Spydertrader's Jack Hershey Futures Trading Journal

[The Swordsman]

I'm sure finer tools help but if you arent trading live or just started, there is no way to take into account all the tools necessary, as that will be overwhelming to start with. Just like a baseball player doesnt go from Highschool to the top ace of the New York Yankees. There is an in between period.

The market is very volitile right now, small insignificant moves are like a point, which means if you see that as insinificant, by the time you realize that insignificant move is actually incorrect identification, well the mkt has just moved even farther away. The good thing is, the moves in your favor are much larger than normal too.

I think its wrong to assume that a "wash trade" is always just .25-.50. Thats completely out of context and people at this level shooting for that when they are wrong are going to be sorely dissapointed.

Quote from bundlemaker:

Using none of the fine tools I'd say your right. But, after some late night epiphanies regarding the OTR chart in conjunction with the DOM, the only thing that could create larger losses is being slow with taking action. This assumes good enough liqidity that the market doesn't gap intraday.

 

[bundlemaker]

In furtherence of Avi 8's post, I have some thoughts on a particular genus of pt3 setup. The situations where pt1-2 and 2-3 are nice, directional traverses (tapes) seem pretty straightforward. The ones where the 2-3 is a lateral is only a bit tougher to sort out.

But, another version that occurs less than rarely, is where pt1-2 is a directional move, then a lateral forms, THEN a directional move back to pt3. Yesterday (8/15/07) provided such an example roughly between 10:30 and 11:30.

Sometime on the 10:55 bar I could see an HVS forming. The DU (relatively speaking) and inside bar of 11:20, suggested it was b/o time. My first expectation was a further move down, as the HVS was entered from above. Not seeing that initially on the 11:25 bar, I carefully observed PRV. PRV and ending volume was higher than the previous 6 bars. Yet volume was NOT as high as the red bar (10:40) that brought us in to the lateral area. Does that observation mean anything? Is there any relation to volume coming into and out of a lateral?

If not, are there any other clues that 10:25 bar was a fake out? I realize that fact that you're already looking for a pt3 is critical, but price could have continued up.

On the 10:25 bar I said "change to up trend". On the 10:30, volume was decreasing, so I said continuation up. It wasn't until 10:35 bar that I'd call change to down trend. It's just this sort of situation that perhaps Swordsman was referring to. Even with finer tools, you'd be chasing the market a bit.

 

[Spydertrader]

Quote from The Swordsman:

I think its wrong to assume that a "wash trade" is always just .25-.50. Thats completely out of context and people at this level shooting for that when they are wrong are going to be sorely dissapointed.

You appear to have defined 'wash trade' as a scenario where price has moved against you by .25 or .50 which then results in a determination of error by the trader. This is not how one determines error. Anyone who views wash trades in this fashion has completely missed the point of the entire Journal.

Wash trades are a consequence of error determination. Market volatility, point of entry, "what someone 'thinks' might happen next" have nothing to do with a 'wash trade.'

When a trader 'sees' they have made an error (either monitoring, analyzing, determining continuation or change, or in taking timely action) a wash trade is the result. Using Price alone ("Oh shit! Price is moving against me!) to determine whether or not to execute a wash trade is using a single data element and not a sufficient data set for making a determination between continuation, and change.

I hope my post provides the clarity many appear to require with respect to this topic. If not, please let me know.

- Spydertrader

 

[Spydertrader]

Quote from bundlemaker:

If not, are there any other clues that 10:25 bar was a fake out? I realize that fact that you're already looking for a pt3 is critical, but price could have continued up.

No. Price could Not have continued up - as it did not do so. Injecting probability into the discussion isn't the way you want to go with understanding that which currently provides you a challenge. Price went in the direction it could only go. Price did not go in the 'most likely' direction.

The sooner everyone begins to understand that Price heads in a direction because that direction is the only direction possible, I believe the light bulbs will start to turn on. Probability is a different game entirely. We aren't discussing probability. We want to focus on 'what must come next. If a trader doesn't have the ability to 'see' these things yet it certainly does not mean they are not there.

It all boils down to reaction vs anticipation. we should all be anticipating the events as they unfold and not reacting to them.

- Spydertrader

 

[The Swordsman]

Spydertrader, I was responding to THIS post where he used the example of one or two tick loss (which is what you said just a single data point). MY post was trying to harp on the point that focusing on a one or two tick loss is IRRELEVANT because it shouldnt be about focusing on price but rather misidentification. As a CONSEQUENCE of misidentification though, in a volitile market, one will lose more than in a non volitile market.

Quote from bi9foot:

A Wash trade is when you exit or reverse after taking a position for a gain/loss of 1-2 ticks or no gain/loss because price did not move as you had anticipated.

