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joshdance

The Close of a Bar is Meaningless

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The OP said that the only bar on which the close was important was the daily bar.

 

I often wonder how people can develop such wrong perceptions of market data. But after years I realize that my perceptions also changed and sometimes dramatically as I realize something that, although in front of me all the time, I hadn't perceived.

 

Bar close is important in at least two ways. First it sets a closing price and second it sets the highs and lows for sure ... no more changes.

 

Now, the OP has perceived truth in daily closes. ...

 

...

 

So maybe those who don't see it will never see it and maybe it will matter to them and damage their trading results. It depends; hopefully not.

 

Kiwi, after reading your post, the only thing you say regarding the meaning of the closing price of a bar is that it means the bar is completed (and thus its range is defined and unalterable), and that it "sets the closing price." Well, these are not exactly revelations. Perhaps you can elaborate on why this value is important.

 

You talk about "truth" and "wrong perceptions" ... Traders have created a structure around a market by grouping transactions together into "bars" and then determined many different ways of presenting that data and different ways of defining the completion of a "bar." These are all methods of data presentation, independent of the market itself. Yet, you call this "truth," and you say that not imposing this structure onto the market is a "wrong perception" ... is that about right?

Edited by joshdance

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when i am looking to exit i'll wait until bar close...often times price is already below my exit, but recovers on close keeping me in a trade that turns profitable.

 

Thanks peter --

Does it also happen sometimes that you take a larger loss, or allow a winning trade to turn into a losing trade instead of closing it, because you held until the close of the bar?

 

i gotta believe if i'm waiting on bar close, there may be significant number of traders doing the same thing, no?

 

Certainly I'm sure there are. Depends on how you might define "significant" ... For the purposes of practicality, I'll assume that everyone in the trading universe starts a ten minute bar on the hour. Every 10 minute bar close will be accompanied by a 1 minute and 5 minute bars closing, though in the middle of your ten minute bar you will have 5 minute bar traders acting on their bar closes. One out of every three ten minute bars will align with a 15 minute bar close and a 30 minute bar close. And so on... So, at 10:20am, you will be seeing a bar complete, while 15 minute and 30 minute bar watchers have another 10 minutes to go, yet you will be on the same closing time as 5 minute bar watchers... except that of course you will be evaluating the close in respect to a whole different set of other values (different open, high, and low).

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It's simply a data sampling issue. It 'means' exactly what it means. The raw data is each and every tick. If you sample that data every 29 ticks, 243 second, 53 contracts or 5.5 points you are holding one variable constant and sampling with respect to that.

 

People choose (or should do) sampling periods to reveal characteristics in the underlying data that suits there trading objectives. The most obvious one is the types of move they are trying to capture.The main characteristics of 'type' are magnitude and length. So for example if you are looking for 2-3 point moves that generally take less than an hour to complete you probably would not use a weekly chart (a weekly sampling) to trigger your entries.

 

Now having said that there are some 'special' considerations. I think the significance of most are being eroded. For example daily bars, the close represents the end of a session however with some instruments trading 24/5 I guess that is less meaningful than it once was. The weekly close probably still has some sort of tangible 'meaning' as markets still close at weekends. 30 minute periods meant something when a lot of people where using market profile (30minute TPOs), probably still do a bit though arguably there are better ways of profiling markets. I also remember a time when I could have sworn that 5 minute closes where 'gamed' by shorter term participants.

 

Anyway short answer is that it is a data sampling thing. A 'doji' on a 10,000 tick chart 'means' price has not managed to maintain any advance or decline within that sample period. A 90minute bar moving above the previous 90 minute bars (sample) high means that price is trading at a higher price than in the whole of the previous sample.

 

Of course attaching special meaning to magic numbers is dubious (imho). A 150 tick chart is likely to be just as effective as a 144 tick chart.

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.........................................................................

