Price, (Volume), Support, Resistance, Demand, Supply . . .

[porgie]

What happened to simplicity? Price goes up, buy........Price goes down, sell....is it really rocket science or does it become an emotional trap that complicates simplicity if one prefers the rocket science approach ? It is as simple as we allow it to be....Most rhetoric is just for grins.....

 

[SOCRATES]

Right, here is the explanation, as promised last night, this time in as simple language as possible:~

The three indexes have different characteristics.
The NQ is the youngest and the Dow is the oldest.
The S+P is in between.
Older indexes contain stocks that are very well known to serious players who repeatedly trade in them.For this reason there is regularity in them, because it is largely the same people trading in them all the time.
So, when I say the same people what is meant is the people that matter.
In a new index this is not the case. It has to be left to mature in order for the underlying stocks to gain a consistent following from the players that matter.
The players that matter do not play in all indexes at the same time.
They only play in the underlying stocks underpinning the indexes that interest them, and then perhaps have a go in the others if there is some spare cash.Therefore not all three can perform perfectly in unison all the time.
You can expect each one to have a characteristic cycle of behaviour all of its own as a consequence.
But they do occasionally appear to be behaving in a similar fashion at the same time.
This is not a hard and fast rule.
It is more of an anomaly than a rule carved in stone.
It cannot be taken for granted that they will behave in unison all the time and the above are the reasons.

All of it is very simple, and if you don't know this you ought not to be trading, or even talking about it in my view.

 

[Porks]

So,

The players that matter don't bother trading in the stocks that make up the younger indexes ?

Trillions of dollars traded by players that don't matter. In stocks that don't have a consistent following ?

Spare cash ???



Pork's

 

[contrakt]

finetunning my own correllation framework

Right, here is the explanation, as promised last night, this time in as simple language as possible:~

The three indexes have different characteristics.
The NQ is the youngest and the Dow is the oldest.
The S+P is in between.
Older indexes contain stocks that are very well known to serious players who repeatedly trade in them.For this reason there is regularity in them, because it is largely the same people trading in them all the time.
So, when I say the same people what is meant is the people that matter.
In a new index this is not the case. It has to be left to mature in order for the underlying stocks to gain a consistent following from the players that matter.
The players that matter do not play in all indexes at the same time.
They only play in the underlying stocks underpinning the indexes that interest them, and then perhaps have a go in the others if there is some spare cash.Therefore not all three can perform perfectly in unison all the time.
You can expect each one to have a characteristic cycle of behaviour all of its own as a consequence.
But they do occasionally appear to be behaving in a similar fashion at the same time.
This is not a hard and fast rule.
It is more of an anomaly than a rule carved in stone.
It cannot be taken for granted that they will behave in unison all the time and the above are the reasons.

All of it is very simple, and if you don't know this you ought not to be trading, or even talking about it in my view.

Soc thanks.
I want to take advantage of presumed correlations between certain stock related instruments.
I currently hold the believe that smh intraday must be influenced significantly by the way intc and qqqq move.
Ill risk a small % of capital per trade until I have carved out an consistent performance better than a certain r:r threshold.

More specific I believe that Business-wise its worth designing, $testing and refining trading the smh in the direction of
1] intc and 2] qqqq IF
-SMH has just rejected important local S/R
-Does SMH has enough leeway in the direction of the next anticipated move?
-Does SMH breaks new local ground in direction of 1] intc and 2] qqqq;
-Does protection/trialling "stop market" order has an acceptable low risk premium?
-Opening positions are executed with limit orders and positons are closed with stop market orders;
-All orders are executed through IB TWS/Island ECN;

ADD until<=full position
If intc/qqqq move up/down in sync,
then long/short smh in direction intc/qqq;

ADDuntill<=50% position
If intc has direction and qqqq is noisy/basing,
then long/short smh in direction intc;
If qqqq has direction and intc is noisy/basing,
then long/short smh in direction qqqq;

Null add to position and simultaneously tighten stops from green positions:
Intc and qqqq move in opposite directions and/or smh shows increasing signs of reversal and/or noise.

