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The Stochastic Indicator
- Thread starter jack hershey
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I had a question about your slow trend trade #2 coming from the channel breakout. Where are you looking for an exit? I would have initially thought that a good exit would have been around 11:15/11:20 when the stochastics made a full oscillation up thru the 80 band and then back down thru the 80 band. What are you looking at to keep you in the trade longer or to get you out of the trade? You are using the MACD crossup and rocket reversal to get you in and then eventually you got another rocket signal on the long side. Then I assumed a good exit would be the end of that long rocket signal.
Also have you thought of putting all these pieces together into one document with chart examples so that people have a way to look over the material without looking thru 500 posts?
Also have you thought of putting all these pieces together into one document with chart examples so that people have a way to look over the material without looking thru 500 posts?
Quote from FRuiTY PeBBLe:
vorzo,
I noticed some people said there was an issue with some signals counting/not counting with the backtesting. What if you make trades on the close of 5 min bars only (both entries and exits)? Have you backtested trading this way?
FRuiTY
Check with blueberry, etc. The first backtesting was done that way.
you do not know just how difficult it is to be arbitrary in backtesting. It takes a very good monte carlo table... LOL...
I parsed this a little bit below. I will post a chart for today next.
Look for the ****'s.
How it works to make a lot of money ASAP is to go through mechanical levels and assemble multiples of intiial capital. To make money has less to do with the charts than the mental attitude and knowledge a person has.
People come in two basic groups. They are terrific in keeping doing what they want to do. What they need to do is have successful experiences piling up on top of each other.
One group is terrifically successful is criticising me and the methods people here are doing very well and in a disciplined manner in a crappy market. Thye do a terrific job staying in a very safe "survival" place for themselves. No risk in bitching and bullshitting at all. They are "successful". I have loads of laughs too. You can see most of them cannot keep up their pace of stuff they throw against the wall. Look at Fruitcake today, he is reaching very very far for BS to pick up by suggesting sometimes not counting/sometimes counting backtesting signals in one test or in groups of tests. His tank is running on dry at this point. Most guys got stuck on typos and grammer and syntax and clarity and length and repetition. These are all well known TA tools as we know.
I have four levels of people running along here in about 8 different markets around the wotrld. They all get experience. To day you saw that on my gragh Friday I typed where the price was not going to go on Monday. That is for your pasting convenience and so you can see happen what I typed ahead of time.
I believe that people make money (learn) if I keep tuuned to where they are. Those that post here I give first shake to; second shake is ET messages and I answer those on the thread if I can. Third shake is Email. There I look for stuff I can quickly tweek and get things fixed. I still have some emailers who won't leave 1 min.
I will post a chart for the day ASAP. The attached is for equities and it appears in another thread. It is a keeper and i will follow it up with the master blank sheet.
Look for the ****'s.
Quote from cornholetrading:
I had a question about your slow trend trade #2 coming from the channel breakout. Where are you looking for an exit?
****At max profit. Actually the market gives us the max profit.
I would have initially thought that a good exit would have been around 11:15/11:20 when the stochastics made a full oscillation up thru the 80 band and then back down thru the 80 band.
**** It did that three times during our accumulation of profits. We like watching it do that over and over. That is just a signal for intermediates that we are "makin bacon". For the beginner you leave as often as the first of two lines BO down and sideline to keep your rocket profits. If a rocket doesn't materialize, as a beginner you wash out at no loss.
What are you looking at to keep you in the trade longer or to get you out of the trade?
****We are presently using things called channels. These trends we monitor where they can be seen as "tapes" on the slowest fractal. A tape is where the channel is filled with price lines. When you are on that fractal usually you operate as abeginner.
You are using the MACD crossup and rocket reversal to get you in and then eventually you got another rocket signal on the long side. Then I assumed a good exit would be the end of that long rocket signal.
*** Good do the beginner thing for a while. You would have four profitable trades today. That builds confidence using a meachanical system. Others would have made four trades too and theirs each would make several times what each of yours did. No body lost money and each way was mecahical. Experts did three more trades today. They made better entries too so they made about 4 times the high low range today.
Also have you thought of putting all these pieces together into one document with chart examples so that people have a way to look over the material without looking thru 500 posts?
