Futures Indexes System and Tool Box

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2. What are the 3 levels of volume?.

*** DU (dry up) use a ray (extended) on the volume for the trading fractal: it screws up on the other fractals. 5,000 is where mine is. This is where little signal and all noise exists. The signal comes above DU. FRV (First rising volume) This is a leading indicator of price BO. For ES I am using 11,000. Anywhere from 8K to 12K is appropriate. To day's short is on FRV all the way so far; we will see it decline going into midday. Peaking is 20,000 and it represents an unsustainable volume where thereafter ther is going to be change (trend and price). The rays make it easy. On the 1 min they are above what you see. VDU in DU times is an important precursor. This is equivalent to loosing the "noise" signal. When you looose the noise, then there is a serious dissagreement among active buyers and sellers. Look for high spreads and whne they cease a hammer is coming down. And what ever happens will fail to be sustained. This is a killer for beginners.

3. Is there a difference between congestion, convergence and centering or are they used as synonyms?.

*** This is a sequence. The order is congestion (lateral fixed volatility channel), convergence (a symmetric pennant transition), and centering (later pennant where there is no harmonic and volatility compression (Conners-Hayward) is the major function. I have converted the YHayward from relative to absolute; we will pick that up later.

4. When do you practice the wash trades at the beginner level?.

****For paper traders daily. For real I would knock off one around 11:00 and do 1 or two more between 11:30 and 12:45.

My understanding is during the low volume period - which stochastic settings do you use for entry?.

****Go in on the away side of the channel you have rolling. you may make a little money each time. If you are doing good washes then do a reversal with the wash and that will sharpen you up a little cause you are doing neutral biased pairs. I can tell you that people invariably favor wash practice in a biased way. This specific comment should give non weasels another clue as to what they are missing in their stuck mental state. I use weasel as you see to trigger responses from non weasels The fruit person is the easiest controlled non weasel at this point.

5. What is the mysterious KISS?.

*** KISS is a grammar school expression that hits when kissing girls comes up. Keep It Simple, Stupid. You can also use it without the comma.

I haven't seen many backtesting results posted, so I'll post mine soon.

****Good thanks.
 
Stop list method and directions:


Here is a good set up for beginning and maintaining a stop log for doing C&R's for trailing stops during trends of any pace.

I'm going to do it in a step by step way using today as an example starting where you suggested above.

1. Make a log of the sequence of potential stops as they appear as significant points in formations.
2. Go to the one minute chart for this because the tape that is running is on the five minute trading fractal.
3. Set the scale to two point intervals, i. e., 878.0, 876.0, 874.0, etc...
4. Enter first the peak, 878.1, and use this as point 1 for the channel that is setting up.
5. Enter subsequent points as they occur: 877.0, 877.2, 875.2, 876.2, 877.0.
6. What I do is actually leave spaces so that I can put the entries in order following the trend. What you get is: 878.1, 877.2, 877.0, 877.0, 876.2, 875.2. Naturally if you have 877.0, you only put it in once. Sometimes, a retrace occurs and I just erase the points that no longer apply. Notice that all the entries are in four significant figures where the least significant is to the right of the decimal point and the numbers 0,1,2,3, just stand for the 1/4 trading values as the number of quarters.
7. Circle the entry that is a current potential stop that you will use when the time comes.
8. Determine how many peaks are occuring every 15 minutes. There are two or three. Use two peaks as your C&R time periodicity (ten minutes for today). Carry this value forward as long as the market is the same.
9. Circle four entries back from your last entry at all times. If the pace quickens, then circle three back. If the pace slows, circle five back. In this way you calibrate the offset of potential stops in current time and pace of market.
10. As the trend ends you will see that you no longer can add values to the stop log. You continue, however, to C&R this is like a pincer movement where the market trend is moving towards you and your stop C&R's are moving to the market. When you notice that you can no longer add values it is time to exit prior to the time that the pincer would close. You make more money this way. When you get to an intermediate or advanced state, you will consider reversing at this time in order to be on the right tack when the price BOs of the existing channel. You will also notice that the last entry you make ususally becomes point 1 of the next channel. This is how a lot of stuff turns into KISS.

As you can see, this all worked out fine.

The trend slowed and a slow trend commenced where the tape is on the 15 minute fractal. You can see that an exit on the fifteen minute was about 866.0. The subsequent congestion, convergence and centering occured up to a point where several VDUs occured.

This set you up for a bracket entry where the centering value is the same as your exit (866.0). It doesn't matter which way the market continues, you use the sequence of break out volume, MACD BO off neutral and the STOC BO off 50%. You can tell when the centering begins because the periodicity ends and only volitility setments (small and large) sequence along.

Today, the BO for your bracket was short. You set up 866.3, 863.5 and 864.3 as respective points 123. Your new point 3 becomes 865.1 and you are on your way with your stop log.

thank Liz for typing the notes.
 
trade offs.
As you move from just trading rockets on the 5 min to other stuff, there are tradeoffs.

The sequence is this:

Trade rockets only.

Practice wash trades for facility during midday.

Add points 1,2,3 so you see trend from beginning to end.

Go to a stop log set up when you begin to extend the rocket and or if you begin to iceberg as a way of extending rockets.

Do bracket trades on centering. (usually PM start up)


At this point you ought to be in a place to understand some or all of the list. I recommend that you make changes in your scope of approach as you make progress in accumulating capital.

When you get to thinking about multiple contracts, then are in a place of confidence where that will work for you.

A very bad mistake to make is paper trading first and then assuming you know a lot so you can just plunge in. You cannot learn the emotional threequarters of trading using paper trading.

You will see that people here in ET do a lot of retreating and freezing up. That is related to what they do not know that they don't know. Rocket trading only then adding wash trades is the most efficient way to learn what you do not know. when people retreat here and they state the context, you see that they go back to what works for them and drop what is interferring that they more recently added to their quiver of arrows.

All the first level stuff is more a prevention of mistakes program that a money making program. Every time you eliminate making a specific kind of mistake, then you get a better income stream.

