hungrybear
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Well, no new high today as predicted. I still expect the market to fall next week, but unless we seee a new high on Monday, I don't think we have seen the high for the year as I previously expected.
So perhaps a pull back for a few days then another rally. We'll have to wait to see what next week brings. Have a good weekend everyone. 😀
So perhaps a pull back for a few days then another rally. We'll have to wait to see what next week brings. Have a good weekend everyone. 😀
Dazz & Lamby,
I think we all agree about one thing,
You can't beat Yorkshire,
😎
Dazz.
Come & join us in our little corner of the web.
http://www.leeds-forum.com/default.asp
I think we all agree about one thing,
You can't beat Yorkshire,
😎
Dazz.
Come & join us in our little corner of the web.
http://www.leeds-forum.com/default.asp
sandpiper
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lockstock said:
lockstock,
VA areas, POC's and MP in general is a depiction of price over/through time. Pivot points and R/S areas/zones are only concerned with time in as much as they are based on the open/close/high/low over a day (or more properly I suppose, a session).
So they are not strictly speaking derived from the same data (albeit, it is all price).
However, as we know, pivot points and R/S can be "traded" in the same way as MP.
It certainly used to be the case that trading between R1 and S1 was considered neutral (in directional terms). It was mainly controlled by the floor, who would look to to move the market to R1 and S1 looking for institutional interest. This is just an extension of the way in which the floor frequently controls the auction throughout the rest of the session, looking for where the large buyers and sellers are.
Conceptually, I suppose this is similar to the notion that the market shifts between balance and imbalance, with traders striving to sell above value (at the offer) and buy below it (at the bid).
Even though floor traders pivots and S/R are "contrived" numbers, they have worked in the past (predominantly on the S&P) because of the nature of the open outcry market. Will they continue to work as the cme continues to change, with off-floor trading expanding at a much faster rate than on floor? Who knows. You just have to keep an open mind about it.
My own limited experience looking at markets other than the S&P and NAS would suggest that floor traders pivots and S/R are far less useful. In truth, why would they be?, given the nature of electronic trading?
So, in summary, the main difference between floor traders pivots and MP? Floor traders pivots are contrived support/resistance levels that are useful as long as there are floor traders that use them. MP works because it shows "natural" support and resistance levels/zones. My own view (fwiw, probably nowt...) is that MP's representation of supply and demand balances/imbalances is far more useful across a wide range of markets (no matter what the mechanics of the market).
Oh, sorry the reply was a bit delayed..... (and if the reply seems a bit OT with regard to original thread). Just thought it was an interesting question that was worth going back to.
sandpiper
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lockstock,
Oops. Sorry bout that. Just noticed perfectly adequate replies to your question by mully and Dr. L.
Still, Dr. L. is absolutely right. The nature of the CME market has changed and continues to do so with more of the previously dominant locals spending more of their time off floor (Borsellino, the elder, being a prime example).
The e-mini terminals at the CME used to be predominantly populated by arbers with a separate process if you wanted to get more than 30 contracts off. All the action was in the pit. As such, e-mini volume was worthless and the only way to get any idea of order flow was with a squawkbox.
Now, volume on the e-minis has increased dramatically (less so in the pit traded contract). However, recent figures suggest that program trading now accounts for 60% of this volume.
All of this just re-enforces the idea that some "natural" methods of observing and categorizing market behavior are indeed timeless, whilst the usefulness of others may be quite fleeting.
So, whilst there is certainly smarts in the phrase "if it ain't broke, don't fix it", it's also worth considering that if all you've got is a hammer every problem tends to become a nail.
Anyway, as we all know. All of these S/R levels/areas just serve to highlight potential inflection points. It's how you interpret the action around these levels that is the key.
Oops. Sorry bout that. Just noticed perfectly adequate replies to your question by mully and Dr. L.
Still, Dr. L. is absolutely right. The nature of the CME market has changed and continues to do so with more of the previously dominant locals spending more of their time off floor (Borsellino, the elder, being a prime example).
The e-mini terminals at the CME used to be predominantly populated by arbers with a separate process if you wanted to get more than 30 contracts off. All the action was in the pit. As such, e-mini volume was worthless and the only way to get any idea of order flow was with a squawkbox.
