Futures Indexes System and Tool Box

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General Comment on the process of shaping up trading.

In a nut shell and by boiling stuff down, you will, I insist, come to the conclusion that there is a replacement for everything that doesn't work. This sounds obtuse. Obtusely speaking, you are required to get rid of stuff that doesn't work and carry forward that which does. Sort.

Anticipation is what replaces all the other stuff. The equities stuff i do was named by others. The name is: Catch Up: Tomorrow's Paper Today. For intraday, so far there is no name. I worked with Bucky Fuller for about three years. When he arrived at where I worked; he took over one of the three "front" offices. We met. On his wall was a picture of his sailboat. It's name is "anticipation" Mine was named "Consort" because it was a King's cruiser (US 122) named after the king of Sweden. Bucky always wore more than one wrist watch because he changed time zones all the time.
So we have an anticipatory approach and system. By by passing predicting and statistics and all macro things we get home free. So far I hope you are monitoring and your consciousness is increasing. as you head to the land of "there's nothing new anymore", I hope you have a record of all that is old and it is arranged like a topography. There is a god reason to know the big pieces and how they are arranged and the filler that comes in between.

If and as I begin a narrative of the passing days. I will go from what has happened to what is happening and then to what is coming up. It is just reading the sequences. I can read from the past chart, I can read from the monitor on the screen , or I can read ahead on the sequence lists.

Our goal is to have leading signals that come along as flaws in the sequencing. The flaws block alternative paths and push us along the way to the end of the trade. As a paper saver, I keep my sequence lists on a Mobius strip. The branches all end like capillaries from arteries and the capillaries go on to to be collected by veins so the Mobius strip gets a little stringy for a while.

One thing that is for sure by using it, you know three things: where you are; what is next; and how fast things are changing.
By using it as a scare tactic, it becomes more and more useful. To have a universal answer sheet, as you see, only takes about 47 minutes to get done.

Questions on process

so which VDU did you enter on?
Ice bergers unite!!!


Do you see that VDU's are followed by volume lines of a particular color?

When you see the STOC go back to 50%, does a VDU follow?

Go to the tape. See the STOC going to the trend.....

13:15 is arriving at 14:00 plus today.


One message flaw summary.

Quote from ges:

No doubt it is all covered in previous posts, but could you summarize your info on 'flaws' in one message?

Use your sequence list for this.

Flaws are there at every branch point as blocks. Look at each branch. You see that either of two sequences will unfold. both branches take you somewhere. The one that contains the flaw takes you out of the trade because it cannot continue.

Here are some possibilities.

1. The most popular: I didn't start doing sequence lists yet.

2. I only have then for some parts of how one indicator works.

3. I have a lot of them listed but I didn't combine them.

4. I rethought it and it is too much work.

5. I know how they work in my mind ;I don't have to take notes.

6. I'm waiting for a short list of flaws so I can sprinkle them
around.

Okay here is a sequence on price primarily.

Congestion ends with a volume flaw(lower volume) so you stop slaloming and exit. The price goes into convergence, you stay sidelined and volume falls more ( no flaws so you continue to be sidelined) You see VDU and price centering. you have note on the departur of the odd harmonic in the congestion , the appearance of the even harmonic in the convergence and you see volatility shifting on and off in the centering. All no flaw sequences.

A price formation on centering appears to make it unsymmetric. Look at this as a flaw for a bracket entry. Be cautios. See a FTP or a FBP form. You branch to either of those and look for the sequence to give you increasing volume, and a price BO. What is the flaw here that can come up? Volume picks up slowly and is not sustained. This is a failure to BO indication. Sure enough you see that you are looping back into another round of congestion, convergence and centering.

The above is a nice package of sequences. As a one pager, it is the most important. You can put on a 5x 8 card the squence for washing as well as a close second.

The point for flaws is that you can do all the numbered stuff and gradually you develop a consciousness. Flaws are voids in squences usually. "What wasn't that?" If a gap occurs in a well etermined sequence you take it as a signal to optimize and exit and not reverse ever.

This is how you gradually get to KISS on this stuff. the topo map gets very clear.


4-08-03
choppy day. big time struggles.

1. trend line break long

macd was positive, stoch had left short zone and down trend line was broken...long @ 877.50. stoch cannot not aboe 50% (10:10 and 10:15 readings - trend still down) mkt reverses and exit at 875.50.

long @ 877.50
sell @ 875.50 -2.00

day: -2.00 16 days: +36.25

2. rocket long (early entry)

12:50 s(76.19, 77.48) macd hist +0.45

entered this rocket earlier then normal...saw a triangle break upward and increase in volume so i entered earlier than i normally would...doh!

stoch leaves zone and macd xo so i exited.

long @ 800.50
sell @ 879.50 -1.00

day: -3.00 16 days: +35.25

3. bo of convergence (triangle formation)

1:25 bearish engulf on increasing volume...1:35 looked like triangle/centering was breaking out down got short on trendline break....low volume was big concern...market quickly reversed...exited

short @ 878.25
cover @ 879.75 -1.50

day: -4.50 16 days: +33.75

4. rocket short

2:40 s(25.00, 24.12) macd hist -0.43

short on the break @ 877.50..looked good until verly low volume inside bar at 3:00 (volume 1,982) next bar was increasing green and trendline break...so i exited....promptly thru computer out window and banged head on table.

short @ 877.50
cover @ 878.25 -0.75

day: -5.25 16 days: +33.00

ugh. not a good day for me....after good day yesterday maybe i was trying to push something that wasn't there...not sure. very disappointed. i am going to stand in the corner...i need a time-out.
edit: looking back volume barely ever over 10k on the 5m bar during trades or most of the day....clearly a warnign sign.
 
Questions for Jack
Hi Jack,

Thanks so much for sharing your insights. I'm playing catch-up with this thread and would be grateful to you if you would help speed up my understanding.

(1) Please expand on your comments in your flaws summary that deal with congestion, convergence, and centering. Specifically, what do you mean by "harmonic," as in "departur[e] of the odd harmonic in the congestion, [and] the appearance of the even harmonic in the convergence"? Also, please explain what you mean by "see volatility shifting on and off in the centering." Does this shifting of volatility manifest itself in an indicator sequence or are you referring to price spiking up and down?

