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Hi Walt,
I remember and still have some of your stuff from the RT list about a year
ago. The thing that spawned my idea of identifying a "20% move within 2"
days from a high/low was what Mark said about system "look ahead" previous
to an entry, telling you one is pending and future determinations of time
and or price for exit of a given entry or move that the system entered.
This may be where those dreaded and shunned subjects of Neural Nets and
Artificial Intelligence programming comes into usefulness.
These conditions would have to exist and be able to be communicated to the
trader for the idea of picking only volitile moves would be possible.
A measure of volatility, perhaps in combination with the increase of volume
and or open interest could signal such a "20%" move before it began. Atleast
this is how I have "empirically observed" them in trading. One of the "old"
methods that I would like to see is the "equi-volume" type chart where the
bar gets fatter as a measure of volume. I suppose a Market Profile type
display, on the horizontal could show this volume measure too.
The other part of the equasion would include Time. When the swing was at
it's end. I have used the retracement of that high or low as verification
that it is in and traded from that, previously.
The idea of swings, I know you have experience in. Any Gann or EW student
knows their value in hind-site. The idea is to make swings work as a
predictive tool. Once that is done, other parts of this puzzel can be worked
on.
Volatility certainly is a part of the equasion, ATR breakouts would also be
part of the confirming information that the move is on it's way. But, you
must know before this has occurred and be in the market for the lowest risk.
Entry as close to the top/bottom and a stop relative to the volatility or
ATR at the time would be, hypothetically, the lowest risk to reward
possible. Particularly if the reward side was a fast, large move!
Lastly and most ignored is intermarket analysis where comparisons of nearby
to farout contracts within the same market, as well as comparitive market
analysis, where other markets are examined to aid in the trading of the
market being traded, could divulge these setups.
Bonds, such as USH8 to USZ6 or USH9 could divulge desparities through
spreads and volume jumping to and from.
S&P and tango/contango to Bonds has been an indicator of one leading the
other until recently. Who knows, Porkbellies could lead the S&P! Anyone ever
looked?
Once on board, other tools would be worth investigating and are already
somewhat known to work. Fibonacci, Gann projections work for both price and
time if you know which one the market is already vibrating or is atune to.
This might have to be determined for each specific market and can change
with time. It can even phase within the specific market, making it appear
that it does not work. I have great faith and no experience in Neural Nets
and AI research for some of these market characteristics. They will
eventually "tune" such a system to work even when the personality of the
market changes, keeping the system working with consistency.
Since I am no system writer, have used a program called Insight and not
Tradestation, I know nothing of how to impliment these strategies, let alone
build systems for non-observing of market, entries and exits.
My Super Charts is limited and so I use a friends TS and his powereditor to
play. Far from the necessary expertise to really "test" such ideas and prove
their workability or folly. Heak I have trouble writing a moving average!
Just poking the pig, seeing how he responds. Sophisticated analysis.
See U
Tom
-----Original Message-----
From: Walt Downs <knight@xxxxxxxxxxxx>
To: Tom <planeacres@xxxxxxxxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Wednesday, February 11, 1998 1:09 PM
Subject: Re: Price vs Move
>Tom wrote:
>>
>> Mark replied:
>> > or sell before a 20% move for the next 2?
>
>> >Here I am! this is me in front of the train. But a train I know well
and.....<snip>
>
>> >Why not mix and match? You could build a system like that.....
>
>
>Mark and Tom,
>
>Interesting post. I have spent quite a bit of time building trading
>models based on these concepts, using the following:
>
>volatility contractions
>ADX contractions
>Proprietary mathematical representations of emotion and psychology.
>
>Building frameworks with these as a starting point, often yields
>reasonably accurate results in predicting breakouts which will quickly
>exceed standard deviations of +3 or -3 the current price.
>
>As you say, the problem is that it's hard to figure out which way
>the freight-train is going to go. :) At first I figured that trading
>with the mid and short-term trend would yield more profitable results.
>Strangely enough, at these times, trend is no help in determining the
>direction of the spike. (Although a trend may reel a counter-trend
>market spike back in.) Rate of change and/or Momentum also yielded
>no advantage.
>
> I believe this is beacause at this point, we are dealing
>with so MANY different technical traders all trying to do things at
>the same time, and there are so many psychological and emotional
>factors at work, direction becomes problematic.
>
>The only entry techniques that I found to be effective, were long
>volatility option straddles or strangles, or just waiting for the
>initial futures breakout to occur, and then piling in on any kind
>of retracement. You'll miss a nice initial move occassionally using the
>later technique, but it's safer (relatively speaking. :) ).
>
>Exit strategies are simple enough:
>
>If Price blows through the nearest major sup/res levels, hold.
>If price stalls at major sup/res levels, exit or take profits.
>If price shows major expansion bars, exit the trade.
>If momentum, ADX, or volatility peak to new highs, exit the trade.
>If Price exceeds 3 standard deviations for 3 days, exit the trade.
>
>That's all I've been able to do with these set-ups so far. :)
>
>Walt Downs
>CIS Trading
>http://cistrader.com
>
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