Futures Indexes System and Tool Box

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post 11, page 4Money Making Process

Everyone is not going to get rich playing the market. People who use this journal complement of information will make money.

I believe strongly in making money from the get go. Below is my general viewpoint.

At a fork in the road you can choose to: A. Go by successful levels (plateaus) of operations and add pieces as warranted by past successes or B. You can choose to jump in with what you think is full knowledge of an approach you feel you have taken the time to learn before you use real money. Obviously there is a combo of these, too.

I propose that you use the A. fork. I have divided A into three levels: 1. Beginner; 2. Intermediate; and 3. Expert. My personal standard of making money is: for equities, 10% every 6 to 8 days on each money stream where your profit potential is 20% and you are using 50% of the time available; for futures indexes, 50 times equities. This is an expert level. I believe the path, in terms of doublings, represents about 8 levels of better efficiency over the spectrum. It is possible for people to not grasp what I am saying.

This is an ES oriented journal primarily. So I have a specification for moving from beginner to intermediate to expert.

Beginners start with capital but do not use any more than that for 1 ES contract until the get to a point where they have three times the initial capital they started with.

I request that, at that point, they take out the initial capital and also spend it on a nonrecurring item in their living style.

Intermediates become experts by consistently making money and then adding contracts. The toolbox will tell you what tools to use as an intermediate and when to add contracts.

After expert, you are requested to do two things: help someone else continually and share profits with a not-for-profit 501 (C) (3) of your local choice. My prefs are fairly wide but CERT, etc is getting my time and stuff now.
 
post 13, page 4

General behind Header.\General, (Behind Header)

In ET there is debate about how to monitor and what to monitor. Add this section to be able to reason through what and how to monitor.

These are my recommendations for a futures index. Display a real time price chart on the 5 min fractal. The 5 minute bar chart is our basic market pace referent fractal.

Below the price, display volume, then MACD (5,13,6) and finally STOC (14,1,3). This group gives you the two direct market variables (Price and Volume) from which the P,V relation is drawn and two ket indicators. See Catchup journal for an overview of the P,V relation. Tuck the print outs behind this post for convenience. You can spend some important time verifying all the price formations and how they follow the P, V relation. This is your best monitoring skill builder. As long as you skip doing this, understand that you are costing yourself about 20% on your profit making efficiency until you do it over and over about five times. This is just a personal reality check for you on your level of reasoning ability. It is on the same level of having triage assessment in gear to be able to do the most good for the most people. This P, V groove you are building is at the top of the list.

Indicators are indirect measures and are comprised of direct data funneled through equations to yield an indication through signals. One other market derivative type data looms in the foreground; this is the A/D condition. You will learn about it later.
On the indicators, I have adjusted the defaults for you Thus, they work for all fractals possible for monitoring (seven in number). You must know how the formulae work down cold and why the originator conceived of them. If you do not, you are a lightweight who is kidding himself. Knowing this stuff is just a warm up for getting signals from them and translating the signals from lagging to leading indicators.

What is important in this post is for you to get straight what it is like being a millionaire.

The P, V relationship and indicators and their respective signals put you in a unique place to continually harvest money from others who are not able to see what is hitting them. Until you get on the right side of the market you are screwed. I want you to notice that when any person comes to ET and for whatever reason is a very sharp trader; he has a viewpoint about me. He has definitely seen me as the person type that he is facing when he trades. The airheads here who make noises about me that are just opinions are not in the sharp trader category. You do not have to have the broad pervasive viewpoint espoused here to make some money but to make a lot of money you do. For me, after 47 years, I have had time to fool around a little. My conclusion is that is it just as easy to continue to extract it, as it is to turn on and off your extraction process. Many people, who just pull out money on singular set ups, do not have ways to handle all the situations possible. So, in fact, they only trade where they have learned to not get beat up. I am going by plateau by plateau as an orthogonal equivalent to get to a broad pervasive viewpoint. The goal is to add (synthesize as well) piece after piece synergistically. I believe that having just several set ups is not reliable for all market operating points. On the other hand as series of risk oriented plateaus do assure continuous profits as you rise in competence and effectiveness and efficiency. Thus as we go along, you can expect to continually see improvement in wealth building velocities.

