Market Psychology and Targets

[seekingTruth16]

Can anyone help set me on the road to understanding the bigger movements within markets over several days to weeks? i.e. what to read, what to think about, how to approach the subject.

To be specific, I am not asking for systems, or entries or money management or discussion of fundamentals or TA. Not to say these aren't all vital ingredients, but I want to understand where in general the market is likely headed based on human nature and why. And then within that framework, apply TA or whatever else to fine tune entry in that larger move that I can understand.

I am interested in Futures (Main indices like Dow S&P, Gold, Oil) and Forex (the majors). I have read Livermore and Wyckoff (including the excellent articles by DBPhoenix here), but I am struggling to see beyond the charts and into a different mindset, of how big players see this.

For example, an answer might be: Crude Oil may retrace 50c-$1 up, but ultimately it is headed to $40-41 in the coming days weeks because XYZ (reason). So I am interested in the next target, where is it going and why?

Hope it's clear what I'm looking for. All help appreciated.

 

[dbphoenix]

Psychology has little to nothing to do with it. If you've read Trading Price, linked below, and if you 've read the Auction Market Theory section of the pdf which is also linked below, then pick something simple and reasonably predictable, preferably something that is mean-reverting. None of what you've listed meet those criteria. If you're an exceptionally disciplined and experienced arbitrageur with access to the best data feeds, then the ES may be for you. Otherwise, not. If you have a thorough understanding of currencies and economics, then Forex may be of interest. Otherwise, not. Are oil and gold mean-reverting? If not, the likelihood of determining any sort of price target is slim.

Don't run the race in lead boots. Make trading as simple and as easy for yourself as you can.

 

[seekingTruth16]

Psychology has little to nothing to do with it. If you've read Trading Price, linked below, and if you 've read the Auction Market Theory section of the pdf which is also linked below, then pick something simple and reasonably predictable, preferably something that is mean-reverting. None of what you've listed meet those criteria. If you're an exceptionally disciplined and experienced arbitrageur with access to the best data feeds, then the ES may be for you. Otherwise, not. If you have a thorough understanding of currencies and economics, then Forex may be of interest. Otherwise, not. Are oil and gold mean-reverting? If not, the likelihood of determining any sort of price target is slim.

Don't run the race in lead boots. Make trading as simple and as easy for yourself as you can.

Thanks DBPhoenix for your time and response. My understanding is that the approach you've posted here is about following price, letting price tell you in which direction to trade, then on top of that, finding areas where good trade opportunities might be available that present a good risk reward, and then allowing trades to run with this. All great things.

But I am asking something other than that. Not tracking price, but getting ahead of it, or at least into its 'mind'. Is such a thing possible?

 

[dbphoenix]

Yes, if you focus on something that is mean-reverting and moves according to auction market theory. Study the posts I've made on "trading opportunities".

 

[seekingTruth16]

Yes, if you focus on something that is mean-reverting and moves according to auction market theory. Study the posts I've made on "trading opportunities".

Why do you say psychology has little to nothing to do with it?

Aren't there such things as smart money, strong hands, weak hands, stop hunting, accumulation, manipulation, fear, greed?

Is none of this psychological in nature?

Not trying to argue, just trying to understand.

 

[darktone]

Can anyone help set me on the road to understanding the bigger movements within markets over several days to weeks? i.e. what to read, what to think about, how to approach the subject.

To be specific, I am not asking for systems, or entries or money management or discussion of fundamentals or TA. Not to say these aren't all vital ingredients, but I want to understand where in general the market is likely headed based on human nature and why. And then within that framework, apply TA or whatever else to fine tune entry in that larger move that I can understand.

I am interested in Futures (Main indices like Dow S&P, Gold, Oil) and Forex (the majors). I have read Livermore and Wyckoff (including the excellent articles by DBPhoenix here), but I am struggling to see beyond the charts and into a different mindset, of how big players see this.

For example, an answer might be: Crude Oil may retrace 50c-$1 up, but ultimately it is headed to $40-41 in the coming days weeks because XYZ (reason). So I am interested in the next target, where is it going and why?

