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The Stochastic Indicator
- Thread starter jack hershey
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anyways jack often about flaws and sequences when you are in a trade i have been trying to do more of this...here is some of what i had this morning...trying to see if i am on the right trrack.
jack...you talked about getting 100 pages of sequences in 15m i don't understand how i would get all sequences that quickly...i think i don't understand what you would want us to do...if you could clarify would be big help.
anyways...flaws of rocket failure and sequences of reversal:
9:45 Short Rocket Signal
s(20.83, 21.76) macd hist -.41
flaws i noted and why i would potentially reverse:
9:45 bar (1)has much lower volume (10,654) vs 9:40 bar (17,412) (2) the bar is an inside bar and did not make a new low of day. lowest 5m vol so far on the day
9:50 (1) nq breaks to a new low and es does not (2) stoch leaves rocket zone (3) my trend channel is broken (4) up volume is increasing (14,406)
9:55 (1) macd xo (2) stoch crosses 50% s(66.67,38.89)
all of these flaws points to potentially higher prices...long consideration close of 9:55 is 878.50 on macd xo.
10:00 macd hist +0.43 (good reading) vol dips a bit (12,000) but still ok.
ROCKET SIGNAL
10:05 high of day broken of strong vol (21,297)...this vol spike was significant and had me wary of exhasustion....this bar is a rocket signal s(84.38, 78.13)
10:10 looking good vol 17451 new highs in price
10:15 price/vol spike rumor of saddam (23,231) this 2nd price/vol spike had me tightening up.
10:20 small price and decreasing vol bar...make new high in price
10:25-10:40 FLAW:sideways movement of price and significantly decreasing volume and breaks my trend channel and mcd xo...potential exit time. stoch still in rocket zone.
10:45 price spike up...FLAW:make a new high by 0.25 on lower vol 15.461 (the statue comes down)...potential exit
10:50 mkt reverse on increasing vol
TREND DEF OVER macd has xo, stoch out of zone, trend line broken.
jack...you talked about getting 100 pages of sequences in 15m i don't understand how i would get all sequences that quickly...i think i don't understand what you would want us to do...if you could clarify would be big help.
anyways...flaws of rocket failure and sequences of reversal:
9:45 Short Rocket Signal
s(20.83, 21.76) macd hist -.41
flaws i noted and why i would potentially reverse:
9:45 bar (1)has much lower volume (10,654) vs 9:40 bar (17,412) (2) the bar is an inside bar and did not make a new low of day. lowest 5m vol so far on the day
9:50 (1) nq breaks to a new low and es does not (2) stoch leaves rocket zone (3) my trend channel is broken (4) up volume is increasing (14,406)
9:55 (1) macd xo (2) stoch crosses 50% s(66.67,38.89)
all of these flaws points to potentially higher prices...long consideration close of 9:55 is 878.50 on macd xo.
10:00 macd hist +0.43 (good reading) vol dips a bit (12,000) but still ok.
ROCKET SIGNAL
10:05 high of day broken of strong vol (21,297)...this vol spike was significant and had me wary of exhasustion....this bar is a rocket signal s(84.38, 78.13)
10:10 looking good vol 17451 new highs in price
10:15 price/vol spike rumor of saddam (23,231) this 2nd price/vol spike had me tightening up.
10:20 small price and decreasing vol bar...make new high in price
10:25-10:40 FLAW:sideways movement of price and significantly decreasing volume and breaks my trend channel and mcd xo...potential exit time. stoch still in rocket zone.
10:45 price spike up...FLAW:make a new high by 0.25 on lower vol 15.461 (the statue comes down)...potential exit
10:50 mkt reverse on increasing vol
TREND DEF OVER macd has xo, stoch out of zone, trend line broken.
Quote from dawg:
if it thought i sucked yesterday..the only way to explain my trading today is vomit. pure vomit...total choke fest. ugh.
