Notes

Part I



Not many realize there are two looking glasses; one separates traders from citizens, a second separates traders from professionals

The following are some random thoughts I pieced together to hopefully further the view into the second

One important note – I do not want to get into a pissing match or (and especially) derail this journal. These are “my” thoughts that hopefully shed some light into a very dark closet – your mileage may vary


If however you still feel a pissing match is in order – start another thread – I’ll respond



Illiquid – I respectfully and humbly ask for your indulgence Sir



Fractals
* Are patterns which repeat themselves to create an identical – bigger pattern – which in turns creates an identical bigger pattern – so on and so forth.
* The base pattern in this case is repetitive buying and selling
* Reoccurring fractals create cycles
* Multiple fractals/ cycles occur simultaneously to build even larger fractals/ cycles
* Fractals / Cycles are a result of Professional Traders (Smart Big money), Market Makers (professional operators), individual traders, and dumb big money – buying and selling at their unique discretion
* Viewing differing fractals is not the same as viewing a chart in differing time frames
* IMO smaller time frames are simply a microscopic look within a larger time frame

Cycles
* Are either Bullish or Bearish – some call them trends
* Have tops and bottoms – everything else in between is just a completion of that cycle
* Cycles occur over time, but are not governed by time
* Weakness of a cycle shows in up candles
* Strength of a cycle shows in down candles
* The direction of a cycle remains in tact until something affects and/or stops/reverses it
* A bull cycle move happens after a substantial transfer of stock from weak hands to strong hands occurs
* A bear cycle move happens after a substantial transfer of stock from strong hands to weak hands occurs
* Aka a market/ price move

Market Moves
* Do not occur on news – major catastrophes notwithstanding
* Are explained/ justified by news
* Are only caused by professionals maneuvering supply or demand (catastrophic events notwithstanding)
* Are the way professionals make money
* Are only stopped/ reversed by professionals (catastrophic events notwithstanding)

Candles
* Indicate price direction
* Represent price spread (aka price action)
* The price spread of a candle contains half the information required to read the market, the other half is contained within that candle’s volume
* Weakness shows in up candles
* Strength shows in down candles
* Always read a current candle’s spread, in relation to its current volume (the result of effort being exerted)
* Always read a current candle’s spread and its volume – within the context of the price spread/ volume that has preceded it
* Contains a Open, High, Low, Close
* Price spread is a candle’s height

Price
* Price action not only describes the price spread of a candle, but can be used to describe general price movements/ cycle direction, support and resistance – the tick by tick movement of price – whatever
* Price only moves because of a supply or demand imbalance
* Price spread is the result of effort being exerted – volume being the exerted effort
* Professional operators create supply or demand
* Resistance = ample float to short / longs are selling – more importantly professionals are selling/ establishing a short position
* Support = minimal float to short/ shorts are covering – more importantly professionals are covering/ establishing a long position
* Always read current price’s spread along with current volume – while factoring in preceding price’s movement and the volume it took to make it happen.
* As price moves – sheep are forced to follow
* Futures fluctuate above/ below cash price, but cash price will always set the limits due to arbitrage
* Sudden price moves away from cash price are usually caused by a professional and/or market makers

Accumulation / Distribution
* At a potential cycle bottom – accumulation begins when professionals/ market makers start buying
* They will remove stock from weak hands by placing them under pressure (forcing prices down)
* They also buy as much stock as possible – while making sure they do not significantly move price up and against their position – they do this until there are few or no shares available at the price level/ range they’ve been buying at – stock changes from weak hands to strong hands
* Once no more selling pressure (resistance) exists (meaning the weak longs are flushed out / majority of the float is controlled) – then price is free to go up
* As price moves up the sheep must follow
* Accumulation is complete
* Accumulation is support


* At a potential cycle top – professionals / market makers sell
* Professionals will sell to the market and/or to the market makers (and cut a deal)
* Market makers now must not only sell their current long position, but must also absorb (agree to sell) whatever professionals have not sold to the market. Market makers will place these surplus shares, from the professionals, onto their “books” – and agree to sell these shares within a specific price range
* Market makers then must sell the majority of their remaining position, and their book, while not driving price down too far or too fast – so as not to force price to go against their own position and/or their other trader’s position (their book)
* Should selling force price down too far/fast – then selling is stopped and price is supported – giving the market maker / other traders (their book) the ability and time to sell more of their stock to the market – as price rises on the next wave (cycle) up
* Distribution is complete once the market maker and their other traders (their book) have sold the majority of their position. Support is removed and a bear cycle begins – this takes time put the pieces in place and complete the transfer – strong hands to weak hands
* As always the sheep must follow
* Distribution is resistance

Volume
* Indicates the amount of activity (effort) being exerted
* Exerted effort should result in a price spread, or not – depending on the professional/ market maker’s intentions.
* Contains half the information, the other half is contained within the price spread of a candle
* Always read volume in relation to its current price spread
* Always read volume and its price spread within the context of the volume and price spread that‘s preceded it
* Professionals/ market makers are the only ones able to create enough volume / price spread for us to read
* In an uptrend – volume showing a substantial and healthy increase is bullish
* In an uptrend – excessive volume is not good – supply may be swamping demand
* In an uptrend – low volume warns of a potential trap during an up move
* In a downtrend – volume showing substantial and healthy increase is bearish
* In a down trend – excessive volume is not good – demand may be swamping supply
* In a downtrend – Low volume warns of a potential trap during a down move
* Excessive volume – either direction – could also be categorized as capitulation or blow off
* Volume coupled with price spread tells the story

Stock
* Holds no intrinsic value
* Individual traders must always be mindful of the perceived value to a professional trader
* If you are able to buy at a better (lower) price – perceived value my be waning
* If you are able to sell at a better (higher) price – perceived value may be gaining