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Thanks
Carl, I have been experimenting with your sq of nine method and it is
working fantastic. using it I hit the low yesterday and the high so far today.
The one question I have is how can you tell when the trend has reversed.
Obviously one of these extremes will be taken out. Now I can combine these
targets w/ other techniques like a retest or Elliott ect. to define the trend
but are there "rules" or suggestions on how or if the sq of nine method by
itself can be used to define a reversal of trend. From what little I have read
that a reversal is more likely at a point found on the cardinal cross from the
previous price extreme. Is this correct and any other suggestions. Also have you
ever seen or done any studies tying the sq of nine in with elliott waves. For
example the rally today which may have been a wave 4 went a 1/4 rotation off the
low. Is this typical?? Lastly do you think that the lows yesterday will be
set in stone as is, retested or significantly broken (if so next
target??)
<FONT face=Arial color=#0000ff
size=2>
Thanks
for all your insights as they are helping me pull a bunch of methods together
and has helped my trading considerable.
<FONT face=Tahoma
size=2>-----Original Message-----From: topos8
[mailto:topos8@xxxxxxx]Sent: Thursday, January 17, 2002 1:52
PMTo: realtraders@xxxxxxxxxxxxxxxSubject: [RT] Price
Distributions and Market ProfilesI'd like to comment
on market profiles, price distributions and their utility in practical
trading situations.The Market Profile was invented by Pete Steidlmayer
(a very successful trader on the CBOT) in the early 1980's.
Steidlmayer told me once that when he first got started trading (in the
late 60's) he learned to evaluate the market's condition in terms of these
profiles. So the idea goes back (at least for him) to the
60's.The basic idea is that most of the activity during a trading day
takes place in what Steidlmayer called the day's "value area". The
center point of the value are can be thought of as the "fair price"
which the market has "discovered" for the day.One very important
point to remember here is that some days do NOT have value areas. There is
no "fair price" or central tendency for the day. The days which lack a
value area are typically wide range days on which the market shows a
strong, day-long trend in one direction. Occasionally days without a value
area are wide-range days on which the market pulls a "U-turn" in the
middle of the session and then develops a strong trend in the opposite
direction for the rest of the day. Once one has learned to
identify days which have a value area, Steidlymayer's main axiom is that
the trend of the market is just the trend (if any) exhibited by successive
value areas. My observation is that in most trends the market will show
occasional days with value areas moving opposite to the underlying value
area trend, but rarely will this happen on two successive days.
The value trend is important. Steidlymayer liked to observe that
all the good traders he knew traded value, not price. In other
words, traders who thought in terms of value areas were happy to fade
reactions against the trend which carried back to or below some
prviously established value area. They were the opposite of trend
followers. One would often observe these value traders fading
breakouts in appropriate situations rather than going with them.Of
course it is helpful if one can learn to anticipate the end of a value
trend in one direction and the emergence of a new one in the opposite
direction. One approach to this is to look at the market's value areas
in longer time frames, e.g. weekly or monthly. I personally have
found this quite helpful and simple to do.Another idea that works
in all time frames is to look for what Steidlmayer called price "excesses"
or "rejections". He always said that the single most effective
trading idea is to trade in the direction of the most recent
excess.Price rejections or excesses typically take one of three forms.
The most common and visible is what I call the false breakout
excess. This happens when the market breaks past a previously
defined high or low, but not by too much and then runs rapidly in the
direction opposite to the breakout. The second form of rejection
is the V or U top or bottom - the market has a fast move in one direction,
then another equally fast or faster move in the opposite direction (in the
case of the U reversal these two moves are separated by a period of dull
or narrow ranges). The last form of rejection doesn't occur at the
extreme, but takes the form of an obvious acceleration in the trend away
from a recently established extreme. I typically use
unusually wide range bars to recognize these three types of rejections.
Most, thought not all, trends begin with a
rejection.CarlTo
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