LOL (a couple people at work did hear me).
dawg don't be hard on yourself it takes courage to admit that you're wrong and identifying your mistakes is the first step towards correcting them.
FWIW, I used to be/am guilty of the same sins. I got me a timer, set it to go off every 10 min when I'm trading and I do a reality check. I made a short list of the most common sins and if I catch myself about to commit one I take a deep breath and reconsider.
It doesn't work every time but it helps. I also try to glance at the list before taking entry/exit.
My trades:
#1 rocket signal #1 - entry before 15m of synch - looked like it synched already (managed to enter at the very bottom)
Short 874.50 9:44
Cover 877.25 9:53 as rocket failed
-3.25
I saw the same sequences very nicely articulated by dawg only I was waiting for point 3. Low volume on 9:45 bar didn't bother me too much as mkt was consolidating after a decline and stochs were still in rocket zone. At 9:51 it became clear that the trend was reversing but I only reversed 1.5 pt later. duh.
#2 reversal on failed rocket-5m MACD cross. x.
Long 877.25 9:53
Sell 878.75 10:02
+1.50
Chickened out as volume was low and fast stoch seemed stuck at 50. Guess I wanted to make up for the loss and lock in some profits. My bad.
#3 rocket signal, baghdad news
Long 880.75 10:08
Sell 883.50 10:41
+2.75
Stayed longer in the trade although my first channel was broken - was waiting for 2nd point 3 but eventually I buckled and sold at 10:41. That was my point 3! Was biased on the long side by the developments in Iraq, expected market to be happier about it. But he had discounted them already...
Today's sins:
jumping the gun (1st trade)
hesitant (reversal)
impatient (waiting for point 3)
biased (by news)
1m chart (watching too much)
A royal flush.
Day +1.50
Week +9.75
Attachments
#1 rocket signal
Short 862.75 10:34
Cover&Reverse 863.50 10:40 channel not broken yet, 5M MACD crossing and 1 min chart spike.
-0.75
#2 reversal
Long 863.50 10:40
Sell 864.50 11:06
10:40 5m bar turned out a VDU with BO, and break of trendline which reassured me to stay in. Rocket failed -> 10:55 VDU inside bar at , stoch hitch at 50 -> tighten -> 11:03 failed BO=FLAW -> channel broken and exit
+1.00
Day +.25
Week 10.00
Looking back, the trendlines that I drew were not really channels in that terrible chop. The trend was slower today, still on the 15m chart.
Short 862.75 10:34
Cover&Reverse 863.50 10:40 channel not broken yet, 5M MACD crossing and 1 min chart spike.
-0.75
#2 reversal
Long 863.50 10:40
Sell 864.50 11:06
10:40 5m bar turned out a VDU with BO, and break of trendline which reassured me to stay in. Rocket failed -> 10:55 VDU inside bar at , stoch hitch at 50 -> tighten -> 11:03 failed BO=FLAW -> channel broken and exit
+1.00
Day +.25
Week 10.00
Looking back, the trendlines that I drew were not really channels in that terrible chop. The trend was slower today, still on the 15m chart.
Attachments
Quote from cornholetrading:
This was posted in Dawg's journal but wanted to move it over here in case Jack wanted to comment on it.
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Quote from dawg:
Here is an idea... the channels you are drawing are really the key.. they show the turning points of the market... perhaps you should one day... try trading based on the channels alone.. w/o any other indicators except for volume?
like today instead of waiting for the 'rocket' at 10:45 i would have been in much better shape (by about 3.5pts) by getting short when my uptrend channel broke instead of waiting for a rocket signal....that is the area i need to become more comfortable in...sometimes i am afraid of getting whipped or not confident enough in my trend lines...just need to keep working on it and get more comfortable.
thanks.
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I traded with trendlines before reading some of jacks stuff and coming from my point of view much of what he has presented has been a great addition for me. I did not use any indicators before, but have found that using the indicators have been a great way to help me stay in my trades longer and usually gives me a double confirm on my trades and reversals. What I was seeing was that I was not staying in trades long enough when I traded. So the indicators give me a continued reason to stay or get out of trades.