It's much worse than you think--- or actually better. I am compiling this stuff four ways fairly rapidly. I also am adding this stuff to other stuff I have piled up (about 15,000 posts) and my records for many years as well.
How it works to make a lot of money ASAP is to go through mechanical levels and assemble multiples of intiial capital. To make money has less to do with the charts than the mental attitude and knowledge a person has.
People come in two basic groups. They are terrific in keeping doing what they want to do. What they need to do is have successful experiences piling up on top of each other.
One group is terrifically successful is criticising me and the methods people here are doing very well and in a disciplined manner in a crappy market. Thye do a terrific job staying in a very safe "survival" place for themselves. No risk in bitching and bullshitting at all. They are "successful". I have loads of laughs too. You can see most of them cannot keep up their pace of stuff they throw against the wall. Look at Fruitcake today, he is reaching very very far for BS to pick up by suggesting sometimes not counting/sometimes counting backtesting signals in one test or in groups of tests. His tank is running on dry at this point. Most guys got stuck on typos and grammer and syntax and clarity and length and repetition. These are all well known TA tools as we know.
I have four levels of people running along here in about 8 different markets around the wotrld. They all get experience. To day you saw that on my gragh Friday I typed where the price was not going to go on Monday. That is for your pasting convenience and so you can see happen what I typed ahead of time.
I believe that people make money (learn) if I keep tuuned to where they are. Those that post here I give first shake to; second shake is ET messages and I answer those on the thread if I can. Third shake is Email. There I look for stuff I can quickly tweek and get things fixed. I still have some emailers who won't leave 1 min.
I will post a chart for the day ASAP. The attached is for equities and it appears in another thread. It is a keeper and i will follow it up with the master blank sheet.
Attachments
There's another beginner thread running entitled" Trading with price action." It makes a % of our yield and blows it completely on congestion by being autimatically whipsawed.
Ouropening trade is always going to start with synch or leater in a context, if any of the prior day. Tomorrow we are potentially in a real down draft.
The midday was late starting and ending. The retrace on the gap down open continued for an hour more than a usual retrace. This was trade 2.
It went into marginally tradable congestion. You would have to trade the congestion on the 1 min.
Congestion, convergence and centering occurred. Very important: The centering BO down into a failure to BO down Our volume told us this and expets would have slalomed out of this right into the BO up into the rocket the beginners took on .
The rtrace went uncompleted and this is important to see. I am asking you to look about with this commentary. The business of not just watching your ski tips and, instead, looking over the terrain you are in.
Both afternoon trends went off stronger than the inital point 1,2,3, gave you. The market really wants to perform but it is definitely tied to the cash indexes. the cash indexes are being "bombarded" by talking heads as we all see.
We are making more money per trade now. Rocket folks are feeling good about getting trends set up. we are really getting swift seeing trends end on the right lines and we feel suspicious coming to the line and we also get confirmations of bounces and also the BO's through.
Fot New Yorkers There are "nina's" like Hirshfield did in the theater section. They are VDU's before trend changes and for bounces off trend lines. Circle them on my chart today. They are "leading" indicators of one thing and one thing only: total price dissagreement among active traders. When you see a "nina" there will be action in 5 to 10 min.
Ouropening trade is always going to start with synch or leater in a context, if any of the prior day. Tomorrow we are potentially in a real down draft.
The midday was late starting and ending. The retrace on the gap down open continued for an hour more than a usual retrace. This was trade 2.
It went into marginally tradable congestion. You would have to trade the congestion on the 1 min.
Congestion, convergence and centering occurred. Very important: The centering BO down into a failure to BO down Our volume told us this and expets would have slalomed out of this right into the BO up into the rocket the beginners took on .
The rtrace went uncompleted and this is important to see. I am asking you to look about with this commentary. The business of not just watching your ski tips and, instead, looking over the terrain you are in.
Both afternoon trends went off stronger than the inital point 1,2,3, gave you. The market really wants to perform but it is definitely tied to the cash indexes. the cash indexes are being "bombarded" by talking heads as we all see.
