I deleted a discussion of the inconsistency of some backtesting here. What the comments came down to were that you need to use two fractals, etc. to get things to click. Also the exits and entries were when you saw them instead of locking into HLOC data. T This is a response to an alternative back testing software: You could do that - but you'll do a lot better simply sitting there keeping track of the trades on paper for a few days. 1) You'll reinforce the rules and method. 2) You'll begin to understand what you don't understand 3) Most importantly, you'll begin to believe. When I first started reading Jack's work, I was convinced that he was a befuddled old man (no slight intended, that's what I am). The next step was to assume that he had something to say, but wasn't very good at saying it. Now I am at a level that truly has me alarmed - I am beginning to understand what he is communicating. Jack sees things a little differently than you or I do. That's what makes it worth the effort to figure out what he has to say. Back testing won't really do that for you. Re: EasyLanguage/TS6 Code For Backtesting... Below within the quote I made some suggestions to help you get a starting point that is correct. Basically your MACD is wrong and so are the exits. Both of these things will tend to change the results. The exit will cause a lesser result as vvvvvv says and the MACD being correct should make it better. look for the ***'s I've been following this thread and today, as an exercise, I decided to try to implement this strategy in EasyLanguage. Unfortunately, it's massively unprofitable when run on 5 min bars over the last two years (the most intraday data that I've got with Tradestation 6). Without commissions and slippage, the numbers are closer to breakeven. I assume I'm missing something but I can't figure out what it is. Is there a directional component on the MACD that needs to be taken into consideration? Is the MACDLimit too low? Maybe I'll mess around with it some more later this week. I've attached the code in a MS Word document since I cannot upload fiiles with a .ELD extension. Because of this, you will have to copy and paste into blank strategies in TS6 to get these to work. There are two strategies - the first is the basic strategy without the MACD filter. The second is with the MACD filter. The default input parameters are as suggested in this thread: (14,1,3) for stochastics with 25/75 as oversold and overbought levels; (5,13,6) for MACD with +/- .04 as the filter level for entry. *** the value is .4 for the histogram for either long or short. The rules as implemeted (and as I understand them after reading this thread) are as follows: The Basic Strategy ("Fast Trend") is: - Enter long when both the fast and slow line crosses above the overbought level - Exit longs when both the fast and slow lines crosses below the overbought level *** when first line to leave happens, you leave right then. the first line to leave is usually the fast line. So replace the above line. - Enter short when both the fast and slow line crosses below the oversold level - Exit short when both the fast and slow lines crosses above the oversold level **** when first line to leave happens, you leave right then. the first line to leave is usually the fast line. so replace the above line. The Filters that are applied are: - Do not enter long unless the MACD is above the MACDLimit - Do not enter short unless the MACD is below the MACDLimit*-1 Your limits are off by a factor of ten (too small). None of the early entry techniques discussed were implemented. None of the variations (such as slow trend or the reversals) were implemented either. Hopefully someone will find this useful or, if I'm lucky, be able to tell me what I'm doing wrong. You are in luck these are just details that are easily screwed up. As you get into how markets work and trading it will come more natural to you. After the beginner part is over and you can do wash trades it get fairly interesting. It would be unfair to add wash trades for you because it defeats finding out how profitable something is and what a win loss ratio is like if a person is not trying to make money. It is okay to use some of the intermediate stuff and not the others. Re: Re: EasyLanguage/TS6 Code For Backtesting... I've modifed the code as suggested - the biggest difference was with the modified MACD limit. Going to 0.4 from 0.04 reduced the number of trades to less than 10 over a two year period. That tells me I've misunderstood how the MACD is used to filter the signals. The MACD filter, as I understand it, is as follows: - Do not enter long unless the MACD is above 0.4 - Do not enter short unless the MACD is below -0.4 I have not posted the revised code - I will if I ever figure out the MACD mistake.
Posted by jack hershey on 02-23-03 07:13 PM: Re: Re: Re: EasyLanguage/TS6 Code For Backtesting... Quote from elindydotcom: I've modifed the code as suggested - the biggest difference was with the modified MACD limit. Going to 0.4 from 0.04 reduced the number of trades to less than 10 over a two year period. That tells me I've misunderstood how the MACD is used to filter the signals. The MACD filter, as I understand it, is as follows: Okay you are in the ball park now. You will see in the journal that I just want to establish a trend as being there. This means the market is no longer flat. I am using, on the 5 min, a range of MACD (5, 13 ,6) between +.4 and -.4 as the flat zone on the histogram. This is a fine point but I was capturing the magnitude of the initial divergence of the MACD as an indication that a trend is under way. The histogram is just a measure of divergence at all times. As a trend romps along the divergence gets smaller and often varies between plus and minus as the A/D changes during the parts of a trend. If you look at what you are doing it is this. you ignored the "momentarily" which is my obtuse, to some, word for not continually. Since you have made the MACD a continuing requirement along with the Stoc stuff there won't be many trades. So just put it in, momentarily, before or after the one or both lines (14, 1, 3) come into the picture. Once you have entry at the time of the arrival of the second line, then kill the need for the MACD because we have met the momentariness which defines "not flat". I am speculating, since you didn't say, that there were some profits on the ten trades you logged. I bet Greenspan helped out on a few of them... be interesting to see the news on those ten trends. You might want to work ahead a little and pick up the Wash trade sequence on back testing so we can see the extent of really doing it often and well when a trend goes no where and we need to exit before losses begin. Once we put stop logs on the table and begin to use them, then we will be watching for the point when no new stops are required. this is going to be our signal to go to the