By Joe Ross on Friday, 16 June 2017
Category: Trading General

A Great Lesson

From a longtime friend and student: 

"I thought that I’d pass on something that you might want to share with your trading community.  I spent way too long thinking that range bars and/or tick bars were my way to the holy grail and I would like to tell you what I realized and why I think I was wrong."

"First some background:  I got started down that path, because wasn’t seeing formations on the x minute charts with what I thought was adequate frequency.  This all got started a few years ago and I haven’t gone back to look at those charts.  Maybe it was just a slow period or maybe I misinterpreted what I needed to see.  Regardless, in my attempt to find a solution, I looked at range and tick charts.  You’ll probably remember that I came to Austin and showed the range charts to you and you agreed that they showed trades clearly.  Tick charts showed different things, but they make beautiful TLOC formations."

"The fatal flaw is time coupled with charting inaccuracies.  The time aspect is that the TLOC formations that one sees on those charts are fantastic, but they are impossible to manage in live trading.  The challenge is that the beautiful formation that you see on a historical chart can take 30 minutes or 30 seconds to form.  Therefore, you either fall asleep before the formation completes itself or you don’t have time to get the order placed.  In addition, the tick change shape completely sometimes when Trade Navigator corrects or recalculates the data.  It doesn’t happen often, but enough to cause a problem: a formation would look one way during live trading and then after the nightly update, it would look similar, but different enough to change how I would have traded it."

"Another aspect is that when trading those charts, you must be "on" 100% of the time that you are trading, because you never know how long it will be before a tradeable formation happens.  With time charts, you know that you have a few minutes while the bar completes, so you can unplug from time to time."

"I don’t know why I didn’t figure this out sooner."

"I went back to minutes and there’s plenty of action, so I’m back in business.  The tick charts seem like they might be useful to see inside a reversal bar, but not on their own.  You might have already put this somewhere in a blog post, but I wanted to pass on my experience."

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