Strange as it may seem, Poncho (once again) cut the cable. Posting via back up connection at present. I plan to resume the market walk though once connectivity returns via cable internet.
Enjoy!
- Spydertrader
Enjoy!
- Spydertrader
Iterative Refinement
- Thread starter Spydertrader
- Start date
Quote from Spydertrader:
Today, should not have provided too many difficulties for you.
The end of day (yesterday) ran down to create a down traverse, followed by the gap up this morning and Lateral (Non-dominant Traverse) created the opportunity for the morning's down traverse to complete a channel sequence. When change arrived on the 11:10 ES [close of] Bar, the market began a series of Traverses (dominant, non-dominant and dominant again) in an effort to complete an Up Channel sequence. The 13:30 ES [close of} Bar then signaled the start of another down Traverse. The market may not have enough time to complete a third channel sequence by end of day, but no matter, at least you'll know where to begin tomorrow - if time runs out today.
- Spydertrader
Just catching up on some reading from the week. This was a great post (but then again they all are), particularly the timing of the analysis and anticipation of the down channel sequence completion not having time to occur. I can see how KSE (and programming the mind to anticipate the legs and their timing given the existing mode and sentiment) definately enables the trader to anticipate the future (as it moves into the now). As I further debrief on the week (and the highlighted day in particular) the timing of the completion of the up channel was to be anticipated and the market gave sufficient signal (13:30) for action (as it always does).
Thanks (as always) for your excellent insights.
Cable continues to remain sliced in half thanks to Pancho's inability to maintain stability with a weed eater. However, the mobile broadband card has provided ample connectivity, so I'll post a few chart snips this morning.
Prior to the sound of the Opening Bell, each trader needs to perfom a 'Pre-Flight check' with respect to understanding the day's events. And while noting an FOMC announcement or Oil Inventory report on one's chart provides an excellent reminder of upcoming possible volatility change, one needs to also make note of where one stands with respect to the right side of the market before the first tic crosses the tape.
On our previous day, we see that Price has headed away from our previous day signal for change, and crossed an RTL of a dominant traverse. So too has Volume transitioned from Point One to point two creating a classic R2R\/ just as the final bar of the day closes. As such, the trader knows the market has reached a certain point in time with respect to its sequences. Further, the trader knows that the market must now move from Point Pwo to Point Three before returning to the dominant direction.
As bar one of the day closes and forms an IBGS, we know to head short, but since beginning level traders wait until market sync before entering for the first time, wait becomes the action step required on Bar One.
While waiting for sync, all traders observe the market and note the changes (or contonuation) which results from the Price / Volume relationship.
Although Bar one heads higher on increasing Black Volume, and we often say, "Price gapped up on increasing dominant volume, we cannot simply assume Bar One has shown dominance just yet. As a result, we assume non doninance until the market proves otherwise.
Bar One - non-dominant
While monitoring, we expect to see one of two scenarios unfold as the market heads toward bar three. We must see the market create either a non-dominant 'tape or a Lateral Retrace. Since both scenarios represent non-dominance,
While Bar Two turns and heads back inside of Bar One, it does so on decreasing Volume. And although (according to Volume) Price has started to move Left to Right, we have yet to see the market provide a retrace or a lateral. However, by the non dominant nature of Bar Two, we can know that Price has not yet finished moving from Point Two to Point thhee.
Bar Two non dom.
As bar three enters the picure, Price struggles to head higher with volume creating a textbook case of non dominant Volume. When Price breaks the lateral boundary, and then, closes back inside, the market has confirmed a formation of a Lateral (Movement), and it has locked in Price's efforts to move from point Two to Point. Since we have yet had a return\ to dominance, Bar Three remains non-dominant, and inside a Lateral Movement (Point Two to Point Three). A trader using medium or fine level tools, most certainly receives a signal to enter the market short at the close of Bar Three, however, the trader using only the 5 minute ES chart also has a trick or two. Within the lateral itself, a change in non dominance has occurred. Bar Two had decreasing red Volume, but we now see decreasing black. If a change in non-dominance has occurred, then most definitiely a change in dominance has also occurred - we just have yet to 'see' it. Combine this logic with failure of Price to Break the Lateral boundary, and a trader has all that is needed. As such, even though Bar Three shows non-dominant, the ES five minute Traverse Level trader heads short knowing the 'right side' is short.