Now, volume on the e-minis has increased dramatically (less so in the pit traded contract). However, recent figures suggest that program trading now accounts for 60% of this volume.
All of this just re-enforces the idea that some "natural" methods of observing and categorizing market behavior are indeed timeless, whilst the usefulness of others may be quite fleeting.
So, whilst there is certainly smarts in the phrase "if it ain't broke, don't fix it", it's also worth considering that if all you've got is a hammer every problem tends to become a nail.
Anyway, as we all know. All of these S/R levels/areas just serve to highlight potential inflection points. It's how you interpret the action around these levels that is the key.
Cheers guys,
The initial discussion was whether VA & PP,R1,R2 were correlated
because of using the same data, nothing I've seen so far will disuade me to think otherwise.
We are talking the VA area for the previous days action against the high/lo/ close of the previous day, the latter giving you a mean, as would the VA, or is the mean. Maybe two different figures, but with the UKX & the comparisons made so far wit-in a few points of each other.
I would have thought if the majority of traders were using PP, R1 & R2 for their buy & sell signals, that's where the major movements will be & also the congested areas. Being congested areas, I would hazard a guess that is where the price would be at the longest- your VA area.
Of the two, Imho, the PP is easier to work out & implement, so coupled with other indicators I will carry on using.Why over complicate proceedings? 😀
The initial discussion was whether VA & PP,R1,R2 were correlated
because of using the same data, nothing I've seen so far will disuade me to think otherwise.
We are talking the VA area for the previous days action against the high/lo/ close of the previous day, the latter giving you a mean, as would the VA, or is the mean. Maybe two different figures, but with the UKX & the comparisons made so far wit-in a few points of each other.
I would have thought if the majority of traders were using PP, R1 & R2 for their buy & sell signals, that's where the major movements will be & also the congested areas. Being congested areas, I would hazard a guess that is where the price would be at the longest- your VA area.
Of the two, Imho, the PP is easier to work out & implement, so coupled with other indicators I will carry on using.Why over complicate proceedings? 😀
Last edited:
Markets, no matter in what they deal, exist to facilitate trade, nothing more, nothing less. As such prices will continually fluctuate between supply and demand to enhance the exchange process. The market abhors a stand off, it cannot exist in a state of paralysis. So market traders will constantly adjust bid and ask prices to keep the exchange going - a combination of a traditional auction to seek top prices, then switching to a Dutch auction to explore for a price bottom.
As prices continually rotate to enhance trading, prices of perceived value (support) and perceived over valuation (resistance) can be recognized by the volume of activity at different price levels. This is the basis of Market ProfileTM (MP) analysis. Distinct patterns of volume and price behaviour can be recognized using MP profiles.
MP illustrates that the majority of trading in a day is by floor traders or "locals" as they are called. These locals constantly take prices up and down to very short term levels of support and resistance, exploring the narrow limits of price/valuation tolerance. Trading for the day will persist between this narrow range unless "outside" buyers and sellers are attracted to the price changes that occur. If the narrow range of support or resistance established by the floor traders can be wrestled from them, then off floor short term traders will be attracted and enter the market, as buyers if short term resistance is overcome or as sellers if short term support is violated. These breakout points then usually reverse their function and serve as test points, i.e. previous resistance becomes support and previous support becomes resistance.
Now the active range of trading expands as the off floor traders enter the fray. If more longer established support and resistance can be successfully breached during the new short term trend that emerges, with the activity of the off floor traders, then longer term traders, position traders, with an intermediate or long term intention of their market commitment will be attracted to join the market.
If one knew the range parameters of support and resistance used by floor traders one would have a handle on the significant areas where off floor and possibly position traders may take over the market direction from the rotating locals. Well the locals calculate from the previous day's range the pivotal or inflexion price and the areas of support and resistance. The calculations are very simple and the results invariably have an influence on the market activity of the day. In fact, if no other information that relates to the market becomes available then the locals' parameters may dominate the day.
The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.
