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  • #341
  • Edited 8:27am Oct 28, 2015 6:39am | Edited 8:27am
Thank you mzvega,

nice idea.

I think the FOM can be a usefull tool too. It shows the potential of the pairs not the opportunity.

FOM measures the range between the bracket break and the last high/low before bracketing again (historical data). With other words: It measures the run between the pauses and gives you a tool to compare the pairs potential. I try to code that in excel, but its not easy... Because you know, Iam an excel-newbee
Today I have registered myself at an excelforum to get some help.
  • #342
  • Oct 28, 2015 2:02pm Oct 28, 2015 2:02pm
Quoting dljonesFan
Thank you mzvega, nice idea. I think the FOM can be a usefull tool too. It shows the potential of the pairs not the opportunity. FOM measures the range between the bracket break and the last high/low before bracketing again (historical data). With other words: It measures the run between the pauses and gives you a tool to compare the pairs potential. I try to code that in excel, but its not easy... Because you know, Iam an excel-newbee Today I have registered myself at an excelforum to get some help.
This is a great resource for excel as well........
https://www.youtube.com/user/ExcelIsFun/playlists
Markets are not efficient, rather they are effective - Jones
  • #343
  • Edited 8:24am Oct 29, 2015 8:12am | Edited 8:24am
Hi mzvega and evak

Ok the macro is finished and it seems to work fine.
It measures the distance between BRACKETUL/DIST(s) 1 to HIGH/DIST(s) 1 and BRACKETLL/Dist(s) 1 to LOW DIST(s) 1. Graphic 1

In other words it measures the Breakout maximum from break to high/low in next bracket (the run).

I have already run some data on the macro and it seems to work fine.

Here some data for 3day breakouts, measured for 2015 in points.

You can clearly see, that on 3 day bracket breakouts GBP/JPY has the highest potential for 2015 (graphic2).
And USD/CAD has the poorest potential on bracket breakdowns compared to the other pairs.
For example if you have GBP/JPY and USD/CAD in a 3 day bracket, net flow in favour of short side, than you would take a short on GBP/JPY rather than on USD/CAD. (Please note that YEN pairs decimal, 2 digits to right )

You can also compare breakout potential for 3day-5day-10day-15day-20day brackets.
For example EUR/USD semms to have more potential on 3 day bracket breakouts compared to 5 day breakouts.

graphic1
Attached Image (click to enlarge)
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graphic2

Attached Image

But there is more, I hope that I can code a risk parameter. Jones graphic shows that too. His advice engine report shows failed longs and shorts...

Please mzvega and evak share your opinion.
  • #344
  • Oct 29, 2015 12:50pm Oct 29, 2015 12:50pm
Quoting dljonesFan
Hi mzvega and evak Ok the macro is finished and it seems to work fine. It measures the distance between BRACKETUL/DIST(s) 1 to HIGH/DIST(s) 1 and BRACKETLL/Dist(s) 1 to LOW DIST(s) 1. Graphic 1 In other words it measures the Breakout maximum from break to high/low in next bracket (the run). I have already run some data on the macro and it seems to work fine. Here some data for 3day breakouts, measured for 2015 in points. You can clearly see, that on 3 day bracket breakouts GBP/JPY has the highest potential for 2015 (graphic2). And USD/CAD has the...
You are definitely a breath of fresh air. I’m deeply impressed. I don’t even know where to begin, I’m not used to dealing with anyone with a general interest.
The Cisco Site has a wealth of info. There’s 39 years of research. From the screenshot you posted I think you are using this page for reference. http://www.cisco-futures.com/aesearch_dj_sp.html

That article is dated 2/13/2004. However, over the many years he may update the same articles with new info, testing results, or in most cases, to elaborate on. Here is almost the same article but published in 2007. It adds a little more “context” and helps to define “risk parameter”. http://www.cisco-futures.com/select_...ackground.htmL