By starting the stop logging, you open up a problem. You are on the 1 min fractal and everything appears to be larger than it is. We only go there to get a sufficient number of log enteries to maintain a nice effective trailing stop offset.

So do not hang out there all the time. just do listing in spurts and stay on the tape fractal primarily.

separating the listing of stops from the time of C&R is a giant step for killing emotions in making money. You do logging as monitoring and you do C&R's as reporting actions. by separating monitoring and reporting, you cut out emotions.

Logs are in concrete. Reporting to C&R is just checking in punctually.

Seeing the logging stall out is a slow motion non emotional event.

Trades taken


by dawg on 03-24-03 02:36 PM:
3-24 Trades
1. with the large gap the stoch opened well into the short zone, i noted the low of the first 15 minutes and got short on the break.

short @ 873.25 10:01
cover @ 868.25 10:52 +5.00

day: +5.00 last 5 days: +18.00

10:45 had a low volume inside green bar(which has been vodoo lately) and when the down trendline was broken. i exited. (see chart) i also attahced my 1m chart with the channel for the down move.

we then had a trend channel for the middle part of the day...did two wash trades...nothing notable other than recognizing the channel. (big whup)

2. 2:45 s(100, 89.86) macd hist +.59 high 866.50

long on the break at 866.75...stoch did leave buy zone, but stayed within my defined trend channel (see chart). Then at 3:15 low volume inside red bar (another vodoo bar) exited on macd xo and break of my trend line at 865.25.

long @ 866.75
sell @ 865.25 -1.50

day: +3.50 last 5 days: +16.50

3. with the rocket failure of the previous trade i reversed my position on my exit and took a short position with macd xo after a rocket failure. trade turns into a short rocket at 3:35 s(0.00, 21.52). But 3:45 we get a good volume bullish engulfing bar. When the high of this bar is broken i eixted at 865.50 for a small loss.

short @ 865.25
cover @ 865.50 -0.25

day: +3.25 last 5 days: +16.25

in general, not much of a day after the morning move...midday brought a good channel (not my area of success thus far) and late day was fairly whippy with a few small losses. 4th positive day in a row, so happy with that.[color]

Stop log refinements

Jack, I'm feelin' kinda stupid, but I am lost with your "stop log" post. Would it be possible for you (or anyone who understands) to post a chart?
A very confused camper...

A big helper replies

this is what I think of 'stop log'

write down value of each spike/hitch/peak (red lines) if value repeat (tweezers) then you don't need to write it twice, if some spike more than the other (exp. yellow line) replace the value of red line with value of yellow line), count number of values starting from where you enter, count backward, if market slow, your stop loss will be the fifth value, if market go fast use the third value for stop loss...and I guess the next question is what/when is fast/slow market

Make the total list be:

878.1
877.0
877.2
875.2
876.2
877.0
874.3
874.0
876.1

You can erase or X out the retraces. You get:


878.1
877.0 xxx
877.2
875.2 xxx
876.2 xxx
877.0
874.3 xxx
874.0 xxx
876.1

The retraces "cover up" trades and leave the sticky places for people who are there participating. These are decision values like support and resistance very short (intraday) term.

Now for pace we look at peaks in the 15 min period. There are 5 in two periods. So roughly that is 2 per 15 min. THe 15 min is a convenient interval for glancing. The more peaks the faster the pace of action (repetition of micro cycles). What you want to know is if it is fast, medium or slow and if it changes.

The log keeps you alert and sort of busy as a non emotional monitor.

Put a circle in 4 entries back for this pace. Do not count xouts.


878.1 circled 878.1
877.0 xxx
877.2 3.
875.2 xxx
876.2 xxx
877.0 2.
874.3 xxx
874.0 xxx
876.1 1.

You can see the xouts affect the circling. That is life. You can see that you need an off set at your entry if there is not a "4 back entry". As you see the offset from 1. to circle (4) for today as 2 points, you will , as days go by get calibrated. So you can use that arbitratrily.

notice that you keep collecting portential stops , making xouts and moving circled value.

When C&R time (two peaks period (10 minutes about)) comes up, then you look at circled value and use it.

You have periodic C&R and you collect data. The two get unlinked emotionally. You monitor and you report.

As you get in the groove, you see connections and relations. The values the market gives you. The market gives you spacing of peaks. You will not get stopped out anymore.

The time between no new stops and the trend end is long enough to take exit and /or reversal action. So you make more profits than being stopped out.
 
Posted by dawg on 03-25-03 02:04 PM:
3-25 Trades
1. failed rocket--->macd xo--->rocket

10:15 s(14.81, 22.22) but NOT a good macd hist reading of only -0.34 so i was in short alert mode and then the following happened...10:20 had an increasing volume reversal bar, the stoch moved out of the short zone(failed rocket) and then at 10:35 we had a 5m macd xo.

So i got long at 864.75 on the 5m macd xo. This eventually turns into a rocket signal at 10:50 s(81.82, 76.24) macd hist: +0.72 that sets up at 11:00. ride this until 11:35 where we get the low volume inside red 'vodoo' bar....while i as definitely conflicted feeling i was bailing early, the next bar was a 5m macd xo but still within up-trend channel.

long @ 864.75
sell @ 872.75 +8.00

day: +8.00 last 6 days: +24.25

2. rocket failure--->macd xo--->doh!

2:00 s(17.65, 25.88) 1:55 macd hist -0.40 low 875.25

low was not broken so NO TRADE, but i was on the lookout for a rocket failure----->macd xo trade again.

2:20 5m macd xo and entered at 877.75...also broke smaller downtrend channel (see chart) mkt reveresed and had another macd xo and i exited at 874.75. DOH!

long @ 877.75
sell @ 874.75 -3.00

day: +5.00 6 days: +21.25

3. short rocket

2:45 s(0.00, 7.41) macd hist -0.72 low 872.75

note: look at a 15m 2:30 bar - big fat bearish bar on increasing volume.

short on the break lower @ 872.50

we get a big vol spike (21,663) at 3:15 and some up movement on lower volume. 3:20 stoch is outside og short zone but withing downtrend. 3:25 macd xo and things are looking about over, but since we made a new low for this move i was drawing in a channel that wan't as steep with a new point 3(see chart) also by 3:30 we have a big 15m reversal bar formed and i put my stop at 871.75. disappointing being up 5 and only making 0.75 but i was trying to stay with the trend.

short @ 872.50
cover @ 871.75 +0.75

day: +5.75 6 days: +22.00

note: you could have reversed at 871.75 w/ a rocket end---->macd xo (and a 15m reversal thrown in) 871.75 which turns into apotential rocket setup at 3:50 and close at end of day at 874.00 +2.25.


