Attachments: Auction Market Value Theory & Analytics

Auction Market Value Theory & Analytics

#561
Edited 6:01am Jan 11, 2016 4:33am | Edited 6:01am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Hi Mzvega

I have a question regarding to the test phase of a bracket. Which data combination do you use?
For example:

1. 5 day bracket test data End Time 06.01.2016 + 1 day high low data 07.01.2016

or

2. 5 day bracket test data End Time 07.01.2016 + 1 day high low data 07.01.2016

for analysis at the 08.01.2016.

Iam currently concentrating on how to measure the market flow. Can you give me please some advice/tipps how you deal with 2 and 3 day data?

greetings
C

#562
Jan 11, 2016 8:11am Jan 11, 2016 8:11am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

Hi Mzvega I have a question regarding to the test phase of a bracket. Which data combination do you use? For example: 1. 5 day bracket test data End Time 06.01.2016 + 1 day high low data 07.01.2016 or 2. 5 day bracket test data End Time 07.01.2016 + 1 day high low data 07.01.2016 for analysis at the 08.01.2016. Iam currently concentrating on how to measure the market flow. Can you give me please some advice/tipps how you deal with 2 and 3 day data? greetings C

Ignored

1. 5 day bracket test data End Time 06.01.2016 + 1 day high low data 07.01.2016

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Markets are not efficient, rather they are effective - Jones

#563
Edited 9:11am Jan 11, 2016 8:55am | Edited 9:11am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Since people like to only read the last page of a thread, I wanted to do a re-post on a new page.......

Auction Markets

From Market Profile to Value Analytics: January 11, 2008

Donald L. Jones

CISCO Futures

January 2008

The CBOT product announcement of Market Profile in 1985 revolutionized market analysis. The focus on intra-day market behavior offered more information than ever before possible. Couched in the terms of pattern recognition, the CBOT Market Profile Manual suggested that analysis proceeded from first recognizing the type of trading day. Day type was the base, the indicator of who was in control of the market; short or long term traders. Unfortunately, the number of day types varies with the author and the same author might cite a different number of day types in different publications.

At CISCO we could not make pattern recognition work for us. In exploring alternatives we found that it was very dicey to put too much faith in a single day's profile. In our book, Value Based Power Trading, 1993, we noted that even a market in a solid trend had day to day variations that on a single day basis made the trend unrecognizable. Broadening that concept led to the Three Day Rule (2007). That rule, simply stated, says that market condition cannot be reliably found from a single day's data. Three days of profiles together offers a much more reliable measure of market condition. That missing link in profile analysis led to our work on value based analyses, starting with the Overlay Demand Curve (1988). (Dates such as (2007) refer to entries on the References page, which are ordered by date)

Background on Market Profile

Market Profile (tm) appeared in 1985 as a product of the Chicago Board of Trade that "integrates price, time and volume". It incorporates real time ticks to generate a 'profile graphic' of market activity displayed in a 1/2 hour bar basis (TPO's). This 'profile' often forms a bell shaped distribution when plotted as a price-activity graphic.

The accompanying CBOT Market Profile Manual, 1985 (MPM 85), explains the uses of the profile in terms of analyzing the bell-shaped graphic. End of day cleared data, the Liquidity Data Bank (LDB), breaks down a day by cleared volume by type of member to show who on the floor is active at what price levels. LDB voume data is the source of profile value (profile value area).

The bell-shaped price-activity chart's similarity to a gaussian distribution* is used to draw inferences about the market such as the type of day (2 listed), (day) condition of the market (trend or balance) and other profile dynamics. Value as found from the cleared volume in the LDB, is the range of the first standard deviation of the volume profile.

Several 'reference points' are identified, more particularly in Market Profile Manual, 1991 (MPM 91). These reference points, again day timeframe oriented, explain certain elements of a market's behavior such as trade facilitation, initial balance, range extension, tails, who is most active in the value area and attempted direction. The book, Mind Over Markets, 1990, Dalton, et. al., (MOM), addresses reference points in a somewhat more organized manner.

Reference points read from the bell shaped price-activity curve, including day type, are prone to more than one interpretation. The goal is to identify the source of market control: short timeframe traders like the locals must trade to make a living and the long timeframe (other) traders are looking for bargains and will not trade otherwise. The interpretations are often judgement calls, depending upon ones recognition of the market patterns. Market Profile Manual, 1985, states that it will take six months to a year to gain the expertise required to recognize and interpret the various market forms. In sum,the user is expected to become adept at pattern recognition.

