My Chick Goslin "Intelligent Futures Trading" Journal

[AshanD]

Quite a negative day today in all markets except stocks, which had a decent up day. (Nominally neutral to small up but recovered from their aftermarket losses) ER2 exploded up on spike type up day.

Gold and euro were both stopped out today, which I think keeps the overall picture quite negative since they had a chance to rally but did not so dollar situation is looking strong.

It's tough to go back to shorts now since most markets are overdue for some upside pressure, just trying to time these movements can be difficult. For now I'll probably wait on the sidelines for a good opportunity to fade a rally.

 

[AshanD]

Tuesday PM comments

Last thing want to do with these comments is cause more harm than good, and unfortunately did that with last night's comments. It was difficult situation though since my feeling was stocks had bottomed and if this case then doubted had much in way of big upside in currencies and gold; problem was being long stocks was against the lines and lines were also giving go ahead for longs in currencies, and to lesser extent gold (had case for anticipation buys), and don't like to go against the lines.

In this game always have to play defense first and so felt best to at least lighten up on longs in stocks and go long some currencies/gold, but not to risk much. Regardless, today's (Tues) action (big up in stocks, big down in currencies/precious metals) has look and feel of being possibly decisive day.

Have been focusing on longs in stocks past week and will continue to do so. Trends still down but momentum line patterns increasingly positive and stocks one market where long term trend is always up.

So am back to trading stocks, and now dollar as well, from long side, and virtually all other markets from short side - lets hope that now will finally get decent period of continuation of these moves.

Chick Goslin

Chick says it's ok to be wrong, just correct your mistakes when wrong. Today we were on the wrong side and today's action gave odds of continuation so now it's time to adjust for that.

SL's in many markets are on long term lows, but ML cycles are also strongly down, some the strongest I've seen ever. Rather than try to time these rallies which is quite difficult I'm going to trade with a longer term focus for these more reliable, more profitable price flows. As mentioned before I'm keeping all positions fairly light to use wider stops comfortably for these trades.

1 ES long at 1275.75
2 bonds short at 114.005
2 mini natural gas short at 10.072

Will probably add a couple cocoa shorts tonight.

 

[AshanD]

Someone privately messaged me a suggestion that I thought would make for a good discussion, so I have removed his name and will reply here.

Shorting natural gas with the 3-10 oscillator at such low levels below the zero line is extremely risky. the way to trade it is to have the 16sma line below zero, BUT wait until the 3-10 osc moves above zero; then you have a low risk trade. Linda Bradford Raschke did a seminar in the mid-1990s that demonstrated the CORRECT way to trade this oscillator.

I haven't read any of Linda Raschke's stuff in a while but if I recall, her timeframe tends to be shorter than the swing/position style me and Chick use. For our purposes there are 2 types of trades we go after, the standard "bread and butter" trades that typically return 50% or less of the margin of the contract. Then there are the rarer, longer timeframe trades that go over 100% of the margin, sometimes a lot more.

Right now with good signs of a solid bear market there are good opportunities for the longer timeframe trades. Especially in these trades the SL is given less weight IF the trend or ML is solidly down. Bear markets like these are scary for other traders so its tough for enough buyers to suddenly appear out of nowhere and cause a significant rally (a big one more than 2 days)

 

[TGM]

Quote from AshanD:

Someone privately messaged me a suggestion that I thought would make for a good discussion, so I have removed his name and will reply here.



I haven't read any of Linda Raschke's stuff in a while but if I recall, her timeframe tends to be shorter than the swing/position style me and Chick use. For our purposes there are 2 types of trades we go after, the standard "bread and butter" trades that typically return 50% or less of the margin of the contract. Then there are the rarer, longer timeframe trades that go over 100% of the margin, sometimes a lot more.

Right now with good signs of a solid bear market there are good opportunities for the longer timeframe trades. Especially in these trades the SL is given less weight IF the trend or ML is solidly down. Bear markets like these are scary for other traders so its tough for enough buyers to suddenly appear out of nowhere and cause a significant rally (a big one more than 2 days)

Linda does not know anything about Concurrent or Crosscurrent markets. Nor does she know anything about ML cycles/patterns. Linda is cool and all. But this is not an LBR thread.

And I assure you as someone who has traded successfully with with the 3-10-16 since 1995 ( As a private Trader and for trading desks). LBR don't know diddly about the 16 nor does she understand how to use it---she only cares about above or below zero and the 3/10. That is incomplete.

Granted, I like Linda. I learned a lot from her. But I did not learn the nuances of the 16 (ML) until I talked with Chick Goslin in the late 90's. When you understand Concurrent and Crosscurrent ML cycles. You will understand which first crosses/short skirts are going to work and which are going to fail. And which Antis to take and which Antis to avoid.

But it is statistically valid to say that the first cross above the zero line by the 3/10 with an ML below zero has about 67% chance of testing the previous swing low.

