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Author Topic: SlipperySlope's Bubble Collapse Journal  (Read 24363 times)
ElectricMucus
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July 17, 2013, 01:31:01 PM
 #261

Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

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molecular
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July 17, 2013, 01:31:30 PM
 #262

Maybe I dont understand you correctly, but gaps dont exist in a 24/7 market so they dont matter. The time zone is also irrelevant, you can pick any time zone you like!

Again, the red trend line is not misleading. It is a valid way to draw trend lines. In this case not the extremes are connected but the bodies of the candles, which gets rid of variance and produces a more RELIABLE indicator that is not influenced by intraday fluctuation. It would be considered broken if a candle closes above it and produces trading signals just as well as the other method but instead more "solid" ones.

Watch the last example on this page:
http://www.candlestickwarrior.com/candlestick-chart-patterns/5-technical-analysis-trend-lines-keep-it-simple.php

The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

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July 17, 2013, 02:50:05 PM
 #263

Quote
Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).


Quote
The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

What you say is true for one or two candles that you can change around at will. But what you need to draw a trend line is a larger number of candles. For 10 or 20 candles the effect of changing cut off times (changing time zone) evens out.
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July 17, 2013, 06:25:33 PM
 #264

Quote
Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).

That depends on how many candles you are talking about. If it is many yes they will tend towards the median price, but if they are just a few it could be anything.
It's better to just use the median price right away.

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July 17, 2013, 06:56:00 PM
 #265

a more RELIABLE indicator that is not influenced by intraday fluctuation

Except "day" is arbitrary here, so intraday has no real meaning.  Other markets shut down for the night/weekened, that's why it makes sense to use their open and close.

But regardless, I don't pay all that much attention to trendlines anyway.  VWAP, ADX, and a few oscillators at various timescales are what I look at primarily.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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July 17, 2013, 06:56:37 PM
 #266

Quote
Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).


Quote
The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

What you say is true for one or two candles that you can change around at will. But what you need to draw a trend line is a larger number of candles. For 10 or 20 candles the effect of changing cut off times (changing time zone) evens out.

can't believe I just did this...

what do these 2 have in common?



exactly, the same underlying data:



(just with "timezone" offset by 50% of a candle width)

EDIT: and this was just randomly drawn without even trying to maximize difference.

you don't "filter out noise", you just get "different noise"

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July 17, 2013, 07:02:48 PM
 #267

do you really think if early stock market operators had had a computer storing a list of every goddamn trade that happened 24/7 they would've invented CANDLES?

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July 17, 2013, 07:16:29 PM
 #268

do you really think if early stock market operators had had a computer storing a list of every goddamn trade that happened 24/7 they would've invented CANDLES?


lol

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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July 17, 2013, 08:17:56 PM
 #269

Quote
Candle stick bodies are arbitrary, the can start and end at any point of the wick depending on the time you choose at the cutoff. They only have meaning in relation to other candles in the form of patterns and should not be used to derive support resistance from.
What works instead is using the weighted price or to a lesser extent the median price.

By cutting off the wicks you effectively get something like a median price because you filter out a big part of noise (the wicks) and get a trendline closer to the median (center of candle body).


Quote
The candlestick pattern will change depending on when exactly for example the day ends (depending on timezone). Therefore the timezone is not irrelevant. I might be misinterpreting something, but I don't think so. min/max/open/close/avg... all that will change if you move the candle boundaries.

What you say is true for one or two candles that you can change around at will. But what you need to draw a trend line is a larger number of candles. For 10 or 20 candles the effect of changing cut off times (changing time zone) evens out.

can't believe I just did this...

what do these 2 have in common?



exactly, the same underlying data:



(just with "timezone" offset by 50% of a candle width)

EDIT: and this was just randomly drawn without even trying to maximize difference.

you don't "filter out noise", you just get "different noise"


Nice example Wink If you do the same thing with more candles you will see that the trend becomes more precise by the number of candles you add.
As mentioned above, you can change around a few candles at will but cant do the same thing with many candles more. Then you WILL actually filter out some noise by cutting off the wicks and shadows that would distort your trendline other wise. An extreme example to illustrate what I mean:



Where would you draw the trendline Wink?


Another view using the same sample (I could have choosen a better one but Im too lazy right now):



Which of the 3 trendlines provides the earliest trend reversal indication?
(remember: the internal trendline is considered broken when 1 or 2 candles close above it, depending on how much reassurance you prefer)
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July 17, 2013, 09:21:43 PM
 #270

thanks for the example, Spekulatius.

You haven't changed my mind, though: I still think a weighted average is much better suited to "filter out noise" (not sure you even want that, though).

In your example, if you happen to have that extremely high point (the "outlier" (still debatable wether or not that should or should not be used, but that I cannot judge because I don't know zip about TA)) right at the open/close, you will have it in your candles, too... "unfiltered". So it's a game of chance what your candles look like and wether or not they filter the outlier.

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July 17, 2013, 09:28:26 PM
 #271


So it's a game of chance what your candles look like and wether or not they filter the outlier.


Exactly.  There are many methods one can use to filter out outliers, but candlestick bodies are just blind guesses.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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July 17, 2013, 11:20:49 PM
 #272


So it's a game of chance what your candles look like and wether or not they filter the outlier.


Exactly.  There are many methods one can use to filter out outliers, but candlestick bodies are just blind guesses.

Its a game of chance after all, thats true. But I think chance works in our favour this way because sticking to candle bodies throws out the unlikely events and make better predictions based on that element of chance.

