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Beyond the hype of hershey futures method journal
- Thread starter RoughTrader
- Start date
Ok. I have been looking at how the tapes form from price action, it's really not that complicated and can be readily captured in code. I'm still looking for clarification on how channels form around some tape formations, so I hope the experts will shine the light.
In this first post, I'm taking a look at basic 1-2-3 tape formations. My current understanding is that the formation can only be "taped" starting from the RTL and ending on the RTL. This means for up-channel 1-2-3's, no inverted triangles. Likewise, for down-channel 1-2-3's, no upright triangles. The attachment clarifies what I am saying.
If I'm off-base, please correct me.
RoughTrader
In this first post, I'm taking a look at basic 1-2-3 tape formations. My current understanding is that the formation can only be "taped" starting from the RTL and ending on the RTL. This means for up-channel 1-2-3's, no inverted triangles. Likewise, for down-channel 1-2-3's, no upright triangles. The attachment clarifies what I am saying.
If I'm off-base, please correct me.
RoughTrader
Attachments
Assuming that the cases established from my previous post are correct, let's look at some price action.
In the attached image, we see that
1) a valid up-channel has been formed from a 1-2-3.
2) After the 1-2-3 forms, price attempts to retrace, and does so deeply.
3) After the retrace, price will continue up through the trendline and expand the channel with a break to the upside.
4) After a final minor retrace, pace has died and the upward tape has very light slope.
From the conclusions of the previous post, we know that down channels don't form from upright 1-2-3 triangles. However, the retrace down has broken lower than our original pt. 3 level. Because we cannot form a down-channel, do we have to abandon the original pt. 2 and pt. 3? In essence, we would be acknowledging the retrace as part of the up-channel. But to do so, we must make the RTL and LTL shallower, breaking down the pace of the market.
Lastly, very occasionally I notice an up-tape that violates its up-channel RTL. For it to remain an upward-moving tape, it must "walk slowly" out of the channel. The latest case I have seen in the ES resulted in a SHARP BO to the upside without any down-retracement in between.
My guess is that we would have to make the RTL more shallow until we see either:
1: a traverse to the LTL (as I mentioned happened)
2: an FTT
3: a direct BO to the downside.
Please advise
In the attached image, we see that
1) a valid up-channel has been formed from a 1-2-3.
2) After the 1-2-3 forms, price attempts to retrace, and does so deeply.
3) After the retrace, price will continue up through the trendline and expand the channel with a break to the upside.
4) After a final minor retrace, pace has died and the upward tape has very light slope.
From the conclusions of the previous post, we know that down channels don't form from upright 1-2-3 triangles. However, the retrace down has broken lower than our original pt. 3 level. Because we cannot form a down-channel, do we have to abandon the original pt. 2 and pt. 3? In essence, we would be acknowledging the retrace as part of the up-channel. But to do so, we must make the RTL and LTL shallower, breaking down the pace of the market.
Lastly, very occasionally I notice an up-tape that violates its up-channel RTL. For it to remain an upward-moving tape, it must "walk slowly" out of the channel. The latest case I have seen in the ES resulted in a SHARP BO to the upside without any down-retracement in between.
My guess is that we would have to make the RTL more shallow until we see either:
1: a traverse to the LTL (as I mentioned happened)
2: an FTT
3: a direct BO to the downside.
Please advise
Attachments
Quote from RoughTrader:
Ok. I have been looking at how the tapes form from price action, it's really not that complicated and can be readily captured in code. I'm still looking for clarification on how channels form around some tape formations, so I hope the experts will shine the light.
In this first post, I'm taking a look at basic 1-2-3 tape formations. My current understanding is that the formation can only be "taped" starting from the RTL and ending on the RTL. This means for up-channel 1-2-3's, no inverted triangles. Likewise, for down-channel 1-2-3's, no upright triangles. The attachment clarifies what I am saying.
If I'm off-base, please correct me.
RoughTrader
You are correct, the way I understand it. Points 1 and 3 MUST be on the RTL.
