The Journey from the Basement

[SOCRATES]

Ah yes, I will as soon as I have some free time. You are not either of these. You have always acted and behaved correctly. I have taken very careful note of who is who in the zoo, so to speak. The Duffers are the ones that persist in trying to take shortcuts, because they think they are cleverer, superior to you and me and they don't have to make any effort. They want results without effort. The Dunces, are the ones who cannot learn and refuse to be taught and in addition, as a consequence of getting frustrated as they do not and can not succeed at all become rude, offensive, and they interrupt interesting and constructive discussions. I hope this clarifies the different categories of creatures for you.

Kind Regards,

 

[SOCRATES]

Don't you worry, Barjon, you just plod along at your own pace, as long as you keep making an effort, that's alright. Just don't you go off the rails in search of solutions that do not exist. And don't let all those temptations corrupt you either. Just keep at it and eventually you will succeed in what you want.

Kind Regards,

 

[SOCRATES]

Right, Currencies, I will explain ths in steps.

The total turnover in currencies is vast, estimated at 3.5 Trillion $ daily if I remember correctly. This is worldwide. As it is worldwide the turnover takes place between different trading locations and by different participating entities. Thus the trading in currencies is not what you could say "centralised" as would be the case for any other instrument in a cash market, whether a share, or a commodity, or a Gilt Edged Security or a Bond or any other form of Govt. Obligation in which an active and liquid market exists, for which there is a centralised exchange.

In consequence of this, it is impossible to collect volume for Currencies. When I talk of volume I mean sizes of trades contributing to volume of turnover, like for example can be collected and displayed for the markets in Equities, Options, Futures, and so on. Incidentally the volume on Commodities is not always declared in real time, in some instruments it is declared the day after, to add to the complication.

As in currencies there is no volume of transaction, there is an alternative. This alternative is volume of activity. Volume of Activity is related to the frequency with which the price changes and is indicative of participation. So far so good, I will let you read this and carry on in the next post that I am preparing....

 

[SOCRATES]

So, as true volume is not available, you can to a certain extent make do with volume of activity.

This requires a different understanding of volume to conventional understanding of volume because it infers different things to conventional volume as delivered in conjunction to centralised instruments.

However, having said that all volume represents activity. A market which is not active will not have any significant volume on an ongoing basis. As currencies are very liquid, there is always something going on in them, even in the middle of the night, as a consequence of them being traded worldwide through different time zones.

Ok ? Read this and I will carry on.....

 

[SOCRATES]

What happens is that like all other instruments, currencies are dominated by large players. It is these large players that are responsible for initiating movement, and then the smaller players join in.

Contrary to popular belief, because viewed from the point of view of trading them in order to make gains from them they are not always connected to economic or statistical releases. In other words, there is risk that the economic or statistical releases and indeed news can be used as cover, as an excuse by the largest players to justify the postures they may have taken in advance. This is baffling to followers of a particular currency as the outcome expected is not always the one delivered in terms of market action or results.

Therefore if currencies are viewed from this perspective, as if they were say "goods" a different handle is used to understand where it is they are at, so to speak. If you think not of currencies as money but as a range of goods this becomes easier to grasp. They are, in essence, Graded Denominated Debt Coupons for which supply and demand functions exist like for anything else that can be bought and sold.

One of the tricks that very large trading interests are capable of doing is bying one of the pair and selling the other of the pair at the same time. This disequilibrium when carried out as part of a deliberate campaign can have very startling and dramatic consequences, viz., the £ / ERM debacle.

So now we can see that currencies are not conventional in terms of their supply - demand functions because the question of following them by trying to pin the volume seems impossible, yet this is not always the case. The most significant changes in volumetric activity occur at turning points. This is because the biggest players intervene at turning points. This is what you have to watch out for.

It can be tracked by volume of activity, meaning a record of the number of changes in price tthat take place at a given price level. When these changes are very fast and repeated there obviously is something going on. The volume of activity increases. It buzzes. This buzz signifies participation by the entities that matter.
When the entities that matter participate, for whatever reason, they cause changes by their presence.

The entities that matter do not participate on a small scale ~ thy do so on a huge scale. This helps in alerting the others who are in contact with the market that something is going on, something is cooking.
When it is seen that a definite direction is chosen, all the players who are waiting jump in and join, and the move progresses.

All of this can not only be seen in a tick chart, it can also be seen in a point and figure chart also. Therefore the absence of volume is not a terrific disadvantage once you get the hang of the alternatives.

 

[TheBramble]

All of this can not only be seen in a tick chart, it can also be seen in a point and figure chart also. Therefore the absence of volume is not a terrific disadvantage once you get the hang of the alternatives.

So the 'number' of price changes per period of time (whatever timeframe one is choosing to trade) could be represented at a vertical bar -just as with normal volume.

If in (say a 5min period) the price changes 1500 times - that's our 'volume' of 1500. If it changes just 700 times - that's an indication (obviously) of reduced 'volume'.

Strikes me you could use exactly the same basis on normal stocks where volume is available.

It might make an interesting exercise to compare the normal volume and the 'volume' as determined by tick price movement.

Of course, I could just be spinning my wheels for the sake of it so, anyone, jump in and let me know if this makes for a sensible use of time.

 

[brys]

Tick Volume

So the 'number' of price changes per period of time (whatever timeframe one is choosing to trade) could be represented at a vertical bar -just as with normal volume.

If in (say a 5min period) the price changes 1500 times - that's our 'volume' of 1500. If it changes just 700 times - that's an indication (obviously) of reduced 'volume'.

