The Really Useless Thread

Those pesky imaginary lines

From relevance to non relevance point it is indeed true, if you close your eyes and randomly drawn few lines youll likely draw at least half of "good" resistances and supports where market highs/lows will "respect" them. Doing enough forward and back testing one can notice that randomly drawn lines are often just as relevant as lines drawn from historical extremes, meaning the flat lines, altough that doesnt matter that they are useless. It is completly possible to create trading edge around them and turning them into patterns with correct price setup. The important part is that you do know what your edge is around them and not just using them becouse X Joe trader suggested that is strong res/sup. The most brutal thing of s/r use is when brokers put each day suggestion to traders which are relevant s/rs for that day, completly useless info if you dont have edge constructed around it. But hey trading is young science its normal to have holes everywhere.

if I can't get a pullback, I'll take a breakout - I'm especially tired of watching financials go sideways. C'mon GS I need $215+ by next week....

Santa will come through.

intweeging......"solid digital gold"...?

http://www.businessinsider.com/r-uks...atform-2016-11

"What we're trying to do with the announcement of Royal Mint Gold - or RMG - is to really address this issue and offer a better way to invest in solid digital gold."

"The platform will operate 24 hours a day, 365 days a year. Unlike the traditional model for investing in gold, with management fees and storage charges, RMGs will offer ownership of the underlying gold with the option for conversion to physical gold by the Royal Mint at zero storage cost."

Very soft and shy US session and NY didn't play ball today one more time. All eyes on Oil for the next few hours and CAD as is in full control until Europe takes control tomorrow morning ...

sisse

I did a semi attempt of a test [we didn't really finish the test, and ended talking about quarters and dow theory] a few years ago with Mr. Hatch and Gator was also part of the conversation if I remember correctly in this same thread.

I just asked for a random number and then we randomly [again] added/multiplied and subtracted another random number to reach to a random level.... That level was then used to show that 'any' level in the right direction and framework can be as valid as any FIB, Mofu or what have you ...

if you find the back-post will be nice to track back that conversation, we may even launch a quick exercise to show the point ...

sisse

I did the same thing. The same thing did other profitable traders before me. And then some before that. And it all proves what you found, what i found, what they found. It is what it is. Its beautiful, one shouldnt look that from negative side, but rather embrace it, how a thing very logical has no real grounding and yet it could work if you find edge in it, and from completly oposite side, what majority would consider moronic has very similar default market reactions.
The end point is it doesnt matter if you found edge in it, but if you didnt do backtest one has no edge, and the lines are just floating lines in the art of drawing.

Hey wait....how about 20 years ago when Greenspan introduced similar thing, metal future contract? Buy some on Comex and they tell you every contract you buy is backed by bullion in their bunker. But hey dont question when numbers of contracts owningo or naked shorts go far above actual posted bullion holdings of that company. Its pyramid scheme meaning that it works the same way that fractional reserve banking works. 4-8% of actual deposits are there when you need them, and thats all fine and green for most of time, but when bank run hits....oh wait, we dont have what you want. The point about bullion is if you are buying that for inflation hedge get the real deal or have nothing. If you are trading thats fine, but why in the earth would you trade contracts or this "new deal" if you can get 100 times cheaper and faster execution on proper futures or FX broker?
Taxing and re-claiming of gold has been done trough history so many times and so easily that if you dont hold physical in some secret spot and un-allocated officially you basically have none, unless you by chance live in that decades of non event time. You either trade it or you have it for really bad times, in either case its very clear what is the aim for either of options in terms of storage, execution, commission, time etc...

Hmm. The philosophical part is, once again, over my head (doesnt take much).But if the results of such a test are what you guys say, doesn't it prove that the only real edge is FA direction?

Problem is that just using flat lines without any other clear identification of pattern is what causes biggest problems. No matter what you trade one needs to specify the pattern, the more clear specified the better the statistical long term results, the more reliable overall edge is. So just using line becouse there was XXX candles ago strong high formed from that is not enough to define the pattern, becouse over 100 examples there will be such a major disconnect in connectivity between patterns in terms of volatility and afterwards/before test PA. There needs to be extra data put in, and usually best approach is to use price structures, or at least some number of candles. This isnt the holy grail or the only way, but it is perhaps the most straightforward case.