Comment:
The basic premise of market profile, it's foundation, is that the bell shaped price-volume curve from the LDB volume and the price-activity curve from TPO's forms gaussian distributions. A gaussian distribution has a well defined form, the bell shape. Two parameters (mean and standard deviation) define all points on the curve.Experimentally, for a gaussian distribution, both the mean and standard deviation can be found from the data. The identical formula can be applied to non-gaussian data, but, of course, the interpretations are meaningless. One problem with market profile is that there is little, if any discussion about data validity; does the distribution at hand fit the bell shape model and what to do if the bell shape is not present that day or the day shows both bell parts and non-bell shaped areas. Tests of the quality of fit to a gaussian curve are available in the statistics literature (e.g. chi-square) but not mentioned in CBOT 1985, CBOT 1991 or MOM.A distribution may have a bell shape and still not be gaussian. That would mean that at the very least, value obtained is questionable.

If the price-volume curve is not bell shaped at all, it is obviously incorrect to apply gaussian statistical analyses. Since bell shaped curves occur in balanced markets (and probably only in balances),it is important to have tools to identifiy balance. None are offered in the Market Profile Manuals or MOM.

continued..............................

Auction Markets
From Market Profile to Value Analytics: January 11, 2008
Donald L. Jones
CISCO Futures
January 2008

*"The bell-shaped price-activity chart's similarity to a gaussian distribution"

Just because a profile "looks similar" to a gaussian distribution does not mean it "is" a gaussian distribution

similar
/ˈsɪmɪlə/adjective
1. showing resemblance in qualities, characteristics, or appearance;alike but not identical

similarity
[sim-uh-lar-i-tee] noun, plural similarities.
1. the state of being similar; likeness; resemblance.
2. an aspect, trait, or feature like or resembling another

"Gaussian Statistical Analysis" is not "Auction Market Analysis"

Markets are not efficient, rather they are effective - Jones

#564
Jan 11, 2016 9:08am Jan 11, 2016 9:08am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Secondly, the profile methodology presented is essentially day timeframe. 'Market condition' is used to describe the current day, not the multi-day market environment. Simple observation of a string of profile days shows the wide variation of shapes day-to-day. If a trader is to judge what a change in the distribution's form means there must be guidelines. The difficulty, of course, is the almost infinite variations in profile shape possible day-to-day or even intra-day.

The concept of finding value for the day from a gaussian distribution was a great leap in market analysis. But not every day can be so analyzed. It is unfortunate that no discussion is made of these situations. For example, what should the trader do if yesterday was gaussian, but today is not; but the market is still not trending?

Lastly, the patterns that trading decisions are based on are often poorly defined.Identifying 'Day Type' illustrates the recognition problem. Day Type is a starting point in the Market Profile scheme for market analysis.A day's analysis begins by recognizing the profile form (day type) which tells who is controlling the action (short time frame or long (other) time frame).

In the words of CBOT Market Profile, 1991, pg 4
...the market has only a finite number of behavior patterns and that finite number is universal from market to market.

and from Mind Over Markets, pg 19:
...Market Profile as a whole tends to fall into readable patterns in the day timeframe, determined by the degree of involvement of the other timeframe participant. These patterns, when properly identified, can increase the day trader's success, as well as provide information regarding what the market is trying to do in the longer term.

CBOT Market Profile, 1985, listed two day types. CBOT Market Profile, 1991 has four. Steidlmayer on Markets, 1989, posts six. MOM, 1990, has nine. Steidlmayer on Markets, 2003, gives five. Markets in Profile, 2007, does not have an index item for Day Type!

The primary writers in the area do not agree with each other or even themselves on the number of basic day types that exist. But day type presumably shows the areas of dominance of the trader types (short and long timeframe) and so is the starting point for profile analysis.How can the student be expected to learn holistic profile market analysis if the guidelines are so variable and so poorly defined?

A real danger is that in spite of the revolution in market analysis effected by market profile methodology, it leads traders to expect too much from each piece of data. All traders want to take a reference point, say value area or initial balance, and predict the coming market activity; or to be able to compare one day's value with the next to explain and project the market's behavior.