I am still trying to figure out the order of importance I want to base my trades off of. My number one is still my trendlines, but I get confused when say a MACD crosses down yet the stochastics continue to stay over bought. Right now I just use that as a indication to be alert for a possible end to the trade and reversal and then wait for the stochastics to also follow thru for confirm. Also I am still playing with the 1 min charts which I did not look at before -- only looked at the 5 min. But it makes sense to look at the 1 min when the 5 min looks like just big bars of nothing. I am still trying to figure out how to do trades if any based on the 1 min when this happens.
Thanks for such a nice wrap up post.
I am working through a series of steps in making money. He is my thesis.
I feel that you need to start off in a simple wya and just make money on the trades that are very strong. These are rockets.
Strangely, as you make money you change as a person. I try to see where a person is and what is affecting them (adversely). We all have baggage and some of it is perverse. As this enegy is released by pringing down the curtains on the various dramas, then people apply theenergy to making money more and more copiously.
you will see humor creeping into things too. The 100 pages of sequences needed a lot of humor because it is a daughting task in reality. It can only be done as a person's consciousness improves. Some bold fragments show up. Indicators come alive and we see their formulas processing data and we adjust cooefficients to tailor them. Finally, when we see their signals we notice that the signals come in order as sequences.
By using signals to make decisions, we get to a point where we can adjust decision making by moving from regular signals to those sognals that come before (precede these).
This isn't enough though. we need to combine the individual sequences into a tree of signals. This shows interrelationships.
What do we get for doing this. No more boredom. And an extreme consciousness. I know what it's like to have a wind shear down when I am dropping down with full spoilers to land in a $100,000 glider. Decisions to turn off problems, come from finding the flaw in the system quickly. After not having your bottom on the seat comes straining a five way harness to the limit and not being able easily to move your hands on the stick and the spoile control; but you have to and using your feet is the first step to make it possible to move your arms out of their wedged positions. I'm all for IHOP but not without syrup.
You will be so amazed that you see these flaws immediately. You see them because you have a fully integrated context.
Double your money velocity 8 times. Think. You get to this money velocity by being conscious. You are truly on automatic by this time. Everyday there is a H?L; how many times the H/L spread is the optimum money velocity?
I go by plateaux to get to the place to be. climb to a level cross until you have excellent skils; scramble up the talis and find your route to the lip and slip over onto the next platueax. We take climb after climb. And the altimeter is read by out money velocity.
So the pay off is moving to anticipation; observing for flaws; having he KISS approach for each flaw.
All of this is based upon the P,V relation. Many tools come from this. Indicators signals in sequences give you fingertip control.
The best example so far of things working, is the ability of people to stay in trends. Next best is staying out of the market (This you will find, makes more money by saving it than most money velocities acheived by profits). You can see that people entering to play in congestion initally is the highest rate of losses. Loosing 5 to 7 points trying to get into the market does not teach much. Staying sidelined when there is not a strong trend is hard to learn but each time you sideline you learn more. Simply stated you do not have sequences to look at and see that there are flaws. When you do you sideline until you reach a plateau where you are usiing othr knowledge to play.
We are trying to assemble and marshal human resourses. to get to the ore and energy needed we need to close down drama after drama (all tradegies..lol..), release energy into consciousness and go on automatic.
Quote from icarus618:
Hi Jack,
Thanks so much for sharing your insights. I'm playing catch-up with this thread and would be grateful to you if you would help speed up my understanding.
(1) Please expand on your comments in your flaws summary that deal with congestion, convergence, and centering. Specifically, what do you mean by "harmonic," as in "departur[e] of the odd harmonic in the congestion, [and] the appearance of the even harmonic in the convergence"? Also, please explain what you mean by "see volatility shifting on and off in the centering." Does this shifting of volatility manifest itself in an indicator sequence or are you referring to price spiking up and down?
