Jack Hershey's trading methods
- Thread starter cnms2
- Start date
For a while I didn't understand the concept until I realized PV and also had to relax a bit as far as observing is concerned. So with channels, you see that the channel is the geometric context for where price is operating. The Volume is the gas pedal so to speak of price operating within the container. In a channel you will see price bounce from one side to the other until it stops. When you look at volume you will see that in one particular direction of the bounce from one side of the channel to the opposite side, each consecutive volume bar will be more or less larger than the previous bar. On the bounce back, the volume bars will have a general decreasing progression. You will have to look somewhat loosely because as you will notice, the migration from one side to the other is riddled with stalled/inside bars. They are easy to pick off because you will see that the volume does not follow the progression and additionally the price bar will not extend beyond either side of the previous price bar.
The framework of the gaussians is that every channel has the dominant where the progression of sequentially increasing volume bars denote the dominant direction of the channel. The sequentially decreasing volume bars are the retrace. Thus a R2B means INCREASING RED VOLUME bars followed by DECREASING BLACK VOLUME BARS. A B2R is INCREASING BLACK VOLUME bars followed by DECREASING RED VOLUME bars. A LONG channel is a repeating sequential series of B2Rs whereas a SHORT channel is a repeating sequential series of R2Bs. The transition between a SHORT and LONG channel is immediately picked off by B2B where you have DECREASING BLACK VOLUME bars followed by INCREASING BLACK VOLUME bars or an R2R where you have DECREASING RED VOLUME bars followed by INCREASING RED VOLUME bars...
I am somewhat of a purist so I don't typically use moving averages. I know the equities folks are using 65 day moving average on volume and as usual, I have a few tweaks of my own that do away with some of the usual software pitfalls. I had a eureka moment this morning and created from scratch 2 tools that had RHAT, ASPV, ENG picked off within 13 minutes of the open. They literally just bubbled up on my screen. It works exactly like a race track. EXACTLY! Excel is my favorite charting app...LOL!
A couple of comments. The DOM stuff definitely takes time to get adjusted too. I have many many tools! So many that I have lost track of them and they are filed away somewhere on my harddrive. The DOM action is for fine tuning when to take action when the cruder tools say it is time to look very closely at the market. There is a picture that is posted somewhere...
Here it is for the ES... There is a substantial DOM post I've been itching to lay out but I haven't had the time to troll proof it.
Kind Regards,
MAK!
Thanks Mak.
One note / request for comment on volume gaussians: I noticed (and I think I read it in one of Jack's posts too) that to see them better you have to adjust your fractal to tape the channel. When you do it right you'll see the traverse's volume increasing and the retracement's volume decreasing, as a single asymmetrical B2R or R2B gaussian. When you go one or two fractals faster you'll probably see how the volume usually dries up at the trend flex point.
One note / request for comment on volume gaussians: I noticed (and I think I read it in one of Jack's posts too) that to see them better you have to adjust your fractal to tape the channel. When you do it right you'll see the traverse's volume increasing and the retracement's volume decreasing, as a single asymmetrical B2R or R2B gaussian. When you go one or two fractals faster you'll probably see how the volume usually dries up at the trend flex point.
I have been reading these Hershey threads for awhile but have not posted until now. The channels and gaussians make a lot of sense to me when the market is trending, but the whole thing seems to go out the window when the market is not trending. When the channels are short and the market cannot make up its mind which way it wants to go it seems impossible to know what to do.
see if the price is not forming a triangle at that point. That is called a volatility trap [that is not Hershey speak, it is a general term, sometimes measured by declining volatility as shown by bollinger bands], the triangle is forming with smaller and smaller bars and then there is usually a breakout somewhere near the apex of the triangle, the place where the uptrend and downtrend lines cross.
Most of the concepts Jack uses in his equity and future trading methods are widely applicable and can be also included into your own trading strategy. But to take full advantage of them he recommends using a universe of stocks that proved to behave better for extracting money: they are high quality stocks with top earnings and price performance, that also showed over the last six months a propensity to oscillate. Check Spydertrader's journals for a better descriptions of all the criteria.
Exactly like with any other crappy "system".
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If ya have to gaze for the trend, ya don't have a system.
nononsense's axiom #5