By having a comprehensive continuous set of signals, you find that they come in sequences that repeat as the rule. After that you will rise to understand that these sequences end when they develop flaws. These flaws constrain the path of the market operating point. Flaws block the possible alternative paths. What happens is that you, then, see what the only remaining focused possibilities are for the next operating point. As a consequence, you will be able to use proper tool combinations to let the market do its job and then provide you with income continually as time passes.
 
I will post a set of condensed versions.

Version I is a process version . The version that best lets a person start from the beginning and see how to learn as a process. It is posted in monthly parts.

Version II is a stacatto rules only version. It is done as a chronologically developed reference. the reference arranged chronologically should help establish a context.

Everyone can recognize themselves in each version. This points out how valuable the participation is. we are trying to affect transference. Skills, knowledge and experience are best transferred to new people by their observations of othrs bfore them going through the BE DO HAVE of it.
 
I have to break the post up a little for the condensed stuff. I just found out there is a character limit. I already know about the attachment limits
 
This is the beginning of a condensed version of the stochastics thread. It began as a thread that was pulled out of a Strategy thread. Next it was moved from the Strategy forum to the Technical Analysis forum. The thread depicts a strategy that uses Stochastics as one of the indicators.
I have pared down the thread into month long excerpts. There are bold new comments. The editing gets severe after the start. February is first.

Here is the comment that lead to the Break Out of the thread:

”I don't want moving averages or stochastics, or any other squiggly line interfering with the price action. While these may be helpful to some, I have a problem with them. ….What I'm suggesting is that it's all in the price action.
I responded to the post:

You can see here how not combining Magee, et al with indicators is a disadvantage in being able to think through what indicators are telling a person.

This is not a complicated process especially if you have a long history with the market.

To get the stochastics straight, you can do two exercises:

First, just use it on paces of the market that are definitive (fast paces only).

Second, set up three defaults on the stochastics to find out what the settings are for. Use the original and Pring's new setting for good extremes. Pick another intermediate one to show parts of the others.

What follows is all the posts as I excerpted them to show a dialogue that makes it clear how to trades the ES mini using a strategy that involves the indicator Stochastics and other stuff. At first I responded to others and at some point I initiated posts. You can tell what is going on by the sequence.
FEBRUARY,

PRO post
Jack...

Interesting reply; good point(s)

In fact over the past months been thinking over what you allude to, i.e. enhancing one's decisions by additional input to an already solid foundational understanding. However the more I'm in the markets... and the simpler it's kept, the better it goes (for me). Yes I do utilize some other indicators. But have no doubt that too many nouveau traders believe "more is more" (or more is better)... when (imho) some of the best on-floor and off-floor/screen traders know that "less is (often) more".

Would be interested in any insights on my premise.

CON posts
Do people really need stochastics to tell them something is reversing from an "oversold" condition? If you trade a single vehicle, whether it be a stock or future, and are capable of sitting down and watching it day in, day out, noting where the levels of resistance and volume are, you will be way ahead of any price/volume derived indicator out there.
Why use indicators as reinforcement? Imho, you either understand and 'get' a setup, or you don't. If you're not confident about what price and volume tells you, then chances are you don't fully grasp the market dynamics. There is a good probability that a need to look to the indicators would then serve as a crutch more than anything else. Think about it, did Livermore, Gann, Richard Dennis and all the other big names use indicators, I really doubt it. The real ephiphany, for me, occurs when one can understand the dynamics of supply and demand as evidenced by the relationship of ohlc to each other and across days.

But then again, whatever works for you should be the ultimate judge. I'm not advocating one style over another, although that I only use P/V.

MY RESPONSE:

Stochastics has really gotten beat up by folks. Old observed that during "oversold" is when he sees the market still.....etc Now you see the "oversold" condition.... as something reversing from something......

