Spydertrader's Jack Hershey Futures Trading Journal
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Quote from Spydertrader:
The next tool on the Syllabus is the DOM. I do plan to begin to discuss this tool next week unless people feel more time is needed with the current tool set. Nothing says we can't delay the DOM discussion as we did with STR / SQU. I built plenty of stack into the Original Lesson Plans.
- Spydertrader
I'm ready for the DOM discussion. Have been following the DOM for a few weeks now. (just monitoring)
regards,
Ivo
I attempted to sct trade on simulator Friday but got discouraged right off the bat as I got chewed up in that HVS at the open. It appears to me that you might be better off to wait for the first move of the day and begin trading with the ftt that ends that move. Spyder can you give any insight on what you are looking for on your first entry of the day?
Jack often recommends waiting until bar 4 of the day before beginning to trade. Waiting allows the Futures markets to 'sync' with the cash and affords a trader the opportunity to 'see' the market as it begins to unfold before taking a position.
As to what I look for at the open, I want to see continuation or change of the previous day's sentiment, and enter a position accordingly. On most days, we can easily see change (or continuation) of the previous day's sentiment (either AH or pre-market) by simply monitoring YM - before the opening bell. However, occasionally, we see where the market hasn't quite made up its collective mind with respect to continuation or change. On these days, we see the market open inside the previous day's final bar (or final several bars). In such a circumstance (what some professionals refer to as 'a split open'), I wait for the market to 'break' in one direction or the other.
On Friday, the market appeared to be saying change from the previous day, and then on bar two, the market said change again. Once one recognizes the market hasn't created an FTT, but rather an HVS, we (as beginners) needed simply to 'wait' for direction to reveal itself. More advanced level traders would have traded each bar (or even Intra-bar) 'slaloming' back and forth until Price exited the lateral. As beginning traders, we want to spend more time observing than trading. we want to learn from Friday's open how we can handle such an environment in the future. We need to make sure we use all the tools available to us and find a sufficient data set which allows us to reach a conclusion of continuation or change.
I can say, having the DOM as a tool does assist the trader to 'see' not necessarily the HVS sooner, but rather, the signal for change sooner, and as such, provides the ability to 'slalom' through an HVS. Even if you choose to simply hold through an HVS (as I often do), having the ability to 'see' price bounce between two extremes in a single bar (and knowing those extremes in advance) instantly alerts your brain to the fact "a possible lateral is forming here." After you 'see' this phenomenon unfold enough times, you (and your brain) automatically makes the connection from lateral to HVS to flaw to hold (or for more experienced traders, slalom).
Combine DOM with STR / SQU and Volume which shows decreasing red and black bars, and you have all the information you need to stay on the right side of the market.
I hope you find the above information useful.
- Spydertrader
Since a number of people appeared to have missed the HVS Continuation on Friday, I wanted to take a moment, and hopefully, provide some points of clarification.
As we know, an HVS results from lateral Price movement, or as Jack says, an 'Even Harmonics' situation. We also know (as beginning traders), lateral price movement means continuation requiring the trader to take the following action: Hold. Certainly everyone can understand the concept of "holding through lateral Price movement." Why then, do we often see such confusion with respect to the HVS Price formation? Perhaps, the answer resides from confusion over which direction Price initially entered the lateral channel.
As discussed previously, we can distinguish an HVS from other Price formations based on the Volume data. We see both decreasing black and decreasing red volume within an HVS (See Yellow highlighted area of attached chart). Once recognized, a beginning trader simply holds in the direction of the current trend. Now, that sounds easy enough, but how (in real time) can a beginning trader determine which direction (long or short) the current trend represents? The answer resides in Price.
How Price enters the lateral channel determines how Price exits the lateral channel (unless an overriding signal for change develops within the lateral channel itself). In other words, If Price enters the lateral channel long, Price exits the channel long. If Price enters the lateral channel Short, price exits the lateral channel short. In both cases, the lateral channel represents continuation: (Hold).
We see two such examples on the attached chart snippet (pinkish arrows). Example One: At the open on Friday, we see Price gap down and immediately enter into an HVS. On Bar Four, Price heads lower as it exits the lateral forming an FTT on bar Five. Example Two: On Bar Eight, Price creates an FBO as it bounces off the 20 SMA, reverses, and heads lower into an HVS. At the end of the HVS (Bar 13), Price heads lower breaking out of the lateral channel. Again, the lateral channels represent continuation of the Price Trend in both examples.
Unless the market provides an overriding signal of change (FTT / FBO) within (or at the end of) a lateral channel, the same dynamic operates at, around and within all Lateral Price Channels.