If we could interpret todays market's, as demonstrated by Steidlmayer in CBOT Market Profile 1991, we would hold the keys to untold wealth. Steidlmayer was in a unique position of personally knowing the players on the floor as well as being an astute observer of market behavior. This is a far cry from the situation of the normal trader. Reality says "you are in a complex environment and it is highly unlikely that knowledge of any one or two market elements will insure your success". It is experimentally apparent that one day's data is inadequate to measure Market Condition. Further,since market shapes run the gamut from well developed bells to completely directional straight lines, there should be some measure of where the crossover occurs between distributions amenable to value analysis and those that are not; if one is to use pattern recognition.

Continued...............

Auction Markets
From Market Profile to Value Analytics: January 11, 2008
Donald L. Jones
CISCO Futures
January 2008

Markets are not efficient, rather they are effective - Jones

#565
Jan 11, 2016 10:58am Jan 11, 2016 10:58am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Background for Value Based Analyses
At CISCO we initially tried the holism path and found it impossible to read a market objectively. Starting with a profile, we first had trouble determining the day type consistently. In some cases day type was clear, others, not at all. Without a day type upon which to base our analysis, we were stymied.

Early on we wrote a computer program that would input a day's price - TPO data and output day type. This was a surprisingly difficult program because there are no sharp demarcations between day types. Our expectation was that once we knew the day type unequivocally we would find statistical agreement between day type and market behavior the next day.We found no aid in having day type, so far as trading the next day was concerned. (1986, CISCO internal report)

So, by 1987 our path diverged from holism to objectivity.First we found that value area, by the CBOT definition, could not be calculated for any but CBOT markets. we researched the Tick-TPO, or Meta-Profile value method and that is now the standard for the industry.

Next we realized that one day's profile could be understood only within the context of the market as a whole, i.e. the (multi-day) Market Condition. That is, Market Condition to us means the collective behavior of several days (minimum of three). That led us to develop the Overlay Demand Curve to determine whether the market is in balance or not.The critical point here is that the reference points used in the holistic interpretation, such as value area, are NOT valid unless the market is stable, i.e. in balance. (1988)

We also examined known trends for day-to-day serial correlation. That is, in a long trend is the trend apparent day to day? We found no serial correlation from one day to the next, some in day to second day and and good correlation basis day to third day. These findings confirm our later measures of balance periods requiring three days to define a balance. This study is on pages 19 - 23 of our book, Value Based Power Trading, (1993)

Back in 1973 when we were beginning to manage money, we ran into the Efficient Market Hypothesis. This theory, championed by the Chicago School of Economics, inferred that all technical trading models were based on invalid principles. If true, our trading model was doomed. We reasoned that if we could find any predictablilty in market data, that would invalidate the Hypothesis. We showed that in a mature futures contract (front month at least 60 days old) a new contract high would be followed by a yet higher high within the next ten days with an 82 percent probablilty. Mission accomplished, Efficient Market Hypothesis disproved. Work by others many years later confirmed our finding. (1973)

Auction Market Value Theory is, we believe, the first comprehensive theory of auction markets. Economists for long have held to the "Sharpe-Markowitz gaussian distribution theory" for equities (Capital Market Theory, or CAPM). Their idea that the market was an equilibrium structure has proved wrong. Steidlmayer and Koy, Markets and Market Logic, brought forth many elegant insights about markets and how they function.But there is no objective theory in their work. Possibly the most comprehensive study of problems with CAPM is Why Stock Markets Crash, by Sornette. That study gave us the courage to develop an axiom based theory. (2005)

A recurring theme in CISCO research is the validity of the data. In 1999 - 2000 we developed the Advice Engine, a daily listing of all markets in balance, with periods of 5, 10, 15 and 20 days. To merit inclusion, there has to be both a 5 and a 10 day balance. This list of balanced markets (end of day) is for trade guidance the next day. The report is in two parts: Part 1 lists all markets in balance at end of day. A sub Part 1, the Select Table, are those futures in Part 1 that a CISCO proprietary algorithm chooses because they are deemed to have have better potential. Part 2 lists the breakouts of the postings of the previous day. CISCO maintains the daily Advice Engine Report in a research database. (2002)

One of the first findings to come from Auction Market Value Theory was The Market Unit, a detailed study of the market cycle, balance, trend, balance, trend, etc. There it was shown that a balance - trend - balance cycle could be four days, seventeen days or any other period. There is no regularity to the periods. a first conclusion is that the standard moving average smoothing is just wrong because there is no internal cycle to smooth. Newer version above: Financial Markets Auction Market Value Theory. (2005)

Value Analytics offers a major change to profile analysis. Heretofore profile analysis was principally day oriented.Now profile reference points are treated as flow variables; how they change over the last three days is more important than their latest day value. How can this be? It is simply that short-timeframe, intra-day situations can quickly develop and as quickly fade away; not affecting the overall market condition at all. A blip; here today, gone tomorrow. (2007) .

