The Stochastic Indicator

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You must excuse me, I was in Chicago interviewing for a position. I did not trade on Friday 03/07/03. This was my loss, as this was yet another day to train with.

You see, Jack is teaching us how trade, not to execute. The current market evironment has been tough, and I have noticed many executors and their systems have been failing. We have lower range days and the uncertainty in the market has lessened the swings and volatility that the intraday SP futures trader so badly needs. In this environment, it is neccessary to learn how to trade. That is...understand the changing character of the market and adapt.

A system may be valid and work for a couple of years then it stops.....why? Perhaps it still works ...but simply adapt the wave-length, cycles, slices of time to evaluate with, or simply lessening the targets and stops.

Anyway's what Jack is teaching is a simple day to day evaluation of the market and its character. It will always work! Your ability to use Jacks methods will determine your consistant "making of profit" daily.

Now while we are beginners there will be up and down days as we have trouble decerning what the market is telling us. Pay carefull attention to the open and getting into "sync" early on in the trading day...this is your key! For me this tells me if I trigger of the 50% line or not....rockets may not be strong today...It is up to me to discover and sync the wave length. Tampa's discovery of the one minute MACD to time entries was important. I will use that. Just take one thing at a time master it, learn it, oberve the other indicators that Jack has given us and try to see realtionsips. Ask "what if" questions, keep a log, write down entries with these different ideas you come up with and track them. Jack cannot teach you this.

REMEMBER DO NOT LET THE MARKET TRADE YOU.......YOU TRADE THE MARKET.

I suggest we take the focus off of getting into sync with Jack's posts and understanding HIM....it will all come as we get into sync with the market and control what it is telling us. Jack will post in here from time to time to check progress, comment, hint to future lessons. It is up to us to struggle to understand how to time all these indicators to help us synthesize the waves into managable risk/loss levels.

A pro trader....can simply put on a positon at the open and "add to", "deduct", reverse, or go flat and then start again. The point here really is not the direction....but I have witnessed pro's balance the trade with trade management to skew the result in their favor...even if they started the sync, out of time with the market. This is where your mastery of wash trades will shift in....and find your direction for you.

Here is a quick observation, then I will shut up and go through Fridays trades and post them in a later post...but these are paper trades not "actual" for Friday. Concerning opening trades, I am assuming that many use "day session" charts and not 24hr. So the opening brings a noticable gap. Now if this gap is even or a few ticks within yesterday's day session close then there is no gap. So your indicators can continue on without "syncing" them with the one minute. So you may not need to wait 12 or 13 minutes to have confidence in your lagging indicators. Friday indicated a gap...so get into sync, recognize range, and make your decisions on your rockets. What mode are you in? Will this be a rocket day? can I try to get in early and observe one minute patterns for wave length?...or perhaps will this will be an iceberg day.

Talk to you later.

Michael B.
 
Quote from ElectricSavant:

. Concerning opening trades, I am assuming that many use "day session" charts and not 24hr. So the opening brings a noticable gap. Now if this gap is even or a few ticks within yesterday's day session close then there is no gap. So your indicators can continue on without "syncing" them with the one minute. So you may not need to wait 12 or 13 minutes to have confidence in your lagging indicators. --

Talk to you later.

Michael B.
More...

Quote from jack hershey:

Today's open is a very important one to have down once and for all. Aside from the source of this mess, we need to know how to handle all opens for every day anyway. Overnight news always impacts. In this case there was profound stuff in the evening and the schedule for Friday was going to have high impact too.

The general rule is to let the market synch before we enter. This is an end effect issue for all: beginners, intermediate and advanced.
.....
Everyday is going to start the same way for us. Get the end effects out of the way. We have durations of 14, 13, 10, and 5 bars to get past from the prior day. But this is not the primary end effect; the discontinuity of data is more important as one part and the lack of agreement of cash and index is the other.
...Now just put in the picture what is done every morning at the open. Let the market synch by watching the csh and index values on the NYSE, or something you choose, come into price synch The formations on the 1 min will do this for you. This will happen coincidently after the 14,13, etc have passed to carryover from the prior day.

...
Summary:

There is never a trade within 12 to 15 mins of open. You always get out of a failure to rocket, as a beginner with a "wash" (flat) trade. Once you are an intermediate, for now, you ride icebergs until they are extinguished by an iceberg on the other side of the trade.
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feel like I am quoting the bible here, in plain english, do not trade at the opening anywhere from 10-15m.
 
