Spydertrader's Jack Hershey Equities Journal II

[cnms2]

Thanks Spydertrader. Your contributions are invaluable to so many people.

I just browsed the "Why oh why can't I stick to my plan ?" thread, and noticed the anti-Hershey posts. Their passion could be explained only through the amount of frustration those traders accumulated with their trading results, and the lack of patience and open minds to try something new.

As you offered to extend the discussion about your method, I'd like to know your opinion about using several fractals during trading.

Trying to capitalize on the natural cycle, that includes a 6-8 day period of explosive price rise (of which you recommend to use only 4 days), I monitor a daily or 195 minute (half day) chart spanning over 1 to 3 months.

I'm also looking to trade in the direction of the next higher fractal, a 1 or 2 year weekly chart.

For entries I'm dropping to the 5 minute fractal (over 2-5 days) and looking for a 3 point definition of a channel in the direction I intend to trade (I use it both to enter long and short).

Once I'm in, I pull back from that level of detail and look mostly at the 30 minute (over 5-10 days), or the daily or the 195 minute (1 month) fractals. I'm strongly attracted back by the 5 minute fractal, but I'm trying not to make exit decisions based on it as it is too noisy.

I wonder how you deal with multiple fractals, and in case you had the patience to go through my contorted explanation, maybe you could criticize it.

Thanks again.

Quote from Spydertrader:

Correct. Bruno R refers to stocks which have had their stochastics fall below the 20 level (or in that range) on the Stochastics. With respect to 'High Noon,' I should have made the clarification that Jack provided in his posts in the other treads. He recommended using Stochastics (5,2,3) for entry and Stochastics (14,1,3) for 'hold' or exits. However, the posts to which the clarifications occur, come from the same discussion. I simply linked to the wrong location. I apologize for any confusion. Here is the Clarification provided by Jack.

- Spydertrader

 

[Spydertrader]

Quote from cnms2:

As you offered to extend the discussion about your method, I'd like to know your opinion about using several fractals during trading.

Thank you for your kind words. I remain honored so many have found the two journals helpful.

While admittedly, you seem to undertake additional work for your trend analysis, I do not think our methods differ by all that much. Although I find the 5 minute fractal far too noisy for my tastes, if you feel a particular method or fractal best suites your style of trading, then I see no reason to alter the approach.

Attached, please find a daily chart for TRLG. I used this chart so you can see how far out in time I draw my channels (orange lines). I draw similar lines in Qcharts using 30 minute fractals, but start a week (sometimes longer) back in time, as well as, add lines for 1 or 2 days prior to the trading day.

In my opinion, following the Hershey Methodology causes me to trade on a daily time frame, using the 30 minute fractal for entry and exit. As a result, much of my nightly analysis occurs while reviewing daily charts. Because of my focus on the daily charts, I find myself anticipating an entry the night before. This "Tomorrow's Newspaper, Today" mentality has me waiting on the 30 minute charts for confirmation of my decision. The TRLG chart below provides a good example.

As you can see from the TRLG chart, MACD (red circle) and both settings for The Stochastic Indicator appear to heading in the right direction. We already see some slight continuation from what once was (2 days earlier) a 'Bruno' R set-up (orange arrow). In addition, price appears to have broken out from the upper trendline on the down channel (purple arrow). As a result, I anticipate continued price improvement from this point. As such, I would look to enter on a 30 minute fractal when I see the normal entry criteria (increased volume and price).

By making most of the decisions the night before, I spend my day awaiting confirmation for entry, rather than, looking for signals. Some may consider the difference semantic in nature, but this slight alteration in mindset, permits me to 'see' the indicators develop (in the mind's eye) as they would 'look' visually at EOD. In other words, I anticipate the changes in realtime before I reach EOD.

Jack has often recommended looking at trading his methods from a "Go / No Go" perspective, and for the beginning trader, I agree with this advice. However, in order to capture those (often) large initial first candle moves, we need to train ourselves to think one or two candles ahead. To this end, the addition of trendlines, even on multiple time frames, becomes invaluable.

Again, I must add a note of caution here. My observations and opinions come from countless hours in front of a screen watching price and volume changes in real time. I cannot underestimate the value of experience with respect to reading "Tomorrow's Newspaper, Today" or anticipating the next move with price and volume. Monday, TRLG could very well head south. If (or when) the market tells me I incorrectly anticipated the trend direction, I simply don't enter, or if I already have a position, I quickly exit.

According to the "High Noon" Clarification, we should see The Stochastic (5,2,3) for TRLG head above the 80 level followed closely by (if not a day or two later) The Stochastic (14,1,3). We would then see a 'pullback' in the Stochastics (5,2,3) followed by an 'intertwining' if The Stochastic (14,1,3). Once the Stochastic (14,1,3) drops below the 80 level, we would then look to exit. Assuming the above events come to fruition, we would then find ourselves riding another "Hershey Rocket."

For the convenience of those who prefer to post smaller charts, I have added another posting chartscript. Hershey Posting Chartscript 2.0 simply provides a simple chart containing both settings for The Stochastic Indicator as well as MACD Histogram. Altering one's account settings after logging into Wealth-Lab.com web site, provides a good chart on which to perform The Stochastic Analysis.

I hope you found the above information helpful.

- Spydertrader

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1047867>

 

[cnms2]

Thanks. Great lesson!