Strikes me you could use exactly the same basis on normal stocks where volume is available.

It might make an interesting exercise to compare the normal volume and the 'volume' as determined by tick price movement.

Of course, I could just be spinning my wheels for the sake of it so, anyone, jump in and let me know if this makes for a sensible use of time.

Quite a few FX brokers provide the tick volume and that's how I have been 'playing' with it. See below.

 

[Rognvald]

Bramble
Tick price is accepted by some as a proxy for volume and this is not a new concept. Some indicators and some software use it.

In my view it is not a satisfactory proxy for a variety of reasons which will become apparent if you study these charts which i believe were produced on a thread dbphoenix may have started some time ago on ET in a debate on a similar subject. So far as I can remember the views expressed on the charts were not his but I cannot recall now whose they actually were

The central blue line defining time is mineand the charts have been size adjusted for fit but nevertheless give (I think) a good picture of the effect of using ticks as a basis for candle charts and volume. As a result of looking at these and some additional study I decided the method was not for me

 

[TheBramble]

Quite a few FX brokers provide the tick volume and that's how I have been 'playing' with it. See below.

Aahhh! Now THAT does make sense.

Thanks brys.

 

[trendie]

OK - I dont get it !!

However, since I have a simplistic, workable, mindset, ( still under construction ), I do not consider I am a failure.
Also, my inability to understand other peoples ideas is not anybody elses fault.
But mine own - totally.

Taking responsibilty for ones own decisions is one true short-cut to success, as you start to focus on your own mind-machinations. The working through of which leads onto a better self-understanding, and self-reliance.

I am too thick for this stuff - I think I shall stick to my Simple MAs and swings.

 

[TheBramble]

By the way Socrates, thanks for the recent bit about price without volume.

Seconded. Spent all evening playing around with that. And thanks Rognvald for your inputs on that sub-topic and your friendly advice to avoid, but you know how these things have to work...

 

[TheBramble]

Oh, and I've just remembered. There was one specific event which made me realise Socrates had some very specials talents of an 'unusual' nature. Which I'll recount as best I can, FWIW.

An opportunity arose on what was then the 'No Inds' thread to play a bit of a game. I PM'd another t2w member (and as I can't remember who - please, shout out if you read this) and suggested we play a certain line along.

This other member had posted something vaguely surreal about 'big toes' and I PM'd them to suggest we have a bit of a laugh and develop the 'big toes' into 'something', without ever actually defining what it was or what it might do or be. Within minutes of my posting the first shot at doing this and the other member replying in an equally serious manner, I got a PM from Socrates. He was on to us!

You'd have to be pretty switched on to pick up on my hi-jinks as my sense of humour can get out of hand very quickly at times. (I'm not boasting - it's a disability - trust me.)

Of course, as has been adequately pointed out elsewhere, those who are only prepared to adopt a perceptual filter of what can be construed negatively in this matter, will do so. And likewise those extremists in the other camp.

But in the middle ground, where most of us reside, I hope there will be sufficient understanding of the above to warrant a little deeper introspection of what this was really all about.

It would be crass and pointless to suggest a poll, but I would recommend anyone to take the time to review this thread and pull out of it what they can, what is useful to them, and develop it. I have a feeling the vast majority would agree they have benefited from this thread. Animal stories and all.

 

[SOCRATES]

Ha ! Ha ! Ha ! Bramble you are funny. This seeking of fun and amusement does not always yield the prize you seek. You gave me the first clue. This clue suggested to me that I ought not to present the thread in the form of tuition.

And this is why all of this has been delivered as a series of discussions and not as tuition which is what everybody criticizes...... but everybody wants, but I am not giving it, not for free or for payment either,
not because I cannot, but because I don't want to and I don't need to and I am not going to.

And now that I am seeing your behaviour, even less, all of you.

And in additon there is a structured route in the form of the correct mindway to properly construct and armour the TP, and I am not giving it either.

And in addition, the main ingredients that would allow anyone to plaigarise the concept and try to teach it have not been included, on purpose.

And in addition the discourses are designed as an intellectual obstacle course to test the mettle of the audience and to establish whether anyone anywhere has been able to replicate the result, and the result is negative.

And in addition the discourses at the same time have been presented in such a way as to see whether it is possible to raise the awareness of the audience both collectively and individually to a level such that from then on all this would become easy , second nature, if you like, but sadly many pretend to aspire and but do not really, therefore few allow themselves to succeed. The great majority do not even try. They do not know what to try means.

This is what finally enrages the idiots, to their frustration and my wry contemplation. I am not alone, there are several of us who look upon them with a mixture of dismay and pity. All of this for us is very easy, absolutely second nature in trading. If it were not so tragic it would be funny.

The excercise has been in two parts, the first to helo people who really needed to realise what was wrong with their trading. This has infuriated several hidden vested interests and lurkers.

The second part was to verify who's who in the zoo. This has also infuriated the same idiot, who appears to be several people all at once, by employing the device of using several nicks, but the same paw print, is clearly evident to all.

The clever ones have benefitted and the others have not and will not, sorry.

 

[Skimbleshanks]

This thread has been closed (a) to preserve its unique content, and (b) because it was becoming unwieldy to manage with 1,000+ posts.

A new thread (called Commentary on The Journey from the Basement) has been started for anyone and everyone to continue their discussions about the subjects introduced in The Journey from the Basement, together with opinions, pontifications, and commentary.

For reference, the following is the link to the thread:
http://www.trade2win.com/boards/showthread.php?t=11515