International Index Trading

[Uncle Festivus]

Is anyone getting a bit seasick from these wild daily changes of direction? I mean I'll trade it, but WTF?

I think this is the financial equivalent of an out of balance shaft, where the vibrations become so erratic & violent that eventually something has to give way. Typical of market tops & exhaustion?

I have given it the title of 'The Goldilocks economy & the 3 bear markets'. The first 'bear' was the correction back in March, the second was the one we are having now, & the third is the one that completes the cycle, possibly to coincide with the 3rd qtr US GDP figures around October, which could be the first qtr which goes solid negative, if not sooner with this qtr.

In the meantime the bull will have one more rush to new highs when it becomes apparent that the Fed is not going to raise rates whilever the housing bust/credit squeeze continues to look for a bottom.

Japan looks to be the fly in the ointment, inflation requiring a tightening bias towards interest rates, & a mad scamble for the carry trade exits maybe?

There is an estimate that there is 35% more global liquidity than would be required for normal productive expansion, thanks largely to excessively low global (mainly Japanese) interest rates, now playing catch up as shown by the bond market this week, after being behind the curve for so long.

Private equity? Global equity surplus looking for a home, no matter how risky. It's out of control & it's not going to be pretty when the derivative & debt disco stops.

October global CRASH anyone?

Oh, and then theres the small problem with bees!

 

[nizar]

Uncle Festivus.

October crash?
Then what -- start of a bear market or sideways market?
For how long?

In your opinion.

 

[Arturius]

New to this forum, but I'm a daily trader scalper of the YM (mini dow) and ER2 (Russell 200) markets, and I reside in Sydney, so this thread seems perfect to me.

I also run a blog at http://ausscalper.blogspot.com

I'll be back later to do some market profiling for tomorrow and what to expect!

 

[Edwood]

Hi Arturius - 'predictions' for tomorrow are always welcome, especially if they're correct!

 

[Arturius]

Haha, I can never 'predict', but I can tell you where several bias's should lie... and luckily, thats all you need to make money in this game. I'll run through it right now.

 

[professor_frink]

Is anyone getting a bit seasick from these wild daily changes of direction? I mean I'll trade it, but WTF?

aaarrrrggghhhhh!!!!!!

Another day of chop after a big opening gap

Wish you U.S traders would hurry up and make your mind up about which way it's gunna go

 

[Arturius]

First thing, I've graphed out here the days market profile. If you don't know what the market profile is, google is your friend. Suffice to say, its not a gann/fib stuff, its just quantative statistical mapping of the days volume, using a standard deviation to show where the most action occurs. The middle white line represents the value point, the point that most people agreed upon. The day was a bracketed one and started on low volume.

The key is what time frame is looking to buy aggressively, what time frame is looking to sell, what time frame is looking to cover shorts, and what time frame is looking to liquidate existing positions. I won't go into my total strategy for this as it'd be the size of a phone book, but suffice to say, we don't want to be caught with any surprises. The worst is when you hit a good buying bottom for institutions, and very rarely are these ever some sort of trendline. More commonly, its represents to them a good point to buy into, usually because the price has lost upward momentum, but the value zone in the total market overview remains high. This will not show up when drawing trendlines, it'll only show up in your mind when you're trying to play "what would they be thinking?" in your head.

I'll also note, I'm not sure how this applies to the Australian markets. The SPI200 is a mix of overseas movements and aus institutional buying of course. US is the leading market, thus its a little easier to trade. I'm sure if you worked on it enough, you could come up with a very profitable system for the aus markets too, but the catch is, you can't use a US system on the aus markets. I've never tried it, but I doubt it'd work, the characteristics are different, although the principles still apply.



Here's the first graph. As you can see, the market trended away at the end on some strong volume (look at my volume lines being broken). It bounced off my value line and went full steam ahead. What time frame did the buying? I suspect the intermediates saw an opportunity to come in and take advantage of a week of sideways movement. Once the force got behind (force = volume) the trade, everyone else piled on, looking to test the next obvious point at 13600. It actually close slightly above. This looks quite bullish in the short term (especially after a slide caused by interest rates; it seems everyones adjusted to that fairly quickly though). But we're not trading short term, we're trading intraday. This would be a bad long for a trader looking to hold for a week or more. Why? Because price has outskipped a weeks worth of value zones. We're banking on this being the start of something big, something most timeframes can get into. I don't see that happening, personally.