Look at ES on the 5 min today (17 FEB 03) using beginner's 14, 1, 3. Now that's oversold!!! What happened was that the STOC stayed oversold and the price as expected continued a strong upward trend.

A relative indicator is always going to be at an extreme under these conditions.

It looks like people see coming into "oversold" as a signal. Well it is, of course. It is an entry signal for fast pace markets and a "hold" signal for all other paces.

You also get to know that a prolonged "oversold" indicates what?......the answer is a lateral period of congestion leading to convergence and centering. where will the Stochastics arrive at at the end of this pattern of three formations?? Where else but on neutral....because it is a relativistic indicator and 50% is neutral point.

Reversals?? What is the indicator sequence for reversals on stochastics?

Well there are three kinds of trends and only two pairs of them can lead to reversals. The other two pairs have as a first trend a lateral trend.

When can you reverse? Not until you are making about 150,000 a year per contract on the ES.

Its best to do a wash trade several times a week as a warm up for reversals. Once you can do wash trades any day of the week you can then see where reversals are possibilities and how to extract yourself when you need to.

If the pace is fast and you are picking off 10 or more points on an ES trend, then you are seeing "overbought" all during your hold period. When you slip out of the trade, the stochastic is headed out of overbought and NOT to a reversal. Now that it is gone from "overbought" it goes to one of two places. the first place it must hit is neutral. From neutral it can chose to reform into the prior trend (rezoom as they say) or cool off from the prior trend into an opposite trend. No reversal here though neutral comes first.

When you get to slower trends than fast paced you will see all the typical formation pattern folk use.

A long trend at a slow pace with the 20 80 taped (intermediate level trading) looks like icebergs floating in a row (count three usually). You enter when "over sold" appears as first iceberg. You hold through the second and third iceberg. You didn't exit like in fast pace because the "oversold was" sustained... old notices this.

You exit only when the lines come out the other side of the tape which proves there are no more "rezooms". Each iceberg is, of course, a rezoom. I was being corny. Resume is what happened.
 
You can see how by building on the "fast pace only" beginner thing and including slow paces too that you creep up from 90,000 a year beginner level per contract to 150,000 by adding slow pace.

I know that the effort of using an indicator like stochastics to get started is not pleasant...maybe. To me it seems a good way to understand the market better and get into learning what sequences of patterns or indicator signals mean.

We still aren't able to trade reversals. first you have to do two more things. To get ready.

If anybody is reversing out of "overbought and is pulling down less than 150,000 per year, just stopping what you are doing will put you further into the chips.

If my stuff is hard to read to one of two things: use a yellow high liner to accent stuff. Or second after you highlight use black to kill about half the rest. Do not cross out the annual money made; you need to underline that in green.

Some responses
Jack

I have no real idea what a tapped stochastic is although I am guessing from the context you suggest people not pay attenion to the 20-80 range or whatever your settings are. Your pacing a market is obviously something you have defined. By the way this is not meant to be insulting because while I am a bit dubious of your claims of a beginner making 3x his money (at the first level) I would love to see it done. I would love to do it myself as I have had to change my methods to cope with the current market conditions and I assure you that while I use to triple my money every year, I have not done so recently.
Question
Jack, why do you prefer one stochastics setup over the other? Could you tell us which one you use in what conditions and for what time frames? I have no personal preferences in this matter, for me it is a time frame that matters more than a particular set of stochastics parameters. For instance, some stochastics bullish in the1 min chart may not be that bullish in the 3 min chart, their parameters being the same.
 
Question for Mr. Hershey
Assuming a 5 min. chart is being used, and both stochastic lines breach either the upper or lower band, is the proper methodology to wait until the close of that 5 min. bar to ensure that the stochastic lines do not retrace? Also, what is the entry point? Is it above the high of that last 5 min. bar, or is it above the close of that bar, or is it something else?

