Thread: Trade the Curve

1 Attachment(s) I thought I'd start this thread to supplement the discussions from the indvidual trading forums. This helps keep things organzied and that I will update easily. The benefit is going to be that traders can observe the value curve grow during the month.

For TradeStation users, I've included the ELD if interested.

What's Price Distribution?

The Price Distribution study utilizes cells to show the range of prices for each period inside the price bar. In my case I use 30 minutes. The number of cells distributed on any one row or one of rows reveals a lot of the ActivityData periods the price occurred.

My Price Distribution studies are not Market Profile although quite similar. No volume is used since no volume is currently available for Forex from a centralized exchange.

If you do not understand the value curve, then you should seek out information and study it as it really isn't the intent of the forum to edue it. The intent is just to examine price levels inside the curve for short term trading.

Here we'll concentrate on the monthly development.There are a few simple terms to understand.

The Longest Line - This price amount reflects the price at which the most trading has happened during the month.

The Yellow Value Area - The box pictured represents a 2% deviation from the maximum line. In addition, I compute the 1 percent deviations. I will list all those levels in the updates.

Worth Area Updates - As value grows during the month, the levels will change. It's totally based upon where price trades inside the curve. If the longest line varies, then the deviations will alter. Early in the month, and this is where we are as of the post, the changes are more frequent because the information is spread over a smaller range (nromally). Later in the month, it may take a lot of action to modify values.

I will post updates as necessary and also do my best to maintain up so that you can see how things operate. Of course I refer to other months in my research, but the distance confinements here do not allow me to post big charts. This chart is most likely too big for many already.

I will try to examine what I find to help anyone who's interested. This can be a total methodology if you are so inclined, or you may just like to utilize it as an additional item of information in your current research. As the month progresses, the levels can become very large and this may not match many traders. You might also do this on a weekly basis when wanted.


UPDATED 5/7

2 percent Deviation - 1.5579
1 percent Deviation - 1.5521
Longest Line - 1.5462
-1 percent Deviation - 1.5404
-2 percent Deviation - 1.5359


Beginning Observations

Price traded today just above the base of value near the -2% amount. This is an excellent buy place. If price moves upward, expect an evaluation of their maximum line resistance at 1.5462.

The value area is growing quite well developed, however notice the monthly high price place. (Arrow) This region isn't fully developed. As price approached 1.5650 it had been rejected. Notice how the base of the curve in the highs started to grow and somewhat of a ledge is left. (Options Defense maybe). I've been EURO bearish recently, however that has changed my thoughts. I expect price to re-visit this region as it is unresolved. Now I also discover that the base of the current value place needs to fill in a little greater, so it wouldn't surprise me if price tries to maneuver up to 1.5463 or outside and then down to fill in.

As a result, I'm long out of the bottom of the curve. What occurs is that buyers and sellers will try to extend price to the extremes, beyond the 2% levels, to determine if price is approved. If it's value will grow. If it isn't accepted it will immediately return to the value place. (As was the situation this in the monthly highs of May). We have not test the region beyond the -2 percent yet, so this really is actually the risk. You will find that the 2% levels give an incredible quantity of supply and demand. Lately, in the EURUSD, you can observe that the -2% amount around 1.5360 has held firm. The extreme extensions up or down could be quite competitive and are usually trend days. 1 thing newer traders do not realize is that markets only trend a rather modest percentage of their moment, I've this number around 6 percent. The other 94 percent of this time is spent growing value over the curve as bulls and bears do battle locally. Better know as Range Trading. This is an excellent region to make money. Not easy to define clearly, but this is what the traders do to unsuspecting traders that expect for Porshe 911's early in their career.

Let's see what happens, as we advance this month. If you are a short term trader, try plotting the levels on a spare chart and play them for practice to determine what you think.

Overview

I'm extended at 5417.

Goal is an approach to 1.58 (as of now). I expect price to proceed to 1.5462 and maybe retreat. I could take some profit here and await price to move above 1.5462.

Risk is down a move below 1.5359 where value is approved and starts to build. I'll only cover if price settles below this field.

http://www.morrisfunds.com/storage/f...D 5-8-2008.PNG
https://www.nigeriaforextrading.com/trading-discussion/18-trade-curve.html

It great to see you post again I saw you join at the E/U conversation the other evening and was wondering if you were planning to post charts again. You bring much needed attention to a very muddy river. Thanks again about going way down, your post yesterday,got down me. Now have holding for mid 5400/5465 with the EZ rate remaining over the USD price may go higher but bias appears to bearish.

Hey DRT,

I'm happy you created this thread because I wished to keep discussion about it. Please excuse the skepticism you are about to survive; nothing just needing to consume some of your wisdom.

Originally Posted by ;

The Longest Line - This price amount reflects the price where the most trading has happened during the month.

Is this not just a glorified Moving Average? Can't I look at my chart, see where my moving average is, and that's where the price at place during X time period?

Originally Posted by ;

The Yellow Value Area - The box pictured represents a 2 percent deviation from the longest line. In addition, I calculate the 1.5% and 1 percent deviations. I will list each of these levels in the updates.