Here is a quote from god (bible writer)

Now I will let you do your homework and find Jacks post here in this thread that his quote came from below:


quote

It is perfectly alright to stick to all the rules. The situation was not a gap up and it was just what looks like a smooth trend with many hour timeout overnight.

end quote

Michael B.
 
I just want to state these are "paper trade hindsight" observations. I was not at the computer on Friday to catch these moves. But I would like to share my observatons for my own help and edification of others.

I will not discuss the gap down opening....this is for Jack. His method may or may not use the statistical probabilities of gap fill within 1 hour or else! He has not eluded to skipping long or short trades built upon a bias......actually this may be very contradictive to the use of his relative stochastics use.

Between 10:10-10:15est the fast line spiked aboe the 80 line on the 14,1,3 Stoch 5 min. The shy slow D line did not rise up to the occasion, so no long entry. Note: thst was a fast move that drove that spike up ...must have been a reaction from the overnight, or the morning report "pricing in" of News/report or impending news/report. The immediate correction of the next 5 min bar and the timing tells me this was a knee jerk reaction to a morning report. Often the charts tell me something is happening and I really do not need CNBC. This two 5min bars between 10:10 and 10:20est can be taped out so that you can see the real day. (tip: do not use duct tape).

The next 14,1,3 long move on the 5min came at the 11:20-11:25est bar, instead of waiting 2 more bars(the real 14,1,3 long signal) at 11:30-11:35est. Do you want to know why the early entry? OK, I will tell you. Let's do it together. at 11:20est our open is at 823.50 and our 14,1,3 is right on our dashed 50% line. It troughed out at 11:10est with a good strong 5min green candlestick bar(retro-rockets firing and getting ready for blast off at the XO of the 50% line). At 11:20est (decision point) we were on a strong 5min MACD cross with a good MACD oscillator reading. "LETS GET IN" The Tampa 1min MACD was no help on this entry. What entry did we achieve? Well, considering that the open of this 5 min decision bar was the high and the low was 822.00, we could not go wrong! So we could get a good entry, with plenty of time. Now, when do we get out? This is tough...but if the 14,1,3 slow d on the 5min did what I think it did between 11:50-11:55est. I would be out. Even the 1min stuff(all 4 of them) would have scared me out at around 822.50. So we would have not made anything and according to the entry we would have a lost a few ticks. There is one thing that would have held me in the trade....that is the use of channels...but this is Jacks decision on when to introduce these...if he uses them at all. If anybody has any comments to the use of our current beginner indicators please comment. I must must master the use of these stochastic's together with MACD before moving up.

The 13:20-13:25est short was tough - no comment.

The 15:10-15:15est long was a sweet moc exit and Tampa's one minute MACD at 16:07est was key to the exit.

Michael B.
 
Where do I begin?

09:50 S @820
09:58 X @817.50

Bailed on a volume spike – I would have also cut and run at 10:26 on a 5M MACD cross at about the same price. However, had I stuck around for the 5M Stochastic signal...an additional point and a half...(sigh)

02:23 S @810.50
02:25 X @811.50

Stochastic signal, plain and simple.

02:31 S @809.75
02:48 X @810

I “cheated” all the way on this trade. Entered with a -.25 Histogram. Toughed out a Stochastic exit.

03:35 S @809.25
03:48 X @806.25

Bailed on a volume spike again. To be honest, profits have been so hard to come by that ANY EXCUSE to exit will do!

I did not take the 1:50 long – just did not see enough volume, and did not want to buy with a 4+ TRIN.

Bottom line: 2 wins – 2 losses Plus 3 ¾ points.
 
Quote from ElectricSavant:

quote

It is perfectly alright to stick to all the rules. The situation was not a gap up and it was just what looks like a smooth trend with many hour timeout overnight.

end quote

Michael B.
More...

Ah, but Michael... If we play by all the rules set forth for the beginners don't we need to quit looking for price, volume and drop back to the 80/20 line? I'm sure that all this comes together here but the rules were specific as to condition 1 and condition 2 being true, then enter with condition 3 and exit with condition 4. Piece of cake... ? ? Course a lot of the posts made it pretty clear that we were allowed to cheat in this way or that, but how far can we take the cheating without reverting back to the way we were trading before?

Tampa, I thought this was supposed to get a bit easier as we went along. I had to do some field work today (maybe tomorrow as well) so I did not get to struggle all day for the short side of 4pts. That's got to be frustrating...

