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08072007, 12:16 AM  #17  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance the premise of this strategy is that for any nonnormal (skewed) distribution, standard deviation will understate the 'true' volatility. thus, 2 std devs is not as far away as you might first think by the std dev calculation (ie, 2 std devs means something different if the the distribution were instead 'normal'  normally distributed). we have observed many cases where price will not return to VWAP  despite VWAP serving as the 'mean' for the distribution in the std dev calculation. thus, for a skewed distribution  you can kind of think as 1 SD as the 'new mean' (though that term 'mean' probably isn't right  just think of it as a new potential 'pivot' since price might very well not return to the VWAP price)  and price should be expected to rotate between the VWAP and 2 SDs (or more)  the price pivots that are above and below 1 std dev. and if price doesn't do what is expected  then many times you will be exiting since the PVP might have changed  or price will trade down far enough away from VWAP just due to pure volatility to allow you to get out. so skewed distributions are kind of funky  you are using VWAP in the calculation as you would the 'mean'  but it really shouldn't be thought of as the mean. Last edited by Dogpile; 08072007 at 12:21 AM.  

08072007, 12:29 AM  #18  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance
btw, until we figure out the PVP code  I am using a screen like this  call it poor man's PVP  2 windows side by side with font shrunk down to '5' (times new roman)
 

08072007, 12:44 AM  #19  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance
First Dogpile, I'm a total newb. Please don't take anything I say on here as rhetorical. That first part was ment to be funny because it was pretty true as a newb. Does that second part of my response make any sense? I think what you said make sense but would like to know how you would back test such an idea. Quote:
Basically, if you were to start over trading, what would you do??  

08072007, 12:48 AM  #20  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance
I think it would also make sense to make a TS thread for the easylang stuff that is needed to get Jerry's tools into TS. It doesn't make sense for everyone to be doing their own version. Surely, I'm a bit biased here though since I have no clue how to program this stuff, heh.  

08072007, 01:02 AM  #21  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance
Talking about burning out neurons, let me see if I can tackle this one from Dogpile: Quote:
Quote:
Quote:
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Quote:
And once again, the mean for a finite skewed distribution is well defined. The VWAP is as mean as they get. lol
__________________ JERRY I'm going to trade til I'm 100, or die trying  

08072007, 01:26 AM  #22  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance
yes I meant that you shouldn't think that 95% of observations should be within 2 std devs if the distribution is skewed  I should have said that rather than saying 2 std devs is different in its own right. clearly, I am not up to speed on the properties of skewed distributions so this isn't intuitive to me. instead of saying: the premise of this strategy is that for any nonnormal (skewed) distribution, standard deviation will understate the 'true' volatility. is it right to say, the premise of this strategy is that for any nonnormal (skewed) distribution, you would expect far more observations to fall 2 std deviations away from the mean than you would if the distribution were normally distributed. ?? re mean and VWAP  most people used to something like a moving average would expect regression to the mean. but we have stated that this is not necessarily the case with regard to VWAP. thus in this case, 'mean' doesn't mean the same thing as 'mean'  as in 'regression to the mean'.... or at least, regression to the mean would not be expected until the skew of the distribution changed. on first read of your reply, it looked like I really didn't understand this at all. but now when I think about it  what I said was not technically correct but the trading implications weren't far off  assuming this post here is correct.  

08072007, 01:47 AM  #23  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance Quote:
Here are my NQ charts #1 Enter long at the VWAP 1933.50, exit at 1st SD 1938.25 profit 4.75 pts #2 Enter long at 1st SD 1939.75 exit at 2nd SD 1945.75 profit 6 pts #3 Enter long at 1st SD 1943.75 Scalein at VWAP 1937.25 giving Break even at 1940.50 exit at 1st SD 1944.00 or higher profit 7.00 pts #4 Enter at 1st SD 1945.00, exit at 2nd SD 1952.00 profit 7.00 pts. Total profit for the day 24.75 pts Pretty good I'd say using just simple statistics.
__________________ JERRY I'm going to trade til I'm 100, or die trying Last edited by jperl; 08072007 at 01:49 AM.  

08072007, 01:55 AM  #24  
Re: Trading with Market Statistics VI. Scaling In and Risk Tolerance
nice. yes well today was quite a different setup than July 25th (the day of the video). I could list all the ways it was different but I know you don't really care. I did watch the PVP/VWAP relationship at times today and did factor this in as a slight (long) bias to my thinking  I did make about 10 pts on NQ today. I should have made more but got sidetracked with thinking that the market was going to have a tougher time than it did with all that previous congestion/resistance from last week. Last edited by Dogpile; 08072007 at 02:01 AM.  

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