(2) How do you distinguish a market that is going into a slow trend (play ice bergs) from one that is entering congestion (slalom)? From my vantage point, slow trends resemble lateral movements especially at their inception. You've repeatedly said that congestion (along with convergence and centering) follow rockets. What is the precursor to a slow trend?

Thanks again.

Posted by colina on 04-08-03 08:31 PM:
More questions for Jack
Besides generating sequence lists are we done categorizing?

Where, when and how is the market pace for the day determined?

What will the days’ pace be?
i) Slow paced solid trend
e.g.. 11/27/02 01/06/03
where macds: 30m div 5m entwining 1m cycling
ii) Faster paced solid trend
e.g 03/17/03 03/25/03 03/28/03
where macds: 5m div 1m cycling
iii)Psycho Fast whiplash kind of day a.k.a. Greenspan
e.g. 11/06/02
where macds: 5m and 1m have violent +/- swings
iv)A nontrend but slalom kind of day
e.g. 04/03/03 morning session
where macds: 1m peaks and troughs with a marginal h/l rnge
v)Do nothing, ‘is the paint dry ?’ kind of day
e.g. 12/24/02
where no volume, no h/l range, nada

Any other types of day to be categorized ?

trades

Apr 4 trades
It sure was a choppy day today as mkt hit Fri congestion area.

#1 the phony channel BO got me too dawg. Fast stoch rising above 50. I fumbled the execution and entered at the very top.

Long 878.25 10:18
Sell 876.00 10:24 sold as fast stoch failed at 50, trying to sell on the ask gave away almost 1 pt.
-2.25

#2 rocket signal, channel BO, MACD hist>+0.4. Didn't know about rumor.
Long 879.50 10:56
Sell 878.50 11:12 held through the correction and sold when low of 11:05 bar was broken. 11:05 bar was an inside low volume bar = flaw, should've exited right away.
-1.00

Day -3.25
Week 8.25

What did me in was clearly not staying on the sidelines despite recognizing the chop factor. Overconfidence from yesterday and trying to squeeze a quarter by buying bid/selling ask. Bleah.

4-09-03
if it thought i sucked yesterday..the only way to explain my trading today is vomit. pure vomit. yesterday too agressive today too jittery....traded like crap....last two days feel like big steps backwards....fear of losing got to me today...total choke fest. ugh.

1. long rocket

10:05 s(93.75, 82.64) macd hist +.835

long on break...vol spike at 10:15..saddam crap...new crap put on alter for exit...exited at 886.25

long @ 882.75
sell @ 886.25 +3.50

day: +3.50 17 days: +36.50

2. short rocket

s(9.76, 19.22) macd hist -0.99

short on break, there was big vol on signal bar (21,435) worried about exhaustion bar.. .11:30 low volume inside bar(6,229) still well within trend macd ok, stoch ok and it exit on the break of high of low vol bar @ 877.75.

short @ 867.75
cover @ 877.75 -1.00

day: -2.50 17 days: +35.50

now i had chances to get back in, but did i...nope. choker. even saw the 11:50 tiny vol/price, but didn't do anything when it broke lower...all i could think about was yesterday whip fest.

anyways this trade should have been a whopper...i even had the range break spotted on my charts (11:15-881) but waited for rocket signal.

real trade=whopper
me=idiot/choke

moving on...

2:00 failed bo, but didn't bit so was looking for a reversal rocket....

3. long rocket

2:25 s(85.00, 79.21) macd hist +.54

missed my entry (first one ever) and then chased (brilliant!) entry to 872.25 and it basically reverses in my face.

long @ 872.25
sell @ 869.50 -2.75

day: -0.25 17 days: +32.75


4. rocket fail macd xo reverse

so the rocket fails and i reverse, but do i reverse right away (of course not)..short at 868.75...mkt reverse...i am getting chopped to death...cover @ 871.75

short @ 868.75
cove @ 871.75 -3.00

day: -3.25 17 days: +29.75

Trading difficulties

i have pulled the plug on my trading at this point

3:10 is a rocket signal...no chance in hell i am taking this trade...pass.

3:40 mkt breaks longer uptrend channel break...pass (good trade)

it's like i see the pieces but just can't get it all to work right...not enough confidence. ugh.

A response:

Dawg's 4-09-03 trades
If it's any consolation, your past winning trades went a long way towards reinforcing for me how this system works. Now your losing trades (and the subsequent replies) are helping me to see some of the "flaws" and how to respond to them. Thanks a bunch for posting.

bassocat5
i suffer for the greater good of the people
__________________

Flaws and sequences
anyways jack often about flaws and sequences when you are in a trade i have been trying to do more of this...here is some of what i had this morning...trying to see if i am on the right trrack.


anyways...flaws of rocket failure and sequences of reversal:

9:45 Short Rocket Signal
s(20.83, 21.76) macd hist -.41

flaws i noted and why i would potentially reverse:

9:45 bar (1)has much lower volume (10,654) vs 9:40 bar (17,412) (2) the bar is an inside bar and did not make a new low of day. lowest 5m vol so far on the day

9:50 (1) nq breaks to a new low and es does not (2) stoch leaves rocket zone (3) my trend channel is broken (4) up volume is increasing (14,406)

9:55 (1) macd xo (2) stoch crosses 50% s(66.67,38.89)

all of these flaws points to potentially higher prices...long consideration close of 9:55 is 878.50 on macd xo.

10:00 macd hist +0.43 (good reading) vol dips a bit (12,000) but still ok.

ROCKET SIGNAL
10:05 high of day broken of strong vol (21,297)...this vol spike was significant and had me wary of exhasustion....this bar is a rocket signal s(84.38, 78.13)

10:10 looking good vol 17451 new highs in price

10:15 price/vol spike rumor of saddam (23,231) this 2nd price/vol spike had me tightening up.

10:20 small price and decreasing vol bar...make new high in price

10:25-10:40 FLAW:sideways movement of price and significantly decreasing volume and breaks my trend channel and mcd xo...potential exit time. stoch still in rocket zone.