Let me know if you have trouble with the links. If you do, I’ll post them. I’m still looking for the reference that best describes the FOM formula.
I am very impressed with your “Potential” analysis. I am not sure of your exact formula, but I think where I see “SUM”, should be “AVG”. But give me a minute to look for the reference that best describes the FOM formula.
Markets are not efficient, rather they are effective - Jones
  • #345
  • Edited 3:08pm Oct 29, 2015 2:17pm | Edited 3:08pm
Quoting dljonesFan
Hi mzvega and evak Ok the macro is finished and it seems to work fine. It measures the distance between BRACKETUL/DIST(s) 1 to HIGH/DIST(s) 1 and BRACKETLL/Dist(s) 1 to LOW DIST(s) 1. Graphic 1 In other words it measures the Breakout maximum from break to high/low in next bracket (the run). I have already run some data on the macro and it seems to work fine. Here some data for 3day breakouts, measured for 2015 in points. You can clearly see, that on 3 day bracket breakouts GBP/JPY has the highest potential for 2015 (graphic2). And USD/CAD has the...
In the other article “Risk” is determined by your SL. This has 2 “contexts” depending if you are using a fixed stop or not. For simplicity purposes I’ll use Cisco’s basic model as we have examples for it.

In Cisco’s basic model, the UO & LO set the risk parameters. So the risk is always the distance between the UL &UO (UL-UO=range or LO-LL=Range). This is not a fixed number. The distance between UL and UO are unique to each profile. So you need to know the Average distance (range) to determine “average risk”. So now we have the “average Risk” variable.

Next variable “average Potential”. On your spreadsheet I saw the word “Sum”, the formula calls for an average. If it is summing, I would recommend changing the “SUM” with “AVG” in your formula. This will now give you the second variable “average Potential”.

average Potential/ average risk =FOM or average Potential/fixed risk =FOM

in the example
average Potential =1229
average risk = 643
1229/643=1.91
Attached Image (click to enlarge)
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Markets are not efficient, rather they are effective - Jones
  • #346
  • Oct 29, 2015 2:29pm Oct 29, 2015 2:29pm
Thank you mzvega,

that is exactly what I want from you and evak. If I made a error you have a eye that can find it. Thank you. I will change that SUM to an average. Iam currently working on the risk parameters, it is not a problem to calculate risk, but the R/R is too difficult for me so I ask in my forum. Iam sure that they can help me... thank you again
  • #347
  • Oct 29, 2015 3:01pm Oct 29, 2015 3:01pm
Quoting dljonesFan
Thank you mzvega, that is exactly what I want from you and evak. If I made a error you have a eye that can find it. Thank you. I will change that SUM to an average. Iam currently working on the risk parameters, it is not a problem to calculate risk, but the R/R is too difficult for me so I ask in my forum. Iam sure that they can help me... thank you again
No, thank you, it's not very often I get any excitement around here.
Not many find the value of a little extra (ok, alot) of effort.
But I find it works for me...............
Markets are not efficient, rather they are effective - Jones
  • #348
  • Oct 29, 2015 3:06pm Oct 29, 2015 3:06pm
The Risk average and potential avg for 5days are done.
The FOM is currently divided into short and long. Should I add them togehter? Iam not sure...
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  • #349
  • Edited Oct 30, 2015 3:38am Oct 29, 2015 3:29pm | Edited Oct 30, 2015 3:38am
Quoting dljonesFan
The Risk average and potential avg for 5days are done. The FOM is currently divided into short and long. Should I add them togehter? Iam not sure... {image}
I wouldn't imo,
as I have seen with Cisco data every thing is given and shown for an upside or or downside. Data if you choose long and data if you use short.
They keep this kind of data segregated, in all the reference material I've been through

Edit: after closer inspection yes I would. Track longs,shorts,total for FOM
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Markets are not efficient, rather they are effective - Jones
  • #350
  • Oct 30, 2015 8:01am Oct 30, 2015 8:01am
I think the FOM can be run once a week, because the whole avg would not change on one day. It can be a usefull tool for R/R parameters, safer trading.
The listing of breakout/NO-breakout cases sounds interesting...

Thank you
happy halloween, have a nice weekend
  • #351
  • Oct 30, 2015 2:53pm Oct 30, 2015 2:53pm
Quoting dljonesFan
I think the FOM can be run once a week, because the whole avg would not change on one day. It can be a usefull tool for R/R parameters, safer trading. The listing of breakout/NO-breakout cases sounds interesting... Thank you happy halloween, have a nice weekend
Thank you for contributing to the thread. By discussing and understanding the FOM, we know how valuable using "proof of principal" data can be to aid in the decision making process.

I will definitely be adding this to my daily analysis. I think I will include the FOM on my daily bracket screen. I will plan on tracking it every day; by looking at the data, day to day (like the volatility study) you can actually see the small gradual changes in the market that aren't detectable on the chart.

