Spydertrader's Jack Hershey Futures Trading Journal

[Gary Fox]

A little direction if you don’t mind.

I use point and figure charts for my mutual fund investing. P&F charts and their respective 45-degree angle trendlines make it very easy to draw both the support and resistance lines on the charts (by hand or computer generated.) I am partial to trendlines and channels, and would like to learn a methodology of drawing them on daily bar charts for the purpose of developing a shorter term end of day trading system.

So, I did not realize from this thread name that trend lines and channels were discussed here. And, before attempting to read these many pages, perhaps you could tell me if this methodology is applicable to end of day charts and trading. If so, is their a book, magazine article, web site or thread here at ET that sets forth the basics of this method (such as the basic rules of creating a P&F chart and trendline construction.)

Thanks in advance for any assistance.

Gary

 

[bundlemaker]

Quote from dkm:

This discussion of the basic principles caused me to review the definition of an FTT. It is described early in this journal as "the turning point of a trend, and more importantly, a change in trend direction". However, the trend change is only manifested at the moment of the R2R or B2B. If we don't get an R2R or B2B then we just have a flaw, hence the difficulty of distinguishing between a flaw and an ftt. Anything prior to the R2R or B2B is just anticipation of a trend change. So where does the change actually occur?

The FTT is the signal for change on a given resolution level. By asking the question "what must come next" you are gauging your observation of change against a standard. The standard being the sequence that follows the FTT.

So, if you observe what you think is an FTT, you next expect to see decreasing non-dominant volume (over the width of the channel). That decreasing volume is now indicating continuation in the new direction. Next, you must see a RTL break on increasing volume. If you do, that again signals continuation. If the break is on decreasing volume, then a new signal for change is realized.

Each component of the sequence offers opportunity to assess change or continuation.

 

[bundlemaker]

Quote from Gary Fox:

A little direction if you don’t mind.

I use point and figure charts for my mutual fund investing. P&F charts and their respective 45-degree angle trendlines make it very easy to draw both the support and resistance lines on the charts (by hand or computer generated.) I am partial to trendlines and channels, and would like to learn a methodology of drawing them on daily bar charts for the purpose of developing a shorter term end of day trading system.

So, I did not realize from this thread name that trend lines and channels were discussed here. And, before attempting to read these many pages, perhaps you could tell me if this methodology is applicable to end of day charts and trading. If so, is their a book, magazine article, web site or thread here at ET that sets forth the basics of this method (such as the basic rules of creating a P&F chart and trendline construction.)

Thanks in advance for any assistance.

Gary

Here is a link to Spydertrader's first journal, which outlines an EOD methodology based on the same principals as being discussed in this thread. It does not use P&F in any way.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=38777

 

[PointOne]

Quote from dkm:

So where does the change actually occur?

On the wall (certainly at Forest level).

I've been reviewing known FTTs on video. The sequences are astounding. (Next I intend to review flaws to see where the differences arise - Price, Volume and channel context is often enough to distinguish them though.)

One of the major defining characteristics of an FTT, I think, is the relative size of the wall (don't imagine walls into being - a real one lets you know it has arrived loud and clear). Walls show up.

So once you have identified the wall location AND the context is telling you to anticipate an FTT, watch the behaviour of price and volume on and near the wall as seen in the tick chart:

translation to the wall -> 2 pair -> Pt1 printed -> spike forms away from wall -> gaussian shift - COLOUR CHANGE.

Then get back onto the coarse 5 minute PV monitoring and watch for x2x for the BO of the old channel for continuation.

In order to catch Forest FTTs you first have to know when and where they are likely to occur (many days/months experience of 5 minute PV and channel context). This prevents going down the rabbit hole to the finer tools too soon.

Note I didn't mention the use of YM 2 min or Str/Squ. For the ES, these tools give you additional comfort but it is possible to identify FTTs without them.

 

[Spydertrader]

Below, please find a parsed response to your post. What I need you to do as you read along is paint a mental picture in your brain of two individuals sitting at a table - each looking at one side of a coin as the coin sits balanced on its side. Neither individual can see the opposite side of the coin from where they sit. However, one of the individuals at the table has previously seen both sides of this coin.

Quote from aeliodon:

Spyder, so you pretty much hit the ground running in SCT.

If you consider the three years I spent trading Equities using the very same methods (without even realizing it) "hitting the ground running" then, I'd agree. However, most would consider three years something else entirely, and not, "hitting the ground running."

Quote from aeliodon:

What if you're just a natural at this stuff and all of us un-naturals are just wasting our time?

Your question assumes transference has not occurred in either Equities or Futures with respect to these methods. One need look no further than the Equities Journal to find individuals who have learned to trade profitably using these same methods in another market. In addition, a number of individuals have learned to take profitable trades in the futures markets (or other markets besides equities). As such, it would appear that one need not be a 'natural' at trading in order to learn the methods outlined in these many pages.

