[ Pobierz całość w formacie PDF ]
.The oscillators attempt to show where the mar-ket is turning in price or where the price has moved against trend fora possible entry.It is important to note that the 7-bar MA on a five-minute price chart represents 35 minutes of clock time; that is almostno time at all for the overall order flow to develop.So far so good.Except this is what all traders are taught from the moment theybuy their first book on the markets or attend their first seminar.Thatmeans this basic moving-average-crossover-with-confirmation sys-tem is used by virtually all traders at some point in time.These tradersare all losing, as any one of them can tell you.Therefore, the winnersmust be thinking something different; otherwise, the losers wouldnot lose with such regularity.Please remember I m not suggestingthat every net losing trader is using a moving-average-crossover-with-confirmation system.I m saying this is a typical net loser chart C-067: Corn CBT (Pit) Cadj Liq (5 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,21) = 361^4 MovingAvg (C,7) = 361^2 3/24/10 11:04 = 361^4(-2^2)380^0378^0376^0374^0372^0370^0368^0366^0364^0362^0360^0358^0356^0TradeNavigator.comRSI (C,7,T) = 51.6010051.602Diff (F,1,1) = 0.3520 MovingAvgX (9,F) = -1.1173 MACD (C,12,26,F) = -0.76530.3520-0.7653-1.1173-203/18/10 03/19/10 03/22/10 03/23/10 03/24/10FIGURE 11.1 Typical Net-Losing Trader Chart Analysis97 P1: OTAJWBT329-c11 JWBT329-Jankovsky July 24, 2010 7:52 Printer: Yet to come98 EXPLOITING MULTIPLE TIME FRAMESbecause it is using what the experts teach the net losers.The moreseminars you attend or books/systems you buy based on technicalanalysis in some fashion, the more you will see some similarities.They are all on a lower time frame; they all have some form of over-bought or oversold analysis.In this illustration, I am simply usingone of the more common ones that most readers might recognize.What are the winners thinking?Please refer to the example shown in Figure 11.2.This is a typ-ical winners chart.Notice that the time frame is 60 minutes, not 5.The winners are using a 50-bar and a 100-bar moving average, not7-bar or 21-bar MA.There are no overbought or oversold oscilla-tors; volume is used.Also, note that there is a retracement study thathas weekly reference points; the retracement studies used are muchlarger than the day in question.Additionally, the 50-bar MA representsover two days of price action; the 100-bar MA represents even moretime.In other words, this chart doesn t reflect random price action.It reflects the probable order flow in a particular direction, and thattakes time to develop.What is the difference between these two opposing pointsof view?The first answer is to define what right now means to thetraders.In the case of losers using a 5-minute time frame, the timehorizon is very short: perhaps 20 to 30 minutes (5 or 6 bars onthe chart).In the case of winners, the time frame is at least 5 to6 hours.Additionally, the winners are looking for clues that definewho is trading (volume, not what the price is).If we stop there, we have the basics to understanding multipletime frames and the issue of time compression.Here is what you needto know: Winners are working on a longer time frame than their oppo-nents.Winners are willing to wait longer for a trade to work.Winnersare looking to see how important a particular price area is to the mar-ket (volume); they are not looking to see if a price change will happen right now in the same way that losing traders define right now. Winners know the price will move eventually.They know that if aprice area of the market is not important, it represents an opportunitybecause it is important to some other group of traders who are notthinking past the next 30 minutes.Losers are on a shorter time framethan winners.Winners know this and attempt to buy/sell the marketwhen losers are seeing an opposite position from their points of view.Let me show you a clear example in Figure 11.3.Here is amarket that has made a big move on the hourly time frame.Notice C2-067: Corn CBT (Comb) Cadj Liq (60 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,21) = 374 MovingAvg (C,50) = 373^4 3/22/10 12:00 = 373^4 (+0^4)378^0Weekly Resistance376^0374^0373^438.2% 372^0370^050%368^061.8%366^0364^0362^0Weekly Support360^0TradeNavigator.com Open Interest Up Close = False Down Close = True Volume = 4644300002000010000464403/14/10 03/21/10FIGURE 11.2 Typical Net-Winning Trader Chart Analysis99 GC2-067: Gold Comex (Comb) Cadj Liq (60 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,100) = 1120.1 MovingAvg (C,50) = 1115.9 3/22/10 08:00 = 1099.8 (-7.4)1145.0Overnight New York1140.0TradeSecure RangeTop of Range 1135.0Failure at1130.050 & 100Hour MAs 1125.01120.11120.0Box Is What 1115.91115.05-Minute1110.0Trader SeesDrop BelowLonger Range on1105.0High Volume1100.01099.8(Liquidation)1095.01090.0TradeNavigator.comUp