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"Structure" of the market

  • #21
  • Mar 28, 2018 2:10pm Mar 28, 2018 2:10pm
Quoting Sossos
...If I take your concept to the intra-day side of things...
May I assume here that by concept you mean using these four structural elements?

Quoting Sossos
...could I run an ATR of say 36 on a 15 or 20 minute chart and come up with an average range of the timed bar. Then set up a tick chart with an ATR of 36 that puts me close in size to my time chart. That tick chart would put me about as close as I could get to correlating the sizes. Does that seem reasonable? Have you thought of that or tried it?
I'm not quite sure I completely understand your question...but you speak of average range based on a specific time. First consideration for my way of thinking is that range is variable as the order flow waxes and wanes...it will not be constant when you base it on time (15 or 20 candle). This is what I mean when I say time is variable. Of course the thing that makes the volatility (ie the average range) is the order flow and the volume. So learning to recognize how that is progressing will greatly affect the choice of setting on your ATR indicator.

In addition, I know of no constant tick chart that is defined by a specific range. I trade constant tick and constant volume charts all the time on Futures and they have been directly responsible for allowing me to "see" the order flow. However I think you mean range bars, which can be defined by a specific range. I have no experience using them, but would note just by viewing them that these bars would mask how I see the order flow as a new bar would only form when price moves outside a specific range. If you are using FX...I'm not sure how this would be helpful. You might be able to correlate your idea with volume data and note when a range extends on unusually low or high volume...but again, I have not specifically studied this.

I am not a big proponent of intraday trading using FX market but understand why people here do it. My feeling is to try and find a way to extrapolate volume delta on your range bars. However in a decentralized market, I am completely at a loss to think of a way to do that.

My personal preference is to use the entire day's volume data and then extrapolate the delta from a fully formed daily candle using available tick data...assuming you are confident in your data feed. Because many brokers only show tick data within their own platform, and because that tick data waxes and wanes during the three major trading sessions, I believe intraday trading is left vulnerable to these "lapses" and they create signals that just don't make sense. This is due to the untrustworthy, or just plan inadequate data service. I have noticed this mostly with the metatrader platform.

So if I understand you correctly you are trying to size the range bar based on the current average true range of a constant time bar. (15 or 20 min)...so would that range bar then be dynamic to the ATR setting when order flow changes at a turning point? As you know, at swing points, sometimes volume drops off as does the volatility - leading to a smaller average. As well, sometimes the volume increases as the order flow reverses and trading volume is absorbed by larger institutions. Thus ATR number would rise. Does that mean you change your range bar settings on the fly? Or develop some software that controls that setting constantly, which then constantly refreshes your chart with new bars?

My head is starting to swim. I must return to the simplicity of simply learning and reading the basal structure of the market...doing this will render all other "alternatives" obsolete.
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  • #22
  • Mar 28, 2018 3:35pm Mar 28, 2018 3:35pm
Quoting DonPato
{quote} A very kind compliment sir, thank you. I actually have developed a methodology for trading using these elements and have since rewritten my trading plan to include the "theories" I am speaking of here. I, however, do not view them as theories but as principles of how the market actually functions. {quote} This is a very common point of view. Most of us from the onset realize there is a time/price relationship in entering and exiting the markets. And if you are anything like me you've spent many years trying to accurately define that point....
My mistake....I thought we are talking on market structure of FX only.
In that case yes you are right order flow and volume matters beside timing and price.

Cheers
  • #23
  • Mar 28, 2018 4:07pm Mar 28, 2018 4:07pm
I use Think or Swim. On a T/S chart they offer the option of getting your chart on what they a tick chart. If I understand correctly, each time the bid or ask changes that counts as a tick. Every twitch is counted.

You can set the tick chart to the number of ticks per bar you want to use. So in my example I have an ATR on my 20 minute chart that oscillates around the 10 cent range. I set a tick chart on T/S at 1600 ticks and that produces bars that are running in the 10 cent range, but are shaped differently than my 20 minute chart. Same price movement, different bar structures.