Thats not to say it might not happen. In a week, we could see a return to some big bull movements. I can't predict that, but its very much a possibility. Each day will give us hints to that movement. So far, I think a trend day (or week) probably isn't going to happen. If you're looking for a swing trade, I'd wait, later next week could hold some good value trades. Its all about seeing it, processing it, looking for confirmation, then trading. If I told you to 'buy in a week, the market will be good!', I'm giving you terrible advice, because depending on how the movement happens will tell me what everyone is thinking. The more pieces, the better the puzzle looks. So far, I've only got some of the frame in the short term.

Intraday, however, is a different story. Price has gotten away from the previous weeks value zone. I'm not totally convinced by this end of day movement. The chartist TA guys will be saying "oh look, its broken 13600, BUY BUY BUY RIDE THE TREND". Poor trading. I have no doubt an upside trend could happen, but I'll need more evidence. I'll need some confirmation that people are happy with a 13600 price, their happy to have a majority of volume at that level, then I'd use that as the base for another trend run. Thats a much higher probability trade then just looking for breaks in basic trend lines. Wheres the force going to come from is way more important then some price mark. Price marks only represent a symbol. Volume represents who gives a ****.

Here's what I'm thinking: See how the market opens. An ideal trade for me would be if the market moves up quickly in the first 15 (maybe even gaps slightly) on light volume, gets uncertain, and starts to go sideways. Perfect short opportunity. I'd look at the TICK, see where the money is going, time my entry using that and a combination of the ER2 + bonds market, short when I start to see some force (volume), then let the market do its thing. Once it returns to that 13550 mark, then I start thinking about covering, depending on the force. If the force isn't convincing, there's probably a lot of covering going on, and once thats over the players will come back in as the price will be near to the value zone, and will start to push at it again. If there's a huge amount of force and its clear that somebody thinks this price is over valued, I just hold it and ride it till it gets to the other side of the weeks value zone. After that, its like going into uncharted waters, we're experienced sailors with good instincts, but its probably better to wait till we have a map. Not worth risking our boat sinking.

Another possibility is the bears fail to move the price down, and there's high volume, side ways movement. Volume will taper off, then the bulls will come in and start the upwards trend again. This is not a strategy I'd use at the open though. Like I said, trades gotten away from the value zone, lets wait for a new one to develop here before we buy. Its like giving us a nice mattress at a price level. There's no point in trading, hoping that some magical bull run is going to happen. That does occur, but its not high probability.

Here's what I mean when I say the value zones for the week. Here's the highest one, a few days ago, with the current price and close.



Like I said, the market could continue. It could do anything. But I've got 2 set ups I'll be looking for that I think are high probability, in that, more often then not, they'll be a winner. Sometimes they'll **** up, but the beauty is, they won't **** up bad. More likely, they'll go sideways on lessening volume, and I exit a small loser or sometimes a small winner. Like the big traders say, cut those losses. But your entry can help you do that too. Feel free to ask questions, (remember, google market profile, way too much to explain on a forum) I make no predictions, but my thinking usually keeps me out of bad trades. I'm patient, if this day doesn't pan out, I just do it again the next day. I'll post my post-day synopsis tomorrow.

 

[Arturius]

for you market profilers, I'll give you a short version of what I'm seeing.

If it looks bracketed, but opens upwards a little bit, I short.

If I see evidence of a trend day with strong volume, I go long.

 

[Edwood]

wow! so knowing market profile means I'll only have to read 2 sentences? I'd better get googling then

interesting stuff Art, yes wouldn't recommend trying to apply Dow strategies to ASX, well in my experience anyway they are completely different.

that harmonic pattern I posted earlier as at Dow cash close is potentially bearish fwiw. more powerful at tops & bottoms, am short at the close but only looking for 20pts or so

 

[Uncle Festivus]

Thanks Arturius for that insight. I was wondering what software you use for your trading; I see you use eSignal for charts?

Generally, would it be possible for posters describing how they trade to include a short tagline describing what software they use?

 

[Arturius]

My software: Esignal (charting and data feed), Marketdelta (specialised market profiling with a few neat features), and Ninjatrader (execution program).

But you can do it with anything. Tradestation is a good one for the budger conscious. I like having the extra power that the more expensive software programs have, even if I never use them in practice; sometimes its fun just to play around with features for a couple of hours.

Yeah, I'll emphasise the "don't trade like this for the ASX". The same value principles apply, but the ASX is a follower market, not a maker. I have no doubt you could tweak a system for the asx, but you're going to have to brush up on intermarket movements first, and depending on your findings, weigh the factors differently and come to different conclusions.

