[jperl]

Originally Posted by n123 »

According to this, and the fact that we can create bars in infinitely many ways (5 seconds bar, 7 seconds bar, or 23.5 seconds bar... etc.) can we say that in fact every price can be a HUP?

Well, I wouldn't say every price, but I would agree that you will find HUP on every time scale. In fact if you look at a 5sec chart, you will see this to be the case.

Originally Posted by n123 »

Then... here can we say that any point from SD1 to SD3 are possible entry points as we can expect price to move at least one SD from there? So SD1.3 SD 1.7 SD 2.4 all work?

On the time scale that you are trading, your expectation should be that upon entry, what ever price that is, price action should move the market plus or minus one standard deviation. So let's say you enter the market at SD1.3 in your terminology. Your expectation as a minimum should be that price will either move to SD0.3 or SD2.3.

[atto]

I'm just as casual observer, as I don't personally trade this way, though I do have a decently strong background in math and statistics. However, I've had a lot of the same thoughts n123 is having regarding this methodology. Thanks for entertaining us

Originally Posted by jperl »

On the time scale that you are trading, your expectation should be that upon entry, what ever price that is, price action should move the market plus or minus one standard deviation.

Why is this? If 1SD has no intrinsic significance besides a measure of volatility -- that is, there's nothing super special about 1SD vs 1.3SD vs 3SD, outside of different degrees of volatility -- why should we "expect" price to move 1SD from entry? There aren't a ton of people trading this way, so it's not a self fulfilling prophecy. Therefore, if the method's valid (which I trust that it is), there has to be some other truth or reason as to why markets move in 1SD increments. Is it just some (unexplainable?) bias markets have?

Also, if pretty much any price could be a HUP (which seems to be the case, since we could be entering at 1SD, 1.3SD, 2SD, 4SD, etc), especially when you consider all the timeframes, why would the market respect 1SD movements from there?

[jperl]

Originally Posted by atto »

If 1SD has no intrinsic significance besides a measure of volatility -- that is, there's nothing super special about 1SD vs 1.3SD vs 3SD, outside of different degrees of volatility -- why should we "expect" price to move 1SD from entry?

Atto, I think perhaps you have answered your own question. The computed standard deviation IS the volatility. Moreover, as I believe I pointed out in thread IV, when computed with respect to the VWAP it represents the smallest standard deviation possible for the data.
For example let's say the standard deviation is 10 ticks. This represents the data volatility. When you enter a trade, regardless of what the price is, you should expect the price to move at least 10 ticks. What of course you don't know, is whether it will move up 10 ticks or down 10 ticks and whether it will do so in a linear fashion. It may move up 5 ticks and then move down 10 ticks. The point is you shouldn't expect the market to move say 20 ticks after your entry.

[atto]

Originally Posted by jperl »

Atto, I think perhaps you have answered your own question. The computed standard deviation IS the volatility. Moreover, as I believe I pointed out in thread IV, when computed with respect to the VWAP it represents the smallest standard deviation possible for the data.
For example let's say the standard deviation is 10 ticks. This represents the data volatility. When you enter a trade, regardless of what the price is, you should expect the price to move at least 10 ticks. What of course you don't know, is whether it will move up 10 ticks or down 10 ticks and whether it will do so in a linear fashion. It may move up 5 ticks and then move down 10 ticks. The point is you shouldn't expect the market to move say 20 ticks after your entry.

Thanks. This is actually exactly the thing I'm asking. Why would the market move 1SD? In statistics, that's just an easy way to reference dispersion, which in a normal distribution, represents around 68.2% of all data around the mean. Besides this artificial construct, it has no significance in itself. In other words, in markets, what's special about 1SD?

For example, let's assume this presents an edge in trading markets (I believe you that it does). However, if we used randomly generated data, there would be no edge. Otherwise, you could devise profitable casino betting schemes based on movements in your P/L in games that have a house edge (and ask any statistician if this is possible).

So, for there to be a market edge, there has to be reason that markets tend to move in 1SD increments (even if the reason is: they just do, we have no idea why). Here's several charts of data. Some is randomly generated, some is market generated. All edges fail on randomly generated data, but if valid, generate an average profit on market generated data. The question I'm getting at is: Why does the market data provide an edge, where the random data does not?

Solution key, use Rot13 to decode:

enaqbz: bar, gjb, sbhe
znexrg: guerr, svir

[BlowFish]

Do we know random data does not provide an edge? What about random price & volume data? (As an aside it is usually really easy to spot random data when random volume is included).

I think the answer may lie in how markets behave. Accumulation / balance / congestion followed by trend / range extension / mark up? Basically the stuff that makes market data not random.

[atto]

Originally Posted by BlowFish »

Do we know random data does not provide an edge? What about random price & volume data? (As an aside it is usually really easy to spot random data when random volume is included).

Yes, we actually do. This is probably outside of the scope of this thread, so respecting jperl's work, it might be smarter to open a new thread for that.

Originally Posted by BlowFish »

I think the answer may lie in how markets behave. Accumulation / balance / congestion followed by trend / range extension / mark up? Basically the stuff that makes market data not random.

Exactly. That is why Auction Market Theory, support / resistance, etc works. People create markets, and people leave behind biases at times.

[jperl]

Originally Posted by atto »

Thanks. This is actually exactly the thing I'm asking. Why would the market move 1SD?
So, for there to be a market edge, there has to be reason that markets tend to move in 1SD increments (even if the reason is: they just do, we have no idea why).

That is my thesis for the threads Atto. If you know the standard deviation, you know what to expect for the market movement. Is this an edge? I don't think so, since you don't know a) when the market will make this move and b)you don't know market direction on the move. You would have to have some additional info to make a decision.

[firstnatt]

The skewness is 2nd distribution and kurtosis is third . Value of -+0.847 represents symetric distribution.
I have skewness v1 indicator for metatrader , and market statistics v4, which are great,
but if someone will be so nice to provide kurtosis indicator and perhaps more advanced
skewness indicator.