other side of the channel to start to max our exits as far away from stops as possible. These two things will help show how the back testing changes as you emerge from being a beginner. I hope you hang in here with this. It is not often that either maths people or software programmers can get into making money. This is a response to a quip made that was deleted about how much money may be made. It is hard to make the point of how money is made to get to a place to make a living trading. It takes less profit per day than is generally understood. I prefer to stay with one contract until the money velocity gets high enough. But your point of using small profits and adding contracts as cash on hand allows, is okay. These are net gains per day and to get to a reasonable income stream is possible with small daily profits and few contracts. No matter how you choose to express it the whole thing blows up (speaking in a positive manner). Nevertheless as people accumulate capital, I am going to focus on the normal ways all loss prevention enters the picture. The wash trade is always there. There is no reason to use protective stops as exit points. The target/ stop goal setting with entries is null and void from now on as a method from my point of view. With ES it is hard to get to a point where you get partial fills and slippage etc shows up. The market is liquid. A lot of people here will begin to comment on alternative uses of stochastics. There are some lulu's and it takes guts to put them on the table. I like to be supportive of others and I want to go through a transition with this from beginner to other levels. suggestion to Jack Jack, another suggestion. How about concentrating ONLY on the beginner stuff at first? Provided that the beginner level allows one to make great $, i don't think anyone would object if you limited the discussion to beginner level first. honestly, it's hard enough to understand what you mean talking about "beginner level", that when you bring in "intermediate" and other stuff it's just too much. A report on the second backtesting affort when the language reached itâs final state: Summary of Results over 2 years: 30.5% profitable trades, .80 profit factor. Funny - an hour of experimental work turned into a longer endeavour than I planned. Another Comment: Thanks for running that....that must take some work. My guess is you're not going to be Jack's favorite fellow! A couple of questions: 1. Do you know how many total trades over the 2 years, how many profitable and unprofitable? 2. What commission factor did you use? 3. Did you assume that trades were held overnight? If so, are you able to tell how overnight trades fared over the 2 years? Would the results be profitable if there were an additional MACD condition: Adding that no long entry unless the MACD histogram were then not only above .4 but also greater than it was 5 minutes ago? [and the opposite for shorts]? More: Well, obviously someone doesn't know what they're doing. We have Jack talking about tripling accounts and we have vvvvvv saying that Jack's system is 30.5% profitable with a profit factor of .8. Question is, who's right? Ummm...not sure that I'm saying anything gggggg, I just put the rules into TS6 as I understand them and see what pops out. I could very well be way off the mark in my understanding of how the rules should work - that's why I provided the code and my interpretation of the rules. Re: Re: Re: EasyLanguage/TS6 Code For Backtesting... The answers are: 1. 1849 Trades. 2. $4.00/contract/side (8.00 RT) for comissions 3. Some trades were held overnight. It doesn't make a material difference if they're not. "My guess is you're not going to be Jack's favorite fellow!" It's not my intention to contradict anyone. This is a way of looking at a set of indicators that caught my attention and, just like everyone else does, the first thing I do is to see how it worked in the past. For all I know, I may not fully comprehend the rules - hence I'm disclosing the code I'm using and my interpretation of the rules. I tried uploading the detailed spreadsheet that TS6 spitted out for me but I kept getting a timeout from the forum - probably because the file was too big (800K). PM me if you need it and I'll email to you. It improved. The Profitability went from approx -24K or so to approx -20.5K or so over the two year period (1 contract).
Another view: Thanks for the information vvvv. I understand that you're just the messenger. I also understand that you may not have interpreted correctly...there's been some confusion. Or perhaps something was lost in the translation into code. Whatever the case, there's a wide discrepancy between these results and Jack's claims. That discrepancy will need to be resolved in some fashion. Just a quick comment on backtesting. I'm not particularly a fan. Markets definitely change over time. So whatever the results in one period, they will probably differ in another. This is clearly one of the drawbacks to systems. The human brain is capable of analyzing and synthesizing information in ways that could probably not be systematized at this time. Yet our desire to exert some type of formal control over the trading process leads away from this marvel, the human brain, to rather one dimensional types of strategies that seem inferior to my way of thinking. Here is some collateral input on Stochastics from another person. He mentioned the thread was 18 pages into it then: I don't expect a great deal from you, but lets give people some starting blocks that they can squarely plant their feet on. The stochastics were created by taking the standard slow formula used by Lane and and smoothing it with a 3-period exponential moving average. The default lookback periods for the lowest low values are 43, while the lookbacks for the highest high values are 15. Several users probably have Lane's formula in their software. For those who want it, you can do a search for George Lane using any good search engine. As can be seen in the picture the fast stochastics (red and green lines) will quickly get you into a trade while the slow stochastics (purple and yellow lines) will tell you the strength of the trend. To achieve that picture I used the parameters 43 and 15 for red/green lines and 172/60 for the purple/yellow lines. The polarized fractal efficiency was developed by Hans Hanula and is also standard in a lot of software. To create the picture I used two intervals: a fast interval using 11 periods and a smoothing factor of 2; and a slow interval using 13 periods and a smoothing factor of 3. I'm pretty sure you can also find him using a web search. Finally, I want to contribute as much as anyone else here on ET, as I've lurked and learned a good deal from others here. Above all I've learned some discipline and some respect for the thoughts and efforts of others, I'm hoping this post will payback some of what I've learned as well