I've tried for 20 minutes to get T/S to transfer a couple of pictures and the piece of shit won't do it. I will eventually get the pics.
  • #24
  • Mar 28, 2018 6:21pm Mar 28, 2018 6:21pm
Quoting Sossos
...each time the bid or ask changes that counts as a tick. Every twitch is counted.
Its actually every transaction whether that transaction is 1 lot or 1,500 lots. This is why there is always a huge discrepancy between tick volume and traded volume. Tick volume counts the transactions, traded volume actually counts the size of each transaction.

Quoting Sossos
So in my example I have an ATR on my 20 minute chart that oscillates around the 10 cent range. I set a tick chart on T/S at 1600 ticks and that produces bars that are running in the 10 cent range, but are shaped differently than my 20 minute chart. Same price movement, different bar structures. I've tried for 20 minutes to get T/S to transfer a couple of pictures and the piece of shit won't do it. I will eventually get the pics.
With tick bars a new bar is formed when the market has registered the number of transactions you specify...in your example here 1,600 ticks. Thus, while the price movement is the same, the way it appears on your chart is different because the bars form independent of time. Yet another reason why a say that "time is variable". If volume is low, the tick bar will continue on the same bar until the requisite number of ticks have occurred, regardless of what time it is...on a time chart, even if volume is low, new candles will form each 15 min...or whatever you have it set to.

Thus the "noise" many see on their small charts during low volume conditions does not appear on a tick chart. And as I've said in a previous post "price action signals" have not meaning...what looks like a "flag" (for example) on a time chart may only be one or two candles on a tick chart, or at times when the market is slammed with volume, many tick bars will form and the 15 or 20 min candle will not have finished yet...

So what looks like a "Price action signal" or "pattern" changes depending on how you have your chart divided into candles...this is why learning to read the structure of the market is so important. The underlying order flow and volume are the same and produce their signals regardless of how you have the price candles configured.

It is a challenge to find "just the right" configuration of candles or time frame...and I usually do not rely on just one. I have multiple time frames going at all times, in a multiple screen set up so I can see which time frame best shows the market's theme and order flow.
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  • #25
  • Mar 28, 2018 10:56pm Mar 28, 2018 10:56pm
Thank you mzvega... I'm sure we all feel duly advised...was there a point to your post that would connect us with the theme here of market structure?
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  • #26
  • Mar 29, 2018 9:55am Mar 29, 2018 9:55am
Quoting DonPato
Thank you mzvega... I'm sure we all feel duly advised...was there a point to your post that would connect us with the theme here of market structure?
Well I guess mzvega deleted his post.
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  • #27
  • Mar 30, 2018 2:18pm Mar 30, 2018 2:18pm
MZVEGA had a thread on this subject that was really intense study stuff. He definitely has an opinion based on his work he has put in. Very scientific.

https://www.forexfactory.com/showthr...0#post10733410
  • #28
  • Mar 30, 2018 2:31pm Mar 30, 2018 2:31pm
Quoting Sossos
All of which takes TIME.
Yup. 90% of the analysis focuses on price, historical price, lots of math done on price, but very little is done with TIME other than trying to optimize period settings for measures of price. Projection lines has been my one of my focuses for a very long time now much of which is just as dependent on the X axis as the Y axis. And then resolving the two to a single unit of measurement. Gann type stuff, but beyond "classical" Gann stuff.

Anywho, Andrew's Pitchforks is one of the few out of the box tools that does a great job of combining price and time and projecting to the right side of the chart where it matters. Opposing pitchforks can pinpoint probable areas in price and time very well.
  • #29
  • Mar 30, 2018 5:12pm Mar 30, 2018 5:12pm
[quote=DonPato;10913400]Hello all...I've tried several times to stimulate some conversation around this topic. I don't know if it's too boring or if no one is really interested. But I am going to try one last time...

Our brothers and sisters at CLS may know a thing or two about mkt structure.
Why not invite some of them to participate in your discussion here on FF ?
https://www.cls-group.com/about-us/board-of-directors/
  • #30
  • Mar 30, 2018 6:59pm Mar 30, 2018 6:59pm
Quoting Squiggles
Our brothers and sisters at CLS may know a thing or two about mkt structure. Why not invite some of them to participate in your discussion here on FF ? https://www.cls-group.com/about-us/board-of-directors/
very impressive...of course they (and their expertise) would be welcomed should they decide to speak with us...however somehow i doubt they'd find the time. Of course if you are friends or family of any of the parties listed perhaps you could extend a hearty welcome on my behalf...I'm afraid if I made contact they'd think I was nuts.