Hope it's clear what I'm looking for. All help appreciated.

Its sounds pretty much the same thing most are seeking "How can i understand and predict the future?". I dont think the answers lay down that road.

 

[dbphoenix]

What amateurs call "psychology" is extraneous to how the market works. There is of course such a thing as Big Money: banks, institutions, funds, etc. But it isn't necessarily smart. If it were, it would always outperform the averages. But it doesn't. Not always. And it isn't always possible to determine what "smart" money is doing. However, it is possible, depending on the instrument, to know what Big Money is doing. In fact, it's almost impossible to hide it. But there's nothing psychological about it. They have their own definitions of value and they buy when they see it. It's just business.

Stop hunting? No. This is something invented by small retail traders to rationalize their inability to know where to place a stop. Accumulation and distribution? Yes. But there's nothing psychological about it. It's just a feature, again, of conducting business. Fear and greed? Yes. But that's not in the market. That's in the trader's head, as I explained in my article on Fear, stemming chiefly from his lack of understanding of how the market works, what to look for, and what to do with it if and when he finds it.

But all of this is nothing more than theoretical babble unless and until one studies a chart. Look, for example, at a daily chart of the NQ for the past six months. At what points does Big Money lay out the playing field?

 

[seekingTruth16]

Thanks darktone for a well-intentioned response. Yes for me, it's about understanding and predicting. If you don't think the answer lies down that road, that fine, you probably have a different question to me. Personally, I would still like to pursue that road.

I do believe things are predictable. I can predict many things in life. But larger market movements? Unfortunately I am poor at it and I can only follow and track, which dbphoenix has provided great work on. Not overlooking the importance of that to trading results, but I'm looking for the understanding beyond that.

 

[seekingTruth16]

What amateurs call "psychology" is extraneous to how the market works. There is of course such a thing as Big Money: banks, institutions, funds, etc. But it isn't necessarily smart. If it were, it would always outperform the averages. But it doesn't. Not always. And it isn't always possible to determine what "smart" money is doing. However, it is possible, depending on the instrument, to know what Big Money is doing. In fact, it's almost impossible to hide it. But there's nothing psychological about it. They have their own definitions of value and they buy when they see it. It's just business.

How can we know what the Big Money is doing? I am looking at NQ. I see highs I see lows, I'm clueless about what the big money is doing and how to detect it. This is exactly what I'm trying to understand. Thanks for your help.

 

[dbphoenix]

.

 

[malaguti]

How can we know what the Big Money is doing? I am looking at NQ. I see highs I see lows, I'm clueless about what the big money is doing and how to detect it. This is exactly what I'm trying to understand. Thanks for your help.

doesn't say much for the links provided, or the methods you may have followed. if you can't follow something its probably not clear enough.
Knowing what the big money is doing....really? how are you going to know? are you going to phone them all? are they going to tell you?
you don't need to understand psychology because if you cant determine what one single person is going to do or know what he/she is thinking, then why try and understand the masses?

find a method that is clear to you, and works and if you don't follow something that somebody is saying, look for something clearer. pm me if you are interested in a nice simple method
no links under my name, no plethora of threads all trying to understand yesterday's price or all trying and failing to draw the same line! and I wont sell you anything other than a couple of books that have made everything a damn site easier. and the best thing is, I didn't write them

 

[dbphoenix]

If malaguti's method is clearer to you, by all means pursue that. Trading price is not for everyone.

 

[malaguti]

Trading price is not for everyone

or straight lines

 

[darktone]

Thanks darktone for a well-intentioned response. Yes for me, it's about understanding and predicting. If you don't think the answer lies down that road, that fine, you probably have a different question to me. Personally, I would still like to pursue that road.

I do believe things are predictable. I can predict many things in life. But larger market movements? Unfortunately I am poor at it and I can only follow and track, which dbphoenix has provided great work on. Not overlooking the importance of that to trading results, but I'm looking for the understanding beyond that.