10:45 price spike up...FLAW:make a new high by 0.25 on lower vol 15.461 (the statue comes down)...potential exit

10:50 mkt reverse on increasing vol
TREND DEF OVER macd has xo, stoch out of zone, trend line broken.
 
Trade comments:

Re: 4-09-03

LOL (a couple people at work did hear me).
dawg don't be hard on yourself it takes courage to admit that you're wrong and identifying your mistakes is the first step towards correcting them.


Here, below, is a major powerful suggestion. The stop log will serve the same purpose. In combination, a person would have a perfect system for keeping ahead of the curve.

FWIW, I used to be/am guilty of the same sins. I got me a timer, set it to go off every 10 min when I'm trading and I do a reality check. I made a short list of the most common sins and if I catch myself about to commit one I take a deep breath and reconsider.
It doesn't work every time but it helps. I also try to glance at the list before taking entry/exit.

My trades:

#1 rocket signal #1 - entry before 15m of synch - looked like it synched already (managed to enter at the very bottom)

Short 874.50 9:44
Cover 877.25 9:53 as rocket failed
-3.25
I saw the same sequences very nicely articulated by dawg only I was waiting for point 3. Low volume on 9:45 bar didn't bother me too much as mkt was consolidating after a decline and stochs were still in rocket zone. At 9:51 it became clear that the trend was reversing but I only reversed 1.5 pt later. duh.

#2 reversal on failed rocket-5m MACD cross. x.

Long 877.25 9:53
Sell 878.75 10:02
+1.50

Chickened out as volume was low and fast stoch seemed stuck at 50. Guess I wanted to make up for the loss and lock in some profits. My bad.

#3 rocket signal, baghdad news
Long 880.75 10:08
Sell 883.50 10:41
+2.75

Stayed longer in the trade although my first channel was broken - was waiting for 2nd point 3 but eventually I buckled and sold at 10:41. That was my point 3! Was biased on the long side by the developments in Iraq, expected market to be happier about it. But he had discounted them already...

Today's sins:
jumping the gun (1st trade)
hesitant (reversal)
impatient (waiting for point 3)
biased (by news)
1m chart (watching too much)
A royal flush.

Day +1.50
Week +9.75
Mother of all chops
#1 rocket signal
Short 862.75 10:34
Cover&Reverse 863.50 10:40 channel not broken yet, 5M MACD crossing and 1 min chart spike.
-0.75

#2 reversal
Long 863.50 10:40
Sell 864.50 11:06
10:40 5m bar turned out a VDU with BO, and break of trendline which reassured me to stay in. Rocket failed -> 10:55 VDU inside bar at , stoch hitch at 50 -> tighten -> 11:03 failed BO=FLAW -> channel broken and exit
+1.00

Day +.25
Week 10.00

Looking back, the trendlines that I drew were not really channels in that terrible chop. The trend was slower today, still on the 15m chart.
4-10-03
3 trades -7.00

18 days: 22.75

falling apart at the seams...i will try and post details later after i calm down....traded more off of trend lines and failed badly


Quote from cornholetrading:

This was posted in Dawg's journal but wanted to move it over here in case Jack wanted to comment on it.


--------------------------------------------------------------------------------
Quote from dawg:

Here is an idea... the channels you are drawing are really the key.. they show the turning points of the market... perhaps you should one day... try trading based on the channels alone.. w/o any other indicators except for volume?

like today instead of waiting for the 'rocket' at 10:45 i would have been in much better shape (by about 3.5pts) by getting short when my uptrend channel broke instead of waiting for a rocket signal....that is the area i need to become more comfortable in...sometimes i am afraid of getting whipped or not confident enough in my trend lines...just need to keep working on it and get more comfortable


corn's comments:

I traded with trendlines before reading some of jacks stuff and coming from my point of view much of what he has presented has been a great addition for me. I did not use any indicators before, but have found that using the indicators have been a great way to help me stay in my trades longer and usually gives me a double confirm on my trades and reversals. What I was seeing was that I was not staying in trades long enough when I traded. So the indicators give me a continued reason to stay or get out of trades.

I am still trying to figure out the order of importance I want to base my trades off of. My number one is still my trendlines, but I get confused when say a MACD crosses down yet the stochastics continue to stay over bought. Right now I just use that as a indication to be alert for a possible end to the trade and reversal and then wait for the stochastics to also follow thru for confirm. Also I am still playing with the 1 min charts which I did not look at before -- only looked at the 5 min. But it makes sense to look at the 1 min when the 5 min looks like just big bars of nothing. I am still trying to figure out how to do trades if any based on the 1 min when this happens.

A bold look at what is going on

Thanks for such a nice wrap up post.

I am working through a series of steps in making money. Here is my thesis.

I feel that you need to start off in a simple way and just make money on the trades that are very strong. These are rockets.

Strangely, as you make money you change as a person. I try to see where a person is and what is affecting them (adversely). We all have baggage and some of it is perverse. As this energy is released by bringing down the curtains on the various dramas, then people apply the energy to making money more and more copiously.

You will see humor creeping into things too. The 100 pages of sequences needed a lot of humor because it is a daunting task in reality. It can only be done as a person's consciousness improves. Some bold fragments show up. Indicators come alive and we see their formulas processing data and we adjust cooefficients to tailor them. Finally, when we see their signals we notice that the signals come in order as sequences.

By using signals to make decisions, we get to a point where we can adjust decision making by moving from regular signals to those signals that come before (precede these).

This isn't enough though. we need to combine the individual sequences into a tree of signals. This shows interrelationships.

What do we get for doing this. No more boredom. And an extreme consciousness. I know what it's like to have a wind shear down when I am dropping down with full spoilers to land in a $100,000 glider. Decisions to turn off problems, come from finding the flaw in the system quickly. After not having your bottom on the seat comes straining a five way harness to the limit and not being able easily to move your hands on the stick and the spoiler control; but you have to and using your feet is the first step to make it possible to move your arms out of their wedged positions. I'm all for IHOP but not without syrup.

You will be so amazed that you see these flaws immediately. You see them because you have a fully integrated context.

Double your money velocity 8 times. Think. You get to this money velocity by being conscious. You are truly on automatic by this time. Everyday there is a H/L; how many times the H/L spread is the optimum money velocity?