The common thread running through all our studies is validity of the data. If trading is to be a science, the data used in the analyses must be valid. The original Market Profile analyses, and still today, treats any calculated value area as a valid measure of value; with further analyses proceeding from that assumption.But our work on Market Condition has shown that a one day snapshot profile may not be representative of a market and often is not. Consequently, relying on simple reference points (point of control, value area) can give a totally misleading read of a market. If your data is not valid, how can you possibly succeed by following it?...............................

From Market Profile to Value Analytics: January 11, 2008
Donald L. Jones
CISCO Futures
January 2008

Markets are not efficient, rather they are effective - Jones

#566
Edited 7:06am Jan 12, 2016 1:00am | Edited 7:06am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Thank you Mzvega for the screenshot.

What do you think about the day trading strategies Jones presents on his website? I think the skill to trade inside day pauses is the key to responsive trading and to enter into already broken down trends. (www.cisco-futures.com/pause_alert_background)
www.cisco-futures.com/market_flow

Iam currently waiting for a 5 day bracket in the markets. Some of the pairs are currently in a 2 or 3 day bracket so maybe a consolidation starts...

Eurchf looks interesting.

#567
Jan 12, 2016 9:47am Jan 12, 2016 9:47am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

Thank you Mzvega for the screenshot. What do you think about the day trading strategies Jones presents on his website? I think the skill to trade inside day pauses is the key to responsive trading and to enter into already broken down trends. (www.cisco-futures.com/pause_alert_background) www.cisco-futures.com/market_flow Iam currently waiting for a 5 day bracket in the markets. Some of the pairs are currently in a 2 or 3 day bracket...

Ignored

Trading intraday pause alerts is as simple as unsplitting the profile.
In fact you dont necessarily need to be able to unsplit the profile.

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Here are some of Evaks charts from 2011( in the previous MP & AMVT thread), before Bandung created a split profile feature; he arranged his chart view to see both the profile and bar chart to identify "pause alerts". If you think it will assist you in trading intra-day by all means use it. For me personally, I can turn on the candles to accomplish almost the same thing. If you notice I always have a developing profile on my chart, which I can unsplit if I feel the need. I dont use it often. It is a matter of focus for me. Its about the same as trading candles, and just too noisy for my taste, and it causes me to watch the chart constantly. It takes a lot of work, imo. The best I could accomplish is many small winners and many small losses. Over the course of time, not as much reward for the amount of time spent. I believe Evak has a job, and doesnt have the time to look at the chart all day. I could be very well wrong. Maybe he will stop by and share his personal opinion..he is by far imo the best I have seen when it comes to trading theses intraday concepts. For me the reward for the effort & time spent is not as profitable as what I do now. Its a matter of personal choice.

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Markets are not efficient, rather they are effective - Jones

#568
Jan 12, 2016 11:03am Jan 12, 2016 11:03am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

Thank you Mzvega for the screenshot. What do you think about the day trading strategies Jones presents on his website? I think the skill to trade inside day pauses is the key to responsive trading and to enter into already broken down trends. (www.cisco-futures.com/pause_alert_background) www.cisco-futures.com/market_flow Iam currently waiting for a 5 day bracket in the markets. Some of the pairs are currently in a 2 or 3 day bracket...

Ignored

Here are some snapshots of cisco's DTE........

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Markets are not efficient, rather they are effective - Jones

#569
Edited 5:16am Jan 13, 2016 2:31am | Edited 5:16am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Thank you Mzvega.

The 3 questions are all about the details in bracket breakout trading. Or in other words I want to get better in the timing of breakouts.

1. Can you explain to me why greater TFF = activity+1 (daily net flow)? Isnt greater tff a sign of lost intrest?

2. Sometimes the test of a 5d bracket comes with a strong price movement. That scares me to lost the opportunity to get in a trade on the bracket limits. It seems to me that Jones prefers tests over early price opportunities. The condition change can only be happen on clear net flow change. Or in other words: Trade only the run, if the bracket test occurs on good net flow (good net flow= strong dir and strong act.). The price broke out of the bracket. In that case the 5d bracket from yesterday dont exist anymore, because it is elongated (=test with strong price movement). The entry would be later than on the yesterdays 5 day bracket limits. Because of the sudden change in condition. Is that correct?