I parsed it below. Look for the ****'s.

Quote from cornholetrading:

I have been following along here and have a couple of questions that have popped up. One you might have covered but some how I read over it

1. What is the sequence of a wash trade? Is it when you are looking at a rocket trade and it fails. For instance you go long when the stochastics breaks 80 but sell your long for a flat when it comes back down thu the 80 band (or 75 band if you are using that)?

***I'm building a FAQ and glossary. You explanation is right on. AS a beginner, a person just wants to profit on fast trends. See the "entwined chart today by nikhoi (3m one). Whne you see that the indictors aren't confirming each other for a rocket (this is a "flaw" developing instead of what you want. You then exit by getting out at a price that is the best possible. Usually you can get out at a small profit. This doesn't cause you to become a "hair trigger out of fear, because as you practice, you get to do it smoothly and comfortably. You are entering when the second (slower line) crosses and that implies trend is there and beginning and fast pace (80 and 20 are BIG values for the STOC). When the fast line slips to the center (approaches the 20 or 80 at a steep angle and volume is not sustaining the beginning of the trend), then you perk up and take action.

2. What is "Away" trade with the MACD?

**** MACD centers on neutral. The strenght of a trend is measured by the + value of a long trend and the -value of a short trend. The further "away" from nuetral the better the trend is. A starting trend comes off neutral. How fast it bursts out is measured by the divergence that shows as a value on the histogram. We, here, on the 5 min ES use 0.4 and -0.4 as being sufficiently "away" to act on a signale from the STOC if it shows as a rocket beginning.



You are asking key questions. I will be editing these into the FAQ and Glossary I'm building for the journal.


My trades since Mon
All trades NQ03M, simulated with FuturesTrader.

Mon

Short @ 1067.00 9:57
Cover @ 1069.00 9:59 -2.00
Stochs were entwined below 20, MACD diff at -1.2, NQ started to sync with ES. Had a stop at -2 pt and was stopped out. Gotta learn to do wash trades.

Short @ 1063.00 10:21
Cover @ 1061.00 10:50 +2.00
Waited for morning low to be taken. Stochs still entwined below 20, MACD diff was >0.5 (positive value?).
Exit when fast line left 20 area.

Mon morning stochs and MACD readings were skewed because of the large gap.
Day 0.0

Tue

Long @ 1057.00 10:46
Sell @ 1062.00 11:02 +5.0
Entry when fast line crossed above 80, exit when it crossed below. Didn't recognized rocket forming. Didn't re-enter.

Day +5.0

Wed

Short @ 1063.50 9:41
Cover @ 1066.00 9:45 -2.5
Fast line crossed below 20 although it doesn't show on the historical chart. Then it snapped back out. Perhaps it's better to wait for both lines to cross, like Jack suggested. Or for the low to be taken, like dawg.

Long @ 1074.00 10:02
Sell @ 1072.00 10:08 -2.0
Fast line crossed above 80 and resistance at 1073 taken, MACD diverging. Stayed in till fast line crossed out. Failed at 1077.00, below yest high.

Short @ 1066.00 11:05
Cover @1066.50 11:13 -0.5
Both lines crossed below 20 on volume spike. Above day's low of 1063.00, and it failed at 1065.00. Red volume spike followed by low volume green bars on 1 min charts - called it a wash.

Both lines stayed below 20 afterwards but volume had dried up so stopped trading.

Day -5.0
Week 0.0

Conclusions:
- entries based only on fast line crossing lead to whipsaws
- wash trades help preserve your capital when a trade doesn't go your way - better that to wait for protective stop to be triggered
- it helps to pay attention to resistance/support lines and close the trade if it fails; one can always reenter if a rocket forms.

More comments on trades:

easiest way to explain is an example

look at a 5m ES chart of 3-25:

10:50 stoch(81.82, 75.13) macd hist: 0.71 volume 13,352 high of bar: 869.50

This is a clear rocket signal

1. I wait for the bar to close for clarity of signals. This keeps me from getting a signal during the bar and then have it reverse against me.

2. The high of the 'rocket signal' bar is 869.50...i buy on a break of this high.

also don't forget to draw in your trend channels (1-2-3 pts) to keep you with the trend longer. good luck.
 
Re: questions
Jack,

Thank you for your comments. Looking forward to your organized notes
My questions:
What do you mean by "tape moves to 15 min"?
What is C&R?

dawg, what prior low/high do you look at before taking a trade (day's, last 30 min etc)?

A preemptive note on the the scaling of my charts Jack - the scale of 10 makes some charts unusable (so flat you can't see anything). It all depends on the size of the window. Now a scale based on a percentage of the index value makes more sense, for instance always having the same percentace spanning the price axis - I aim for 50% which for NQ is ~ 50 points on the 5 min chart. For longer/shorter time frames, one would have to increase/decrease it.

Thanks and good trading.

ps: As I'm typing this there is a nice rally forming in NQ on low volume - intermediate traders are riding it perhaps.

Dawg's response is right on.

You can also see the transition going on for dawg. The market is better and he is getting more of the trends by the wyas (skills) he is now using. I think it is great that Dawg can tell you what to do and it is a terrific thing also that you can understand how the comments are very focussed.

Dawg is running weeks at a money velocity of about 4 points/contract a day now and we are into this for a month or so.

With trading on several markets (European, Aussie, and US) we can see that there is a transition that takes a matter of a few weeks to be running at an inital money velocity.


Every market has strong potential. We are terminating many aspects that cause losses. and now, through repetition, the trading day is becoming clearer and more routine.