The only reason i dont think the answer doesnt lay down that is cos ive done the journey more times than I care to remember, but that dont mean nowt. If i was in your position id probably say the same, im a stuborn **** and id still do it my way even if god himself came down from heavens to guide upon my tarding journey

Re the long term. Everything priced in money will go up over time, the reason is due to the way money is created. Now you know the direction

Opportunity:-
How do we define the opportunity the market gives us? Lets have a look at fridays dax chart with some zig zag BS put on it, everybody loves a chart. Obviously there was more opps but the zig zag BS is very visual and pinpoints a top and bottom in the 'past history of price action' bars.

Prediction n confirmation:-
We love love to make predictions cos they are safe and comfortable for us psychologically.
"I predict my partner wont do someone else cos they tell me they love me"
"I predict I will live for one more second... (Boooom I was right )"
"I predict the market will goto xyz because i bought the breakout and ive got a stop beneath the last low as marked with the lines on my chart"

All very comfy

Problem is, trading dont work that way

Its a game of two halves. The downy half and the uppy half.

Problem buying on the downy half is that youre catching falling knives, maybe even adding to losers and you dont do that cos PTJ says so and your account will blow up cos everyone here says so and your an idiot and and and...... you get the drift.
Thing is, it works, very well when done in a considered way. Theres not much to predict, buy when it goes down, sell when it goes up. Buy low, sell high,, repeat.

 

[seekingTruth16]

doesn't say much for the links provided, or the methods you may have followed. if you can't follow something its probably not clear enough.
Knowing what the big money is doing....really? how are you going to know? are you going to phone them all? are they going to tell you?
you don't need to understand psychology because if you cant determine what one single person is going to do or know what he/she is thinking, then why try and understand the masses?

find a method that is clear to you, and works and if you don't follow something that somebody is saying, look for something clearer. pm me if you are interested in a nice simple method
no links under my name, no plethora of threads all trying to understand yesterday's price or all trying and failing to draw the same line! and I wont sell you anything other than a couple of books that have made everything a damn site easier. and the best thing is, I didn't write them

Thanks Malaguti, a kind offer. As I mentioned, I don't want to get into systems. It's understanding the why I am interested in here. Some think that knowing why isn't important. Maybe that's the way it is, but I still want to explore if we can know why, and therefore predict what next. dbPhoenix has a price based approach to this. Is there a non TA, non FA approach?

In terms of knowing what the big money is doing. Ok, maybe 'know' is the wrong word. You are right, we can't know. But could we make an educated guess? After all, big things should leave some sort of trace. Big interests should have some sort of plan. Big positions can't be exited in the same way as small. If the herd is losing, then the herd too must have some sort of behaviour. Is it just TA/price action/auction theory we need to master?

 

[seekingTruth16]

dbphoenix, on your chart, line 1 is a recent high. So the second time it approaches it, it is good to be aware of it, but seems dangerous to predict it would turn down there. So we'd just be aware that it could. The 3rd time it gets there, maybe we could be more confident in thinking it would reverse.

The same seems to apply to line 3. For line 2, at what point can we think it's heading back up towards line 3? Maybe the day of that gap up on your chart that follows the bar which touched line 2. By then we're nearly in the middle of the range.

As I said, you've written skilfully about finding good risk-reward areas to trade and how to enter. Is that all there is? Is the only information that can be gathered from the chart you've posted, the trading range that you've drawn, or is there more we should be seeing to understand what I think Wyckoff called the Composite Operator. Maybe an expert could say that this time when we get to line 3, we're going to burst through it, and here's why I think that.

 

[dbphoenix]

dbphoenix, on your chart, line 1 is a recent high. So the second time it approaches it, it is good to be aware of it, but seems dangerous to predict it would turn down there. So we'd just be aware that it could. The 3rd time it gets there, maybe we could be more confident in thinking it would reverse.

The same seems to apply to line 3. For line 2, at what point can we think it's heading back up towards line 3? Maybe the day of that gap up on your chart that follows the bar which touched line 2. By then we're nearly in the middle of the range.