as communicate the thought that people deserve to be treated here with some respect. As another trader puts it, "Forget the jerk around BS." The entry and exit continued to be a difficult consideration: Quote from jack hershey: **** Short answer. There are two lines on the stochastic. One precedesthe other. "last one in" means both lines must be there so the signal is the slow line. Verse visa, "first one out" means the signal is when the fast line leaves. verification: On the beginners level: is it correct to enter the market when both lines appear on the overbought or oversold zone and to exit the market as soon the fast line moves out of the overbought or oversold zone? I quote Jack "Exit as both leave the 20 or 80 always first one out" Couldn't you say "Exit as one leaves the 20 or 80" ? question: If the above information is correct then how are trend continuation handled? When the slow line stays in the zone but the fast line moves out of the zone and back in. Should reentering be avoided at beginners level or how would this be handled with this method? Without the consideration of cheating. These are key questions. I use the expression "entwined" once we get started. the term "entwined is what you are describing and it is a good idea to stay in a trade when you have this context as today. You will see that when both leave that the Stoc goes into divergence. Be out at that time. Your comments above are precisely accurate. So if the fast line go out and entwining hasn't been going on, then you will see this divergence right off and you are out of the trade. All this is sensitizing you to two things: a low volatility trend (entwining is the representation of this with stoc) and learning to do wash trades. Thus you see my response was to follow the directions given. Another comment follows. The comment shows how difficult it is to consider things. It certainly is difficult. If you had done it Jack's way... 09:35 Short at 843 10:20 Covered at 840.25 Plus 2.75 points. Using other methods Jack has spoken of, you could have done even better. Of course the "Backtesting Boys" would have not taken the trade, since the method doesn't work. Some others would have passed because they were once on a message board where some Guru was wrong. Another part of the transition: This is a tough one...the MACD Histogram said no, but the one-minute chart said yes - at least as far as I am concerned. 10:30 Short at 839 The MACD was right, I was wrong - would have resulted in a one point loss. Another tough call - everything looks good, but the MACD Histogram is not quite there... 11:15 Short at 837.25 I was somewhat distracted, and took the trade...when I saw that the Histogram was not where it should be I bailed with a 1/4 point. Playing by the rules, as I understand them, I did the right thing - I think. It appears that this is no "rocket" My comments: This is a fine call and that is how it is for now. I am introducing "entwining" vis a vis rrrr. Your next comment is great too the MACD says no and this indicates a flat market. You can see the money velocity on a trade is very low. Here is where you practice wash trades if you took on the trade. For ice berg people: you are in the trade short from almost the open. Keep the 20/80 tape on still. You see that by 11:15 when the market goes into slow gear that you heald the trade through the am. Now the 4 o'clock drift will set in. You can use the guidance of the MACD (being below neutral) as your guide. For beginners we are out and we took one trade and not the second. What is ahead for everyone: A slow day. The 13:15 is the nominal wake up time for the mark. what you are looking for is: icebergs will see a above 80 to take them out of trade. The MACD fast line will cross up over slow line. If this becomes a rocket, then look for immediate divergence on the MACD and the histogram going to .4 and you enter. this puts the icebergs into the trade too but not as a reversal. It is an exit pause and an entry.
I summarized the back testing. It is February and we have not been performing as in July up to this point. Here is the spectrum of how back testers have reported: .84 for a loss of 5,878 over five years; .71, for a loss of 12.735 over five years; and this post. I hope this (back testing participation) continues to parallel the effort. The next most helpful runs will be based on : 1. "entwining" observation and being put into practice. 2. Wash trading when no trend is here. 3. beginning stop logs so we can have trailing stops. 4. Using the end of trailing stops as a signal to exit on the other side of the channel for max profits 5. Beginning icebergs It will become observable how each iterative refinement improves the back testing. what also emerges is the software to run the stuff mechanically. The best part of all of this is the way the Neurolinguistic Programming changes for people. So far we have a neat spectrum of views that do depict quite well how most people are programmed. The pictures we see have no negatives in them. If people have market rules that are expressed negatively; the mind is not created the picture they desire. The rules have to be restated to make them work as pictures. "Don't fall down on the ice." "Walk carefully on the ice." Okay now you get it. NEW Phase. Here I begin a post as a new topic in the thread. So far I have beenina response mode and introducing some stuff through questions being asked by others. 4 O'clock drift nearly 13:00. Now you see all the stuff we expected. 4 O'clock drift on low volume. Lower volatility. "entwined lines on stoc and MACD. we are set for the signals that i suggested would show up for making money If not. we stay at a low risk place: beginners sidelined after a fast paced profit and icebergs piling up nickels steadily. The backtesters are forward testing now too and they are working on the next six levels of back testing coming up. some people have done a wash or two to see how nice it works in this flat current pace. Summary. This is a comment on the market during the day (23 FEB03) Re: 1st trade of day Jack How long after the open do you wait for a trade if it starts out below 20. I have read some posts with you talking abou the need to let the market "synch" before entering. Today for example, I waited for the first 2 5m bars and went short at 842.50 (below previous 5m bar's low)...On my exit i was seeing the 1m MACD XO at 10:05 and the it crossed over 0 at 10:16. And the 5m appeared ready to XO these combined had me exiting at 839.25 for a 3.25 gain. Also, the 5m MACD reached a peak low of -2.86 at 10:00. One other comment on your explanation of rocket for a beginner. We enter when both break below 20 (or above) with the hope that they entwined and we then have our rocket. If they DO NOT entwine and the fast line leaves you could look at that as a divergence and potential exit since our rocket never formed. Your comments are right on and very precise. The ice bergs (intermediates) were (are) slogging along with few signals. The beginner signals may be frustrating in comparison but they really do achieve getting a near consciousness. The synch is important. The open "end effects" screw things up. Later we will do some stuff related to "what is the trading fractal today?" the simple statement is to go to slower and slower one to get a smoother picture of the situation. But at the same time use a faster fractal to see what to anticipate. Try this. See how it relaxes you as well. For formation folks, on the 5 min, there is a nice BO down into congestion, convergence, and centering. The BO down out of the centering was nicely set up by the VDU's before the BO down. DU is dry up volume and V is very. This is simulated by an RSI with default like the 5,2,3 Stoc. The 13:15 is as good as this ccc was. ccc means congestion, convergence and centering. Quote from jack hershey: 1. "entwining" observation and being put into practice. 