This is where we begin to start anticipating from the vantage point of the present where things are under control.

Not jumping in too soon is happeniong with several of you and you are advising others who still do. They will follow your lead. Volume not sustaining is a major additional helper on discerning a "flaw" or "failure".

Later people say "Why didn't you tell us this in the beginning? The objective is to make money in a sustained way and then to continue to build facility and confidence.

Focus on rockets going into congestion at the sides of the S/R band. At first you exit on signal. Then you see days after day certain repetitive partial day sequences. AM, midday, and pm.
you now can rank pars of he day fr making profits. Top is AM; bottom is midday.

So we get set up in AM after synch and we see volume always sustains the moves.

By 11:15 you have one or two trades in. the first trade sets the S or R for the day. (Support or Resistance). The second trade if it occurs is because the first trade was slower than ususal and a reverse can occur. Otherwise you see highly volatile whipsaw.

Now we are getting to a place where we see trend endings. We can add to this view the consideration of getting into what follows the end of a trend. When we see we are on S or R, then we can consider trading the congestion by going against the whipsaw of congestion.

By learning the wash trade on all failures to trend. You gain a facilty and skill that eliminates being whipsawed and also concurrently allows you to gain the skill to be on the correct side of whipsaws.

So many people never get over being whipsawed. Here is why. They go out on stops as a modus. You can look at thread after thread. Look at the swing trade exit thread started by trader fader (?) We are breaking a habit of going out on stops by using signals to exit. We are starting to log stops, though and there are many reasons. We are bringing into the picture price formations and the significant signals within each formation. These are the stop log entries.

I get into trouble here a little. A log entry is sometimes misunderstood as a market entry. The phrase I use "potential stop" in place of log entry also causes some problems. Bear with me here. It does come out on the wash. I have rows of three ring binders that have completed logs. I will learn to scan and annotate and attach them as time passes. We can use these to cover the bases faster instead of waiting for all the events to occur.

Between logging and pint 1,2,3 and washing, you get to a point of consciousness then skill that you can slalom whipsaws on the right side. What actually happens mentally, then emotionally, is that this place allows you to see what it is like to make money.

By going to this trading level with one contract initially instead of piling on contracts doing rockets with multiples of initial capital, is that you still keep your edge for developing skill instead of just being rich.

The common tone of many traders is to jump into a whole system and try to make money. So they trade on paper and get to a plce where they are very deceptive. They feel so strongly that they know something. They are playing with Mulligans all the time. They slip and slide with their perception of timing. some people have determined that you will not do as well with real trading as paper trading. I feel that the transition and first real effort always end in failure to preserve capital. They have to refinance and start over by repeating the mistaken process over and over.

there are posts in ET that tell newbie to just tough it out for ....... The usual word is years. Our contrast with that is getting to an av of 4 points a day in a matter of weeks.

This plateau of rockets (fast pace) and sideling is very protective of your emotions and money. The discussion of entering, one line, both lines, end of 5 min bar. WOW. This is consciousness being established. Notice the high ratio of win profits to wash losses. One is going up and the other is declining. This is a feeling thing. Feeling like things are improving and advancing.

What if in a short while the trades go all along the trend? What if we slalom on congestion?

We actually have the tools and we are sharpening them up day by day on this plateau.

Posted by jack hershey on 03-26-03 12:03 PM:
C&R and Tape
The C &R means cancel and replace.

If you have a protective stop in. You first cancel it before you replace it. So the term.

You can imagine how messy it could get while trading if you are sloppy. for oral C&R there are eleven separate events in the detail of it besides the other person's job.

As we do logs, I separate the data collection in monitoring from the C&R which I call reporting.

the key compoinents here are keep track of what is going on and figuring out the timing for doing things.

The period of C%R's I determine from price foramtions. For now, it is a time found by multiplying by 2 the period between peaks or troughs. Two cycle lengths.

This puts you in synch with the market. You set up reporting times. For me it is column changes on my trading sheet. I fill in time across he lanscape sheet. The rows are the eleven items.

If you set up the times in advance, then you do not have to decide "when" anymore.

You log stops in the column as well. Do entries, cross outs, and move the circled value.

When to the approaches read stuff and settle down. Do the deed by reporting using the circled value. This is the opposite of guessing the right time and the right value as something in the chart catches your eye. Work off the fast fractal for this stuff.

TAPING.

The "taping" process is one where you slow everything down. Price need never scream at you.

What we are doing is getting trend and volatilty to work together for us and also eliminate the noise that signals ride upon.

The market always has a threshold of noise. we want clear indicators and their respective signals. The pace of the market tells us how often we need to regard things. We want to calmly continue to continually make money and take profits.

We go to the pace the market tells us to.

In the AM, we pull down the carry over trend if possible, we sit through synch. we look for entry signals and as they arrive, we do point 1,2,3 to get the trend. This channel envelope is traversed over and over.

what we do is switch to slower fractals to see bars that traverse the channel all the time. we have a channel and we then fill it with bars the width of the channel. This puts us on the fractal that the market is trading upon. I call the bar-filled channel a tape. The chart shows a band (tape) moving along making money. All the traverses are there and they appear to be just getting the job done.

The indicators have calmed down and volume is changing more smoothly. We occassionally zip to the fractal for doing our stop log. we also hang on the 5 min as our nominal fractal. In this way we are current and not emotionally overpowered by stuff that shouldn't upset us.
 
Posted by dawg on 03-26-03 02:13 PM:
3-26 Trades
1. vol bo, stoch 50% bo, macd bo from 0.

10:25 macd xo w/ increasing volume stoch broke below 50% and macd broke away from 0.

short @ 870.25
cover @ 870.25 0.00

day: 0.00 7 days: +22.00

had my trend channel drawn, but mkt had very poor follow thru and volume, but as long as it stayed in my channel i was in the trade. Eventually turns into a potential rocket, but there was not a good macd hist reading (-0.4 or lower). And at 11:15 there was a 5m macd xo, but price was still within my trend channel. So when my trend channel was broken i exited flat.

