Alrighty then. Before I jump headlong into a detailed explanation, I want to remind everyone about the dangers of moving along the trading continuum (beginner, intermediate, expert) before the appropriate time. Fail to follow this advice, and you do so at your own peril. One simply must build a strong foundation developed from many hours of chart review before one can expect to profit at more advanced levels of trading. I continue to recommend thorough reviews of Journals One and Two, not out of ego, but rather, out of how the repetitious chart review builds the mind to 'see' and then anticipate what comes next.
Having said all that, the decision to move forward remains a matter of personal evaluation. Some traders move along quicker than others, while some need additional time to internalize the process. Absolutely no one should feel 'behind the curve' or pressure to move ahead. Each individual progresses at their own pace. Remember, the market cares not if you arrive prepared or if you don't.
O.K. then. Now that we have that out of the way, here we go.
MACD: When we look at the MACD we want to see divergence (the lines separating) in the direction of our trade. In the example of GROW, we entered short, and therefore, want to see the lines pointed downward and widening further apart. Sometimes, we want to see the lines cross (a few bars later MACD Histogram goes from red to green) creating a possible signal for entry or reversal.
Stochastics: Again we want to see the lines pointed in the direction of our trade along with divergence. Ideally, we want to see 'inter-twining' take place above the 80 line (for longs) and below the 20 line (for shorts). In Jack's 'High Noon' clarification, he discusses how 'inter-twining' Stochastics (14,1,3) lines provides a 'hold' signal (on a higher fractal).
Money Flow Index (MFI): The MFI isn't a part of the Hershey Methodology. I use it as a measure of 'extremism' in the marketplace. By that, I mean, MFI measures extreme movement, but not necessarily direction. High levels of MFI may indicate a 'top' has formed. A high MFI could also mean you have latched onto a rocket. In other words, you could win big or lose big. I do not recommend trading based off of MFI levels without a great deal of study.
Concerns mentioned: Keep in mind that I monitored the ES throughout the day, so I wasn't constantly checking the charts. As a result, I wasn't looking when price went against me. However, someone actively trading on the five minute fractal could have 'slalomed' back and forth from short to long and back again by following price (within channels), volume levels, as well as, MACD and Stochastics levels.
Second, one should never look at a Profit / Loss statement when trading. You should remain focused on execution. If you execute successfully, the dollars take care of themselves.
Anticipation vs. Prediction: Although the difference between anticipation and prediction seem slight, significant differences between the two words do exist. We do not 'predict' where price plans to head by the end of the day simply by looking at indicator levels in the early morning. We 'anticipate' price movement based on the input of data sets (price location within a channel, volume, MACD and Stochastics and most importantly - experience). By reviewing the charts every day, your mind begins to learn to recognize both price and volume patterns, as well as, sequences of indicator levels which often foretell price direction. These sequences occur on every timeframe - on every fractal. You already experience this when you look for 'Bruno R' set ups and monitor for 'Rockets' blasting off from the launch pad. What I describe is no different - I simply remove the directional bias.
If you still experience difficulty, take a step back (move to a higher fractal) and try to look at the 'big picture' in an attempt to slow down the decision-making process. With Qcharts, one can draw in the trendlines on a higher fractal and have them remain in place when moving to lower fractals.
Lastly, All indicators generate their levels based on the fractal monitored. I do not create indicators on higher (or lower) fractals for use elsewhere.
If you find yourself unable to determine direction based on the data input currently provided, no problem. Take a step back. Relax, and simply watch for a while. Remember the lessons you learn from the monitoring. One does not learn how to trade by reading books (or even Journals). One can learn the methods needed from the books (and Journals), but to learn to trade, requires experience. The necessary experience comes from reviewing the charts.
I hope you find the above information helpful.
- Spydertrader
. I got in at $24.24.