Here is a real screw up. The person thinks that when coming up through 80 means that you “know” you should go short because the price will immediately reverse. In fact we know this is the beginning of a rocket or icebergs.
Some people just don't know how to use the stochastic. Take a look at the attached chart. Every time the fast stoch pulled back to 80 you would have had an excellent short entry.
This post was corroborated by another:

What in the hell are you trying to do - give the store away?

Let the poor fools continue to think that stochastics are overbought/oversold indicators.

If I were you, I'd ask the moderator to remove that post before too many
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90,000 a year beginner level??

Give me a break.
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stochastic is not a perfect indicator, because there is no perfect indicator. Personally I find stochastic usefull when it agrees with another oscillator like MACD, however both can be useless if there is a strong trend.
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I find it strange that you use one oscillator to confirm another oscillator, that's hardly a good way to get any new information that the first oscillator does not already contain. As for a strong trend they are useful too, you just need to know how to use them. In fact, they can even tell you that you have a strong trend and then using them you can pinpoint pullbacks for entering the trend.

fast pace trading
Jack, I asked if you could post a chart of a day in ES with your "fast pace" stochastic trades. You keep saying that "fast pace" style is the simplest one and one that people should start with.. OK, so teach us the fast pace trading with stochastic. Everyday post a 5min ES chart, with fast pace stochastics trades clearly marked on it. If you do that even for a week or two, people might start getting it.

Attempt at "Fast Trades"
In an attempt to learn more and it seems others are interested I am trying to trade jack's 'fast or rocket trades'. I have read through quite a bit to try and get it straight (MIF and Don Cameron's site) and will report here my trades and hopefully Jack can critique them and provide further insight to his method. I will also try my best to attach .gifs with the trades written on charts. Hopefully we can all learn something. If i should put this in another thread just let me know, but i thought this was the place place to bring this up. Thanks.

I have my screen setup as Jack suggests:
5m Price
Volume
Stoch (5,2,3)
Stoch (10,2,3)
Stoch (14,1,3)
MACD (5,13,6)

and have a 1min screen with same info to get a better picture as what potentially lies ahead for the 5m.

My understanding of the Fast/Rocket Trade:
Use the Stoch (14,1,3) enter LONG when both the fast and slow move above 80 and exit when both leave the 80. Enter SHORT when both the fast and slow are below 20 and exit when they both leave the 20. Ignore anything else on the stoch indicator.

Trade #1:
Stoch (14,1,3) 9.38(fast), 10.74(slow)
10:20 Short @ 845.00
10:43 Cover @ 847.00
Total: -2.00 Day: -2.00

Comments: Shorted on the move to new lows. MACD was below ) and sloping downward the first few minutes of the trade.
At 10:35 the stoch read 30.00(fast), 20.78(slow) as this was barely over 20 and not trying to picky, I would wait and see what the next bar brought. At 10:40 stoch was 25.00(f), 22.25(s) there was a little spike up over some reversal bars so the i closed my short. I did not enter again b/c the next potential entry was after 11:15 and the MACD appeared to be very choppy and directionless.

Trade #2:
Stoch 12.50(f) 12.10(s)
1:25 Short @ 841.75
2:02 Cover @ 842.00
Total: -2.25 Day: -2.25

Comments: Market making new lows of day MACD below 0 not by a lot but faster line moving away from slow line. At 13:50 the lack of follow through in the nq to make new lows while the es made new lows concerned me (negative div. in my mind). At 1:44 the 1m MACD XO and at 11:55 the 5m MACD XO. Trade was exited with the stoch at 36.36(f) 25.76(s) 2:00 5m bar for a tiny loss.