The low volumes-lack of follow thru so far today leads me to believe that there is not much to trade. (written at 11:30)


11:50 rocket NO TRADE

11:50 s(88.89, 78.75) macd hist +0.45 but volume stinks v: 3400

Due to the low volume i did not take this trade. Looks like you could have made a point or two.

2. rocket end---->macd xo--->wash trade

12:35 macd xo and uptrend channel ends and previous rocket ends i got short at 872.75. forms a small trend channel, but douldrums set in and volume continues to stink don't like the action as mini channel is broken and i exited at 873.00. pretty much a wash trade. held for a half hour and no real movement. 1:15 also had a macd reverse xo and macd appears to be pretzeling. also stoch is hanging around 50% nuetral line.

really just a big sideways channel today. 867-875 range.

short @ 872.75
cover @ 873.00 -0.25

day: -0.25 7days: +21.75

3. After terror rumor and refutal of the rumor.

2:25 s(81.08, 79.28) macd hist +0.93 high 872.50.

it was REAL WHIPPY at this point so i tried to define a trend channel and buy near the support of the channel and improved my price by 1.00. entered at 871.75. 3:10 mkt breaks trend channel and has a 5m macd xo and leave 75 zone. exited at 871.50.

long @ 871.75
sell @ 871.50 -0.25

day: -0.50 7 days: +21.25

There was another rocket short w/ 3:55 entry but it was so late in the day i passed. Just a crappy range day and i have not done well on these types of days, but i didn't hurt myself today.

an exhausting day.

another set of post exchanging information:[b/]

Posted by vorzo on 03-26-03 06:32 PM:
Jack,

Thanks for answering my questions. Your insights are helpful and equally challenging, as always
I'm still working on backtesting - I am comparing results from single line vs both line entries, high/low break entries (a la dawg), in both NQ and ES, entry on bar close vs. middle of bar. Should be done in a few days.

I haven't read through the whole thread yet - will print it out today and read the part about points 1-2-3.

dawg,

Thanks for your answer. Another question - you seem to take some of your entries based on MACD crosses - is this discussed earlier on in the thread or is it your own strategy?

Posted by dawg on 03-26-03 07:26 PM:
vorzo
yes. after you have been trading rockets for a while it was suggested that instead of just exiting your position when a rocket ends (or fails) you could reverse into the opposite direction(double your contracts on the exit)...while there are potentially different points to reverse/exit a rocket for example: macd peaks, macd xo or macd divergences (after a xo), exiting near top of channel and reversing, channel break....i happen to use the macd xo after a rocket exit for reversal point.

generally it goes like this:

rocket trade--->stoch leaves rocket zone--->price breaks trend channel--->macd xo

So normally you would just exit at some point along that chain and recently i have been looking to reverse into a new trade. your two most likely outcomes i believe are : congestion, convergence, centering OR reversal. The first outcome c,c,c leaves you with a small gain/loss or wash trade and the reversal sets you up early for a potential rocket trade.

i would catergorize it as the next logical step after the rocket trade.

some times I will get a 'rocket alert' that will not setup (break hi/low of bar) and then i will be on the look out for the macd xo. in that case there is no reversal just an original trade, but the process is really the same.

rocket alert/no setup--->stoch leaves zone--->macd xo

there is not a lot of black and white to the methodolgy and this is all my opinion of how to use it...or how it fits me best right now. at first reversing from a rocket was too much to think about. i was looking at all these indicators and drawing trend lines, etc., but slowly some things have fallen into place.

Posted by vorzo on 03-27-03 10:00 AM:
ES trades today
dawg,

Great post thanks. Clarified some stuff for me. Can you please go over the point 1 2 3 channel drawing?

Today I sim traded ES for a change. Volume is much higher, and it whips around more and faster than NQ. In this sense NQ is probably better for beginners.

Tried my hand with a few wash trades in the morning since the market didn't seem to trend much. Then tried a MACD cross after a failed rocket and got out when it stalled at congestion. This was somewhat of a wash trade too. Quite the laundromat but it's nice to be able to go in and out without hurting yourself. Now I gotta work on the timing of the washes.

Then a long rocket started to set up. Got in on the high volume bar at 11:12 861.50 and stayed in as it retraced from 864.00 after fast line left the 80 area as it seemed to be entwining. Then volume dried up on the next bar (5,200) so got out for a small gain. Then gave up as DU settled in.
See notes on chart.
I tried to draw a point 1-2-3 channel, not sure I got it right.

Good trading in the afternoon (I'm off to work).
 
Posted by ges on 03-27-03 10:33 AM:
Re: ES trades today

Quote from vorzo:


Tried my hand with a few wash trades in the morning since the market didn't seem to trend much.



These 'wash' trades may be good for learning, but they can attrit your account badly.

Last fall I made my first foray into NQ trading. My two month result was $40 positive, but after adding in commissions I lost several hundred dollars. Lot of 'wash' trades, but commissions tilt against you.

More]

Posted by bassocat5 on 03-27-03 11:31 AM:
re: 3-26 Trades
Dawg,

I was wondering why you didn't get into the 13:45 short rocket? Were you not at your computer or was there something else in your decision process that kept you out of that trade? Or maybe I'm not reading the indicators/charts correctly?

Your trade posts are a great supplement to Jacks posts.

Thanks

Posted by dawg on 03-27-03 11:55 AM:
3-26 afternoon short rocket
the volume kept me out

1:35 s(0.00, 7.14) and the volume was 2,031 (which is just pathetic) and with the choppiness of the day so far i wanted more volume.

volume picked up at 1:45 to 6,609 (still not great) but at that point i did not want to chase.

hope that helps.