*** all this stuff is in sequences. The harmonics are caused by the shift from A to D. dkm, this is what makes scoring work. The nature of loosers in commodities is a "noise" phenomena. If you make a list form ET posts alone of the looser whining and traps you can see pairs of stuff. A pair is the looser type and the type of situation. for simplicity and to point fingers, look at the first time in a trend the price traverses to the right channel line. volume goes down (looser type a, and procrastination..stream of exits is going on); then the bounce and price rockets to the other side. Here you see the odd harmonic. 3 times the trend fundamental. AQll cycles look like triangular wave formations. In La palce transforms these are odd harmonic series (Sums); in the limit it is an infinite series. Haromics have three variables : frequency, amplitude and phase angle to the fundamental. So this is duck soup stuff. Even harmonics give you square wave functions. Square waves on a sloping trend carrier give you flights of stairs. Again the limit is an infinite series.
The volatility being on or off is a "noise" phenomena. Markets are operational only when there is sufficient minimum volume. The volatility is the first and major measure of sufficient volume. It is a go/no go phenomena. I appears as alternate "stalls" where one is in a larger range than the other. Most backtesting omits all of this stuff. For me to ramp up a backtester to a minimum level of performance is really an exercise. They also have all their dramas and baggage to boot and some of them even prctice curve fitting.
(2) How do you distinguish a market that is going into a slow trend (play ice bergs) from one that is entering congestion (slalom)?
*** It is a well kept secret among experts that you always play for max money velocity. The 50% line is the key signal from STOC on this. I will put in the journal three baseline posts. One for each level of trading. The basic operating rules will be there. Id you are an expert you are doing several times the H/L range per day in money velocity. This means being in the market more and do ing more reversals.
Inermediates who find an iceberg is congestion just hang in there for the band crossover. Usually this is a wash at worst. As you go through learning to make money you can't do everything at the beginning. But if you follow a riorous path you will hardly remember when you weren't really pulling it down all the time.
A lot of people are in loops. They make money and then they loose money. This is the carpenter with 20 years experience; he has a first year repeated 20 times. Look at Bob and Cathy posts. they are cyclic vis a vis making money. the particular guru under that trading stuff is not being understood beyond a given level. The loop breaker is to move to a higher level using that guru's stuff. The "guru" moniker is Bob and cathy's.
There is a major transition in investing and trading. First you have to know what is going on. Then you move to anticipation (you give up predicting during the phase of finding out what is going on). As you anticipate, you have an offset for action. At this stage, you are combining knowledge and decision making and it deals with entries primarily; the next level up is being able to detect flaws in "what is going on and anticipatory decision making. This level allows you to "see" the normal is twarted and you have to go to the cover for anomolies. Anomolies definitely make the most money and the fastest money. this is more and more a micro thing that is KISS oriented.
there are major mathematician driven effort to deal with this stuff. They get twarted because of a Macro viewpoint instead of a micro viewpoint. the jist is that they process more and more dats when they needed to just slip into a more intrusive time frame. Most people can't read or understand what I am saying. That's kewl. If a person ever asks for deeper stuff I do take the time to spell it out.
From my vantage point, slow trends resemble lateral movements especially at their inception. You've repeatedly said that congestion (along with convergence and centering) follow rockets. What is the precursor to a slow trend?
Usually another slow trend. Look at how often trend channel are icebergs and how one trend channel becomes another upon reversal.
In contrast you will see rocket driving right into support or resistance and failing in momentum (volume) the breakthrough. This is a major clue for everyone on when S and R are going to bebroken. It is not going to be going into midday.
Thanks again.
Quote from vorzo:
ditto dawg. thanks jack.
Sorry that was humor.
I posted on this two posts back this am.
I think the effort to do the work to get sequences makes more money per hour invested than any other effort.
It is a terrific use of time when ever you are bored looking in from the sidelines.
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