3. Or is there a other way to get more information about the condition change? I know focusing on vty and tff in the bracket is one way. But dir cant be one because dir doesent change in the bracket (capping on the limits).

I know the main target is to identify the condition of the market. The market runs in units. So our job is to analyse the changing condition between the units to adjust our strategies from responsive to breakout (or only breakout) by analysing the market flow.

example:

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#570
Jan 13, 2016 9:14am Jan 13, 2016 9:14am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

1. Can you explain to me why greater TFF = activity+1 (daily net flow)? Isnt greater tff a sign of lost intrest?

Ignored

First, the flow data it asks if the # is greater or smaller.
While I explain the answer, can you explain to me "Why" you think it's a sign of lost interest?

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Markets are not efficient, rather they are effective - Jones

#571
Jan 13, 2016 9:54am Jan 13, 2016 9:54am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Quoting mzvega

Disliked

{quote} First, the flow data it asks if the # is greater or smaller. While I explain the answer, can you explain to me "Why" you think it's a sign of lost interest? {image}

Ignored

Thank you for your response. Please help me with the questions 2 and 3 because they are more important to me.
A market with a high tff = shutting down, fewer traders take part in trading. So market activity must go lower. A rising tff for example is a warning sign, congestion could set in and fewer traders take part. Why they dont trade is not so important, but they do and the tff shows that fact.

greetings
C

#572
Edited 11:46am Jan 13, 2016 10:28am | Edited 11:46am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

Thank you Mzvega. 1. Can you explain to me why greater TFF = activity+1 (daily net flow)? Isnt greater tff a sign of lost intrest?

Ignored

We have 2 kinds of references, Directional and Activity. TFF is an activity reference, you cant assign it direction. These are daily tf measures (daily profile). In the daily tf floor traders & commercials (short tf participants) are happiest with balanced markets and commercials are in control of balanced markets. This is where they operate and do business this is where they are active Price is auctioning (rotating) inside the balance area. Intraday they are buying & selling the daily profile extremes.

Remember, they end the day flat. They arent going with trends they like to trade balance. So in the short TF (daily profile) a greater TFF means price was facilitating two-way trade. That tells us what?

That the short tf participants are happy, "active" and in control.

The public are LTF and they dominate trends. A greater TFF means the Public participants (Ltf ) have no interest in higher or lower prices and the short tf is in control and quite active.

Not all market participants are Speculators. Commercials & floor participants need two-way trade (auctioning) to conduct they're everyday business.
This is within context of the daily profile. The LTF 5day overlay has its own TFF. We want to identify How and where prices are being used.

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Markets are not efficient, rather they are effective - Jones

#573
Jan 13, 2016 11:11am Jan 13, 2016 11:11am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

2. Sometimes the test of a 5d bracket comes with a strong price movement. That scares me to lost the opportunity to get in a trade on the bracket limits. It seems to me that Jones prefers tests over early price opportunities. The condition change can only be happen on clear net flow change. Or in other words: Trade only the run, if the bracket test occurs on good net flow (good net flow= strong dir and strong act.). The price broke out of the bracket. In that case the 5d bracket from yesterday dont exist anymore, because it is elongated (=test with...

Ignored

No. You dont/wont know there's test until the close. A bo that closes back inside the bracket and not creating a new, higher or lower bracket limit is a test .

"A market is testing when it moves from balance to breakout back into balance within a short time (typically, a day). The test can be thought of as price passing back and forth through the boundaries of a defined balance region (bracket). Alternatively, the test can be seen as price traversing a fuzzy boundary, as noted on fluctuation.

In either case, one sees an apparent breakout from a bracket, with price waffling back into and closing within the bracket. Testing is not to be confused with a hidden trend (where price writes an extension onto the old bracket; creating a new, higher or lower bracket limit). Hidden trends are prevalent in the grains." -Jones

If you know that Yesterday was a failed test (not being confused with hidden trend) you might be more confident in taking a responsive trade. But you go with the initial break, if it was a break, creating a new higher or lower bracket you may consider holding (hidden trend/value creep), if yesterday was a test (no hidden trend) you may want to chose a responsive trade.