Trade #3:
Stoch 95.45(f) 87.96(s)
3:27 Long @ 842.75
4:00 Sell @ 844.75 (market close)
Total: +2.00 Day: -0.25

Comments: Upward sloping MACD above 0 and moving away from slower line. Other stoch (5,2,3) and (10,2,3) also in their respective buy zones. Concerns during trade were at 3:42 the 1m MACD XO and a 1m trend line was broken. Both Stochs never closed belwo 80 on the 5m. Stayed in trade and closed at 4pm.
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I snipped many pages here… The post below represented a set of comments that show how a person could view what I said above. I left it in for the express reason that people reading this condensed version can get a “feeling” or orientation to this as a “possibility”.




jack
this is my interpretation of a portion of the thread and i am not speaking for jack, nor am i jack under an alias. i first have to say, i think overall folks were kinda hard on him - he's 70 y.o and seen alot of markets in his day, and the fact he's still in the game is a testiment to his ability. frankly, i listen close when someone that has been doing something for almost 50 years takes the time to instruct me, particularly for free. he even gave setting on the indicators, i bet that involved alot of trial and error.

there are some younger guys in my business that think its easy and that im nothing speacial, but F**K them, ive forgotten more than they know. ill be retired before they get their heads out of their rear-ends - if they even last that long!

we all have the ability to ignore posts or posters completely, so its kinda sad that people attack folks when they try to make a point. im no ace trader or ex-wall streeter, but ive seen some gems of advice here that has been trashed and the thread died out - stuff that ive learned through observation and trading losses. im not perfect either, so im not trying to preach (well, maybe a little).

i found jack's thread very thought-provoking... i was particularly interested in his view on taking trades after the ST had crossed the 20/80 lines (crossing below 20 and crossing above 80).... i think he was trying to say that you have to be able to recognize and trade a trend (fast moving market), before you try timing reversals. if you cant trade with the trend, then better stay away from timing reversals or countertrend trades.

i will also look for the 3 icebergs - the ST bumping along between 0 and 20 or 80 and 100 after slow move in either direction. i guess the psychology behind this would be a bottoming price action with people getting shaken out as price stabilizes. then the reversal is tradable (with confirmation) on the eventual move over the 20 or 80 line ("area").

the part about taping the area between 20 and 80 seems perfectly reasonable - for the most part thats no-man's land, or at best an area to monitored very closely if trades are taken there. ceratinly not a place to key trades if one is a beginner?

here is what i found:

http://www3.sympatico.ca/donald.cameron2/
I have read several things Jack wrote in all the different places on the web. And the things you can read between the lines are very valuable. This goes beyond some simple rules for a Stochastic indicator
DAWG is the poster of trades; his second post:
I agree with your post completely which is why i figured if we can use some trades as a basis of conversation and information we would all be able to learn more about the nuances of his methodology as Jack critiques the trades or gives insight as to why he would or wouldn't take a particular trade (or where to exit best). It is the little things that are not black and white that make a methodoogy work. Clearly it is not a mechanical system,which is why I think we need to discuss particular trades to figure out the little things that make it work best.
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These sites give a quick "primer" if you want it

http://sputnick5.www8.50megs.com/

http://mycoolstars.hypermart.net/jackdocs/
Dirty Rackafratz...
If I am doing this right, Jack's stochastic method would be up 8 1/2 points so far today.

Attempting to trade it, but second guessing, and just plain not always believing, I am up 2 points.
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Almost a believer...
With only a very basic understanding of the method, and understanding that Jack may well have passed on some trades, I calculate a gain of 9 1/2 points on the day. This was achieved simply by taking all of the 14-1-3 signals on a five-minute chart.

On the other hand, passing on about a 1/3 of the signals, and bailing early because of my own use of support/resistance, plus some second-gussing, and some disbelief, I walked with 5 1/4 points on the day.

nether total is bad...
Here is a section on the back testing series of posts that appeared.
Wishful thinking
Don't start spending those winning just yet. Running Jack's "system" through a backtest over the last five years yields a juicy profit factor of .84.

Nor is is fadeable since the test does not include slippage and commissions.

Posted by jack hershey on 02-22-03 05:00 PM:
Update and review.
I am going to update this thread that was started by a moderator. I also am starting a journal that I hope people read but do not comment in. Make comments to me if you wish in the thread in which I am participating instead.

Posted by jack hershey on 02-22-03 05:22 PM:
Re: Question
Jack, why do you prefer one stochastics setup over the other? Could you tell us which one you use in what conditions and for what time frames?

