Spydertrader's Jack Hershey Futures Trading Journal

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In my experience, in trading HOPE is a losing proposition. I'm in a trade only as long as it confirms my analysis (or at least it doesn't infirm it).

When you're looking to enter a new trade you have the luxury to be wrong not taking the trade, and not paying for this. Maybe this is why some people feel that they know when to enter and don't know when to exit: they don't account for their missed trades.

When you're in a losing trade and you hope for a reversal, against what your analysis says, you can be surprised by a rocket against you and suffer a big loss.

I guess an instance where the advice of not watching your P/L applies, is when you have to exit and take a loss because your trade doesn't go as you expected. Just do it!
Quote from PointOne:

Since the journal is in a summer-break type mood, would you mind reminiscing a bit more on your experiences with learning these methods and any important breakthroughs you had along the way?

I have a question about wash trades. I've read most of Jack's posts on this subject (e.g. Columbus / not falling off the edge of the earth analogies). IF price gets away from you, do you HOPE for its return within a reasonable time-frame? This goes totally against Spyder's advice and I have difficulty reconciling the wash trade mentality with Spyder's approach (exit or reverse).

cheers :)

P1
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Quote from cnms2:

I think "looking for a new entry in the opposite direction" works only for SCT (or EHR, then RHR), and for EHE when your trade is profitable. For EHE, in order to preserve capital, you should also take wash trades. These are the first two drills Jack suggested. snip . . .
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The beginning rule set Spydertrader had used here was basically FTT to FTT, though they went through a change at one point. There was an exit on FBO, but this is basically SCT at a beginning level. And exit if you get confused or low volume. A little different approach than what you went through with the original crew, but to the same end, hopefully.

The posts by Jack I was referring to were more recent but again to the same end. Trying to get someone out of entry/exit to doing reversals.

See Second post by Jack: http://www.elitetrader.com/vb/showthread.php?s=&threadid=87084&perpage=6&pagenumber=1 and: http://www.elitetrader.com/vb/showthread.php?s=&postid=1290105

Regards, EZ
 
The reason I made my comment was that after being in the chat rooms and having numerous conversations it seems there are a number of people who think that they are going to practice all of this up until "graduation" and then jump into live trading and rip the market a new a**hole. This seems to me to be a disaster waiting to happen. I was hoping, in the chat room, to get a group trading the basic strategy until a few of us were making money consistently and then start working on improving the entries and exits but it quickly became apparent that this was not going to happen. Maybe Im wrong and everything will come out hunky dory. Time will tell.
 
I agree hope is not a strategy. I know this Journal is not about the Psychological aspects of trading but the emotional state and maturity of a trader is a major issue. I can not stress this point enough that there is no substitute for watching the market in Real Time and also eventually trading. BE SURE WHEN YOU ARE STARTING OUT THAT YOU ARE USING MONEY THAT YOU CAN AFFORD TO LOSE AND TO SET DAILY LOSS LIMITS.

My past trading expereince I used a trading service that made all my decisions. All I had to do was execute the trade. Now I am trying to trade
on my own without the support of the trading service. I am constantly questioning my decisions and with time I am beginning to trust and understand better the rationale for executing a trade.

There is a art to trading and over time you will develop your own biases.
In the meantime you can get some good ( and some bad ) sage advice from these forums and I encourage you to:

1) Start out slowly
2) Plan on losing some money
3) Don't expect to pay your bills off of trading for several years

Yesterday I was up 6 ES points in the AM and tried twice to go counter the market in the PM and saw my 6pt gain become 0 pts. In the afternoon I was very loosly following the Hershey system ( I was going long after washouts ). Next time I will probably take BEARBELLY's advice and look for point 3 entries instead of Potential Point 1's. This lesson was learned the hard way but after losing my profits was eventually learned.

Experience can only teach this.
 
A couple of thoughts on 'trading': Please review the reaction in this post by Dantheman, http://elitetrader.com/vb/showthread.php?s=&postid=1487766#post1487766 and note Spydertrader's response below it.

Spydertrader mentioned in the first part of the journal that execution is a separate skill and he would cover it later in the year. I believe the syllabus says in November 'Putting it all together' which might be the execution part.

I ask myself sometimes, "How long will it take before I can trade as I'm being shown?" My answer is always the same, "As long as it takes." Trading or even simming before one is really seeing the market is just making the journey longer and more difficult. I remind myself that it took years before I was making good money as a professional pilot, why should this be any different?

-Mike
 
It became obvious today that my use of a lower fractal was a hairbrained idea. While I got away with it for a while it was clear I lack the discipline to stay out of the rabbit hole.
Going back to using the 2 min ym and 5 min es p-v and channels only was much more relaxing and successful. All the same signals are present at the same moments and there was less noise to filter.
I could use some clarification on what comes next after an ftt.
In an up channel after a ve or flaw you get an ftt, vol is just right and the next bar shows decreasing vol changing from black to red and finishes black. The next bar should tell you what action was appropriate but what about now?
 