Assuming of course you are serious and not just trolling this thread
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  • #31
  • Mar 30, 2018 7:45pm Mar 30, 2018 7:45pm
Quoting DonPato
{quote} Its actually every transaction whether that transaction is 1 lot or 1,500 lots. This is why there is always a huge discrepancy between tick volume and traded volume. Tick volume counts the transactions, traded volume actually counts the size of each transaction. {quote} With tick bars a new bar is formed when the market has registered the number of transactions you specify...in your example here 1,600 ticks. Thus, while the price movement is the same, the way it appears on your chart is different because the bars form independent of time....

I prefer to use one time frame. The reason is that I'm looking for each swing to build itself. If your goal is to catch every tick of every swing, then you shouldn't follow me. I use terms like micro pullback, minor pullback or major pullback. I see wide range bars and hidden gaps. I count pivots. That isn't pivot points, that's "pivots" as in turns. I do something really old fashioned. I pay attention to higher high and higher low, or lower low and lower high.

Those should be the simple basics for every trader, but it requires work and a lot of observation to find the nuances of a market. I would add here that each piece of the puzzle that I've mentioned so far has it's own "quirk". But the only way to find those quirks is to look at a chart and ask questions and then chase down an answer for yourself.

The tools I use are the median lines and the fib extension tool to measure vertically the pullbacks. The market likes to repeat, but usually only once. I have to say that the longer I study the market from this simplistic way. My understanding of price movement becomes deeper. As I said in a prior post. I am still a journeyman in the world of trading. I am not satisfied with what I have observed so far and I will keep looking from this simplistic approach knowing that there is more to learn without having to venture into multiple time frames or adding another data set to attempt to comprehend. There is more here and I fight A.D.D.

My brothers and I were in a business together for 30 years. We struggled for the first 8-10, refined and got better at it over the next 8-10. We did much better the last 8-10. Why would it not be the same in this business? I've entered the center period of running my business in trading. The journeyman's level. Being in business for 30 years taught me a couple of things. Stupid is supposed to be painful and rinse and repeat. Not PHD stuff, but that's what works!!!
  • #32
  • Mar 31, 2018 4:52am Mar 31, 2018 4:52am
Customers go to a Bank to get their Orders filled at as good a Price as the Bank can get.

If the customer isn't satisfied he will move is business to another Bank who can get him filled at better Price's.

Which ever Bank/Banks have the most Buy/Sell Orders to fill, wins the day, and Price moves up or down accordingly.

Banks, Institutions have Price Levels they use to get their Customers Orders Filled. (Can you guess what they are?)

If the Bank is lucky they get to piggy back along for the ride.

The greater Volume is created, of course, where Orders are Accumulated (Balance) by the time we see Momentum all of one side of the Book has been consumed and Price moves to the next Level of waiting Buy/Sell Orders where Volume will Build once again.

Personally I just use Price Levels (.--800 --.--000 .--200 .--500) - Structure (HH HL LL LH) - Order Flow (Is Price moving UP or DOWN) to Trade

This is as deep as I go, any deeper and my head explodes.

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  • #33
  • Mar 31, 2018 7:38am Mar 31, 2018 7:38am
Quoting stevepatt
Customers go to a Bank to get their Orders filled at as good a Price as the Bank can get. If the customer isn't satisfied he will move is business to another Bank who can get him filled at better Price's. Which ever Bank/Banks have the most Buy/Sell Orders to fill, wins the day, and Price moves up or down accordingly. Banks, Institutions have Price Levels they use to get their Customers Orders Filled. (Can you guess what they are?) If the Bank is lucky they get to piggy back along for the ride. The greater Volume is created, of course, where Orders...