I have no personal preferences in this matter, for me it is a time frame that matters more than a particular set of stochastics parameters. For instance, some stochastics bullish in the1 min chart may not be that bullish in the 3 min chart, their parameters being the same.
You will find that in a while the slower chart (3 min) will go bullish. The 1 min chart can be used to anticipate the action on the slower chart. What is the message I am giving you here? I am suggesting that you use fractal pairs to trade. Trade on the slower and use the faster to anticipate.
Re: Question
I have read some of your postings here, and I have a question on methodology. Assuming a 5 min. chart is being used, and both stochastic lines breach either the upper or lower band, is the proper methodology to wait until the close of that 5 min. bar to ensure that the stochastic lines do not retrace?

Also, what is the entry point? Is it above the high of that last 5 min. bar, or is it above the close of that bar, or is it something else?

As you watch on entries enter when the slow line appears. Often it will disappear and come back again. It is slow and shy.

When you have been making money for a while ,cheat a little and use just the fast line on the 5, 2, 3 then go back to the 14, 1, 3; this will allow you to make a lot more money sooner.

For leaving leave at the first opportunity on the 14,1,3. after a while watch the MACD (5, 13,6) if it is still on the same side of the neutral line, then

I will use Macd for trend, channels for range (and formations to show S and R), we are using stochastics to make money temporarily.
This is a response to the haranges on the earning power of beginners:

Watch and see.

Today's date is 22 FEB 03. Let me know how much you want to start with. you can be our example. When we get to 90K plus your number we can prorate the annual ROI. If it happen to get rolling I am going to cheat and move up the earnings pace to prevent dullness from setting in.

Let me know the daily profit needed to squeak by in just a year too if you
A technical response I made:

Take a good look at the two. Stoc is relativistic and MACD is absolute.
 
In strong trends, you will see the MACD go "away" from neutral and sit at the money velocity of the trend. On the other hand Stoc just goes to an extreme and pegs. Most people sit and watch the Stoc be pegged and say something like: Gees (mktman talk..lol...) i hope it breaks through soon so I can get into ...blah blah. All the while the MACD is telling you how fast money is being made.
Once we start making some real money here we can get the MACD and Stoc coordinated because they really both give great signals that can be put in sequences to help us out on taking profits and reversing into the next trends if they are coming up.
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Don Cameron's handle was dufferdon, wasn't it? I wondered what happened to him, and certainly we all wish him well.

Don is now not maintaining the site. It as turned over to David Marshall for the future safekeeping.

Don will not be posting anymore. He was one of the most supportive persons that could be for short term equities traders.
Quote from dawg:

In an attempt to learn more and it seems others are interested I am trying to trade jack's 'fast or rocket trades'. I have my screen setup as Jack suggests:
5m Price
Volume
Stoch (5,2,3)
Stoch (10,2,3)
Stoch (14,1,3)
MACD (5,13,6)

and have a 1min screen with same info to get a better picture as what potentially lies ahead for the 5m.

My understanding of the Fast/Rocket Trade:
Use the Stoch (14,1,3) enter LONG when both the fast and slow move above 80 and exit when both leave the 80. Enter SHORT when both the fast and slow are below 20 and exit when they both leave the 20. Ignore anything else on the stoch indicator.
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Great set of comments. For future stuff it is best to set your price chart to 10 point scale. The two point one you are using clouds your ability to "see" when the market is flat.

This day and the next were flat so no trading was possible.

I will go back to the very beginning as the days go by. We will not play on flat days. We
will use MACD to tell us if the day is flat. Do this: check foir flatness by staying sidelined when the histogram on 5 min is less than 0.4 for the time being.

Flat days do not have sufficient volatility to make money. They are valuable for practicing "wash" trades. Just do wash trades when you are in and not making money on a flat day. Do at least three to five a week if you get the chance.

Move your chart order so price is on top and then volume and MACD then the Stocs. They are correct as you have them.

