Spydertrader's Jack Hershey Futures Trading Journal

[bundlemaker]

Quote from Spydertrader:

Please show me where I said this .....

- Spydertrader

Spyder,

On numerous occaisions, (chat, PM's, thread, Tucson) I understood you to say it was NOT possible to know you had a flaw until the next bar completes. I believe you also stated this same situation with identifying FTT's.

The first example of where I can quote you is on 5/3/07 when you stated in the journal...

"Most flaws won't show their true colors until the next bar after the bar you thought was an FTT, so you won't know until later that you incorrectly viewed a particular bar as an FTT."

I sincerely hope that my question is as clear to you as it is to me, because there is a huge logical gap between this quote and the idea that one can trade a flaw in a specific fashion. That, of course, implies you'd need to know you were dealing with a flaw. I'm pursuing discussion of this particuar subject, but the same sort of logical disconnects is what is causing me troubles all over the place.


EDIT: actual date was 5/2/07
Thank you so much for your help.

 

[Pepe]

Quote from bundlemaker:

Two serious questions:

If you can't know it's a flaw until after the fact, what good does it do you? Please forgive the derisive sounding nature of the question, it's not meant to be. I actually feel a bit foolish taking so many months to be able to even realize it's a question I've had unconsciously all along. I mean, how does classifying a bar as a hitch, a stall, an HVS, or a zippity do dah help the trader? Especially in light of the fact that a trader can't even know it was a flaw until after the fact, thus making it unknown to me, even in principal, how one would trade it as a flaw unless you knew it was a flaw ahead of time.

What must come next? I'm afraid I've been pulling the same stunt I've tried to so often before. I'm reading this as "what must come next, unless something else happens". Is this true or am I still road blocking myself?

I could post many more such idiotic questions, these should suffice. I've just reviewed the 2 1/2 hour live trading session from Tucson. Since then, I've added much knowledge to my personal data base, but my ability to have any level of confidence in what I'm doing hasn't moved. Everytime I learn something, apply it, and see it work; is followed by a period of utter confusion. I simply cannot get the tools to work consistantly in a co-ordianted fashion.

I understand that more time is needed. I also know, from so many varied life experiences, that the definition of insanity is doing the same thing expecting different outcomes. Continuing to view the market throught the same lens (my current filters) and expecting a different result is how I've felt for quite some time now.

I am as yet unable to even imagine how one would trade outside of a probability mentality. The way I'm approaching the analysis is "what's most likely to happen", as when I use WMCN, I'm wrong even more often.

Hi bundle,

I understand very well what you are saying.

During the learning phase of these methods, we find several moments of frustration and impatience, mainly because our expectations are higher than our current real understand to how to make money from this.

Reading your post again, it seems to me that your concerns are at ‘execution’ and how to trade flaws. For me this makes sense, as the main objective is to make money from these methods, and so we should know or at least understand how to profit from them. ‘Execution’ seems easy, but it’s in fact hard to accomplish, because it adds several other factors that are not related with the methods (P/L, emotions, etc.) (‘Execution’ is in the syllabus btw)

But, We are learning a methodology that the only thing it gives us are signals of ‘Continuation’ and ‘Change’, nothing more, nothing less. No ‘up’ or ‘down’ signals, no ‘how long’ signals. No ‘Flaw’ signals, No ‘Entry’ or ‘Exit’ signals. Just ‘Continuation’ and ‘Change’. And we know that a ‘Continuation’ signal is any other thing that is not ‘Change’.

Also, we know that a signal for ‘Change’ is a set of signals, which means it’s not only price or volume, or S/S or Wall or 2pair, it’s a combination of at least two of these signals on a particular moment that trigger a ‘Change’ signal.

Last, we know what signals of change exist and where are they expected within channels (‘coarse’ level). There are 4 action moments that indicate Change: Left Trend Line, Right Trend Line, Failure to Trasverse and Failure to Breakout. This with volume makes our ‘coarse’ level at ES. (the one that one should fully understand before using medium and expert tools)

Now, one tricky thing - ‘Resolution levels’. This is for me the most difficult part to understand and the one that is more problematic. Remember, this methodology only gives signals for ‘change’ and ‘continuation’, it doesn’t say that this ‘change’ signal is from a limb, a tree or a forest channel. Also, even when we are at a specific level, one sometimes needs to look ‘closer’ to understand something (or not). So, if we want to force ourselves to stay at a specific resolution level, we must ‘ignore’ some (expecting) ‘change’ signals.

