Spydertrader's Jack Hershey Equities Trading Journal III
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Nope. You need to 'fan' your channels. See attached. In addition, you left out a Pennant (light blue) Break Out - which created the B2B Gaussian.
FTT's form Point One's or Point Three's. Jack has always viewed FTT's as always forming Point One's.
Price moves Higher on Increasing Black Volume when in an up channel. Price moves Lower on increasing Volume when one finds themselves in a down channel. Both these represent Dominant Volume. When sentiment changes from Dominant to Non-dominant across two bars, we have no difficulty distinguishing between the two. In an up channel we 'see' the move from Dominant to non-dominant as decreasing red Volume moves Price back to the RTL. However, in the case of a gap, we have an Intra-Bar Gaussian Shift. If you want to 'know' how Sentiment effects these bars, drop down to a lower time-frame from daily. The same holds true in futures. Viewing the 2 minute YM Chart often provides clarity when trading the 5 minute ES.
- Spydertrader
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1699270>
I 'fan' my channels while 'recycling' the Point Three. Others re-use their Original Point One. See attached.
- Spydertrader
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1699274>
Since the indicators used represent some derivative of Price, we can agree that they lag (somewhat) the price Action itself. As such, any 'gap' in Price becomes 'baked into the cake' (so to speak) for a period of time - often affecting the indicator in question. As I posted above, if you think in terms of how Price gaps in a certain direction (meaning how did Price arrive to its initial location at the 'gap' open), you can easily 'see' the shift in sentiment which takes place as a stock gaps down (or up) and then retraces from Non-Dominant Volume coming into the Market. On occasion, the Non-Dominant Volume switches to Dominant within the Daily Bar (similarly seen in Futures within a Five minute Bar. By knowing how far Price has traveled since its last 'low' (or trough), in percentage terms, one can know the difference between "Time To Sell" and "Time To Hold."
Try keeping on eye on how far Price has moved (including the gap) - not from your entry - but from the previous Price Trough. Also (as you mentioned), when Price hits the LTL - irrespective of distance traveled - many people call it a day - looking to sell and move their money to another trading vehicle.
Any Market - Any Time Frame - Provided Sufficient Liquidity Exists. Does the stock to which you refer have sufficient liquidity on the 5 minute fractal? If so, the PV Relationship, and their visual representations (Gaussians and Channels) operate just fine. If Sufficient Liquidity does not exist on the fractal monitored, then either 1. choose another fractal, or 2. Choose another stock. Keep in mind everyone who trades the ES Futures side of this methodology uses a 5 minute chart - proving, with enough liquidity, the thing works as designed.
During the 'lunch time' period, the market undergoes a 'Pace Change' with respect to Volume Levels. One must take this Change in Pace into account when making decisions. I advise Beginner Level Futures traders to avoid trading during these Low Volume Periods until developing the sufficient expertise required. The same advice applies to equities traders as well.
As described in previous paragraphs, when one 'sees' a gap, one must include in one's analysis several factors in order to provide the 'context' required to correctly evaluate the situation. Does Price appear to be unfolding in a manner which represents a 'gap and run' (Price gapping and rocketing in the same direction), or does Price appear to have indications of trying to show a 'Gap and Fill' outcome. Obviously, these two different contexts have two entirely different outcomes, and as a result, require two different courses of action. You appear to be looking for a 'one size fits all' solution when no such paradigm exists. With respect to your determining to hold as Price exited the RTL, only you can determine if your decision resulted from cold calculated analysis, or out of rationalization masquerading as analysis. Monitor these gap situations in the future, and then determine had the same action occurred in a different context, how happy would you be with the outcome.
As I have often recommended in the Futures thread, everyone needs to draw their own 'lines in the sand,' and then, have the discipline to take action when the current context (a line is crossed) calls for that action to be taken. Its the ability to perform the self analysis required (during the debriefing period) which allows one's critical thinking skills to develop. These skills a trader needs first at the end of the day, and ultimately, in real time as one Monitors, Analyzes, Decides and Acts throughout the trading day.
I hope you find the above information useful.
- Spydertrader
Once again, many thanks for your well thought out responses, Spyder, and sorry for another lengthy post.
Thanks, this correction of my bad assumption clears up a couple of my problems and simplifies my channel drawing.
