Jack Hershey – MACD and Stochastics helpers for 123 and FTT's

Discussion in 'Journals' started by callmate, Dec 31, 2007.

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  1. I had posted the fast stochastic chart and did not know you were going on topic for slow stochastic. I just saw your recent post.

    I will leave the charts for now, as you continue to discuss the stochastic as you have in order.
    #31     Jan 5, 2008
  2. The slow STOCH is set up to keep the CONTINUE MODE in place and allow a person to HOLD until the time is right to reverse.

    Therefore, we want a long shadow and a wide shadow to prevail. Up to thirteen bars may be invloved.

    For rockets there are always 13 bars involved on the RTL and almost no bars (few) involved on the LTL. Closes always advance (in the direction of the move) on rockets.

    This adds up to the oscillator readings being extreme all of the time.

    Lets look at the end of the rocket. Price is going to move away fro the LTL finally. The close will no be at the top of the bar, perhaps. The whole slow STOCH evaluation system (the results of values being plugged in) is shrinking, too. The shrink cannot be seen since the graphical display is constantly of a given height.

    All of this obliges us to use signals to get the first notice of CHANGE in the sense of MODE. We are sweeping a set of 13 elements (the log stuff) and more on the display. The slow STOCH going through the signal value of NO LONGER BEING PINNED AT AN EXTREME tells us to focus on making a good reversal in the near future.

    By looking at the slow STOCH move from very extreme towards the signal, we get to see how some overlap is occurring in various things. there is a data range compression occurring during this time. To make money we trade the long diagonals of channels. Often R or S is contributing to the formation at the ends of range expansions. All of these things show up in slow STOCH valuations.

    The CONTINUE of MODE comes to and end and CHANGE begins.

    CHANGE is on a bar and CONTINUE is bars in duration.

    The slow STOCH signal (crossing through 80 or 20) defintiely ends CONTINUE.

    Market pace has to be sufficient to drive the slow STOCH to extremes. You can see that the greater the pace the more opportunity there is to have higher money velocities and fewer formations in the dominant traverses. The slow STOCH is smoothed to provide us with a strong CONTINUE signal.

    Slower paces lead to less trending strength and under these conditions we read the slow STOCH as one would read the icebergs.

    Lowest pace market do not even create icebergs and all reading are within the signal band all of the time. SCT trading involves trading all of the time and the slow STOCH is not used to sideline traders....

    At this point we are able to use the slow STOCH for every chart annotation signal; it is the EXIT portion of the reversal as far as its signals are concerned.
    #32     Jan 5, 2008
  3. Here is a chart of the ES daily as of EOD January 4 2008.
    This has the slow stoch ( 14-1-3), fast stoch ( 5-2-3), and the macd (5-13-6).

    This chart can be used to annotate and post.


    A larger image can be viewed below on link.
    #33     Jan 5, 2008
  4. A fast STOCH chart has been annotated and put up. Thanks so much; this is a super aid for everyone.

    The chart is a five minute ES chart and it's buddy the YM looks the same with the added advantage that there is an leading offset of the YM and the ES.

    the signals from the fast STOCH are entry oriented with respect to reversals.

    The slow STOCH is exit oriented with respect to reversals.

    All of these things put us in the ball park. And CHANGE batting takes place between the two. Annotated two minute and five minute charts are very high quality signal generators. Defaulted STOCH's and MACD's also give us signals on bars (endings solidify them) as the forming lines are floppy and hinged on the solidified portion of the chart. we observe the floppiness to our advantage.

    Trading 81 bars a day is a fairly accurate way to make money. We can view our effectiveness and efficiency from such a vantagepoint.

    At this point everyone has white space on the right of their charts and we are annotating charts into the future. It is commone for me to project a non dom gaussian into the time line of a chart, for example. then I know the approximate time of a potential B2B or R2R (I am capable of putting a vertical tick (short vertical ime in heliotrope) throught the pace level and its Gaussian intersection. I can also coordinate this tick with an anticipation on the fast and slow STOCH's. This all adds up to where it is possible for a potentially tough decision to be made.

    You can check out ET's trading and see where most people have difficulties. The subject is how a retrace becomes a reversal or a beginning of a new dominant traverse. We are on the RTL and a lot of times there is no question since there has been an FTT. What is at hand is the BO or FBO (Todd terminology).

    If a trader is unable to make decisions, it is because of lack of or faulty analysis. Here in this thread out intentions are to tie together what we need to do good analysis so that decisions take care of themselves.

