Reading Charts in Real Time

[thalestrader]

Originally Posted by Gabe2004 I was surprised that Thales brought up indicators when he advocates trading without them but this is his thread and there is no need to be upset. Gabe

Well, I really didn't bring up indicators. I simply showed some charts that showed some of my trades that were several years in the past. The main point of those charts was not the indicators, but that the approach itself, trading the 123's, has endured through bull and bear, through extremes of both low volatility and high volatility.

Best Wishes,

Thales

[daedalus]

^^ I was gonna say I don't think thales ever brought up or advocated indicators... it was the others in this thread like myself that have the desire to lead everyone astray....

[Kiwi]

Marko, the Stockcharts info is misleading you. Typical price is not smoothed. In fact the way it works (doubling the effective move at bar extremes) is almost the opposite of smoothing.

Most of it (SMA and normalizing factor) is smoothed but that is just the background position vs SMA and normalization to the 200 to -200 range. It's smoothing is a "good" thing because it stops the average value (average price) and the current normalization from interfering with the output calculation - they become very near to constants for the calculation.

But the key output, Typical Price (H+L+C) isn't smoothed. It has a near constant subtracted from it (the current sma) and is divided by another near constant (the normalizing factor) but it isn't significantly smoothed by them.

If it was the ma of TP then it would be smoothed (as happens with most indicators). But as it is the impact is that if the close is not at the extreme then if it moves X% it moves CCI by X% over 3 and if its at the extreme it moves CCI by 2*X%/3. So at bar extremes CCI pushes twice as hard as it does "within" the bar. There is some small distortion of this because the normalization and average will "catch up" towards it but that effect is very small.

The lack of smoothing of TP and the multiplying factor at bar extremes is why CCI is jerky while stochs etc with the output price component smoothed are not. That's also why you see people putting up smoothed CCIs - they prefer the smoothed (summarized) version.


Note: despite debating the construction of an indicator I stand by my original recommendation for new traders in this post. FWIW ... anyone who wants to use an indicator should do the work required to really, deeply, understand how they work. The work will probably put you back to PASR with horizontal lines only.

[Marko23]

Originally Posted by Kiwi Marko, the Stockcharts info is misleading you. Typical price is not smoothed... Typical Price (H+L+C) ....

Typical Price is not (H+L+C) as you quote.

Typical Price is (H+L+C)/3 . That is an arithmetic mean value from usual understanding.

Its maximum value is H - (H-L)/3, if C == H .
Its minimum value is L + (H-L)/3, if C == L .

[BlowFish]

Not all indicators are based solely on price data. The ones that tend to still tempt me towards the dark side are ones that are not. For example market delta type indicators or breadth and depth indicators (tick adv/decl etc.) or even statistical type indicators (like VWAP & its standard deviations or volume profiles).

Of course as Tams points out if your are aiming towards automation, data pre processing might well make the task simpler.

As an aside anyone who is interested in automation (or a purely mechanical approach) based entirely on price action should consider a good look at Dunigans' "New Blueprints for Gains in Stocks & Grains" and the "One-Way Formula for Trading in Stocks & Commodities" (available fairly inexpensively as a single publication). Actually it's worthwhile even if simply interested in price action, I particularly like the rigour with which he describes PA. His objective in the second publication is to define a completely mechanical method to trade any instrument simply based on price action as depicted by a chart. You get a good idea of his thought processes and how the method evolved too.

[Kiwi]

With 2 n's Blowfish

Thanks for the reference; its time I looked at it again.

[RichardTodd]

Originally Posted by Marko23 - an indicator merely transforms price action into another picture. This vital information is within the price action, no need to move to another representation

I have never understood why so many people at TL care so much about how I represent my data. Maybe you should also be picking out what clothes I wear, too!

Anyone with significant mathematical experience knows that equivalent representations aren't all computationally equal for a given purpose. Discounting the possibility that human brains have magical powers, I see no reason why this would apply less to human cognition than it does to turing machines. It's easier for me to read clear text than distorted text, for example, even if the pictures are equivalent via an isomorphism. Some representations are just... better for me than others.

Happy holidays.

[Rustie]

I hated yesterday, the worst trading ever. Faked out so many times. I get very confused during these sessions.
Short now at 1.6033

[thalestrader]

Hi Folks,

I'll not be trading again until 2010, but I still like to watch my charts.

Here is the current hourly look of the eurjpy. A little short, probably best managed on the 15 minute, should take price down into the lower support zone represented by the large blue rectangle. Should price indeed find support there, a decent target for a continuation of the rally would be the small rectangle in the vicinity of the 12/11/2009 high.

Please note, this is neither prediction nor anticipation. I am simply having fun.

Best Wishes,

Thales

[Rustie]

Short short lived.. Stopped -15