Where:
-smh= weighted big semi companies.
-qqqq=weighted big tech. companies;
-intc= the semis bell-weather.

 

[peto]

relationships between indices

Right, here is the explanation,
All of it is very simple, and if you don't know this you ought not to be trading, or even talking about it in my view.

Older indexes contain stocks that are very well known to serious players who repeatedly trade in them......./......In a new index this is not the case.

Nearly all the DJIA component stocks can be found in the S&P500. Some can be found in the Nasdaq as well.

The players that matter do not play in all indexes at the same time.
They only play in the underlying stocks

Where they trade stocks which overlap (e.g. Microsoft) they do indeed influence all 3 indices at the same time.

It cannot be taken for granted that they will behave in unison all the time and the above are the reasons.

But not the only reasons...1. the method of calculating the indices varies, Dow stocks for example receive a price weighting. 2. Also the indices may be influenced by different industries different industries, Nasdaq for example favours techs. 3. The larger the number of stocks in an index the smaller the average size of company.

All these will influence how the index reacts to news and market conditions.

But they do occasionally appear to be behaving in a similar fashion at the same time.

Depends on your time scale. Look at them on a one-minute chart over a period of half an hour or so and you will see (nearly all the time but not infallibly) almost identical tick-by-tick moves occurring within a fraction of a second of each other. Over the long term you are correct.

BTW on the subject of indices I am surprised that the Russell2000 is rarely mentioned on these boards. The ER2 future e-mini is a very liquid and volatile creature now traded on 2 exchanges. The Wilshire 5000 may be worth looking as well if one is researching u.s. indices since it contains some 7,000 companies ( all u.s. headquartered co's with readily available price data).

All of it is very simple

Perhaps it is for you but I find it to be a complex and fascinating subject which may contribute an edge to my trading.

pete

 

[SOCRATES]

Nearly all the DJIA component stocks can be found in the S&P500. Some can be found in the Nasdaq as well.



Where they trade stocks which overlap (e.g. Microsoft) they do indeed influence all 3 indices at the same time.



But not the only reasons...1. the method of calculating the indices varies, Dow stocks for example receive a price weighting. 2. Also the indices may be influenced by different industries different industries, Nasdaq for example favours techs. 3. The larger the number of stocks in an index the smaller the average size of company.

All these will influence how the index reacts to news and market conditions.

Depends on your time scale. Look at them on a one-minute chart over a period of half an hour or so and you will see (nearly all the time but not infallibly) almost identical tick-by-tick moves occurring within a fraction of a second of each other. Over the long term you are correct.

BTW on the subject of indices I am surprised that the Russell2000 is rarely mentioned on these boards. The ER2 future e-mini is a very liquid and volatile creature now traded on 2 exchanges. The Wilshire 5000 may be worth looking as well if one is researching u.s. indices since it contains some 7,000 companies ( all u.s. headquartered co's with readily available price data).



Perhaps it is for you but I find it to be a complex and fascinating subject which may contribute an edge to my trading.

pete

Quite correct.

Now consider all of this from the point of view of volumetric arbitrage.

A totally new volumetric picture comes alive.

Once it is totally mastered it is as if you have a slide rule inside your head all the time.

 

[RUDEBOY]

Volume wise....is there enough to disrupt the mid term trend fully? Are we likely to see a slight draw back shortly and then a continuation? All i can say is that i reakon this will top out shortly, if not already? This is of no help really, i understand that. Newbies, you have got to do your homework, put the hours in, it's that simple. All the best, Rude.

Newbies. There is nothing more rewarding than finding out for yourselves (not to sound arrogant). Rude.

 

[Splitlink]

So,

The players that matter don't bother trading in the stocks that make up the younger indexes ?

Trillions of dollars traded by players that don't matter. In stocks that don't have a consistent following ?

Spare cash ???



