The Stochastic Indicator

[jack hershey]

Quote from dawg:

Volume falls off (see the Stoc go to 50%) and price centers. as volume kicks back in (do porrata or one min observation ) and the end of the day effects are in play from here on out. These three end of day events always happen and whatever contemporary volume is there will always sustain these events.

If you have read this far you better notice that you are not an expert at all. The message here is that there are a lot of stuff to learn to pull down the money all the time.

Qusetions:

1. What do you mean by contemporary volume.

****The prevailing volume for the last three events: mutual managers leaving, day traders shutting down and bottom fishing starting up.

2. Are talking about end of day trend changes going throguh this process: volume decreases---->stoch goes to 50% (which stoch are you refering to?)------>volume picks back up and drives price

***** don't connect 50% to end of day. The 50% on the 14,1,3 was just a dwelling point. This kind of event is ALWAYS a possibility. It can always be something that can happen.

Zillions of people trade out of the 20 or 80 on a hope that there will not be a dwelling point at 50%. some day i will go back with a few people who have records and they can see that a lot of failures to BO are exactly because the SToc goes to 50% and sits there before going back into a trend.

Please follow just the volume description as a separate sequence.

3. What does FBP mean? (edit: Flat bottom pennant. go it. saw it in an earlier post)

Yes I will start using the different pace formations from here on out. We will focus on 5 min primarily and slip up to 15 min as good trends appear to understand formations. Then i will use the 1 min to pick off about four or so formations that set you up for logging stops for C&R purposes.

You can google a little and see that all these topics are mostly untouched.

what happens is that you build a signal vocabulary and that leads to have sequences of signals and finally swquences in a tree that tells you waht trend possibilities are being eliminated. Once you see sequences then you are at KISS.

Imagine slipping out of fast paces right into slalom reversals cleaning up point after point just like going down a black diamond trail or sweeping from side to side in a glider at ship speed when an updraft is racing up a canyon.

By then we will just have to focus on the partial fill problems of linked reversals.

Thanks.

thanks for your Q's

 

[FRuiTY PeBBLe]

Quote from jack hershey:

Here is more bytes worth and the price is in right place

Jack or someone, please help me out here.

In Jack's chart for 2/27 (http://www.elitetrader.com/vb/attachment.php?s=&postid=210817), I follow all of his trades except one. At 12:10 Jack has a vertical green line on his chart. On my chart, this bar would have been a short entry because the stochastics were below 25 and the MACD histogram was at -.42. At 12:20, the fast stochastic was exactly at 25. If it must be above 25 to exit, then you would have exited at the 12:25 bar. So my point is, you'd either be out at 12:20 or 12:25. However, on Jack's chart, he drew a long green horizontal line to the 15:30 bar. I don't understand this at all. What does the 15:30 bar have to do with this trade when you would have been out at 12:20 or 12:25?

Someone please explain.

F. P.

 

[FRuiTY PeBBLe]

Here's a chart explaining what I mean above:

 

[FRuiTY PeBBLe]

I think I didn't understand that one trade in Jack's chart because he threw in an iceberg trade? Am I correct?

I understand the beginner trades 100%. However, as smart as I am, I don't understand icebergs. Can someone explain the icebergs again?

I didn't put too much time into learning icebergs yet because Jack said we should do beginner trades until you triple your account or something. So since I have not done that yet , I should not be doing icebergs, correct?

F. P.

 

[dawg]

an iceberg trade is for an intermediate trader, so you are correct.


You enter a short when the stoch go below 25 and you do not exit until they cross over the 75. This trade is for a slow trend which is why you do not exit when the stoch leaves the 25 area. So you have two basic trades rockets for beginners and you would add the iceberg trade as you become an intermediate and have two trades in your arsenal.

If i have anything incorrect i am sure jack will correct any mistakes, but i believe that its right.

dawg

 

[FRuiTY PeBBLe]

Quote from dawg:

an iceberg trade is for an intermediate trader, so you are correct.


You enter a short when the stoch go below 25 and you do not exit until they cross over the 75. This trade is for a slow trend which is why you do not exit when the stoch leaves the 25 area. So you have two basic trades rockets for beginners and you would add the iceberg trade as you become an intermediate and have two trades in your arsenal.

If i have anything incorrect i am sure jack will correct any mistakes, but i believe that its right.

dawg

Thanks, dawg.

I'm just curious...

1) Is there a time to do rockets and a time to do icebergs? How do you know which to do (assuming you're at the level to do both successfully)? For example, you said icebergs are for slow trends. How do you know it's time to trade slow trends?