2. Wash trading when no trend is here. 3. beginning stop logs so we can have trailing stops 4. Using the end of trailing stops as a signal to exit on the other side of the channel for max profits 5. Beginning icebergs 1. Now with "entwining" the method becomes very subjective. Doesn't it? How much entwining, in what rhythm, etc.. at what can a divergence be recognized and being separated from entwining? 3. How are stops defined? Could you please go more into details regarding stops. 4. Could you also please go more into details regarding this point. I did not answer this set of questions. The answers are found in other places, however. Here is a set of trades that allowed a lot of commentary. After a while it got terse. Posted by xxxxxxx on 02-24-03 02:36 PM: As I see it... 09:35 Short 843 +2.75 01:30 Long 835.5 -1 02:50 Long 834.25 +.5 03:50 Short 832.75 +1.5 All trades = "Beginner Level" 4/RT +3.75 points.
Just thought I'd mention that it appears you used the fast stochastic to enter and exit. OK with me, but Jack had said to use the slow line to enter, the fast line to exit. That short at 3:50 looks like it should have been at 831.75, a point lower. It's not clear to me how you exited this or when. There's no foolin' you, nnnnnnn. Yes, I do use the "fast" line for entry. As for the 03:50 trade, it is a real one - I can't explain why you think it should have been a point lower...as for the exit, it came a few minutes after 4PM...and was closed simply because of the time. This popped into the above. So Jack, basically you agree that the "beginner fast pace stochastic" method as you first laid it out, is un-profitable when backtested? And now you're adding additional rules and "stuff" and you're telling us that as they get added, the results of backtesting will improve and get into the profitable territory? I'm just trying to understand soo we're clear on what's going on here. I did not respond to this because I felt it was more baiting. Baiting from people is something that is just like being cautious in learning something new. For reading this as a condensation, it is a good idea for me to leave in stuff in this tenor once in a while. In ET at the time, it was the dominant theme it turned out. On the other hand there was curiousity as well: Jack, thank you very much for sharing your ideas. Whether or not I can get your ideas to work for me, I'm learning a lot about stochastics, MACD etc. I have a couple of questions for you or anyone else here that may know: You talk in your postings about "wash trades". I couldn't find much information about them. Could you possibly explain them in more detail or refer me to a site on the net about them. While reading through your postings I noticed some talk about Don Cameron and how he is sick from cancer. I was just curious, how he is doing right now? The latest I can find is back from December To return to the trade stream: It could have been "worse"... The post 1:00 run up would have worked out as follows... +1.25 +1.50 -1.25 So sitting here paralyzed didn't hurt too bad... 03:25 Long at 833 04:00 Out at 338 A two point loss, and a 5 point win...+3 net. Being positive is always good, but I didn't do what I should have done, so I could be happier. Here is a collection done by a contributor and his comment at the end: Quote from vvvvr: Jack, You talk in your postings about "wash trades". I couldn't find much information about them. Could you possibly explain them in more detail or refer me to a site on the net about them. Quote from jack hershey: Your next comment is great too the MACD says no and this indicates a flat market. You can see the money velocity on a trade is very low. Here is where you practice wash trades if you took on the trade. Quote from jack hershey: Nevertheless as people accumulate capital, i am going to focus on the normal ways all loss prevention enters the picture. the wash trade is always there. there is no reason to use protective stops as exit points. The target/ stop goal setting with entries is null and void form now on as a method from my point of view. I think wash trade = trading without any profit Another thought: It might be interesting to post theoretical trades in which the stochastics signal a trade, but for which the MACD does not confirm. This would provide a method to determine the actual usefulness of this filter. FWIW A "wash trade" is to exit at break even. FWIW My "Jack Type" Trades 1. Short below the 9:45 Bar stoch(5.77, 12.82) already had a MACD reading below -0.4, but waited for low of day to break (only 0.25 difference) b/c market opened below the 20 line. Short @ 822.75 Cover @ 819.50 Trade: +3.25 Day: 3.25 Week: +5.25 Reason for exit: Double reversal candles, large vol print 24k @ 10:00, MACD 5m XO @ 10:15. Did not look for trades until after 1:15 2. Long above the 1:20 5m bar stoch(100, 91.67) MACD Hist 0.44. Long @ 825.50 Sell @ 822.75 Trade: -2.75 Day: +0.50 Week: +2.50 Reason for exit: 1:35 bar stoch(56.00, 70.50) broke low of this bar. 3. 1:55 bar Stoch(95.24, 80.87) i viewed this as a re-entry of the current trend, so was not looking for the MACD reading although it did go over 0.4 on the bar I entered. I waited for the HOD to be borken and bought on the b/o. Long @ 827.25 Sell @ 828.50 Trade: +1.25 Day: +1.75 Week: +3.75 Reason for exit: 2:35 bar Stoch(64.10, 76.07) went below low of this bar and i sold. 4. 3:20 bar stoch(82.76, 83.65), several MACD hist readings above 0.4. Buy above 3:20 5m bar. Long @ 834.50 Sell @ 839.25 Trade: +4.75 Day: +6.50 Week: +8.50 Reason for exit: 4pm close Thought people might be interested. So far it has been majority of grinding type-breakeven trades with a few real nice winners, but if there is any extended trending you will definitely get a good portion of the move. Like a lot of trading a few winners may make up the bulk of the profits. Not making any conclusions just observing the results so far.