As Bar Four closes back inside the previous bar, many will 'see' this as the same as Bar Three's transition away from Bar Two. Clearly, a rather large difference exists between the two (Bar 2 to 3 and Bar 3 to 4). If you have difficulty 'seeing' it, think this way - Price was heading in one direction until something caused us to head short. After that point in time, Price headed in a different direction.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2119595>
Bar four represents non-dominance (just as all the other bars of the day), but this bar shows us something more than what I described in the previous paragraph. Bar 4 shows a slowing of the money velocity (the point in time where we begin to 'see' the market transition back to dominance. The Equities folks 'see' this same thing when the market shows 'Dry Up' Volume, but we aren't watching Volume just yet. However, you can 'see' it in the slowing of the money velocity. The rate of Price change has decreased - just as it does with Volume - we just don't get to know we have reached a Volume trough until the next bar.
As Bar 5 breaks out of the Lateral Boundary on increasing Volume, the trader knows to waitp once again in order to make a determination of dominance or non-dominance. Clearly Price continues to move favorably in line with our expectations of short. This is simply a money making scenario. One cannot profit without Price change, and that Price change, cannot occur without Volume. However, the trader's responsibility with respect to thorough monitoring involves remaining mindful of changes in dominance. This is not a money making proposition. The sequences simply tell the trader when the time has come to bank profits.
And on Bar Five, we assume non-dominance until the market proves otherwise.
Bar Six, no doubt, fooled a number of people. Certainly, increasing Volume appears, and as such, one would think both Bar 5 and Bar 6 would then show dominance. Unfortunately, this is not the case. Why? Take a closer look at Bar 6. What at first glance looks to form an an FBO on dominant Volume (similar to Friday Morning), upon closer inspection, the trader can see an example of a Bar which closes a significant distance away from its extreme. bar Six represents a Spike Bar, and we all know what sort of bars they represent. As such, Bar 5 and 6 represent non-dominant bars, and as a result, we have not yet returned to dominance.
Bar 7 is an easy one (perhaps, not in real time for you, but certainly by the end of the bar). Increasing Red Volume. Price breaks an RTL (and stays outside) which provides our required return to dominance, and a completed sequence from the previous day. In addition, Price closes back inside the previous bar, requiring a discussion with Mr. Jokari. At the end of that discussion, the required action becopmes reverse, and the trader repeats the process - now in the opposing direction.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2119600>
You'll note my failure to create a Lateral beginning with Bar 7. The reason for the ommission has to do with one thing ending and another beginning. One need not tie those two events together.
HTH.
- Spydertrader
However, the mobile broadband card has provided ample connectivity, so I'll post a few chart snips this morning.Prior to the sound of the Opening Bell, each trader needs to perfom a 'Pre-Flight check' with respect to understanding the day's events. And while noting an FOMC announcement or Oil Inventory report on one's chart provides an excellent reminder of upcoming possible volatility change, one needs to also make note of where one stands with respect to the right side of the market before the first tic crosses the tape.
On our previous day, we see that Price has headed away from our previous day signal for change, and crossed an RTL of a dominant traverse. So too has Volume transitioned from Point One to point two creating a classic R2R\/ just as the final bar of the day closes. As such, the trader knows the market has reached a certain point in time with respect to its sequences. Further, the trader knows that the market must now move from Point Pwo to Point Three before returning to the dominant direction.
As bar one of the day closes and forms an IBGS, we know to head short, but since beginning level traders wait until market sync before entering for the first time, wait becomes the action step required on Bar One.
While waiting for sync, all traders observe the market and note the changes (or contonuation) which results from the Price / Volume relationship.
Although Bar one heads higher on increasing Black Volume, and we often say, "Price gapped up on increasing dominant volume, we cannot simply assume Bar One has shown dominance just yet. As a result, we assume non doninance until the market proves otherwise.
