Jack Hershey – MACD and Stochastics helpers for 123 and FTT's

[callmate]

I am really fascinated with Jack Hershey’s work, I spend most of my spare time reading his stuff.
For the last 12 months some of us have been following Spydertrader's Jack Hershey Futures Trading Journal. This journal will be coming to an end soon. It has been an incredible journey for some of us. Initially I couldn't draw or understand how to draw trendlines, but now it's like second nature, what I couldn't "see" a few months ago despite working so hard I " see" now. Still a long way to go nevertheless I see the light at the end of the tunnel. All due to two main players, Jack and Spyder but there many others behind the scenes ( you know who you are)
I have been reading The Stochastics Thread, where the use of MACD and Stochastics is detailed at great length. I was wondering whether locating FTTs, 123s could be improved by using MACD and stochastics, I am not talking about rockets or icebergs.
Some of us can locate an FTT and 123s realtime, I was wondering whether we can come up with some kind of a criteria in making decisions for FTT’s or 123s by the use MACD and Stochastics.
In this journal we are aiming to discuss how we can apply MACD (5,13,6) stochastics ( 5,2,3) and ( 14,1,3) to identify FTTs and 123s. There have been lot of discussion around this subject elsewhere on ET. I am hoping Jack, Spyder and others will contribute.

NO detractors please, take your plays/fights/challenges elsewhere. We are not here to prove whether Hershey method works or to provide blotters. Simply it’s a journal for asking question, working out answers and sharing our knowledge.

For the background understanding, please refer to the following journals, you will find answers to many of your questions within these.
Spydertrader's Jack Hershey Futures Trading Journal
http://www.elitetrader.com/vb/showthread.php?s=&threadid=83604&perpage=6&pagenumber=1
The stochastic Indicator
http://www.elitetrader.com/vb/showthread.php?s=&threadid=14129&perpage=6&pagenumber=1

I would like to wish everyone a Healthy and a Prosperous New Year

 

[Icarus5]

Quote from callmate:

I am really fascinated with Jack Hershey’s work, I spend most of my spare time reading his stuff.

You have to read deeper.

The place where Jack truly excels are in his understanding of leverage and money management algorithms.

Entry and Exit signals are one thing, and to some degree depend on the personality of the individual trader. I find that the detractors hang their hat on SCT, which in many cases will work (particularly on range bound markets, but I don't like it for trending days).

But when you really understand how to use leverage (and he most definitely does) the potential of short-term trading (well, actually, all fractals) becomes realized.

Good trading in '08,

I

P.S. The only reason I mention this is because he's just tossing the pearls there, waiting for someone to pick them up.

 

[cnms2]

Intriguing opinions, Icarus5!

You wrote: "The place where Jack truly excels are in his understanding of leverage and money management algorithms."

I was under the impression that Jack's trading methods make almost no use of money management, because at his level of expertise there's almost no risk. He advises to start with one contract and build from there just because beginners make mistakes.

You wrote: "... SCT, which in many cases will work (particularly on range bound markets, but I don't like it for trending days)"

In my experience, SCT works as well for any degree of trending or non-trending environments. This is because it forces you to optimize both your entries and exits at the same time: best exit is the best entry in the new trend. It is just our beginners' lack of skills, like the delayed reading of the market's signals, especially the finer ones, that results in errors E1 / E2 (early / late reversals). For me the tougher market is when it is range bound with low volatility, and the most profitable one is when it's trending. High volatility periods, like the 3:55 bar, or the big announcements are difficult to trade because they require excellent reaction time and perfect use of the fine tools.

Would you care to elaborate on your opinions?

Quote from Icarus5:

You have to read deeper.
...

 

[Joab]

callmate,

It's nice to see you as a moderate

Keep up the hard work you are a very nice and special lady.

It's been a pleasure watching you grow as a trader.

 

[cnms2]

I am using MACD and STO with Jack's recommended settings, following as best as I've understood his directions.