I go by plateaux to get to the place to be. Climb to a given level cross the plateau until you have excellent skills; scramble up the talus and find your route to the lip of the higher plateau and slip up onto this platueax. We take climb after climb. And the altimeter is read by out by higher money velocity.

So the pay off is moving to anticipation; observing for flaws; having he KISS approach for each flaw.

All of this is based upon the P,V relation. Many tools come from this. Indicators signals in sequences give you fingertip control.

The best example so far of things working, is the ability of people to stay in trends. Next best is staying out of the market (This you will find, makes more money by saving it than most money velocities acheived by profits).

You can see that people entering to play in congestion initally is the highest rate of losses. Loosing 5 to 7 points trying to get into the market does not teach much. Staying sidelined when there is not a strong trend is hard to learn but each time you sideline you learn more. Simply stated, right now regarding congestion, you do not have sequences to look at and see that there are flaws. When you understand that you are not yet equipped, you sideline until you reach a plateau where you are usiing the required knowledge to play.

We are trying to assemble and marshal human resourses to get to the ore and energy needed. To do this, we need to close down existing drama after drama (all tradegies..lol..), release energy into consciousness and go on learning how to apply this vast new energy.
 
Questions for Jack

Hi Jack,

Thanks so much for sharing your insights. I'm playing catch-up with this thread and would be grateful to you if you would help speed up my understanding.

(1) Please expand on your comments in your flaws summary that deal with congestion, convergence, and centering. Specifically, what do you mean by "harmonic," as in "departur[e] of the odd harmonic in the congestion, [and] the appearance of the even harmonic in the convergence"? Also, please explain what you mean by "see volatility shifting on and off in the centering." Does this shifting of volatility manifest itself in an indicator sequence or are you referring to price spiking up and down?

*** all this stuff is in sequences. The harmonics are caused by the shift from A to D. dkm, this is what makes scoring work. The nature of loosers in commodities is a "noise" phenomena. If you make a list form ET posts alone of the looser whining and traps you can see pairs of stuff. A pair is the looser type and the type of situation. for simplicity and to point fingers, look at the first time in a trend the price traverses to the right channel line. volume goes down (looser type a, and procrastination..stream of exits is going on); then the bounce and price rockets to the other side. Here you see the odd harmonic. 3 times the trend fundamental. AQll cycles look like triangular wave formations. In La palce transforms these are odd harmonic series (Sums); in the limit it is an infinite series. Haromics have three variables : frequency, amplitude and phase angle to the fundamental. So this is duck soup stuff. Even harmonics give you square wave functions. Square waves on a sloping trend carrier give you flights of stairs. Again the limit is an infinite series.

The volatility being on or off is a "noise" phenomena. Markets are operational only when there is sufficient minimum volume. The volatility is the first and major measure of sufficient volume. It is a go/no go phenomena. I appears as alternate "stalls" where one is in a larger range than the other. Most backtesting omits all of this stuff. For me to ramp up a backtester to a minimum level of performance is really an exercise. They also have all their dramas and baggage to boot and some of them even prctice curve fitting.


(2) How do you distinguish a market that is going into a slow trend (play ice bergs) from one that is entering congestion (slalom)?

*** It is a well kept secret among experts that you always play for max money velocity. The 50% line is the key signal from STOC on this. I will put in the journal three baseline posts. One for each level of trading. The basic operating rules will be there. Id you are an expert you are doing several times the H/L range per day in money velocity. This means being in the market more and do ing more reversals.

Intermediates who find an iceberg is congestion just hang in there for the band crossover. Usually this is a wash at worst. As you go through learning to make money you can't do everything at the beginning. But if you follow a riorous path you will hardly remember when you weren't really pulling it down all the time.

A lot of people are in loops. They make money and then they loose money. This is the carpenter with 20 years experience; he has a first year repeated 20 times. Look at Bob and Cathy posts. they are cyclic vis a vis making money. the particular guru under that trading stuff is not being understood beyond a given level. The loop breaker is to move to a higher level using that guru's stuff. The "guru" moniker is Bob and cathy's.

There is a major transition in investing and trading. First you have to know what is going on. Then you move to anticipation (you give up predicting during the phase of finding out what is going on). As you anticipate, you have an offset for action. At this stage, you are combining knowledge and decision making and it deals with entries primarily; the next level up is being able to detect flaws in "what is going on and anticipatory decision making. This level allows you to "see" the normal is twarted and you have to go to the cover for anomolies. Anomolies definitely make the most money and the fastest money. this is more and more a micro thing that is KISS oriented.

there are major mathematician driven effort to deal with this stuff. They get twarted because of a Macro viewpoint instead of a micro viewpoint. the jist is that they process more and more dats when they needed to just slip into a more intrusive time frame. Most people can't read or understand what I am saying. That's kewl. If a person ever asks for deeper stuff I do take the time to spell it out.



From my vantage point, slow trends resemble lateral movements especially at their inception. You've repeatedly said that congestion (along with convergence and centering) follow rockets. What is the precursor to a slow trend?

Usually another slow trend. Look at how often trend channel are icebergs and how one trend channel becomes another upon reversal.

In contrast you will see rocket driving right into support or resistance and failing in momentum (volume) the breakthrough. This is a major clue for everyone on when S and R are going to bebroken. It is not going to be going into midday.[/color]

Re: Re: Flaws and sequences

I posted on this two posts back this am.

I think the effort to do the work to get sequences makes more money per hour invested than any other effort.

It is a terrific use of time when ever you are bored looking in from the sidelines.


4-11-03
Had to leave at 3:30 for weekend traveling. Here is Friday's stuff:

Well, after the two retart days i tried to figure just what the heck went wrong....basically dealing with the open was killing me. i was drawing trendlines where there was just chop and trying to enter on any liitle break of a tiny trendline...instead of waiting for a rocket or rocket failure i was looking so closely i was jumping in at anything...the biggest mistakes was trying to enter to early....no rocket signal at all...no good macd....(stoch BELOW 50 for a long one time) just a trend line break....and in reality i was just getting whipped by the opening chop....in short i was NOT doing what i had been having success with...anyways went back to basics on friday and it offered a big 'ol meatball reversal...so a tough week with a good ending.

