Timmy
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Motorway - thank-you also for correcting my reference to constant volume bars as momentum bars - this refers to constant range bars of course as you pointed out.
New analysis technologies
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To understand what a chart is best able to reveal
will be best understood when you have a clear understanding of what causes each bar/column to be drawn ( what sort of map is it )
CTB.........each bar is drawn when a arbitrary amount of time passes
CVB......... When an arbitrary amount of volume is aggregated
CRB......... When an arbitrary amount of range is exceeded
Point......... excess weight is given to one particular unit ( of time , volume, or range ) The decisive unit is the one that starts drawing the next bar
So while these charts are maybe hugely significant,,, They can miss the forest for the trees....They do not grasp the reality that matters , on its own terms in a purely adaptive way.... ( This does not mean that they are not very important types of maps )
Timmy ........You made the point that support and resistance was important to determine....( and when properly understood ...maybe they are the ALL ? )
P&F ..........what draws the columns ? When does a column change ?
Not with any criteria divorced from the reality of support and resistance.
Not with anything that is arbitrarily set..........
Regardless of the box size and type
It is support and resistance always and only... That draws and changes the columns.......
So P&F is different
Now if support and resistance properly understood is the ALL
It follows that in a real way P&F is the cause and effect chart.
Trading range or trend ......It is Support and Resistance that are the driver.
higher highs & higher lows , lower lows & lower highs
broadening and contracting patterns etc..
Who creates this support and resistance ?
It is created by the interaction and dance between the more and less informed....By Smart Money
By the "Composite Operator" ( Wyckoff term which means all those things )
Sure .... The P&F can have different Box size... But that is only a change in degree of magnitudes, of resolution, of the scale of support and resistance.
The columns will be still drawn from this dance that matters , unfolding in its own time..........
The old proviso was "with the noise across the buy sell spread removed" .
P&F fell into disuse because software could not draw it as well as bar charts
and people forgot what it was that made it special and saw it as a sort of deformed bar chart..
P&F chart is 100% adaptive ...Columns never change with an arbitrary tic of volume, range or time........
100% adaptive to support and resistance .
To the actions of the "Composite Operator".........
OK , But when the volume comes in at a particular time ? Then ( and all along in coordination ) The CTB chart reveals the effort and result at that particular time ...
I am not saying P&F charts are more important .. Just that they are different.
Being different They can inform and qualify the other types of charts.
The P&F chart will always be moving differently...
motorway
will be best understood when you have a clear understanding of what causes each bar/column to be drawn ( what sort of map is it )
CTB.........each bar is drawn when a arbitrary amount of time passes
CVB......... When an arbitrary amount of volume is aggregated
CRB......... When an arbitrary amount of range is exceeded
Point......... excess weight is given to one particular unit ( of time , volume, or range ) The decisive unit is the one that starts drawing the next bar
So while these charts are maybe hugely significant,,, They can miss the forest for the trees....They do not grasp the reality that matters , on its own terms in a purely adaptive way.... ( This does not mean that they are not very important types of maps )
Timmy ........You made the point that support and resistance was important to determine....( and when properly understood ...maybe they are the ALL ? )
P&F ..........what draws the columns ? When does a column change ?
Not with any criteria divorced from the reality of support and resistance.
Not with anything that is arbitrarily set..........
Regardless of the box size and type
It is support and resistance always and only... That draws and changes the columns.......
So P&F is different
Now if support and resistance properly understood is the ALL
It follows that in a real way P&F is the cause and effect chart.
Trading range or trend ......It is Support and Resistance that are the driver.
higher highs & higher lows , lower lows & lower highs
broadening and contracting patterns etc..
Who creates this support and resistance ?
It is created by the interaction and dance between the more and less informed....By Smart Money
By the "Composite Operator" ( Wyckoff term which means all those things )
Sure .... The P&F can have different Box size... But that is only a change in degree of magnitudes, of resolution, of the scale of support and resistance.
The columns will be still drawn from this dance that matters , unfolding in its own time..........
The old proviso was "with the noise across the buy sell spread removed" .