Markets are not efficient, rather they are effective - Jones

#574
Edited 2:32pm Jan 13, 2016 11:39am | Edited 2:32pm

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

3. Or is there a other way to get more information about the condition change? I know focusing on vty and tff in the bracket is one way. But dir cant be one because dir doesent change in the bracket (capping on the limits).

Ignored

I am not quite sure I understand the question.............. Direction can change the bracket......Commercial capping is something that happens in the intraday TF (daily profile). Commercials go home flat or hedged. They are not trying to cap the edges of "brackets" (LTF). The are trying to cap prices within the context of the daily profile.

That's why the market "tests" in the context of overlays. This is where the commercials (short tf participants) and the public market participants (LTF speculators) are fighting for "Control", the commercials & other short tf participants control balanced markets in the daily TF. The public and other LTF participants control trends. When the two meet (or overlap) there is a "fight" for control......

Just because LTF participants (Speculators) have no "interest" in higher or lower prices, does not mean there is no activity in the market, it's business as usual for short TF participants.

You might try to look at it this way, if the TFF is greater, there is no/less LTF "interest"(activity) in the market, if the TFF is smaller, there is no/less short term "interest" (activity) in the market. It's a measure of "who's" activity is in control.
Different participants have different behaviors, and have different mind sets. Understanding "how" and "where" different participants "use price" is very important.

Quoting dljonesFan

Disliked

A market with a high tff = shutting down, fewer traders take part in trading. So market activity must go lower. .

Ignored

Edit: We are conditioned to think "linearly"
"Activity" is not a "direction"

Markets are not efficient, rather they are effective - Jones

#575
Edited 8:15am Jan 14, 2016 12:13am | Edited 8:15am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Ok, that tff answer makes sense. Thank you.

1.The biggest problem for me is the timing of a breakout. If you are too early then capping sets in and your stop will be taken. So when is the best time for a breakout after balance? For example sometimes there is dir 7 and act -4, close at 5 day bracket UL: should I take the break or not? Iam a little concerned because of the act -4. I think Iam confused because I dont understand activity and direction relationship. Why is

act=-5 and dir -4 -> net= -9 -> flow down?
act=3 and dir 2 -> net= 5 -> flow up?

I thought direction + rising activity is what we want. For example a direction is only of good quality with rising activity? The "flow down" makes no sense to me. More active markets lead to breakouts in brackets. Low activity in brackets tend to continue with the congestion. (www.cisco-futures.com/TVA_PROFILE_GAME_SAMPLE2) A market with direction down and rising activity in a bracket tells me that the break could occur at the LL. A market with direction down and falling activity tells me that the congestion will continue.

Here is an example: 29.12.2015-4.1.2015

29.12.2015. trend was up, dir: 5; act: 0 net:5. ->up
The market moves into a 5d bracket

30.12.2015 dir:-7 act:2 net: -5 ->down

31.12.2015 dir:-2 act 4 net: 2 ->up, makes no sense to me

04.01.2015 5d bracket breakdown with dir: -7 act: 4 net: -3

Maybe Jones means if dir down + more activity then the net should be with change in algebraic sign -> net= -dir+ act*(-1) ?
Then would be the 31.12.2015 dir:-2 act 4 net: -6 and that would be logical and mean perfect sense to me in relation to Jones explanations about activity in brackets.
I checked the charts with that data and it fits well. I think with that data I can practise day trading strategies and responsive trading too.

2.If a breakout occurs with a fall back into the bracket, should I get out of the trade?

greetings
C

#576
Edited 10:31am Jan 14, 2016 9:28am | Edited 10:31am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

Ok, that tff answer makes sense. Thank you. 1.The biggest problem for me is the timing of a breakout. If you are too early then capping sets in and your stop will be taken. So when is the best time for a breakout after balance? For example sometimes there is dir 7 and act -4, close at 5 day bracket UL: should I take the break or not? Iam a little concerned because of the act -4. I think Iam confused because I dont understand activity and direction relationship. Why is act=-5 and dir -4 -> net= -9 -> flow down? act=3 and dir 2 -> net= 5 -> flow up?...

Ignored

Quoting mzvega

Disliked

{quote}You might try to look at it this way, if the TFF is greater, there is no/less LTF "interest"(activity) in the market, if the TFF is smaller, there is no/less short term "interest" (activity) in the market. It's a measure of "who's" activity is in control.