Flat days were an initial problem. I introduced the MACD histogram and using a standard scale of 10 points to clarify what flat means visually. More details:

Both of us are looking ay the 18th and 19 th and they are flat days. Soon it will be clearer that money is not made by going into a market moving laterally with low volatility. The posts on these two days are reflecting how perceptive people are on flat days.

Remember stoc is a relative indicator and it moves through it's whole range on all days. Begin to watch MACD for the ablsolute value indication of the trending of markets. With the histogram on MACD sitting around less than >5 most of the time, you will get to know a flat market.

Notice how xxxxxx and yyyyy disregard the flatness of the market and look all the time to stoc for a possible trade. They will be whipsawed often by non signals.
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The 18 th and 19th were flat. Today, you did have some trending. To pull down 3 points or 150 bucks on one contract for 250 day a year is only 60,000 dollars plus not compounded. If you compound it is over 90k. Soon we will be getting making money understood.

Getting ready for Monday.
Read the Journal and read the grouping of people taking part. They will form great examples of changes in level of performance.

If you have William J . O'Neil's book "How to Make Money in Stocks" set up a log of where you have been in increments of years of your choosing to see when and where you lost the 18 common mistakes most people make as noted in chapter 20.

Make a chart and form columns of the past and leave some space for the future.

This past week we had two flat days and then Friday which came close to flat. A week ago on Friday there were four nice 10 plus point trends.

We can get going on the beginner stuff and with zzzzz keeping tabs (backtesting) on how each improvement we make, we can see how good it can get.

One thing that sometimes happens is "intuition" and wisdom" sets in. Who knows what happens when people get creative and proactive.

If you look at the journal and indent it so you can more easily see the order of importance of things, then you can look at the big chunks first instead of being myopic.

If you get to seeing sequences, for example you will begin to see the market turn to slow motion. This also lets you catch on to the fact that by choosing signals from indicators properly, you then leave the premise that indicators are always lagging.

Take the derivative of the fast line of the MACD and note that when it peaks and begins to lessen you have just seen a leading indicator signal.

Do not use the design default of 12, 29, or whatever for MACD, that went out the window when PC's were invented. It bridges trading cycles in today’s investor approaches and algorithms and paradigms. Use the 5, 13,6 set up.

A helpful comment that was posted for the group:

Check this out. multiply the equity times 5% each day and you know what it costs you in IB commissions and how many points per trade and how many contracts and how many round turns to achieve it in 21 days.
More...
 
Re: Technical Question
Thanks for the questions. Many people will have the same items to deal with.

What is meant by?

Set ES to 10 point scaling
**** Short answer. Look at the labels on your price graph. Make them read in a 10 point series. something like 830, 840 ,850.

Long answer: The software people are not traders. They are selling a product to you that they want to be appealing. They see "filling the screen" as more important than having a default that makes you money. To focus on market characteristics you need a consistent viewpoint. You can better achieve this with a constant scaling deliniation. The biggest ten point illustration is achieved by scaling up until a new scaling shows, then backing down so it just disappears again. In this way you have a consistent 10 point scale and the screen may not be filled. If we get some all day trends (like on news that the war has been cancelled or the war is beginning) then to stay on the screen we probably will have a 20 point or 50 point scale.

"Greenspans" occur occasionally too. A standard "Greenspan" is 150 points both ways on the DJXX in an hour and 1/2. He goes off on tuesdays or wednesdays about 7 or 8 minutes before his announced timing of 14:15.

We will get into scaling etc as we go further into fractal pairs as anticipation which is the replacement for prediction and back testing (back testing is a self fulfilling method of backwards predicting)


What is meant by... "always (last one in)" and "always (first one out)

**** Short answer. There are two lines on the stochastic. One precedes the other. "last one in" means both lines must be there so the signal is the slow line. Verse visa, "first one out" means the signal is when the fast line leaves. Watch xxxxx if she posts. She may get into advanced cheating by just operating on the fast line and ignoring the slow line.