Ignoring ‘change’ signals, has some (big) problems (depends on the market pace). If you trade at ‘Tree Level’ and you took a pnt1 then you will probably ignore a Pnt2 because you ‘know’ that after this is just a retrace to Pnt3, and the trend will resume. But what if pnt3 ‘change’ signal doesn’t occur? You are caught at the wrong side of the market from pnt2. This is the opposite of the “Always stay at the right side of the market”.

And how about ‘Flaws’? All ‘Flaws’ start as an FTT, and the only moment you ‘know’ it’s a flaw or a FTT is in the following bar. So, in my opinion, ‘Flaws’ should be treated as FTTs until proof in contrary (often in next bar). Also, if one wants to profit from ‘Flaws’ (which are FTTs on finer resolutions) one needs to use fine tools (2pair + DOM (walls)), but that is done only at expert level.

Now, if there wasn’t any other tools, just ES price and volume, what good ‘flaws’ do to you? Well, in my opinion, no good. Unless you can realize intrabar that one bar is a flaw, ‘Flaws’ gives you a loser or a wash trade. However, it’s very important to fully understand ‘flaws’. Knowing how each one develops (and why it develops) gives you skills to reverse sooner.

Regards,

 

[bundlemaker]

Quote from Pepe:

Hi bundle,

I understand very well what you are saying.

During the learning phase of these methods, we find several moments of frustration and impatience, mainly because our expectations are higher than our current real understand to how to make money from this.

Reading your post again, it seems to me that your concerns are at ‘execution’ and how to trade flaws. For me this makes sense, as the main objective is to make money from these methods, and so we should know or at least understand how to profit from them. ‘Execution’ seems easy, but it’s in fact hard to accomplish, because it adds several other factors that are not related with the methods (P/L, emotions, etc.) (‘Execution’ is in the syllabus btw)

But, We are learning a methodology that the only thing it gives us are signals of ‘Continuation’ and ‘Change’, nothing more, nothing less. No ‘up’ or ‘down’ signals, no ‘how long’ signals. No ‘Flaw’ signals, No ‘Entry’ or ‘Exit’ signals. Just ‘Continuation’ and ‘Change’. And we know that a ‘Continuation’ signal is any other thing that is not ‘Change’.

Also, we know that a signal for ‘Change’ is a set of signals, which means it’s not only price or volume, or S/S or Wall or 2pair, it’s a combination of at least two of these signals on a particular moment that trigger a ‘Change’ signal.

Last, we know what signals of change exist and where are they expected within channels (‘coarse’ level). There are 4 action moments that indicate Change: Left Trend Line, Right Trend Line, Failure to Trasverse and Failure to Breakout. This with volume makes our ‘coarse’ level at ES. (the one that one should fully understand before using medium and expert tools)

Now, one tricky thing - ‘Resolution levels’. This is for me the most difficult part to understand and the one that is more problematic. Remember, this methodology only gives signals for ‘change’ and ‘continuation’, it doesn’t say that this ‘change’ signal is from a limb, a tree or a forest channel. Also, even when we are at a specific level, one sometimes needs to look ‘closer’ to understand something (or not). So, if we want to force ourselves to stay at a specific resolution level, we must ‘ignore’ some (expecting) ‘change’ signals.

Ignoring ‘change’ signals, has some (big) problems (depends on the market pace). If you trade at ‘Tree Level’ and you took a pnt1 then you will probably ignore a Pnt2 because you ‘know’ that after this is just a retrace to Pnt3, and the trend will resume. But what if pnt3 ‘change’ signal doesn’t occur? You are caught at the wrong side of the market from pnt2. This is the opposite of the “Always stay at the right side of the market”.

And how about ‘Flaws’? All ‘Flaws’ start as an FTT, and the only moment you ‘know’ it’s a flaw or a FTT is in the following bar. So, in my opinion, ‘Flaws’ should be treated as FTTs until proof in contrary (often in next bar). Also, if one wants to profit from ‘Flaws’ (which are FTTs on finer resolutions) one needs to use fine tools (2pair + DOM (walls)), but that is done only at expert level.

Now, if there wasn’t any other tools, just ES price and volume, what good ‘flaws’ do to you? Well, in my opinion, no good. Unless you can realize intrabar that one bar is a flaw, ‘Flaws’ gives you a loser or a wash trade. However, it’s very important to fully understand ‘flaws’. Knowing how each one develops (and why it develops) gives you skills to reverse sooner.

