SignalBender wrote:Missed Monday due to constant fatigue. Energy levels have been low lately. Probably need another vacation - coming soon. Also, dealing with an illness in the family as well - mentally and emotionally exhausting for me.
This is one (1) Indicator within a system containing more than 750 inputs and that now produces more than 150 signals - and that is just the 30,000 foot view. So, don't read too much into just one (1) contributor to a much larger Engine.
The Fundamentals of Delta Trading:
I am what I call a Delta Trader.
Don't bother looking it up - there is another company out there on the net using the same term "Delta" but the two ideas are not even remotely the same. I coined the term, first - therefore, though I have no legal claim to the name (and don't plan to obtain one) - history shows me that I don't see the concept used the way I use it now. You can also refer to me as a Spatial Trader - or - Vacuum Trader, it is all the same idea.
The first and most important concept that I learned years ago, was the concept of: Magnitude. A non-directional concept (has nothing to do with the direction of "Price") and a Scalar Quantity. For those of you familiar with basic High School Physics, you will note the classical definition of Scalar. The closets calculation (very similar calculation) is ATR (Average True Range), though not identical. The Indicator name that I use to describe the markets magnitude is called, Omega. So, whenever you see me referring to the Omega of a Pair, you know I am referring to its Magnitude (or, think ATR if you like).
In my system, there are three (3) Delta concepts. Omega is one type of delta concept. Both Trajectories (TCD-Long and TCD-Short) are also delta concepts. Omega is an Internal Delta between two data points, while a Trajectory is a Contiguous Delta of two adjoining Bars of data between two or more data points. The other category is called the Non-Contiguous Delta, which relates one or more data points across multiple (disconnected or non-adjoining) Bars of data. Thus, the system's most basic calculations are intra-bar (internal deltas), inter-adjoining-bars (contiguous deltas) and inter-non-adjoining-bars (non-contiguous deltas). These are the fundamental sources of calculable data that exist within the system AND that are taken directly from the real market. All other calculated data within the system is Meta, or that which is derived from the output (results) of the fundamental sources of calculated data - not from the real market itself.
Omega, is everything. There is no price action outside of Omega - the market cannot exist outside of Omega. Omega marks the Absolute Value High and the Absolute Value Low for any time-interval, right down to the Tick Spread. So, the ultimate representation of Omega is in fact, the Spread between the bid and the ask. However, Omega only consists of data points within the same bar.
The Fundamentals of Trajectories:
To better understand why it is important to know this, consider or imagine a brick in your hand. What's truly in your hand? What you have in your hand are a countless number of atoms, each having a closely related set of high probability electron patterns that are very hard to break down, in essence. The force that binds the electron in orbit around it's nucleus in a probabilistic pattern sufficient to give the brick its physical/structural consistency, is what we observe as being real -or- reality - a real Brick. However, the brick exhibits another "reality."
The brick in your hand is also a form of Energy, as each orbiting electron is composed of even smaller particles and each of them composed of even smaller particles - right down to the very essence of the composition of Matter itself - until we reach the point of both Matter and Anti-Matter (some will say: Particle and Anti-Particle). Sir. Albert Einstein, in the most eloquent way humanly possible to date, expressed the nature of Energy in a very eloquent statement that read: Energy was directly proportional to mass multiplied by the velocity squared. Or, more well known as: E~MC2. Similarly, all price action (Energy) can be described as Omega (Mass), in the absolute. That which is in orbit about the center of Omega are two (2) elements that I call: Trajectories (TCD-Long and TCD-Short). You can think of them the same way you do orbiting electrons about the nucleus of an atom, as their combined orbital patterns are what give the market its Structure and Price, its Stability. Thus, the Energy (Magnitude) of the market can be thought of as being directly proportional to the product of its Mass (Omega) and the Speed of its two Primary Trajectories squared. Or, Volatility ~ Omega X ((Dominant TCD) - (Subordinate TCD))[squared].
The Value in Understanding Basic TCD Trajectories:
These Indicators (Omega, TCD-Long and TCD-Short), if viewed correctly, shows the literal DNA signature of the market for the Bar it represents.
There is no price action that exists outside of the parameters of these three (3) primary Indicators. All price action, price behavior and all other derived Indicators (CCI, RSI, Stoch, ADX, etc., etc., etc.), including all market reaction to News and Economic Events/Reports; all of them - are encapsulated within Omega, TCD-Long and TCD-Short. The simplicity of that is staggering, as most people consider the markets to be hyper-complex and virtually unintelligible. So the very first thing to understand is that "Price" (what mot people call Price) exists within this composite representation of Energy, Mass and Velocity -which I have converted to Omega, TCD-Long and TCD-Short. In Excel, I use the line graph for the data representing TCD-Long and TCD-Short. Both of these two (2) Indicators (TCD-Long and TCD-Short) are what I call: Trajectories - a fundamental component and concept in the way I trade.