Posted by jack hershey on 02-25-03 09:22 PM: chart. With some help from a friend we got a chart with few enough bytes to transmit. Thanks dawg for the values you listed. It is in the journal. The last week of so is a very good practice time for staying on the sidelines. The MACD is particularly helpful for this. You can see also the gap opens are there and the last two days after the open the synch period (let it be 15 min or the time you get by personal opbservation of the DJXX cash and futures beginning to move together. The ice bergs had a rocket start, a loss between 11:00 and 11:30 and then a long (start of trade 2 for beginners) that took the rest of the day. Trendy will be picking up an edge with her "riskier" entries if you are tracking the method I suggested she use. The back testers can see their data changing with the last two days of additional stuff. Today didn't have too much fussing regarding being on the fence for exits. Their were two nice examples of "entwining" on the first and last trades. The midday sideling was well illustrated too. I attached the chart that went into the journal. chart and text look great, thank. Quote from nnnnnn: As I understand Jack are "wash Trades" reversals in the current range. Opposite "whipsaw" when you enter on top of the range and exit on the bottom of the range. Wash would be short on top of the range cover on bottom of the range. do correct me if I'm wrong Jack. Hi nnnnnnn, We are using "wash" here as an entry and exit at the same price. Later when we get into the details of ends of fast trends, we can take up the opposite of getting whipsawed. This is when you do trades with the congestion, convergence and then set up "brackets" on the centering. Everyone must wonder who is making it when others are getting whipsawed. There are many people who play the cycles of congenstion and convergence. Also there is a slow motion version of this for head and shoulders and double tops and bottoms. Elsewhere there is a thread running on how people with long experience always explain "oh you don't take that entry and do it that way.... under these circumstances." then they plug in the comment on what you do when the particular circumstance occurs. This is a good observation that also said that the circumstances list gets to be at least 100 elements long. The point is that there is a topic that covers all of this. I call it flaws. All special circumstances originate with "flaws" or variant on the system. Right now we are using beginner technique to learn one basic thing: How to stay out of a market that is not making money. The opposite of getting whipsawed in congestion is a technique for making money is rapid continuing reversals. I did a series on LC in MIF to demo the method. To this day several people there could not recognize that I was on the right side of the trade even with my advance posts. we can do this as a way to enhance wash trades to get out at better than even. Wash trades are essentially to take you out of a trend that didn't play out. What happens when a trend doesn't play out often is congestion. Once we can determine the sequence set (the series of signals from our indicators and price formations) we get the opportunity to improve washing and go into being on the right side of whipsawing. See channel labeling etc. Has anyone figured out the compounded minimum daily profit to make 90,000 with one contract? Has anyone seen what the profit level required is that you go to no more than two contracts and not compound? Posted by jack hershey on 02-26-03 01:09 PM: sidelining Do not worry about being out of the market. Siting around not losing money is a great idea whose time has come. You probably noticed that those posting their trades are making over 90K a year prorata. We will begin to see wash trades soon. The fact that there are few posts is a good measure of people staying on the sidelines. Posted by xxxxx on 02-26-03 01:58 PM: Uncle, uncle... OK, I give, I'll do it Jack's way... Using a 75-25 Stochastic trigger: 10:30 Long at 839.50 10:35 Out at 837.75 02:50 Sold at 828.00 03:00 Out at 827.00 Bottom line: Minus .75 on the day. To this point I can see no benefit to using the 75-25 trigger...the 80-20 would have served me better, not only today, but all week. FWIW My Jack Trades 2-26 1. 2:45 Short @ 830.00 3:36 Cover @ 827.75 Total: +2.25 Day: +2.25 Week: +10.75 This trade was during the bar, mkt was b/d out of a channel and MACD and Stoch were well below the area so I shorted. Used the 1m to anticipate (look at 1m and see little consol. 2:40-2:44 right at 830.25 and shorted as it broke) Reason for exit: 5m MACD XO at 3:15- that bars high was 828.75 and was using 829.00 as a stop at that point. Mkt sold off and made a new low by 0.25 , but on lower volume (NQ did not make a new low). 1m MACD made a higher low. MACD Hist did not turn negative but stayed positive and was a reversal candle. Put stop above high of candle @ 827.75. 1m MACD also XO zero at 3:36. Exit at 3:36 @ 827.75. I used the 75-25
Posted by jack hershey on 02-27-03 01:19 PM: Re: Chop I've been watching the ES contract today. Has anybody been trading the chop since about 11:15 EST? Reason I'm asking is there have been some nice up and down runs that stochastics have captured. VVVV and some others are tuned into this. They are working it using an orientation that comes from wash trades being improved by trading on the right side of congestion. They are simply using the end effect of a fast paced trade going into congestion and trading the opposite of getting whipsawed. As you saw this (chop as you say) ending, after convergence with a flat bottom pennant (FBP) centering. All of this (FBP centering) leads to the 13:15 daily event. Today 13:15 occurred at 14:05+/- and the beginners drop into a short fast paced trade while the intermediate ice bergers have been in since the first chop bottom at 12:10 +/-. You can see that the volume took everyone out of the chop because the chop only operates on less than a trend sustaining volume. Soon we will add three levels of volume as horizontal lines so everyone knows how to be trading as experts according to the volume level situations. It is important to know when things are going to be beginning and you can tell this by tracking volume levels since you can easily see their