1. rocket failure--->macd xo reversal

ok. up a lot into the # at 9:45 i did not have a position on long b/c just seemed like a lot of risk to enter as the # was going to hit.....anyways...9:50 big fat bearish engulfing candle (nq's was REAL big) and trend line break...i waited for the macd to xo...10:00 macd xo short 878.00....held until 10:35 bar with sideways action exit @ 871.50...stoch and macd were still giving good readings, but i wanted to get a winning trade in my pocket after the tough week. if you held you made even more.

short @ 878.00
cover @ 871.50 +6.50

day: +6.50 19 days: 29.25

2. short rocket

1:25 s(5.26, 9.53) macd hist: -.47 v: 5678

also broke the low of day...1:35 bar reverses into the previos range and rocket fails.

short @ 866.00
cover @ 866.75 -0.75

day: +5.75 19 days: 28.50
 
Posted by vorzo on 04-13-03 06:06 PM:

Intrabar backtesting

I used a simple trick to BT inside the 5m bars - used 1m data, and multiplied indicators parameters by 5:
Stoch(70,5,15)
MACD(25,65,30). This is a gross approximation by if you look at 5m and 1m charts side by side, indicator values for a 5 min bar don't differ too much from values of the 1m bar that corresponds to the close of the 5m bar (for instance, 9:54 1m bar for 9:50 5m bar). So signals are generally identical.

Settings:
-Entry on fast line + MACDHist, on close of 1m bar
-Exit on fast line, on close of 1m bar
-Between 9:30-12:00 and 2:00-4:00pm
-Stop at 2 pt.

Results for fast line only were abominable, too many whipsaws. So I tested:
-entry on fast and slow line + MACDHist
-exit on fast line.

Results vary from -$3k/contract to +$7k/contract, with better results if you use the 20/80 trigger (+$5.7k vs +$2.4k cumulated over 2 years).

Optimization: combined trigger (entry 20/80 for fast line, 30/70 slow line; exit 25/75 fast line) gives better performance, +$8.4k over 2 years. Translated: you enter earlier (fast line above 80) but avoid whipsaws (slow line above 70), and you stay in the trade longer and avoid whipsaws (exit below 75).

So what does this mean? The results are not impressive at all ($8.4k/2 years means 0.34 ES points/day).

Skeptics can gloat all they want, because, as I pointed out before, I don't see this as a mechanical methodology. The stochs/MACD are merely the primary signals, and you act on them based on other secondary signals. The way you interpret the secondary signals is discretionary, and so will be the results. I believe that if you follow Jack's guidance you'll do very well with this method.

A simple example where discretion improves results are morning gaps. The system takes lots of losing trades after gaps (I didn't feel like coding for eliminating this): enters in the direction of the gap on every 2nd 1min bar, and gets stopped out on the next as long as the signal is there, although mkt is filling the gap.

You have the 5m bar backtesting attesting for it - if you avoid the intrabar signals you would make $97k/2 years, or 3.9 ES pt/day (see attached).

This concludes my backtesting efforts for a while, it's time for forward testing now. I hope this is helpful.


A continuing discussion on this stuff


Let's see if I got it right.
Here are 2 sequences that were played out more than once:

Sequence#1: 5m MACD convergence -> fast line leaves zone -> 5M MACD cross -> channel BO = FLAW so exit

Sequence#2: 5m MACD convergence -> channel BO -> second point 3? -> 5M MACD cross -> fast line leaves zone = FLAW so exit

#1 and #2 are different, but they have common elements. So you can write the following decision trees:

Channel BO
#1 you have the trendline broken and you exit because all other indicators are pointing that way too.

#2 the trendline is broken BUT the other indicators are still good so you wait for a second point 3, but exit when the other indicators give exit signals.

Fast line leaves zone
#1 channel still intact but it may be a whipsaw - you wait for 5m MACD cross and channel BO = flaws so exit.

#2 channel is already broken with 5m MACD cross so you have your flaw and exit.
You can move your decision point further up and exit on MACD cross. Or even further, you can add a new decision point, such as failure to traverse to the left side with peaking volume, and exit there if it occurs.

Did I get it right Jack? How would you translate this into a diagram?

I did not answer at the time. This is a terrific way to back test. Putting it on a chart is idfficult because of having to make he indicator adjustments.
 
Discussion of Back Testing

VORZO,

You really should take the results of the system testing for what they are. Jack's method really gives you NO edge.

Now, you are at the point of applying a layer of discretion which you think will improve the results... So in reality it would be your discretion not the system that would make you $.

I dont get it.. why dont you just trade purely discretionary.. and avoid all indicators.. except for price and volume. In reality you are proabably in the same boat. Indicators alone dont work mecahnically.. so who says you are better off combining discretion with something that doesnt stand well alone??

As I have stated many times.. indicators like stoch's macd.. wahtever.. are all BS. They give you absolutely no edge. If you want to become a pro trader.. you have to realize this. There is no method using indicators that will give you a mechanical edge.. Once you start adding discretion.. then you are just making an excuse not to use the indicators..

The only reason you would become profitable trading similar to DAWG's performance thus far.. is because of you experience and ability to trade disectionary... I looked over Dawg's charts every night.. and noticed.. a lot of times he avoided many mechanical trades part of Jack's system.. I bet if he took each signal Jack's system put out.. he would be losing.

In reality its DAWG's discretion thats making him the $. I also bet that if DAWG continues his good performance and gets the hang of trading.. he will more and more use less of Jack's methods and use more of his discretionary ability.

You look to Jack as if he knows all the answers to the market.. in reality he is a fraud. I have never seen one trade of Jacks in realtime.. I have seen his system backtested many times yielding unprofitability.. And also I have seen Jack answer hundreds of questions with complete mombo jumbo crap... Jack claims you can make thousands of dollars as a novice with his bullshit...

I am just getting sick of people like Jack... playing with all the vulnerable newbies... and taking them for a ride...

Vorzo.. after your experience with jack.. which I bet will fail... you will be back to where you started... looking for the holy grail or some set of magical indicators... The answer is far away..

