Spydertrader's Jack Hershey Futures Trading Journal
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Quote from gooch87:
Here is the way I see them. I may be wrong on this and look forward to correction.
Nice gooch. This is the point I'm trying to make. When you have the proper shift in volume along with these little "pockets" between the price bars and the RTL, you know a 1 and 2 have been formed, and are waiting for confirmation of point 3.
Spyder's chart shows the down-channel as just a tape, and ivob also thinks the same way.
Looking closely, there is a guassian shift in the volume (albeit low volume), with the appropriate 1-2-3 triangle formed. In keeping with a fixed resolution, we have our first up-channel, followed by the second down channel. The up-channel one level of resolution can be drawn in, but if we're trading on our given resolution, I don't see how it adds any useful information to our decision-making process.
As far as your point about volatility expansions, my view is to be careful about this. You can have a tape expansion without forming a pt. 3 channel. this is usually marked by a slope or "pace" increase in the tape. However, a point 2 will only form *after* a subsequent pace decrease or reversal of tape direction takes place, with dying volume.
RT
when I was starting to learn this method, and code my auto-tapes, one of my errors was assuming that a point 3 channel had to have an up-down-up tape sequence, or the inverse. I then started noticing that it is in fact more subtle than this. What I found is that not the *sign* of the slope, but rather, the relative magnitude of the slope of each tape matters.
For example, an upward pt. 3 channel could very well have an up-down-up tape sequence. But a complete change in sentiment is not required. We can have stalls or pauses in sentiment, meaning the market knows where it wants to go, but needs to spend a few bars gathering more strength to get on its way.
In this way, our non-dominant traverses could be flat, or even in the same direction as our dominant traverses! In other words, we could easily have an up-flat-up sequence, or even an up-less up but still positive-up sequence to complete the channel. (see attachment).
I think when some people see a progression of bars that make higher highs and higher lows (or inverse), they reach the conclusion that the bars are just one long tape. However, whenever there is the 3-step change in the PACE of the progression, the volume confirms with the appropriate gaussian formation.
Some upward pt. 3 channels never have zero pace or pace that opposes the direction of the dominant traverses. A lot of these channels look very slim, and can be easily be mistaken for tapes. But if one adheres strictly to the level of resolution one has chosen to operate on (extremely critical IMO), then one must be careful not to mix tapes with channels and vice versa.
RT
For example, an upward pt. 3 channel could very well have an up-down-up tape sequence. But a complete change in sentiment is not required. We can have stalls or pauses in sentiment, meaning the market knows where it wants to go, but needs to spend a few bars gathering more strength to get on its way.
In this way, our non-dominant traverses could be flat, or even in the same direction as our dominant traverses! In other words, we could easily have an up-flat-up sequence, or even an up-less up but still positive-up sequence to complete the channel. (see attachment).
I think when some people see a progression of bars that make higher highs and higher lows (or inverse), they reach the conclusion that the bars are just one long tape. However, whenever there is the 3-step change in the PACE of the progression, the volume confirms with the appropriate gaussian formation.
Some upward pt. 3 channels never have zero pace or pace that opposes the direction of the dominant traverses. A lot of these channels look very slim, and can be easily be mistaken for tapes. But if one adheres strictly to the level of resolution one has chosen to operate on (extremely critical IMO), then one must be careful not to mix tapes with channels and vice versa.
RT
In my opinion this is not the way to stay on the right trading resolution. Tradable channels / tapes are those that have their dominant traverses showing volume increase, and their retraces showing volume decrease, as long as they meet the minimum pace for your expertise.
The sentiment fractals are independent of your chart resolution, which acts as a digital filter, and, from all the fractals that contribute to the price's action, only those that have a frequency at most half of the chart frequency can be observed.
Jack talks about having 30-40 SCT trades a day, which is 81, ES 5 minute, bars. This means an average of one trade every 2 bars (or 10 minutes). This correlates well with transmission theory that states that you need a sampling frequency at least twice the highest frequency of the signal, in order to fully recover the signal. Practically a 5 minute chart doesn't give you enough information to trade faster (more often) than this.
The sentiment fractals are independent of your chart resolution, which acts as a digital filter, and, from all the fractals that contribute to the price's action, only those that have a frequency at most half of the chart frequency can be observed.
