Quote from Spydertrader:
If you read through Jack's "Too Long" attached post, he describes situations where volume leads price. Jack posted his document in an effort to get traders following his methods to improve their rate of return. Instead of only buying when a stock entered into Dry Up Mode (followed by price and volume breakout), Jack advised using multiple streams of money to latch onto equities with an increased money velocity...
Just a quick comment since I am trying to do your equivalent with futures spyder so that between the both of us we have most if not all bases covered...
There is some overlap between equities and futures especially aspects that is well understood in this thread ala DU & FRV1/2/3 etc... In other words the V components of PV. What makes equities trading different is that ENTER/HOLD/EXIT is the name of the game as opposed to the futures HOLD/REVERSE (via a double down).
The velocities mentioned in the "Too Long" post is with regards to a slight shift ENTER/HOLD/EXIT to ENTER/HOLD/SWAP (arguably SWAP/HOLD/SWAP). This is the racetrack issue I mentioned way way back some time ago. We have our quality universe set which ALL make money. If you had to pick 6 to invest in, you just pick the top 6 (ie. the ones that are CONTINUING to have the greatest change in price per unit of time). The doubling shift is a means of always having your capital in the top 6 performing assets. The quality universe always performs. I remember a year or so ago when HANS cropped up onto our hotlist... LOL!!! Now the CNBC guys say should have would have could have, why didn't they???
NET NET, the velocity aspect is a "now that I have multiple streams of capital deployed continually", how do I manage it? It is done by deploying/opting for the top 6 performing assets. The result of doing it is that you find that the entrance is later than usual and your exit is earlier than usual. However, what's realized is that your swap execution (ie. early exit of an asset into a late arriving entrance into an asset) actually made more money in the time span between usual entrance and usual exit.
A small illustrative description. A car goes from 0-60 then back to 0. Going zero to 60 in my high end xuv takes about 5.8 seconds. Braking from 60 to 0 takes about 2.5 seconds. In all that's about 8.3 seconds. The distance covered by a car going 60 mph for 8.3 seconds is greater than the distance I cover going from 0 to 60 then back to 0. Distance is precisely the same as price distance. Time is a traders most precious component since it cannot be recaptured. When measuring things with respect to time, it is easy to see that the objective should be to capture the greatest amount of distance per unit of time.
Using the above example... It is easy to rank the 3 following scenarios in order of greatest distance covered in an 8.3 seconds...
1. Car goes from 0 to 60 and than back to 60.
2. 2 Cars, one car going from 30 to 60 to 30 in 4.15 seconds, and a second car going from 30 to 60 to 30 in the latter 4.15 seconds.
3. Car maintains a speed of 60 mph for the whole 8.3 seconds...
All of the above covered a distance. Two scenarios employed the use of a single vehicle, one scenario employed the use of 2 vehicles. This is a tool that is not available in futures. In equities you have multiple vehicles to choose from. Since this available, why not choose the fastest moving vehicles. So, Scenario 3 unquestionably covers the greatest distance. Scenario 2 covers less distance than scenario 3 but more distance than scenario 1 assuming you swap into the second vehicle as it's velocity surpasses the first vehicle. You do scenario 2 when there is no scenario 3. It is a swap for xover into increasing velocity vehicles since maximizing price distance per unit of time just makes more money...
Kind Regards ALL,
MAK!