Bar One - non-dominant
While monitoring, we expect to see one of two scenarios unfold as the market heads toward bar three. We must see the market create either a non-dominant 'tape or a Lateral Retrace. Since both scenarios represent non-dominance,
While Bar Two turns and heads back inside of Bar One, it does so on decreasing Volume. And although (according to Volume) Price has started to move Left to Right, we have yet to see the market provide a retrace or a lateral. However, by the non dominant nature of Bar Two, we can know that Price has not yet finished moving from Point Two to Point thhee.
Bar Two non dom.
As bar three enters the picure, Price struggles to head higher with volume creating a textbook case of non dominant Volume. When Price breaks the lateral boundary, and then, closes back inside, the market has confirmed a formation of a Lateral (Movement), and it has locked in Price's efforts to move from point Two to Point. Since we have yet had a return\ to dominance, Bar Three remains non-dominant, and inside a Lateral Movement (Point Two to Point Three). A trader using medium or fine level tools, most certainly receives a signal to enter the market short at the close of Bar Three, however, the trader using only the 5 minute ES chart also has a trick or two. Within the lateral itself, a change in non dominance has occurred. Bar Two had decreasing red Volume, but we now see decreasing black. If a change in non-dominance has occurred, then most definitiely a change in dominance has also occurred - we just have yet to 'see' it. Combine this logic with failure of Price to Break the Lateral boundary, and a trader has all that is needed. As such, even though Bar Three shows non-dominant, the ES five minute Traverse Level trader heads short knowing the 'right side' is short.
As Bar Four closes back inside the previous bar, many will 'see' this as the same as Bar Three's transition away from Bar Two. Clearly, a rather large difference exists between the two (Bar 2 to 3 and Bar 3 to 4). If you have difficulty 'seeing' it, think this way - Price was heading in one direction until something caused us to head short. After that point in time, Price headed in a different direction.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2119595>
Bar four represents non-dominance (just as all the other bars of the day), but this bar shows us something more than what I described in the previous paragraph. Bar 4 shows a slowing of the money velocity (the point in time where we begin to 'see' the market transition back to dominance. The Equities folks 'see' this same thing when the market shows 'Dry Up' Volume, but we aren't watching Volume just yet. However, you can 'see' it in the slowing of the money velocity. The rate of Price change has decreased - just as it does with Volume - we just don't get to know we have reached a Volume trough until the next bar.
As Bar 5 breaks out of the Lateral Boundary on increasing Volume, the trader knows to waitp once again in order to make a determination of dominance or non-dominance. Clearly Price continues to move favorably in line with our expectations of short. This is simply a money making scenario. One cannot profit without Price change, and that Price change, cannot occur without Volume. However, the trader's responsibility with respect to thorough monitoring involves remaining mindful of changes in dominance. This is not a money making proposition. The sequences simply tell the trader when the time has come to bank profits.
And on Bar Five, we assume non-dominance until the market proves otherwise.
Bar Six, no doubt, fooled a number of people. Certainly, increasing Volume appears, and as such, one would think both Bar 5 and Bar 6 would then show dominance. Unfortunately, this is not the case. Why? Take a closer look at Bar 6. What at first glance looks to form an an FBO on dominant Volume (similar to Friday Morning), upon closer inspection, the trader can see an example of a Bar which closes a significant distance away from its extreme. bar Six represents a Spike Bar, and we all know what sort of bars they represent. As such, Bar 5 and 6 represent non-dominant bars, and as a result, we have not yet returned to dominance.
Bar 7 is an easy one (perhaps, not in real time for you, but certainly by the end of the bar). Increasing Red Volume. Price breaks an RTL (and stays outside) which provides our required return to dominance, and a completed sequence from the previous day. In addition, Price closes back inside the previous bar, requiring a discussion with Mr. Jokari. At the end of that discussion, the required action becopmes reverse, and the trader repeats the process - now in the opposing direction.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2119600>
You'll note my failure to create a Lateral beginning with Bar 7. The reason for the ommission has to do with one thing ending and another beginning. One need not tie those two events together.