The first cross setting itself up in NatGas has an even higher percentage because it is concurrent to the downside. Of course, Ashan and other students have already made some money and are NOT waiting for a pullback like the rest of the planet. That is the magic and simplicity of the approach.

 

[AshanD]

Great to hear from you TGM! You were one of my earliest references to Chick's material

Couple letters sent out this evening by Chick

ML now on very solid up cycle in stock indexes. When this the case most of time can treat market as if it's in an up trend, even if the ten week ma is still down, so continue to see long side as right side to trade there. However, markets do not go straight up and as rule it does not pay to be/go long when both price and SL on recent extreme highs and trend down, even if ML is on solid up cycle. So on this basis would not be a buyer of stock indexes in this area, at this time, but would be buyer on next day and half to two day or so down move.

VIX has been giving some very good signals recently. Monday had Dow and S & P down sharply yet VIX was also down about .90. This was a very good next day up signal for stocks. Did not mention it since futures were down so much Monday night did not think it would work, but it did, and that signal usually does work for next day. Week ago Weds VIX dropped over three and half points and this was solid sign of significant bottom in stocks. Now today have Dow and S & P up moderately and VIX also up a little. This is a weak next day down signal.

So, with price and SL on recent extreme highs in all stock indexes, while trendd still down and VIX giving a slight next day down signal can make case to take profits on any longs and wait for next day or two dip to reposition. Doubt any dip will go far or last long due to very solid up cycle in ML (and numerous other signs of at least intermediate term bottom), so depending on time frame of trading no problem sticking with any longs and just adding on next dip, but in these days of extreme moves personally prefer to go to sidelines briefly and wait for next dip to buy again, and if have to buy back higher (if dip comes from higher level), so be it.

Have rarely seen as good example of how Platinum and Silver tend to lead Gold than action of past week or so. Nothing works all the time, but this "rule" tends to be quite reliable.

Anytime a market has a solidly cycling ML can make good case to position with ML on any one to two and half day counter move. This is also a very reliable rule. Currently have bunch of markets with very solidly cycling ML's (up in stocks and dollar, down in almost all commodities and close to going solidly down in all currencies and precious metals). In all of these situations if are just patient and pay attention and wait for one to two and half days of counter moves (counter the ML direction) "should" do very well for at least few days, but if position before that day or two counter move then run risk of having to ride out the inevitable brief, but possibly sharp, counter (ML) move.

Chick Goslin

Couple other things.

The Russell 2000 has been the leader of stock indexes on this up move. Today it lagged the others all day long. This is another small next day or two negative warning sign.

At moment with current line patterns as they are am just looking at short side of commodities, precious metals, energies and currencies, with one exception - cotton. There can now make case for some light against trend longs (trend still down but only slightly, ML now on solid up cycle and price/SL putting in big bullish divergence). In addition cotton has had every reason and chance to sell off sharply past week or two and has not, instead has held very well. Relative strength wise it is clearly the most positive (actually least negative) commodity on board. In this game always want to be buying the strongest and selling the weakest, whether in general or within a group of similar markets. This is just another variation of the "continuation" rule.

Another "rule": It's OK to trade against trend when have solid ML with you and maybe some other indicators (like situation now in stocks), but when trade against trend and get in "late" in a move (eg., going long stock indexes in this area), then as rule should try to get out "early," i.e., before lines turn or give any hint of turning. When trading with a strong trend no problem getting in late or at poor price since trend will tend to bail you out, but when going against a trend and get in late have to realize are instantly in vulnerable position. So rule is when going against trend and get in late, have to get out early (before any significant negative warning signs from lines).

Chick Goslin

Lot of things for me to digest today and consider for re-evaluation of my own trading, I may have been too aggresive to position with the MLs recently without waiting for rallies to offer better risk/reward shorting (on the other hand I am pretty light and willing to ride through some temporary upside)

Chick wrote that the fear/greed dynamic can actually be thought of as 2 fears: the fear of losing money, and the fear of missing out on profits. I may be leaning towards the latter lately with all these strong bear markets going on. Positioning light helps to reduces any rash decision making, but I still need to be careful about trying to chase profits too hard, maybe be willing to give some of them up in order to get in when the odds are better.

For now the ES contract has been exited, other commodities are being held onto.

 

[Patient Trader]

TGM -- I don't think you help your credibility by slamming Linda Bradford Raschke. She is, after all, one of the few "Market Wizards," and is widely recognized in the trading community as an excellent trader and teacher. She has been using the 3-10-16 oscillator throughout her 20-plus years of trading, and even today her chart setup includes this indicator. Her TAG seminar in Las Vegas in 1995 concentrated two full hours on five reliable 3-10-16 oscillator patterns. It is considered a classic presentation in technical analysis!

