I'm sure there will be a plethora of books coming out in the next couple of years. They will be recounting the author's entire careers as an era came to an end. If you want a head start here are three good ones that show how the inductive nature of the HF systemmic approach comes to an end, individually or collectively. If you have ever heard panels or seen competitive real time trading among ex GS types and expert traders, it is a sketch. The same questions get very different answers and the "training" and aculturalization of the ex GS types basically "freezes" them in high velocity money making situations where expert traders do executions as run of the mill capturing profits. read: Bass Derman and the LTCM comedy book.
Daytraders can enter orders as rapidly as anyone, and we get excellent realtime market data. Our advantage over the big boys is that they're trying to manipulate markets to accept huge blocks of stocks, while we're just trying to go along for the ride with our 1000 shares, we can get in and out in a blink and we can recognize when they're moving the market.
GS has the advantage of moving the market with their size/programs. I don't know how many times, I've seen Goldman selling hard driving the ES down, then buying the next minute, a little consolidation, then pop huge rally as they start bidding up. They are the market.
Here is a try. the original was a .png that I had to change to an acceptable ET attachment. the whole display screen is just used for carving turns so you only glance at each of the seven leading indicators shown above. On a screen things are clear but if you look (glance) at the four aspects of this window, two bands and compression and expansion, you get a data element to combine with the other elements of the data set. I would have started to do the trade when I had compression and I would have done the partial fills (trading above the capacity of the market)to pick off trades on the tick pair coming into the low, on the low, and on the tick pair following the low. The OTR charts show this and the YM precedes the ES. This is just an example of carving the turns. The noise (blue) and signal bands (red) are adjusted as a moving non stationary window using delete--add coding. This chart on stretch squeeze is a sensitive and precision way to "watch" the "tells" of smart money. The tells which happen on the NYSE lead the S&P500 which is traded as ES a market dominated by herd type traders. Basically by inventing and refining things like S/S you can carve the turns. I commented elsewhere in detail how much this chart adds to an intermediate's traiding when he begins to go to expert. It is 15 points a day per contract and he is trading 20 to 30 contracts and up to 50. As you see, most people do not recognize the opportunity the market offers. If and when they do, they get their display screen to allow them to see the markets. Building the mind is a concurrent effort with applying techniques to trading markets.
Jack, I've been studying your teachings and have successfully applied some of them to my trading, so thank you! It's an honor to write to you Please confirm my understanding of this important concept with my simple example. Based on your table, I can plot the cumulative intraday DU, FRV and Peak volume lines for the upcoming day in advance. If the 65 day average volume of IBM is 100 for example, they would look as follows (not exactly to scale). I would buy IBM if its volume crosses above the FRV line and stays there the rest of day 1, correct? And on day 2 and beyond, the volume must stay above the blue (Peak) volume line, correct? Any other tips on this, like confirming price action? Thanks in advance! P.S. The red line is IBM's cumulative intraday volume
I redid your graph. The three columns are shown as 15 non linear segments going from the open to the close roughly speaking. Each segment is calculated by the % change of the segment So the lines I drew are not accurate but they are representative. If you want to do the work to draw the graphs I recommend it. I did not do such a reprsentation because I just want to make a couple of points to correct your drawing in general. It is not that I am lazy but it is time consuming to teach how to draw graphs. Lets assume al the pints for a day are plotted. Here are some points: 1. each day starts with no volume. On open volume begins to accumulate. 2. We are looking for signals to make money. 3. DU goes on for days so there is no signal. 4. A Signal occurs when the day will not be in DU any longer. 5. We project the DU EOD (End of Day) value HORIZONTALLY to the FRV graph to see when (this is a time) DU is broken the day of FRV. This is the mental worth and thinking of the normalized chart you worked from. More thoughts. IBM cannot be used with this chart. IBM does not make money at the money velocities of PVT trading. PVT traders choose universes to trade by clicking the mouse and a list appears. This is not trader666 type of lazy thinking. You have to click a mouse to get the universe. Tons of programming is done (in FA data bases) to give you the click of the mouse. From that you use the initial evaluation to get the RANK of the stocks. with a click of the mouse. Then the universe is sorted to have a hot list for the day and for setting up batting orders of streams of capital. Scoring shows you where a stock is in the cycle and 30 minutes charts on your display are put up by clicking them and you see the channels etc. DU is at the score of 0 for this universe. You make your batting order up with 0's at the top of your line up and below them you put the 1's which will become 0's shortly. Work three deep. As you can see IBM is never going to have the QUALITY TO MAKE THE LISTS. TRADER666 USED THE S&P500 FOR FIVE YEARS TO GET HIS LIST. He did not do a click of the mouse to get the list. He did not know that NO stocks of the S&P 500 have high enough QUALITY to get on the list EVER.
Jack one thing I never quite figured out, is that I understand you look for certain fundamentals (EPS>80, price, etc, amongst) along with stocks that make repeatable cycles within a 6 month period. However, one thing I noticed, is when I tried to apply the concepts of "DU" to other more liquid stocks, these periods of contraction and expansion werent so clear cut Any idea why?
Yes. The one click universe we use has many FA facets. Think in terms of an outfit like SAC but use FA/TA instead of "buying" the FA information to get timing. So you see that the Universe is critically described by rules and coding to get a homogenous slice of the whole nine yards. People are always inventing and usually not refining. One is more fun than the other but often it is not clear at first which is which. So we have a conveyor belt and everything on it looks a like. as the stocks on the belt go through the "unusual volume" sorter they are dropped onto the "tradable" conveyor and ranking gives then various batting averages. In our game the best batters get priority. Stocks like NTRS have 30% cycles in three days. Other sto9cks only do 15 or 20 %. Some guys are the 10%' ers. We keep the turns rate cranked at 100 per year because iterative refinement is more fun than inventing. The machinery is tuned to make money continually day and night. We make more at night than in RTH. At night this happens while we sleep. It is all very pleasant. All the stocks in the universe look alike. That is why the "normalized" page is so pleasant to use. I have crossed the Atlantic on boats, super connies and 707's and big jets. They were all fun but adjusting my watch by 15 minutes every 4 hours or listening to props for 13 hours is not as nice as popping in and out of the big jet. The three beta slice oscillates like a clock so you can do 100 turns a year. Doing a turn in a short time is the best clue. I admit I do trade gaps but it is not so much fun as watching conveyor belts humming away. 3% a day is how to groove in stocks. Capital X1.03^100 is sweet as an annual return. Get some belts and hang on.