I keep reading the rules and the posts and still think there is something that we are overlooking. Yet when it works, it works well.
 
Quote from tampa:

Jack,

...what happened to the "tampa fix"?
More...

Trend Paces.

After starting with an trading basis composed of several tenants to assure continuing capital appreciation, the tasks expand as proficiency is attained.

For those who are used to a return in their investments based on prior experience, two tasks appear: learning about this approach and integrating the appropriate parts into your existing performing system.

Where we are headed is in the beginning of the journal. Where we are is getting down about four of five things a week as time progresses.

Recently we added a measure to handle the difficulty involved with staying in a trade longer to be able to derive more profits. This involved finding three points to establish the trend channel. Point 1 is usually in the prior formation (comes first in time) and point 2 tends to define the width and volatility of the channel. Finally point 3 shows up on the same side (right side of the forming channel) as point 1. Points 1 and 3 form the side of the channel from which, at the end of the trend, a breakout (BO) will occur. We will no use this to exit the trade if at all possible since this point is not the point of maximum profit; it is just the end of the trend.

Having this basis established we can make use of the situation. First, we see it as a beginning and second we must be prepared to modify it one particular way. Trends begin as Break Outs (BO’s) of prior price formations. The initial period is very significant and it is not perfectly sustainable. This surge settles down somewhat in almost all cases. We can use this knowledge to make one adjustment it turns out.

We do this by setting a new point 3 when called for after the initial period of the BO. Think of an airplane taking off. It climbs steeply at a relatively low velocity. As velocity is attained the angle of the climb is lowered for the rest of the length of the haul to the assigned flight altitude. This is a two step process. The initial channel is adjusted the same way to attain the trend channel width. It is a little wider and it slopes less in money velocity.

What has occurred is that we have gotten the market pace for the trend established. And we can take the flight more comfortably.

Initially I have delt with this to help people stay in trades. To get them past the place in time where they look very diligently for the answer to the question “What’s wrong here?” What is wrong is nothing and a trend is making point 3. This occurs on the first decline of volume in the trend. The lesser volume affects the momentum of the BO. When the passing time occurs, people think and think hard, then they begin to act again. The trend moves along with the price then traversing the established channel. A micro cycle of A/D has occurred in this interval. (A/D is accumulation /distribution, the buyer/ seller market control thing).

The adjustment of the point 3 that then comes up after the price bumps off the left side of the channel, is a repition of the above just later in time. By knowing and watching and adjusting, you yourself are calibrated as well to making profits more effectively. Ithappens to be that nature of ET to have a predominant flavor of very short trades , often several within a trend. This is a kind of thing that glues a person efforts together ( A sort of need to be doing something at all times.)

The best thing to do passing time is to log protective stops from price formations.
We will get to that. I choose to focus on making money for the time being and we will get to lesser goals later.

Main Point.

We have channels understood. Now we learn to use fractals to lengthen the money making period. This will be the most relaxing part of this whole trip to being rich ASAP.

There is another tape to deal with. You can determine the market pace by simply looking for the tape. Use yesterday. Go form 5 min to 1 min and see things get jumpier. Go back to 5 min , then 15 min and finally to 30 min.

Look at what happened to the channel you drew in. At some point you see that the price bars fill the channel like a child painting (coloring) between the lines. This is a “tape” at that point. This tape is a band running at a given slope as a price channel. We are always day trading off the 5 min for the time being.

The “Tampa Fix” is the process to go to the fractal that gives you a “Tampa Tape”, i.e., a tape that fills the channel up with price bars. You sit on this fractal and trade. You use the next faster to get your stop log and you “anticipate” there as well.

You can see the Stoc, MACD, volume and price give you identical sequences as before. So there is nothing to learn except to relax.

Yesterday this takes you through most of the day from beginning to end.

Big Point.

Also from now on make your channels interday ones when possible. We are day trading; we get out at the end of the day for one reason: our margin requirement is ½ that of position trading. There is a major reason as you all know.

We can resume our trade the next day using our prior knowledge and practices.
 
I cleaned up the above post on the Tampa fix and put it in the journal. I also posted about five other items there including the P, V relationship and the scoring stuff. I waited a week for whois to do his thing and he didn't come across.
 

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Re: tampa fix

I don't know that I have been "fixed" yet, but I'm working on it:)

Thanx Jack - as always there is much to digest...
 
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