 

[TGM]

Quote from Patient Trader:

TGM -- I don't think you help your credibility by slamming Linda Bradford Raschke. She is, after all, one of the few "Market Wizards," and is widely recognized in the trading community as an excellent trader and teacher. She has been using the 3-10-16 oscillator throughout her 20-plus years of trading, and even today her chart setup includes this indicator. Her TAG seminar in Las Vegas in 1995 concentrated two full hours on five reliable 3-10-16 oscillator patterns. It is considered a classic presentation in technical analysis!

I am not slamming Linda. If I come across harsh---it is not intended. I know the presentation well. I still have it on tape. And it does present good 3-10-16 patterns. It is a good introduction......just incomplete IMO.

Linda will teach you how to read the tape in the stock market and do short skirts, and grails.....that's great.

And I might add ---this is a different approach with the 3-10-16. A completely different look at using the whole indicator. Also, this is Ashan's Journal based on Chick Goslin's approach in Trading Day by Day.

With all that being said, considering the fact that Ashan is up several hundred percent. Isn't it very arrogant to chime in and tell him he is doing something incorrectly? Especially, if you are referring to an entirely different approach. Before anyone comments, they should at least read the book and understand the actual approach.

Can anyone show me an LBR students thread were I can read how they made several hundred percent in their first year trading? Maybe they are out there?? One thing Ashan is doing is MAKING MONEY. Can't argue much with that.....and I don't care what approach you use.

Oh and as far as my credibility goes on ET, I could care less. Those that know me ---know me. And Market Wizards stopped impressing me quite some time ago. I traded for some that were in the first book and got over all that Market Wizard hooray. Everyone should get over the Market Wizard syndrome. Nothing secretive here. Just find an approach that works for you and if you are up several hundred percent .......you are on your way.

 

[steveg0429]

Quote from TGM:

Linda does not know anything about Concurrent or Crosscurrent markets. Nor does she know anything about ML cycles/patterns. Linda is cool and all. But this is not an LBR thread.

And I assure you as someone who has traded successfully with with the 3-10-16 since 1995 ( As a private Trader and for trading desks). LBR don't know diddly about the 16 nor does she understand how to use it---she only cares about above or below zero and the 3/10. That is incomplete.

Granted, I like Linda. I learned a lot from her. But I did not learn the nuances of the 16 (ML) until I talked with Chick Goslin in the late 90's. When you understand Concurrent and Crosscurrent ML cycles. You will understand which first crosses/short skirts are going to work and which are going to fail. And which Antis to take and which Antis to avoid.

But it is statistically valid to say that the first cross above the zero line by the 3/10 with an ML below zero has about 67% chance of testing the previous swing low.

The first cross setting itself up in NatGas has an even higher percentage because it is concurrent to the downside. Of course, Ashan and other students have already made some money and are NOT waiting for a pullback like the rest of the planet. That is the magic and simplicity of the approach.

Hey TGM:

Thanks for sharing your insights. There is always something new to learn. Personally have traded the SMR oscillator patterns going back to the mid-1970's, but like you really got a whole new take on things from Chick and the concurrent/crosscurrent market concepts.

Would also really like your further insights into which first crosses and anti's work as opposed to those that don't....even though these particular approaches are not part of this thread..I think it would still be useful to people having further insight into these concepts based upon your experience .

 

[AshanD]

Yes my gains have been exceptional using this method. Like Chick I don't really like talking in dollar/percentage terms, the market has a way of punishing this kind of talking But returns have been very good. Not because we have some complicated formulas or forecasting, we just try to pin down various price energy flows and trade with them, either ignoring the short term noise or waiting until it is beneficial for a trade on our side.

Midday (11:30 am) comments

Stocks down sharply at this moment (Dow down 200), but NDX showing some very positive relative strength (it's only down 12) and this is a good upside warning sign for market as whole. Safer to wait for another day before going back long (if sold out last night) or adding to longs (if held), but really doubt have much in significant downside risk in stocks with ML up so strongly and if this case price levels currently attractive for new longs. So if want to be aggressive see buying in this area as fine, but safer to wait until tomorrow (although if do that may be buying higher). I've been going with Russell 2000 and NDX for longs. This is high risk since still going against trend, but excellent potential if happens to be right and have decent signs "should" be.

ML in bonds on solid down cycle and now on big day and half rally to 115.00, this qualifies as good enough to start shorting.

No change on other markets with all but Cotton looking like shorts on rallies (although would not short Wheat and close to being able to go long for short term trade there).

Chick Goslin

I mentioned before that Chick considers more factors than me... a couple of these for the stock market are the VIX and the CBOE put/call ratios. I felt like I was factoring them in too much so I decided to drop them altogether. I'm still mixed about doing this, I don't want to place too much weight into these background indicators, but at the same time neglecting them is not smart either. I may continue to watch them as Chick has and jsut try to understand how they connect (or fail to connect) with the stock markets.

