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The document discusses several concepts related to analyzing markets: 1) Exogenous events are unexpected events outside of typical models that contribute to market uncertainty. 2) Information, whether positive or negative, can have an exponential effect on outcomes as more accumulates, rather than a simple additive effect. 3) A gap in prices signifies a total change in market thinking and presents a large trading opportunity, especially if the gap is later filled according to the "gap rule".

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100 views3 pages

Halfback

The document discusses several concepts related to analyzing markets: 1) Exogenous events are unexpected events outside of typical models that contribute to market uncertainty. 2) Information, whether positive or negative, can have an exponential effect on outcomes as more accumulates, rather than a simple additive effect. 3) A gap in prices signifies a total change in market thinking and presents a large trading opportunity, especially if the gap is later filled according to the "gap rule".

Uploaded by

jadie ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as RTF, PDF, TXT or read online on Scribd
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Exogenous event

An unexpected event that wasn’t considered within anyone’s model of expected market
moving events; these events occur more than most mathematicians anticipate. They
contribute to market uncertainty.

Exponential effect

As we accumulate either negative or positive information we can’t simply assume that


each new piece of negative information, for example, can be added or incorporated
into our analysis by simple mathematical addition. As the negative information begins
to accumulate, each new piece of information may have the effect of very rapidly
multiplying the possible outcome of risk or opportunity. We have experienced this
effect as we build sand castles where finally the last grain of sand collapses the castle.
Graphically the effect would look something like the following graph.

Gap

Is another form of excess. Price moves rapidly away from a prior trading level or
reference; a gap signifies a total reordering in market thinking. NOTE: A gap, as it is
employed in the Field of Vision video, Mind over Markets, and Markets in Profile, is
measured from the previous day’s high or low—not from the settle. A gap signifies a
market that is out of balance and presents a large opportunity.

Gap Rule

If the gap is filled and value cannot at least be similar value to the prior day, odds of a
later day move in the direction of the gap are likely.
Go with Trades

Go with trades are required to benefit from breakouts from balance, trading ranges,
etc. To benefit from these breakouts, traders will be paying ‘10’ for something that may
have been priced at ‘6’ prior to the breakout, for example. These trades, very often,
represent a dynamic change in market thinking as well as risk and opportunity. These
trades are high risk if you are positioned against the breakout; but large opportunities
if you are going with the breakout. With successful breakouts, structure and value will
follow. The opposite of go with trades are reversion to the mean opportunities.

Go-No-Go Level

A level where the market is unlikely to remain. The odds are that it will make a
meaningful move one way or the other, but with regards to direction, it is important to
remain neutral.

Half Back

This reference is usually reserved for day and short-term timeframe trading and is
most applicable when the day or short-term timeframe is dominating the market. It is
also most applicable during the market’s initial auction; if there are day or short-term
timeframe buyers below the initial rally high, or day or short-term timeframe sellers
above the early auction decline, they tend to surface on a 50% pullback or 50% rally of
the initial auction range (high to low). Throughout the day the half back reference
”floats” as there is range extension; however, it is still a day and short-term timeframe
reference. We stress day and short-term timeframe because when the market is
dominated by longer timeframes they pay no attention to these very short-term
references. It is always important to know what timeframe is dominating since the
trading behavior will change.

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