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Non-Tech : The Woodshed -- Ignore unavailable to you. Want to Upgrade?

To: Square_Dealings who wrote (6348)	5/8/2004 11:01:30 PM
From: Michael Watkins	Respond to of 60907

Must be a whole lot of panicing going on, only one of the last five days was less than 100 points high to low if memory serves me correctly. In fact, the DOW has put in far more 100 plus point days since the start of March than otherwise. While we are on this topic, we may as well share something useful. I have long preferred short trades in futures because in futures - and in virtually every other market I have ever traded, price falls faster than it climbs. For short term profit generation, nothing beats a rapdily moving sinking market. Price falls faster than it climbs. Think carefully about that. Now, apply that observation to daily or longer term charts and one comes to the obvious conclusion that down trending markets will usually have longer bars than uptrending markets. I watch the bar length for other reasons, chief among which is position sizing based on risk, but its also useful to know that if price is heading down and bars are getting longer, there is something tradeable afoot. Two charts to demonstrate this: trendvue.com First, DJ30 index showing not an average of bar length but absolutes. Bottom panel. The "trigger" line for the color shift to magenta is when bar length is over 100, since 100 is the number being talked about. Note how frequently coming into 2003 daily price swings were > 100. Once the chaos of a newly emerging trend was past, bar length drifted lower. Bar length is again starting to mostly be higher than 100 and indeed, price has failed to regain old highs and is swinging down in intermediate time frames. And just FYI heres the same chart but with a 5 period average applied. trendvue.com ABL isn't all that useful for timing, but it does tell something about volatility and this can be helpful in sizing risk. ABL is similar to Average True Range except that I am only really interested in the actual range of the daily bars, not the gaps that ATR includes. But that's another story.