Ignored

TFF is just one reference......... Before you jump straight to Net, you need to understand and firmly grasp what each reference, and it's implications mean on its own, before you can use it in context and conjunction with others.
dir: -7 looking at each of those references give you the fine details, which some may be more relevant then others depending on what each one, on its own, means

2.If a breakout occurs with a fall back into the bracket, should I get out of the trade?
In most cases yes, depending on your analysis

The flow table shows the current short term trajectory of the market, the following links explain the calculations, you need to know what each one(refs) means. Understand by following the examples...

A hard look at pattern recognition leads to the suspicion that it is not quantifiable. Each reference point carries it's own type of information. The information from reference point 1 may or may not be equatable to the information in reference point 2, although each is telling you something about the market. Some reference points are clearer than others; a tail is very clear, a day type is often not clear at all. Stirring all reference points into the pot makes it difficult to reach a measurable outcome (in a quantitative sense). Indeed, this has been the experience of most traders. Many have felt that there has to be a better way if traders are to gain the obvious benefits of market value analysis.

The better way, we feel, is to focus on each reference individually. Understand it, and then put each one in context, relative to the others. Starting at the beginning: There are 30 or so reference points. Each reference point contains unique information about the market. Value area points to value, tails at the extremes of a profile distribution indicate whether an auction has completed, day-to-day volume differentials point to increasing or decreasing participation and so on for each of the reference points. Each can tell you something about a market. If you track a reference point, e.g. volume, over the last several days you can see how it is moving, it's flow. You now have a flow variable. You not only have the latest day's volume, but also the direction it is moving. Do the same for the other reference points and in a one-page table you have captured the substance of that market. No set of patterns to memorize, no holistic grouping, just some simple flow variables that you can understand. This is Value Analytics.

Typical questions answered objectively by Value Analytics are:
Is the market in balance? Always the primary question.
Is volume increasing, decreasing?
Is the price range increasing, decreasing?
How well is the market facilitating trade?
Is the Initial Balance widening, narrowing?
Is the point of control rising, falling?
Is the value area increasing, decreasing?
Are the tails showing completed auctions?
Are the range extensions consistent?
What is the market 'attempting' to do?
https://web.archive.org/web/20150220...analytics.html
https://web.archive.org/web/20150110..._example1.html
https://web.archive.org/web/20140401..._example2.html
https://web.archive.org/web/20071105..._mainpage.HTML

Markets are not efficient, rather they are effective - Jones

#577
Mar 3, 2016 8:32am Mar 3, 2016 8:32am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Hey Mzvega,

how are you? I hope fine. What do you think about "longer time frame" analysis. Do you think the 20 day is enough?

greetings
C

#578
Mar 4, 2016 9:18am Mar 4, 2016 9:18am

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

Hey Mzvega, how are you? I hope fine. What do you think about "longer time frame" analysis. Do you think the 20 day is enough? greetings C

Ignored

LTF Analysis is something I use on an everyday basis. I don’t trade any TF without knowing where price is within/relative to the context of a larger TF, i.e. if I am trading a 5day balance, it is crucial for me to know where the 5day balance lies within the 20day balance. Is the 5day balance in the middle quads? Or is the 5day balance concentrated in the upper or lower regions of a balanced 20day dist. Or where does the 5day balance lie within a trending 20day dist... Shorter TF trading always happens within the context of a larger TF. I am not “trading” the 20day profile per se; I am using the “market generated info” from the 20day to guide my trade decisions on a shorter TF.

Do I think 20 days is enough? Yes, I do. A change to the 20day dist. takes time. If the 20day is trending, you will see the 3,5,10 come into balance as the 20day begins to slow its trend and come into balance. If the 20day is in balance, you will see the 3,5,10 break from balance and begin trending as the 20day prepares to test for a break. Again, this takes "time". There is an ebb & flow in which all of this happens. It is only when you track and record this data, that you can see these ebb & flow patterns……..For me the 20day in conjunction with the smaller TF analysis is enough market generated info for me to detect these ebb & flow patterns…………….

Markets are not efficient, rather they are effective - Jones

#579
Edited 9:33am Mar 8, 2016 2:27am | Edited 9:33am

dljonesFan
| Joined Oct 2015 | Status: Trader | 159 Posts

Quoting mzvega

Disliked

{quote} LTF Analysis is something I use on an everyday basis. I dont trade any TF without knowing where price is within/relative to the context of a larger TF, i.e. if I am trading a 5day balance, it is crucial for me to know where the 5day balance lies within the 20day balance. Is the 5day balance in the middle quads? Or is the 5day balance concentrated in the upper or lower regions of a balanced 20day dist. Or where does the 5day balance lie within a trending 20day dist... Shorter TF trading always happens within the context of a larger TF. I...