We are making more money per trade now. Rocket folks are feeling good about getting trends set up. we are really getting swift seeing trends end on the right lines and we feel suspicious coming to the line and we also get confirmations of bounces and also the BO's through.
Fot New Yorkers There are "nina's" like Hirshfield did in the theater section. They are VDU's before trend changes and for bounces off trend lines. Circle them on my chart today. They are "leading" indicators of one thing and one thing only: total price dissagreement among active traders. When you see a "nina" there will be action in 5 to 10 min.
Attachments
Quote from jack hershey:
I had a question about your slow trend trade #2 coming from the channel breakout. Where are you looking for an exit?
****At max profit. Actually the market gives us the max profit.
I would have initially thought that a good exit would have been around 11:15/11:20 when the stochastics made a full oscillation up thru the 80 band and then back down thru the 80 band.
**** It did that three times during our accumulation of profits. We like watching it do that over and over. That is just a signal for intermediates that we are "makin bacon". For the beginner you leave as often as the first of two lines BO down and sideline to keep your rocket profits. If a rocket doesn't materialize, as a beginner you wash out at no loss.
What are you looking at to keep you in the trade longer or to get you out of the trade?
****We are presently using things called channels. These trends we monitor where they can be seen as "tapes" on the slowest fractal. A tape is where the channel is filled with price lines. When you are on that fractal usually you operate as abeginner.
As a follow up question I wanted to find out what the intermediate traders would do if we go back to your example again about trade #2. You are assuming the trader took the reversal entry in and got in around 843/844. You get points 1 and 2, but at that time you don't know where point 3 is going to be so you don't know if there is going to be a 3 point pullback or a 5 point pullback, or a complete reversal. If the intermediate trader is not getting out when this new rocket ended like the beginner trader (around 847.50) then where do they get out in case the #3 point does not form or forms after a big pullback. Are they waiting until the stochastics goes all the way back down thru the lower bands. I think above you said the stochastics popped above the upper band 3 times before an intermediate trader would get out and that is how many times it did this until the stochastics made a move all the way down to the lower band. Hopefully this all made sense.
ges and dawg,
You make a valid point that I was aware of when I started to backtest. There may be intrabar signals during the day that may ruin your profit margin obtained taking the signals that DO show up on the historical charts.
For argument's sake, let's say you trade the strategy purely mechanically, and you take all the entries. If you have 4 false intrabar signals during the day, and you have a 2 pt stop, then you would have a -$400 loss in stopped trades each day, or -$24k for 60 days/contract. Scary :eek:
But, we don't actually use stops when we trade like Jack is teaching us, we do wash trades if they don't go our way, and we have other signals to validate the primary ones. My understanding is that Jack's methodology is not supposed to be traded mechanically, but instead used as training wheels to help us understand and feel the market.
The only way to know for sure would be to write a code that would use consecutive 1 min data points as closing values for the 5 min bar. That way you'd have 5 intrabar points in your stoch plot that may catch an intrabar signal. And this would still be an approximation, you'd have to go to tick data points to be fully accurate. I'll think about a way to code the 1 min data points into a 5 min chart - any ideas are welcome.
Fruity,
I posted results for entry on bar close - return was ~ $1k/mornings, so about $2k/60 full days, or about 0.75/day. Bummer.
You make a valid point that I was aware of when I started to backtest. There may be intrabar signals during the day that may ruin your profit margin obtained taking the signals that DO show up on the historical charts.
For argument's sake, let's say you trade the strategy purely mechanically, and you take all the entries. If you have 4 false intrabar signals during the day, and you have a 2 pt stop, then you would have a -$400 loss in stopped trades each day, or -$24k for 60 days/contract. Scary :eek:
But, we don't actually use stops when we trade like Jack is teaching us, we do wash trades if they don't go our way, and we have other signals to validate the primary ones. My understanding is that Jack's methodology is not supposed to be traded mechanically, but instead used as training wheels to help us understand and feel the market.
The only way to know for sure would be to write a code that would use consecutive 1 min data points as closing values for the 5 min bar. That way you'd have 5 intrabar points in your stoch plot that may catch an intrabar signal. And this would still be an approximation, you'd have to go to tick data points to be fully accurate. I'll think about a way to code the 1 min data points into a 5 min chart - any ideas are welcome.