transitioning to new levels before the price action begins. For back testers we can do this as exercises after the first 6 to 8 back tests are completed. Roughly what happens is that the back testing model in use is sequenced as the P, V relation dictates what test mode is to be used during the market intraday action. The current order of magnitude differences( 12,000 for one and 1200 for the other.) of the back testers will get resolved as we find out what their limitations are as we get into back testing screw ups. Trading Jack...I think A really bad connectivity problem, I was late getting in, and too scared to stick around on the first trade: 10:32 Long @835 At one point I had better than 5 points, but could not get out until +3.50 I did not take the short signal at 02:30, as the Histogram did not confirm. Not really knowing what to do, I entered at 02:40 when the Histogram dropped below -0.4. The price action did not make me happy, so I "washed" at 02:53. 03:47 Long @837.50 03:56 Out @835.50 minus 2 points For the day: Plus 1.50 points. Posted by jack hershey on 02-27-03 02:27 PM: chart for today so far Here is the chart so far. the icebergs are smart enough to get out at end of beginner trade because they know the beginner trade ends in congestion and trading the "chop" until convergence and centering come up. FWIW My Jack-Stoch Trades 2-27 1. Enter: Long @ 834.25 10:29 Exit: Sell @ 839.00 10:43 Total: +4.75 Day: +4.75 Week: +15.50 Reason for entry: 10:20 5m Stoch(83.87, 76.34) MACD Hist 0.415. Bought the break over the 10:20 high (was also a new HOD). Reason for exit: Ok i bailed early. Mkt approached 840 which had been death resistance for the last 3 days so i got before it. Also the big vol spike 27k had me thinking exhaustion move. There was a MACD 5m XO at 11:10 with a low of 839.25 so i think it may have been the same price either way. 2. Enter: Short @ 833.75 @ 2:33 Exit: Cover @ 832.50 @ 2:57 Total: +1.25 Day: 6.00 Week: +16.75 Reason for entry 14:05 5m bar Stoch(8.70, 22.90) Macd Hist:-0.473. Now i was hesitant b/c it was still within a channel on my chart that i had drawn from the afternoon chop so i wanted to see a little more downward movement. (see attached chart). SO we had several reversal candles and then a b/d out of the channel which is when i shorted. Reason for exit: Big vol spike at 2:35 bar and when the 1m MACD had a XO(2:42) and then a higher low on the new low(2:52) and the new low was on much lighter volume and the NQ did not make a new low i put a stop above the high of the 2:50 bar @ 832.50. 3. Enter: Long @ 837.75 3:42 Exit: Sell @ 836.50 4:00 Total: -1.25 Day: +4.75 Week: 15.50 Reason for entry: 3:35 5m bar Stoch(92.86, 77.23) MACD Hist:0.765. Bought a move over the high of that bar. Reason for exit: held to end of day. Sold at 4pm. Posted by jack hershey on 02-27-03 03:50 PM: Re: Jack a few questions Volume falls off (see the Stoc go to 50%) and price centers. as volume kicks back in (do prorata 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. Questions: 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. got 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 sequences in a tree that tells you what 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.
Jack or someone, please help me out here. In Jack's chart for 2/27 (http://www.elitetrader.com/vb/attac...=&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? 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? _____________ 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. More ?âs follow 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? 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 intermediate handles it. Posted by jack hershey on 02-28-03 09:44 AM: 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 by 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 fact that trading 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 congested 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 always 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 values 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 practitioners who have not gotten to a point of making a lot of money. What they do is continually 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 to 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 (flatter 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 absorption. All these things can become part of your rational thinking. People who continually crap on me like xxxx, yyty, and rrrrrtr, 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 of the purposes they assign to me. On the other hand, 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 often 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. ggggg doesn't see the three sequential parts of congestion, convergence and centering. He doesn't see that centering takes on a formation that is one 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 rythymically until the centering. If you can't see centering you get your toilet flushed on the BO at least half the 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 initial capital for the first time. Posted by ggggg on 02-28-03 10:32 AM: Just wandered on in here and saw this thread. Iâm trying to put a chart together to follow along and am getting confused by the MACD indicator. Iâm using MetaStock and it doesnât allow this kind of input for the MACD⦠My question is what averages are used to make the histogram and which are the two moving averages. And are the two moving averages built from the histogram or the price chart? Any and all help would be greatly appreciated on this. I can write a MFL indicator for MS if I know which values to subtract to get the Histogram, FastAverage and the SlowAverageâ¦