Russell has the most positive lines except the SL on long term highs. However trend is the weakest down and ML is the strongest up. Situation is still mixed right now so I am going lightly long 1 contract.

Will also add a single bond short today. This trade now has 3 contracts so no plans to add any more in order to keep my trades light.

I added 3 long cotton yesterday and it has had a small up day. I tend to get a one sided bias when many other markets are trending one way (especially when as steeply as they are now) so I would have looked at cotton and probably thought "poor market for shorts" and left it alone while I shorted some others in the group.

Chick notes that we always want to short the weakest and long the strongest commodities so cotton would have been a good long candidate, especially when on lows like it is now. Anticipating the trend actually shows it to be neutral, and the ML is dropping what looks like a "valley" of SL numbers so will definitely be turning up now. The last half of the ML downcycle did not continue negative pressure which Chick felt was a positive sign.

Now that I look at it, cotton does seem quite positive, just takes a little more speculation than usual for me (anticipating both trend and ML, though there is no reason not to because both have a good case) Also have to disregard what I thought about trading the general group direction, though the softs are probably the least interrelated group there is.

Interesting that the copper short started working yesterday and had a good down day today. I already exited that one however so didn't catch the down move. These markets often like to work on their own schedule, sometimes we can get them and sometimes not. It helps to be more flexible to account for this which is hard (how do I know if I'm being flexible, or if I'm being stuck on a trade that is deteriorating or building up energy against me?) Another thing that I think just comes with chart time and experience.

Euro and gold are both looking extremely negative in the short term lines now. I would have shorted both right now. Chick has reminded me that jumping into trades like that, which can be smart in an emerging concurrent mode, can also be risky and force one to ride through an sharp spike against the trade right from the start. It's happened to me several times throughout this journal. Better to not chase after everything and wait for great opportunities in these markets to present themselves.

 

[TGM]

Quote from steveg0429:

Hey TGM:

Thanks for sharing your insights. There is always something new to learn. Personally have traded the SMR oscillator patterns going back to the mid-1970's, but like you really got a whole new take on things from Chick and the concurrent/crosscurrent market concepts.

Would also really like your further insights into which first crosses and anti's work as opposed to those that don't....even though these particular approaches are not part of this thread..I think it would still be useful to people having further insight into these concepts based upon your experience .

I have found that the ML cycle and the 'velocity' of the current ML cycle determines which first cross or antis are going to work.

Let me elaborate. I was trading for a desk in Chicago and a handful of guys (myself included) would get this big spreadsheet from LBR. It would have all kinds of neat stuff on it.

Linda does not look at the cycle of the ML. Instead she comes to the same conclusions using several auxiliary tools (adx being one of them) and all the trick trades they give off (holy grails etc etc etc). That works for her.

So we would get these spreadsheets with all this info on it about these auxiliary tools and trick trades. But each spreadsheet line adds yet another question to be asked about each market. Asking a lot of questions makes trading difficult. So when talking to Chick, I noticed that by understanding ML cycle. I could eliminate all those other questions.

For instance, on this natural gas market. Just by looking at the ML cycle moving in big jumps. I know adx is going to show a trending market. And there are literally dozens of examples.

So by taking a step back, I was able to take a giant step forward. Just by understanding the 16 and how it cycles. And it was sitting in front of my face the whole time.

One of the challenges with trading is that it is stressful. Asking more questions = more stress.

I only need to answer 3 questions about any chart. Where is the LL? Where is the ML? And where is the SL?
And by asking the second question, I was able to eliminate literally 30 other questions.

In my opinion, if you have an ML cycle on your side ---the patterns tend to work. But understanding WHERE we are at in the current cycle is also important. Another factor is the velocity of the ML. I use a dotted ML. So I can easily see when it moves in big gaps. All this can be done with by just looking---no questions (tip for you Ashan--switch your ML to dots from the line and ask Chick to explain ML velocity---you will be able to see it visually when it is really moving).

For instance, if you look at the attached chart. The anti really worked when the market first went concurrent to the upside. The first cross worked when the market was still concurrent to the upside. When in a crosscurrent mode.......the pullbacks fall off. When the market is not concurrent ---you are rolling dice by not understanding the ML cycle. LBR gets around that by asking 30 other questions about her trick indicators/trade setups. I don't like asking dozens of questions. Especially when I only need to ask one question and get the answer.

One note, if you want to learn to read the tape on the stock market. Linda is your girl. That is one thing she did teach me. And another thing like Chick she will answer your questions and you can talk with her. Chick doesn't charge much for this. Linda charges a fair price to yap with her.

The price of admission to Le Chick in La Jolla is the price of buying his book. And you can call him and he does answer. That always floored me about Chick. No chat room etc...just pick up the phone and call him...lol