I did leave out the Time element -

Time Frame used M5/M1

Time of Day 5am GMT to 10am GMT (this for me is the most profitable time to Trade)

Time for a Trade to SetUp

Time needed for it to reach Profit/StopLoss
  • #34
  • Mar 31, 2018 12:14pm Mar 31, 2018 12:14pm
Quoting DonPato
Hello all...I've tried several times to stimulate some conversation around this topic.
It's a very good (and important) topic in my opinion but I do think that before getting too deeply into it, it's very important to make the distinction between market "structure" and market "mechanics".

Quoting DonPato
I see many threads out there... that... don't seem to take into account how the market actually works. Or in other words, how does that cute little line, or pattern, or indicator, or ___ (fill in the blank) tell you what the market is currently doing?
For example, when I read the above statement I see instances that relate to mechanics and structure both within the same sentence. To clarify my position; the question, How the market actually works? relates to mechanics in my view, whereas the question, What the market is currently doing? relates to structure. I do recognise that mechanics and structure are closely interrelated therefore the distinction is subtle but I believe if one is able to treat these things as two separate parts it can help further our overall understanding of how and why price moves and thus profit from it.

Regarding mechanics, if any person were to ever ask me, What's the one thing you would recommend I do in order to understand the basic mechanics of a market? I would advise them to go visit a local "real" auction in their town and sit at the back of the room and observe what happens to the price of those things the auctioneer offers to the room once the hands in the room go up and the bidding starts. As we traders who've been at this game for a while already know, the price of the instrument on offer goes up. Notwithstanding closing out the auction process, this very basic and extraordinarily simple phenomena seems woefully overlooked by many retail traders. Why that is, I have no idea but it seems to me there's something in human behaviour that avoids simplicity.

Regarding the question, What the market is currently doing?, I think if one looks on a price chart and understands how to spot the main bidding and offer points, which I personally define as fresh swing points (I think a number of posters here have already done so too) then it's only natural that the market will tend to move between these points because if it didn't it wouldn't be possible for those participants creating the swing points to make any money.

As we know, price doesn't move straight up or down to those major swing points so the participants bid the market up, then back down a bit, then back up even more over a period of time thus producing various "patterns" of behaviour; flags being one manifestation. That said, the end result is always the same, price moves between the major swing points. The skill of the retail trader is to understand whereabouts price is on the main supply and demand curve for the timeframe he's trading and then have made enough observations with enough bum-on-seat time to know what price manifestly can and may do next. Out of this of course, is eventually born one's trading method.
  • #35
  • Mar 31, 2018 2:32pm Mar 31, 2018 2:32pm
^v^v✓✓~?(-?)? = $$$$$$
"The fun is in the hunt. Not the kill."
  • #36
  • Mar 31, 2018 3:42pm Mar 31, 2018 3:42pm
This video shows how the market is structured. Knowing this, how do you intend to trade it? For me, I equate it to other world activities. For simplicity sake, let's choose basketball. A player and the team and the other team move back and forth from goal to goal. You can average each player's shots, steals, rebounds, as well as average each team as a collective and finally both teams as the statistics and score vary through time.

Buyers are one team. Sellers are the other team. I average them as they move back and forth through time. Hope this explains it. Not that hard of a concept.

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You cannot be extraordinary by being normal
  • #37
  • Edited 8:41pm Mar 31, 2018 8:27pm | Edited 8:41pm
http://www.pieria.co.uk/articles/is_...ently_unstable

Nothing new here but in regards to 'market mechanics'; pretty self-explanatory. I found it an entertaining read. Maybe it will get some new lightbulbs to start flickering.

Definitely more entertaining and therefore enlightening than dkrock's thread about market equilibrium. No offense to him; he may be a self ascribed genius and phenomenally multi-disciplined but he's still a boring narrator. The market tells the story better.
"The fun is in the hunt. Not the kill."
  • #38
  • Apr 1, 2018 6:45am Apr 1, 2018 6:45am
Hi,

Everyone see the market different, because of that, we have counterparty to our trades. Someone can see Elliot waves, another can see confluence zones, it's up to our mind, so it's not an unique way to see the market, humans are like that.