P&F fell into disuse because software could not draw it as well as bar charts
and people forgot what it was that made it special and saw it as a sort of deformed bar chart..
P&F chart is 100% adaptive ...Columns never change with an arbitrary tic of volume, range or time........
100% adaptive to support and resistance .
To the actions of the "Composite Operator".........
OK , But when the volume comes in at a particular time ? Then ( and all along in coordination ) The CTB chart reveals the effort and result at that particular time ...
I am not saying P&F charts are more important .. Just that they are different.
Being different They can inform and qualify the other types of charts.
The P&F chart will always be moving differently...
motorway
Very interesting Motorway, your depth of knowledge constantly amazes me.
As you know I've been spending a bit of time working on getting a better understanding of P&F charts, and as I get more familiar with them and come to understand more of your posts about P&F charts I'm constantly amazed at how powerful a tool they can be.
Thanks for sharing your knowledge.
As you know I've been spending a bit of time working on getting a better understanding of P&F charts, and as I get more familiar with them and come to understand more of your posts about P&F charts I'm constantly amazed at how powerful a tool they can be.
Thanks for sharing your knowledge.
Cobweb theory was developed from observations of cycles in prices of Pigs and Grain ( hog cycle ) in the 1930's
Role of expectations
One reason to believe this model's predictions is its assumption that investors are extremely shortsighted; they are fundamentally unable to judge market conditions or learn from their pricing mistakes that result in boom/bust cycles. In other words, investors in this model have adaptive expectations, which react in a fixed way to past observations, rather than rational expectations, i.e. expectations consistent with the actual structure of the economy. The cobweb model serves as one of the best examples of why expectation formation is so important for economic dynamics, and therefore so controversial in recent economic theory.
From Agriculture to the stock market eg
Predicting Turning Points With Cobweb Theory by Chris Satchwell, Ph.D.
Copyright (Economics plays a role in the markets. Here’s how the
underlying premise of point & figure theory is consistent with
the tenets of cobweb theory.)
The first quote questions if Farmers are shortsighted enough
My adjustment suggests that traders and investors ( or at least a major subset ) Are.........Weak hands
If You ever think you know more about something than everyone else
If you ever think you are the smart money ...Stop Trading
Never Buck Trends at an extreme... You would never buy what someone would sell
never sell what someone would buy ( at least on the stock market)..Call it the Groucho Marx investment method... Of course if You can trade in harmony with trends ?
Then You are not joining or even fading the crowd caught in the cobweb...But aligning with the real Smart Money the ...Composite Operator...
OK our markets are "Double Auctions" So there is a losers curse......
Someone buys at the highest tic
Someone sells at the lowest tic .....On moves of all sizes
Out of harmony...........However someone must have done the opposite..
So watch the reaction... Where are those half ways points
After a SOS is there a LPS ... After a SOW is there a LPSY
Identify real ( as in effective ) SUPPORT and RESISTANCE
In this type of market........How important then to uses charts
And to measure.
Once a market is full of speculators
Then having enough shortsightedness in not a problem
And smart money should standout a mile high...
Back to the charts
motorway
IFocus
You are arguing with a Galah
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Unfortunately I remember a time that some one was me LOL
Focus
Timmy
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Focus, its all of us at some time or another...
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motorway,
That's the first I have heard of Cobweb theory but from what I can gather it fits with my understanding/observation of market dynamics.
For those who might not be familiar with economics : adverse selection is a one brand of market failure characterised by an information asymmetery between buyers and sellers.
The textbook example of this phenomenon is the insurance industry - the insurer (seller) offers a product to the market (insurance policy) at a particular price with the expectation that each potential buyer is statistically the same. The result: those who anticipate consuming the insured service the most (ie. health care) buy the insurance policy, while those who expect to need the insurance the least don't. In effect, you attract the lemons.
Of course the insurer is able to discriminate potential customers by analyising individual characteristics - much more difficult to differentiate between traders since each buyer / seller is essentially identical.
That's the first I have heard of Cobweb theory but from what I can gather it fits with my understanding/observation of market dynamics.