You talk about "truth" and "wrong perceptions" ... Traders have created a structure around a market by grouping transactions together into "bars" and then determined many different ways of presenting that data and different ways of defining the completion of a "bar." These are all methods of data presentation, independent of the market itself. Yet, you call this "truth," and you say that not imposing this structure onto the market is a "wrong perception" ... is that about right?

 

 

Now you are getting to the hub of the problem JD ..... if the compilation of the source information we are observing is fundamentally flawed then we need to deal with it before we can push on.

 

Kiwi says the intraday bar close is important because it locks in the high/low of the bar and provides a snapshot of the price.

I happen to agree with his statement but the information has absolutely no meaning to me since the bar size is not set by the market.

 

Some of the posts I have read in this most interesting thread remind me of a blindfolded boxer coming out of his corner swinging ... his reasoning being that if he swings enough times, then he is bound to land the odd punch or two and yet he has not stopped to wonder whether his opponent is even in the ring.

 

There is surprisingly little source information available to us from the markets and yet we bring with us from the outside world an overwhelming desire to create more of it.

This in turn creates an inverted pyramid .... not unlike balancing an Elephant on a pinhead ... it can possibly be done I suppose, but why would you bother, the Elephant is going to fall off.

 

The other big surprise is just how little information we need to trade profitably.

 

And so I would suggest that we make ourselves aware of the quality, source volume (amount) and accuracy of our information and it's presentation before pushing on.

 

One other thing while I am on a roll.

 

The law of cause and effect.

As an example ...

Some of us may discover a pattern that emerges from the bars that signal a reversal and so we trade it with 65% accuracy over a sample of say 34 trades.

Because we are not paying attention ( looking but not seeing) we are oblivious to the fact that 65% of our signals occur at supply/demand zones whilst the other 35% land between the zones.

We are in fact trading the 'effect' and not the 'cause' ....imagine our results when we start paying attention.

 

And I will leave you with one last thought.

 

There is a popular belief running around TL that we can have a high win/loss ratio of trades or we can have a high points won/points lost ratio ... but we cannot have both.

 

This is crap, pure crap along with some of the crappy theories concerning the need and placement of stops .... obviously some people do not understand the importance on momentum because they cannot see it correctly on their screen.

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Of course attaching special meaning to magic numbers is dubious (imho). A 150 tick chart is likely to be just as effective as a 144 tick chart.

 

Are you sure, BlowFish? I'm sure I once saw a John Carter vid where he said that it is a magical number . . .

 

On a more serious note: one thing that jumps out reading back through this thread is that everyone keeps referring to the same time frames: 1, 5, 10, 15, 30, 60 mins. Now given that most traders lose money, and assuming we set aside preconceptions about self-fulfilling prophecies etc, then wouldn't it make more sense to employ reference timeframes that are not commonly used by other traders?

 

In other words, why haven't you configured your charts for 4, 7, 18, 43 minute bars? Or, for that matter, 144 minute bars!

 

Hope that's thought provoking (ps I lifted this idea from an old Joe Krutsinger book where he discusses 180 min bars).

Edited by BlueHorseshoe

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Are you sure, BlowFish? I'm sure I once saw a John Carter vid where he said that it is a magical number . . .

 

On a more serious note: one thing that jumps out reading back through this thread is that everyone keeps referring to the same time frames: 1, 5, 10, 15, 30, 60 mins. Now given that most traders lose money, and assuming we set aside preconceptions about self-fulfilling prophecies etc, then wouldn't it make more sense to employ reference timeframes that are not commonly used by other traders?

 

In other words, why haven't you configured your charts for 4, 7, 18, 43 minute bars? Or, for that matter, 144 minute bars!

 

Hope that's thought provoking (ps I lifted this idea from an old Joe Krutsinger book where he discusses 180 min bars).

 

gm BH,

 

Many years ago I switched to a 280 second chart to give me an edge over the 5 minute guys....