Quote from aeliodon:

Also what do you have to say to guys that haven't gone all into this system? I mean I'm still stuck in January. But if I can just nail one or two ftts a day for 2-3 points per contract average per day and have a pf of greater than 2.0 than that's fine for me.

Again, please do not confuse execution signals with signals of continuation or signals of change. Anyone 'still stuck in January' has chosen to do so. I see nothing wrong with learning to differentiate between continuation and change, but choosing only to apply the lessons learned at various resolution levels (Forest, Tree, Limb). However, deciding to 'stop learning' and focus on entry and exit signals (nothing more than synthetic constructs used in trading) shortchanges your development. Again, if one chooses do cease the learning process, then one cannot expect to progress beyond the current plateau. As a trader's comfort level improves along each step of the learning process, the number of trade opportunities the learning trader sees increases. In addition, as the comfort level and experience levels increase, so too does the number of actual trades taken. determining "what's OK for me" without ever experiencing what lies beyond the horizon is a bit like a child saying, "I'm OK with walking, I don't need to learn how to run."

Quote from aeliodon:

I think porgie was used a channel system based on SCT but he only used what he was comfortable with. He used to say all the time that he had a 100% no risk system. But I doubt he was all-in at all times.

Again, please review the original premise of this Journal. SCT is not a goal. SCT is a consequence of the learning process. The most common variable within this process is time. Some learn in a few hours, while others, take years to perfect the differentiation between continuation and change.

Quote from aeliodon:

I think he just took some the highest probability trades and was happy with that.

If you've never seen the other side of the coin, how do you know what the other side 'looks like' - and by extension - which view you prefer?

Quote from aeliodon:

Do you agree that its okay to be content with just a few points per day or is edge trading mentality so bad in the long run for financial and mental health that its never worth persuing no matter how good the money seems to be.

I agree that if you have exhausted all mental efforts and worked as hard as possible to grasp the lessons, and as a result, find you can only progress to a certain plateau without moving farther, then yes, by all means, remain happy with the accomplishment. However, your post indicates you have made decisions, not based on facts, but on uninformed opinion.

The reason I push people so hard to move forward is because the expert level tools and expert level trading is no more complicated than any other level. Nothing about the methods described here are complex. We just have a whole lot of simple to wade through in order to get to the other side.

Remember the two individuals seated at the table? Which individual do you think represents me? Since I've seen both sides of the coin, I know which view I (and most others) would prefer. Sure, its easy to learn a little bit, create a few entry and exit criteria and stop right at the Forest without ever looking at a tree. After all, years might pass before you could ever reach full SCT level so why even try? Remember, the goal isn't SCT, the goal is to differentiate continuation and change in any market on any time frame (provided sufficient liquidity exists). Learn to do that and you have an ATM Machine.

I'd be willing to bet if you learned all the tools and used them appropriately to catch the signals for change as close to the actual tic as possible, you'd find yourself, almost accidently, drifting into the land of SCT without even realizing it.

....... First by accident; Then by design .....

Sound familiar?

- Spydertrader

 

[excav8tr]

See Here for setting up Quote Tracker Range charts.

 

[Tums]

I looked for FTT, and I found FTT, including plenty of false FTT.

FTT happens only 1 in 15~20 bars. It is tiring (and frustrating) to look for something that is not there most of the time.

So I re-orient my perspective: Instead of looking for FTT, which is a signal for "Change", I ask myself if this trend is going to "Continue".
I'd stay with the trend until I lost the signal to "Continue".

 

[8833broc]

SpyderTrader,

I've attached a chart and my CONTINUATION/CHANGE comments that represents my current level of understanding. The bar numbers are on the chart. Bar 4 I would of definitely called a FTT. Bar 5 I would of definitely thought I was wrong about bar 4 ftt. Bar 10 I would of been on FTT alert monitoring the next bar for confirmation of the FTT.

Question 1
Am I thinking correctly along the lines of Continuation vs Change ?

Question 2
I am amazed that some of your flaws are not labeled as FTTs. Are your charts an "idealized" chart of what we should aspire to annotate in Real TIme or are your charts your actual RT annotations.

I am slowly getting it.

Thanks for bringing us this Journal. It is an invaluable resource to me.

 

[FilterTip]

I remember when Spyder wrote this..

It doesn't matter!
01-04-07 07:29 AM

I understand it was in context of the tool set we had, and learning from mistakes.
But surely this holds true now and always.

Does not, how fast we look to see change,
depend on how fast a resolution we have chosen to trade on?