Ignored

1. These "ebb & flow patterns" are the waves? Markets move in waves/units as Jones would say. So you detect them on the market flow data is that right? Because I think Jones dont use graphical patterns like Steidelmayer do (P and b patterns).

2. I still have serious problems to detect the direction of the underlying long term trend (breakout direction for 3-5 day balance).
Too often there are bracket-tests that take my stop. I now try to detect the underlying long term trend, using monthly profiles with 1 day periods, because I think I place my stop in the range of some short term trends (intraday trends, short term traders) that go against my position and kill me every time. We are trading longer time frame and so we have to set our stops at that longer range or dont use stops.

3. Bracket tests often widen the bracket. Would you say it is always better to wait for that test before setting the entry stops on the limits? Because Iam always too scared to get on the trend too late. I always set my entry before the bracket-test, is that wrong?

Attached Image (click to enlarge)

Click to Enlarge

Name: nzdcad 08032016.png
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There is a downtrend with a rally. I try to short the 3 day balance if it breaks for a retest of the bottom.

Attached Image

We can see clear the balances, breakouts and where we should not place our stops.

#580
Mar 8, 2016 4:56pm Mar 8, 2016 4:56pm

mzvega
Joined May 2009 | Status: Trader | 1,879 Posts

Quoting dljonesFan

Disliked

{quote} 1. These "ebb & flow patterns" are the waves? Markets move in waves/units as Jones would say. So you detect them on the market flow data is that right? Because I think Jones dont use graphical patterns like Steidelmayer do (P and b patterns).

Ignored

You can see it in the raw export data. Flow analysis only gives us the current short term trajectory of the market. You are correct that Jones does not use pattern recognition (graphical patterns). Pattern recognition is subjective. Quantitatively a market is either bracketing or it is not. You cant quantify an "it looks like a balance/bracket". It quantitatively is or is not.

Quoting dljonesFan

Disliked

{quote} 2. I still have serious problems to detect the direction of the underlying long term trend (breakout direction for 3-5 day balance). Too often there are bracket-tests that take my stop. I now try to detect the underlying long term trend, using monthly profiles with 1 day periods, because I think I place my stop in the range of some short term trends (intraday trends, short term traders) that go against my position and kill me every time. We are trading longer time frame and so we have to set our stops at that longer range or dont use stops....

Ignored

But what direction does the data tell you its going? Is the poc moving higher or lower? Is the range increasing or decreasing? Are there more tpos above or below? Are they increasing or decreasing? Where is the close located? Is volatility increasing or decreasing? Is the TFF increasing or decreasing?

Learning is a process..what does mean if the poc moves higher? Value is shifting. If value is shifting higher and the range is increasing, what does that mean or tell you about the market? If value is shifting higher and the range is decreasing, what does that tell you about the market?

If the poc moves higher, value is shifting higher, and the range is increasing, and the tpos above the poc (seller participation) are increasing, what does that mean or tell you about the market? That as price moves higher, you have an increase in seller participation. Has the volatility been increasing or decreasing? Maybe not the best conditions to be looking for a breakout trade.

You need to understand and firmly grasp what each reference, and it's implications mean on its own merit and what it tells you about the condition of the market, before you can use it in context and conjunction with others.

I use the data to answer my questions about the market before making my trade decisions; I do not use visual cues as a reason to enter a trade.

Quoting dljonesFan

Disliked

{quote} 3. Bracket tests often widen the bracket. Would you say it is always better to wait for that test before setting the entry stops on the limits? Because Iam always too scared to get on the trend too late. I always set my entry before the bracket-test, is that wrong?

Ignored

Its a matter of personal preference. Again, I use the data to weigh the probabilitys of a successful breakout or not. If the probabilities are in my favor Ill set an entry, if not I move on to the next pair. Every EOD analysis, I look at my list of bracketing pairs, I go through each pair and the data associated with it, and pick out a few with the most potential. I use the data to determine which pairs & tfs has the highest probability for a breakout that carries the least amount of risk. And look for opportunities on those pairs only I dont blindly trade every bracket I see.

You may want to wait for a test first, or maybe you should only trade the second attempt of a break, but in all honestly, I couldnt even begin to make that kind of determination without looking at the data first.

Markets are not efficient, rather they are effective - Jones

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