Quote from nasdorq:
Hey Jack,
Another great post. Things seem to becoming more and more clear to me. Thank you. I've been studying your channel strategy for a bit now and it's been a great eye opener. Though I've only used intraday channels and have yet to incorporate longer term channels with it, which is the next step. While channels are great for setting entry points and exit targets, I still find I often miss the first move of a new channel, and this is because the channel hasn't been formed yet. For example, the ES has been trending downward, fails to traverse to the left line, and moves up breaking through the right channel line. The down channel is now void. The long thrust upward continues and then stalls, and begins to pull back. So we have point 1 at the failure to traverse, and a point 2 where the breakout move upward stalled. But we need a point 3 to establish a channel, which hasn't yet occured. So we don't have the luxury of a right line in place for our entry long. I notice that most channels, once established after point 3 was made, traverse perfectly to the left line. But many short lived channels only have this one move after point 3, before a new channel is formed, so missing the entry at point 3 is painful. I guess you need to use other indicators for this one particular channel-less entry? Is the YM/INDU enough at this point? It's a terrific tool, but I seem to get whipsawed when using it on it's own. Perhaps I just need more practice. For timing the first pullback of a new trend, I've played around with MA's, bollinger bands, and pitchforks, but neither of them is consistent enough for me to "trust" completely, and you never mentioned any of them, so I'm inclined to just toss them. If you have any thoughts and feel like commenting, I'd love to hear it. I feel like I'm stuck at this point.
You won't be stuck for long.
What you wrote above is flawless and can only be the result of getting the job done on the chart.
The efficiency that you now have is to be able to profit from the 3rd traverse of the 4 or more major channels that form during a day.
Here are some things to that will enhance your situation. I will try to get you to a point 1 and you can take it from there over and over.
Lets do the first, second and fourth channels of a daily supply that looks like an M or a W. The pace on the first channel is usually fast trend channel so it may be a "tape"
I had a call today that went like this: "I got up (in AZ it is an early start) and looked things over". "I noted (he uses short horizontal lines) the overnite H/L" "It was my first guess on today's possible H/L"
Okay he is set for the tape: The first leg of the M or W. (If you read the Greenspan post I made note how identical it is)
He can estimate the exit from his pre open work. First we get the open, though. What I mean is this. The tape usually goes from open to either the H or L of the day and at least the AM H or L.
We can bank this as a multi point sucess that ends in one of two things. Either another trend in the opposite direction or some slaloming on the R or S. If the overnite H/L is on either the R or S, respectiviely, or they are in "compression", that is not making the R or S and just being "inside" R/S.
As in the FOMC Greenspan trades, the "Tape long ran up to the H of the overnite H/L. As you see it going there and getting there you have the first point 1 of the day and it is for the second channel of the day.
For all point 1's, you have the "right" to believe in them. It is fortunate that the volume at open sets a fast pace trend and this leads directly to failure at the end of the trend.
Today trend 2 started out with a narrow channel like a tape also. We were runnning over 10 to 12 k. More important, we were nailing down over 20K where the DOM fifth cummulative level was relatively low (under 4 to 5K). This means there are a lot of three digit "protection" and fake contracts sitting on both sides of the DOM.
You got to draw a lot of lines for traverses on trend 2. bar 3 and 4 tops gape you the tape downright line. point 2 was bottom of bar 4. The left to right traverse was "down" and just a hold after the entry by reversal at the end of the tape on the overnite H value of around 17.0.
You see volume declining on the left to right traverse. (As expected). Thus you are "holding" through bar 5, and 6. (end of taping). Thus you are looking for "new point 3" as you hold through bar 7 to bar 8. top of 8 is new point 3. 9 and 10 cause the right to left traverse on high volume in direction of "hold" (short). You are now back to the open as..............POINT 1 forms for the next trend.
Here we are in a F
AILURE TO TRAVERSE=POINT 1 OF NEXT TREND
On bar 10 you watched all through the bar and "knew" the PRV was lower than that of bar 9.
You are solidly in the day by now. Two trades of 5 and 10 points respectively. The second "hold" was for 7 or 8 bars. youhad to draw two sets of channel lines for the second trade.
You SEE that the volume bars are the color of the trends you traded.
Okay. Use yellow high liner to pick off all the points I have made so far to reinforce your post.
You go long on bar 10 as it spikes. Bar 11 rolls. It is high volume over (higher than) bar 10.
Now the rest of the am goes into meduim pace.(bar 12) Use volume to get the pace.
You have bottoms of bar 10 and 11 defining the long right line and the top of br 11 defining the left channel line.
Slow down and think. All the channels and volume stuff tell you just where you are at all times.
Right now you are in the third channel on a first right to left traverse (defined by the "tape" of bars 10 and 11) that has taken two bars. The pace of the channel is determined on bar 12. So you "see" bar 12 is an inside bar after bar 11 "spiked".
You are 3 points plus into the third trade and you hae given up profits if you did not exit on the spike of bar 11 and "watch". Say you have everything straight up to here.
Where you are now is way ahead of your post and still in a trade (long) that is shifting to a "medium" pace. Try to get to medium pace thinking. review my descriptions of medium paced stuff. You read that on the first reverse that you can hold through it because there is little reversal possibility.
Okay sit and hold. And draw the medium paced channel after you get point 3.
Okay unwritten but implied, I have taken you to and past another point 1 on the way to point 3. This all helps to get you unstuck.
What is getting you stuck is being on sidelines and getting into the market. I avoided that by getting you into the market at the beginning of the day after synch. Today we had "jobs" before open kick starting the day. Naturally, Rumsfeld tempered everything for 6 hours.
Lets say you trade the bar 10 etc. Bar 15 gave you the point 3 for the medium paced channel and you "held" to the "failure to traverse" at around 13 plus. This is a point 1 which takes you into a"short", that ends with a slow paced volume for midday (bar 21).
Sideline for the low midday volume after the four trades of the AM. (5, 10, 6, 3)
You get to centering on bars 49, and 50 on VDU volume. It is after 13:30 and Rumsfeld is still doing his thing.
Good employment news, lousy everything else news.
On bar 51 you begin five more trades for the afternoon. a tape short followed by four more color reversals on volume all kewl for each trades point 1's 2's and 3's.
It is your call to trade each HVS bars of the middle short trend of the PM. The five trades look like 9, 3, 4, 2, and 6 points each.
It's somewhere around 50 points for the day.
You are at the place in life that when you have point 1 (it is the end of the prior trend), that you can enter on the point 1 of a trend. Reversals work just fine for this.
Trade fast pace (4 today) as 10 to 12K or more volume. 20k stuff is easier.
Trade medium pace as 4,500 to 10K volume these trends (4 today) can be slalomed after the new point 3.
Sideline exit for midday. trading on "noise" is silly when you are knocking down nearly 50 points a day.
Use of more indicators. the fast STOC 50% line is your second signal for being on the "right" side of a trend. As it goes through 50% to the side of the trend (to 20 for short, to 80 for long) you confirm that you are making money. Use the slpe of the MACD as another indicator. If you have those down well from the past, use what you learned there instead for better info.
The pace, the channel lines and spiking will really nail all trades for you.
MA's guarrantee that you will miss half of profits, Bollinger bands always have one faulty side and are lagging. I do not know what a pichpork is.