Posted by jack hershey on 02-28-03 10:37 AM: 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. I wait for synch. The MACD had to spread (diverge from prior entwined close. I see I should have added to go in at sync if all other conditions are met. It is perfectly all right to stick to all the rules. The situation was not a gap up and it was just what looks like a smooth trend with a many hour timeout overnight. You get past the "end effects" of staring a new day and then you are at work making money again. When you can't make money you are out and sidelined. Posted by jack hershey on 02-28-03 11:46 AM: Re: Re: healthier chart Jack or someone, please help me out here. In Jack's chart for 2/27 (http://www.elitetrader.com/vb/attac...=&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? I comment: The green line was an intermediate trading method. Both beginner and intermediate are super imposed Another continuing interjection: âSo Jack, basically you agree that the "beginner fast pace stochastic" method as you first laid it out, is un-profitable when backtested? And now you're adding additional rules and "stuff" and you're telling us that as they get added, the results of backtesting will improve and get into the profitable territory? I'm just trying to understand soo we're clear on what's going on here.â My comment is that we are doing an iterative learning process. For this person my statement does not sell very well. The person is asking another question really. The question is something like: Hey I think you are changing the rules when someone brings up another point. It looks like you do not know what you are doing. My real question is: Are you for real?. To work best with people is to be in support o their interests, most helpers begin with a good straight forward concept. At best it is hard to communicate the concept clearly and briefly enough for it to take hold. Amplification usually sounds like changing the rules and fixing what was said. Therefore, there is a normal attrition among readers who cannot orient to making money primarily because of things more important to them. The back testing theme that will continue along is âa pointâ being made. Now in July it is different; the points being made are along the lines that request abbreviation. A new comment follows: jack, I'm thinking you're showing some anger. Why? I'm not the only one who offered a different version of stochastics. There have several attempts to figure out exactly what you are saying. I don't fault you for that. What I disagree with is your almost constant attempt to denigrate the contributions of others to this thread that may not agree with your point of view. Or to put it another way, its your way or the highway. Take a look at this thread: http://www.elitetrader.com/vb/showt...?threadid=13888 scroll down and look at the post entitled "A stochastic example". This guy, like me uses a doubly smoothed stochastic oscillator. Reviewing his *.gif files reveals he uses a time frame similar to mine for the NAZ index his are a fast line of 15 and a slow line of 65 whereas mine are a fast line of 15 and a slow line of 43. So the other day when I asked if anybody was trading the "Chop", I was curious, because there are other ways of trading stochastics than the ones you are describing. I replied: Hi nnnnn: The points you got from what I said are yours and enjoy. 4 out of 5 people disagree with me. And you see that what I am starting with here is shown in back testing to be a failure by those who are doing it for a benefit to others. In most efforts people make as a common thing, the most important activity is trying to understand each other. What I am constantly doing is putting forth in a proactive creative manner is how to begin to make some money consistently and steadily. I also feel, clearly, that the level to be made on a contract is the determinant of the level of success of the person. You see me as an angry dude. Enjoy. Thank you for the two stochastics examples. Their settings are examples of "bridging" with an indicator and as a consequence it does not gives "signals". I hope anyone who wants to use either does that. You make an example of a person who misses stuff in this manner. The market follows sequences and they should be taken advantage of at all times. We see almost every day at the end of each fast paced rocket, the advent of congestion, convergence and centering. After the centering there is a trend break out. You see "chop" and you also want to know something in regard to it. Others post and email me about it too. They are learning about what they want to learn about; I contribute my views. There is a connection, for me, between wash trades and the congestion, convergence, and centering (chop to you). By getting good at wash trades, a person can then do trades as he comes out of rockets (after he has made three times his initial capital). Trading into congestion is not a beginner or intermediate thing. What usually happens is "whipsawness". I can achieve some kewl stuff by combining rocket exits and wash trades. The important goal to evolve to is to get a person (beginner) to exit on the "away" side of a trend. This is on a long trend, the top. This is on a short trend, a bottom. If a person does this correctly then all I ask is that he double down on the contracts as well. I convert wash trades to do this as a warm up with some people (They will begin by reversing on washes). It is like a spinnaker jibe going down wind. You don't change the direction of the boat you just put the main and spinnaker on the other sides for your next move. Think of being stalled in a flat trade and reversing in the stalled flat trade. There is no loss at all. You are just at risk not making any money by being in a trade that is still flat. If I connect this stuff to an "away" exit on a rocket by reversing into the first retrace I am still making money. As the congestion sets the channel width we reverse into more profits and it is just a slalom along the channel from then on. You "see" chop. We see signal after signal until the centering is signaled and we sideline and set up for the BO out of the centering into another rocket. Stick with your settings, they bridge all these signals. You do not get to a point where you can use your default or the "smoothed" one. Smoothing is what makes it impossible to pickup a Fast line "slow entwiningâ in a congestion and then convergence sequence. That is why I presently have different middle numbers on different stochastics so people can see how the set up for making "nickels" on congestion. Your view of me is what you make it. Enjoy. Disagree and/or dislike to your hearts content. Be critical everyway that lets you vent. Whatever you do turns into an educational experience for others each time you step up to the plate and take your swings. I'm contributing to improve people's batting averages.