    The thinking processes is a "funnelling process". We only have a few elements in the decision set. the above example was chosen because it is pertinent to a lot of failure in trading. On the other hand the most frequent common decision that is made is one that leads to more money being made by inaction, meaning continuing to hold. The MODE column of the log always takes care of this. When you put a C in a row for a given bar, it means you are holding through that bar.

    As an aside. If you are fully annotated and you see a dominant traverse is four bars long, you can look at four rows on your log and see four C's. You can put three of them in ahead of time if you wish. There is nothing wrong with filling in as much as you know ahead of time. you can always put ticks on the long to show where real time is happening to keep straight. as a matter of fact, why not run out 3,4, or 5 bars ahead once in a while to keep your "anticipator" happy.

    Lets go back to the BO/FBO on RTL @ a possible R2R or B2B moment. The FBO gives a R2B or B2R, we know that.

    At this time, the fast and slow STOCH's are going to be very clear about the signals. For a BO nothing happens. It is the greatest WWT that there is. No sentiment change on the fast; the extreme continues on the slow.

    On the otherhand a FBO is signalled by a slow STOCH exit and then a fast STOCH entry. A gate opens up so to speak for a period of time. we go to a medium and then fine level of detail to take care of the precise turn at that time.

    How many CHANGE cases do you have to run through during off hours of the market? Do them all. you can simply make 1/3 of a page of a log as mini sheets to do each of the possibilities. Do odds, evens, FTT's, BO's , VE's, and FBO's. Some are identical, arrange all of them in sequences and stack them on your trading desk.

    You can also do all the internals. Do a stack of dominant patterns (hitch , stalls, dips). Do the non dom pennants (FTP, FBP and SYM). Make a whole sheet to go through the CCC. Do a pm BO sheet.

    The STOCH's give you the MODE and the sentiment. You see it is possible use the 13 columns to narrate all of the MADA sequences that could come up during the day.

    KIWI put up sone nifty MACD charts that have the correct annotations on them. Review these and I will do a development on the MACD tomorrow and on Monday I will try to get a lot of Q's answered if no one else steps inand answers. Be sure to make up a set of MACD photos and then put each in their sequence to have a train. you can make up a Moebis strip on this too. I may have spelled Moebis wrongly; someone can fix that.

    We can all see that this fits into the iterative refinement thread as well.

    If you know any young people (third to sixth formers), think about giving them the log to work with. For whatever reason making graphs by hand (EOD for stocks), annotating graphs and doing logs for a school year is like changing the whole world for a young person. They simply get to see that they can do anything in the world that they want. It takes the meaning of money out of the religious category since they see so much of it is available all the time. The log is a language ultimately. We are beginning with annotating photos as a vocabulary drill. Photo trains become sentences and trading is telling the story of the yellow brick road to anything you want to do for the world. Take a deep breath.
    #34     Jan 5, 2008
  5. This is a chart of the ES 5 MINUTE eod as of January 4, 2008 with the Fast stochastic 5-2-3 , Slow stochastic 14 -1 -3 , and the Macd 5-2-3.

    Again this can be used to annotate for ideas, and to show the relation of the indicators, and price and volume.

    #35     Jan 5, 2008
  6. Munck


    I stripped MACD and stochastics from my charts 4-6 months ago, but after reading this journal a couple of times, I've added them back again :)

    Many thanks for some very informative posts/charts so far! I look forward to more, and hope I can contribute to some extent later on.

    Jack, a question for you:
    I have difficulty understanding exactly how fast/slow stochastics are meant to behave on a BO/FBO of the RTL. If you can elabroate on the following or point me to where I can read about it I would be truly grateful

    - When you say 'nothing happens' on a BO, do you mean the fast continue its sentiment from which it started from the last FTT?

    If we take TASR for example: according to my charts we had a BO on the 2. january. Fast stochastic was 'flat, and slow stochastic was in the extremes (>20).
    If we take TSL as another example, it shows the same stochastic behavior, on a FBO (again on the 2. January)

    I am a bit confused, are my charts totally wrong or have I missed something? :)
    #36     Jan 6, 2008
  7. Munck


    Chart of TSL:

    Thanks in advance for any help/comments :)
    #37     Jan 6, 2008
  8. jjf


    Can anyone briefly explain R2R and B2B
    #38     Jan 6, 2008
  9. Tums


    <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=833448">
    #39     Jan 6, 2008
  10. doli


    r2r: red-to-red
    b2b: black-to-black
    Look at the color of the volume bars in the interval.
    Whoops! Tums just deleted his post that showed that! Mustn't make it too easy.
    #40     Jan 6, 2008
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