I dont have the answer to your questions.. but I do know that if you will make $ trading it will not be because of someone elses system or set of rules... It will be because you have found an edge and will apply your experience.

another interjection on the back testing

Posted by Trend Fader on 04-13-03 07:24 PM:


VORZO..

You are trying to make sense of the market... as if they really care about MACD and crossovers.. your post sounds as if Jack knows the rythem and rhyme of the markets...

"#2 channel is already broken with 5m MACD cross so you have your flaw and exit."

This sounds like the market is your friend and you know its personalities.. as if it really cares what all of these indicators are doing...

You have done the testing yourself.. market couldnt care less what Jack's indicators say.. nor any indicators at all.

I hope all the newbies are reading my post.. so I can save them lots of time.

Posted by nwbprop on 04-13-03 07:56 PM:
What i see from Jack Hershey's methods is a mechanical system that is part discretionary. It is discretionary until you can recognize all the flaws that happen in certain sequences. Once you get to this point, it becomes a mechanical system at every level.

The big picture that i think Jack is trying to convey is that you can take money out of the market at all times of the day. It depends on your level of conciousness to see things.


This is my interpretation(what i see) of his system.
AM: Get in the trend using stochastics, 20,80, macd 5M Xover, Stoch cruise through 50%. Draw channels using points 1,2,3 which you can get using the P,V relationship. Draw second point 3. IF price doesn't reach the left channel or right channel with volume pooping out, then you reverse(usually around 11ish). Stay in the trade using P,V. you are either gonna get a wash trade or new points and channel.
MIDDAY: IF after the reversal, you have a wash trade, see volume decreasing, then you must come to the conclusion that you are probably in CCC(horizontal trend) and trade using the 1 min macd xovers for rapid reversal trading. Once you see centering which is VDU and macd, stoch on 50%, then do a break out bracket trade. This might take you to the new trend with channels and pts(look for volume increasing compared to CCC period.).
PM: Ride the trend using points 1,2,3. Look for second point 3. Do reversals based on price not reaching channel line and then do points 1,2,3 again.


This is how i interpret his Methods. As you can see, you will find that you really can take money out of the market at all times. It all depends on what you see(Level of consciousness). I am sure i am still not seeing a bunch of things.

I also wanted to ask Mr. Hershey a question. I sometimes get whipped around in the morning looking for the trend to materialize. What is the sequence that you look for for the initial AM trend? I think Dawg might have the same question. thanks.
 
for this part of the discussion I colord the group participants green and I colored the person who was advising Vorso, red. This makes it easier to follow. The basic major point that comes out is that SCT (Seamless, continuous trading) is something unkown to others as a possibility. Getting the SCT possibility on the table is a terrific consideration to get the oppotunity to face.

Posted by Trend Fader on 04-13-03 08:59 PM:

Quote from nwbprop:

The big picture that i think Jack is trying to convey is that you can take money out of the market at all times of the day. It depends on your level of conciousness to see things.

C'mon lets be real... all times of the day?

You are telling me Jack can trade the AM. the midday chop and closing all using his methods successfully everyday?

There is no method universal to all types of trading conditions.. and all parts of the day.

This is completely bogus. His methods are supposed to do all these wonderfull things.. yet when backtested they are completely garbage... Now he is gonna give you the song and dance.. of how you can not backtest his methods.. there needs to be a layer of discretion applied...

Just notice his first post in ET. He states that a beginner can make 6 figures a year easily trading his rocket methods...

Posted by vorzo on 04-13-03 11:15 PM:
Re: Re: Intrabar backtesting

Quote from Trend Fader:

I dont get it.. why dont you just trade purely discretionary.. and avoid all indicators.. except for price and volume. In reality you are proabably in the same boat. Indicators alone dont work mecahnically.. so who says you are better off combining discretion with something that doesnt stand well alone??

I am just getting sick of people like Jack... playing with all the vulnerable newbies... and taking them for a ride...

Vorzo.. after your experience with jack.. which I bet will fail... you will be back to where you started... looking for the holy grail or some set of magical indicators... The answer is far away..

A response:

Trend Fader,

I think you mean well, although in a non-constructive manner, but you're not paying attention to what I'm saying. I said in an earlier post that I look at Jack's method as training wheels to help me acquire market consciousness and find my edge, not as a mechanical system. BT results gave me an idea of the number of occurrences of the mechanical setup, what I can expect if I take all setups, and how entering earlier on the bar can make a major difference in results.

So what I'm trying to do is discretionary, and I use the indicators as signals that point out that something, not visible in PV to the untrained eye, is happening. If I were to trade purely discretionary, as you suggest, it would be so discretionary I wouldn't know where to start. So again I would need setups, more or less defined (S/R levels, trendlines, PV action, patterns)?

You seem to have a real problem with indicators, as if you got hurt using them and now you hate the very idea. They have been used successfully for decades and now you come along and tell us newbies that they are shit.

And yes, I may be a newbie, but I've been around just long enough to realize that there is no holy grail and I'm not looking for it either. There is the EDGE, and each trader has to discover his own. That's what I'm looking for. And that's what Jack is trying to teach people: how to understand the market so they can find their edges. You may have had the chance to learn your trading directly form other people, and you may have gotten to the level where only discretionary makes sense anymore.

As far as Jack having an answer to all my questions - I'm sure he doesn't but he's showing me how to find my own answers. Too bad you can't see this, you seem to have a personal vendetta instead.
There are at least a few people, including dawg and myself, that have benefited greatly from Jack's coaching and from this thread. If Jack's method doesn't pan out, what I'll be getting out of the journey is priceless: better understanding of the market, and hopefully an edge.

Posted by Trend Fader on 04-14-03 01:24 AM:
VORZO..

I sincerely wish you all the best... and I realize that you are a clever person.

Here is my problem... Jack came along from another site claiming to teach people how to make thousands of dollars as a beginner.. using somewhat esoteric methods.. that many people still dont fully understand even today...

There is absolutely no proof to his success nor that his methods actually work in real trading... I just caution people to the reality Jack is presenting... Look at the facts.. thats all.

UNtil I see some proof that Jacks methods work I will doubt every thing he says.. and consider him just another snake oil salesman. Altough his motives are not financial they might be based on a cult following he tends to create.