Quote from ticktrade:

I could use some clarification on what comes next after an ftt.
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In an up channel, the bars following your ftt should have reducing red volume until price crosses the right trend line and then red vol should increase to give the R2R as the BO occurs.

That is the "textbook" sequence. Anything else and you may have a flaw instead of an ftt. Keeping an eye on the behaviour of ym at this point can often provide clues in advance of ES.

David
 
Interesting discussion going on here.

Let me first resume some details about some aha moments that I have had in the past as a way to share (I think) some knowledge and encouraging (I hope) at the same time others to do the same. What I will try to tell here, for some it will be just plain basic and that’s nice, but for others it may have something new (I hope).

Also, any comment from you will be much appreciated. Correct me if you think I’m wrong; ask if you don’t understand something. I encourage you to share your aha moments, I’m sure we all have much to learn with each other.

1) Beliefs
I will start you the hardest and more important issue (for me). This methodology is based in believing that some ‘things’ will occur more or less the same way all the time. We call them ‘sequences’. Sometimes it’s hard for the unprepared brain to understand that those ‘sequences’ really happen time after time in the markets. It’s my opinion that the journey that one needs to do by himself is to ‘format’ the brain to integrate all this beliefs, and that’s why there are no shortcuts or ‘speed learning’ that can be made. The brain needs time to adapt, and that time is not negotiable.

The most important thing that one must believe is that “Price bounces off from the trendlines, the LTL and RTL” IF sufficient (relative to previous) volume exists. What this means is that if volume is fast decreasing price probably will not touch the TL, if it’s increasing it will probably break the TL. This behavior is the same at LTL and RTL, the difference is that at RTL we call it a BO and we invalidate the channel, and at LTL we call it a ‘Volatility Expansion’ (VE). A channel VE must have increased dominant volume, so if a channel has a VE with decrease volume, best choice is to not consider it a VE, leave the LTL at the same place, main reason is that volume is not supporting the VE. Why is this good? You will see price bounce at LTL and will not give you a FTT. Ok, but why is that important? You will be ready to enter at that expected price (LTL) in the opposite direction if volume at that time is not increasing (PRV) putting you in the L-R transverse.


2) Transverses
Another belief, Price DO transverse inside channels. Meaning, price will have an R-L transverse AND then an L-R transverse, always. Questions here are: When it ‘changes’? And for How long it ‘Continues’? (Feeling a Déjà vu here :) )

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1544492>


As you can see in this picture, I have drawn what I call the golden line, as it shows the transverses that price did: R-L, L-R, R-L, etc (it’s not the 100% money on the market line, but it’s maybe the 90% line). Transverses goes from one TL to the other TL. If you have this always present, what happen if at the R-L transverse price doesn’t reach the LTL? Well, you have the FTT, and then price starts the L-R transverse as you know. And what if in an L-R transverse price doesn’t reach RTL? You probably will have an increase in market pace and a new steep channel is on the way;

If you look closely, flaws also are more noticeable (and expected) if you consider in what kind of transverse price is at. Because you ‘know’ where price is headed for, a stall or a dip is just a small pause in the way (remember flaws = Continuation).

Also, the golden line shows how an expert trader will be trading. Make that one of your objectives at some time in on your trader career. For sure it’s one of mine, just not now :)

I think it is very important to understand this, because once one can see it, one knows exactly where market is. Call it the ‘context’. If you see price reaching the LTL (with equal or decr volume) expect price to start the L-R transverse. In times of some confusion, seeing in what transverse price is helps to focus. It is at the same time important to know what channel is influencing most at one time, this is because if we have a non-steep channel do not expect that we have a full L-R transverse of that channel if volume is increasing faster, if that’s the case, draw ASAP the steeper channel, consider it the ‘influence’ channel at that time, and be prepared for the transverses of that channel.

3) Market Pace

Volume strength and matched steep channels define the Market Pace. If you note that volume is increasing you need to have a channel that matches that pace level.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1544495>

In this picture, you can see that there are four different speeds (see channels Teal (1st gear), olive (2nd gear), black (3rd gear) and violet (4th gear) ) all with different increasing volume levels.

Also, note the moments where price bounces, see what happen at LTL and RTL, when one should expect price to bounce (L-R, R-L). Now, compare those moments with volume levels at that time.



Now, why all of this matter for the trading strategies being discussing here?

If you understand what I try to say here, there are only four places where one may act to be at full SCT mode (at least Golden line trader):

a) RTL;
b) LTL;
c) ‘FTT’ on an R-L transverse
d) Increasing pace Trend resume on an L-R transverse (which btw is another FTT but on a lower fractal)

If you follow Spyder’s indications, (“Forest level”) you use only “a)” for entries (at pnt3) and exits (at BO) of channels;

Hope this helped and sorry for the long post... :(

Regards,
 

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