Interesting part about those pesky lines is that majority of traders that use or draw them have very unprecise or avarage method of how they define rejections around them (as they trade rejections around them by majority). They approach them similar the way regular gold bug does markets (damn i keep mentioning those), basically meaning anywhere around if i am right, i am right ill just stretch the view into my call.
For example like that:



Defining lines by avarage demand/supply is not by defacto wrong method, it is however when one defines edge by calling shots precisely of it, hiding with winners and stretching them. So then you come to most important point what exactly is rejection how and precisely where it is defined around that line. This are key questions, and they can make very wierd non-sense lines make completly profitable with proper pattern approach, and if not respected make what majority would define as very logical price levels to fail along with trading system.
The way my findings have proven is best if you define that magical line that aparantly the whole market is looking at, and then finding that key structural PA pattern and then doing homework around it and then trade that, only then that pesky line gets and edge. However that by the fact proves that flat line matters nothing at all. The structural pattern has its own defined way it will go and so it does no matter how round the number or how strong the sup/res market think it is.

Lets take this example:


By basic S/R approach that is by most traders clear sell right before it broke. Rejection, flat line, sell. The easiest way to pick the holes in any strategy or any science that has easy to prove matrixing is by going in counter argument. So instead of sell there you look for patterns that tell you to buy, do homework and if you find the edge, then it points that something is wrong with basic s/r approach, what is wrong is that statistical reliability and actual market factors are very weak.

Funny thing is that if you bulk together hundred different profitable long run traders they will trade many different patterns, indicators, structures whatever. But what i did notice one thing that they do share largely against retail losing crowd is that many of them trade breakouts rather than bounces. So large portion of profitable edgers trade breaks, while large portion of rest of retailers trade bounces, and that is significant thing to consider. It makes those pesky lines questionable, the flat rejection levels.

From my view the mean reverting moves on market come from volatility change, not all changes come from there, but large portion can be easier picked from that setup. Volatility changes are more like flow and becouse they are like flow every nearby historical action is important in terms of extremes, meaning that majority of actual precise changes will be pointed way before that flat pesky lines get broken, whatever the method used it will usually point to vol change before that "important" sup/rest gets dealt with.


If one uses matrixing those flat lines are easily deconstructed, so are trendlines, unless there is more data to define pattern behind it. Anything in universe can be deconstructed by using matrixing and in the end one gets to point where "wrong" and "right" are no longer even a valid definitions. Its really beautfull how deception is created by universe itself, it has nothing to do with human or what humans think of their supperiority on inteligence.

We have a couple of pending post from the series. From here it gets a bit dense but for those still interesting in keep reading ....while we wait for the close and Oil ...

Bar 5 and 6: Mastering price analysis in real time
"Execute the basics; master the basics...when you master and execute the basics, the rest comes naturally

Yes all these notions make sense and look great in an ex-post chart. The problem is applying them in a live chart. Sound like a clich but its true, only trading (screen time) day after day like in any other activity will make the process natural. No mentor, guru, blog or book can give you a shortcut to proficiency. Therefore, the only think I can aim is to establish some basic notions in price analysis that can at least set a potential pathway to follow; but at the end successful trading is a personal journey that cannot be canned in a recipe book.

There is only one last thing left in this collection: bullish and bearish traps. But before that I will add a 5th and 6th bar in the analysis to talk a little about the types of charts and wrap up the notions defined before.

Attached Image

Time charts have a unique feature over all other form of charts: the obvious control of time. Controlling the frequency in which each bar is formed it is very helpful, it allows to have a time reference to make decisions, it tells a trader when to watch the screen, when its too late to entry and when to get ready to pull the trigger among other things.

These characteristics are especially important if you are scalping or trading fast timeframes. However and as you probably know,there is always a tradeoff when trading: in this case, bouncy charts, more whipsaws, lots of choppy (because of the nature of time charts, bars are plotted regardless of volume size or # trades) and missing some trades (most of them if you are using a bad time chart for your instrument) because of the size of the trigger bar can make a very bad entry.