Posted by dawg on 03-27-03 05:24 PM:
3-27 Trades
1. short rocket

mkt opens with a gap down and stochs and macd are giving short signals...wait 15 minutes, amrk the low and short on the break. at 10:10 there is a 5m macd xo, but i was looking for a new pt 3 so i gave it some room. Up volume started to increase and i exited at 860.25 during the 10:25 bar.

short @ 859.50
cover @ 860.25 -0.75

day: -0.75 8 days: +20.50

2. long rocket

11:10 s(90.48, 79.18) macd hist +0.61 high 862.00

hod was 862.50 so i waited until that was broken and entered at 862.75. You get a high volume reversal bar, stochs leave zone and macd begins to pretzel. Stoch move to 50 area and volume dropped significantly. Exited at 861.00. Wash exit was possible if you held longer. Trade felt more like an iceberg, but out of my league.

long @ 862.75
sell @ 861.00 -1.75

day: -2.50 8 days: 18.75

took a break until after 1:00. And then around 2:15 cable in three counites goes out and my day was done.

overall market has been crappy for rockets last two days, today was suited more for intermediate level trends. we'll go get 'em friday.

A new player:

Posted by colina on 03-27-03 10:18 PM:

I see in hindsight
Looking at 03/27 ES mini, I see now what must have been obvious to everyone else in hindight. Unfortunately I am married to the 1 minute chart (lol). A habit I am trying to break.

Last tradings days' end of day effects created a rocket (oversold) at close. Carry over to todays' gap down opening, of which the break out or the continuation of yesterdays' rocket failed. What followed was a potential iceberg going long. On the 5 minute chart peaks of the iceberg occured approximately at 11:15, 13:00, 14:25 - ish. During this interim the stoc (14,1,3) remained above the 50 % mark. Neat.

This also converts to a rocket on the 15 min chart ? (Too bold a move for me).

Would I have used the trough of the stoc(5,2,3) on the 5 minute as an exit point on the failed break out ?

Would I have used the stoc (5,2,3) on the 5 minute as an entry signal for the "long" ?

Would I have used the stoc(14,1,3) on the 5 minute, crossing under the 50% mark as an exit signal for the iceberg ? Or would I exit when the stoc(14,1,3) on the 15 minute chart falls back into the tape region ?

What would be best ?

More trades

Posted by vorzo on 03-28-03 09:33 AM:
Friday trades
ES03M simulated

Long 863.75 10:25
after MACD crossed up, stochs crossed up and hist >+0.4
Sell 863.00 10:37
fast line had crossed above 80, but pulled below, slow line below 50 and low broken on 1min chart.
-0.75

Then a rocket set up on the next bar, with both lines above 80 and MACD>+0.4.

Long 864.00 10:39
Sell 866.25 10:56
+2.25
as volume dried up un the 2nd 5 min bar after volume spike, it barely made 5k so I got out at the away side of first channel. Although both lines were still above 80.
A second, faster channel was set up but I noticed it after closing the trade. Volume dried up so I decided to wrap up.

Day +1.50
Week:
ES +3.25
NQ 0.0

At 11:15 the volume picked up and the rocket was still there (fast line left went below 75 then snapped back in). I guess I overplayed the low volume bar and bailed out too early. I hope others stayed in longer.
 
Congestion pointers

Use this to see congestion and set up for PM BO
It's Friday. Learn about Friday's and Monday's. I have arranged them in order for us this week and next. There might not be a pm BO is my point.

I hope everyone is "seeing" what entwined means.

The part you are not trading in trades one and two we pick up later. Slalom people look at how to transition during this lateral. That sym pennant in trade two set the Resistance. The bottom of trade one set the support.

We are going to go through 8 levels of getting this in a pristine shape. Each one will double your ROI performance.


Re: 3-28 Trades

Quote from dawg:

1. 10:45 s(88.00, 85.39) macd hist +0.567

i entered during this bar @ 865.00 when the mkt broke the HOD. 11:30 had a 5m macd xo, but was still within my channel, but at 11:45 another xo and breaks channel. exit 867.25

*****You did set up points 1,2,3, got synch by time of pt2. MACD was above 0.4 from just fter 10:15. From here all you need is Stoc slow line to hit 75 or 80. You have a four bar stall (set of same size bars and they are lined up laterally.) I recommend that you consider that price range as the entry. From 10:36 on the 1min you do have every indication that volume is driving price up and DU is stabilizing price. This is the clue; no flaws. By 10:45 you had many minutes to pick off 863. The volume for the situation (Friday during war) is at a low general range. I know that this is a good reasonable thing to use to stay out since it was low.

I don't know how to convey this to you easily but you are doing a killer job under these circumstances. You cannot imagine what will happen when we have a "resonable" market. You are definitely going to excell.

Your sell is excellent.



long @ 865.00 (863+ was possible)
sell @ 867.25 (excellent)

day: +2.25 9 days: +21.00

2. 12:05 s(0.00, 7.84) macd hist -0.57 low 864.75

short on break @ 864.50. 1:20 channel break and mcd xo. exit 864.00.

Good channel. good entry. very very good hold in a slow trend. This is very good. Good exit.

short @ 864.50
cover @ 864.00 +.50

day: +2.75 9 days: +21.50

3. 2:25 s(9.09, 22.29) macd hist -.39 low 860.50

short on break @ 860.25. 2:30 and 2:40 reversal bars and 2:50 macd xo. exit at 863.00 during 2:50 bar.

******Okay here is the cure. You needed to do a prorata on the 2:35 bar re: volume. The rocket was dead. You saw a Failure to BO down here. See how the volume had to be sustained. BO vol started at 2:20, 2:25. 2:30... then capute. You have five min lead with vol over price move. There were three candles in a row asying zreo price volatility. No big deal but we can nail this stuff as days pass.

short @ 860.25
cover @ 863.00 -2.75

day: +0.50 9 days: +19.25

in general:
could there be less volume? and these moves totally suck. while i haven't made anything, i haven't lost much either...big whup. the war has killed this market.

try and find the channel and trade off the bands b/c no follow thru at all.

******You have everything right here. And it is a big deal and makes it difficult. I have not commented on these trades before because I wanted you to build a foundation. You certainly have.

I am so impressed!!!! From here on in I will be commenting as day goes by into the group thread. I will raise points. Today I said "It's Friday" This was a "summer" friday to boot. A summer Friday is when the smart money goes to the Hamptons and Greenwich early. There was a barbershop in Greenwich across from the pickwick at the top of the hill. All the barbers were millionaires. What a neat place.

anyways have a good weekend.


