[darthtrader3.0beta]

Originally Posted by BlowFish »

It is worth clicking through to 'Lévy stable distributions' if you have an appetite for a bit of maths. Basically financial data series are fractal (by Mandlebrots definition) unless you disagree with his conclusions about the distribution of financial data series.

I don't know if its because I'm interested in this type of stuff but don't have the the math to really understand the math behind it that I've never ran across anything conceptually in this field that doesn't have a degree of absurdity to it.
What strikes me about modelling financial time series is your essentially modelling an X sided dice with each side having a different weight and then trying to model the distribution of the rolls of that dice..The problem though is both X and the weighting are moving in continuous time, along with the number of rolls, the force of how hard or soft you throw the dice...
While obviously you can get a Phd in statistics by modelling historic static dice rolls of this nature, it really has nothing to with the reality because your not modelling the important variables of the function, exactly because they are unknowable...so you fudge it to make your model work on paper.
Modelling the distribution is the easy stuff, the important stuff of modelling the variables is basically impossible unless there is enough computing power to find nash equilibrium in continuous time of an N player game, N equal to the number of players of the game, which obviously when it comes to the markets even knowing the number of players is impossible let alone the computation of something that can't be known.
That to me is quant finance in a nutshell.

[Hlm]

Originally Posted by darthtrader3.0beta »

One thing that I'm surprised has not come up is that this all depends on your style of trading.

In my opinion multi-trend trading (the way I trade it) combines all three styles of trading depending on how you define them. You are trading with the trend, entering on a reversal of the smaller trend with your risk decreased, and you are holding a portion of your inventory for a breakout through the first smaller trend resistance to complete the cycle.

Originally Posted by darthtrader3.0beta »

For my style, I'm not a trend trader at all and don't find MTF to be of any use. I don't like trend trading, I actually fear trends because by their nature you are giving up good position/price to get with the trend. The only time I ever trade with the trend is if a flag sets up.

It would be interesting to see a chart labeled with what you are looking at. Of course MTF is not for everyone. However, the majority of people I have explained it to resulted in a light bulb going off and their trading finally taking off. But again, more than one way to trade.

Originally Posted by darthtrader3.0beta »

The danger of multi time frame analysis is in assuming a fractal nature to price and using the higher time frame pattern to make a prediction about a lower time frame pattern's path...To my mind that is worse than wrong, its absurd. While its easy to cherry pick a pattern that worked in this fashion in retrospect, what it ignores is that the information coming down the pipe at the present + 1 unit of time is not only unknown, its unknowable.

The up leg of a trend (see pictures I posted previously) is created by smaller up trends. The up leg of those smaller trends are created by smaller up trends. It's the nature of the market. It's the ebb and flow of the market. No, it's not perfect (of course), but that's what money management is for. I will not get into the discussion of self-similar because it's not needed. As for the predicting comment, there is no reason to "predict" the lower time frame. I think people are getting confused and stuck on this concept. There is no prediction, it's a fact...larger trends are created by smaller trends. The theory behind multi-trend trading is to find areas where you can enter with bias/pressure and limit your risk w/out limiting your reward. There is nothing to cherry pick if you are sticking to the true essence of a trend. If you are talking about the fractal concept shown on the pic that atto posted HERE, that is not what we are talking about.

[BlowFish]

Originally Posted by VolumeJedi »

The late Robert Krause did some good work in this area too. While I am not big on indicators, I like his use of one chart with indicators from higher timeframes. Mainly because it allows the trader to look only at the "entry, exit and stop" level chart-the small timeframe, while getting trend/momentum/support and resistance from the higher timeframes.

Kraus was one of Drummonds students just fyi You can see the root of a lot of his work. Of course that doesn't diminish its value.

[OAC]

Not to mention that he was the creator of the Fibonacci Trader software: "The first multiple time frame software for traders"

[Treefungus]

Hi Jason

Nice post reg. multiple timeframes. Im trading in a similar way. Not using that many timeframes but otherwise the same. My idea is based on phases. 1-2-3-4 where 1 is the base before a run up. The run up is phase 2. Phase 3 is the base before the drop. The drop being phase 4. My idea is to trade the phase 1 and 3 breakout/breakdown on a lower timeframe but with the trend or range on the higher timeframe. If you are interested in sharing ideas let me know.