If someone comes to ET.. and claims these types of returns.. before even making their first few posts.. a background credibility check should be warranted. I think its only due dilligence.

Why doesnt he make a Journal in realtime and show us how well he trades.. why doesnt anyone of his true students tell us how they make 1-3x their capital trading rockets???

WHy should anyone care what Jack has to say.. if there is no proof in the pudding. You must take these types of claims with a grain of salt.. because you know that in this business 95% of the gurus are bull. And one thing for sure.. Jack does claim that he is a guru... look at this first few posts on ET>. stating how much people are expected to make trading his methods...
 
Quote from bubba7:

The basic major point that comes out is that SCT (Seamless, continuous trading) is something unkown to others as a possibility. Getting the SCT possibility on the table is a terrific consideration to get the oppotunity to face.
More...


Now you're talkin' Mr. Hershey. Let's take an example of a trading framework, say, Drummond Geometry. Its premise is turn anticipation using geometric projections to anticipate possible turning points. Basically, you're "pinging" these counter-trend projections until the actual turn occurs, culminating in the biggest score. It's not selective because you can't possibly know which one is going to be "the turn", hence an example of your "continuous" trading.

If what you've defined by your model is such a framework, then it warrants further study.
 
I do not comment when a discussion is forwarding what I feel is very important stuff. People tend to assinate me instead of staying with the topic.

When people are trying to learn something new, it is difficult in this mode. Typing and chatting is not very efficient. It takes time to get from A to B. I feel the necessity to have a process ensue that is from the viewpoint of the participants and not driven by what I hold as the goal to be reached. The goal is SCT but that is not articulated at the onset. I did articulate potential performance in making money.

When these two items: SCT and making money, appear and are in the space for a person who absolutely knows none of these items are real for this person, then a real disagreement comes to pass. There is not going to be a possibility of resolution. What is very important is to look at why and how the person got to his viewpoint and to understand it's basis thoroughly. As a presumed snake oil person, am required to follow strict and unvariable guidelines to "make the sale". I am presented clear and straightforward requirements to meet. In sales parlance, I must "overcome all objections". Most sales people know the set of objections thoroughly. They do stuff to make the sale proceed.
I think here in ET many many of the objections are clearly on the table. Luckily, the required elements to overcome them are articulated too. We know what satisfies each objection in the objector's mind. The person also knows whether or not they are going to get satisfaction by getting them. My choice so far has been to hope another person will give the location of the elements for overcoming objections when they have been aware of these in past forums. This simply alows the objections to be handled by others since I have done the stuff before. The CPM I prefer is as above. By keeping my efforts undiluted, I feel I will accomplish my goal of getting what I do and know tranferred to others in a usable form before it is too late.

4-14-03 Trades
not much happening for me today...slow grind. spent alot of time going over last weeks trades, trying to reionforce the good and avoid the bad.

1. long rocket

11:30 s(86.21, 82.07) macd hist +.49 v: 21,055

long on break higher...was concerned about quick price/vol spike at 11:30 bar. 12:15 macd xo. 12:40 stochs leave zone and i exited....these slow trends are difficult for me...hard to get a handle on my trend channels.

long @ 878.00 11:43
sell @ 878.50 12:42 +.50

day: +.50 20 days: +33.50

2. long rocket

3:40 s(100.00, 94.71) macd hist +.45 v: 9,186

volume was picking up (for once) long on the break. closed at end of day. pretty simple, not much movement...felt i was getting in late in the trend.

long @ 883.50 3:45
sell@ 884.50 4:00

day: +1.50 20 days: +34.50

side note: felt good about avoiding the morning chop. was patientthe whole day...couldn't find much and didn't push it.

Comments on trades

Re: 4-14-03 Trades

Quote from dawg:

...."long on break higher...was concerned about quick price/vol spike at 11:30 bar. 12:15 macd xo. 12:40 stochs leave zone and i exited....these slow trends are difficult for me...hard to get a handle on my trend channels"......

I hope i can help you by showing you how i saw it. I saw a ftp/breakout play right before the rocket.
The trade turned into a rocket and i immediately started looking for points 1,2,3 using volume.
Point 2 occurred at 12:15 and point 3 at 12:30 on decreasing volume.
This channel was broken on very low volume, therefore I started looking for the second point 3. Point 3 is at 12:45 on increasing volume.
price then tries to make a push to the other side of the channel but lacks the volume. Jack said to reverse at this point.
This can either turn into a wash trade or into another trend.
Volume dries up, turns into CCC.
Do 1 min macd xover trades.
breakout bracket trade at 3:18 on increasing volume. Turned into a rocket and never got points 2 or 3.

This is all based on what jack has said to do in previous posts. unfortunately, i was paper trading because i have another system i use.

Same day different trader:

Trades Apr 14
nwbprop, nice going.
I saw the same sequences:

#1 CCC then VDU at 10:30 -> BO 10:36 entry
Short 870.50 10:36
Cover 872.00 10:45 as BO failed, and reverse as vol was strong on price increase. Should've washed earlier, at the close of the 10:30 when failed BO was obvious. Held because I though a move was imminent after the CCC and low volume in the morning.
-1.50

#2 Reversal on VDU BO failure
Long 872.00 10:45
Sell 877.25 11:34
VDU BO failure bar marked point 3 in a slow channel -> channel traverse to away side on increasing volume -> rocket signal w/out MACDHist -> channel traverse to the right side on decreasing volume -> rocket signal failed. Held since P,V and channel had no flaws, MACD entwined "away".
11:15 channel BO after VDU -> held one more bar as down volume was not strong (same as the 1st VDU BO) - very hard to hold through this, it took all my mettle -> reward came as next bar was an up nrb -> volume picked up w/MACD cross up, rocket signal -> exhaustion volume that peaked at 11:33 -> sold because I had to go to work.
+5.25

Day +3.75
12 days +31.00 (33 trades; comm. - 3.25 ES pt)
Net comm +27.75, or 2.31 pt/day. Not bad

more trades

Apr 16 trades
Couldn't trade yesterday.
Today:

#1 traverse to away side of slow channel (continuation of yest trend) on vol BO
Long 893.75 10:24
Sell 893.50 10:28 failed to traverse -> wash. Thought about reversal but didn't do it (anticipated congestion)
-0.25

#2 rocket signal
Short 889.50 10:42
Cover 886.50 10:15 point 3 at 10:55 -> channel BO at 11:05 -> new point 3 -> 5m MACD x -> 11:10 down bar volume DU = FLAW so no new point 3 -> exit
+3.00

Day +2.75
Week +6.50
13 days +33.75
trying to find the slow trend
i have been looking back at past days charts a lot and trying to get better recognition of slow trends....finally thought i spotted it correctly today anyways here is what i saw:

10:20 rocket signal that is also a reversal candle.