Fruity,
I posted results for entry on bar close - return was ~ $1k/mornings, so about $2k/60 full days, or about 0.75/day. Bummer.
ES03M simulated.
#1 rocket
Short 847.75 @ 9:47
Cover 843.00 @ 10:08
+4.75
Entry after synch was over, rocket signals all there.
PMI was reported at 10:00 but decided to ignore the knee-jerk reaction.
Then a sequence: 1 min MACD divergence -> 5 min MACD convergence so I got out.
MACD crossed at 10:15 and fast line left the area at 10:19, so using the sequence gave me a better exit price in this case.
Nice setup for a MACD reversal intermediate.
#2 rocket
Long 847.75 @ 10:56
Sell 847.25 @ 11:10
-0.50
Channel already in place with a point 3 at 10:16, entry on rocket signals.
Exit on following sequence: 1 min MACD cross down (11:05) -> 1 min MACD divergence, then below zero -> fast line leaves 80 -> right side of channel tested. Besides volume vas VDU. Could've gotten a better exit if I had waited 2 more min but didn't want a bigger loss as rocket failed.
#3 rocket
Long 852.75 @14:39
Sell 855.25 @15:08
+2.50
Entry on rocket signal, volume surge after dry-up period.
Exit sequence: 1 min MACD cross below 0 -> 5 min MACD flat -> fast line out. Besides, high retest was on low volume - 5 min up bar at 15:50.
I was tempted to exit 1 min after the 1 min MACD crossed down, at 14:58, and price tested the away side of the channel with the slow uptrend since morning, as I had it drawn (I failed to recognize the lateral channel - Jack thanks for posting the charts they help a lot). This exit would've given me 0.50 more but the rocket signal was till on so I stayed in.
#4 rocket
Short 850.25 @ 15:39
Cover 846.00 @ 16:00
+3.25
Entry on rocket signal and increasing volume.
1 min MACD crossed up at 15:46 but on low volume and 5 min MACD still looked good, so I stayed in.
Sold on cash mkt close, at 16:00. Whoever stayed in 5 more min scored 2 more points.
Total 10 points - awesome day.
#1 rocket
Short 847.75 @ 9:47
Cover 843.00 @ 10:08
+4.75
Entry after synch was over, rocket signals all there.
PMI was reported at 10:00 but decided to ignore the knee-jerk reaction.
Then a sequence: 1 min MACD divergence -> 5 min MACD convergence so I got out.
MACD crossed at 10:15 and fast line left the area at 10:19, so using the sequence gave me a better exit price in this case.
Nice setup for a MACD reversal intermediate.
#2 rocket
Long 847.75 @ 10:56
Sell 847.25 @ 11:10
-0.50
Channel already in place with a point 3 at 10:16, entry on rocket signals.
Exit on following sequence: 1 min MACD cross down (11:05) -> 1 min MACD divergence, then below zero -> fast line leaves 80 -> right side of channel tested. Besides volume vas VDU. Could've gotten a better exit if I had waited 2 more min but didn't want a bigger loss as rocket failed.
#3 rocket
Long 852.75 @14:39
Sell 855.25 @15:08
+2.50
Entry on rocket signal, volume surge after dry-up period.
Exit sequence: 1 min MACD cross below 0 -> 5 min MACD flat -> fast line out. Besides, high retest was on low volume - 5 min up bar at 15:50.
I was tempted to exit 1 min after the 1 min MACD crossed down, at 14:58, and price tested the away side of the channel with the slow uptrend since morning, as I had it drawn (I failed to recognize the lateral channel - Jack thanks for posting the charts they help a lot). This exit would've given me 0.50 more but the rocket signal was till on so I stayed in.
#4 rocket
Short 850.25 @ 15:39
Cover 846.00 @ 16:00
+3.25
Entry on rocket signal and increasing volume.
1 min MACD crossed up at 15:46 but on low volume and 5 min MACD still looked good, so I stayed in.
Sold on cash mkt close, at 16:00. Whoever stayed in 5 more min scored 2 more points.
Total 10 points - awesome day.
