[jperl]

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

[BlowFish]

Thank you!

[darthtrader]

excellent. I went and looked more at ensign after this, I see why you use it now. Thats really cool how it works with the previous time frame chart data.

Are you able to backfill data for the monthly/yearly vwap/pvp with IB/ensign?
I was thinking I would need software that can archive data and then get one of those new terrabyte drives but it seems I've made this much more complex than need be.

I found this on their site
http://ensign.editme.com/StdDev
Have they pretty much knocked off this stuff that I wouldn't have to program my own? I notice they mention this site in the response.

[jperl]

Originally Posted by darthtrader »

Are you able to backfill data for the monthly/yearly vwap/pvp with IB/ensign?

Yes, no problem

Originally Posted by darthtrader »

I found this on their site
http://ensign.editme.com/StdDev
Have they pretty much knocked off this stuff that I wouldn't have to program my own? I notice they mention this site in the response.

Interesting....didn't know they were working on it. You should see the post by mp_trader whose has been working on this too. I don't know if he has completed it though.

[mp_trader]

Jerry, I am working on it right now. To those who have downloaded that vwap_std template, the vwap is correct, but the stdev lines are off. I failed to weight the prices properly for a vwap. The stdev lines are shown with equally weighted prices, and they are different from Jerry's. My apologies to those who have tried it.

[momentom]

No applogies required. I appreciate your sharing!

[agon]

Yes mp_trader, your work is fine but can you fix this (to weight the prices properly for a vwap) ?
Thank you very much

[darthtrader]

Originally Posted by mp_trader »

I failed to weight the prices properly for a vwap. The stdev lines are shown with equally weighted prices,

How are you weighting the bands? I've been messing around with trying to get this going for ninjatrader but its just a mess. I've backed off and have been doing basic C# tutorials so hopefully i can get this going at some point. The nice thing with ninja is it would be free for anyone to use.

multiplier3 = 3
VWAPUpper3.Set(VWAPLine[0] + multiplier3 * vwapsd[0])

i take it thats the wrong way? The weighting would be 2nd std dev by .7 something and 3rd by .9 something?