As always, annotating correct Price Channels (which always match Gaussian Volume Formations) place the trader in the correct mental framework (mindset for lack of a better word) to 'see' the current trend. Note the Brown Down Channel on the chart snippet. This channel represents a 'steeper' carryover channel (and one I neglected to annotate on my original chart). By annotating this 'steeper' Point Three Channel, we can easily see how Price enters the Lateral from the short side as our FBO becomes a Point Three of the down trend. Had we annotated correctly, even if we missed seeing the 10:05 Bar (Bar Eight) as an FBO, everyone can most certainly 'see' it is a Point Three Down Channel. Clearly, a long position, in such an environment, places the trader on the incorrect side of the market.
In summary, Lateral Channels may represent left to right traverses of both Up and Down channels. Determining which trend one needs to follow, and how one arrives at the right side of the market, results from careful consideration of Price. Even if one believes they 'see' the market correctly, a trader needs to remain mindful of the possibility something remains amiss. However, if we note the direction Price entered the Lateral Channel, we can anticipate the correct exit.
I hope everyone finds the above information helpful. If anyone needs additional clarification, please let me know.
- Spydertrader
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1451061>
As we know, an HVS results from lateral Price movement, or as Jack says, an 'Even Harmonics' situation. We also know (as beginning traders), lateral price movement means continuation requiring the trader to take the following action: Hold. Certainly everyone can understand the concept of "holding through lateral Price movement." Why then, do we often see such confusion with respect to the HVS Price formation? Perhaps, the answer resides from confusion over which direction Price initially entered the lateral channel.
As discussed previously, we can distinguish an HVS from other Price formations based on the Volume data. We see both decreasing black and decreasing red volume within an HVS (See Yellow highlighted area of attached chart). Once recognized, a beginning trader simply holds in the direction of the current trend. Now, that sounds easy enough, but how (in real time) can a beginning trader determine which direction (long or short) the current trend represents? The answer resides in Price.
How Price enters the lateral channel determines how Price exits the lateral channel (unless an overriding signal for change develops within the lateral channel itself). In other words, If Price enters the lateral channel long, Price exits the channel long. If Price enters the lateral channel Short, price exits the lateral channel short. In both cases, the lateral channel represents continuation: (Hold).
We see two such examples on the attached chart snippet (pinkish arrows). Example One: At the open on Friday, we see Price gap down and immediately enter into an HVS. On Bar Four, Price heads lower as it exits the lateral forming an FTT on bar Five. Example Two: On Bar Eight, Price creates an FBO as it bounces off the 20 SMA, reverses, and heads lower into an HVS. At the end of the HVS (Bar 13), Price heads lower breaking out of the lateral channel. Again, the lateral channels represent continuation of the Price Trend in both examples.
Unless the market provides an overriding signal of change (FTT / FBO) within (or at the end of) a lateral channel, the same dynamic operates at, around and within all Lateral Price Channels.
As always, annotating correct Price Channels (which always match Gaussian Volume Formations) place the trader in the correct mental framework (mindset for lack of a better word) to 'see' the current trend. Note the Brown Down Channel on the chart snippet. This channel represents a 'steeper' carryover channel (and one I neglected to annotate on my original chart). By annotating this 'steeper' Point Three Channel, we can easily see how Price enters the Lateral from the short side as our FBO becomes a Point Three of the down trend. Had we annotated correctly, even if we missed seeing the 10:05 Bar (Bar Eight) as an FBO, everyone can most certainly 'see' it is a Point Three Down Channel. Clearly, a long position, in such an environment, places the trader on the incorrect side of the market.
In summary, Lateral Channels may represent left to right traverses of both Up and Down channels. Determining which trend one needs to follow, and how one arrives at the right side of the market, results from careful consideration of Price. Even if one believes they 'see' the market correctly, a trader needs to remain mindful of the possibility something remains amiss. However, if we note the direction Price entered the Lateral Channel, we can anticipate the correct exit.
I hope everyone finds the above information helpful. If anyone needs additional clarification, please let me know.
- Spydertrader
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1451061>
I think there is a problem with my understanding of stretch and squeeze so I would like to post my thoughts and have someone point out the flaws for me. When we are at nuetral we are at fair value. Normally the futures lead the cash. When price moves up the futures lead a bit and cash follows along. When price moves fast, futures will start moving above fair value creating stretch as the cash lags. When price moves down and futures are moving down faster than the cash, futures move below fair value and we have a squeeze. Where Im having a problem is interpreting extreme stretch as bullish and extreme squeeze as bearish because I thought that beyond a certain point the programs would come in cause a temporary reversal in the futures to bring them and cash back in line. Comments please.
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