Close = False Down Close = True Volume = 1326950000250001326903/14/10 03/21/10FIGURE 11.3 Short-Time-Frame Trader Not Seeing the Whole Picture (Random Noise)100 GC2-067: Gold Comex (Comb) Cadj Liq (5 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,21) = 1106.3 MovingAvg (C,7) = 1107.9 3/19/10 13:10 = 1108.1 (-17.6)1135.0After New York OpenOvernight Trade1130.0High over Overnight Trade1125.0with Pull Back Suggesting1120.0 Buy for a Day Trader1115.07 Bar Risingover 21 Bar1110.01108.11106.31105.0Rising Oscillators1100.01095.0TradeNavigator.comStochD (3) = 87.64 StochK (14,3) = 87.5110087.64755025Diff (F,1,1) = 0.4155 MovingAvgX (9,F) = -0.2242 MACD (c,12,26,F) = 0.1914-0.1914-1-0.2242-2-4FIGURE 11.4 Longer-Time-Frame Trader Seeing More Structure in the Same Market (Potential Order Flow)101 P1: OTAJWBT329-c11 JWBT329-Jankovsky July 24, 2010 7:52 Printer: Yet to come102 EXPLOITING MULTIPLE TIME FRAMESthe square box ahead of the big move.That square box representswhat a 5-minute chart would show for the same market.Please re-fer to Figure 11.4; this is the price chart for the exact same marketfor the exact same time period just prior to the big move seen onthe larger time frame.Notice that the 5-minute chart showed a veryclear uptrend potential that would have signaled get in for short-time-frame traders just before a major move the other way.In otherwords, the losers were watching something different from what thewinners were watching.The winners were seeing a possible range topwith potential for a downside breakout.They were getting positionedfor the bigger move while the losers were focusing on making money right now. These are the basics for using multiple time frames: Net winnersare using a longer time frame than net losers.Net winners are watch-ing something different from net losers.Net winners want to knowwhere the other participants are taking a position.Net losers are fo-cusing on a potential price change and using a very short time framehorizon to determine that.Losers are trading random noise.Winnersare trading order flow.T HE T RA DER S L I FEThe key takeaway from our starting point on using multiple time framesis to understand how traders using larger time frames are seeing more ofthe potential in the market because they are willing to wait for the orderflow to develop against losing traders.This takes time [ Pobierz całość w formacie PDF ]
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.The oscillators attempt to show where the mar-ket is turning in price or where the price has moved against trend fora possible entry.It is important to note that the 7-bar MA on a five-minute price chart represents 35 minutes of clock time; that is almostno time at all for the overall order flow to develop.So far so good.Except this is what all traders are taught from the moment theybuy their first book on the markets or attend their first seminar.Thatmeans this basic moving-average-crossover-with-confirmation sys-tem is used by virtually all traders at some point in time.These tradersare all losing, as any one of them can tell you.Therefore, the winnersmust be thinking something different; otherwise, the losers wouldnot lose with such regularity.Please remember I m not suggestingthat every net losing trader is using a moving-average-crossover-with-confirmation system.I m saying this is a typical net loser chart C-067: Corn CBT (Pit) Cadj Liq (5 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,21) = 361^4 MovingAvg (C,7) = 361^2 3/24/10 11:04 = 361^4(-2^2)380^0378^0376^0374^0372^0370^0368^0366^0364^0362^0360^0358^0356^0TradeNavigator.comRSI (C,7,T) = 51.6010051.602Diff (F,1,1) = 0.3520 MovingAvgX (9,F) = -1.1173 MACD (C,12,26,F) = -0.76530.3520-0.7653-1.1173-203/18/10 03/19/10 03/22/10 03/23/10 03/24/10FIGURE 11.1 Typical Net-Losing Trader Chart Analysis97 P1: OTAJWBT329-c11 JWBT329-Jankovsky July 24, 2010 7:52 Printer: Yet to come98 EXPLOITING MULTIPLE TIME FRAMESbecause it is using what the experts teach the net losers.The moreseminars you attend or books/systems you buy based on technicalanalysis in some fashion, the more you will see some similarities.They are all on a lower time frame; they all have some form of over-bought or oversold analysis.In this illustration, I am simply usingone of the more common ones that most readers might recognize.What are the winners thinking?Please refer to the example shown in Figure 11.2.This is a typ-ical winners chart.Notice that the time frame is 60 minutes, not 5.The winners are using a 50-bar and a 100-bar moving average, not7-bar or 21-bar MA.There are no overbought or oversold oscilla-tors; volume is used.Also, note that there is a retracement study thathas weekly reference points; the retracement studies used are muchlarger than the day in question.Additionally, the 50-bar MA representsover two days of price action; the 