Pork's

I doubt that traders use AIM much. As Socrates says, the spreads and liquidity are much better
on the top 250 shares. That is where the big (and not so big) traders go. IMO AIM and the like are more for investors who have gone into the fundamentals. I have two small caps but I am not holding my breath for instant daily returns. I trade on the FTSE100- why go anywhere else,
unless you have very strong feelings about the share?

Sometimes Socrates is correct, although I am reluctant to give him too much credit, in case he is picking someone else's brains.

Split

 

[porgie]

Identifying precise emini tops and bottoms realtime was a real challenge for me. It took a few years.... for me time and money are not exciting issues. If an intraday emini scalper watches too much stuff, he/she might become a scalpee.............Might a smart person learn this business in 5 years....a brilliant person in 10??

 

[porgie]

Db's stuff is enlightening..cherry picked some stuff....I haven't read Socrate's, but I am sure his stuff is informative also.....My stuff is what counts for me tomorrow morning when the opening bell rings and only I will be sitting here, putting only my money at risk....I use a 1 to 2 or better risk reward ratio.usually a lot better..........I usually don't trade before 9:00 CST....I use 2 charts....intraday only......never watch Squawkbox or other external information as I don't do stocks. ......Only watch the pc monitor picture since that's where my system is working for the trading day....try to enter top/bottoms of runs.....YM allows better risk/reward for me as a weak account trader...just into trading what appears to be the best system I can develop ..System developers usually are bad traders...I am no exception........I try to never anticipate after years of biased mind costing the crap out of my account...I don't trade yesterday's market .....I never consider any news as I start @ 9 and use the tight stops so big deal if I lose a little money occasionally...Greenspan is caution @ announcement time, but just requires caution.wait for whamo, or don't wait for whamo..tight stops or stay out, etc...Once confidence is maximum, it's time to put up or shutup...system works on all markets, just not enough money in account to go there again....yet....up/buy..down/sell........This is weekend crap, so please don't attack as off topic...noodle just needed some adjustments ...Happy Trading to All

 

[Splitlink]

I agree, how bout we start talking about Price and Volume again?

OK. Here's a tentative start. Schroeders met with resistance at 800 at 21/10/03. Again on 14/02/05 and again over the past 2-3 days. I shorted this morning, mainly because of that, but I also tried to study dbphoenix's post on this thread- 611-12 and bring his theory to bear on the matter. The result is very short and sweet, I must admit.

Point A represents a high point and Point B a higher point but with less volume i.e. no buyers interest.

What do you think of that? I am not an expert on chart transfers, I'm afraid.

Split

 

[aricho]

umm, i'm not a guru like alot of the others here, but i would have waited for a lower high or something to confirm the move down.

Looking at volume, it looks like it has dropped off since it moved down, so it may just be a false break of the line.

if i'm worng please say so i will get it right

keep em comin too....

cheers :cheesy:

 

[Splitlink]

umm, i'm not a guru like alot of the others here, but i would have waited for a lower high or something to confirm the move down.

Looking at volume, it looks like it has dropped off since it moved down, so it may just be a false break of the line.

if i'm worng please say so i will get it right

keep em comin too....

cheers :cheesy:

The high point at 800 is about 20 months old, so I figure that it should be difficult which is the real reason for shorting this. Volume is still an unknown quantity for me, but I am trying to fit it in. I spotted, and traded, the double bottom in May, which was a beauty on the chart- I needed no volume and, although I see that there was a strong volume day on the break, I didn't take it into account.

Here's to volume and the bigger the mug, the better!

Split

 

[dbphoenix]

OK. Here's a tentative start. Schroeders met with resistance at 800 at 21/10/03. Again on 14/02/05 and again over the past 2-3 days. I shorted this morning, mainly because of that, but I also tried to study dbphoenix's post on this thread- 611-12 and bring his theory to bear on the matter. The result is very short and sweet, I must admit.

Point A represents a high point and Point B a higher point but with less volume i.e. no buyers interest.