Your participation is greatly appreciated.

And a nice weekend for you too!
Markets are not efficient, rather they are effective - Jones
  • #352
  • Edited 4:18pm Oct 31, 2015 3:46pm | Edited 4:18pm
Since dljonesfan addressed the subject of the FOM (Figure of Merit) & Potential, I wanted to post some Cisco data I find relevant to the subject of Potential ("proof of principle")

Auction Market Theory
Donald L. Jones
CISCO Futures 2002

Experimental Standard
Measuring the effectiveness of a trading procedure or model is more complicated. The market situation in which the model operates is not in equilibrium. This makes finding a closed mathematical solution of the optimum unlikely. The trading function is different for each trader and is fundamentally unknowable in general. Yet, an experimental standard can be developed. The primary condition is only that a trade be initiated at the breakout point defined by AMT. Other subsidiary conditions relating to time can be applied for special cases, but for the basic standard for day trading, we specify that all trades not otherwise closed out will be terminated at the close of exchange trading for the day. Conditions, then, are two: enter on the AMT breakout, exit no later than the close for the day. No information is needed on the explicit model followed by the trader.

Potential
A trade can be either profitable or unprofitable. The best possible result comes when the trade is not stopped out but exits on a close that is the highest post entry price (if a long trade) or the lowest post entry price (if a short trade). Normally, the best open-trade price occurs not at the close, but at some intermediate time after initiating the trade. The best open-trade price is the Potential of that trade. Potential is always positive or zero, while the actual trade may win or lose.

Potential measures a trade's maximum possible return. Potential plays a role akin to the index in CAPM. It is a quantity against which the trade's performance can be measured. Unlike the index - portfolio comparison, the trade return - Potential ratio cannot be greater than 1. That is, the return on a trade cannot exceed the potential. Further, a portfolio may decrease in value, but still be considered successful if it beats the index. The return - Potential comparison is absolute. Potential never 'loses', it can not go below zero (before costs). But the trade can lose. A losing collection of trades (portfolio) is just a loser. There are no mitigating circumstances of the sort in CAPM.

The absolute nature of Potential makes it the 'ideal' measure, within the limitations of the initial condition of the model (entry price). Turning things around, the Potential is a measure of the effectiveness of the selection process. Potential also qualifies the trading model. Markets are qualified by their potential too, some offering a lot, some a little. Over time, some high potential markets abate, some low ones improve. Potential measures the performance of a model, evaluates a market's tradeability and provides a check on selection processes such as Advice Engine.

the article in its entirety http://www.cisco-futures.com/amt_theory.html
Markets are not efficient, rather they are effective - Jones
  • #353
  • Nov 1, 2015 12:44pm Nov 1, 2015 12:44pm
I've posted this previously in the thread,but I thought I'd post it again

Calculation of Reward and Risk
The aim of trading is the reward, the gain from a trade. Reward (plus or minus) results from the trading process. Auction Market Theory does not specify trading procedures; rather trading strategies. It will be shown that maximum potential reward in a day trade depends only on the entry point. In certain situations (e.g. balanced markets) entry points are readily identifiable. Reward maxima for a trading event can then be found.

Reward alone, while significant, is better understood in terms of it's relation to the risk involved. The rarely known reward-to-risk ratio is important to appropriate money and risk management. A risk estimate can be found from a simplified standard trading model that uses entry prices and risk from an AMT analysis process. The maximum time frame of a trade is from trade entry to market close. The maximum possible reward is the largest price excursion from entry to close. This is defined as the Potential of the trade. Potential for a trade in such a case, is defined by one variable, the entry point. Potential in day trading plays somewhat the same role as the index in CAPM, i.e. as a marker for success. In AMT, Potential measures opportunity. These points will be developed in Part 2 below.

Standards: Potential and Opportunity
Standards are desirable but rare as a basis for evaluating models and markets. If an investor's stock portfolio value declines while the market index is declining more, the investment is described in positive terms (it beat the market). In non-equilibrium trading there are no indexes. A loss is absolute, a gain is absolute. But, losses can carry different connotations. A loss in a market offering little opportunity is quite different from a loss in one with much opportunity. Potential is the arbiter, it sets the standard. If one trades a market that consistently offers low Potential, one should change markets. If one does poorly in markets that consistently offer substantial opportunity, one must examine one's trading methodology.

the article in its entirety http://www.cisco-futures.com/amt_theory.html
Markets are not efficient, rather they are effective - Jones
  • #354
  • Nov 3, 2015 3:15pm Nov 3, 2015 3:15pm
Auction Markets produce hard information of two sorts: price data (technical) and value data (market generated).

