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One
of several major keys to intra day price analysis, usually for the purpose
of daytrading\scalping, is to be able to decide as consistently as possible
whether price movement is rising or falling in the live moment, and if
and when it seems to be about to stop rising or falling or reversing.
Whilst "investing" is a thinking process, daytrading is a visual
process in which, to be able to buy, sell, short or exit, we are only
interested in trading what we see not what we think.
It
must therefore follow that successful intra day trading must largely depend
on trading in the same direction as that in which price is travelling,
though this is only one element of an overall trading methodology, others
include financial management and usually a set of trading rules finely
tuned to the particular instrument in play, together always with the development
of those personal skills needed to implement all that with considerable
discipline and repetition.
When
there is a methodology to accomplish this, computerisation of the process
can arrive at such a decision faster and more frequently than can the
human brain, and more accurately than can the human eye. There is therefore
no attempt here to "predict" anything, merely an attempt to
analyse what is actually happening now in the above described terms. What
this means is that on a macro time frame, the "intentions" of
price are constantly being revealed by the price action and our visual
process is that of seeing what those intentions apprear to be. For example,
is the price rising or falling, is the rise or fall running out of gas,
is a price turn a turnabout or just a mark up inside a downmove etc.,
This
in house computerised chart analysis program is currently in re-development
of its umpteenth incarnation due to trying to keep up with technological
changes without the same budget as Microsoft, and is an attempt to prove
that very short time intervals, in this instance of 2 minutes duration,
can be read in a similar manner to reading sheet music, a score - with
each group of adjacent bars being the equivalent of a series of notes
and their syncopation. When reading music we are reading a sequence of
notes as they occur, so that the fingers know what to actually play, i.e
the direction of the music is given to us from the written notes, together
with how loud or soft each part is, hopefully producing a good performance.
In music we are not predicting anything but reading what is occurring
now and what should happen next. Our ability to read those notes accurately
or otherwise dictate the success or failure or our efforts.
Musical
composition and notation follow an orderly, regulated and artihmetical
structure, and once the first part of a tune is known, the next part of
that same tune can be reliably anticipated most of the time, and most
music contains parts and patterns which repeat. However, in addition to
the tune, there is also the accompaniment which, for example in the case
of a piano piece, will contain a treble clef for the tune and a bass clef
for the accompaniment, with mainly the top part being played by the right
hand and the bottom part being played by the left hand.

The
belief underlying this experiment is therefore that, like music, short
term price action also follows an orderly, regulated and arithmetical
structure. On a chart of an Index, the price bars represent the musical
equivalent of a treble clef, and the volume bars the bass clef.
A
bar in a high area of a chart (of a predetermined size) is analagous to
a high musical note, or a note in a higher octave. Conversely, a bar in
a low area of a chart is analagous to a low musical note, or a note in
a lower octave. This, if you like is the range.
The
most important element of playing any music that is being read is timing,
the most important element of intra day trading of a chart being read
is also timing.
This
program therefore attempts to find the arithmetical correlations in short
term price movement, i.e. it is not interested in interpreting underlying
factors, such as supply and demand or accumulation or distribution, it
is only interested in reading the bars as though a piece of music, and
providing the reader with a clear visual means of navigation because,
at the end of the day, many people are attracting information overload
from which they make their trading decisions which usually ends up in
either confusing, expensive errors of judgement, or both. The process
of Trading requires a clear observation of whether price in this moment
is rising or falling, and the more accurately we can see that, the more
chance we have of making trades which make sense and make gains.
Music is of course a form of entertainment, and therefore so is this program
but running alongside an ordinary live chart at the trading desk can often
assist to keep the Trading activity OUT of likely poor positions which
might otherwise be placed in the wrong direction as a result of each individual's
own decision making process. The Program does not attempt to "tell
you what to do" but can be a visual aid to enhance the individual's
intra day analysis.
NOTICE:
This article is a brief explanation of the system for academic or entertainment
interest only, i.e. it is not a product to be sold or rented. However,
the technical and administrative feasability of live broadcasts to students
for purely educational or entertainment purposes only is currently being
studied. If you are a Software Engineer with experience or ability in
producing a charting program please email.
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All
musical notation has 7 white notes and 5 black notes, meaning that all
music is composed from a total of just 12 notes!
However,
there is almost an infinite number of permuations of those notes, if it
were not so then most music would sound the same.
Although
there are just 5 indicator colours used by the Program, these represent
the outcome of many indicators to embrace many thousands of permutations,
which share the same colour for rapid observation of apparent price action\direction.
In
the same sense that there are traits which are unique to jazz music and
distinct from pop music, so too does each individual financial instrument
or market possess its own distinct aspects. Therefore, each market has
its own unique "library" of about 1000 indicators in turn sub
divided into 100's of lines of algebraic definitions.
Clearly,
it is probably impossible to capture every possible permutation but each
library has sufficient of them to to
compute the analysis of what each successive bar is revealing about the
live price action in an attempt to "track" the direction and
mood of the price, factoring in any extremes of trading activity, automatically
producing an indicator when appropriate., together with some additional
onscreen arithmetical information to complement the visual aid. For example,
if there is a blue followed by a green and leading to a correct analysis,
and then a series of reds to suggest the end of the move, this does not
in itself provide a viable opportunity if, no matter how accurate the
signals are, the number of points travelled between one signal and another
is too small to be of tradeable value. Hence, the wider the range of any
given day, the more practical this program is.
No
User input is required and no classical technical analysis indicators
are employed. |
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