Split

The fact that price is testing potential R is no reason to short in and of itself. Your task is to observe what is happening during that test. As for buying interest, traders have brought price up over a hundred points, and if there were no buyers' interest at present, price wouldn't continue to rise. The lack of activity suggests a paucity of selling interest, not of buying interest.

A move thru R tells sellers that they may have been wrong, which is where successful BOs, short-covering rallies, and "third time's the charrm" come from. It's up to you to decide what your strategy is going to be and how you're going to play this: the reversal off 680, the breakout, the retracement after the breakout. There is no "right way", but rather choices made based on risk tolerance and risk management. There's no reason to short unless and until you have some evidence of a reversal, e.g., a lower high. Otherwise, you're just feeding the higher highs.

--Db

 

[OpenMind]

Hi DBPhoenix,
I was following the discussion between you and Splitlink with interest (2-3 pages back). You said that to get a true understanding we should watch price/volume in real time. Did you mean that only for intra-day traders or also for people who trade with end of day prices?

I have never seen a real time price chart because I trade with daily prices and never thought I needed them. What should I be looking for in a real time chart and how should I train my eyes?

Many thanks.

 

[barjon]

housekeeping

Because so much bickering had gone on it was suggested that this thread be closed and useful contributions made from around post 438 on be put into new sub-topic threads. That would have been a big task and instead I have done some draconian pruning and deleted well over 150 posts which I hope will put the thread back on course and not leave it looking too disjointed. Apologies to those whose pertinent (if off-topic) posts have been deleted but I hope the result is ok.

One question if I may. As moderator the deleted posts are replaced by a "deleted by" post (for the purposes of any any future management of those posts) which is unsightly and hinders the flow. Is it the same for readers or have the posts just disappeared altogether? Thanks


This post, too, will destruct in a day or so.


jon

 

[legacytrader]

have you had a look at the 'delta phenomenon' -not really my bag, but I hear it uses elliot wave and moon/wave cycles for timing points...

 

[dbphoenix]

Hi DBPhoenix,
I was following the discussion between you and Splitlink with interest (2-3 pages back). You said that to get a true understanding we should watch price/volume in real time. Did you mean that only for intra-day traders or also for people who trade with end of day prices?

I have never seen a real time price chart because I trade with daily prices and never thought I needed them. What should I be looking for in a real time chart and how should I train my eyes?

Many thanks.

For an EOD trader, much less one who trades off weekly charts, watching the PV dance in real time must be less exciting than watching grass grow. However, I do believe (and note I said "believe", not "know") that an understanding of the dynamics of demand and supply is of benefit to any trader, regardless of his timeframe, and, further, that watching the dance take place in real time, if only for a few hours, can be illuminating.

As to what to watch for, perhaps the best place to start for an instrument which is traded according to value of some sort is to focus on levels or zones of S/R, since these are most likely to spark interest. For instruments that trade according to news, then perhaps focusing on the reactions to expected news -- such as announcements, reports, releases, etc as opposed to unexpected events like bombings or crashes -- might be more efficient and productive.

--Db

 

[OpenMind]

Thank you DBPhoenix. I have one more question. Can you provide me with a basic list of books I should read to pursue this area of trading (price and volume)? I am sorry if you have discussed this somewhere before. Please point me to that dircetion if this information is already available. I have searhed this thread for 'books' but nothing came up.

I know Richard D. Wyckoff is a pioneer in this area, but there are so many books written by him. Can you suggest which one I should start with.

Many thanks.

 

[dbphoenix]

I provide a list of recommended books via my website. Click the www icon below. But there aren't many as there isn't much to say. There are only a few principles, so the bulk of what's written consists of examples (this thread illustrates this ratio).

Based on my experience with those who claim to be interested in this, a prerequisite of understanding is the acceptance of certain postulates, i.e., that support and resistance exist, that there is such a thing as trend, that there is usually intent behind price movement. If one is convinced that S/R and trend are figments of the imagination and that price movement is random, then this approach is not for him. Those who insist that there is only one way are going to find a variety of irreconcilable approaches to the market. This quandary generates a great many posts.

--Db