As I said, you've written skilfully about finding good risk-reward areas to trade and how to enter. Is that all there is? Is the only information that can be gathered from the chart you've posted, the trading range that you've drawn, or is there more we should be seeing to understand what I think Wyckoff called the Composite Operator. Maybe an expert could say that this time when we get to line 3, we're going to burst through it, and here's why I think that.

The numerals refer to points, not lines.

One needn't draw any lines at all to see that price rose for two weeks in June and July before changing the angle of its ascent. It then rose for another three weeks before making its third retracement. After each previous retracement, price made a higher high, a continuation. This time, it doesn't. The Money is no longer paying the ask. It's done, at least for now. This goes on repeatedly until price falls in September. When it gets to 4650, The Money sees value and buys. This is the only reason why price reverses, not the small retail trader, not an indicator, not a pattern, but because TM sees value there. They are the only force powerful enough to not only halt the decline but also reverse it. Price then rose to 3, at which point TM again declines to pay the ask. This provides the frame for your trading, just as determining the opening high and the opening low provides the frame for the daytrader.

There is no prediction involved here. You are merely observing where TM is entering the market and where it's exiting the market. The "why" is irrelevant. If you were trading this, you would have been long since 4650. You have since then had nothing to do until price reaches the upper limit of the range or its stride is broken and reversed. If there is a continuation at the upper limit, you're already in. If there's a reversal, then apply what you know about reversals and trade accordingly.

Yes, that's all there is. The Money refers to those who have enough of it to halt and reverse price. They are the longer-term players who determine where price is going to go, when it's going to go, and how long it's going to take to get there. The Composite Operator is an amalgam of every market participant, including the small retail trader. In this regard, however, The Money and The Composite Operator are for all practical purposes equivalent. It helps to understand that the crowd or "herd" is always right except at turning points, and to fight it is to lose. At turning points, the herd is always late because it doesn't understand what's going on. Sooner or later it catches on, perhaps because its indicators have finally caught up with price, which helps to account for the acceleration one sees after the crest of reversals. The smart traders understand that the tide has turned. The stupid ones continue to trade counter-trend and provide the liquidity that the market needs.

As for the expert and what he thinks, who cares? Price is always right. No expert can make that claim. You probably will have noticed that Wyckoff doesn't predict, he observes. Re-reading his year-long analysis of the daily average once a week will do you more good than pouring over blogs and articles and trading forums.

 

[seekingTruth16]

Thanks dbPhoenix, the why might be irrelevant to you, to the market, to trading successfully, that's fine. It's not irrelevant to me. I'd like to know the why, and I'd like to know why they saw value where they did, and why they refused to pay a particular price and decided to reverse price where they did.

Can anyone shed any light on that?

 

[dbphoenix]

Thanks dbPhoenix, the why might be irrelevant to you, to the market, to trading successfully, that's fine. It's not irrelevant to me. I'd like to know the why, and I'd like to know why they saw value where they did, and why they refused to pay a particular price and decided to reverse price where they did.

Can anyone shed any light on that?

There's no way of knowing, except in hindsight, and even then "experts" will disagree.

So you have a choice between driving yourself crazy with the why or getting on with it and focusing your attention and efforts toward making money. That is not something that I can help you with. This is "psychology", but it has nothing to do with the market.

 

[seekingTruth16]

There's no way of knowing, except in hindsight, and even then "experts" will disagree.

So you have a choice between driving yourself crazy with the why or getting on with it and focusing your attention and efforts toward making money. That is not something that I can help you with. This is "psychology", but it has nothing to do with the market.

Thanks again, but this isn't going to drive me crazy. It's just a question. Why do you need to bring it back to trading or systems or "getting on with it"? I haven't asked how to trade successfully. If that's what I wanted I would ask you for help or start a journal and ask you to look in or take malaguti up on his offer.

I'm asking about understanding something. Forget trading it. If it helps, assume I'm not interested in trading at all, purely an academic understanding of something, price movement and the psychology of the money. If you say that it can't be known, not even guessed at, not even got right more than wrong, or guessed at ahead of time - why the money thinks what it does - then that's fine. Maybe someone else can add something. Or maybe not.