2-28 FWIW My Jack-Stoch Trades Well I didn't take the opening trade although at the 9:45 5m bar Stoch(97.56, 88.08) MACD Hist:0.43 b/c all of the economic numbers at 9:45 and 10:00 spooked me. This trade cleared the 9:45 high when the economic came out and was all over the palce and so i passed. Looks like it was a winner of about at least 2pts. 1. Enter: short @ 837.25 3:40 Exit: cover @ 837.25 3:46 Total: 0.00 Day: 0.0 Week: +15.50 Reason for entry: breaking the low of day as well as out of the channel. The 3:35 5m bar stoch(11.76, 22.44) MACD Hist:-0.31. When I entered the current bar (3:40 5m bar) was below -0.4, but it was early in the bar and the mkt reversed a little and the bar did not close with a MACD Hist short signal so i got out at breakeven. Tried to anticipate a little and was wrong, but didn't get hurt. That's it. Good week. Look forward to see what next week brings. This week stats for my stoch trades: +15.50 11 trades 7 Winners (63%)(3.25, 3.25, 1.25, 4.75, 2.25, 4.75, 1.25) 3 Losers (-1.25, -2.75, -1.25) 1 Flat largest loser: -2.75 largest winner: 4.75 (twice) I would be interested to hear anyone elses results for the week to see if can improve on entries and exits. Posted by ddddd on 02-28-03 02:27 PM: Two trades today... 12:33 Short at 841 12:45 Out At 840.50 03:40 Short at 837.50 03:50 Out at 838.25 Minus 0.25 on the day. Am I happy? No, I'm thrilled. While I have not totally "accepted" Jack's methods, I believe in the entries. That has kept me out of the market when I should have been. I still need to "accept" the exits without second guessing the method. Obviously I wish that I had done better this week, but I have no complaints. Posted by yyyyyy on 02-28-03 02:32 PM: Time Frame jack, I'll have to say, looking at both 3-minute and 5-minute charts, you are correct. Attempting to trade the settings I use for stochastics (43/15) & (172/60) is a real trial. However, using 1-minute bars, I can begin to get into the ballpark. I really chart and trade using tick charts, so can see the input I might make to this discussion is of limited value to people using the minute and higher charts. I can see how it would be difficult to trade the "Chop" using the time frames you are using. However, I believe these shorter tick charts are able to help identify nicely trending prices not noticed when using the longer time frames. That's what I came to recognize after I asked if anyone was trading the "Chop" the other day. Your update pretty much confirmed that several others were not seeing what I was seeing. Well, this is getting windy, as there is no need to post a picture to show my viewpoint. on that 12:31 trade XXXXX, i had no idea what to do...it was like middle of the day, but it is a clear setup...doh! i think what most important is that you don't get burned entering under these setups and if there is any rally/selloff you will definitely be in for it. It's like single, single, strikeout, strikeout, triple. Have a good weekend. Posted by jack hershey on 02-28-03 04:40 PM: todays results and posts. I am really impressed. I liked the week's results too. I really appreciate how people are reporting their stuff here. Just as a simple comment. It is like adding light to a room. Each equal amount of light seems to change things in a large way at the beginning. The four lights we have burning are: The knowledge that Stoc is relative and you can hold in the "over...." as a trend that is fast is a good achievement. Just doing fast paces only as a place to begin is equally great as an achievement. I appreciate everyone keeping the 20/80 taped so far. The biggest thing that I think occurred was knowing to stay out of lateral markets. Jack I am confused on how you use the term 'wash trade' do you mean for example: enter a short at the top of a channel like today (2-28) near 846.50 or so and exit near the bottom of the channel' or do you mean entering and exiting at the same price. Basically fading support and resistance in a channel after a rocket. So an advanced trader would exit out of his rocket and by doubling the contracts on his exit he would have a short position to ride into the congestion/channel/convergence and exit on the 'away' side of the channel. And continue this until centering towards zero on the MACD and then we just sit and wait for the b/o to occur and look for our rocket. I am calling what you list as a flat trade a wash trade. As you say entry and exit are at same price. Yes the reversal out at max profits sets you up to profit every half cycle through the congestion. For gggg, he can glance at our MACD 5,13,6 on the 1 min and see that the MACD telegraphs the reversals right on down the line. As the amplitude of the MACD absolute indication shrink you see the convergence and then the centering for a BO. The small numbers like 5 and 6 help with preventing bridging. On the 1 min the 14,1,3 stoc is always entwined and not readable for the congestion. The channel and the MACD stears you right along. By seeing it as the linked turns of a slalom you recognize the rythym right away. Re: todays results and posts. Quote from jack hershey: The biggest thing that I think occurred was knowing to stay out of lateral markets. I agree that knowing when to stay out of the market is very important. It's better to stay out of it than to enter it at a wrong time. Some comments on the midday sideline rule for beginners: I know what you mean. Obviously, it violated the 11:15AM to 1:15PM "rule" - but as I am sure you know, some nice trends start at that time of day. While I find Jack's methods to be VERY interesting, I am having trouble following them to the letter - but that's the story of my (trading) life, and the main reason I am interested in what he has to offer - go figure It does not please me to be looking at something called "beginer level", but... Here is a kindred comment that helps end February: Well first, I gotta send a big thanks to Jack. I have learned a ton from reading a big pile of his stuff. The funny thing is, I am not using stochastics or MACD right now at all, but I have still learned alot from what he has to say. I am actually using a custom oscillator that isn't closely related to either of these. Another one of the same high quality: Here's a suggestion. You don't have to exactly trade Jack's method to learn from it. Write down all of his rules, then write down your version that you want to trade on a separate page. Trade your version if you like, but JOURNAL exactly how what you are doing is different from Jack's method. Go back through at the end of the day and compare how your system did compared to Jack's version. You will still learn Jack's method this way. As a matter of fact, I'm almost positive you will learn more this way. Just make sure you consistently follow one or the other of them. Finding a balance between consistency and adaptability is one of the hardest parts of trading. And the last post: Hey, where's this 11:15 AM to 1:15 PM rule? Did Jack suggest this rule, or is it someone else's? Maybe I missed it?