Cheating will be a sport here and it is different than dumbness. Cheating is one way I lead into anticipation but then to perfect it we use fractal pairs which then actually stops the cheating aspect. We have a physicist here too, I will let him use different leading indicators by applying the equivalent of differential calculus to non-continuous functions. You can make up a way of using statistics to simulate calculus. Fractal pairs is another way to turn lagging indicators into leading indicators.

Enter as both show on the 20 (short) or 80 (long) always (last one in)
Exit as both leave the 20 (short) or 80 (long) always (first one out)

Also, are the settings for stoch & macd, simple or exponential?

****Mine look simple; I have never seen any exponential ones unless they are superimposed on an exponential price chart.

some Q's
1) You mentioned using MACD (5,13,6) histogram to stay out when there are small ranges. I understand it would be used in conjunction with the stochastics indicator. I'm wondering if I have the correct understanding of how you would use the MACD histogram.

You mentioned the histogram value, ".4". By this do you mean only take long trades when the histogram is > .4 and only take short trades when the value is < -.4?

******Short answer: Yes, exactly.

***Long answer. I am using the histogram here in a simple way that represents divergence of MACD. The "C" part of MACD. The divergence of the 5, 13, 6 is corrordinated with the Stoc 14, 1, 3. The difference of 13 and 14 is small and either could be shifted a little so let's not bother with this dissonance.

Since the Stoc is relativistic we can't use values like we can with MACD which is an absolute indicator. The point four buiness is a dividing line between flat and trending for beginners.

As we know, you can only make money when there is a trend (up or down). Lateral trends do not make money. The things that happen in lateral trends are opposite pairs: whipsaw and wash trades. A person can get on the wrong side of the micro cycles in a flat low volatility horizontal channel; this is called being whipsawed. On the other hand it is a good exercise to do wash trades for mental practice in such channels to prove to yourself that you can usually exit any entry with no loss of capital. By seeing that the MACD histogram is small and smaller you get used to pegging non trends right off and then stay on the sidelines. By staying out of non-trends you achieve a major thing: you are never in the market when it BO's (breaks out) against you.

If a person where always debriefing himself on his efforts, he would find, often, that the market "goes against him". You can now translate that statement to: "Beginners sit in non trending markets for some reasons, then when the market trend starts up there is a 50% chance that they are on the wrong side of it and they do not have proper protection either". The best protection is to be sidelined in non-trends. The second best is to have sequences that tell you trends are coming to ends and to be able to exit far away from your protection and not use protection for exiting. Third best is to be in a place where you can be entering (sidelines are nice place to enter from).

So I am making an effort to get to anticipation. You will see this showing up as your consciousness is raised notch by notch.

Look at zzzzz; a very low consciousness showing there and he has a loud mouth too.

2) When using 5 min bars, do you only take trades upon close of the current bar? Or is it ok to enter/exit trades during an open bar if the stochastics give an entry/exit signal?

For example, say the last 5 min. bar did not give us a long signal, but the current bar is, although the 5 minutes have not completed. Is it ok to take the trade now, or do we wait until the bar closes to see if the entry is still there?

*** This is kewl place to be thinking. We will give it a shot when it occurs and not wait until the end of the bar. Check the 1 min to confirm your entry as you make it. If the trend goes flat just tough it out for a few mins and watch the next bar

_________
neat Q
This shows a lot of consideration and effort.


How would you suggest to fit the parameters to other markets such as the Euro Stoxx 50 Future? I have done some testing but maybe you have a more clear solution for that matter?
Regarding Stoch, Histogram(Volatility mesurement), Macd


***I am a strong believer in transference of ideas to other markets and to other people using the same stuff in the same market successfully.

So go for it. What is extremely important is to keep track of the nuances as you tune it up iteratively. Most markets, today, have a strong PC and electronic trading influence. This stability of setting is very helpful.

You also can work to find, intially, the best operating fractal..

The beginner stuff is just that. It is a truncated algorithm designed to make money using the fewest parts in an algorithm.
 
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