Iterative Refinement

Quote from tobbe:

Could you please explain what the drill is all about? Are the times EST? Thank you :) .
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Hi Tobbe,

I've "known" about washing for a number of years now, but have never understood Jack's drill to practicing it. Icarus was kind enough to give me a nudge in the right direction. Here's part of the PM I received, quoted with permission:

We learn to trade by trading for real. Washing is the trading skill that really allows a person to gain confidence while learning because it allows a person to participate and even grow the account a little.

You learn to wash by entering and exiting with 1 contract. No reversals. Giving up ticks on a wash is not recommended. Gaining a tick or two on a wash is. Washing flat is also quite good, and with 1 contract costs little.

Wash trading will teach you something you already know: an entry and exit are not emotionally the same. Anyone who says an entry and exit are the same is talking about trading in a vacuum. If you paper trade, yes they are. If you have something at stake, no they are not.

A wash trade is not a random trade. For a successful wash you need to know the market's sentiment. We are trading the slowest intraday trends (channels) of the ES that we glean from 5m bars. On most days, there are several of these a day. On trend days there are fewer. The direction of these channels is the sentiment.

I recommend you focus on wash trades at p3. Do a couple of these a day for awhile. Don't focus on the P&L at all. Focus on entering at p3 and watching volume confirm. If volume doesn't confirm, you exit immediately. P3's are continuation trades. Even if you don't pick the exact tick on a p3, the market will come back through your price to allow you to wash.

There are a lot of details you will have to add to what I've said.
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I hope that helps clarify things. Have a good weekend.

-Au
 
A few questions for Icarus, Aurum, Jack Hershey or anybody else who practiced wash trades successfully. Having no success with my interpretation of guidelines in the past, I would like to attempt to make these potentially very valuable wash guidelines as idiot-proof as possible.

A wash trade is not a random trade. For a successful wash you need to know the market's sentiment. We are trading the slowest intraday trends (channels) of the ES that we glean from 5m bars. On most days, there are several of these a day. On trend days there are fewer. The direction of these channels is the sentiment.

I recommend you focus on wash trades at p3. Do a couple of these a day for awhile. Don't focus on the P&L at all. Focus on entering at p3 and watching volume confirm. If volume doesn't confirm, you exit immediately.
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1. Does the designation 'pt3' highlighted in red above means the bar that one believes to be a future Point Three of the new channel based on: (a) increasing PRV on that bar and (b) the presence of an FTT in the previous channel signaling change in sentiment in the direction of the wash trade.

2. "Watching volume confirm" - does this statement refers to the same 5 min ES bar where one enters, or the following bar.

3. If the "volume confirms", whether it's the same bar, where the entry occurred, or the following bar - when does one exit?

4. How does the presence of pennant/formation fits into the wash trade?

5. Should one pay attention to any YM signals a the time of wash entry?

I would greatly appreciate any insight.

Every statement or observation with respect to this methodology can not be taken literally and is only valid within a specific context.

The statement - "entering at p3 and watching volume confirm. If volume doesn't confirm, you exit immediately." - requires a qualifier, if not several.

By example:
  • YM leads ES (at points of change)
  • Jokari Window signals change (only within specific context)
  • Drawing trendlines gives one a religious experience (but not necessarily teaches one how to annotate correctly)
 
Quote from romanus:

A few questions for Icarus, Aurum, Jack Hershey or anybody else who practiced wash trades successfully.
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As a disclaimer, I've never conducted a successful wash trade on purpose. I've succeeded in exiting a trade at break even, but that's not the wash trade, per se. With that said, I can only comment with my current understanding and assumptions.

Having no success with my interpretation of guidelines in the past, I would like to attempt to make these potentially very valuable wash guidelines as idiot-proof as possible.
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Perhaps it wasn't clear in my first post - my apologies. These instructions are clarifications for conducting wash drills. (i.e. see Jack's "Crow's nest" post) As I see it, they will help to build the foundation for understanding and conducting wash trades. These are not rules, but rather several directed steps to help get jump started to doing the drill. With that intent highlighted, I suspect your following questions should change, or perhaps be answered with "I'll have to see what the market says to do in this situation." Remember - "There are a lot of details you will have to add to what I've said."

I hope this helps - I realize that I may have frustrated you further, but that is not my intention. Until I've had a chance to actually run through the drill, I can only speculate on many aspects of it.

-Au
 
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