Question for Grob/Hershey...

[Stalker]

Achilles, you were touching the single most complicated question for me (and it´s not even of topic) - that is what are the characteristics of trends that do not retrace? What clues to look for that a trend will not retrace? How to handle sharp reversals without a second test off the high-low (the V-bottom yesterday morning was created cause of news so I´m not thinking off that one).

Some days there are fast paced moves without retracements and other days there are long, slowly drifting trends without retracements. I usually have a lot of ideas and try to test them and try to gather clues to different types of moves, but this question bugs me. What are the clues that there wont be a point three/retracement when a move starts and stochastics go to overbought/oversold?

 

[achilles28]

Quote from cnms2:

I noticed that many channels end without a second point 3. I also look for larger time frames' trends and channels.

Thanks for your help, cnms2. Any guidance in regards to this is genuinely appreciated.

I agree with referencing all relevant time frames to provide the appropriate 'bounding' or 'context' in which to trade.

I am currently using dailies to generate trades - referencing weeklies and monthlies to guage overriding areas of support/resistence.

"failure to traverse" is a huge warning sign - at time, more easily observed than others.

Im sure more questions will follow.

 

[cnms2]

Hopefully Jack or some of his better students will read your questions and offer more and better advice than I can provide.

Using the general frame of Jack's method, you may need to customize it a little in function of the market and time frame you're trading, because they have different trading characteristics. Some of them trend better than others. This thread is about ES day trading and you should apply Jack's method as is (as you understand it). If you want to swing or position trade ES or SPX you have to recognize that larger time frames don't trend as well as the intraday ones, and make some changes.

Quote from achilles28:

Thanks for your help, cnms2. Any guidance in regards to this is genuinely appreciated.

I agree with referencing all relevant time frames to provide the appropriate 'bounding' or 'context' in which to trade.

I am currently using dailies to generate trades - referencing weeklies and monthlies to gauge overriding areas of support/resistance.

"failure to traverse" is a huge warning sign - at time, more easily observed than others.

Im sure more questions will follow.

 

[achilles28]

Quote from Stalker:

Achilles, you were touching the single most complicated question for me (and it´s not even of topic) - that is what are the characteristics of trends that do not retrace? What clues to look for that a trend will not retrace?

I know. I seem to be having a lot of difficulty with the finer details.

Like, for instance, is it ok if the trendline drawn from point 1 to point 3 is violated by the high or low of bar#2 (with point #1 being drawn from bar#1)?

I'm unsure? Judging by a few trends, I would think so - with most trends, a point 1-3 trendline predicts the following bounce points extremely well even if bar#2 violates the line between 1 and 3.

Quote from Stalker:

What are the clues that there wont be a point three/retracement when a move starts and stochastics go to overbought/oversold?

Good points. Im also unsure. Im playing with the idea support/resistence of current and higher time frames are decent indicators as to when a 'no look back' trend will start. But as of right now, i dont have enough experience to speculate any further.

 

[achilles28]

cnms2,

Thanks for your help again. I trade currencies; which seem to exhibit an uncanny line-up of support points if the trendline is drawn correctly.

Problem is, even the drawing the easiest 1-2-3 setup can be confused by a period of congestion or chop following. Finding the right point one after that is challenging.

 

[txuk]

Quote from achilles28: I trade currencies; which seem to exhibit an uncanny line-up of support points if the trendline is drawn correctly.

Problem is, even the drawing the easiest 1-2-3 setup can be confused by a period of congestion or chop following. Finding the right point one after that is challenging.

Achilles, glad to hear you are exploring Jack's work. My first thought when I saw your posts was about volume, which is integral to so much of what he teaches. Is it possible to get accurate volume data for forex? I don't know a lot about forex, but my understanding is there is no central exchange, so its hard for me to imagine where meaningful volume data would come from?

Jack has commented briefly about forex in the past and mentions the cycle length, so if you intend to use the MACD & Stoch indicators then you might have to look at tuning them from the standard values he gives us.
http://www.elitetrader.com/vb/showthread.php?postid=911255#post911255

Regarding your comment about chop, I annontate this as a lateral channel bound by the relative hi & lo. I annotate every traverse between the opposing sides, as eventually one of them will BO or FTT, and then you know where the pt1 is.

Hope this helps.

 

[achilles28]

Quote from Stalker:

What are the clues that there wont be a point three/retracement when a move starts and stochastics go to overbought/oversold?

Hi again.

I can't give you a definitive answer to your question.

But what i've noticed tonight - after 6 hours of pouring over my charts - fast trends lacking sufficient pullbacks for a point # 3 usually exhibit the following:

1) long, successive bull or bear candles

2) this first stage movements range is 'extreme' in distance compared to movements manifesting a point#3

3) little/no wicks on the opposite side of the trend for extreme movements - ie on a bull trend, no low wicks. Bear trend, no high wicks. Contrasted with usually medium to large opposing trend wicks that penetrate the bodies of preceding candles at the first movement stage of point #3 manifesting moves.


Suggestions:

1) when faced with an extreme first stage movement, draw the trend using the first two bars. Usually, the temporary right hand trendline will be sufficient to capture the move at a low or high depending on trend.

or

2) buy on the close or open of a bar in a trend exhibiting 'extreme' price movement. With little or no opposing trend wicks, buying on the close or open (same thing) might work well without having to employ a generous stop.


Just my suggestions so far. Be interested in yours.

 

[achilles28]

txuk,

Thanks for the timely help.

Grob seems to dislike trading forex with his 1-2-3 method based on comments from his post you referenced.

Volume data is unfortunately unavailable for forex due to reasons you cited - no central exchange.

Stoies and MACD is something ill have to take a look at. haven't made it through this 300 page behemoth thread yet!

Thanks for the annotated chop instructions. Makes sense. Will get back to you guys tomorrow with more questions.

 

[Stalker]

achilles - i suggest you read the "channels compiled" document that is attached somewhere in this thread, it´s really good.
I look at the first move as a traverse of a channel that doesn´t exist until there is a retrace. This works most of the time, but then we have the moves with no retrace...
If there is a spike or two that violates the trendline I don´t care as long as it describes the slope of the trend good.

 

[Stalker]

"Just my suggestions so far. Be interested in yours."

My approach so far is that I don´t trade if there is no retracement. This is not satisfying of course, but until I know exactly what I want to see I just don´t know how to enter the trends that doesn´t look back.

To spare you some time - I suggest you read the first thread, this is a continuation of a thread that started in august and that has the same name. There are more posts by Jack there and it´s far better when you´re focusing on drawing the channels. There are tons of charts there by Easyrider and Mak that you can use as reference.

This is another thing I think is important -

By Jack:
"A trader/investor has to have four sets of capabilities; these may not occur to a learner for quite a while. When they do it may not be possible to recongise and compare and contrast their inherent considerations. Why? Again it is because there is not comparable prior set of experiences, knowledge and skills in the picture. Short cuts are very appealing under these circumstances.

These are the four tasks the trader/investor repeatedly performs:

a. Gathering Data.
b. Doing analysis
c. Making decisions
d. Taking actions

They are different, do not really overlap in mental processes and they have to be performed at a faster pace than that which the market operates. No small task."


I believe that all successful traders go through these four steps every time they take a trade. Most of them are probably not aware of it and it has taken them several years to get to the point where it´s done effortlessly. I believe it can speed up the learning process to be aware of it.

It may sound simple, but at least I have to struggle every day to separate the four steps and be consious of them. But focusing on it makes you more rational and you discover more easily how and when you try to fool yourself and how your mind play tricks on you.