time-price opportunity
         occurrences, TPO being the market's basic unit of measurement.

VIII. Market activity is an expression of participant need, triggered by:
      A) market-imposed timeframes
      B) participant time frames
         1) A market's volatility is dependent on the mix of long and short
             market-imposed and participant timeframes.

IX. Market activity generates information:
    A) A readable preference of variant time-price opportunities which
        occur at different times, at different or the same prices, at
        different or the same levels of volume. This is an expression of
        accepted, rejected or changing value by participants as a whole.
            1) Time-price opportunities (and hence prices) can appear with a
                  large or small relative amount of time.
              a) Those time-price opportunities resulting in a large amount of
                   time must result in large transactional volume and display
                   market acceptance or value for both sides in that timeframe.
              b) Those time-price opportunities resulting in a small amount
                   of time must result in small transactional volumc and display
                   market rejection or unfair value for one side in that timeframe.
   B) This amounts to market distinction as to price.
       1) prices accepted versus prices rejected
   C) A further distinction of the type of market activity can be made within
        the framework of acceptance/rejection.
         1) prices in a market-created opportunity which arc responded to
             versus prices in a market-created opportunity which arc
              overtaken by other initiating forces. Therefore,
              Price + Time  = Market Acceptance (responsive or initiating)
                                = Transactional Volume
                                = Market Value (definition of all free markets)

X. All markets, although they may be structured differently (dealership,
auction house, exchange market, etc.) arc nevertheless motivated by
the same forces, and operate based on these basic principles.
     A) traders and investors should understand sound market logic so
          that they can extract and read market-generated information to
          satisfy their particular needs in every marketplace.

THE MARKET'S OPERATIONAL PROCEDURES

What the Market Does to Create Activity

      A) The concerns and needs of the participants which collectively
           determine the activity of a marketplace are many and varied and
            can be different for different timeframes, but are brought to
            balance in the closest timeframe. These concerns and needs arc not
            necessarily balanced in time frames outside the closest parameter.
       B) In balancing itself, the market focuses on a dominant set or single
       concern or news item -- whether real or imagined -- and
        neutralizes that in the very short run by offering a range of prices
        in order to locate an area which faci litates trade. In doing so, the market makes the situati on f air to both si des in the closest timeframe.

       C) Once balance is found, the marketplace will continue to trade in
           this fair area until another influence from either the immediate or
           longer term timeframe enters and upsets the balance, shifting to a
           new price area. This new balance can be changed by a new set of
           concerns or participants becoming active. This process can be
          continuous or opposite to the initial dominant conccrn in nature.
           In the short run, this process is rapid and volatile.
               1) Thus, the dominant conecrn usually motivates the short
                    timeframe participants to change the price to creatc fairness.
              2) The dominant concern usually does not motivate the long
                   timeframe participant. He is often motivatcd to takc thc "fair
                   price area" as a markct-createn opportunity or pricc excess in
                   his timeframe. In other words, the activity of the longer
                   timeframe may upset the balance created in the short term.
          D) The market provides a range of time-price opportunit'ies on which
              participants can act. Their action or inaction determines the
             structure of the marketplace. The market rotates in order to bring
                i n i nvolvement of all timeframes and facilitate trade. The price
                area most accepted is the price area most often used, which
                 therefore is the price area which facilitates trade, which is
                  accepted as value.
         E) The market will continuously offer various time-price
             opportunit i es to reassure this activity.
         F) The nonaccepted prices are either over- or undercompensations
              used to find balance. It is these over- or undercompensations
              which motivate entrance by longer timeframe buying/selling
              participants, either dcsiring to take advantage of price away from
              value or due to distress, and which are used as reference points for
              the short timeframe participant.
        G) This over- or undercompensation is always present in the
            marketplace to a small or large extent, depending on volatility or
            commonplace among participants, which is dependent on the mix of
            timeframe influence.
        H) The marketplace regulates itself and exercises control over its
             primary function, which is to facilitate trade. It does this when,
             as the market moves toward the extremes of the balance area, it
             becomes attractive for long time frame participants, and at the
             same time attracts short timeframe traders. 
Thus, the marketcreated opportunity does not last long, because of increased
competition to take advantage of the opportunity. This introduces
time as the controlling factor in the marketplace.

