ES Journal Archive (2006 - 2008)

[JimmyJam]

Quote from saxon22:

As for body building, my brother was very much into it and still goes to gym 5 times a week and watches his diet like nobody I know. I myself was never into it to call myself a body builder, but I used to bench press 320 pounds. Unfortunately, that was so long ago that I probably should not even go around and boast about it.

I used to lift (for tone)/take class (classical ballet, russian technique - talk about the women)/do yoga (and a type of machine called gyrotonics) back in my twenties and thirties ... I actually kept that body for 10 years after I stopped working out.

Now I get to the gym once a weak (pun intended), and I'm trying to get back into yoga, that's about it, but (hopefully) that should be enough.

JJ

 

[Mins]

Quote from JimmyJam:

I used to lift (for tone)/take class (classical ballet, russian technique - talk about the women)/do yoga (and a type of machine called gyrotonics) back in my twenties and thirties ... I actually kept that body for 10 years after I stopped working out.

Now I get to the gym once a weak (pun intended), and I'm trying to get back into yoga, that's about it, but (hopefully) that should be enough.

JJ

Lol with everyone talking about bodybuilding i thought id shine in - kool to see many lifters who are also traders.

I been going gym for 5 years now, currently been 2 weeks out from everything due to another major knee surgery.

Saxon 320 bench is huge, very impressive indeed, my max before my surgery is 350. However, i do have decent 500 deadlift and 550 squat (prior too my bad knee).

Anyway keep up the training and the trading guys - every post is much appreciated and i have learnt a lot. Thank you very much.

 

[brotherben]

THE TREND IS YOUR FRIEND. HAPPY TRADING JJ....NOW, A SYSTEM PLEASE....ANY SYSTEM....ES NQ YM....I BELIEVE ALL THE LOYAL POSTERS HERE DESERVE A SYSTEM FOR ALL THE 3000 POSTS...INTRADAY ONLY....ONLY.....NOT OVERNIGHT HOLDS, NOT 1 TRADE PER DAY.....GIVE US THE CODE...

 

[n00b7r4d3r]

Quote from brotherben:

THE TREND IS YOUR FRIEND. HAPPY TRADING JJ....NOW, A SYSTEM PLEASE....ANY SYSTEM....ES NQ YM....I BELIEVE ALL THE LOYAL POSTERS HERE DESERVE A SYSTEM FOR ALL THE 3000 POSTS...INTRADAY ONLY....ONLY.....NOT OVERNIGHT HOLDS, NOT 1 TRADE PER DAY.....GIVE US THE CODE...

while (!Rich)
{
if (Stockprice.Goingup == true)
{
Buystock();
}
elseif (Stockprice.Goingdown == true)
{
Sellstock();
}
}

 

[mbusch]

Last Friday, I made a nice long trade which I posted here in real-time (including my error in exiting the trade too early). I subsequently received several PMs from ES Journal readers asking me to explain my methodology, and specifically how I arrived at my profit targets.

My methodology is embarassingly simple and unsophisticated. I'm sure it could be vastly improved -- especially after studying some of the S/R zone charts that Apex82 has posted here on a regular basis. (Anyone heard from him lately?)

Just to catalyze a discussion, let me summarize my admittedly over-simplistic approach. Then you more-experienced traders can improve on it and perhaps we'll all benefit.

First, some terminology:

The most basic price action in any auction market is a three-wave move -- either up-down-up or down-up-down -- that I will denote by its four price points A, B, C, and D. In an up-move, the price goes up from A to B, down from B to C, and then up from C to D. (In a down-move, the directions are reversed.)

For an up-move, B>A, C<B, and D>C. For a down-move, the inequalities are reversed.

Now here's the most over-simplistic assumption in my model: In a three-wave move, the most likely price movement for the third wave is equal to the price movement of the first wave. In other words, AB = CD.

Now, we all know that this doesn't always hold true. Sometimes CD is only 50% or 60% of AB. Other times, CD is 130% of AB. But the most likely value for CD is approximately equal to AB. (At least that's the assumption I use when setting price targets.)

Okay, now let me try to relate what was going through my head last Friday as I was trying to decide whether to trade, and if so, when to enter and whether to go long or short...

First of all, my trading objective is to hit home runs, not scalps, so I generally prefer to trade with the trend rather than countertrend. To figure out what the trend was Friday, I looked at the 60-minute chart to review what had been going on for the past 2-3 weeks. When I did that, it seemed clear that the trend was up.

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1582051">

NOTE: The green crosshatched rectangle depicts information I did not have when doing this analysis prior to Friday's trading.

It doesn't take a rocket scientist to see that the short-term trend changed (rather violently) from down to up on August 17th. (More about longer-term trends later.)