Jacks thanks for your comments
your comments accurately convey what i was 'feeling' during the trades, but somewhat hesitant to act upon....now i have a set of pictures i can think of when faced with a similar situation. while today was not a profitible $ wise, it was definitlely an addition to my knowledge that can be drawn upon in the future. i feel like these are all steps in the right direction.
 
BACK TESTING RESULTS ON WEALTHLAB

Posted by vorzo on 03-31-03 01:14 AM:
Backtesting results
Here are the backtesting results for Jack's methodology.

Size traded: 1 contract
Commissions: $5/round trip (IB's rounded up)
Time frame: 5 min
Time of day: 9:30-12:00 EST except for Mon 9:30-16:00 (the hours that I trade).

Entry: the signals used for variations of the method are indicated in the first column, and the entry price was set to the midpoint of the entry bar (average of open and close) to approximate live entry as soon as the line crosses rather than on bar close. I've included several results for entry on bar close for comparison.

Exit: on close of signal bar, or at indicated stop.

Settings: Stochastic 14,1,3, MACD 5,13,6
Software used: WealthLab


First I tested entry on fast line in and MACDhist +-0.4 /exit on fast line out with different point stops (and also a stop on low of bar), on the most recent expired contract (ES03H). All entries after 9:30. Entry after 9:45 - synch period - included as it has better results then entry after 9:30. Two different triggers were tested 20/80 and 25/75.

Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown
ES03H
in:fast line 1 pt 20/80 $8,950 135/138 (8/10) -$444
and MACDhist 25/75 $8,953 123/159 (6/10) -$700
out:fast line
1.5 pt 20/80 $9,595 145/113 (8/9) -$497
25/75 $9,629 130/129 (7/9) -$588

2 pt 20/80 $9,177 146/110 (8/8) -$598
25/75 $9,358 131/121 (7/8) -$592

[in:after 9:45] 2 pt 20/80 $9,087 135/85 (8/8) -$452
25/75 $9,456 121/94 (8/8) -$786

3 pt 20/80 $9,859 145/100 (8/8) -$520
25/75 $9,995 130/110 (8/8) -$560

bar low 20/80 $8,741 134/134 (5/8) -$481 (-$130 largest loser)
25/75 $9,351 122/139 (6/8) -$481 (-$130 largest loser)

From these results it appears that the best results (highest return, highest win/loss ratio, lowest drawdown) were obtained with a 3 pt stop, and a 25/75 trigger. A 3 pt stop 20/80 trigger, however, offers a better win/loss ratio and a smaller drawdown, although total return is slightly less. Results for 2 pt stop were the next best thing, and when tested over 5 contracts the 2 pt stop was better than the 3 pt (results not shown).

Next, I tested entry on both lines in, or on fast line in/no MACD hist.


Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown

in:both lines 2 pt 20/80 $4,856 111/112 (10/9) -$824
out:fast line 25/75 $4,765 116/133 (7/11) -$1,360

in:fast line 1 pt 20/80 $9,946 177/175 (7/10) -$490
exit fast line 2 pt 20/80 $9,807 174/173 (7/10) -$490

Waiting for both lines to get in misses out on signals with almost half the return of entry on fast line, without much improvement in win/loss ratio. Drawdown is significantly higher too.

Next, I tested entry on close of signal bar (tested volume greater than 5,000 as entry condition to see if it makes a difference).

Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown

in:fast line
and MACDhist 2 pt 20/80 $1,041 93/168 (5/10) -$2,224
on close 25/75 +$1,857 92/163 (5/10) -$2,421
out:fast line

in:fast line 2 pt 80/20 +$480 62/93 (7/7) -$1,722
and MACDhist 75/25 +$567 55/99 (4/7) -$2,265
and vol>5000
on close
out:fast line

Return is down dramatically because of the late entry. Entry only on vol>5,000 misses out on signals with lower return.

Next I tested entries a la dawg, on the break of the signal bar.

Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown

in:fast line 2 pt 20/80 -$437 61/109 (4/8) -$1,667
and MACDhist 25/75 -$172 63/113 (3/8) -$2,538
on hi/lo break 3 pt 20/80 +$262 62/99 (7/7) -$1,601
out:fast line

in:fast 80/20 3 pt 80/20 +$967 45/69 (7/9) -$1,843
and slow 75/25
and MACDhist
on hi/lo break
out:fast 75/25

Returns are very low most likely due to even later entry (above close of bar).

Next, I tested a variation of the exit signal - on MACD cross instead of fast line out.

Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown

in:fast line 2 pt 80/20 +$7,190 114/114 (6/6) -$690
and MACDhist 75/25 +$7,760 122/127 (7/6) -$640
out:MACD cross

in:both lines 2 pt 80/20 +$3,762 83/90 (5/6) -$996
and MACDhist 75/25 +$3,731 97/118 (5/9) -$1,266
out:MACD cross

Returns and win/loss are slightly worse than exit based on fast line out, so will stick to the fast line signal.

Since the best returns, highest win/loss ratio and lowest drawdown were obtained with:
- entry after 9:45 on fast line in and MACDhist >< +-0.4, as soon as line crosses
- exit on fast line out, on close of bar
- 2 pt stop
this combination was tested 5 contracts back (for some reason, software failed to retrieve earlier contracts data from Quote.com servers - will try it at a different time).

Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown


ES03M to date 2 pt 20/80 $1,136 23/21 (6/3) -$397
25/75 $1,290 23/24 (4/4) -$412

ES02Z 2 pt 20/80 $10,283 146/106 (6/5) -$545
25/75 $10,250 123/122 (6/5) -$575

ES02U 2 pt 20/80 $15,612 148/97 (11/4) -$650
25/75 $17,251 147/104 (8/4) -$725

ES02M 2 pt 20/80 $9,175 128/112 (5/6) -$461
25/75 $9,047 116/122 (6/6) -$478


ES02H 2 pt 20/80 $5,038 96/80 (11/4) -$466
25/75 $6,015 90/92 (7/6) -$730

ES01Z 2 pt 20/80 $3,805 89/105 (7/5) -$648
25/75 $2,663 87/124 (5/7) -$701

As you can see results ar consistent with a peak return on Sept 2002 contract, and lower returns on older contracts.
Roughly, 250 trades are taken for a given contract, which comes to 3 trades/morning and 7 trades/full trading day.