Regards,

Pepe,

I appreciate your words. I want to emphatically say my post was NOT about execution. It was one example of what I call a logical hole. I wouldn't push on this, but frankly I've received a number of PM's saying they were too chicken to push. Moreover, Spyder has made it absolutely clear that the whole process is binary (his word, not mine; I don't think it's a scientifically/mathematically accurate term but I also think we all get what he's saying). Finally, if I piss off Spyder I know it's temporary, because I'm totally convinced he wants people to get this.

I'm just taking all the instructions and putting them together. I'm trying to be as literal as possible. And we HAVE to be literal, because to do otherwise is to become TOTALLY subjective. If one stays literal (to the extent I understand what is being stated), one runs into HUGE GAPPING LOGICAL HOLES. This causes a lot of pain for a lot of folks.

Let me provide an even broader example. Lets consider data sets and MADA. Speaking for myself now, I start to scan for the data set, and more times than not, I am able to instantly analyze whether that data set tells me change or continuation. Now, in order to be rigorous and logical, I MUST continue MADA. I do so, and now I get a different signal (telling me change instead of continue or vice versa).

Practically speaking, the flickering tick, oscillating between red and black is typical of what I speak of. But it's not just that, it's also the bar that keeps retracing on itself multiple times. And of course, many other scenarios too.

My point is NOT that this can't work, not that it's hard, not that I can't get it; but that simply beating the hammer of doing what I've been doing just isn't going to produce results different than what I've already produced. I've spent a lot of time doing self analysis and what I find is painful. Sure, I've had minor success, but I am not able to repeat them. Way too much of what I'm doing really does turn out to be guessing. A good place to start attempting a repair job is stop using the word anticipate, because our engrams are wired to make anticipate = predict = guess. And whenever I stop guessing, I'm left with reassessing every single tick, because that is what the instructions are telling me to do (based on my understanding of the instructions).

 

[Spydertrader]

Quote from bundlemaker:

"Most flaws won't show their true colors until the next bar after the bar you thought was an FTT, so you won't know until later that you incorrectly viewed a particular bar as an FTT."

Let's try this again. Re-read the above placing the correct emphasis on the highlighted words.

Quote from bundlemaker:

"I sincerely hope that my question is as clear to you as it is to me, because there is a huge logical gap between this quote and the idea that one can trade a flaw in a specific fashion.

I see a huge logical gap, between what I actually said, and what you have decided I meant.

I still fail to see how You won't know equals you can't know.

Quote from bundlemaker:

If you can't know

So please, show me where I said you can't know.

Thank-you.

- Spydertrader

 

[dkm]

Quote from bundlemaker:

What must come next?

This phrase has always troubled me. It can be read in the sense that there is only one possible outcome, given the current situation. I do not believe this to be true. Someone please correct me if I am wrong, but my understanding of what Spyder is saying is this, for example: "If this is an FTT, what must come next? Answer, reducing volume as price moves towards the RTL." So, if we get something else then it clearly isn't an FTT. In other words "what must come next?" to validate my conclusion. If what is required doesn't come next, then my conclusion is invalidated.

Perhaps it might be better said as "What must come next for continuation? What must come next for change?"

It is not possible to know what will come next, but we are aware of sequences that frequently occur and we can aniticipate the sequence unfolding.

 

[Spydertrader]

Continued Flaws and Internal Formations

Alrighty then, we have laid out the various types of flaws which pop up from time to time. We also see how Price and Volume play a role in differenciating a flaw from an FTT. In addition, we already know that flaws manefest themselves across dominant traverses, and they do so when a certain number (or contracts traded) decide the current trend has moved far enough. Lastly, we can determine what type of flaw with the passage of time using differencial analysis as to what the 'thing' cannot be and eliminating choices until we are left with the only thing it can be.

Now, we do have other 'things' which crop up from time to time. These are not 'flaws' as we know them. They represent 'formations' of Price (and Volume) bars. These also provide the trader with instructions as to what must come next. Examples of these 'formations' include: Laterals and Pennents. The Pennents should be easy to spot (Flat Top, Flat Bottom and Sym). They begin with a two bar formation (but could last longer), and then Price Breaks Out in one direction or another. Now, we do not associate any sort of probability with respect to direction on a Pennent. We simply see the Pennent Formation as a momentary pause - a place in time at which the market has chosen to 'reset' and start again.