Pivot point = P = (H + L + C)/3
First area of resistance = R1 = 2P - L
First area of support = S1 = 2P - H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P - (R2 - S1)
So unless significant market news has been made available between yesterday's close and today's opening you can expect locals to take prices to test the near term support and resistance and the pivot price. Should, for any reason, these near term support and resistance areas fail then the second such area will likely be tested. If these support or resistance areas fail, because of market influencing news or observations, the off floor or, more particularly, intermediate term positional players will likely enter the market and make the market trend.
So these floor trader pivot points are areas to be aware of and respect. They are both dangerous and areas of opportunity. Stop orders to enter at these points are readily whipsawed by 'floor sweeping' by the locals as they rotate up and down the perceived range. On the other hand, if you find support or resistance was forthcoming as appropriate it offers a low risk entry point with a close Stop loss point identified. On the other hand, failure of anticipated support and resistance, as appropriate, offers a low risk entry point with a close Stop loss point identified in what is likely to be a trend emerging from the 'local' noise of the market.
Even if you are not a day trader, knowing the key pivot, support and resistance points can help the short term off floor and intermediate positional trader to identify potential entry points and stop loss levels for your trade if your other criteria have determined the direction in which you should be trading.
Make it a daily ritual, calculate the pivot point and the areas of support and resistance after the close each day for the markets you are interested in. Study the next day's price action in the context of those pivot points so that you get familiar with the dynamics of the market .
As prices continually rotate to enhance trading, prices of perceived value (support) and perceived over valuation (resistance) can be recognized by the volume of activity at different price levels. This is the basis of Market ProfileTM (MP) analysis. Distinct patterns of volume and price behaviour can be recognized using MP profiles.
MP illustrates that the majority of trading in a day is by floor traders or "locals" as they are called. These locals constantly take prices up and down to very short term levels of support and resistance, exploring the narrow limits of price/valuation tolerance. Trading for the day will persist between this narrow range unless "outside" buyers and sellers are attracted to the price changes that occur. If the narrow range of support or resistance established by the floor traders can be wrestled from them, then off floor short term traders will be attracted and enter the market, as buyers if short term resistance is overcome or as sellers if short term support is violated. These breakout points then usually reverse their function and serve as test points, i.e. previous resistance becomes support and previous support becomes resistance.
Now the active range of trading expands as the off floor traders enter the fray. If more longer established support and resistance can be successfully breached during the new short term trend that emerges, with the activity of the off floor traders, then longer term traders, position traders, with an intermediate or long term intention of their market commitment will be attracted to join the market.
If one knew the range parameters of support and resistance used by floor traders one would have a handle on the significant areas where off floor and possibly position traders may take over the market direction from the rotating locals. Well the locals calculate from the previous day's range the pivotal or inflexion price and the areas of support and resistance. The calculations are very simple and the results invariably have an influence on the market activity of the day. In fact, if no other information that relates to the market becomes available then the locals' parameters may dominate the day.
The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.
Pivot point = P = (H + L + C)/3
First area of resistance = R1 = 2P - L
First area of support = S1 = 2P - H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P - (R2 - S1)
So unless significant market news has been made available between yesterday's close and today's opening you can expect locals to take prices to test the near term support and resistance and the pivot price. Should, for any reason, these near term support and resistance areas fail then the second such area will likely be tested. If these support or resistance areas fail, because of market influencing news or observations, the off floor or, more particularly, intermediate term positional players will likely enter the market and make the market trend.
So these floor trader pivot points are areas to be aware of and respect. They are both dangerous and areas of opportunity. Stop orders to enter at these points are readily whipsawed by 'floor sweeping' by the locals as they rotate up and down the perceived range. On the other hand, if you find support or resistance was forthcoming as appropriate it offers a low risk entry point with a close Stop loss point identified. On the other hand, failure of anticipated support and resistance, as appropriate, offers a low risk entry point with a close Stop loss point identified in what is likely to be a trend emerging from the 'local' noise of the market.
Even if you are not a day trader, knowing the key pivot, support and resistance points can help the short term off floor and intermediate positional trader to identify potential entry points and stop loss levels for your trade if your other criteria have determined the direction in which you should be trading.
Make it a daily ritual, calculate the pivot point and the areas of support and resistance after the close each day for the markets you are interested in. Study the next day's price action in the context of those pivot points so that you get familiar with the dynamics of the market .
barjon
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lockstock
All good stuff, but the index is not a market. It is merely a
calculated figure based on the sum of what is happening in
the 100 individual markets of its constituents.