For those who might not be familiar with economics : adverse selection is a one brand of market failure characterised by an information asymmetery between buyers and sellers.
The textbook example of this phenomenon is the insurance industry - the insurer (seller) offers a product to the market (insurance policy) at a particular price with the expectation that each potential buyer is statistically the same. The result: those who anticipate consuming the insured service the most (ie. health care) buy the insurance policy, while those who expect to need the insurance the least don't. In effect, you attract the lemons.
Of course the insurer is able to discriminate potential customers by analyising individual characteristics - much more difficult to differentiate between traders since each buyer / seller is essentially identical.
And If there is asymmetric information
and if there is smart money
Then where that edge is to be found becomes clear ?
It is using ( new analysis technologies ? ) analysis to identify the actions of that smart money and then ( working with the Composite Operator ) keeping in harmony.
Rather then worry about the public either trying to fade or follow..
If there is no smart money at best there is only a cobweb of moves.
mere appearances that can be profitable but will often ensnare..
Because it is just a following of nothing... I buy/sell because you buy/sell because I buy/sell...........
motorway
and if there is smart money
Then where that edge is to be found becomes clear ?
It is using ( new analysis technologies ? ) analysis to identify the actions of that smart money and then ( working with the Composite Operator ) keeping in harmony.
Rather then worry about the public either trying to fade or follow..
If there is no smart money at best there is only a cobweb of moves.
mere appearances that can be profitable but will often ensnare..
Because it is just a following of nothing... I buy/sell because you buy/sell because I buy/sell...........
motorway
Timmy
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I started this thread to get some feedback and ideas about the value or otherwise of some of the new methods of presenting market-generated data (price and volume basically). Constant volume bars, constant range bars, change bars, then breaking up the volume into "aggressive" buy and sell elements.
I have summarised what, for me, are the most significant points. Some of these points may seem obvious, and indeed some of them are(!), but stating or re-stating them is valuable to me, so I have.
I have only summarised the first 1.5 pages (approximately), it is going to take me a bit longer to assimilate the next 1.5 pages (so far). It is basically up to where Motorway has started talking about some of the theories of market imperfection and how they relate to the use of TA.
Thanks to all contributors so far, this has been very valuable to me, let's hope it can continue.
--------------
MW:
The market reality is non linear by the way.... It DOES not have a fixed speed ... The old tickers sometimes went silent and sometimes could not keep up ...What matters happens at only particular times critical junctures
"turning points" of price volume and time....That happen before the new trends emerge
I once charted the same data as tick bars Volume bars and range bars
They tended to look not much different than P&F charts
And bought with them a negative characteristic that hid what is a
peculiar characteristic of P&F that is it's most useful
(It is not in the quote above but follows from it )
Why use these types of charts (P&F) ?
To better define position
To qualify the movement seen on a normal bar chart.
It is trend-lines that are esp different for example
On the bar chart it might only be the time axis that causes the break
or builds a base.
Here is an important difference... The P&F chart is not forced to move sideways
It could be a continuous vertical column that simply pauses and resumes
This is what makes the congestion on a P&F chart significant ..
And for example trend line breaks significant..
Sideways is significant because moving sideways does not just follow naturally. It is not a given.... Something real ( that will have an effect ) makes the chart move sideways....
-----------
TechA:
Time is still an important factor for me. It allows me to have some idea when a short term move I'm trading is likely to complete.
While not entirely accurate I know wether a move is shaping up as it should or stalling.
Just anther aspect of the analysis.
Very fast moves normally indicate a fast and sharp correction to the mean.
The central core I believe.
(1) Aggressive buyers/Sellers little/no increase in range (Either buying or selling climax)
(2) Increase in range no aggressive buyers or sellers ( look for a slowing/stop to the move)
--------------------
J:
In my opinion, TIME is an arbitary division of price: price is not dictated by time, but rather by volume. The quantities that are demanded and supplied by market participants faciliate shifts in equilibrium or demand/supply balance.
