A trend trading question

[ProfLogic]

Quote from Carboncredit:

I am very happy the professor posted this. It clearly shows the bad effects of hindsight bias that damages many traders. He states that the longer a price series run continues the stronger it is, meaning the more likely to continue.

This is totally wrong and illogical. The professor has fallen into the common trap. Length of directional movement had nothing to do with strength. It's time these market myths are put to rest.

So the pullback in Gold since November 9th, 2010 is a stronger move in price direction than the continued up move from October 24th, 2008, February 5th, 2010 or the closest point from July 27th, 2010? And you call me wrong and illogical. You have absolutely no clue on what "logic" is.

This from a hedge fund shill that makes the bulk of his income from commissions pushing pump & dump products down people throats. How did your Euro/US Dollar call pan out shill? This idiot and his opinions are the reason the "average Joe" is pissed at Wall Street.

Bye Bye

 

[jack hershey]

Quote from TraderZz:

Jack, you are being very specific recently in your posts and it is very appreciated. Might you suggest a start to look at your material given the refinement over the years,

thank you.

OVERVIEW

This is late 2010.

Here is my recommended plan , strategy, and routine to follow for the next 12 months.

A person and his family MUST become immune to the developing Depression by following a CPM.

Start with any small capitalization.

Make several definite commitments:

1. Be purposeful in learning and focus on one thing only: Having a fully differentiated mind via doing prescribed drills in a prescribed order.

2. Commit to dwell time at each skill level in order to gain facility. Never skip steps especially if you are smart. Never invent, it wrecks differentiating your mind.

3. Commit to becoming a millioinaire in less than 12 months. You must NOT have any orientation aspects that stem from the Conventional Wisdom.

Your plan, strategy and routine has one basis: pool extraction. Pool extraction is the principled orientation to take the market's continuitng offer profit segment by profit segment.

A plan is an organized business plan of 12 parts. It is written and it explains your partnership with the markets. You define completely both your role and the markets role and precisely why neither partner usurps, at any time, any facet of either role. The explicit cycle of enhancing performance in terms of effectiveness and efficiency is expressed as part of a repeated cycle involving: 'tells', acceptance. value and then trust.

The strategy is pool extraction using a fully differentiated mind.

The routine is MADA which stands for Monitoring, Anaysis, decision making and timely Action This epitimizes monitoring and analysis of trends on three interlocked fractals. The PEP is the foundation and PEP stands for Pool Extraction Paradigm.

BE DO HAVE

You become a millionaire within 12 months. In the present context, 15JUL11 will occur in that 12 month period and the Depression ,which is underway, will be full blown by then.

The plan is a writing task. It includes monthlies for three years and quarterlies for the next two years. (44 columns).

The pool extraction strategy centers on one thing: differentiating your mind. Drills enable the building of the mind. Short term memory becomes long term memory and long term memory becomes fully organized.

You do one and only one routine repeatedly. It is done several times for any forming price bar and related volume bar. Volume leads price.

Devote 6 months to PVT. Here you perfect using three interlocking fractals which display the annotated (both price and volume fractals). The long pattern is B2B 2R 2B. The short pattern is R2R 2B 2R. This is three price movements and four volume movements. You annotate on daily, 30 min and 5 min charts for stocks. The schedule of trades comes from the Universe which is Kept on an Excel and all stocks have file folders which contain an IAS and the copies of the logs DAS when owned or being bought using the "one pager" rules on "unisual volume". All annotations are printed and added to folders.

At the end of six months you will have done a couple hundred stock actions. You are shooting to do 100 PVT turns a year @ 10% profit where the offer is 20%. Al trading is done from the viewpoint of having cash to enter another better opportunity (Cross over trading).

The last half year you trade the ES starting with 2 contracts and 5K. You do 10 cycles of 12 days each. Cycles 1 through 5 are shown on the P&L that takes 5K to about 3/4 of a million dollars in 60 days.

The remaining 60 days are for cycles 6 through 10 which deal repectively, with YM. DOM sums. DON walls, S/S, and OTR. Here you use a nominal 50 contracts and incur a breakpoint of the P&L every 12 days.

 

[jack hershey]

PVT DETAILS

The universe is obtained with one mouse click.

Learning to annotate stems from 10 cases. Use a platform that encases the internal cases in a yellow filled box and laterals in a blue filled box. Treat internals as one bar.

Fully annotate all patterns on all fractals (three) of every stock on your hot list and for any IAS you do for any Universe stock.

Use three cut folders.