My results after this bold move were as abysmal as before, but it did encourage me to find out what slice of the market was controlled by the retail Guys..... something less than 15% as I recall and I imagine that has diminished since then.

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...

And I will leave you with one last thought.

 

There is a popular belief running around TL that we can have a high win/loss ratio of trades or we can have a high points won/points lost ratio ... but we cannot have both.

 

This is crap, pure crap along with some of the crappy theories concerning the need and placement of stops ....

 

One too many thoughts IMO but rather than sidetrack this discussion I will leave my thoughts on this for another place, another time.

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........

In other words, why haven't you configured your charts for 4, 7, 18, 43 minute bars? Or, for that matter, 144 minute bars!......

Been there, done that.

 

And in the end didn't amount to much difference.

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Kiwi, after reading your post, the only thing you say regarding the meaning of the closing price of a bar is that it means the bar is completed (and thus its range is defined and unalterable), and that it "sets the closing price." Well, these are not exactly revelations. Perhaps you can elaborate on why this value is important.

 

You talk about "truth" and "wrong perceptions" ... Traders have created a structure around a market by grouping transactions together into "bars" and then determined many different ways of presenting that data and different ways of defining the completion of a "bar." These are all methods of data presentation, independent of the market itself. Yet, you call this "truth," and you say that not imposing this structure onto the market is a "wrong perception" ... is that about right?

 

Joshdance, as far as I see you are trying to say that intraday bar closes don’t matter.

I say any bar close don’t matter if it is not in relation to any other bar close or to the market structure. Moreover, even my last statement doesn’t matter if it can’t be used to make money. After all, bars, indicators and so on are made to help us make sense of the market direction so we gain an edge.

 

On any time, tick, volume chart, - market flows in waves of supply (down) and demand (up). In these waves the individual bars are in relation to each other. The bar low/high shows what were the extremes of supply and demand for the bar period. The close shows where the price have settled for the chosen bar period. None of this will matter if it doesn’t make sense to me and/or can’t be used to make a decision on a trade direction.

 

Trading is a probability game. Me as a master of my world need to make sense of the big black nothing out there called market. I choose my tools and start exploring.

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Tim.i think i'm gonna have to buy you a drink sometime 'cos it seems i'm always picking on you,candles,fibs;):)

 

But i got a problem with the way this actually works in real time for you..or anybody.I'm gonna make my tues trading moves based off of mon ohlc which are printed history and not going to change.I got hours to work it out...wouldn't you agree?.

 

Now,you say you need to see an intraday bar close before you can interpret it..Yes? so i reckon you got a micro second to make a move before the next bar starts forming and you cannot interpret that one either until it closes:confused:

Help me out here

 

I think you're misinterpreting me. If I'm looking at a 15-min candle, I don't place any weight on the formation until the candle is closed. If it's 13-minutes in and is a big body bearish candle it could rally and close as a hammer, see what I'm saying.

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One too many thoughts IMO but rather than sidetrack this discussion I will leave my thoughts on this for another place, another time.

 

It is all to do with waiting for momentum to washout before taking a position.

If you are trading ES from say a 5 minute chart you really don't have a chance of seeing it.

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It is all to do with waiting for momentum to washout before taking a position.

If you are trading ES from say a 5 minute chart you really don't have a chance of seeing it.

 

Hi John,

 

How do you go about "seeing" this washout of momentum?

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It is all to do with waiting for momentum to washout before taking a position.

If you are trading ES from say a 5 minute chart you really don't have a chance of seeing it.

5 minute bars, other than during fast, news related moves, don't give high point trades.

 

Unless your idea of high point amounts are 2-3 points. My idea is 10-20 pts which isn't obtainable in short timeframes.

 

But to say a high win/loss ratio plus high win amounts can be done in the same strategy defies all that I have ever seen myself as well as everyone I have ever traded with or read about in the past decade and a half of trading.

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5 minute bars, other than during fast, news related moves, don't give high point trades.