10:25-10:35 market slowly backs off, stochs leave rocket zone, macd xo but #s are very tiny, more like pretzeling

10:35 stoch reading of 50 fast line...got me thinking maybe a slow trend an it should halt around here and form a point 3. volume continues to get lighter.

10:50 bull flag formed, volume tapered off and the 10:50 bar is a low volume inside range bar..break of range would also trigger bull flag. volume on irb is 2,450 (lowest of day) high of bar was 881.75.

went long on break of irb at 882. and now had a slow trend channel to also work with.

they key for me was spotting the 50% stoch acompanied by lower volume and slower price action. after the 50% reading market formed an irb 2 bars later and broke up from bull flag to continue the current trend. also on break up of irb volume was 6,667 compared to 2,450 of inside bar.

anyways my 2 cents....maybe some progress on the slow trend recognition. hope this helps.

Nice trade, dawg...

The other clue was the MACD - it has been above the zero line for most of the day...

4-17-03

here is today's wrap. i will try and do a weekly wrap and total trade update sunday night, i am traveling this weekend for the holiday.

1. slow trend long

you can see the above post for entry reasons. exited during the 12:30 bar, mkt spike after philly fed, 12:25 bar was a hgih volume reversal at the top of my trend channel and exited when low of bar was broken.

long @ 882.00
sell @ 887.50 +5.50

was really psyched about this trade b/c first slow trend i was able to spot and capture some points on...although very difficlut to hold onto the position.

you could have continued to hold the position as the trend channel was never violated but exited on the away side of the channel on a spike reversal still seemed ok.

day: +5.50 23 days: 43.75

2. trend line break ---> short rocket

day long trend line was broken at 2:35 bar, got short when low of bar was broken...first time all day stoch was below 50 and a good macd reading -.37

good volume and follow thru on the 2:40 bar...2:45 inside low volume bar...2:50 rocket signal s(22.22, 24.07) -.475, but a reversal candel...what i was thinking was that this could be a new point 3. exit when reversal candle sets up. rocket fails.

short @ 889.00
cover @ 889.75 -0.75

day: +5.00 23 days: +43.00
 
Re: trying to find the slow trend

Quote from dawg:

i have been looking back at past days charts a lot and trying to get better recognition of slow trends....finally thought i spotted it correctly today anyways here is what i saw:

10:20 rocket signal that is also a reversal candle.

10:25-10:35 market slowly backs off, stochs leave rocket zone, macd xo but #s are very tiny, more like pretzeling

10:35 stoch reading of 50 fast line...got me thinking maybe a slow trend an it should halt around here and form a point 3. volume continues to get lighter.

10:50 bull flag formed, volume tapered off and the 10:50 bar is a low volume inside range bar..break of range would also trigger bull flag. volume on irb is 2,450 (lowest of day) high of bar was 881.75.

went long on break of irb at 882. and now had a slow trend channel to also work with.

they key for me was spotting the 50% stoch acompanied by lower volume and slower price action. after the 50% reading market formed an irb 2 bars later and broke up from bull flag to continue the current trend. also on break up of irb volume was 6,667 compared to 2,450 of inside bar.

anyways my 2 cents....maybe some progress on the slow trend recognition. hope this helps.

You find the slow trend using icebergs. The wednesday down trend was just interrupted once and youdid two ice bergs. An am one and a pm one.

For today the iceberg went all day.

This is how intermeditaes make 10 points a day just letting it grind out. What you notice is that ice bergs keep you in a trade and they let you see tha most of the time there is no really tricky things to consider. This is a very good relaxation technique.

After acquiring a few months of rockets and icebergs just about anyone creeps up to enough capital for two then three then four and finally five contracts.

Three rockets on a day or a 10 point iceberg when you are doing 5 contracts begins to get you ready for doing the expert level stuff.

VDU's

Be sure each day to note the VDU's and what happens on the 5 min within a couple of bars.

This is a training exercise for doing BO's off the 50% of STOC and the neutral of MACD.

The last two days the slow paced icebergs showed you how the MACD entwines "off" neutral. You can see that you are making money all the time when both lines are cruising "away" at least .4.

The ES gives you steady money velocity every day. By doing the point 1,2,3, you get used to staying in the full trends as well.

Posted by vorzo on 04-17-03 10:23 PM:
Re: Re: trying to find the slow trend

(didn't trade today).

I am somewhat confused. I thought we were suppost to reverse when price fails to make the traverse across to the other side of the channel. This occurred on friday at 11:15 am. Should we stay because of the possibility of the iceberg or reverse because of the possibility of a reversal? I actually i ended up washing and got long again at the BO of the ftp at 12:00pm. thanks

Quote from vorzo:

Good point nwb.
My take: if you trade rockets and use channels, you can get out early on failure to traverse to the "away" side.
If you trade slower trends using icebergs, you stay in the trade until the lines come out on the same side you entered.

What i learned from friday on the failure to traverse is that it can lead to a wash, reversal, or the creation of a new point 3(trend continuation). the reversal ended up being a wash and i waited before entering a new trade because i saw a BO,FTP forming that could either turn into a reversal or new point 3. It ended up being a new point 3. the only problem that i can see with this is if after you reverse, it becomes a wash and an immediate trend continuation without the price traversing to the right side of the channel to create a new point 3 or confirmation of the reversal. If this would happen than you would miss out on the rest of the trend until you jump back in on the next point 3. I am guessing that the odds of that sequence happening(not reaching the right channel line before trend continuation) is low due to the price not reaching the traverse to the left originally with the volume falling off. I guess you just have to look for those flaws.
 
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