Watch the short pattern preceding the long pattern you will trade. Enter on the sendiment change to save time. Exit a held stock when any other stock is is a buy to save cycle time.

Post you hot list and batting order daily. Post the charts of the four (minimum stocks you own daily. Post the stocks completing their short last move to FTT daily.

Outline and post the 12 parts of your business plan. Cut and paste it together from prior posted business plans. Do it by parts of a little less than 10,000 characters each. Illustrate the BP with cut and paste illustrations from prior posted illustrations.

As the months pass you will continue to update the P and L of the BP.

A typical trading record of a starting BP is about 60 trades in the first three months when four (the minimum ) streams of capital are used. Early exits are the norm. Most people beginning, exit on the B2B instead of holding through the B2B 2R 2B. The 2R is usally a lateral or a slightly increasing positive sloped fast rtl. This is because of the QA level of the universe.

Excel has a graphic charting tool. Be sure to use the semilog verson since your P&L curve is an exponentional and not linear at all.

I probably will complete my five books on this before you complete you efforts.

As you do your mind building you will notice questions arise. Ask them. The series of Q's that arise are always the same and in the same order for learners.

A brief document that covers the first six months is : "Putting the Pieces Together". The person who "betting order" that was used was running 4 streams that started at 100,000 dollars and he was bulding thestreams to 1,000,000 milion dollarsat that time. In the 30 some illustrations of one day, you can see how the trading took place. It well exeeded the 10% goal for a cycle on each owned stock. That is how it goes. In the document you see the emplasis on shortening a hold to get into a btter stock. The annual game plan is to do 100 turns @ 10%.

By spending 6 months in this routine, you get familiar and have facitiy with all the tools you will use in extracting capital in ES trading. when you then begin with 5K you take the 5K to 3/4 of a million in 60 days. Actually you make much more and you sweep weekly and put excesses into PVT streams.

your priorities are:

1. Being on the correct side of the market profit segment by profit segment.

2. Compounding profits.

"Building the Mind for Building Wealth" is another document to get a hold of. the Appendix C outlines a business plan with text.

You can use the information in the forum in traders laboratory to have an encapsulation of pool extraction oriented trading. It features trtend monitoring and analysis which is very different than the lagging trend following orientation.

 

[Gabfly1]

Quote from Maverickz:

WHAT?!?!

Trends are functions of supply and demand and yes if you see see an equity coming into a supply area in a 30 min or daily chart you really should think twice about taking a long trade on a 1 min chart just because on the 1 min it looks like it should be going up. You absolutely SHOULD consider multiple time frames.

For people who don't actually trade in multiple time frames, I think the use of multiple time frames is overdone. I suspect they provide more comfort than value. Of course, this is just my own opinion based on my own experience. And in that vein, I wonder if people who use multiple time frames to trade in a singular time frame would be well served by spending some more time working on their method in their principal time frame. But, to each his own.

 

[Gabfly1]

Quote from Carboncredit:

Trends only exist in the past. Any thinking in this manner is sure to end in ruin.

It's the wrong way to view the market.

Surf, may I call you Carboncopy? Didn't you once defend the notion of "drift" in your defense of VN and his trading? What is the practical difference between "drift" and "trend?" Are they not essentially the same thing for all intents and purposes, with the only difference being how adept one is at identifying and exploiting them? All else being equal, if a market is steadily "drifting" on one direction, are you going to make a play in the opposite direction if there is no indication, by your own standards, that the "drift" is coming to an end?

 

[bone]

Time horizon. Successful trading is all about time perspective and trade holding timeframes.

I traded for a large commercial for a few years where I took positions based upon several months. I traded for a hedge fund where I took positions based upon several weeks. I traded for a large private equity firm where I took positions based on several hours. I traded for a large prop firm where I took positions based upon several minutes. I traded my own account where I took positions based upon several seconds.

Every participant in any market has a different timeframe requirement. Once you learn to optimize and blend each of those considerations the worm will turn for you.

The very best thing you can do for your trading is to enhance your timeframe sampling and analysis strategies. It is the most important thing that I do in my personal trading, and in the strategies I teach to clients. More robust timeframe sampling is what made me survive and ultimately thrive. There is no holy grail, but enhanced timeframe sampling is a very potent weapon indeed. It is always the most under-developed and misunderstood element for the new clients I take on.

 

[jack hershey]

Most of the posts in this thread point out a very difficult problem most traders do not succeed in handling.

A very new trader is often overpowered by how the market moves when he has such little understanding.