TRLG's one week old upswing happened on diminishing volume. I wonder if it was a retracement, and if the downwards move will resume. It seems there's also a resistance zone about $18.7.

There's another active thread on which Jack talks about drawing channels: trend lines [part 1]

 

[Spydertrader]

Quote from cnms2:

TRLG's one week old upswing happened on diminishing volume. I wonder if it was a retracement, and if the downwards move will resume. It seems there's also a resistance zone about $18.7.

For the exact reasons you state above, I have avoided entering into a position position. I have spent the last week watching and attempting to learn.

- Spydertrader

 

[virgintrader]

Quote from Spydertrader:

One trader posted his Wealth-lab code for entering trade based on two different Scores. You might find his results interesting.

I hope the above helped.

- Spydertrader

Thanks Spydertrader! Do you happen to know this traders' alias? I browsed the Chartscripts at Wealth-lab and couldn't find one that had this functionality.

Again, thanks in advance.

P.S. FORD appears to be a good candidate (score 7, 3x ave volume, MSCD x'ssed "0")...your thoughts?

 

[Spydertrader]

Quote from virgintrader:

Thanks Spydertrader! Do you happen to know this traders' alias? I browsed the Chartscripts at Wealth-lab and couldn't find one that had this functionality.

The trader who shared his Wealth-Lab Chartscripts using score for entry went by the name of Odelys. He posted his code within Journal One. I do not believe Odelys ever posted his chartscripts on the Wealth-Lab.com web site.

Quote from virgintrader:

P.S. FORD appears to be a good candidate (score 7, 3x ave volume, MSCD x'ssed "0")...your thoughts?

FORD appears to have all the necessary requirements in place to continue its strong move upward. However, we often see a small pullback for a day with stocks that move 10% or more in the first day as FORD did.

I strongly encourage you to review all posts (background material and attached documents) in Journals One and Two. Many individuals contributed insight which you will no doubt find helpful.

- Spydertrader

 

[Spydertrader]

Current Final Universe

ARD ASPV ATHR BBC BNT BTUI CKCM CNTF COGO CTHR DXPE ENER ENG FMCN FMD FORD FTEK GMXR GROW HANS IIJI ISE IVAC LMS MEK MIND MTEX NCTY NDAQ NGAS NGS NTRI NWRE PWEI REDF SFCC SIMO SIRF SMSI TASR TIE TRLG TWGP TXCO VPHM

Unranked

ENER FMCN IIJI NDAQ SIMO SMSI TXCO VPHM

- Spydertrader

 

[nrTC]

In this post, I have included links to data that I put together on paper-trades and real trades that I made between the beginning of January to the end of March 2006, using the trading method described by Spydertrader in his "Methodology" post: link

I created the attached form, "Today's Stock Trades", as an initial way to track my learning progress, and I also used the form as a checklist to ensure that all of the 'trading methods' entry requirements for a stock had been met before I placed a buy order for it.

I got the idea for my form after seeing a form that Jack had previously posted on the "Hershey's Equity thread",
page 40, post #1. link

I followed the trading method as best as I could while learning more about it. One exception is that I exited every trade the same day that I entered it, and the exit was always made by either a market-stop-loss order set at the prior days closing price or by a Market-On-Close order for stocks that did not trigger the market-stop-loss order. For paper trades, I used the End Of Day price to approximate the Market-On-Close price that I would have received if the trade had been a real trade. I used this exit system because my work schedule at that time prevented me from monitoring a stocks price and volume progress during the day. All of trades were entered before 11:30am ET, most before 11:00am ET. I currently live in the PT zone, so I was able to place all trades before 8:30am PT and then completely remove myself from the actions of the market for the rest of its trading day.

Before the start of each trading day, I had a list of between 20 to 30 stocks with DUVolume Alerts set in my trading platform.
After the end of each trading day in January and February, I removed from my DUVolume Alert list any DU stock that went up more than 5% in price that day; I did not include it in my next mornings list of stocks set with DUVolume Alerts. I would wait however many days it took for that stock to reach DUVolume again before I would place it back in my DUVolume Alert list.
On March 10th, I increased the cut-off amount from 5% to between 10% and 12% depending on the stocks volume, price action, and overall trend pattern. This increased my overall gains. The DUVolume amount that I used for each stock was very close to the LowerBand DUVolume that is listed on Wealth-Lab. My Final Universe of stocks included stocks that had recently lost rank, some of which later regained rank.

In my next post, I have attached an excel file, "Today's Stock Trades - Results", that shows the gain/loss amount in points for every trade that I made, paper and real trades, during the 3 months of January, February, and March, 2006.
TC

 

[nrTC]

Here is the link to the attached excel file, "Today's Stock Trades - Results", that I mentioned in my prior post.
This file shows the gain/loss amount in points for every trade that I made, paper and real trades,
during the 3 months of January, February, and March, 2006.
TC

 

[cnms2]

Probably showing the % gain instead of the $ gain would be more informative. A gain of $1.49 indicates a different performance for a $15 stock compared to a $45 stock.

Quote from nrTC:

Here is the link to the attached excel file, "Today's Stock Trades - Results", that I mentioned in my prior post.
This file shows the gain/loss amount in points for every trade that I made, paper and real trades,
during the 3 months of January, February, and March, 2006.
TC