Price is a linear, one dimensional variable.

Value is a non-linear two dimensional variable (price over time).
Profiles convert one-dimensional price data to two-dimensional value (price over time).

Price Data:
1. Ticks and transactions reported during the day.
2. End of day "daily summary" of open, high, low, close, volume and open interest.

These data are basically one dimensional, tied to price. Price data are the raw material for 'Technical Analysis'.
Technical analysis encompasses charting (gann, elliot, candlesticks, bar charts, etc.); price and pace indicators (moving averages, relative strength, oscillators); sentiment (psychology, consensus, volume analysis, open interest analysis); and price projection (spreads, seasonals, cycles).

Technical analysis is, briefly, a search for indicators, for market timing. Is the market ready to trend? Is a trend finished? Is the public bullish?, bearish? Many, many indicators can and have been developed. Often, different indicators give conflicting signals.

Value Data:
1. Meta-Profile Data (tpos)
2. Overlay Demand Curve (composite profile)

Unlike one-dimensional technical data, Value data is developed from a combination of time and price.

Markets are complex, self-regulating and driven by feedback.

Meta-Profile is the only tool we know that decodes the market's feedback into Value. This finding lies at the root of auction market value theory. We find that the market's feedback becomes the principal arbiter, the limiter of how theory can be applied

Basic market analysis that applies the concepts of feedback, day value and market condition (multi-day value); and, 3) A set of axioms and observations forming the basic principles of auction market value theory.

Complex systems are generally nonlinear with feedback acting to continually adjust the system. There appears to be no hard and fast definition of a complex system.

Markets are driven by feedback; therefore new information comes in at the feedback rate.

1) Feedback occurs within the system (all agents observe the system and make changes in their behavior)
2) The system adapts to information from feedback (losers get out, winners increase holdings)

Feedback is diverse, affecting each agent or trader in a unique, personal way. The net effect of the feedback manifests itself in macrosocpic market parameters such as price movement and volume. But it is impossible and not even desirable to isolate a particular feedback element from any one of the agents; the useful observable is the net market change related to that element.

Feedback: change contains an element of remembering, agents behavior evolves thru feedback and adaptation

Looking at the complex market from a differential equation standpoint, a descriptive equation would likely be nonlinear (feedback does not behave linearly), non-homogenous (variables most likely could not be separated, even if they could be defined) and the coefficients are non-constant.

Although changing price and varying timeframes are observables from the market feedback, that variation makes the definition of value uncertain in its practice. Value is a macroscopic variable while market behavior parameters in a non-stable market are microscopic variables. Feedback cannot generally provide predictive information since the feedback depends on trader behavior. Market response time to a pulse is non-zero (feedback takes time)

Another characteristic of Auction Markets is a time delay in a market's response to a pulse of activity. Feedback from the widely scattered agents/traders takes time: each trader acts within his/her own interpretation of the market action and within his own timeframe. In a market driven by feedback the time to respond is variable depending on the impetus, And value, not price, guides the way

"Price" and price to price relationships (time-series data) are a linear, one dimensional variable.
"Value" is a non-linear two dimensional variable (price over time).

Using Price data and price to price relationships (time-series data), as opposed to Value data for Auction Market Analysis is like using a tape measure, to measure the amount of sugar required to bake a cake or using a tape measure to measure the amount of water it takes to fill a 50 gallon fish tank.

From an Auction Market Analysis Perspective if you wouldnt use a tape measure to measure the amount of water it takes to fill a 50 gallon fish tank. It is just as illogical to use "Price" and price-to-price relationships (price action) a (linear, one dimensional variable) to measure the amount of "Feedback" it takes to measure "Value" (nonlinear two dimensional variable (price over time).

The Fundamental difference between Auction Market Analysis and Technical Analysis is the Data used. Auction Market Analysis analyzes Value, Technical Analysis analyzes price.
You have to ask yourself, are you using the correct Data for the task at hand? Are you using the correct Data for questions being asked???????
Markets are not efficient, rather they are effective - Jones
  • #355
  • Nov 4, 2015 10:03am Nov 4, 2015 10:03am
Hi mzvega,

thank you for the articles and the links, much appreciate.

