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Hello all,
<P>I am interested in day trading stock index futures, and I am wondering
if there are any day traders out there who share my views on market analysis
and use them to trade the s&p intraday. Here goes:
<P>There is only one type of technical analysis that interests me in the
slightest, and that is any type of analysis that attempts to actually measure
the amount of buying and selling taking place in a
<BR>given market. I refer to this as "cause based technical analysis",
because it attempts to analyse the <I>cause </I>of price movement, rather
than measure the <I>sypmtom</I>, i.e. price action itself. In a way,
it is a
<BR>perfect balance between technical and fundamental analysis -- fundamental
analysis relies on the underlying supply/demand factors which really effect
price, while a lot of tech. analysis only looks at actual price movement.
The type of analysis I am talking about uses technical indicators to measure
supply/demand. I was first introduced to this type of analysis in
Larry Williams' "the Secret of Selecting Stocks..." and his accumulation/distribution
indicator.
<P>Anyhow, the stock market is obviously the one market which differs from
most markets in this regard, in the sense that there are an abundance of
indicators to measure sentiment and buying/selling, such as:
<P>advancing/declining issues
<BR>advancing/declining volume
<BR>new highs/new lows
<BR>option premium ratio
<BR>put/call volume ratio
<BR>odd lot short sale ratio
<BR>tick index
<BR>public/specialist short sale ratio
<BR>etc.
<P>What I am trying to get at here is that it is possible to measure supply/demand
and hopefully forecast price through other indices, rather than trying
to use past price action to predict future price action (such as is the
case with moving averages, momentum, etc.). Many people say that
technical analysis is useless because of the ever changing nature of the
markets, however, one thing that never has changed and never will is that
buying and selling moves prices, and if you can accurately measure it,
then you'll be ahead of the game.
<P>Some of Dennis Meyers' systems are really good examples of the type
of analysis I am talking about, but these are all long term systems.
So my question is, are there any day traders out there who are using this
type of analysis in their trading, and if so, how well is it working?
<P>Thanx,
<P>Dave
<P>P.S. This is not meant as an attack on price based indicators or people
who use them -- if you can use these successfully, I say more power to
you!</HTML>
</x-html>From ???@??? Sun Dec 28 09:00:53 1997
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Date: Sun, 28 Dec 1997 09:59:16 -0400
From: "A.J. Carisse" <carisse@xxxxxxxxxxx>
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Subject: Re: Cause based trading
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Status:
mr_bond@xxxxxx wrote:
> There is only one type of technical analysis that interests me in the
> slightest, and that is any type of analysis that attempts to actually
> measure the amount of buying and selling taking place in a
> given market. I refer to this as "cause based technical analysis",
> because it attempts to analyse the cause of price movement, rather
> than measure the sypmtom, i.e. price action itself.
I don't trade futures, but I don't think there is any fundamental
difference in instruments in this regard. The cause of price action is,
of course, *buying and selling* (for whatever reason), and any inquiry
into "fundamentals" is only relevant to the degree that it is being used
as an impetus. However, most fundamental data is at best tangentially
related to an instrument's value. Price action isn't a symptom, it is
the event itself. Your reasoning assumes that it is a function of
"fundamental" factors, which in the short term isn't really the case.
I'm not saying this data is useless, but it must be kept in proper
perspective. To paraphrase a friend, the only analysts I'm really
interested in is the ones who are putting real money on the table.
> In a way, it is a
> perfect balance between technical and fundamental analysis --
> fundamental analysis relies on the underlying supply/demand factors
> which really effect price, while a lot of tech. analysis only looks at
> actual price movement.
What are the *real* factors affecting supply and demand? In the long
term, fundamental analysis will obviously be a factor, since you are to
a large degree engaged in predicting fundamental health. However, there
are numerous factors affecting s/d in the short run, not the least of
which is price. In this sense, technical evaluation is to a degree
self-perpetuating (e.g. a certain pattern causing buying or selling
among those using a popular study). In any case, the task of the trader
is to predict future *price* movement, and if certain fundamental
patterns end up being highly correlated, then it would be wise to heed
them. However, purely technical patterns still are the most accurate,
and more importantly, most simple means of deciding the odds on a given
play.
> What I am trying to get at here is that it is possible to measure
> supply/demand and hopefully forecast price through other indices,
> rather than trying to use past price action to predict future price
> action (such as is the case with moving averages, momentum, etc.).
I suppose so, yet I don't think this would *substitute*
> Many people say that technical analysis is useless because of the ever
> changing nature of the markets, however, one thing that never has
> changed and never will is that buying and selling moves prices, and if
> you can accurately measure it, then you'll be ahead of the game.
That's what TA is, though. Anyone who would say that TA is useless
obviously does not have any kind of understanding of it. The only way
this would be true is if markets were random, which thankfully is far
from the case.
> So my question is, are there any day traders out there who are using
> this type of analysis in their trading, and if so, how well is it
> working?
Frankly, I wouldn't expect such studies to be of much value in this time
frame, but if you can find something along this line which works, then
it would be worth looking at, at least as a supplemental indicator. It
is important not to clutter the decision-making process excessively,
though.
A.J. Carisse
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