100-bar MA represents even moretime.In other words, this chart doesn t reflect random price action.It reflects the probable order flow in a particular direction, and thattakes time to develop.What is the difference between these two opposing pointsof view?The first answer is to define what right now means to thetraders.In the case of losers using a 5-minute time frame, the timehorizon is very short: perhaps 20 to 30 minutes (5 or 6 bars onthe chart).In the case of winners, the time frame is at least 5 to6 hours.Additionally, the winners are looking for clues that definewho is trading (volume, not what the price is).If we stop there, we have the basics to understanding multipletime frames and the issue of time compression.Here is what you needto know: Winners are working on a longer time frame than their oppo-nents.Winners are willing to wait longer for a trade to work.Winnersare looking to see how important a particular price area is to the mar-ket (volume); they are not looking to see if a price change will happen right now in the same way that losing traders define right now. Winners know the price will move eventually.They know that if aprice area of the market is not important, it represents an opportunitybecause it is important to some other group of traders who are notthinking past the next 30 minutes.Losers are on a shorter time framethan winners.Winners know this and attempt to buy/sell the marketwhen losers are seeing an opposite position from their points of view.Let me show you a clear example in Figure 11.3.Here is amarket that has made a big move on the hourly time frame.Notice C2-067: Corn CBT (Comb) Cadj Liq (60 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,21) = 374 MovingAvg (C,50) = 373^4 3/22/10 12:00 = 373^4 (+0^4)378^0Weekly Resistance376^0374^0373^438.2% 372^0370^050%368^061.8%366^0364^0362^0Weekly Support360^0TradeNavigator.com Open Interest Up Close = False Down Close = True Volume = 4644300002000010000464403/14/10 03/21/10FIGURE 11.2 Typical Net-Winning Trader Chart Analysis99 GC2-067: Gold Comex (Comb) Cadj Liq (60 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,100) = 1120.1 MovingAvg (C,50) = 1115.9 3/22/10 08:00 = 1099.8 (-7.4)1145.0Overnight New York1140.0TradeSecure RangeTop of Range 1135.0Failure at1130.050 & 100Hour MAs 1125.01120.11120.0Box Is What 1115.91115.05-Minute1110.0Trader SeesDrop BelowLonger Range on1105.0High Volume1100.01099.8(Liquidation)1095.01090.0TradeNavigator.comUp Close = False Down Close = True Volume = 1326950000250001326903/14/10 03/21/10FIGURE 11.3 Short-Time-Frame Trader Not Seeing the Whole Picture (Random Noise)100 GC2-067: Gold Comex (Comb) Cadj Liq (5 minute bars)TradeNavigator.com 1999-2010 All rights reservedMovingAvg (C,21) = 1106.3 MovingAvg (C,7) = 1107.9 3/19/10 13:10 = 1108.1 (-17.6)1135.0After New York OpenOvernight Trade1130.0High over Overnight Trade1125.0with Pull Back Suggesting1120.0 Buy for a Day Trader1115.07 Bar Risingover 21 Bar1110.01108.11106.31105.0Rising Oscillators1100.01095.0TradeNavigator.comStochD (3) = 87.64 StochK (14,3) = 87.5110087.64755025Diff (F,1,1) = 0.4155 MovingAvgX (9,F) = -0.2242 MACD (c,12,26,F) = 0.1914-0.1914-1-0.2242-2-4FIGURE 11.4 Longer-Time-Frame Trader Seeing More Structure in the Same Market (Potential Order Flow)101 P1: OTAJWBT329-c11 JWBT329-Jankovsky July 24, 2010 7:52 Printer: Yet to come102 EXPLOITING MULTIPLE TIME FRAMESthe square box ahead of the big move.That square box representswhat a 5-minute chart would show for the same market.Please re-fer to Figure 11.4; this is the price chart for the exact same marketfor the exact same time period just prior to the big move seen onthe larger time frame.Notice that the 5-minute chart showed a veryclear uptrend potential that would have signaled get in for short-time-frame traders just before a major move the other way.In otherwords, the losers were watching something different from what thewinners were watching.The winners were seeing a possible range topwith potential for a downside breakout.They were getting positionedfor the bigger move while the losers were focusing on making money right now. These are the basics for using multiple time frames: Net winnersare using a longer time frame than net losers.Net winners are watch-ing something different from net losers.Net winners want to knowwhere the other participants are taking a position.Net losers are fo-cusing on a potential price change and using a very short time framehorizon to determine that.Losers are trading random noise.Winnersare trading order flow.T HE T RA DER S L I FEThe key takeaway from our starting point on using multiple time framesis to understand how traders using larger time frames are seeing more ofthe potential in the market because they are willing to wait for the orderflow to develop against losing traders.This takes time [ Pobierz całość w formacie PDF ]