Spydertrader's Jack Hershey Futures Trading Journal

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quote from bundle "In bar to bar mode (distinguishing change and continuation) I have created a rule of thumb that is still in the making. I'm wondering if I've invented something that will lead me astray, or if this has valididty."


Bundle, that makes sense to me. Further observation of this will prove it's validity. These type bars used to send me for a spin when trading CO methods. Using the YM sometimes is helpful. Lately the only time I look at the bid-ask volume is on these bars, I have found it very helpful in identifying these as continuation or change. This is also still in the observation mode.

As for the syllabus. I welcome and look forward to any new tools, but am still incorporating some of the recent past ones.
One of Spyders recent posts mentioned the next part of the syllabus as expert level tools.
I am a long way from that but realize now the importance of bringing these new tools in at a beneficial time, which will be different for everybody. The flaws for me will be easier to fit in than some of the more recent ones. It seems like flaws have been a key object in the annotating for a while.

At this time I don't take much from the Dom, T&S or tic charts. I understand the value of these and slowly pick things up, only a few AHA moments with these tools. I have seen substantial walls at turning points, most of these ATF have been major turns. These are walls that appear of 3500-4000k and don't budge. The majority have been at lows, not sure if it is a coincidence of the timing of observations or that they appear more at lows.

I wasted a lot of time not following Spyder and Jacks advice from the beginning regarding just observe and annotate until you get it. I tried trading it, simming it, watching and trading old methods..... After I stopped all that, things started to click. I get lost occaisionally in the low volume chop. When I do place the occaisional real time trades, past mental experiences are still a struggle. I exit too soon, sometimes feel anxious(but less and less so) and know it slows the learning process.
 
Quote from Spydertrader:

A. Hitch
As dominant traverses proceed the price change there is, at first, an almost continuous
advance. Therefore, from bar to bar, the offsets and the bar length repeat one after
another. Progress can soften after a period of time and it shows up as a momentary one
or two bar repeat. Repeat means that consecutive nearly identical bars show up. The
bars often do not have the volatility of the prior advancing bars. Volume will flag
somewhat preceding this phenomena. Then the price resumes its prior advance. The
market has momentarily caught its breath, so to speak.

B. Dip
Dips are like hitches only they are more pronounced, meaning that a small noticeable
retrace for one bar may occur. The corresponding volume flagging is more pronounced.

C. Stall
Stalls are longer hitches and the volatility may not be less than prior bars. Picture it as a
definite pause and dwell period that occurs not too close to the left fractal channel line.
Volume will oscillate somewhat by flagging and then refreshing and flagging again. snip . . .
More...

Spydetrader,

A few questions on the descriptions from the Channels for BW pdf to add some clarity:

Hitch - the description mentions a repeat, consecutive identical bars. Most hitches as I understand it are usually a single 3 or 4 tick wide bar with low volume. Definitely not a repeat of the prior bar (see posted hitch pic on previous page). Is there something I'm missing here?

Dip - When it refers to "volume flagging is more pronounced", is that compared to prior bars or is it comparing it to hitch volume since it started out comparing dips to hitches? (I believe it's the former)

Stall - volume flagging, refreshing and flagging again. Is that within the same bar, a PRV reference?

Does a stall need to traverse the same bar more than once - example open near the high, go to the low of the bar, then retrace and close back near the high?

Thanks - EZ
 
Quote from Ezzy:

Hitch - Is there something I'm missing here?
More...

Jack's definition of a Hitch is different than my own.

Quote from Ezzy:

Dip - When it refers to "volume flagging is more pronounced", is that compared to prior bars or is it comparing it to hitch volume since it started out comparing dips to hitches? (I believe it's the former)
More...

To prior bars ...

Quote from Ezzy:

Stall - volume flagging, refreshing and flagging again. Is that within the same bar, a PRV reference?
More...

Yes. You'll often see a stall reverse within the same bar.