Assessment of market 'imperfection' allow us to draw conclusions about the stability of shifts in market price. 'Perfect competition' describes a market where no individual buyer or seller is able to influence market price: of course this situation is a purely theoretical - all markets resemble imperfect competition to some degree. Imperfection is characterised by liquidity, depth, market impact, etc.
--------------------
MW:
identifying support and resistance is one of the most important things to do .
Momentum then is an important measure of the changes in support and resistance .....These changes allow one to anticipate and confirm ..
momentum ( and volume ) reveal how supportive and how resistive
Buying pressure and selling pressure are and how they are changing..
The actual levels that they become active reveal demand and supply unfolding ( trends )
------------------------------------------------------------
I have summarised what, for me, are the most significant points. Some of these points may seem obvious, and indeed some of them are(!), but stating or re-stating them is valuable to me, so I have.
I have only summarised the first 1.5 pages (approximately), it is going to take me a bit longer to assimilate the next 1.5 pages (so far). It is basically up to where Motorway has started talking about some of the theories of market imperfection and how they relate to the use of TA.
Thanks to all contributors so far, this has been very valuable to me, let's hope it can continue.
--------------
MW:
The market reality is non linear by the way.... It DOES not have a fixed speed ... The old tickers sometimes went silent and sometimes could not keep up ...What matters happens at only particular times critical junctures
"turning points" of price volume and time....That happen before the new trends emerge
I once charted the same data as tick bars Volume bars and range bars
They tended to look not much different than P&F charts
And bought with them a negative characteristic that hid what is a
peculiar characteristic of P&F that is it's most useful
(It is not in the quote above but follows from it )
Why use these types of charts (P&F) ?
To better define position
To qualify the movement seen on a normal bar chart.
It is trend-lines that are esp different for example
On the bar chart it might only be the time axis that causes the break
or builds a base.
Here is an important difference... The P&F chart is not forced to move sideways
It could be a continuous vertical column that simply pauses and resumes
This is what makes the congestion on a P&F chart significant ..
And for example trend line breaks significant..
Sideways is significant because moving sideways does not just follow naturally. It is not a given.... Something real ( that will have an effect ) makes the chart move sideways....
-----------
TechA:
Time is still an important factor for me. It allows me to have some idea when a short term move I'm trading is likely to complete.
While not entirely accurate I know wether a move is shaping up as it should or stalling.
Just anther aspect of the analysis.
Very fast moves normally indicate a fast and sharp correction to the mean.
The central core I believe.
(1) Aggressive buyers/Sellers little/no increase in range (Either buying or selling climax)
(2) Increase in range no aggressive buyers or sellers ( look for a slowing/stop to the move)
--------------------
J:
In my opinion, TIME is an arbitary division of price: price is not dictated by time, but rather by volume. The quantities that are demanded and supplied by market participants faciliate shifts in equilibrium or demand/supply balance.
Assessment of market 'imperfection' allow us to draw conclusions about the stability of shifts in market price. 'Perfect competition' describes a market where no individual buyer or seller is able to influence market price: of course this situation is a purely theoretical - all markets resemble imperfect competition to some degree. Imperfection is characterised by liquidity, depth, market impact, etc.
--------------------
MW:
identifying support and resistance is one of the most important things to do .
Momentum then is an important measure of the changes in support and resistance .....These changes allow one to anticipate and confirm ..
momentum ( and volume ) reveal how supportive and how resistive
Buying pressure and selling pressure are and how they are changing..
The actual levels that they become active reveal demand and supply unfolding ( trends )
------------------------------------------------------------
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motorway,
could you elaborate on the application of this form of supply/demand analysis to trading?
could you elaborate on the application of this form of supply/demand analysis to trading?
Everything in general ?
Something in particular ?
The general theme of elaboration ?
motorway
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maybe a recent trade set up that incorporates a number of the elements you've discussed in this thread ?
Timmy
white swans need love too
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As I said in my most recent post I am still assimilating in my mind all this stuff about market imperfections and its applicability to trading - Cobwebs, adverse selection, and so on. I think it is going to take me a while, but in the meantime I will continue to focus on support & resistance, momentum, understanding "the wave" and where we are in it - I suppose technical analysis, as I see it, as it can be applied to trading.
