Quote from dkm:
I cannot see the correlation so far. I am wondering if I have this histogram set up correctly.
1. I currently have my 'offset' value set at 65
2.
Inside -2 to +2 we consider neutral or noise - no signal.
3. As I indicated in
this post, one should
not look for STR/SQU to provide a signal for change or continuation
except at the Resolution Level
action points.
4. In order to seek a correlation between STR/SQU and ES Price, one needs to use a combination of STR/SQU the DOM Levels and Wall changes, as well as Trend Lines and T & S.
5. Remember,
sufficient data sets means obtaining the data needed to differentiate between
continuation and
change. If the sufficient data sets needed can be observed using ES or YM, then a trader need not continue to STR/SQU at that point in time. The goal of adding tools as we continue through the syllabus is to provide an opportunity to catch the
change signal sooner in the bar while
remaining on the correct Resolution Level for
monitoring. In other words, we want to remain on the Forest or Tree Level for monitoring, but we use tools that can provide the
opportunity to 'see' the change signal sooner in the bar. We do not want to use the finer tools to catch
every signal for change throughout the day - only those occurring at our individual 'Action Points.' When a trader masters their current Resolution level for
monitoring using
all the tools available (even those tools not yet discussed),
then the time may be appropriate to move to the next level for monitoring and thereby increasing the number of signals received and trades taken.
By example, Forest Level Resolution Traders look for Point Three's and Breaks of the Right Trend Line. The
only time a Forest Level Resolution Trader needs to use
any tool (PRV, Gaussians, YM, STR/SQU, DOM, T&S, Tic Charts) is at the right side trend line. As long as price remains within the channel, the Forest Level Resolution trader need not care whatever else is going on. Once price approaches the right trend line, The Forest Level trader thinks, "What do I need for continuation, and What do I need For Change?"
Using one specific example of how the mental process needs to work ....
If an uptrend, then,
Increasing
Black ES Volume with Increasing ES Price (on a PRV basis) = continuation
Increasing
Black YM Volume with Increasing YM Price = continuation
STR/SQU > +2 = continuation
Increasing
Red ES Volume with Increasing ES Price (on a PRV basis) = change
Increasing
Red YM Volume with Increasing YM Price = change
STR/SQU < -2 = change
The trader then thinks, "O.K., I know what I need to see, now what do I see?"
The trader sees increasing PRV Volume with STR/SQU > +2
This
sufficient data set says
continuation, so the trader mentally moves to the 'Action Step' which changes based on 'context.'
Is the trader already long in the uptrend? Then Continuation means
hold.
Is the trader short in the uptrend? Then, continuation means
reverse.
Is the trader sidelined? Then, continuation means
enter long.
As you can see, the
action required of the trader at any point in time changes based on the
context. However, the market's mode (continuation or change) remains the same irrespective of context.
Some, may recall my warnings over attempting to perform brain surgery while using sledge hammers and pick axes. Previously, traders attempted to trade at resolution levels for which they did not yet have the tools. While STR/SQU definitely holds no resemblance to a pick axe or a sledge hammer, it isn't a scalpel either. As a result, I recommend using STR /SQU in a manner more closely correlated to each individual's Resolution Level Monitoring, rather than, a stand alone signal by which we look to take every wiggle, head-fake, and pop.
I apologize for the length of this post, but hope many find the information useful.
- Spydertrader
Later, when one has mastered the various levels of resolution, trading at the bug level (with the appropriate tools) permits the trader to trade within the bars.