One theory I am testing out

[Soultrader]

Im testing out a trading setup based on market understanding.

We had a wide value area today for 64 points. Now combining this information with the fact that we had a %TREND of 60.78% yesterday, I am interested in finding out the percentage of time the markets will remain inside of value.

Today the markets chopped around all over the place inside value. This seems to occur alot after a nice trend day with a wide value area.

The markets did provide good long opportunities from the value low pivot but it spend some time trending in between VAH and VAL respecting the daily pivot a number of times.

This analysis will be continued....

[carter]

I see the concept, but how would you create a trading setup based on it?

[Soultrader]

Im still trying to devise one actually. It would make more sense to me if the markets tested the lower and upper extreme of value. I am still trying to figure out a method to understand why prices hover in between. Notice how the daily pivot was pretty much in the middle of the two value pivots.

Perhaps I can set a target at the daily pivot when this happens instead of trying to ride it out towards the other extreme. I will keep you posted if I find anything insightful.

[Follow The Trend]

Is this not just an example of markets being over bought and over sold, but just over a very very short timescale?

Maybe you could incorporate an RSI (Relative Strength Index) into your new theory?

Then maybe compare the market movement, to the trend / shifts in the other major worldwide markets?

[Soultrader]

I just don't like the concept of overbought or oversold. I dont believe any market should be considered "overbought/oversold". Its a reallly bad way of putting things.

Im still trying to organize my thoughts on this one... been testing out some strategies but none seem to make any sense yet. Will keep you posted.

[Trade Up]

Perhaps another way to describe "overbought" and "oversold" would be relative strength?

Relative strength against the market / sector, etc is an easily definable variable. It can also be a very useful indicator, especially for the short term trader.

The beauty about markets is that no matter how hard we try to track and predict movements, we can never be sure. That is why we all enjoy the challenge that the "market" offers.

Its every Trader against the market!!

[Soultrader]

Yea.. relative strength may be better. Different sectors tend to be laggers or leaders depending on the current economical cycle.

Indexes also tends to lead one another. FTT, are you familar with intermarket analysis? If so, would love to hear your opinion on the global markets.