Matcha's Dow E-mini Journal
- Thread starter Matcha
- Start date
Quote from PatientOperator:
Hi Matcha,
No worry, the weekend is here for a break to digest what we have learned. And to watch your favorite movies and TV shows.
I share exactly the same feeling on the more I learn the more confusion it can be. It is common to look at TOO MANY things - indicators, and other goodies that it will have contradicted signals. I think you might need to re-evaluate what really are comfortable with you to use and remember to keep things simple.
I suggest to read pg 105 on Marcel's book regarding KISS!!!!! He mentioned that by over-complicating indicators and systems one can create more trouble than it's worth!!!!
That's why I like to stay in SIM trading when I am testing new "goodies" indicators and systems.
Have a nice weekend and enjoy your latest CRUSH
--po
Hi, PO.
Thanks for suggestion. We will do good pretty soon. I believe!
Matcha
I have a personal log I did after market. I marked all the good entrys and patterns. And my behavior patterns. I then sort all good trades by pattern, calculate the winrate, proficiency and profit margin. But, there is always a "but", I didn't do a very good jobs on analyzing BAD trades, only because I over trade so much, and I forgot why did I entered, all the comment I made was "impulse trade".....
I promise I would do a better job mark all the detailes on bad and good trades from next week and limit my trades to 9 maxi.
No no.... no no!
My advice: Dump the stochastics. Reason: Stochastics changes too fast from "oversold" to "overbought". When price is in uptrend, it stays in "overbought" for a long time. (Vice versa.) Stochastics is like a "on/off" switch. It confirms that you are in an uptrend or downtrend. But doesn't give you much time to react.
Especially you look at the cross-over of the fast and slow. Happens too fast. IMO it is not good for intraday trading. If you look at the Stochastics on the daily charts that's a different story.
My advice: Use RSI. I have a modified version of RSI that I called "RSI3". Stolen from an article on Technical Analysis for Stocks and Commodities. It is simply the 3-period moving average of the RSI. It smooths out the RSI signal (which is a little bit jagged). It has worked wonder for me on 1-min through 60-min intraday charts. (See attached for my modified version of EasyLanguage).
My version paints the overbought with Red and oversold with Cyan by default. And if the RSI stays in the middle (>45 and <55) then it is painted as Yellow.
Here are some simple rules:
In a trending market:
Avoid buying when RSI3 is red (overbought).
Avoid selling when RSI3 is cyan (oversold).
Buy when price is in an uptrend: but buy only when RSI3 is yellow (these are retracements). Best to get in the trend early.
Sell when price is in an downtrend: but sell only when RSI3 is yellow (these are recoils). Best to get in the trend early.
Typically in an uptrend, RSI3 will hit red (overbought) 3 or more times without getting a cyan (oversold). (Maybe just down to mid band - yellow). If you are in a long position, prepare to get out at the 3rd (at least partially) overbought.
Typically in a downtrend, RSI3 will hit cyan (oversold) 3 or more times without getting a red (overbought). (Maybe just down to mid band - yellow). If you are in a short position, prepare to get out at the 3rd (at least partially) oversold.
In a range market:
Simply plan to buy the oversold (cyan) and sell the overbought (red). Especially with a Momentum Divergence on the RSI3.
Play with it a bit to see if this works better.
===================================
inputs:
Price( Close ),
Length( 5 ),
OverSold( 30 ),
OverBought( 70 ),
MidLow( 45 ),
MidHigh( 55 ),
OverSColor( Cyan ),
OverBColor( Red ),
MidColor( Yellow);
variables: MyRSI( 0 ), MyRSI3( 0 ) ;
MyRSI = RSI( Price, Length ) ;
MyRSI3 = AverageFC( MyRSI, 3);
Plot1( MyRSI3, "RSI3" ) ;
Plot2( OverBought, "OverBot" ) ;
Plot3( OverSold, "OverSld" ) ;
{ Color criteria }
SetPlotColor( 1, Darkgray);
if MyRSI3 > OverBought then
SetPlotColor( 1, OverBColor )
else if MyRSI3 < OverSold then
SetPlotColor( 1, OverSColor ) ;
if (MyRSI3 < MidHigh) and (MyRSI3 > MidLow) then
SetPlotColor( 1, MidColor );
{ Alert criteria }
if MyRSI3 crosses over OverSold then
Alert( "Indicator exiting oversold zone" )
else if MyRSI3 crosses under OverBought then
Alert( "Indicator exiting overbought zone" ) ;
Hey,
I've been following the ES/YM a lot recently and one technique that i picked up from alexander elder was to look for divergences in the inidicators you use. You can see the most obvious example below at the double bottom at 6:30. Notice how price makes a very close double bottom whereas the MACD and RSI do not. In the second dip neither the RSI or macd make the same low. This signal was a bit more evident in the ES when the second price dip went slightly lower then the first.
