Spydertrader's Jack Hershey Futures Trading Journal
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The idea of entering on a flaw and being able to come away unscathed or with a minor profit is an intersting concept. I take this to mean that one enters on a flaw, realizes the flaw, and quickly reverses to get back on the right side. Does this mean that, in the process of realizing the flaw and reversing one might lose a tick or two but once back on the right side, one makes up for those minor losses by being back on the right side of making money?
Cocaine,
That's how I understand it too. For example if you look at my ES chart a few posts back, if you went short at 9:55 instead of going long, you would have realized you were on the wrong side within a minute or two. I guess the key is you would have to reverse your position, not just buy back your shorts. Although today you would have made a handy profit even if you were wrong initially, most days are not are not like today from what I can tell. I would like to see more discussion about this myself. Any comments?
That's how I understand it too. For example if you look at my ES chart a few posts back, if you went short at 9:55 instead of going long, you would have realized you were on the wrong side within a minute or two. I guess the key is you would have to reverse your position, not just buy back your shorts. Although today you would have made a handy profit even if you were wrong initially, most days are not are not like today from what I can tell. I would like to see more discussion about this myself. Any comments?
On the 'Forest' Level Resolution, Flaws do not exist. As long as price remains within the Point Three Channel, one does not care what happens within each bar. Flaws do begin to appear when one drops down in resolution level (trees, limbs and leaves). One profits from the flaws first by the amount of money made from the initial reverse (when the trader thought they observed an FTT) to the present time (when the trader realizes he did not observe an FTT). On many occasions, Price has already moved more than a few tics when the trader sees (based on Volume) that he could not have had an FTT. As such, the trader reverses. At this point the trader locks in the profit. When the market moves back to the original reversal point, the trader profits again (making an additional profit he / she would not have made without the error and reversal compared to simply holding). As the market continues to move in the original direction, the trader continues to make money.
First by accident (Oopps, that wasn't an FTT), and later by design (finer resolution calls for tools which show these FLAWS as instruments of change). The trader will continue to profit.
Again, all of the above occurs on resolution levels below Coarse Level Resolution.
- Spydertrader
As I understand it, that is the theory. In practice I find that I can often lose at least a couple of ticks in both directions, having also decided that the decision to reverse was incorrect. Flaws can be tricky. As we only have prv to assist the decision process, it can be quite misleading, particularly in the early stages of the formation of a bar. I am not sure if there is any way to avoid this at present with the restricted toolset, other than using the "Forest rules".
Thanks Spyder, but I'm still a bit uncertain how I should have read the ES bar at 9:55. If I understand what you're saying, the Point Three Channel was established by 9:45, at which time the up trend channel was established and one should have gone long. And since the bar at 9:55 did not close below the RTL, the up trend stayed intact. Is this correct?
This is just my opinion so take it fwiw...
The upchannel was carried over from yesterday. To start off the day we had a retrace of the dominant upchannel. If you channel the retrace beginning w/ bars 2,3,4 for points 1,2,3 respectively, later at bar 6 (9:55) becomes an ftt of that retrace channel. Go long, or hold long here.
There was also a nice hint at 9:58/9:59 range on YM at another ftt that said go long. This is all in hindsight though. I got lucky by having a buy stop around 1452 that I rode up---no skill involved here though
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