Concerning the data part to the distribution, this I find interesting. I took a course in statistics in college, so my understanding is just limited to there (although it seems like a lot enough).

I'm a little unclear as to what 1 percent deviation represents. Might you mean 1 Standard deviation? In that case, this would make this whole indior bollinger band-esque. Feel free to set me straight if I'm off here.

Largely, this distribution thing is like bollinger bands with pubs, right? Bollinger bands show a supply you want.

I understand you said you don't transaction solely on this, which I'm grateful because I still feel like this is just part of the mystery. I think being aware of news is a good thing.

Originally Posted by ;

Hey DRT,

I am glad you made this thread because I wanted to continue discussion about it. Please excuse the skepticism you are about to survive; nothing only needing to soak up some of your own wisdom.



Is this not just a glorified Moving Average? Can't I look at my chart, determine where my moving average is, and that is the point where the price in which the trading has taken place during X time period?



Concerning the data part to the supply, this I find fascinating. I took a course in statistics from college, so my understanding is just limited to there (although it feels like plenty enough).

I am a bit unclear as to what 1 percent deviation represents. Might you mean 1 Standard deviation? If so, this would make this indior bollinger band-esque. Feel free to set me straight if I am off here.

Mainly, this distribution item is like bollinger bands with bars, right? Bollinger bands show a supply you want.

I understand you said you do not trade solely on this, which I am glad since I feel like this is just part of this mystery. I think knowing news is a fantastic thing.

Kevin,

The benefit to viewing the Bell Curve (and comprehending it) is that you can see where the areas of supply/demand lie. Perhaps you can, but I can't discern this from a standard bar chart or candlestick chart. In general you may come close. This is a different method of defining value.

For example, can you tell from looking at a bar chart that up the area close to the monthly highs in out of equilibrium and needs resolving at any point this month?

I really don't know whether that euro downtrend is the huge traders trying to clear the way before sending the pair up or it actually denotes a different wave of insanity.

UPDATED 5/8 7:00AM(EST)

2 percent Deviation - 1.5608
1 percent Deviation - 1.5535
Longest Line - 1.5462
-1 percent Deviation - 1.5390
-2 percent Deviation - 1.5318


Observations - BULLISH

Balancing Boundaries


The overnight semester saw price auction downward as the distribution curve balanced its borders. Many time you can forecast the distance of the moves into some level.

Look at the prior post. If you measure the distance from the high of 1.5647 down to the top of the value area at 1.5579 you would get a distance of 68 points. Now go to the bottom of the previous chart value place which is 1.5359 and subtract the identical distance of 68 points. This provide a predicted low of 1.5291. The actual low was around 1.5283.

The curve has balanced its own borders and there is a fantastic chance that the monthly is set up. Now traders will create the curve.

If you are in the EURO TO 1.65 Camp then last nights Asian session has been an excellent buying opportunity. There was large order flow and price has returned into the value place. I continue to find a move up to equilibrium the unfinished area close to the highs that are monthly. We will work on balancing the current value place.

At this point I anticipate price to climb to 1.5463. We may move back down to equilibrium the part of the curve. If we proceed above 1.5463 and build value then I anticipate 1.5608.

Mr. Trichet speaks now, therefore it ought to be whacky. Weak longs are currently heading for the exits.





http://www.morrisfunds.com/storage/f...5-8-2008.1.PNG

Thread bro. . I want this thread will probably be active with good analysis

Just a note here...

When price tries to move beyond the boundaries of the yellow box trading gets quite risky. This is a indiion that a tendency day/week/month is growing. In such regions lie the traders with ideas. Hedgers, CB's, Option Warriors, etc..

While it is extremely risky, it is also extremely rewarding. Go figure. Moves develop.

One thing to watch for is a push beyond an extreme, if it is fulfilled with buying/selling and returns to both %/-2 percent area and retains, then this is a good place to set up places in the direction of their intial move.

Nothing new here, only a reminder of the energetic related to the charts. Normally(if there's anything), a breakout does not happen until a value area has balanced into some high degree. This is very important. News can drive price quickly to some new value area, but it will return to equilibrium the value.

Notice that as of 9:00 the market gave the chance to buy at the -2% amount and is currently fighting to move through the -1% amount at 5390. Then we may return down if 1 percent holds. Then you can set a move back to this level with shorts and goal the longest line if 1 percent fractures.

You might want to observe the Euro Index Distribution.

This curve moved down from the 2% value area, and it has constructed value. It is attempting to move up back to appreciate. If it does make it back and retains, then I would say there's a possiblility that its goal will be met by the curve.

Again, in order to equilibrium, the distance from the top 2% amount to the monthly highs will be similar to the space from your -2% level into the current lows. This gives us a goal of 121.76.

It's possible to see that currently there's unfinished business in the yellowish value area. It needs to fill in.

Make no mistake there's a lot of wood to chop for this to happen.

http://www.morrisfunds.com/storage/f...Y 5.8.2008.PNG