Quote from Ezzy:

Does a stall need to traverse the same bar more than once - example open near the high, go to the low of the bar, then retrace and close back near the high?
More...

A stall doesn't need to do so, but it often does.

- Spydertrader
 
Flaws and Internal Formations

Before we proceed toward a discussion regarding Internal Formations and Flaws, let's try to clear a few items off the table.

First, one cannot expect to know immediately upon the open of the bar whether or not one sees an FTT or a Flaw. Almost all Flaws start out looking exactly like an FTT. Only with the passage of time can we see the subtle differences which tell us, "What wasn't that?"

Second, forgotten among the many discussions and side debates of this Journal is the fundamental concept which drives all trading of these methods: Volume and Price are inexorably linked to one another. The methods both graphically and literally show the changes in market sentiment over time. While channels do provide context, and Gaussians show the ebb and flow of volume Pace, everyone needs to evaluate every post, every tool, and every bar through a lens which differentiates between continuation and change.

With that said, we can now begin.

We need to understand at a fundamental level just what 'flaws' represent. To the Beginning Level Trader, flaws provide an opportunity to hold through periods of uncertainty. To the more advanced level trader, 'flaws' provide additional opportunity for profit.

Why the disparity? The answer is simple: Time. Beginning Level traders have not yet had enough Time in front of a computer screen to 'see' the opportunities presented by 'flaws' and view these areas as confusing. I do not mean to suggest a certain quantity of Time flips a switch allowing all a great insight into the inner workings of market microstructure - far from it. What I am saying to you is, lost in all the sound and fury is the meaning behind the bar formations - continuation or change? It should not matter if the change is an FTT, flaw or formation. Can you not see how using Price and Volume in combination alerts you to what must come next?

None of this is new stuff. It's all been posted before, in one form or another, on one web site (or USENET Group) or another since 1998. But let's see if we can't try to look at these things from a different point of view.

Fundamentally, Flaws represent a minority opinion in the market place. Depending on the size of the trading accounts involved, and the conviction of the traders controlling those accounts, the market will react in several, ways.

The Hitch represents only a handful (compared to the entire market) of traders who have decided, on their own or in collusion, that the current trend has run its course. This small (again in relation to the overall market) throw their weight, influence and money head first into the current trend. This activity (and it does not matter at this point of the trades represent a counter trend [reverse] move or simply an exit from the market itself), briefly stops the current trend (temporarily), but this particular group of traders doesn't have the numbers (or economic clout) to bring about a trend reversal on their own. They need others to follow their lead. Since nobody follows, we see very little range in price and significantly less volume than the previous bar. The result: a temporary shift in market sentiment and a very small range with respect to Price. Since nobody followed, the temporary trend stop (or small reversal) ends, and the dominant trend resumes along its previous pathway.

The Stall, on the other hand, has a few more people behind the move. A few larger accounts, a little more weight, increased clout and cash, by the use of which, this group hopes to influence the market. While the stall group does manage to push Price a little further than The Hitch Group, they too find nobody willing to follow just yet. As a result, we see a little larger Price move (when compared to the Hitch), but very little volume (normally) when compared to the previous bar. Of course, just like the Hitch, the market resumes its previous course.

I'll continue with this post tomorrow, but for now, look at the last chart posted. Study it long enough and you should be able to see differences (compared to what you already know about adjacent price bars) which allow for the differentiation between continuation and change.

Good Weekend all.

- Spydertrader
 
Continued Flaws and Internal Formations

With Hitch and Stall understood, we move to the next example of temporary change - The Dip. Again (as with Hitch and Stall) a minority of market participants think, feel, believe they know, the current trend has run its course, and the time has come for the market to head in the opposite direction. This group of traders has more money, economic clout, and influence (due to their relative larger numbers) than either Hitch or stall (Hitch < Stall < Dip), but not yet do they have the needed influence to motivate enough 'others' to follow. As a result, The Dip group effects change for a longer period of time than either Hitch or Stall, but The Dip Group does not yet have enough economic clout to 'change' the minds of enough individuals just yet and alter (longer term) market sentiment. Because their influence is greater than either Hitch or Stall, we see in the charts a longer period of influence (often 3 to 5 bars). Price pulls back forming a 'hat' or 'bowl' (depending on direction) and Volume drops off significantly as well (usually across several bars). If a Dip last long enough, one can often see a Dip end with an FTT - especially when watching a small traverse (limb or small tree).