Thanks,
TNG
Quote from RoughTrader:
Assuming that the cases established from my previous post are correct, let's look at some price action.
In the attached image, we see that
1) a valid up-channel has been formed from a 1-2-3.
2) After the 1-2-3 forms, price attempts to retrace, and does so deeply.
3) After the retrace, price will continue up through the trendline and expand the channel with a break to the upside.
4) After a final minor retrace, pace has died and the upward tape has very light slope.
From the conclusions of the previous post, we know that down channels don't form from upright 1-2-3 triangles. However, the retrace down has broken lower than our original pt. 3 level. Because we cannot form a down-channel, do we have to abandon the original pt. 2 and pt. 3? In essence, we would be acknowledging the retrace as part of the up-channel. But to do so, we must make the RTL and LTL shallower, breaking down the pace of the market.
Lastly, very occasionally I notice an up-tape that violates its up-channel RTL. For it to remain an upward-moving tape, it must "walk slowly" out of the channel. The latest case I have seen in the ES resulted in a SHARP BO to the upside without any down-retracement in between.
My guess is that we would have to make the RTL more shallow until we see either:
1: a traverse to the LTL (as I mentioned happened)
2: an FTT
3: a direct BO to the downside.
Please advise
I'm certainly no expert, but I think I know these answers. The LTL will "expand" with the channel. At least, for channels other than tapes, that is correct. I haven't gotten to the tape part of the learning yet, however. The math equivalent of what I'm saying is the LTL will always touch one price only, and will have the same slope as the RTL.
Thanks,
TNG
In this post I am examining pace increases and decreases in a channel.
The image attached illustrates examples of both. In the first example, we have an up-channel that experiences a pace increase. My observation is that this only happens after a volatility expansion of the original LTL. The question is: is it safe to abandon the original RTL and LTL and follow the pace increase? There are three possible outcomes I can consider:
1: A further volatility expansion causes an additional pace increase
2: We have a BO to the downside, or an FTT followed by the BO, to create the pt. 1 of a new down-channel.
3: Price can retrace deeper than the pt.3 of the increased pace channel, forcing the RTL to become shallower (please see previous post).
In the second example, our channel experiences a pace decrease. There seems to be one of two ways to mark this change in pace:
1: create a new channel to reflect the decreased pace (grey dotted lines)
2: Make the original RTL more shallow to include both paces as part of the same up-channel (blue dotted lines). Which is correct? Our end goal is to catch the turning point to a down-channel as quickly and accurately as possible, so which is most effective in doing so?
RoughTrader
The image attached illustrates examples of both. In the first example, we have an up-channel that experiences a pace increase. My observation is that this only happens after a volatility expansion of the original LTL. The question is: is it safe to abandon the original RTL and LTL and follow the pace increase? There are three possible outcomes I can consider:
1: A further volatility expansion causes an additional pace increase
2: We have a BO to the downside, or an FTT followed by the BO, to create the pt. 1 of a new down-channel.
3: Price can retrace deeper than the pt.3 of the increased pace channel, forcing the RTL to become shallower (please see previous post).
In the second example, our channel experiences a pace decrease. There seems to be one of two ways to mark this change in pace:
1: create a new channel to reflect the decreased pace (grey dotted lines)
2: Make the original RTL more shallow to include both paces as part of the same up-channel (blue dotted lines). Which is correct? Our end goal is to catch the turning point to a down-channel as quickly and accurately as possible, so which is most effective in doing so?
RoughTrader
Attachments
Quote from RoughTrader:
In this post I am examining pace increases and decreases in a channel.
The image attached illustrates examples of both. In the first example, we have an up-channel that experiences a pace increase. My observation is that this only happens after a volatility expansion of the original LTL. The question is: is it safe to abandon the original RTL and LTL and follow the pace increase?
No, you keep the original RTL and widen the width of your channel for the LTL. This new wider channel becomes your operating channel and FTT's are identified within this wider context.