 

Unless your idea of high point amounts are 2-3 points. My idea is 10-20 pts which isn't obtainable in short timeframes.

 

But to say a high win/loss ratio plus high win amounts can be done in the same strategy defies all that I have ever seen myself as well as everyone I have ever traded with or read about in the past decade and a half of trading.

 

ST,

Would you specify when win/loss ratio and high win probability become high in your opinion, please!

 

Thanks

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I think you're misinterpreting me. If I'm looking at a 15-min candle, I don't place any weight on the formation until the candle is closed. If it's 13-minutes in and is a big body bearish candle it could rally and close as a hammer, see what I'm saying.

 

Yes i see that.But what i'm trying to understand with your statement is where are you in this scenario? Are you flat,waiting for the bar to complete before entry or already in the trade? If you are already in the trade where is your stop in relation to the bar completing? Couldn't your stop sometimes be hit before it completes? If so,your stop is not just a price but time related as well.

If you are flat and you are waiting for a bar to complete then you are (presumably) waiting for some kind of confirmation before entry and that confirmation is not based on just price..price action?

Just trying to understand,since i only trade price using the previous day(s) Ohlc.Any bars that form,in any time frame below daily have no meaning for me in themselves.I only want to see momentum away from my entry and the tape can give me that info.

Statements like the one you made don't really explain very much about how a trader is using the bars to trade/read the market.

Yes, it could form a hammer..if a hammer is what you are waiting for,then bingo. But as has been said it will look look something else on another chart setting.And those kind of problems is another reason i only look at price itself.

None of this is a criticism,just trying to get a better understanding

Anyone else want to answer these questions?

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As someone who writes code, I know the value of c is priceless. I know things about other concepts with the same certainity. I have facts that are the result of experience. I would enjoy proving these statements. I could learn a lot by a back and forth discussion as I revealed facts but as a coder, I'm limited in what I can say. I can say with certainty that coder's are tight lipped.

 

the value of c? ....to a coder?

 

priceless.

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As someone who writes code, I know the value of c is priceless. I know things about other concepts with the same certainity. I have facts that are the result of experience. I would enjoy proving these statements. I could learn a lot by a back and forth discussion as I revealed facts but as a coder, I'm limited in what I can say. I can say with certainty that coder's are tight lipped.

 

the value of c? ....to a coder?

 

priceless.

 

Ok,on the face of it that sounds good.But can you expand just a little bit in the interest of "back and forth discussion",without giving away any code?

For example,which close? any or all of them on any timeframe?

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Been there, done that.

 

And in the end didn't amount to much difference.

 

Thanks for the reply. It's been on my long list of 'things to look into'. It just went to the bottom of the list! I think my assumption was less to do with how it might impact theoretical strategy performance, and more about whether it would improve execution - obviously several of you have tried this in live trading and found no substantial improvement though.

 

On a fairly closely related topic, has anyone experimented with or becktested swing trading strategies using (obviously very large) range bars, as opposed to daily?

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......

On a fairly closely related topic, has anyone experimented with or becktested swing trading strategies using (obviously very large) range bars, as opposed to daily?

Although I was interested when momentum/range/kase bars came along years back I reverted back to time and tick based (mostly time) because nothing beats the real thing. Everything else is a guessing game.

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1. It is extremely hard to look at a bar in ES and trade based on it. Algos or just the fact that is a combination of 500 individual tickers, make a bar by bar trading approach very hard. Most of the time it is pure noise and my ability to correctly call the direction is probably something like 40% - if I go bar by bar on ES.

 

2. However, if I wait and restrict myself to just 1 or 2 trades per day, then I start to show some improvement in my discretionary trading ability.

 

3. Also, analysis of my equity curve suggests that just taking 1 trade per day or maybe 2 on some days and skipping some days will reduce my DD significantly and will help me experience much superior returns.

_________________________________________________________________________-

 

From a trader on es journal at ET often a good fade in itself.- Most of them going long today through the drop.