As you can see with these three types of flaws, each represents an ever increasing number of market participants who feel the time has come for a change in sentiment. It does not matter at this point if an individual participant chooses a reversal or an exit to articulate their respective view.

The HVS, on the other hand, represents a dynamic slightly different than the previous three examples. With the HVS, you have a near 50 / 50 split with respect to how the market participants view the current trend. Support / Resistance, Long / Short, Bull / Bear, Up / Down, Good / Bad or Dog / Cat - it does not matter what terms one uses to describe the environment. What we see during the HVS is a battle between the two groups. "Things are great!" / "No, they suck!" "The market is gonna' make new highs!" / No, its going to crash worse than 1987!" "Less filling!" / "Tastes Great!"

Back and forth, back and forth until one side capitulates deciding neither their opinion nor their capital can overwhelm the opposing group. Occasionally, one side gets a bit tricky and raises the white flag, regroups and comes roaring back a few tics later in the game. We have no need to worry about this trick as we see it play out in advance on the DOM (at the large walls). The important take home message here is we can spot an HVS by the decreasing levels of oscillating volume (red, black, red etc.). Price sometimes creates a lateral, but other times does not. One can trade through an HVS situation using expert level tools.

CCC brings about another type of situation that differs entirely from the previous 4 examples. During periods of CCC, the market participants have chosen to not participate. They head to lunch, they leave for The Hamptons or they simply decide to wait until some scheduled News Event takes place (Fed Day). This lack of participation by the key players creates a scenario whereby noise has a far greater impact on each individual bar than during any other periods of the day. Risk has increased to the individual trader, and we, as students of these methods, often choose to exit this type of environment. We see this scenario manifested in the charts by flatlined price combined with super low (DU or VDU) level volume.

More later .....

- Spydertrader
 
Two serious questions:

If you can't know it's a flaw until after the fact, what good does it do you? Please forgive the derisive sounding nature of the question, it's not meant to be. I actually feel a bit foolish taking so many months to be able to even realize it's a question I've had unconsciously all along. I mean, how does classifying a bar as a hitch, a stall, an HVS, or a zippity do dah help the trader? Especially in light of the fact that a trader can't even know it was a flaw until after the fact, thus making it unknown to me, even in principal, how one would trade it as a flaw unless you knew it was a flaw ahead of time.

What must come next? I'm afraid I've been pulling the same stunt I've tried to so often before. I'm reading this as "what must come next, unless something else happens". Is this true or am I still road blocking myself?

I could post many more such idiotic questions, these should suffice. I've just reviewed the 2 1/2 hour live trading session from Tucson. Since then, I've added much knowledge to my personal data base, but my ability to have any level of confidence in what I'm doing hasn't moved. Everytime I learn something, apply it, and see it work; is followed by a period of utter confusion. I simply cannot get the tools to work consistantly in a co-ordianted fashion.

I understand that more time is needed. I also know, from so many varied life experiences, that the definition of insanity is doing the same thing expecting different outcomes. Continuing to view the market throught the same lens (my current filters) and expecting a different result is how I've felt for quite some time now.

I am as yet unable to even imagine how one would trade outside of a probability mentality. The way I'm approaching the analysis is "what's most likely to happen", as when I use WMCN, I'm wrong even more often.
 
A couple of months ago Spyder gave a tip here -- most of the FTT are preceded with a Flaw.

My extrapolation: The first slow down you see, most novice will be asking: Is this a FTT? I will be asking: What kind of Flaw is it?
 
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