Did you point out the missed Pennant formation to help clarify the volume Gaussians? I have not spent a great deal of time studying flaws and other formations. I know you are discussing them in the futures journal right now and Iâm slowly working my way through that journal, but I prefer not to jump ahead and potentially create more questions than answers. What I do know is that flaws are generally some form of consolidation or drift before the market makes up its mind as to direction. Therefore, these formations can slide sideways out of a channel without technically Breaking Out of the channel (which is accompanied by the B2B or R2R). Is this correct? Is there something more I should be picking up from you pointing out the Pennant?
Iâve always kept my original point 1s, just âfanningâ with my new pt. 3 â thatâs always made the most logical sense to me. I would be interested in hearing why you prefer to move your pt. 1 forward when you draw a TL based on a new shallower pt.3.
Iâm beginning to see the full appropriateness of the name you chose to use in your wealthlab profile ⦠Master Yoda, indeed
. I feel like Iâm still missing an âaha!â moment with respect to your advice here, but let me try to put in words how Iâm interpreting your answer to see if I can gain some more clarity.
When you discuss thinking in terms of âhow did Price arrive to its initial location at the âgapâ openâ, my best interpretation of the point you are trying to make is: if I see where the stockâs gap open is in the context of the IT channel, I will then be able to âseeâ the change in sentiment for what it truly is â non-dominant volume carrying out a retrace of the IT channel. Perhaps put another way, the gap can be looked at as simply speeding up the natural movement of price in a dominant traverse of the IT channel. If price has moved far enough towards the LTL of the channel, it is a natural part of the cycle for non-dominate volume to come in and retrace price to some extent across the channel. Therefore (unless price has reached a point already decided to be a profit taking area), according to PV analysis, we would continue to hold through such a retrace (confirmed by red volume peaks decreasing), but, if and when, red volume peaks started to increase during the day we would interpret that as a switch from a retrace to a dominant traverse of a new IT channel and exit the position.
Iâm assuming here you are pointing out that if price has already moved at or near 20% from the low of the candlestick beginning this trend, then we should recognize this as weighing in favor of selling the position.
In regard to this statement, I was wondering more about volume pace change (slowing) throughout the morning as we approach lunch and itâs effects on peak volume levels in gaussian analysis and figuring out (as discussed above) if itâs just retrace volume or a switch to Dominant volume. Specifically, as the red arrow is showing, each new red volume peak is lower than the previous one (i.e. what we expect from a non-dominant retrace). However, I was worried these lower volume peaks could just as easily be attributed to slowing volume pace in general as we approached lunch. In trying to answer my own question, Iâm assuming the volume levels required to create a new dominant traverse are going to be pretty noticeable.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1699678>
Sorry I wasnât clearer here. I was only interested in analysis of the âGap and Fillâ situation. My analysis of a âGap and Runâ on increased volume would be trend continuation and hold (barring other considerations such as % stock has already moved from last low).
I agree with what youâre saying. I think, once again, I probably poorly worded what I was trying to convey. I was looking more for confirmation that I was using sound objective analysis or if someone else had objective analysis that might shine further light on the situation. After all, you only see what you have the knowledge to recognize. In fact, your answer regarding the shift in sentiment with non-dominant volume causing a retrace confirmed to me that that part of my analysis was sound, and you are certainly shining a light on some areas I lacked knowledge to better interpret the situation.
Thanks again,
-A
Thanks, this correction of my bad assumption clears up a couple of my problems and simplifies my channel drawing.
Did you point out the missed Pennant formation to help clarify the volume Gaussians? I have not spent a great deal of time studying flaws and other formations. I know you are discussing them in the futures journal right now and Iâm slowly working my way through that journal, but I prefer not to jump ahead and potentially create more questions than answers. What I do know is that flaws are generally some form of consolidation or drift before the market makes up its mind as to direction. Therefore, these formations can slide sideways out of a channel without technically Breaking Out of the channel (which is accompanied by the B2B or R2R). Is this correct? Is there something more I should be picking up from you pointing out the Pennant?
Iâve always kept my original point 1s, just âfanningâ with my new pt. 3 â thatâs always made the most logical sense to me. I would be interested in hearing why you prefer to move your pt. 1 forward when you draw a TL based on a new shallower pt.3.