What can the charts - be they time-based OHLC/candles, non time-based OHLC/candles, P&F, volume delta - tell me about S&R, momentum, the wave?
If I may be so bold, this is the track I would suggest we continue to focus on in this thread, should it indeed continue to attract interest, with an emphasis on the "newer" forms of presentation of the price and volume data - volume, range, change, footprint, volume delta charts, while certainly not excluding time-based OHLC/candles and P&F. I think the thread needs re-focusing, anyone who wishes to post about using these newer forms of analysis, be it a question, a comment, a chart, a trade, will contribute to this refocus and to our store of knowledge about these new analysis techniques.
What can the charts - be they time-based OHLC/candles, non time-based OHLC/candles, P&F, volume delta - tell me about S&R, momentum, the wave?
If I may be so bold, this is the track I would suggest we continue to focus on in this thread, should it indeed continue to attract interest, with an emphasis on the "newer" forms of presentation of the price and volume data - volume, range, change, footprint, volume delta charts, while certainly not excluding time-based OHLC/candles and P&F. I think the thread needs re-focusing, anyone who wishes to post about using these newer forms of analysis, be it a question, a comment, a chart, a trade, will contribute to this refocus and to our store of knowledge about these new analysis techniques.
Tim .. Yes it probably has drifted
But they are all ways of looking at support and resistance
I like to start from principles...
eg Why is there support and resistance ?
trading range How the hell do you get a trading range
what does it mean when you have one etc
Tim .. There is price, volume time...We want to see changes in behavior that herald a change in the subsequent wave... This is how We get into harmony
looking at the yin in the yang........
So all those charts could help
Julius.....Most of my posts on the forum have been circling around the main issue ( as I see it )
If you want to see a stock that is displaying
adverse selection.. a cobweb etc ( They are only other ways of looking at Wyckoff insights by the way ) and slowly coming under the sway of the CO ..
Have a look at MCU....
How far to markup ?...
Tim what is the best way to chart changes in behavior of price volume time
( That is what will pick up changes in the relationship of these primary yardsticks of demand and supply ? )
VSA is often presented as focusing on high volume
But where is the real hinge ?
( think of a door swinging on a hinge ... The high volume everyone notices is the far edge of the door.. where the violent move is.. The swing that hits you .. the swing that bangs.. none of it happens with out the hinge. At the hinge is relative stillness... On the chart it is where the volume isn't.. it is the little move in the wrong direction that leads the way )
MCU is a similar chart to BPT
but maybe all the charts are the same
DYOR
motorway
But they are all ways of looking at support and resistance
I like to start from principles...
eg Why is there support and resistance ?
trading range How the hell do you get a trading range
what does it mean when you have one etc
Tim .. There is price, volume time...We want to see changes in behavior that herald a change in the subsequent wave... This is how We get into harmony
looking at the yin in the yang........
So all those charts could help
Julius.....Most of my posts on the forum have been circling around the main issue ( as I see it )
If you want to see a stock that is displaying
adverse selection.. a cobweb etc ( They are only other ways of looking at Wyckoff insights by the way ) and slowly coming under the sway of the CO ..
Have a look at MCU....
How far to markup ?...
Tim what is the best way to chart changes in behavior of price volume time
( That is what will pick up changes in the relationship of these primary yardsticks of demand and supply ? )
VSA is often presented as focusing on high volume
But where is the real hinge ?