The value of the TCD is readily apparent, after one understands what the TCD means. The TCD, being a Contiguous Delta calculation, always relates the Current to the Previous (Current High - Previous Low) and (Current Low - Previous High). Whereas, Omega, being an Internal Delta, relates the Current to the Current (Current High - Current Low, averaged over N periods ago). So, it takes a minimum of two (2) Bars of data to form the TCD-Long and the TCD-Short, whereas it only takes one (1) Bar of data to derive the Omega (Magnitude). Thus, all Price action flows from Omega -but- is fully contained and fully defined within the TCDs.
This leads to two (2) important facts about TCDs. One will always be Dominant while the other is Subordinate. This defines market direction at any time. There can be no better "Trend Indicator" than the cumulative or aggregate definition of price direction given by the TCDs. If the TCD-Long is Dominant (has the larger value), then the market in that time-frame is Long by definition. Of the TCD-Short is Dominant (has the larger value), then the market in that time-frame is Short by definition. There can be no other mathematical definition for market direction outside of that which constitutes market direction AND market direction cannot be defined outside of TCD-Long and TCD-Short, as no new high or low can ever be established without a corresponding growth or contraction in either TCD-Long and/or TCD-Short, based on their fundamental and contiguous calculable data points. In other words, the "Trend" is composed of "Trajectories."
So, if you ever want to know what the "real direction" of the market is at any time - first note that there are as many markets as there are Time-Intervals. Then, simply note which TCD value is Dominant (larger) for that specific time-interval. What people call the "Trend," is nothing more than one TCD dominating within particular time-interval. However, that same TCD may not be Dominant in other time-intervals. There is always a constant shifting and re-ordering taking place among the TCD-Long and TCD-Short, in some time-interval (market) somewhere. Therefore, the superior question to ask is not how is "Price" trending, rather which market (time-interval) is emerging as Dominant and what impact will that particular market have in markets (time-intervals) in its Past and in its Future.
Without having a fundamental understanding of the above, it will be very difficult to "see" any of the worth or value in a trading system that establishes the Delta between multiple price points as the reason for being in the market in the first place. No Delta = No Trade. Where the objective is to enter the market in the direction (Long or Short) where the Historical Delta has a high probability for being maintained. Which explains why sometimes, certain Fibonacci Retracements never happen. Or, why some Elliot Waves, never unfold. Or, why some Bollinger Bands get stretched seemingly forever. Or, why some Oscillator based indicators get pegged and seem to never want to come down. Or, why the ADX never seems to want to uncross or cross itself. Or, or, or, or, or.... Somewhere in all of that, there is a very strong Dominant TCD unwilling to unlock itself. But, when it does, the Market panics, and either irrational buying or selling takes place with fear and trembling. Noting happens outside of Omega and TCD.
Just by knowing about the existence of the TCD and how it works, you can start asking the market specific questions about Timing and Synchronicity, that most other Traders are totally oblivious too. You cannot trade what you cannot see. Those who can't see the TCD, cannot trade it on purpose - though many do by mistake, completely unaware of what they are trading in actuality - or why they are trading it.
Omega: High - Low, for X periods of Bars ago.
TCD-Long: Current High - Previous Low, for X periods of Bars ago.
TCD-Short: Current Low - Previous High, for X periods of Bars ago.
(Synchronize all values of "X.")
Delta: The mathematical differential between one or more data points that are either Internal (inside the same Bar); Contiguous (inside adjoining Bars); or Non-Contiguous (across multiple non-adjoining Bars).
For the manual Trader - the way you visually present these three Indicators on your screen, can be just as important as the indicators themselves. Often times with Delta based trading, the visual representation speaks volumes about what to do "next" in the market.
The right Delta creates opportunity. Not all Deltas are optimal for trading. The next thing to learn is how to recognize executable (trade worthy) Deltas. Pick the grapes before their time and the Wine will be sour. Pick the grapes at precisely the right moment and you can't help but produce a quality varietal, good with most any meal. The same holds true for Delta picking and part of the secret is to look inside all Time-Intervals for synchronicity and optimal timing.
Ok, that's enough fundamental stuff for one day. I need to get something to eat and then get back to work.
TRO: thanks for the explanation on the Histograms.
I'm going to have to download and install the Histogram that places the TCD-Short on the Red side (below zero) and the TCD-Long on the Green side (above zero) and then see if I can spot any Histo-Bars that are all one-sided (either all Green or all Red) with no price action being represented in the Subordinate TCD. In the one that I have, there are many instances of the Dominant TCD showing its color, while the Subordinate TCD never appears in the Histo-Bar.
thanks for the insights in a little part of your system.
the concept of magnitude is that coming from posts of tradevector of about 5 years ago?
http://www.forexfactory.com/showthread. ... #post21902
and although TRO always say: don't complicate things .. keep it simple i have a gut feeling he will be intriged by it and use more sparetime to build/amend indicators for this.
and as a programmer myself i can agree that his code is clear and readable (cq understandable).
but he also states that he does NO EA ; so finally you probably will need another coder to glue things together or ...