|
PureBytes Links
Trading Reference Links
|
Bill,
I've included a couple of replies directly to your last post.
Bill Eykyn wrote:
> As you trade the Bonds, you will have charts to hand. Look at the last ten
> days of action. The market has traded between a high of 122^22 and a low of
> 120^01 and during that time it has been all over the place! A couple of
> small up days, a large range day, a reverse and reverse again, up, down,
> like a ruddy yoyo!
Yes, but within any timeframe you can discern tendencies. My goal is
to identify the tendencies of the timeframes larger than the one that
I want to trade. In regards to the last 10 days in T-bonds, I would
identify the tendency (trend direction) as upward, but the strength of
that tendency is weak to non-existent, so essentially it is a sideways
market. Within the next larger time frame, I would identify the trend
as down. The strength of that trend is also weak, but a bit stronger
than the trend tendency over the last few days.
> I cannot see how a large time frame indicator is going to help you on the
> intraday trading. And not to take a trade because the intraday movement is
> in the opposite direction of the daily indicator direction, doesn't stack up
> for me. The market may well be going up and the indicator showing this -
> but current swing could well be in the opposite direction.
I consider the larger time frames to have the greater degree of "push"
on the market. If the market is going to start making bigger moves
(which I think it WILL do, due to very low historic volatility levels)
I want to be on the side that has the greater degree of push.
Naturally, trend changes do occur, so one should always trade with
stops just in case a trend change occurs while you're holding a
position, but I just consider that the odds will be in my favor if I'm
on the side that currently has the bigger "push".
As far as the current swing being in the opposite direction of the
larger forces, so what! It just means that I stand aside and wait
until either those forces re-assert themselves, or until the new camp
takes over. Oftentimes that current swing will be THE deciding factor
in the trend change, but I just don't want to participate until its
proven itself. I'm in no hurry. I don't need to trade every day. I'd
just as soon wait until the set-up was just right. It also does
wonders for reducing the anxiety level. To me, trading is oftentimes
a game of patience, ESPECIALLY in a market like T-Bonds, where price
can trend within very narrow ranges for extended periods of time.
Yes, using this tact means that you can potentially miss some big
moves. But that just doesn't bother me. I'd rather trade with the
confidence of having the odds in my favor. As a matter of fact, I try
to avoid having a position open in this market when CPI, PPI, GDP or
Employment numbers are released, precisely because of the big moves
that can often occur. But what I WILL do is watch the action at these
times to see if the trend of the larger time frames are being
confirmed or reversed.
> During the days referred to, the market as a whole would have been moving
> slightly up, then slightly down and then slightly up again. On a broader
> spectrum, it might be considered in overall congestion, at the level
> mentioned. But the intrady action would be dictated by the relevant
> support and resistant points and the need would be to trade between these
> areas, quite regardless of what the daily indicator was saying.
>
> For me, what keeps the probabilities on my side is the price action - not an
> indicator - as it approaches these areas. More often than not (and that is
> the whole point!) it will show you what it is going to do. After that it
> is a question of timing and money management, which is yet another story...
I agree with most of what you have to say here. It seems to me that
we are trading this market in two different timeframes, and that could
well be the crux of our different approaches. Although I prefer not
to hold positions overnight, there are times where my confidence in my
reading of trend is strong enough that I will do it, and I've never
been burned too badly (I can always liquidate it overnight if the
anxiety level gets too high). I prefer to take a position earlier in
the day near a support or resistance level and then target the
liquidation of that position at one of the next levels in my trade
direction. Or sometimes, when I expect an increase in volatility, I'll
use trailing stops.
>From what you've told us, I would imagine that you're working in a
tighter time frame (although this is purely conjecture on my part) and
have developed a way of interpreting price action at a highly
magnified level from the one that I use. I would very much like to
hear about the approach that you use in more detail.
One other comment might be pertinent here. Whenever I use the terms
"trend" or "trend strength" or "change in trend" I do so not in terms
of trying to seek the "true meaning" behind the markets action, but
only in terms of constructing a framework that allows me to interpret
its actions and trade off of that interpretation. Those methods work
for me and the way that I approach the markets. It's part of the total
system or methodology that I use and that fit my comfort level.
Although I freely discuss this framework with others as a means of
gaining feedback, I certainly do not expect anyone else to adopt this
framework in their trading at face value. There's just too many
nuances involved. But, then again, that's what I find so appealing
about trading . . . I can customize it to my own personality and way
of dealing with the world. Few professions offer such freedom without
outside interference. But it is only through exposure to different
ideas that we have the opportunity to grow as traders and find out
what works for us.
So, Bill, tell us in greater detail what works for you.
Bob Hunt
|