As seen, a lot of people remain in a major trap regarding how time goes along or really works in markets.

The market dictates the timing of the moves it makes. The main time factor is the time the market spends betweens its limits of the moves of it variables.

As you see as you read, most posters ursurped the market's prerogative. They fell into a trap.

It is a major choice to discontinue doing this. For most, it is not likely.

How the trap go going for any person stems mostl likely from their learning and/or operating process as employees or just retail (like me).

If a person can ever get to the point of stepping back and assembling the pieces, he finds that the market is very orderly in reaching its variable's extremes.

When do traders do best? The particular time period is very well explained in Behavioral Finance study records results.

when do traders do worst? There is a three way plit: over reacting, underreacting and irrationality.

The breakthrough in learning that avoids all of these items is to come to understand the role of market variables.

Time is NOT an independent variable in market operations. It is, in fact, a dependent variable.

How can a person learn to treat trends as the independent variable, instead. The rationale has been posted for as long as electronic communications have been avaialbe and long before.

By undertanding what is dependent and what is independent, it becomes possible to measure the process of the independent variables.

In Behavioral Finance the type and kind of events are defined. there are two.

Events have three defined parts: pre, actual and post.

Knowing these things, it is possible to keep track of the market.

Logging is the most powerful tool. To do this a person has to "see" the markets and use a glossary to describe the goings on . Assigning colums to a vertical log (or rows in a horizontal log) is mostly impossible when a person uses time as an independent variable.

Rhetorically speaking: So what it the test of where a person is in getting the independent and dependent variables of the market straight?

Also, it is the reaason the log is the bridge from manual trading to automated trading. It you do not build a proper bridge you can't get across the barrier you have found.

Find the pieces. Put the peices together and discover the measures of the independent variables of markets and that time is a dependent variable.

This very huge trap (see above) is why the relationship of size to profits is an inverse function as pointed out in this thread.

 

[Maverickz]

Jack I have noticed you like to reference documents and white papers on various topics and suggest them for reading but you never provide a link and I have not been able to find any of them. Could you please start posting links?

 

[jack hershey]

This is the home page of Behavioral Finance:

http://behaviouralfinance.net/

On the right side in a box, you can find the topic BF or BS? just below the Word Introduction.

Below is a reference to Andrew Lo who is the MIT recipient of a lot of NSF funding and he has, for some reason, become a reference on many aspects of the financial industry. He is a vey ggod example of things to read to see if you can think critically. He can't.

http://web.mit.edu/alo/www/

For setting up ATS's on the approaches I use you may want to go to a forum in ET devoted to that. Or you can go to a platform and search under my name. Usually the stuff in those places has my name on it as a courtesy. Same for WIKI, there the new indicator defaults (PC era adjusted) are often mentioned.

For stuff I've written it comes in two sizes. Books and papers. Authoritative stuff in various fields is in the NITS repository. Use dot au after my regular name to get lists of books and their reviews.

Their are over 10,000 pages on trading topics. I neglected to put my name on these in the titles. searching my name is a deadend usually since it is mostly derrogatory stuff with my name in the title. Here in ET under education their is a thread. It may be impossible to refer to documents there since there is a character count limitation.

Usually if you ask for something, someone or I will send it to you according to the means you suggest.

In the future, I will try to post the place to go to get what I refer to.

Currently I am committed to 6 books. One is a squeeze on the treatment of PTSD a la vets. The other five are a suite that merges the stuff I have previously posted on the web and more recently some stuff in ET It is now overdue.

We spent 5 years doing journals here on the topics and processes of PEP and its applications. There you will find supportive answers to the Q's that were asked over those years. If you print out the boot camp it comes to 1938 pages.

What I post now is dual purpose. It is being woven into the upcoming suite.

The best stuff you can find is related to Spyder's synopsis of his journals.

 

[baro-san]

Quote from nursebee:

I remember from some turtle trading type books ...

I also recall that if the previous breakout worked, they would not trade the market, but if the previous breakout did not work they would be sure to put on a position.

... My questions for you all are:
1. Other than sticking to the system rules, is there something about a failed breakout that makes a subsequent breakout better? imo, it is a matter of more weak hands have been chased out.

2. Is there something about a successful previous breakout that makes entry less appealing?

...

This seems very much like the coin flip probability question. It doesn't matter how many times you got head or tail in a row. The probability for the next throw to be either is always 50%.

Applying it to your described system, it seems that as long as you don't know why your last breakout failed or not, your probability that the next breakout will do the same or not is still 50%.