In my opinion, the higher the timeframe the less impact these bad factors your trading plan will have. Again, the fundamentalist (long term traders) and investors are right and thats why, ceteris paribus, trading daily, weekly or monthly charts are by far the best option from a technical perspective.

Sometimes time charts can be poor for trading analysis but good enough as 2nd timeframe trigger when using multiple timeframes in slow charts. In general as a rough reference (it depends on the instrument) common used time charts are better for direction and volume/tick charts can be more useful for triggers. Yet at the end it doesnt make much difference if you dont have a consistent trading plan, a winner/loser is a winner/loser regardless of the chart type.

As you can see in fig 6a) again the bears took control from the highs of the 4th bar testing a good range of the buyers in that bar. By the end of the 5th bar buyers appeared and manage to push price up a few ticks below the open but they were overpowered again by sellers on the 6th bar.

Attached Image

In any case, the analysis in order of importance will go like this:

1. The most important issue with these bars is the formation of the 1st swing high(bars 3 and 5 highs are lower that bar 4 high). This marks the beginning of the wave down.
2. In that swing we plot a horizontal bar and we have the Resistance level.
3. The area between the high of the swing bar, the close of the swing bar and more important the open of the next bar after the swing define the resistance zone.
4. The mini point of control A is stronger than ever. The wall protecting the strong (early/smarter) buyers on the open of the 1st bar not only resisted the sellers on the 2nd bar, but know they have a new round of buyers protecting them in bars 3rd and 4th.
5. Now there is a new mini point of control A1 because the price range between the open/low of the 3rd bar and the open/low of the 4th bar hasnt been tested in the next consecutive bars.
6. Its important to remember that we dont know if the new buyers in bars 3rd and 4th are long-term positions, swing traders, day traders or scalpers. But we know that there are stronger buyers holding from bar 1 and therefore these are not the ones who initiated the move up (continuation buyers). By the close of bar 6th we also know 100% sure that all buyers in point A and A1 are in profits.
7. Obviously, every time the move extends, buyers will start taking profits and adjusting the stops to protect profits. For example, scalpers will be mostly out already, day traders and swing traders (depending on timeframe of course) will be probably out, or scaling out and adjusting stops to higher levels. In other words, only if buyers in point A are big enough and have a longer perspective this point will hold for a long time (for long term traders, these bars are just noise. Assuming that point A represent real buying pressure, they can afford to see price chop around for a long time or even retrace back to the A area).
8. Bar 4th broke the mini point of control b. Now there is also a new mini point of control B because the price range between the high of the 4th bar and the high of the 5th bar hasnt been tested yet.
9. We can also plot a new invisible line that is still sloping downwards in an uptrend connecting the consecutive highs of bar 4th and 5th. As you can see the 6th bar not only couldnt break this line but sellers in this bar broke almost all the buyers in the 4th bar (which is a nice visual indication of where were the weaker bulls in that last wave up compare this with the sellers on the 2nd bar ). Bears are in control since the beginning of the wave down (as we expect in any a wave down sellers control wave direction)
10. After 6 bars the move up is intact but now there is a new wave down against the tide. Is time to get ready for when the next wave up is forming to get in the first HH and HL high probability setup.

In the case of fig 6b), these bars only keep warning us that the move is overextending.

1. There is no new swings, S&R levels and therefore no new S/R zones
2. The mini point of control A is stronger than ever. The wall protecting the strong (early/smarter) sellers on the open of the 1st bar have a new round of sellers protecting them in bars 3rd 4rd and 6th.
3. Now there is a new mini point of control A1 because the price range between the open/high of the 4rd bar and the high of the 5th bar hasnt been tested in the next consecutive bars.
4. Bar 4th also broke the mini point of control b. This time there isnt a new mini point of control (B) forming because all prices have been tested by bar 5th. This is the first clear warning that new selling is evaporating and the move can stall or bottom.
5. If we plot a new invisible line connecting the consecutive lows of bar 4th and 5th (the lows because bears are in control) this time we have a 2nd important warning that the move is overextending and its definitively too late to get in: An invisible line sloping downwards in a downtrend. The move down on the 6th bar was almost impossible to catch because of the risk in placing the stop and the big range that was required to break the invisible line.
6. After 6th bars sellers are in full control and there is not much to do.