I was knocked out by a virus,cant work for 3 days.

What do you think about the daily averages table Jones speak about? http://www.cisco-futures.com/np_averagetables.htmlx

I know you already using a daily bracketing table and the net flow table.
What do you think about the TFF avg, Range/VARange table and the others for 90,5,10 ... days?
Have you ever used them? And what are your experience with these avgs?

Attached Image (click to enlarge)
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Today i finished my work with the fom table and created the daily avg tables. I also created a risk/reward table discribed in Jones fom article. I want to understand and read these tables.

greetings
  • #356
  • Nov 4, 2015 1:42pm Nov 4, 2015 1:42pm
Nice data mining effort here. It could weed out some of the correlation of some of these data point perhaps determine the conditional strategy for good probability breakout

Anyway Some of the Major pairs broke out today that i traded..

-EU down trend continuation trade after a 8 days pause with a 5 day balance break.

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-UJ base consolidation breakout day on all overlays; it seems to be bracketing since today is not a double distribution day.

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-Fail trade on AU to break up, it developed into a responsive play. The previous 3 day Flow was up but volatility wasn't stable. I took the bait anyway

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  • #357
  • Nov 5, 2015 1:51am Nov 5, 2015 1:51am
Quoting dljonesFan
Hi mzvega, thank you for the articles and the links, much appreciate. I was knocked out by a virus,cant work for 3 days. What do you think about the daily averages table Jones speak about? http://www.cisco-futures.com/np_averagetables.htmlx I know you already using a daily bracketing table and the net flow table. What do you think about the TFF avg, Range/VARange table and the others for 90,5,10 ... days? Have you ever used them? And what are your experience with these avgs? {image} Today i finished my work with the fom table and created...
Cisco stopped posting the average tables some time back. But leaves the info for educational purposes. That was the impetus that started the flow studies and the other quantitative analysis that are now called Auction Market Value Analytics http://www.cisco-futures.com/amva_fs.html

However, I know you shouldnt fixate on any one reference point, but I do run an average on VTY. Just to give me some semblance of a norm to measure against. I also, use it as a guide to keep my stop outside the fluctuation envelope of VTY when I place a protective stop to lock in profits. Due to the fluctuations in price as the market adapts/adjusts to feedback, its a measure I use to keep that me from being unnecessarily stopped out of a perfectly good trade. Just because Cisco doesnt post them doesnt mean you cant track them. I often run an avg of a ref just to satisfy a curiosity. Some refs carry more weight than others for individuals depending on the context. VTY, TFF, Range/VARange, TPOs are all avgs I have tracked at some point or another. But at the end of the day Im more concerned with the net. But as Evak pointed out, they definitely can be used for conditional parameters for developing a personal trading strategy.
Attached Image (click to enlarge)
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Markets are not efficient, rather they are effective - Jones
  • #358
  • Nov 5, 2015 2:12am Nov 5, 2015 2:12am
Quoting Evak
Nice data mining effort here. It could weed out some of the correlation of some of these data point perhaps determine the conditional strategy for good probability breakout Anyway Some of the Major pairs broke out today that i traded.. -EU down trend continuation trade after a 8 days pause with a 5 day balance break. {image} -UJ base consolidation breakout day on all overlays; it seems to be bracketing since today is not a double distribution day. {image} -Fail trade on AU to break up, it developed into a responsive play. The previous 3 day Flow...
Great trades! I love the analysis and your charts never disappoint
Markets are not efficient, rather they are effective - Jones
  • #359
  • Nov 5, 2015 5:00am Nov 5, 2015 5:00am
Thank you mzvega for your advice.
Thank you evak for sharing your entries.

Today GBP/USD looks good for an aggressive short on 3 day bracket. G1
Attached Image (click to enlarge)
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G1

Netflow down with activity not that strong, but slightly better than yesterday and direction down. Predictive down. G2
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G2

What do you think? Go aggressive short on 3 day Bracket LL breakdown? Or wait for 5 day bracket?

Greetings
C
  • #360
  • Nov 5, 2015 5:56am Nov 5, 2015 5:56am
What do you think about AUD/JPY?
Strategy: 5day bracket UL breakout.
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Net flow
Direction is up, activity is negative, not predictive.
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