Market Characteristics

I. All markets are essentially auction markets.
     A) There are two categories of auction markets.
        1) Active auction -- range develops during negotiation.
        2) Passive auction -- range is already predetermined in a
             packaged offering.
       B) Active auctions can go from low to high or from high to low. In
          the auction process, the market will continue in the same direction
           in an effort to facilitate trade until the last buyer or seller has
           participated.
       C) All prices change from the previous price for a purpose, that being
           to satisfy the condition of the market.

II. Participants have a spectrum of timeframe perspectives during which
they operate. For simplicity, participants can be classified into two
categories according to their timeframe perspective.
      A) Those conducting business for the short term (or day) -- short
           timeframes.
      B) Those conducting business outside this parameter - long (or other)
           timeframe.
         1) Those with different timeframes operate in the market
             differently.
               a) Short (day) timeframe - looking for fair price within a
                   short time.
               b) Long (other) timeframe - looking for market-created
                   opportunity where it relates to individual participant need,
                   an elective type of activity.

III. Activity Levels for timeframes are as follows:
         A) Short timeframe participant activity usually makes up most of the
            transactional volume in a given timeframe.
        B) Long timeframe participant activity usualJy makes up a smalJ
            amount of the volume in the same timeframe.
            1) Anxiety level for a short timeframe participant ranges from
                acti ve to passive.
            2) Anxiety level for a long timeframe participant ranges from
                 passive to active.
            3) Total mix of volume wilJ be a blend of these circumstances and
                will affect the market's structure accordingly.

IV. Regardless of whether prices are in an excess, or are facilitating
trade in the short timeframe, a market-created opportunity which is
attractive to a long timeframe buyer wilJ not be attractive to a
long timeframe seller. Thus, desire for participation for a
long-term buyer and a long-term seller are opposite at the same
price, at the same time. Therefore, long-term buyers almost never
buy from long-term sellers. Thus, no market exists which is composed
solely of long timeframe participants trading with one another.

V. Where prices are facilitating trade and are thus fair in the short
timeframe, a price or price area which is attractive for a short timeframe
buyer will be attractive to a short timeframe seller.

VI. The normal trading pattern has the short-term trader transacting
business with the long-term trader, yielding various buyer-seller
combinations: long timeframe versus short timeframe. Each
combination transacts business in varying quantities throughout the
structure of the range.

VII. Participants can and will change their timeframe depending upon the
situation as it relates to their needs. The effect of this is to
increase or decrease market activity.
         A) Long timeframe participants, when they decide to abandon their
             posture of only trading with an advantage and trade in the short
         timeframe, become short time frame participants because their   needs
         and goals as expressed in market activity become identical to
           those of other short timeframe participants. This increases
            market activity.
        B) Likewise, when long timeframe participants extend their timeframe,
           market activity is decreased. Further, when a long timeframe
           participant passes up a market-created opportunity, market
            activity decreases.
        C) When the short timeframe participant lengthens his timeframe, he
             becomes a long timeframe participant, decreasing activity.
        D) When the short timeframe participant shortens his timeframe,
             activity increases.
        E) Regardless of timeframe, those who have initiated positions in
           nonconsuming markets may look to exit the positions over either
            timeframe.

Quoting the redlion

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how do you know the RED LION is full of sh*t

test it out.

here is a simple experiment and if you lose money dont come crying to me.

open up your lap top and look at current events, the NYSE, EUROPE, ASIA stock markets, look at the six majors together and ask yourself just this question.

where is the general direction? are the correlations in tune with each other?

now open up your currency pair, eye ball it and think in terms of speed, thrust, momentum, order flow prevalence.

i am against pretty lines drawn on charts but if you are gonna...

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Quoting lolpie

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I think CP was being more literal when he said the markets never change.

This is his post explaining how 95% of the time, price closes above or below the open. Hence in that sense, the markets never change.

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Also I think we might have gone a bit too far off the main topic, talking about momentum, speed, etc. That's more discretionary and has to do with making trades and not really the 'essence' of the market - which was the original point of this thread.

So...

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Quoting Pipalicious

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Ok lads and lasses...

So in my rollercoaster voyage ive been thinking lately more and more on how to simplify everything as much as possible.

So here goes an open question for all of you:

In one sentence or two, describe your interpretation of the market and the essence behind what you essentially do to profit from it.

Id also like to add that due to a lot of personal thinking along with some thought provoking comments from individuals on this forum ive come to the conclusion that trading and its essence can be described in...

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