Quote from Ross:
Clym,
Allow me to propose a modifiction to your channeling. Once your daily appears to signal an entry (or exit) draw your channels based on a 30 min chart instead. You will often get a max top channel as well as an intermediate one. None the less I suspect you will find that your higher profit scenerios will infact play out as close to suggested exits on the 30 instead of the Daily.
Ross
After reading your post, I took a look at several 30 minute charts and compared the shorter term intraday channels with daily chart channels
It seems like a common scenario would be to desire a breakout above a narrow intraday channel but with room to run before hitting the top of the larger flat or upward sloping daily channel. I was wondering if that is what you typically look for?
After reviewing my own trades, by far the most important change I could make to become profitable, was to use channels.
Behind the use of channels to improve results was the possible elimination of the FRV rule.
After reviewing my trades and going over the different scenarios, I am finding that what intuitively felt wrong is playing out the way I would expect.
Specifically, use of the 1st day FRV rule appears to be less profitable than eliminating it. (In my LIMITED experience of trying to trade this method for a few months.) But take a look at the attachments I posted a few pages back if you are wondering where I am getting this idea.
First, here is why I say intuitively it does not feel right.
Stock goes up on strong volume = bullish
Stock falls back a little on low volume = BULLISH (normal healthy pullback)
(vs. stock falls back on increasing volume = bearish which would support the FRV rule incorrectly if price remained positive for the day IMO)
So we see this all the time. A stock in dry up opens strong of good volume, then falls back a bit on low volume. To me, this is normal. This is more typical of a stock that is going to have a 20 percent run in 3-8 days. It will rarely just go straight up nonstop with no price or VOLUME pullbacks. This bullish pullback on low volume causes the FRV rule to go into effect. (strong volume as stock goes up, low as it pulls back or just sits there). However we are really after 3-8 day 20% moves here (where we capture approx half of that move). Since we are all also looking at 30 minute charts why are we not recognizing and holding instead of selling stocks that PULL BACK on LOWER VOLUME.
(There is a nice paper posted here on the stop offset method. To me it makes more sense to discard the FRV rule and either use a blanket stop loss or something like the stop offset that actually considers the individuality of the stock. )
Search Grob109 on ET and you will find the following post on the first page in response to the time frame he trades.
âHow many stocks at most will you trade in your portfolio for:
daytrading: N/A
swing trading: N/A
Position trading: 6 capital streams, 2 stocks per stream, limit 100K shares/stock, price range 10 to 50 dollars/share. Hold is for 1/2 natural cycle., cycle is 12 to 16 days. Long only.
Thanks.â
I think that anyone who reads the original journal and finally makes it to spydertraders amazing trade log, is surprised at all the day trades and 1-2 day trades for a method that seems to focus on stocks with a history of 4-8 day moves (yet Jack himself is talking about 12-16 day cycles)
Keep in mind that I am no authority. I opened a $2200 account to experiment with 60 days ago and now have an account balance of 2201.
After evaluating my poor trades, I am ready to question a few rules before I continue. I hope that no one takes offense; I am only hoping to become profitable.
So far I plan on.
Immediately using Channels to eliminate stocks at the TOP of daily channels. (ideally 5-10 daily bars)
For downward sloping channels, I have to see a break out above top channel at time of signal.
I am currently not going to use the FRV rule, but will follow closely the FRV scenario VS. my actual.
Take Rossâs suggestion to monitor 30 intraday charts. Ideally, I think I am looking for breakouts above narrow (small percent moves) intraday channels that are 4-5% below the upper longer term daily channels. (realizing that sometimes no legitimate channel is available).
Clym
(the one dollar man)
