Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Thank you @Pa Dax and @josh both for putting down in words what I was thinking, but much more eloquently than I was likely to muster lol.
From a personal perspective, I can and will give decent weight to how and when a bar is formed for all the reasons mentioned here, but more than anything I pay attention to how price reacts at a level of interest... and if I see what I'm looking for, I will pull the trigger regardless of where we are in the process of said bar being generated. Seems no matter the methodology, everything boils down to a level and whether it holds or folds.
A bar type I haven't seen?? With all my early years of searching for the grail I thought i'd seen them all. I have actually thought of something like this bar type and searched but found nothing...and I haven't gotten so far as to code my own stuff...yet. Right now I use smaller time frame bars and usually "scrunch" them up so you almost can't see individual bars...just the flow, but your description has sparked my interest. Where did you find this? and do you know what platforms it is available for? I use Ninja 7 still.
Appreciate any info,
Thanks, Craig
Until you make the Unconscious conscious, it will direct your life and you will call it Fate...
Cause, if you would be mimicking those traders, the exact close of that bar defines where those traders define their risk and thus their profit targets. Had you entered before either higher or lower you are out of sync with them.
I agree with you that mathematically if you define a stop and a target you can enter at any point in time if current price gives you a favorable risk/reward/probability skew but we're talking here about why traders are looking at the close of a bar and reason is simply because that's what everybody else is doing as well. There well always be a sperm cell swimming the other way but the easiest chance of success is to follow the herd.
@josh, I think you've made a lot of good points and many of the responses that have been written in reply to your original question have been thought provoking and offer some insight into how the "market" represents all of our different views, by facilitating trades to allow us all to express those different views.
One view I have to offer is shown here in one of the first indicators I built when I started trading futures.
It simply plots a rectangle where a new bar has gapped up or down from the prior bar's Close.
It is my belief that the activity that took place to form that Gap is a reflection of the fact that traders were willing to "jump" into that trade (for whatever reason) and their zeal caused the next bar to open either higher or lower than the previous bar's close.
In my opinion the Gaps show (me) areas where Supply or Demand has been present and the market has confirmed my suspicion by moving in the direction of those gaps until the traders that "pushed" the move exhausted their initial desire.
One thing to note here is the "Bar Gap" indicator I use does not work well on Volume or Tick charts because there are very few Gaps formed on those charts (mostly limited to a Gap on the Open from the prior Session Close) due to the way the bars are formed.
I do like the way they work on Time based charts though.
Food for thought,
Trade well.
R.I.P. John Bottomley (Botts), 1956-2022.
Please visit this thread for more information.
What do we really mean when we say "gap"? We mean that there is so little interest to sell (in a gap up) or buy (in a gap down) that the market ("market" means the order book, specifically the BBO here) moves without much actual trade happening.
"Gaps" do exist intraday -- thinly-traded equities, orange juice futures, etc. In a market as thick as the one your charts show, however, it's very rare, even in the most volatile of news releases, to see a market trade price X and then X+2, without seeing price X+1 trade.
An opening bar print compared to a closing bar print on ES is in all but the most rare of circumstances going to be either equal, less than by 1, or greater than by 1. Any trader of any size can create that opening bar print. If the market is bid at the closing print, then a buy at the market will create an opening print higher, and a sell at the market will create an equal or lower opening print. Vice versa if the market is offered at the closing print.
So, on a given day with more positive "delta" (not in the options sense, in the volume @ bid/offer sense), you are slightly more likely to see your bars "gap up." Vice versa for a day with negative delta. So, in a way, you a probabilistically more likely to see these gaps correlate with the market...maybe.
But you are still using two transactions that occur sequentially in time, and the placement of these transactions along the partitioning of bars (5 minutes, 15 minutes, ...) is purely random. The sequence of "gaps up" and "gaps down" can be very interesting, and in fact this is exactly what a delta measurement does -- it gauges demand based on trades transacted at the bid or offer. This is very helpful. But to negate all but two sequential transactions every 5 minutes is ... well, like this: Imagine a long line of people of varying heights. Take two people out of every 300 or so and compare their heights. Do this every 5 minutes. After a few hours, you have some samples. How well do you think you have done in predicting whether the height of the people in the line is increasing or decreasing over time? Ignoring thousands of data points and sampling two that are related in no way is not a solid basis for determining much of anything.
I commend you for thinking of the market on this level, and as I've mentioned above, it's basically a tiny sample of what delta tick/volume is all about, which is very useful. But we must be careful that the things we choose to look at in fact make sense. We must always ask: is this a sound and logical idea?
Your Sunday gap, and equity gaps on daily bars, mean a LOT. This is because, as in my original post, these periods where trade is not possible are true delineations. By the close of business, the business better be done, or it must wait for the next trading day. In this situation, where the market closes means something, for sure!
This all makes sense, but the more I think about it, almost every system of trading is like this. Unless you are trading fundamentals of the underlying asset (which is impossible for a retail trader), you’re looking at a chart that shows the price of a derivative, and using that chart alone is in and of itself sort of superstitious. I don’t think that means you can’t obtain an edge, though.
Thanks for your post -- two things come to mind here:
1) It's definitely not impossible for retail traders to have a fundamental-first approach. It's true that they don't have the same level of access to information that large institutions do. But they also don't have access to the same level of technical-based information that an HFT firm has, yet they trade technically, primarily. I think the choice of technical vs fundamental for retail traders comes down to the motivation most of them have for trading: they want to get rich quick. Fundamentals take more time, more intelligence, and more work, IMHO. It takes a few days or weeks to get comfortable with trendlines, candlesticks, and RSI. It takes months and years to understand the holistic picture of the financial landscape, and retail traders just aren't interested in that.
2) If you watch some of the webinars Peter Davies does, he often mentions that prop firms which he has experience being around are not chart-focused. Yes, they use charts. But that's not how they really figure things out. In my own time with a prop firm, all the traders I worked with used charts, but they were more in tune with what moves markets, using the chart as more of a context to make a decision, and then ignoring it when it ceases to become useful.
That’s good to hear. If I’m being honest, TA is interesting and makes a lot of sense when studied “in theory” but when I try to apply it to actual trading I feel lost. I know the technical advantages that HFT firms had, but I always assumed (perhaps erroneously) that the difference in quality of the technical data was far less than the difference in quality of fundamental data.
If you had any good resources for learning and creating a strategy that focuses more on fundamentals, please share. No one I’ve asked (not on this forum, but others like it) has ever thought it’s even possible.