Thursday, January 04, 2007

Charts

Have you had the feeling that the charts you have no longer tell you what you want to know, but the charts you then construct to adjust aren’t right either. The last 2 months I struggled and that means I need to go forward. The system I used to trade no longer works, but an adapted one is not yet implemented. Markets change and either you change as well or you perish. A proven system should not be abandoned lightly, but there is a point when it becomes necessary to adjust it, so it again shows you what you expect it to do: Giving you an entry, an exit and an edge in the ever changing markets.

As I already wrote I had been introduced to Market Profile charts and it’s adaptation Ensign is using. Something enthios is using for a long time by the way. And his system was the only mechanical system which tested positive in my attempts to create a mechanical trading system, so that gives his ideas credence in my eyes.

My current interpretation of market profile charts based on traded volume (Ensign offers different ways to display the price histogram) is, that high volume at a certain price acts as a magnet. Price swings around this highest volume price, breaks out and finds a new price where it starts to swing around.

Now that’s something you can very nicely see on todays DAX chart
Globetrader070

But what is missing in this chart is the information, when to enter, when to exit a trade. When is price ready to go from one level to the next? I tried using different timeframe charts, but got confused. I had this chart as a 9 minute chart on my screen, but that made it worse, as I saw nearly 2 days of action on the chart, which led me disregard, that the average range of 1 bar was about 10 to 20 ticks and I sure don’t like trading with a 20 to 40 tick stop in the DAX. (The HSI was worse btw, there the average range of 1 bar was 40 points with the HSI displaying extreme volatility of 300 to 500 points within 1 session or about 2 hours trading). I hesitated for a reason taking trades, but switching back to my charts, as I used them last summer did not help either.

Globetrader_97

Still this chart had something familiar, something missing on my new charts. I decided to add the CCI to my new charts. I have a preference for the CCI as it is the oscillator I used for the longest time and the one I can interpret a lot better than any other oscillator I tried. So now I came up with these charts

Globetrader_98

Will see how these charts work.

 

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