Promising progress!
In this post I am looking at the FTT.
If you look at the attached image, when an FTT forms, one could designate the FTT as a pt. 3, with pts. 1 and 2 already residing on the LTL and RTL. Documentation suggests, however, that an FTT should be a pt. 1.
In the case in which the FTT is followed by a pt. 2 and 3 for a new channel (in this case, to the downside), there is no problem. Channelizing the tape remains seamless.
However in the 3rd illustration in the attachment, it is possible that the BO to the downside was a fake-out, and price would subsequently rebound back into the channel (I have drawn it with increased pace).
The issue is this: if the FTT is designated as point 1, there is way to seamlessly connect the original up-channel with the next up-channel (here with increased pace). If the FTT is marked as pt. 3, then the down-channel (dotted blue lines) connects the two up-channels so that there is no interruption in capturing the price movements.
Please advise.
If you look at the attached image, when an FTT forms, one could designate the FTT as a pt. 3, with pts. 1 and 2 already residing on the LTL and RTL. Documentation suggests, however, that an FTT should be a pt. 1.
In the case in which the FTT is followed by a pt. 2 and 3 for a new channel (in this case, to the downside), there is no problem. Channelizing the tape remains seamless.
However in the 3rd illustration in the attachment, it is possible that the BO to the downside was a fake-out, and price would subsequently rebound back into the channel (I have drawn it with increased pace).
The issue is this: if the FTT is designated as point 1, there is way to seamlessly connect the original up-channel with the next up-channel (here with increased pace). If the FTT is marked as pt. 3, then the down-channel (dotted blue lines) connects the two up-channels so that there is no interruption in capturing the price movements.
Please advise.
Attachments
This post is somewhat of an extension of the previous post. What I am examining is the possibility of channels within channels ON THE SAME FRACTAL.
If you look at the illustration, a 1-2-3 is formed with longer-than-average tapes. Keep in mind that a tape, composed of a sequence of individual bars, is the deepest level of resolution obtainable. The 1-2-3 formation has been captured by the channel RTL and LTL (thicker grey lines). After one more dominant traverse to the LTL, a sequence of shorter tapes offers a 1-2-3 formation to the downside. However, this formation lies completely within the channel formed by the original 1-2-3 formation, so both formations are on the most basic level of tapes. However, the down-channel formed by the second 1-2-3 (marked by thicker red lines) is actually nested inside the original channel.
For organizational and proper housekeeping purposes, it doesn't seem correct to have channels within channels on the same fractal. Do we simply ignore the red 1-2-3 formation and treat it as a simple non-dominant traverse toward the RTL?
Please advise.
If you look at the illustration, a 1-2-3 is formed with longer-than-average tapes. Keep in mind that a tape, composed of a sequence of individual bars, is the deepest level of resolution obtainable. The 1-2-3 formation has been captured by the channel RTL and LTL (thicker grey lines). After one more dominant traverse to the LTL, a sequence of shorter tapes offers a 1-2-3 formation to the downside. However, this formation lies completely within the channel formed by the original 1-2-3 formation, so both formations are on the most basic level of tapes. However, the down-channel formed by the second 1-2-3 (marked by thicker red lines) is actually nested inside the original channel.
For organizational and proper housekeeping purposes, it doesn't seem correct to have channels within channels on the same fractal. Do we simply ignore the red 1-2-3 formation and treat it as a simple non-dominant traverse toward the RTL?
Please advise.
Attachments
Quote from RoughTrader:
In this post I am looking at the FTT.
...
Please advise.
Wow, you are thorough.
An FTT does not have to be a P1, often it is the P3, as channels overlap.
In the case where there is an apparent FTT followed by a BO, you MUST have increasing volume coincident with the old RTL being broken. If not, you suspect the gradient of your original channel is too steep and fan a new RTL from your prior P1 (or P3) to make a shallower channel to accomodate the price action.
I will look at your posts in more detail but wanted to get this comment back to you ASAP.