Let me make an example:
There is an arbitrary time period, lets say: 1 hour in which price action happens during a usual day in the Bitcoin markets. 40 minutes of this hour you can expect little to no action but 9 minutes moderate price action and maybe 1 minute you will have a whale move the market quite heavily. This means there is a 40:60 chance that the hourly candle closes during little market action times which would represent the mayority of this 1 hr period, there is a 9:60 chance the candle closes during moderate price action and a chance of 1:60 that the candle closes exactly during that minute when price is at its most volatile. As you can see though, it is quite unlikely that we will have a candle closing out of the ordinary. So candlestick bodies are no "blind guesses" after all but an acurate representation of distributed chance.

@ molecular:

I think you are right in that a weighted average is the best way to filter out the noise. Im not sure which indicator provides the best signals though. Ill look further into it  Cheesy
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July 31, 2013, 07:43:09 PM
 #273

Nice post. Thanks!
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August 21, 2013, 10:27:01 PM
 #274

So looking forward to your next post SlipperySlope Smiley

Is there a certain activity you are waiting for to the upside and downside?

When would you change your opinion that we are still in a collapse?
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August 22, 2013, 12:21:55 PM
 #275


Bubble collapse finished now ??

I'm wondering if this is the start of a new up channel,



1 year log chart MtGox, bitcoins vs USD, from my blog.
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August 22, 2013, 12:49:04 PM
 #276


Bubble collapse finished now ??

I'm wondering if this is the start of a new up channel,



1 year log chart MtGox, bitcoins vs USD, from my blog.

As Slipperyslope showed in his last post your new channel would only be valid if the adoption rate would increase above the historical, already exponential, adoption curve. Chances for this are extremely low. In fact chances are higher for the adoption rate to slow down as the low hanging fruit has been harvested already and more resistence of adoption to be expected.

Even if the historical adoption curve remains constant, meaning a continuation of the exponential rate of adoption, price will stay within the channel Slipperyslope drew in his last post, and this price would still likely bottom out at $40-$50. If rate of adoption slowed it would likely bottom out lower.  
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August 22, 2013, 02:01:07 PM
 #277

As Slipperyslope showed in his last post your new channel would only be valid if the adoption rate would increase above the historical, already exponential, adoption curve. Chances for this are extremely low. In fact chances are higher for the adoption rate to slow down as the low hanging fruit has been harvested already and more resistence of adoption to be expected.

Even if the historical adoption curve remains constant, meaning a continuation of the exponential rate of adoption, price will stay within the channel Slipperyslope drew in his last post, and this price would still likely bottom out at $40-$50. If rate of adoption slowed it would likely bottom out lower.  

Not sure if price is so tightly correlated to adoption as that. There are other factors that govern price. If demand kicks off existing users will pay more, doesn't need new users. However if price rises enough, new users will start flooding in, in a positive feedback loop.

My channel makes me wonder if the bubble might not fully deflate but instead re-ignite (into an even bigger bubble). Unlikely perhaps, but considering the way the world economy is right now maybe not too unlikely ( western economies burdened with debt, central banks printing money, bail-ins being legislated etc ). The last bubble popped because of crapy MtGox infrastructure, maybe there is latent potential for the price to skyrocket even more ?

I'm not saying this will happen, all I'm saying is i joined some dots on the chart and spotted what looks like an upwards rising channel, which I'll be monitoring over the next weeks.. 
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August 22, 2013, 02:16:43 PM
 #278

or maybe it was never a bubble at all, maybe bitcoins are just slowly rising up to find their true value  !
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August 22, 2013, 02:36:49 PM
 #279

91 days after the April 10 peak



Clearly this bubble collapse is becoming more similar to the 2011 collapse than was the case a month ago.

Speculative financial bubble theory says that a collapse takes about the same time as the speculative inflation. Initially, I believed that this bubble started in January, but another interpretation of the price chart allows for the bubble to start last October - a six month inflation. A six month collapse would end in the September - October timeframe. I drew the long term support trendline in green, and added the support line of the June 2011 peak, and drew a black trendline extrapolating the current decline.

Evidence and experience drawn from the comparison of this bubble with 2011, and bubble theory makes me believe that the bottom will occur in September or October. The price then should be above $32 and below $50. The lines intersect at approximately $40.

Assumptions include the continuation of the two year long term support rate of growth. If the bitcoin economy rate of exponential growth has decreased, the the collapse could well undershoot the target. The previous peak of $32 should provide support according to Elliot Wave Theory. Bubble theory, on the other hand, allows for prices to collapse back to pre-bubble levels, e.g. $10.


The expected duration of the collapse is indeed important. Looking at bitcoin the collapse in 2011 took 5 months. How long took the exponential bubble inflation? Your chart above shows it was only 2 months in 2011, in April and June. So the collapse took considerably longer than the period of exponential rise. This seems to have been true also for the smaller bubbles. The 2011 november-december exponential rise took 2 months also, the following correction took 5 months before hitting the long term trendline again. The next exponential rise was from June till July 2012, also just 2 months, after which it corrected/flattened for 5 months too.  

What's different in the recent exponential rise is that it went up for 3 months before correcting. Which is 50% longer as the previous ones. Considering corrections took more than double the time of the rise in the past (250% longer), that would bring the current correction at 3 months x 250% =  7.5 months, or around november-december. By then however the trendline will be above $50. And since it tends to go up strongly after the bottom is reached, never to see that price again, I think it will be important to buy at such time.

Fingers crossed history repeats Wink
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August 22, 2013, 03:12:33 PM
 #280

That lower trendline on slipperyslopes' chart has provided strong support several times, but even so there's nothing to say we have to fall to it in the timescales you're looking at.

Time will tell I guess.
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