( think of a door swinging on a hinge ... The high volume everyone notices is the far edge of the door.. where the violent move is.. The swing that hits you .. the swing that bangs.. none of it happens with out the hinge. At the hinge is relative stillness... On the chart it is where the volume isn't.. it is the little move in the wrong direction that leads the way )
MCU is a similar chart to BPT
but maybe all the charts are the same
DYOR
motorway
Trading ranges = prices caught in a cobweb
Adverse selection = seen at the edge
winners and losers curse = seen at the points of reversal
Some important things marked by lines
arrows and one count...
non linear chart
periodicity through what ?
ratio of what to what ( vertical - horizontal )
speed of what ?
non linear chart... dissolves time frames.. trade magnitudes
non linear bar charts...have come about in part because not many softwares can draw non bar charts well ( eg P&F )
They scale them like bar charts
congestion
speed
ratio
motorway
Timmy
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Hi Motorway
Let me start at the start…
That chart shows a 0.025 x 1, so 2.5 cent box and 1 box reversal, just as an aside there are only “X” and no “O”, haven’t seen a P&F without the “O”.
There is an explanation of “Cobweb theory and diagram” as it applies to economics on YouTube (I am glad I have finally found a use for YouTube beyond watching funny cats and music videos…), There is also a video on Adverse Selection, but the presentation of the visual is appalling.
The red lines you have marked are all at 45 degrees (and 135 degrees for the pedants) – the numerous lines through the big congestion (basically the entire width of the chart example), how would these be used?
The red arrow (left of chart) shows the highest point and reversal.
The blue arrow shows the lowest point on the chart and reversal.
Given it’s a P&F chart, non-linear, a reversal can only occur through supply/demand, or buying/selling, changes. Periodicity (bar – in this case column - interval) is derived from change in direction, not time. All the way through the chart there are changes in the buy/sell or supply/demand pressure; there is no sustained directional move arising from this congestion area - yet.
The blue writing 0.975, what does this refer too, and why it is where it is?
There is no volume on the chart, would you include volume on a P&F? Would adding volume aid in assessing if this congestion is accumulation or distribution, or is it assessable from the price moves alone?
Given this share is in a range for the area presented on this chart, would you be trading it or waiting for a trend to develop out of this congestion?
Let me start at the start…
That chart shows a 0.025 x 1, so 2.5 cent box and 1 box reversal, just as an aside there are only “X” and no “O”, haven’t seen a P&F without the “O”.
There is an explanation of “Cobweb theory and diagram” as it applies to economics on YouTube (I am glad I have finally found a use for YouTube beyond watching funny cats and music videos…), There is also a video on Adverse Selection, but the presentation of the visual is appalling.
The red lines you have marked are all at 45 degrees (and 135 degrees for the pedants) – the numerous lines through the big congestion (basically the entire width of the chart example), how would these be used?
The red arrow (left of chart) shows the highest point and reversal.
The blue arrow shows the lowest point on the chart and reversal.
Given it’s a P&F chart, non-linear, a reversal can only occur through supply/demand, or buying/selling, changes. Periodicity (bar – in this case column - interval) is derived from change in direction, not time. All the way through the chart there are changes in the buy/sell or supply/demand pressure; there is no sustained directional move arising from this congestion area - yet.
The blue writing 0.975, what does this refer too, and why it is where it is?
There is no volume on the chart, would you include volume on a P&F? Would adding volume aid in assessing if this congestion is accumulation or distribution, or is it assessable from the price moves alone?
Given this share is in a range for the area presented on this chart, would you be trading it or waiting for a trend to develop out of this congestion?
Timmy
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Motorway - I am preparing a post with some questions/comments/random thoughts etc. which compares the P&F with a Constant Volume chart, both at roughly the same scale, or at least both trying to represent the same thing.
I am chuckling as I type because I keep trying to talk about these new techniques and you keep on coming back to the P&F, which is interesting because although the P&F is a very old technique it will be new to many people brought up solely on OHLC with P&F barely registering as an alternative, if at all. I am here to learn and your postings on the P&F are forcing me to do just that - thanks a lot for the postings!
Anyway, new post coming soon comparing and conciliating P&F with CV bars.
I am chuckling as I type because I keep trying to talk about these new techniques and you keep on coming back to the P&F, which is interesting because although the P&F is a very old technique it will be new to many people brought up solely on OHLC with P&F barely registering as an alternative, if at all. I am here to learn and your postings on the P&F are forcing me to do just that - thanks a lot for the postings!
Anyway, new post coming soon comparing and conciliating P&F with CV bars.