 

[mbusch]

Having established that the trend going into Friday was up, my next step was to try to arrive at a profit target for a long trade. For this, I switched to the 15-minute chart:

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1582059">

On this chart, I identified what looked like they might be the first two waves of a three-wave move: A-B-C. This included what looked like a nice reversal at point C right off the uptrend line. So it seemed like going long Friday would be a good bet, particularly if I could enter on a retracement to at or near the uptrend line.

Calculating the profit target using the AB=CD method, I projected a target price as 1515.50.

However, given that the AB leg had been three days long, it seemed likely that the projected CD leg would also take several days to unfold.

 

[mbusch]

Given all the crazyness lately, I was a little uncomfortable with the notion of holding a trade over the weekend. So I decided to look at whether perhaps I could come up with a less-ambitious profit target that might be achievable before the market close on Friday.

Going back to the same 15-minute chart, I looked for a a smaller three-wave sequence more time-compatible with an intra-day trade.

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1582065">

I wasn't all that crazy about this wave pattern, because although it meets the C>A requirement, it doesn't do it by much. But given the price movement on Thursday, this was pretty much the only choice for an intra-day wave pattern.

Once again, using the AB=CD approach, I claculated an intra-day target for Friday of 1486.25 Turned out not to be a bad guess: the actual high just before close was 1484.00.

During pre-market trading on Friday, ES was kind enough to retrace back to the trendline, giving a marvelous entry point around 1460. This would have been a great place to go long with a close stop and ride up for a 24-point gain. Unfortunately, I slept right through it.

By the time I was awake and at the computer, the price had started to rise uncomfortably far away from the trendline. Since I insist on close stops for my trading, I decided not to chase the market, and waited patiently for a pullback to enter. It turned out to be a nice, profitable trade, but far short of 24 points. That'll teach me to sleep!

Throughout the trading day Friday, I watched the 240-tick chart, identifying micro-three-wave moves and calculating AB=CD profit targets for them. This caused me to fine-tune my profit target several times during the day, and also to keep validating that the uptrend was continuing. But the adjustments turned out to be small, and the orignal target was pretty close.

 

[mbusch]

One more thing before I end this series of posts: There was no guarantee that the trend on Friday would continue to be up. Trends change, and you have to be prepared for that eventuality.

So during my pre-Friday homework session, I also mapped out a trend-change scenario to see what it would look like. I used the same 15-minute chart as before, but I've zoomed in to make it clearer what I was looking at.

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=1582084">

Under this scenario, the trend changes from up to down. The points that used to be B and C in the presumed up-move now become points a and b in a postulated down-move.

How will we know if the trend has changed? Two early warnings:

If the price penetrates the trendline, we'll want ot be on our guard. (It actually did this on Friday, but not by much.)

If the price drops below C (see dotted cyan line), then this obviously invalidates the A-B-C-D scenario and it's time to re-evaluate.

Under this trend-change scenario, I calculated a profit target (for a short trade) as 1441.75, using the ab=cd method.

Didn't happen, but it could have, and it was necessary to be prepared for that eventuality.

 

[brotherben]

I WISH U NOTHING BUT THE BEST...MBUSCH....THE COUNTERTREND COMMENT WAS GOLDEN....DON'T DO IT....A TREND IS RECOGNIZED BY HIGHER LOWS, HIGHER HIGHS VICE VERSA.......THE SMART ONES DON'T COUNTER TREND TRADE.SIMPLY ENTER NEAR AND WITH YOUR LONGER TERM TREND LINE OR HAND DRAWN LINES......THE ONE TIME THEY MIGHTAPPEAR TO ENTER COUNTER TO THE TREND IS WHEN THE APE X IS SEEN AND APPEARS TO BE A COUNTER TREND TRADE WHEN IN REALITY IT IS A SIMPLE ZERO STARTING POINT ENTRY FOR THE NEW RUN, OR REVERSAL...VERY AGGRESSIVE TRADING HIGH RISK.......BEST TO WAIT FOR CLEAR PICTURE OF NEW RUN, BUT ONE CAN RECOGNIZE THE APEX IF THEY STUDY A FEW YEARS..ALL INTRADAY STUFF....THERE ARE BASICALLY NO TRUE INTRADAY TRADERS POSTING HERE AS MOST SAY "THE TRADE WAS AGAINST ME SO I HELD OVERNIGHT"....THAT IS NOT GOOD FOR CREDIBILITY BY THOSE WHO UNDERSTAND REALITY...STOPS WILL BE A BIG PROBLEM FOR MOST...BOTH INITIAL AND TRAILING...JJ I HOPE THIS DOESN'T WRINKLE YOUR TUTU....

 

[Jack Nestle]

Quote from brotherben:

Could someone give a system that works. 4 or 5 rules...entry signals..time frames. ...not gut trading silliness...real stuff that anyone can set up and use profitably..ma line crossings, for instance...most scream if u really wanted to help others you would call live trades...that helps no one....call a real coded system....never seen it done here....or other forums...ES system....

Porgie, You flip flop from giving advice to begging for it.