HTH.
- Spydertrader
Spyder, Thanks again for the food for thought. Can I ask a few (somewhat related) questions;
When do you perform your pre-flight checks? (I am assuming pre-market but wanted to confirm).
If so, then should one consider pre-market action a factor in determining where one might anticipate the sequence to begin?
Is it possible to reliably perform pre-flight after RTH close for the next day, or is it a matter of accuracy and/or resolution between evening and pre-market?
I ask because in the drill, you mention that we have PT1 and PT2 (R2R) and are looking for a non-dominant traverse to complete the sequence (pre-flight check). So my thinking here is that IF bar 2 on the open is a combination of P/V which would reflect further movement in the dominant direction (down) that we would extend PT2 from prior day and pick up sequences (i.e. extend the tape) looking for change back to non-dom? I think this is a context issue but I did not want to assume it is and overlook some facts or points.
Another question then becomes (this is more one for me to note as self-awareness)... are markets essentially continuous in their sequencing?
It is clear in reviewing this example (with regards to sequencing moreso than respect to channel C.O.'s, though we do routinely see CO's respected as well)
Thanks for any additional insights. This was a very informative drill (illuminating more layers for me), Many thanks for the wonderful narration.
Spyder,
Thanks for the bar by bar analysis for the drill.
The preflight check is one of the areas that has posed considerable difficulty for me especially dealing with gap up and gaps downs and how they affect the continuation of sequences from the prior day.
I would not have been able to continue the downward movement we started the prior day with the gap up due to price opening higher and in effect having point 3 higher than point 1.
Now that I see how you ignored the gap up, I will work on a few days of charts to see how it works out.
Thanks for the bar by bar analysis for the drill.
The preflight check is one of the areas that has posed considerable difficulty for me especially dealing with gap up and gaps downs and how they affect the continuation of sequences from the prior day.
I would not have been able to continue the downward movement we started the prior day with the gap up due to price opening higher and in effect having point 3 higher than point 1.
Now that I see how you ignored the gap up, I will work on a few days of charts to see how it works out.
So ... why not a few of you pull up the rest of the day, and walk through the process as the market moves from Point One to Point Two to point Three. IF people see things differently, the various points of view can often cause things to 'click' for those still struggling. Heck, you can discuss the moves in real time if need be. So what if things don't work out exactly as you thought at first. When one is attempting to learn something new, expect mistakes to be made now and then.
A 'Pre-Flight' Check represents nothing more than Monitoring - except in this case - it occurs prior to the opening bar. In other words, the trader contantly does a 'Pre-Flight' Check for bars which in the now sit somewhere in the near future. Nothing is different - except for the time of day in which one performs the action.
However, to put a finer point on it, I know what to expect the next day based on how the end of the current day works out.
Do whatever you feel works best. I personally have no idea what gyrations the pre-market has encountered prior to the opening bell. For me it simply doesn't matter. The market will open and move either dominant or non-dominant, and then, repeat the process all day long. I have more than enough to do in 81 bars, and I see no reason to add more work for myself.
Markets haven't changed since the days of 'Day-Trading' Rice 1400 years ago, and they certainly aren't going to change how the fundamentally operate while I sleep.
As I have often said, When 'context' changes the answer to WMCN also changes. However, keep in mind, just because something has to move non-dominant, doesn't mean it can't do so for a considerable period of time.
Every market, on every time frame provided suficient liquidity exists. That should sound familiar
Everything depends on where one sits with respect to completing a sequence, and as you can see, the market always creates a completed sequence, prior to transitioning into the new trend.
Nothing posted by me over the last few days represented anything new with respect to the learning process. All points made made their way into the record before I ever authored a Journal. You all know this stuff already. Not all of you have connected the 'dots' within your mind's eye yet is what seperates everyone following along.
Rarely does the market ever show actual decreasing Volume on bar one. As such, altering one's mindset to let the market prove whaich side represents dominance allows the trader to remove the 'bias' which temds to arise due to 'increasing' volume bars at Bar One.
HTH.
- Spydertrader