Attachments
Quote from cornholetrading:
As a follow up question I wanted to find out what the intermediate traders would do if we go back to your example again about trade #2. You are assuming the trader took the reversal entry in and got in around 843/844. You get points 1 and 2, but at that time you don't know where point 3 is going to be so you don't know if there is going to be a 3 point pullback or a 5 point pullback, or a complete reversal. If the intermediate trader is not getting out when this new rocket ended like the beginner trader (around 847.50) then where do they get out in case the #3 point does not form or forms after a big pullback. Are they waiting until the stochastics goes all the way back down thru the lower bands. I think above you said the stochastics popped above the upper band 3 times before an intermediate trader would get out and that is how many times it did this until the stochastics made a move all the way down to the lower band. Hopefully this all made sense.
I think everyone's views make sense. Your description of what is possible as a trend could just as easily be applied to the congestion that occurred after the end of trade 2.
We need to always be sure of what is going on and also have back up protection for our capital.
You are asking your Q's from the viewpoint of improving performance as we all see from the get go.
The most general answer comes first then we go to more details.
We look for flaws in what is going on at all times. To do this we have stepped out of the mechanical phase of trading and into the descretionary part that will elevate profits.
From point 2 onward there were no flaws, so we were in the groove. This response is not an easy one to accept. I will fill in on it in a moment.
Lets go back to the limited mechanical approach first. Beginners exit trade 1 rocket. They stay sidelined until the rocket of the trend appears. They exit it after point 2. Intermediates enter on the beginning of the rocket and do icebergs, meaning they stay in until 13:10 or so when the tape is broken on the 20 side. Both levels of trading were profitable.
Now back to your question, the what if on point 3 and its pull back. Can you now see what I meant by no flaws at this point. It will appear to you that both beginners and intermediates are protected by mechanical means. If a person is not a beginner nor an intermediate because they have made sufficient money, then we are going to conclude that their skills in seeing sequences are better than mechanical. This allows for descretionary trading such as going in on the BO of the trend or better. Better still is, for example, seeing an inside bar after the spike down (their point 1) and, further, that the prorata volume kills the short (down trend on the P, V relation). This latter consciousness allows an entry around 842 or better.
All this being where a person is, then the question you ask is going to be handled by the knowledge and skill which concludes "there are no flaws here"
You can imagine how difficult this is for a person who is trading in fear or "from fear". As the person monitors, he is SOL vis a vis what is going on. It is impossible to get to an expert level without knowing the market cold. What is required to get there trading contructs or systems that allow you to "know down cold" that construct and not be exposed whenever you have money on the line. People criticize me continually and strongly from vantage point that says they do not "get it". Books do not work for learning to be an expert. ET demonstrates that to a tee. What works is repeated success, level after level of money velocity.
We are dealing right here right now with something that is clearly the nub of getting committed to learning to be excellent on the level each person is now on. Your question tells us (you and I)what each of us has to understand in this situation. You need to know that trading mechanically is your current challenge. I need to be very conscious of where you are going to leap to next, once you get the breakthrough of making charts. You are very intelligent and it is clear to me your will get all 8 steps of doubling performance from wherever you started. The pace at which you do it is determined by how long you wish to remain in the place you are.
Imagine what it will be like when everyone knows what each of the points 1, 2, and 3 hold hidden right now. four trades today can be stretched in profits (each and every one). I admit slaloming today between trade 2 and 3 would be pushing it. But I also say that passing on it, can also be just a choice based on other factors than "can you do it".
Today was a trader's day. We see it here with quality questions on several topics and only one harranger.
Your question has an answer. I believe i gave you the best rendition by staying focussed and only slipping in a little stuff on point 1 entries (I'm actually backing into the trade 1 max exit.)
I will compile all this stuff for you people ina way that is really sophisticated clear and concise. For now what is important is that you get the experience of making money with more and more velocity. When experts start asking Q's, I will shoot stuff into the journal under the outline headings.
Like read wally and find out how he screwed up trade 2 and lost on it. Then find out why his system whiplashes in congestion, convergence and centering. How did he miss the centering bracket entry on trade 3? Why doen't he recognize failure to BO on BO's? This is same question asked two different ways. This is all price only stuff. It is good to practice some sports with one arm tied; it can sharpen you up.
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