Iâm beginning to see the full appropriateness of the name you chose to use in your wealthlab profile ⦠Master Yoda, indeed
. I feel like Iâm still missing an âaha!â moment with respect to your advice here, but let me try to put in words how Iâm interpreting your answer to see if I can gain some more clarity.When you discuss thinking in terms of âhow did Price arrive to its initial location at the âgapâ openâ, my best interpretation of the point you are trying to make is: if I see where the stockâs gap open is in the context of the IT channel, I will then be able to âseeâ the change in sentiment for what it truly is â non-dominant volume carrying out a retrace of the IT channel. Perhaps put another way, the gap can be looked at as simply speeding up the natural movement of price in a dominant traverse of the IT channel. If price has moved far enough towards the LTL of the channel, it is a natural part of the cycle for non-dominate volume to come in and retrace price to some extent across the channel. Therefore (unless price has reached a point already decided to be a profit taking area), according to PV analysis, we would continue to hold through such a retrace (confirmed by red volume peaks decreasing), but, if and when, red volume peaks started to increase during the day we would interpret that as a switch from a retrace to a dominant traverse of a new IT channel and exit the position.
Iâm assuming here you are pointing out that if price has already moved at or near 20% from the low of the candlestick beginning this trend, then we should recognize this as weighing in favor of selling the position.
In regard to this statement, I was wondering more about volume pace change (slowing) throughout the morning as we approach lunch and itâs effects on peak volume levels in gaussian analysis and figuring out (as discussed above) if itâs just retrace volume or a switch to Dominant volume. Specifically, as the red arrow is showing, each new red volume peak is lower than the previous one (i.e. what we expect from a non-dominant retrace). However, I was worried these lower volume peaks could just as easily be attributed to slowing volume pace in general as we approached lunch. In trying to answer my own question, Iâm assuming the volume levels required to create a new dominant traverse are going to be pretty noticeable.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1699678>
Sorry I wasnât clearer here. I was only interested in analysis of the âGap and Fillâ situation. My analysis of a âGap and Runâ on increased volume would be trend continuation and hold (barring other considerations such as % stock has already moved from last low).
I agree with what youâre saying. I think, once again, I probably poorly worded what I was trying to convey. I was looking more for confirmation that I was using sound objective analysis or if someone else had objective analysis that might shine further light on the situation. After all, you only see what you have the knowledge to recognize. In fact, your answer regarding the shift in sentiment with non-dominant volume causing a retrace confirmed to me that that part of my analysis was sound, and you are certainly shining a light on some areas I lacked knowledge to better interpret the situation.
Thanks again,
-A
In looking at the chartscript on ASIA, Friday's high should have made for a 20% percent up move over 4 days (started just under $10. and made it close to $12.50). I'm not sure why the chartscript didn't recognize it. Am I missing something?
This would have made for the fifth such move within 6 months thereby allowing it to maintain rank. I'm keeping it in my final universe.
This would have made for the fifth such move within 6 months thereby allowing it to maintain rank. I'm keeping it in my final universe.
The chartscript waits to draw the 20% lines (thin blue) until Price pulls back off the recent high. As a result, the actual run in Price isn't set until the day after the Price run.
- Spydertrader
I pointed out the missed Pennant to show why Volume moved into a B2B cycle at that exact point in time.
You'll cross the important information with regard to formations when you reach September's posts in the Futures Journal.
Also covered in the Futures Journal.
This is only part of the picture. Certainly, other signals exist prior to the above environment materializing. The bottom line for you (or anyone else involved in trading these methods) is this: Determine what works best for you - based on your own psychological outlook. Do you exit at the LTL or the RTL? Do you exit on Gaps, or do you hold through the retrace in order to capture a possible bigger overall move? each path has its own positives and negatives. After determining which best suits your goals, institute a proper plan, and develop the discipline to stick to it. With experience, one will learn when to bend the rules, and when it isn't appropriate to do so. After all, one thing no book, no Journal, no post or no DVD can provide is experience. This comes from time in front of the screens.
Bingo.
If you are monitoring Volume Pace change throughout the day, then you have switched fractals off the daily. A daily fractal has no 'midday' section.
The choice is 'Sell on Gaps' or 'Hold on Gaps' when a gap occurs. Pick one or the other, and over time, you'll 'see' when and when not to violate your rule set.
Good Trading to you.
- Spydertrader
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