The same holds true with Lateral formations. A wide range bar followed by multiple bars - all of which remain inside the Price range of the wide range bar - creates a lateral formation. The wide range bar casts its 'shadow' until Price breaks free of the lateral formation.

Both Pennants and Lateral formations almost always show decreasing volume from beginning to end of the respective 'formation.' Jack has lumped all these sorts of 'things' into what he calls - Internals (short for Internal Formations). Both Flaws and Formations comprise the group Jack calls Internals.

If we look at the combination of Price and Volume and how each interacts with the specific 'Internals' examples. we can 'see' how one could view a flaw or an internal formation as a signal for change. with flaws, the signal is not of very long duration - a few bars at most. With formations, the signal is forthcoming. We have no movement now, but expect to have price change occur shortly. The only exception 9off the top of my head) is when Price leaves the formation boundary, but then returns. This is sort of like when Price exits the channel and then returns. With a channel exit and return, we call the event an FBO. A similar example occurs with formations. although we do not want to call the event an FBO (in an effort to avoid confusion with the channel FBO), a similar mindset needs to be applied.

"Well we broke out but came right back in, now what?" Simply wait until the next bar and look for what we always look for - Price direction on increasing volume.

More Later ...

- Spydertrader

 

[bundlemaker]

Spyder,

It's not just me. In the last couple hours I have recievied no less than 4 pm's saying how much they appreciated me articulating these thoughts. I am nowhere's near lone on my mis-understanding.

I invite you to show us all how You can know. THe bottom line is many of us are exerting untold scores of hours each week and PROGRESS IS NOT BEING MADE.

I am not sore, I am interested in progress. We are not getting it the way it's being taught. I urge you to create some video with verbal articulation on exactly what you're thinking and doing. Learning by example, as opposed to explanation, almost always works. I know you've talked about student, professor, material; before. Please remember that different people learn much, much, much differently.

As regards your last post/reply to me. I can tell you, beyond a shadow of a doubt, that you have told me and others that a flaw is only a flaw AFTER the flaw bar completes. I will look for other places you have stated this. But really, that helps no one. I for one, (and I know others too) really desire an answer to my question. Let's not play semantic games. Let's say "most". Then tell us, on most bars, how do we tell it's a flaw during the flaw bar? In the mean time, I'll research where you said what I say you said and post it as soon as I find it. May be a long night, glad it's the long weekend

 

[Spydertrader]

Quote from bundlemaker:

Then tell us, on most bars, how do we tell it's a flaw during the flaw bar?

This was my intention beginning with my first post of the month. I then became side tracked with someone who decided my opening sentences created a 'gaping hole in logic.' In addition, I advised looking at a specific chart. Hopefully, people followed my advice.

- Spydertrader

 

[bundlemaker]

Quote from Spydertrader:

This was my intention beginning with my first post of the month. In addition, I advised looking at a specific chart. Hopefully, people followed my advice.

- Spydertrader

I believe I did, and like so many other questions I have had, the answer I recieived was "enough screen time will show you", or something to that effect.

Honestly, 9 times out of 10, I still can't tell you what the YM is telling me. 9 times out of 10 I still don't understand what I'm doing. 9 times out of 10 everything looks like a big mish mash to me.

The bottom line (and I believe I speak for many, please correct me if I'm out of line) is that without a lot of actual examples most of us aren't going to learn this. By example I mean LOTs and LOTs and LOTs of extremely well verbalized and annotated video. Right now I'm just spinning my wheels.

 

[bundlemaker]

Quote from Bearbelly:

Did you guys track profitability on forest level channels and volume way back when? If you have confidence that even the most elementary form of this method will make money you might not get so frustrated with the fine tuning. It seems to me that all this frustration indicates lack of confidence in the method overall. So you dont catch every traverse, Big deal. If you catch one traverse of a dominant channel a day you will do quite well. Dont focus on the limbs and leaves so much. jmho. I called a lot of point three trades in the chat room the large majority of which were profitable. A solid base to build on.

Bear,

This is just my point. I can draw the channels, and I can see the PV after the fact. I can see everything, after the fact. Beforehand, it's all just guessing. To me, in my experience, it's guessing. And so far, no one has explained, in a way I understand, a way to NOT guess.