2) For the iceberg entries, do you know if the +/- .4 MACD histogram applies for them, too?

3) For the iceberg exits, do you exit when ONE line is above 75? Or, do you exit when BOTH are above 75?

FRuiTY P.

 

[dawg]

not sure. jack needs to clarify those things.

You enter a trade and you have no idea whether it will be a rocket or an iceberg. Not sure how the internediate handles it.

dawg

 

[jack hershey]

Quote from dawg:

not sure. jack needs to clarify those things.

You enter a trade and you have no idea whether it will be a rocket or an iceberg. Not sure how the internediate handles it.

dawg

Super observation. This is a real stickler for beginners. they have to exit. this is where the wash trading get to be so practical.
Ice bergs are slow trends and beginners have to stay out of these.

It must seem backwards but the rocket is the "easy" money and in the slow trend it is not so easy to make slow money.

what seems to happen is that by doing lots of wash trades and always taking action just bt rote, you get to a place where you have beat the emotions which freeze your transition from beliefs to behavior. Until you can act ( and act in a timely manner) you cannot acquire confidence in the simplest things.

The "of well, I knew that" of paper trading is incidious in many ways. The antidote is real wash trading. As you look at the daily grind, you become aware of the fat thattrading costs become negligible. these are just "movie ticket things" I. E., the "price of admission.

Wash trades lead to trading the right side of the whiplash.

rockets teach you how the market becomes conjested at the end of a rocket. It takes being and intermediate to learn to trade slow trends; they do not always end in reversals but often they do.

We alwqays have to remember that Stoc is a "relative" indicator. It will always use it's full range of values because it is tuned to just the vlaues that are in the calculation. In flat times it still will go to extremes. This is where the rocket comes from.

Intellectually many people cannot rise to the occasion when dealing with relative indicators. In fact, there are many "non signals" that are used by practioners who have not gotten to a point of making a lot of money. What they do is continualy get into places that will not turn out well.

You can see the back tester's dilemma showing up a little bit so far. as his market continues to be mostly flat, we grind away and have daily opportunities to make a small amount of money.

this am, yet another time a rocket went into congestion and we got out as the congestion began.

Think about it. Wouldn't some of you take the crossing into the tape as a signal to got short. Well if you did and didn't know how o trade congestion on the right side of being whipsawed... soon you get whipsawed by getting exactly out of phase because of how most people handle the interval between the two trends (fast and then congestion laterally). There is no interval. You must reverse at the peak. People wake up at the end of the retrace off the peak and "hope" that the trend resumes. There is no indication nor signal that is "saying" this at all.

Congestion is within the tape (20/80). It is simply a weaving to approach and be centered on the 50%. The weave is wide in slow markets (flater ones) and the weave is narrow in faster ones. All of this is extinguished (diminished, really) when the equations move out of the former trend territory.

By reading this and relaxing you will be going through a process of absorbtion. All these thing can become part of your rational thinking. People who continually crap on me like bdixon, j0m0, and daniel, are people to read closely so you can discern what they are missing in their approaches. They, naturally, look at what I say as serving one one the purposes they assign to me. On the otherhand, many people are going to find out quite thoroughly that I can put myself in almost anyone's place simply because I have witnessed, through mentoring, for years and years how people behave and are programmed. Going from belief to behavior is oftern fouled up by past experience. Getting to a balance on being able to go with the flow of making money is not easy and takes effort. I observe the effort of people to find out where they are. by going to that place I can then be supportive of getting to a better place.

bdixon doesn't see the three sequential parts of congestion, convergence and centering. He doesn't see that centering takes on a formation that isone of three: symmetric, FTP or FBP; nor does he see this biases the BO. He sees the quaint "chop". Others are looking at how it is continually making money rythmeically until the centering. If you can't see centering you get your toilet flushed on the BO at least time if you are still in the trade. Experts catch the BO with bracket entries.

just read this and get to a place where it is helpful and relaxing to you. It will come into play as we soup up the thread. right now we are just doubling our inital capital for the first time.

 

[FRuiTY PeBBLe]

Jack,

Please clarify something for me. From the open today, the stochastics were already above 75. I did not make any long entries because I thought the stochastics had to cross from below 75 to over 75. Since they were already above from the open, I thought I might be getting in late, so I stayed on the sidelines. Was this the right thing to do?

Please tell me what I should have done this morning since the market opened with stochastics already above 75. I considered entering when I got a MACD histogram reading >= +.4, which was the 9:40 bar.

Thank you,

FRuiTY P.

 

[Scrutch]

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