So where to go from here?
A lot of ideas. The basic idea is to start with extremes, break them into waves, or highs/low, movement of highs/lows, and dissect it into as many parts as possible
There are a few ways to define Up days vs Down days:
1. Up is when the close of the day is higher than the open of the day. (C-O > O>C)
1b. Down is when the close of the day is lower than the open of the day.
2. Up is when the high of the day (compared to the open) is larger than the low of the day (H-O> O-L)
2b. Down is when the low of the day (compared to the open) is larger than the high of the day
3. Up is when the Low of the day occurs before the High of the day.
3b. Down is when the High of the day occurs before the Low of the day.
The third, which I like the most for a few reasons, introduces one of the prime elements of trading different from the first two: calculations based on price, or calculations based on time. After much picture drawing, there aren’t necessarily problems against using price as the subject rather than time, but rather that using time has it’s own benefits. Most notably, as a day trader, time is very important. The time between NY close and Asian open never offers better trade opportunities than during the London session. Likewise, the mid Asian session is much better to trade than the end of the NY session. Because of these consistent time volatility “laws” in the market, it is important to know not just if the price that you are entering at is good, but if the timing that you entering at is good.
So with timing, with calling Up days as days where the low occurs before the high, then what? How do you know to trade long or short? In theory if you could nail the timing of the low on an actual up day, you should trade long at the bottom no matter how bear of a day it would be. Good idea? Bad idea? Find ways to continue trading the bear in the bear day?
Track highs and lows, track highs and lows. Track retracements from highs and lows, track characteristics and follow throughs of new highs and new lows, track numbers of highs and lows, track timings of highs and lows, etc. I’m starting to see the idea of this as being just watching for new breaks of price levels. Again: a very simple concept, put into vigorous testing.
Characteristics of a continuation?
Characteristics of a bottoming out/topping out?
How many highs until the absolute high? How many lows until the absolute low?
What are some characteristics of the MM? Major Move? The single swing that captures both the high and the low?
How long does MM last? What kind of movements occur before MM begins? What time does MM begin?