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Didn't I post a YouTube link in my reply?

 

Are YouTube videos not allowed at TradersLaboratory? Funny, there is a YouTube tag.

 

[ame=http://www.youtube.com/watch?v=IFJFuJ6-tQY&feature=plcp&context=C3f06e6bUDOEgsToPDskK_keMjudxPO30pqKckQ1vk]All You Need To Trade Is A Horizontal Line - YouTube[/ame]

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Didn't I post a YouTube link in my reply?

 

Are YouTube videos not allowed at TradersLaboratory? Funny, there is a YouTube tag.

 

Dare I ask:

1) Is the placement of the line arbitrary?

2) The premise of your idea is based only on price it seems: if price is moving up, we want to buy, and vice versa. So, why do you need a line at all?

 

While your video is off topic here, I do appreciate the simplicity of the premise, and generally try to trade the same way: go with the intraday trend. If buying is strong, don't try to pick the top, and vice versa.

 

So to relate this to the topic at hand, look at the 5 minute ES chart attached. Four consecutive bars close near their lows. Does this mean the market is weak? Not in my view of things; if we shifted phase to have the bars start at say :03 instead of :00, :05, etc., we would have different closes, perhaps near the highs.

02_16.2012-10_55_21.png.234c40c526ed814a4587f43bacacfbe1.png

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When looking at 5 min bars more than a close comparision are needed, most of the time. That chart is a prime example. It was strickly a consolidation zone with narrow range bars and tight open/closes signifying indecision or a pause in trend and not a reason by itself to exit a long and definitely not to short.

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ST,

Would you specify when win/loss ratio and high win probability become high in your opinion, please!

 

Thanks

I'm not saying they can't be high or "too high". I'm saying they can't both be high within the same strat. It is an either or situation.

 

High win/loss ratio with small win amounts or Low win/loss ratio with high win amounts.

That is just how math works whether it is trading or sports or music or .......

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Have only skimmed a couple pages of the thread so maybe someone already made similar comments. God I hope so…

 

The close of a bar is meaningless

AND

The close of a bar is meaningful

 

It’s individual representational system dependent! But herein we have a bunch of ‘thoughts’ posted without much grounding in the individual’s perceptual framework behind it – and if there are ~20 posters and 1000 readers then, by golly, there are 1020 different perceptual frameworks, yet more than half the posts ignore or assume that everyone just automatically understands or even worse, assume that those differences don’t matter, or even more worser, assume that those differences don’t even exist! – Now, that is meaningless. Peeps, if we continue to be so ‘bias’ blind and so blatantly non-specific, TL will become just a mini ET…

 

Then we have a bunch of impressions of the value of the close in systems and coding, again and similarily, without much grounding in the underlying systems. The close of a bar, on ANY timeframe or bar type does remain what it is at base – just another price point. But, the ‘close’ is not useless in a system that needs discreet, scheduled ‘snap-shot’ measurements instead of continuous stream. Coded systems ‘prefer’ those discreet, scheduled ‘snap-shot’ measurements, so continuing with that thinking, the ‘close’ is not meaningless or useless in a system where the close can somehow acceptably proxy for or complete the effects/outcomes of the whole previous period that just ‘closed’. Conversely, the close is meaningless or at least no more meaningful than any other price print if other intrabar data points are actionable in the system.

 

All the bar types, doms, time and sales, profile ‘distributions’ are our own best personal representational systems for the ‘auctions’. Ie the map is not the thing mapped! Hopefully most of the thousand readers are doing serious inner work aligning their representational system to their own perceptual type/profile, instead of assuming, the standard consensus charting methods, the bars, etc. really are the market…

Hopefully, we haven’t influenced anyone to come to discount the close if it actually should be ‘meaningful’ in their world

… And vv ...Hopefully, we haven’t influenced anyone to come to represent the close as something more than it really is if it should be just another price print in their world. … either of those would be worse than meaningless and useless…

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