Jack talks about having 30-40 SCT trades a day, which is 81, ES 5 minute, bars. This means an average of one trade every 2 bars (or 10 minutes). This correlates well with transmission theory that states that you need a sampling frequency at least twice the highest frequency of the signal, in order to fully recover the signal. Practically a 5 minute chart doesn't give you enough information to trade faster (more often) than this.
Umm... yeah... Just what he said.
J/k. Actually, I'm an EE so I understand what you're talking about (it's called the Nyquist sampling theorem).
What I don't see is how that relates to trading.
Basically my argument is simply this: We create channels from tapes and price formations. From here, higher-level channels can be created by using these pt. 3 channels as legs.
As was mentioned before, we only want sufficient information to be fully informed for upcoming decisions that need to be made.
If one chooses to trade the pt.3 channels formed from the price bars, we stick on this resolution and look for information pertaining to this resolution only.
The higher-level channels give further context about where the trend is on a more macroscopic level, but that doesn't give us what we need to know. For myself personally, trading on the resolution of tapes and the consequential pt. 3 channels leaves me looking for FTTs or point 3s at this point in my training.
RT
We may say the same thing, but I consider irrelevant if we call them channels or tapes. If a tape satisfies the Jokari window then it is tradable on my chart fractal. If a channel doesn't satisfy it, it isn't tradable.
To make the most money, you want to trade the fastest channels / tapes you can handle.
To make the most money, you want to trade the fastest channels / tapes you can handle.
Some upward pt. 3 channels never have zero pace or pace that opposes the direction of the dominant traverses. A lot of these channels look very slim, and can be easily be mistaken for tapes. But if one adheres strictly to the level of resolution one has chosen to operate on (extremely critical IMO), then one must be careful not to mix tapes with channels and vice versa.
The third figure is the "hockey stick" I was referring to the other night and if the Jokari relation is to be fulfilled, one would predict a move down at the end of the second traverse. On the other hand, the Jokari does appear to fail sometimes and so it is of interest then to see if there are sets of conditions where one can reliably predict a failure. The second figure is a lateral formation (LF) demonstrating the "in from below, out from above" condition and being a stall, the LF would also suggest the possibility of a FTT in the not to distant future. So again interesting vis a vis anticipated price activity.
Isn't the "tape vs channel" thing simply based on Jack's definition of what a tape is? I'm not saying that this is not of consequence but rather that it is constructed not derived, but I don't know that with any certainty.
lj
The third figure is the "hockey stick" I was referring to the other night and if the Jokari relation is to be fulfilled, one would predict a move down at the end of the second traverse. On the other hand, the Jokari does appear to fail sometimes and so it is of interest then to see if there are sets of conditions where one can reliably predict a failure. The second figure is a lateral formation (LF) demonstrating the "in from below, out from above" condition and being a stall, the LF would also suggest the possibility of a FTT in the not to distant future. So again interesting vis a vis anticipated price activity.
Isn't the "tape vs channel" thing simply based on Jack's definition of what a tape is? I'm not saying that this is not of consequence but rather that it is constructed not derived, but I don't know that with any certainty.
lj
Two points. I think throughout this journal, what has been under-emphasized is the third component of non-dominant price traverses.
It's been written ad nauseam that non-dominant price traverses can explicitly oppose the *direction* of the dominant ones, or can display overall lateral movement. The third possibility is that the traverse continues in the direction of the dominants, but with slower pace.
If one is to trade at a level where a stop and reverse is ordered each time a leg (traverse) completes, then more context is needed. As it is, it is very difficult to trade lateral traverses profitably. My stance is that fading the dominants when the non-dominant remains in the same direction will simply cost you money.
Dominant traverses will always have defined pace magnitude with either positive or negative sign. Non-dominants will require sufficient context (I still am not sure what it is) to avoid staying on the wrong side of the market while the point 3 is being formed and price progresses back into a dominant traverse.
The second point is about the definition of tapes vs. channels. My perspective on tapes is that they are created by two bars that make higher highs and higher lows (or the inverse). Future price bars must not violate the project RTL of the tape for the tape to remain valid. Once the RTL has been violated, we know that a pace decrease has occurred in the progression of price. As for channels, as I pointed out, a progression of fast-slow-fast or fast-reverse-fast must occur for a pt. 3 channel to take place.
RT
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