This is the Market Statistics thread that some of you advanced traders have been waiting for. This is the "how to trade anywhere, anytime" thread otherwise called the "when not to trade thread", but not for NEWBIES. If you are a NEWBIE, back off and read the first ten threads on this topic starting
here.
One of the properties of most markets is the up and down motion that price action displays on virtually all time frames. Some traders call this the market volatility, others call it the natural market rotation. Newbie traders don't like this motion, because when they enter a trade they want the market to continue moving in their direction. Newbies fear volatility. Advanced traders love it. What ever you wish to call it, it is this motion that is tradeable. In the words of Nihabaashi, "To fear volatility is to fear profits".
The main purpose of this thread will be to show how you can use market statistics to determine the most probable times when the market will rotate and when it will not. Once you know this, you can then enter a trade either in the same direction that the market is moving or take a contertrend trade in the opposite direction. If you have read the previous market statistics threads, you already know how to do this. Here I want to start to put this all together in terms of a generalized concept which I call
HUP.
HUP stands for Hold Up Prices. As the name implies,
HUP are those prices where the price action tends to hold up, that is where the market slows down, pauses, then either reverses (read rotates) or continues in the same direction.
There are two kinds of
HUP, static and dynamic. Static
HUP are those prices which are fixed for the day. They don't change with market development. In contrast dynamic
HUP change as the day progresses. As new data is added, dynamic
HUP will readjust to reflect the new data.
Below are some examples of
HUP that can be used in daily trading
STATIC
HUP
Yesterdays High,Low,Close
Overnight High,Low
Any computations based on these
such as classic pivot points
DYNAMIC
HUP
Yesterdays
PVP,VWAP and
SD's
2 day
PVP,
VWAP and
SD's
1 week(5day)
PVP,
VWAP and
SD's
2 week
PVP,
VWAP and
SD's
1 month(4 week)
PVP,
VWAP and
SD's
2 month
PVP,
VWAP and
SD's
1 year
PVP,
VWAP and
SD's
You can of course come up with other examples of
HUP, such as previous bars highs and lows, or 2 day or longer static
HUP, or dynamic
HUP that are in between the ones I have listed. It really doesn't matter. More important is to realize that these
HUP points are prices where the market will tend to hold up.
What
HUP doesn't tell you of course, is how long the market will hold up and/or how far it will continue in the same direction or if it reverses, how large the reversal will be. Getting the direction correct doesn't mean you can sit back and do nothing. You still have to manage the trade.
In the video that follows you will see a 15 second chart with
HUP lines drawn on it..
Green lines are
SD's above a
VWAP. Red lines are
SD's below a
VWAP.
VWAP are dotted blue.
PVP are purple lines
Now watch this video to see where these
HUP lines come from and how the market reacts to them.
ER2HUPlinesOct24