As for an example, you enter on what you think is a pt 3 however, it turns out that the non-dominant traverse is not done yet and you don't have a point 3. So you exit ASAP.

 

[Spydertrader]

Quote from The Swordsman:

As a CONSEQUENCE of misidentification, in a volitile market, one will lose more than in a non volitile market.

While it appears my previous post does not apply to you directly, your post here suggests you still aren't where you need to be mentally (maybe only a human hair's width away).

The longer one takes to monitor, the longer one takes to analyze, the longer one takes to decide, the longer one takes to act all contribute to the size of the loss (or gain) on a wash trade. Volatility has noting to do with it. Time represents the one constant which effects gain or loss size in a wash trade. Now, one could argue the point, "Since the market is more volatile, Price moves a greater distance per unit time. Therefore volatility does play a role." Such a statement, while correct, fails to accurately place the traders mental state in the correct place. A trader cannot control the amount of market volatility. A trader can control the speed at which they move through the M-A-D-A algorithm. My assertion simply attempts to place emphasis on that which a trade can control, and therefore, on which a trader needs to focus. 'See', Think, Decide and Act Quickly, and the volatility works in your favor. repeat the process at a significantly slower pace, and in times of high volatility, a Break even wash, might turn into a small loss wash (or even a big loss wash). As such, volatility isn't the problem. The Time needed to move through each step is the problem

I hope the above clarifies my position, and Good Trading to you all.

- Spydertrader

 

[bi9foot]

Quote from The Swordsman:

Spydertrader, I was responding to THIS post where he used the example of one or two tick loss (which is what you said just a single data point). MY post was trying to harp on the point that focusing on a one or two tick loss is IRRELEVANT because it shouldnt be about focusing on price but rather misidentification. As a CONSEQUENCE of misidentification, in a volitile market, one will loss more than in a non volitile market.

My apologies if I have caused any confusion by my explanation. I meant to explain that the usual result could be a <b>GAIN</b> or <b>LOSS</b> of a few ticks if you took action when what you anticipated did not happen. You seem to have focused on just the </b>LOSS of .25 to 0.50</b>.

In my example I said exit <b>ASAP</b> NOT when one is down 1 or 2 ticks.

I never made any reference to what type of markets this applies to, in a non-volatile market someone that is very slow in execution could lose more than a point, I guess I should have clarified that as well.

 

[The Swordsman]

I agree focusing on what one can control is the key. But the market went from an 80mph fastball to a 97 mph fastball very quickly. The time it takes most traders on this thread to react is going to be much greater than it takes you or Jack Hershey. I said in a previous post that the volitility can work in your favor when you identify a situation correctly and quickly. Because time of your reactions and thought processes is on the individual to control, I agree that we should all focus on this first and foremost. But also understanding the current enviroment is important.

Quote from Spydertrader:

While it appears my previous post does not apply to you directly, your post here suggests you still aren't where you need to be mentally (maybe only a human hair's width away).

The longer one takes to monitor, the longer one takes to analyze, the longer one takes to decide, the longer one takes to act all contribute to the size of the loss (or gain) on a wash trade. Volatility has noting to do with it. Time represents the one constant which effects gain or loss size in a wash trade. Now, one could argue the point, "Since the market is more volatile, Price moves a greater distance per unit time. Therefore volatility does play a role." Such a statement, while correct, fails to accurately place the traders mental state in the correct place. A trader cannot control the amount of market volatility. A trader can control the speed at which they move through the M-A-D-A algorithm. My assertion simply attempts to place emphasis on that which a trade can control, and therefore, on which a trader needs to focus. 'See', Think, Decide and Act Quickly, and the volatility works in your favor. repeat the process at a significantly slower pace, and in times of high volatility, a Break even wash, might turn into a small loss wash (or even a big loss wash). As such, volatility isn't the problem. The Time needed to move through each step is the problem

I hope the above clarifies my position, and Good Trading to you all.

- Spydertrader

 

[Spydertrader]

Quote from Spydertrader:

It all boils down to reaction vs anticipation. We should all be anticipating the events as they unfold and not reacting to them.

Quote from The Swordsman:

The time it takes most traders on this thread to react is going to be much greater than it takes you or Jack Hershey.

Can you see a mindset difference between these two posts?

- Spydertrader

 

[bundlemaker]

Quote from Spydertrader:

Can you see a mindset difference between these two posts?

- Spydertrader

I'm taking the bait because I'd really like to get this. I see the difference totally. Doing it is altogether a different story.

WIthout regard to all the examples I might lay out, for me, the experience is that anticapating is guessing. That's where my probability mindset enters.

I know it's not supposed to be. But a significant % of scenarios where I "anticipate", based on what I believe to be a complete data set, ends up being wrong 5 seconds later. Then I correct, but 5 seconds later, I'm wrong again. This is the barrier I face.