He calls it a class B bullish divergence, same applies for the opposite. A class A, which is a more "powerful" signal occurs at 1030 to 1100, when price makes a higher high, but the MACD makes a lower high. However, the RSI made a double top, which isn't as powerful as the macd's second lower dip, but still valid.
I've noticed it works, but not always, sometimes that formation will lead to a trip bottom and yet perhaps another high low on the indicators. Usually it does turn in the expected direction, but you could be shaken out many times before that occurs.
I've also noticed they're more valid on longer time frames, eg more so on a daily chart then a 5 min. And i've almost come to stop using them in the 1 min timeframe because the failure rate is much higher.
I believe this is true of most indicators, the longer the timeframe the more valid it is. If anyone wants to add/confirm that would be best haha.
Keep up the good work, and thanks to everyone who's contributed so far, i've been following this thread religiously haha.
<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=2906054">
I've been following the ES/YM a lot recently and one technique that i picked up from alexander elder was to look for divergences in the inidicators you use. You can see the most obvious example below at the double bottom at 6:30. Notice how price makes a very close double bottom whereas the MACD and RSI do not. In the second dip neither the RSI or macd make the same low. This signal was a bit more evident in the ES when the second price dip went slightly lower then the first.
He calls it a class B bullish divergence, same applies for the opposite. A class A, which is a more "powerful" signal occurs at 1030 to 1100, when price makes a higher high, but the MACD makes a lower high. However, the RSI made a double top, which isn't as powerful as the macd's second lower dip, but still valid.
I've noticed it works, but not always, sometimes that formation will lead to a trip bottom and yet perhaps another high low on the indicators. Usually it does turn in the expected direction, but you could be shaken out many times before that occurs.
I've also noticed they're more valid on longer time frames, eg more so on a daily chart then a 5 min. And i've almost come to stop using them in the 1 min timeframe because the failure rate is much higher.
I believe this is true of most indicators, the longer the timeframe the more valid it is. If anyone wants to add/confirm that would be best haha.
Keep up the good work, and thanks to everyone who's contributed so far, i've been following this thread religiously haha.
<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=2906054">
You remind me of myself back when I was obsessed with trying to find the right combo of indicators, multiple time frames, and techniques to solve every little market move. Give it up, the markets don't work that way.
A few of the long time respected guys on here have been kind of enough to share bits and pieces of their methods with me via PM over the years, and not a single one of them uses any indicators. Unless you count various tools they use to keep track of relation to other trading products. (pairs, baskets, indexes etc...)
Learn about what drives buying and selling in modern markets and that will help you. You just gonna frustrate yourself and waste time messing with those indicators and MA's and all that.
A few of the long time respected guys on here have been kind of enough to share bits and pieces of their methods with me via PM over the years, and not a single one of them uses any indicators. Unless you count various tools they use to keep track of relation to other trading products. (pairs, baskets, indexes etc...)
Learn about what drives buying and selling in modern markets and that will help you. You just gonna frustrate yourself and waste time messing with those indicators and MA's and all that.
Quote from NoDoji:
Matcha, here's my 2 cents: Remove everything from your chart except the 20-bar moving average (that's the training wheels for us noobs).
OK, now are you totally confused?
and
(Too many cooks ruin the stew, Matcha, so take everything I say with a pinch of salt - no pun intended
)Many traders don't use indicators (for the most part) when trading and of these a majority are adamant in their rejection of anything but the most simple of charts. I count myself among these; however...
I've yet to meet a trader who <i>today</i> doesn't use indicators that didn't study and use them <i>at some point</i> in his career (including myself - I love including myself
). It is easy to overlook and discount how much using those indicators helped the trader to better identify and understand price action. Stochastics help understand acceleration, MACD to understand overbought/oversold, multiple and different types of MAs help to better grasp the fractal nature of the market (fuck, I'm starting to sound like JH) and trend persistence, volume and open interest analysis help to break down the elusive nature of market participation, level II (while useless most of the time) gives a better intuitive feeling for liquidity, automated algos and bid/ask pressure, etc.While getting rid of indicators is <i>ultimately</i> some very good advice (in my opinion, anyway), everybody should do it at his/her own rhythm, once the trader has absorbed all the indicator/s can teach him/her, once the trader can honestly say (not just be told and believe on faith) that s/he can <i>actually see</i> everything the indicators signal in the price action alone. (Or she may eventually decide that her true calling is system, not discretionary, trading and then she will likely need the indicators to hard code her strategies).
Think of it as writing poetry; much of the greatest poetry of the last century was written in free verse, but those poets didn't start writing in free verse, they started counting foots/syllables, trying assonant and consonant rhymes, etc. They started writing "Roses are red, violets are blue..." not "If you want me again look for me under your bootsoles". Then, one day they ditched rhythm and rhyme and the rest is history. (Now compare with those who couldn't tell the difference between masculine and feminine rhyme, but throw together a bunch of words in three lines and call it a fucking haiku).
With my best wishes to the reigning Queen of Price Action
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[Sorry? 
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