The results indicate that the method is profitable historically, which gives one confidence in the method when trading it.
If you remember that these results are for mornings only (and one full day) than they are even more impressive!

Contract Stop Stoch P&L Win/Loss(max consec) Max Ddown

ES03H 9:30-4:00 2 pt 80/20 $16,783 272/203 (10/8) -$800
75/25 $18,266 240/221 (6/7) -$800


Of course, live results will differ from backtested due to differences in entry prices, false signals that do not show up on the historical charts, rationalization of signals etc.
Better exits may be obtained in live trading since in backtesting the exit was on bar close.
Also, using sequences, 1 min chart prorating, volume, channels, wash trades and all the other refinements that Jack is kindly teaching us may greatly improve returns and win/loss ratio.

Hope this is helpful. If anyone is interested, I'll post the WealthLab script that I used.
 
Back Testing comments:

this is a little redundant but it is more readable for first timers.

Posted by Walther on 03-31-03 07:22 AM:
Vorzo,
You did a great job ! If i am not mistaken , Jack also mentioned divergence in a past as an confirmation tool. If you have a time,try to test entries only after Stoch. and price divergence. It will cut down number of trades, but it should improve profitability.
Thanks,
Walter

Posted by dawg on 03-31-03 07:28 AM:
Vorzo
wow. great job, gives you a lot to think about. thanks for all your work.

dawg

Posted by ges on 03-31-03 07:30 AM:
Re: Backtesting results

Quote from vorzo:


Entry: the signals used for variations of the method are indicated in the first column, and the entry price was set to the midpoint of the entry bar (average of open and close) to approximate live entry as soon as the line crosses rather than on bar close. I've included several results for entry on bar close for comparison.



Thanks very much for the testing.

I'm not sure what you mean by the above...entry price set to midpoint of entry bar. Don't you have to wait until the signal bar has closed to know if you've got a valid entry? How can you anticipate this in real time? It would seem to me you'd have to enter on the open of the bar following the signal bar (crossing of fast line over 75 or 80). Am I missing something?

ges

Posted by dawg on 03-31-03 08:10 AM:
vorzo
what does the software do with the following:

during the bar the fast stoch goes above 80, but closes below 80....would it exit you at the close or once in the trade your 2pt stop kicks in? thanks in advance.

dawg


Posted by vorzo on 03-31-03 09:25 AM:
Re: Re: Backtesting results

Quote from ges:



Thanks very much for the testing.

I'm not sure what you mean by the above...entry price set to midpoint of entry bar. Don't you have to wait until the signal bar has closed to know if you've got a valid entry? How can you anticipate this in real time? It would seem to me you'd have to enter on the open of the bar following the signal bar (crossing of fast line over 75 or 80). Am I missing something?

ges



ges,

As Jack mentioned several times, the entry should be as soon as the fast line crosses into signal area (be it 75 or 80). Yes you get more false signals (fast line crosses during the bar and snaps out of the area before close of the bar) but that's where sequences, volume, etc. come into play.

vorzo

Posted by vorzo on 03-31-03 09:30 AM:
Re: vorzo

Quote from dawg:

what does the software do with the following:

during the bar the fast stoch goes above 80, but closes below 80....would it exit you at the close or once in the trade your 2pt stop kicks in? thanks in advance.

dawg



dawg,

In this case, the software doesn't know that the fast line crossed in and out of the area - historical charts do not show occurences like this. The signal is simply not there.
One could go to a shorter time frame and look for a signal but it would be tough to code for a 5 min intrabar cross based on 1min data. Not impossible though, I'll think about it.

vorzo

Posted by vorzo on 03-31-03 09:32 AM:

Quote from Walther:

Vorzo,
You did a great job ! If i am not mistaken , Jack also mentioned divergence in a past as an confirmation tool. If you have a time,try to test entries only after Stoch. and price divergence. It will cut down number of trades, but it should improve profitability.
Thanks,
Walter



Walter,

Can you explain what you mean by price divergence? Thanks.

Posted by ges on 03-31-03 10:06 AM:
Re: Re: Re: Backtesting results

Quote from vorzo:



ges,

As Jack mentioned several times, the entry should be as soon as the fast line crosses into signal area (be it 75 or 80). Yes you get more false signals (fast line crosses during the bar and snaps out of the area before close of the bar) but that's where sequences, volume, etc. come into play.

vorzo



Then how do you test this in Wealth Lab? How do you treat those failed signals? Are you accounting for them? Just want to make sure, as it could make a huge difference. Right now test results look very good.

g

Posted by ges on 03-31-03 10:08 AM:
Re: Re: vorzo

Quote from vorzo:



dawg,

In this case, the software doesn't know that the fast line crossed in and out of the area - historical charts do not show occurences like this. The signal is simply not there.
One could go to a shorter time frame and look for a signal but it would be tough to code for a 5 min intrabar cross based on 1min data. Not impossible though, I'll think about it.

vorzo



Ahh...that means there are many (how many?) failed signals that would have been taken and you would have had to get out of. Without knowing how those trades impacted overall results, you can't give much credence to the test results. I'd say, the only thing you could do is test on next bar's open. If it is decent, then you can hope that in real trading you might improve on it.

This is a problem.

g

Posted by dawg on 03-31-03 10:21 AM:
back test
i think ges makes an excellent point. if you get a stoch cross during the bar and enter a buy, but it closes below the 75/80...and the mkt proceeds to go down...in REALITY you have a losing trade, BUT in the BACK TEST version it doesn't even show up as a trade. so we have unfortunately eliminated a losing trade that in REALITY would occur....and thus screwing up our results.

Now i don't know anything about backtesting, so i can't offer any suggestions.

BUT i think that is why some people have sugggested using the closing price on a 'good signal' for backtesting...at least you are sure you are not excluding the 'whip' losing trades. Otherwise you are omitting some losing trades.

just my 2 cents.
 
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