In my experience they are valuable tools that help in recognizing the turning points. When the MACD 5,13,6's fast line goes flat the price sets a local top or bottom, as FTT and 123 points are. When STO 5,2,3's fast line crosses 50% it anticipates a volume increase which means continuation, and happens on the dominant traverses of the trading fractal. When MACD hovers around 0, and STO hovers around 50% it is a sign of CCC and / or low pace market that requires getting out, and setting bracket orders for the subsequent BO.

Quote from callmate:

...
I was wondering whether locating FTTs, 123s could be improved by using MACD and stochastics, I am not talking about rockets or icebergs.
...

 

[callmate]

Quote from cnms2:

In my experience they are valuable tools that help in recognizing the turning points. When the MACD 5,13,6's fast line goes flat the price sets a local top or bottom, as FTT and 123 points are. When STO 5,2,3's fast line crosses 50% it anticipates a volume increase which means continuation, and happens on the dominant traverses of the trading fractal. When MACD hovers around 0, and STO hovers around 50% it is a sign of CCC and / or low pace market that requires getting out, and setting bracket orders for the subsequent BO.

Cnms, care to post some examples of charts demonstrating the above comments.

 

[Icarus5]

Quote from cnms2:

Intriguing opinions, Icarus5!

You wrote: "The place where Jack truly excels are in his understanding of leverage and money management algorithms."

I was under the impression that Jack's trading methods make almost no use of money management, because at his level of expertise there's almost no risk. He advises to start with one contract and build from there just because beginners make mistakes.

Yes, more perfect money management.

Quote from cnms2:

You wrote: "... SCT, which in many cases will work (particularly on range bound markets, but I don't like it for trending days)"

In my experience, SCT works as well for any degree of trending or non-trending environments. This is because it forces you to optimize both your entries and exits at the same time: best exit is the best entry in the new trend. It is just our beginners' lack of skills, like the delayed reading of the market's signals, especially the finer ones, that results in errors E1 / E2 (early / late reversals). For me the tougher market is when it is range bound with low volatility, and the most profitable one is when it's trending. High volatility periods, like the 3:55 bar, or the big announcements are difficult to trade because they require excellent reaction time and perfect use of the fine tools.

Yes, I didn't say that it didnt' work for trending days, I said "I don't like to use it's philosophy of Seamless Continuous Trading for those types of days" ... iow, that's my personal preference. It means that I don't capture all of the potential range that exsits in a given trading day ... but then again, I don't have to. If I can capture just a portion of it, combined with the money management that is discussed freely in his posts and on spyder's thread(s), I am very fiscally and psychically happy.

Quote from cnms2:

Would you care to elaborate on your opinions?

Look at today's trading of the ES.

I would have captured the early drop, but not taken the reversal off the bottom becasue the market was looking too bearish for my tastes (I use other criteria to determine the state of the market besides price action/price patterns).

But SCT would have nailed the early drop AND caught the reversal off the bottom.

So pure SCT would have made more money, but I would have been very satisfied with the money that I made.

(Sincerely) hope that explains it.

I

 

[callmate]

Quote from Joab:

callmate,

It's been a pleasure watching you grow as a trader.

Thank you Joab for helping/guiding me, I hope to pay forward one day.

 

[callmate]

I'm posting a chart showing stochastics at extremes, displaying readings of 85+. Look at the price and gaussians.

 

[TradEStar]

Quote from callmate:

I am really fascinated with Jack Hershey’s work, I spend most of my spare time reading his stuff.

In this journal we are aiming to discuss how we can apply MACD (5,13,6) stochastics ( 5,2,3) and ( 14,1,3) to identify FTTs and 123s. There have been lot of discussion around this subject elsewhere on ET. I am hoping Jack, Spyder and others will contribute.

I would like to wish everyone a Healthy and a Prosperous New Year

As a heads up..AMT4SWA used the MACD 4,13,9 setting with a 5,5,2 Stochastic..you may want to check those out. AMT had lots of great MACD info in a MACD thread from the past here at ET.