Is there a difference between waiting to know what the market is doing
and waiting for the market to do what we know?

When Spyder says It doesn't matter,
I needed to ask myself, what am I choosing matters, and why? !

By learning the methodology, we already know what we are going to do.
Aren't we just waiting for the market to get there so we can do it?
I knew the methodology worked.
I didn’t.

Personally, the beauty of the journey in this Journal,
has been learning how to change my mind and my mind set.
Both came through learning the methodology.

Continuation or change is a fluid process.
We can start at any moment. (now).
We are part of it, (whether or not we know it), until we choose not to be.

As the market does not know we exist, how we stay fluid,
seems more about what’s going on in our head than what’s going on in the market.

“The eye of the will is impure
and makes for distortion.
Only when we want nothing,
only when our gaze becomes pure contemplation,
does the soul of things…the very beauty, open to us”
Hermann Hess.

Here's to Spydertrader..
"Dom di dom ..."

FilterTip

 

[Spydertrader]

Quote from 8833broc:

Bar 4 I would of definitely called a FTT.

Not possible. Bar 4 (red bar just above the Pink #2) represents a Volatility Expansion. One cannot have a VE and an FTT on the same bar.

Quote from 8833broc:

Bar 5 I would of definitely thought I was wrong about bar 4 ftt.

Bar 5 provides yet another Volatility Expansion.

Quote from 8833broc:

Bar 10 I would of been on FTT alert monitoring the next bar for confirmation of the FTT.

Bar 11 forms the FTT of the Down channel and the Point Three of the Green Up Channel. You need to 'picture' in your mind's eye where and how a Point Three channel forms. Such a mindset provides the basis for anticipating the arrival of Point Three formations vs. reacting (what most people do) to what one thinks is an FTT.

Quote from 8833broc:

Am I thinking correctly along the lines of Continuation vs Change ?

Close. You still need to alter your mind set into an anticipation mode. A trader of these methods develops a hypothesis on each bar (or multiple times within each bar depending on resolution level), then sweeps through the tools in an effort to locate a sufficient data set (not a single data element) to confirm or invalidate the hypothesis. Once a located, the sufficient data set confirms a decision required of the trader. The correct decision then facilitates the final step - action. An appropriate and timely action follows as required (Enter, Exit, Hold, Reverse, Wait) Wash. Rinse. Repeat - minimum 81 times a day.

Quote from 8833broc:

I am amazed that some of your flaws are not labeled as FTTs. Are your charts an "idealized" chart of what we should aspire to annotate in Real TIme or are your charts your actual RT annotations.

I make errors now and then just like everybody else. I've made them in public (See, TASR Trade Journal I, or posting to the ET chatroom, or trading live in front of a group), and I have made them while sitting alone in my office. The difference between my errors in 'seeing' the market's signals is this: In the blink of an eye I take corrective action immediately upon recognizing my error. Most people who have seen me trade live comment on how I simply do not care about a 'screw up' at all. I don't hope things will come back in my favor. I don't wish things to turn out as expected. I simply correct the mistake. Sometimes these mistakes result in small (2 -3 tics) losses. Occasionally, these errors result in small gains. Normally, the errors result in a wash (break even). The key to the whole thing is to know that taking the corrective action is going to result in not only placing me back on the right side of the market, but also, the 'right' side is going to reward that choice by moving sufficient distance to cover my error's loss and provide some extra profit as well. This whole process stems from a mindset which says (in part) mistakes, errors and screw ups don't reflect on the quality of one's character. Failure to immediately correct one's errors, mistakes and screw ups does reflect on one's character. Such advice remains true in all areas of life - not just trading.

On the other side of the coin is when I really have the day nailed down. On these days, I have the Gaussians and Channels drawn in well in advance of the market. On these days, Price turns exactly on the tic I expect. Most days fall in between, but do not be amazed at how I do not think every bar is an FTT. I've already posted (within the last 3 months) how to go about 'knowing' what must come next. Time to practice it is all you need.

But forget what I do. Focus solely on your own development. Your goal should not be to trade like me (or some other successful trader). Your goal must be to learn to differentiate between continuation and change on every bar during the trading day. Once achieved, it turns out that you then already trade better than the majority of people on the planet.

Quote from 8833broc:

I am slowly getting it.

Take all the time you need. The market has no plans to head off into the sunset and vanish. Even if it did, we can always find another market. No competition exists between individuals attempting to learn the methods presented here. Time is the one variable which everyone has, but which few have in common. Some folks grasp the whole concept in a few hours. Others require years to mentally wrap their minds around the whole enchilada. How long a trader needs to fully prepare themselves and build a strong foundation remains an individual choice. The market will be ready and waiting whether the trader comes prepared or not.

Good Journey to you all.

- Spydertrader