Regards!
  • #39
  • Apr 1, 2018 2:55pm Apr 1, 2018 2:55pm
Quoting Sossos
... But the only way to find those quirks is to look at a chart and ask questions and then chase down an answer for yourself...
Understood...but sometimes there just IS NO answer...except that the order flow changed. Often we will never know WHY it happened, just that it did happen. This is because we cannot be in the mind of every participant out there as they make their decisions to enter, hold, or exit...so by understanding the fundamentals of HOW the market works, we don't really need to know WHY certain participants did what they did...only that what they did affected the order flow.

Quoting Sossos
...The tools I use are the median lines and the fib extension tool to measure vertically the pullbacks. The market likes to repeat, but usually only once. I have to say that the longer I study the market from this simplistic way. My understanding of price movement becomes deeper. ... Not PHD stuff, but that's what works!!!
These kind of lines and studies are all well and good, but focus on only one aspect of the market...Price. While many consider it the ONLY thing that matters, I disagree. Price is the RESULT of the other three structural elements (Time, Order Flow, & Volume). And while price movements will create a feed back look creating more of the same it is the end result...not the cause. Thus by limiting yourself purely to price studies, you place a barrier between yourself and the market. Then create another level of "noise" by the use of lines, extensions, etc. Your focus is better served by learning to "see" order flow and anticipate when it has exhausted and/or balanced...THEN if you still feel they are useful, use the levels you create with your price studies...
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  • #40
  • Apr 1, 2018 3:15pm Apr 1, 2018 3:15pm
Quoting simond2002
... it's very important to make the distinction between market "structure" and market "mechanics"...
Agreed...While I can find no clear definition, I would offer this as mine.

Structure: The basic elements that create or support a system...in this case the financial markets. Again I repeat those structural elements are:

  1. Time - Which eventually creates an "urge to action", or the drive to participate in the market
  2. Order flow - which is a direct result of the previously mentioned "urge to action"
  3. Volume - works together with order flow but also measures the confidence of participation. If one is dubious of the position he/she takes in the market they will usually reduce the size of their order. Conversely if one is very confident of their position, that position size is generally larger.
  4. Price - the direct result of the previous three factors creates price and price movement. Price then creates a "feed back" into the start of these factors and a cycle (virtuous or vicious) begins

Understanding that these are both physical AND psychological elements to each participant. Without any of these elements, the "market" ceases to exist.

Mechanics: The physical farm of servers that is processing the order flow and volume. These computers only job is to take orders and match them with opposing orders to create positions for individual participants. This action is collectively referred to as "the market". Time here plays an important factor because even with modern technology, the farther away your computer is from the server you are trading with, the longer it take for your order to be placed in the queue. Meaning it takes more time to get filled, AND in that time, price may have moved from your original order. Thus if you may get "slipped", or you may not get filled if you are now at the back of the line.

Many on this forum (FF) refer to "structure" as that pattern that is visually created on a price chart. They then draw lines on top of that "structure" as if it is a physical thing...what is often not realized is that "price structure" can look completely different from one type of chart to the next, and indeed from one broker to the next. Thus these "structural" components...support/resistance, trend lines, etc, are only imaginary lines and have little or no meaning to the actual order flow or price. They are just psychologically comforting to the participant. And speaking of psychology:

Quoting simond2002
... As we know, price doesn't move straight up or down to those major swing points so the participants bid the market up, then back down a bit, then back up even more over a period of time thus producing various "patterns" of behaviour; flags being one manifestation. That said, the end result is always the same, price moves between the major swing points. The skill of the retail trader is to understand whereabouts price is on the main supply and demand curve for the timeframe he's trading and then have made enough observations with enough bum-on-seat...
The psychology of trading behaviors (as seen in price patterns) is merely the result of order flow waxing and waning...due mostly to the type of participant that is dominant in the market. Day traders will take profits intraday or before the close of the session...swing traders will hold for up to two weeks...thus as traders enter and exit, the order flow and volume increases and decreases...while some technical analysis can "see" this is usually only AFTER the fact. However real time analysis (when viewed through the lens of structure) is far more accurate and anticipates the price action patterns long before they finish forming.
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