Unless the activities of tracker funds are the pre-eminent
driving force (which I doubt) it amazes me that movement in
the index fits in with TA so well - particularly on days when
there is a huge variation between price movement of the
various important constituent shares with some heavily up
and others heavily down.
Mine not to reason why I suppose - good trading
jon
All good stuff, but the index is not a market. It is merely a
calculated figure based on the sum of what is happening in
the 100 individual markets of its constituents.
Unless the activities of tracker funds are the pre-eminent
driving force (which I doubt) it amazes me that movement in
the index fits in with TA so well - particularly on days when
there is a huge variation between price movement of the
various important constituent shares with some heavily up
and others heavily down.
Mine not to reason why I suppose - good trading
jon
sandpiper
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lockstock,
Good points.
I think the thing to remember about that article is that it refers to the S&P futures pit. In it's original form the article was written about 4/5years ago (if I remember correctly) at a time when the S&P pit volume outstripped e-minis by 10 to 1 and when program trading accounted for a fraction of the volume that it does now. As Lecter says, the locals had much more of a grip on the floor then than they do now.
The floor traders pivots were also used when the locals just carried their decks and a notepad and used P&F a great deal more than it is used now, i.e. before palmtops and PDAs. BTW, not being nostalgic here 😉, just trying to offer some context.
Lots of people also try using floor traders pivots and assume that the futures always lead the cash. Clearly that just isn't true. And as Barjon has indicated, when the cash market wants to go somewhere, floor traders pivots or not, it's going to get there.
It's also worth noting that there are many "versions" of the floor trader's pivot calculation. Some include the open ((O+H+L+C)/4) or indeed the current sessions open ((H+L+C+Todays Open)/4). There is also a version that uses ((O+H+L+(2*C))/5). They are all used both on and off floor at certain times under different market conditions.
Anyway, continued good trading with it.
Good points.
I think the thing to remember about that article is that it refers to the S&P futures pit. In it's original form the article was written about 4/5years ago (if I remember correctly) at a time when the S&P pit volume outstripped e-minis by 10 to 1 and when program trading accounted for a fraction of the volume that it does now. As Lecter says, the locals had much more of a grip on the floor then than they do now.
The floor traders pivots were also used when the locals just carried their decks and a notepad and used P&F a great deal more than it is used now, i.e. before palmtops and PDAs. BTW, not being nostalgic here 😉, just trying to offer some context.
Lots of people also try using floor traders pivots and assume that the futures always lead the cash. Clearly that just isn't true. And as Barjon has indicated, when the cash market wants to go somewhere, floor traders pivots or not, it's going to get there.
It's also worth noting that there are many "versions" of the floor trader's pivot calculation. Some include the open ((O+H+L+C)/4) or indeed the current sessions open ((H+L+C+Todays Open)/4). There is also a version that uses ((O+H+L+(2*C))/5). They are all used both on and off floor at certain times under different market conditions.
Anyway, continued good trading with it.
Sandpiper,
there is an assumption in your replies that the PP, R1 etc are the sole lines that I & others rely on when trading.
This is not the case, I take on board what you are saying but you need some sort of reference point & the support/ res. lines as I said before are the easiest to calculate & implement.
Take this am price action. it's bounced off the S1 line & is now reaching the PP (UKX)
R2 4372
R1 4358
PP 4346
S1 4332
S2 4320
As the saying goes- if it aint broke don't fix it. 😉 In otherwords if it starts getting a million miles out , then I'll discard them & use something else.
Cheers
there is an assumption in your replies that the PP, R1 etc are the sole lines that I & others rely on when trading.
This is not the case, I take on board what you are saying but you need some sort of reference point & the support/ res. lines as I said before are the easiest to calculate & implement.
Take this am price action. it's bounced off the S1 line & is now reaching the PP (UKX)
R2 4372
R1 4358
PP 4346
S1 4332
S2 4320
As the saying goes- if it aint broke don't fix it. 😉 In otherwords if it starts getting a million miles out , then I'll discard them & use something else.
Cheers
