An approach to Monitoring

As price create patterns as discussed earlier, same way value or VA create its own patterns; both these patterns may either tell same story or different one. It may happen that, price may show an uptrend, while VA may not follow same trend; thus, various permutations & combinations of price & VA placements are possible, giving newer perspective to look at & to think about the market auctions. For JD, while monitoring, the direction of price movement is only one part of the analysis; the other being how good or bad are the forces, which are driving the given price movement? So, it is beautifully summed up as the ‘Three Big Questions’ i.e.,

Which way is the market trying to go? and

Is it doing a good job in its attempt to go that way? and

How good or bad is the job being done?

First question is about attempted direction & other two questions are about directional performance. Answer to the first question is quite simple, & can be revealed using conventional analysis of price action. The answer to the second question takes into account volume generated by the day's market activity; while last question requires three other parameters such as value area placement, value area width, & structure.

VA placements simply means relationship of day's VA with previous day's VA (PDV), & it can be of various kinds: either clearly higher or lower to PDV, overlapping or unchanged, overlapping to higher (i.e., previous day's VAH) or overlapping to lower (i.e., previous day's VAL), inside or outside VA. VAW is proxy for day's volume & it may be either compatible to or incompatible with the day's actual volume on relative basis i.e., as compared to previous day. Structural health for the trend days could be either healthy or emotional structure; & may be stated as balanced or symmetrical for most other day types. Then there are other interesting shapes as noted earlier having their own significance; e.g., p shape could mean short covering & b shape may suggest long liquidation.

Majority of loss-making traders look at only first question, so they rely on various price based momentum or trend- indicators or purchase sophisticated buy or sell signal-based algorithms or programs to make their trading decisions. JD uses a term called ‘price blindness’ for the behavior of such traders who follow price momentums blindly and never ever think of the forces behind that price movement. JD claims that by using value instead of price, one can avoid perils of price blindness and also majority of the psychological issues associated with trading will vanish automatically. Personally, for me, this claim itself is a very profound statement; because during my early trading days, I had faced great pains to learn some market strategy which worked for me, but still my results were poor due to issues related with trading psychology. I got trapped into the dichotomy of market strategy & psychology; i.e., between the two noises - ‘without a strategy having an winning edge, you can’t make profits’, & ‘Market psychology is only requirement to make profits.’ Thanks to JD's work, that such diabolical polarity got resolved for me & I could shed my market blindness.