I can go forever analyzing an ex-post chart bar by bar but thats not my point. I only wanted to show you a pseudo rational approach that can help you analyzing the basic price notions in any live chart. Before moving to live charts I am going to add one more bar in the next and last post in this collection to define the last basic notion: bears and bulls traps...

TBC

sisse

PS: @janpec1000 uff I wouldn't have posted this long post if I have read your previous post ...well 2 very long reads for those interested...

No wait, there has to be clear line drawn, theories (philosophy) vs fact based counts. I am not economists, they use theories to draw future conclusions, nothing in my post concludes that.
To answer your question, there are many ways too find edge you can use strictly technical data, strictly FA, or both or something else. There is edge in many things elsewhere. But the way matrixing works is that macro patterns swallow directionality of micro patterns with stronger force, and since FA patterns are very high macros with usually very few if any higher macros on human life time scale is that they are really good way to follow the lower micros. Large asteroid hitting the earth might destroy majority of electrical equipment and ruin most of lower macro setups, but chances for that to happen in avarage human life span are so little that its worthless to worry about. In this space FA patterns are kind of a king of the hill as rarely anything is above it. Having very reliable macro pattern is good to follow by, it just simplifies things, increases odds etc etcs.

Ok, let me say that i am not being or try to be arogant when i say this but i get what you are saying here, but not sure if many other traders get it. The info there or what i put in previous post is very simply to grasp one doesnt need a science monkey degree to understand it, but actually swallowing the data and implementing it into the system is where most traders fail. It is underlaying understanding of price patterns that are usually printed in longer term traders brains and they pass it just as if they are obvious informations. Trading is one of strongest sciences that really needs millage to get things going, or as it was put in movie: "noone can be told what matrix is, you have to see it by yourself". Perhaps the quickest and easiest thing trader can do is just use two TFs, use macro and micro at same time, just by doing that chances of success are increased by ton. Thats how matrixing is performed all around. Just saying your data is completly fine but it has to be applied properly to be long term edge-ful.
The way you approach it seems to be candle to candle basis which might result in lesser RR and lesser precission from my counts i found that its best if you approach each structure from certain aproximate candle+time+volatility count as that projects the most symetrical view that can be mirrored to other setups. However upscaling to higher TFs and less candles is also important becouse it highlights all 3 components in a bit of different overall environment, so if all is symetrical and you still get same bear or bull info its even stronger signal. But it could be deceptive if 3 key markers are not correctly identified.

So would you still say this level isn't defended?

...and we rolled in a blunt day in the Euro and US Equites in a very timid session given the good round of reports we got earlier. All eyes in OIL for those tracking a potential major mover and shaker in the commodity front...

Not much to see or do with same levels, same trades, same all. Tracking very closely US equities holding the break tomorrow and Euro 1.061x as only level in play for this week ...

sisse

Funny how 4 words triggered all those long posts.

and why not just draw some random lines on a chart and use them, bet you I could trade off them just as well really..

What level are you tracking?

sisse

total tweet mode shit, I expect the usual hash of contradictory ones....

You can tell if it is, but why not looking it from other side. If you know how largely it is defended and when it fails you can make better aproximate expections on what the bearish impact should be on losing side based upon what they provided for defence from their economy productivity and milatary or else force.
Much easier to project basis from that, than by doing it other way around. Just becouse something is protected it doesnt mean it cant be quickly overrun if large enough size is provided, and usually that size is harder to find, spot or define in quick enough time.

I cant tell for sure what bearish implications current attrition price war of Oil will have on US economy and Oil secto (level on defense?)r, but the bearish implications of the rest of smaller oil/non US aligned producers are way more clear especially judging from corporation balance sheet size and structure. History shows what by majority happens to those smaller countries that are cought in war of attrition.

Defense vs offense, pattern has to be defined well to get chances going.