 

[Arturius]

The handbook on CBOT is an excellent starting resource too.

http://www.cbot.com/cbot/docs/handbook.pdf

 

[Magdoran]

for you market profilers, I'll give you a short version of what I'm seeing.

If it looks bracketed, but opens upwards a little bit, I short.

If I see evidence of a trend day with strong volume, I go long.

Hello Arturius,


Welcome to ASF. Nice to see such an accomplished trader posting. I think you will find a lot of interest in your style on this site, there are quite a few traders that are always looking to view different approaches.

Interestingly, this band based system (market profile??? – Steidlmayer???) looks a bit like wavepicker’s standard deviation “sigma” envelope approach, but probably doesn’t use the de-trending/displacement refinement to remove the lagging component. It also seems a bit like a Bollinger approach too. There is even a parallel with Frank’s “AMT” model here in concept.

Arturius, did you design this, or is it a package issued with all the parameters configured for you? For instance how do you deal with the lagging component of the envelope? ("wavepicker" should be the one to talk about this, this is his speciality)…

Personally I look at markets in a totally different way, but I’ve seen quite a few good traders use this style of approach combined with good charting skills.

The weakness I see in this style of band based system is entering short at the top of the band, or entering long at the bottom of the band when a move continues past the channel band when a strong sustained move comes along. How stops are set is quite an art (hence I can imagine this is included in King Arthur’s “phone book” lexicon). It will be interesting to watch this in action real time…


Regards



Magdoran

 

[Arturius]

Oh, I'm not using a band approach. The bands on my charts is just to help me visualise what price is doing. Its like a wave channel. I don't use any system. They're keltner bands as well, bollingers looks very crazy on the screen

I don't make any trades based on the position of the price in the band. It just helps me not to get too focused on a few tall candlesticks and the like and start thinking about the 'bigger' picture with price movements.

 

[Arturius]

One more thing before I go, if you're interested in some dynamic possibilities contained within market profiling and intermarket analysis combined with TICK set ups, read this blog:

http://highprobability.blogspot.com/2007/03/high-probability-trade-setups.html

I was a little bit into profiling before, but this guy really inspired me to push it harder, and I'm indebted, even though I've never met him (I have commented a few times ).

If you have no idea wtf he's saying, don't worry, I was the same. Persevere.

 

[Magdoran]

One more thing before I go, if you're interested in some dynamic possibilities contained within market profiling and intermarket analysis combined with TICK set ups, read this blog:

http://highprobability.blogspot.com/2007/03/high-probability-trade-setups.html

I was a little bit into profiling before, but this guy really inspired me to push it harder, and I'm indebted, even though I've never met him (I have commented a few times ).

If you have no idea wtf he's saying, don't worry, I was the same. Persevere.

The blog in the link seemed to indicate a band/channel approach based on standard deviation (but I presume based on a lagging indicator like a Bollinger style of approach right???) The logic flow diagrams depict a style as I previously outlined of shorting near the top of the band, and going long near the bottom of the band.

What was interesting was the concept of “point of control” (POC) and the use of volume being depicted horizontally in line with a section of a trend/drive to work out support and resistance in price. I really like this, and I’ve always tried to do this in my head and visualise it using my imagination. That’s how I’ve got by. But I never really thought of it in quite the way it is depicted. Thanks for that. I must look at this some more, there may be a refinement I can incorporate out of this.

Now, the block trading is an interesting concept if you’re a day trader, but for position traders, I’m not sure how relevant this is…

Thanks for putting up the link.


Mag

 

[Edwood]

cheers for the link Arturius, have been meaning to get under the bonnet with MP, has been recommended to me a few times but the need for specialised s/w has turned me off. would be great to see someone working it 'livetime' so to speak!

 

[>Apocalypto<]

cheers for the link Arturius, have been meaning to get under the bonnet with MP, has been recommended to me a few times but the need for specialised s/w has turned me off. would be great to see someone working it 'livetime' so to speak!

Elwood

from what i have read about MP and i like it alot, I really think that Franks Markets Dynamics is a great system and that is what i will move into next learning ATM and market dynamics, as it follows the market and not just the intraday.

correct me if i am wrong MP traders.

 

[Edwood]

sounds like a plan Trade It - would be interested to hear how you get on, Franks results look good

 

[professor_frink]

Elwood

from what i have read about MP and i like it alot, I really think that Franks Markets Dynamics is a great system and that is what i will move into next learning ATM and market dynamics, as it follows the market and not just the intraday.

correct me if i am wrong MP traders.

Trade It,

I don't think Frank's Market Dynamics system has anything in common with Market Profile. I think it has alot more to do with pivots than MP.