There are numerous way's to use the stretch indicator... If you look at you chart you can see that when an up stretch line is crossed, that the trend can be up for several day's and when the stretch down line is crossed, that the trend can be down for the coming day's... The stretch indicator is not a trading system on it's own... Running man: The stretch indicator calculation is: If you have a up day: open - low. If you have a down day: high - open. Calculate this for ten day's and divide by ten. If you are going to use this on a 24 hour market, like the ES, be sure that your daily trading bar includes the full session...
Those large opening GAPs on the RTH charts you're talking about has a directional price movement in the ovenrnight trading session (all globex session chart) that's news related. Simply, that trend day you notice on the RTH charts had actually started before 0930am est. You should also review your charts and key market events calendar for the overnight trading session because there's a lot more stuff occurring on those particular trading days besides just them being +/- 10 points rth GAP for the S&P 500 futures. Mark
Since the ATR(14) or ATR%(14) takes into consideration the gap up/down, couldn't it be atleast used to determine the max move to expect for the day. For instance, if the ATR%(14) is 5% and the current day's ATR% is already close to 5%, couldn't you at least use that as an indication to close your longs or at least do not enter a new long? I certainly would not want to be hanging onto a winning position if it has already exceeded it's ATR%(14). Ed
...been trading a few years, there is a TON of stuff I can still learn, but I find kinda of ridiculous that some people still have the naiveness or arrogance to believe that they can "predict" what the market is going to do next.
You're right. Trying to predict what the market is going to do is not realistic. It's also unrealistic to expect stock movements to do things they have never done before. Stop Losses can cover you on the few occasions where the unusual happens (Enron, Bernie Madoff, etc.) I agree that you cannot know what a stock will do the next day. As I have stated before, if anyone knew what a stock was going to do a day in advance, they would be richer than Bill Gates. However, the stock market isn't totally random and unpredictable. If you believe it is, then I can't imagine how you ever trade. We stop at red lights when we are driving to prevent accidents, but occasionally you will get rear-ended. It doesn't mean we quit stopping at the red lights. Cheers! Ed
Couldn't agree more with you. Although everyone is different and different trading styles are for different people what works for me is strategic options selling ( still learning about it ). I am sure there are other trading styles that are just as good if not better. The thing is that there seem to be a close correlation between trading and gambling. If a trader does not have an edge he is a gambler and most traders are gamblers in denial. Just because they don't bet on the ponies they think they are different. Like the guy who goes to Vegas and tries to predict a number at the roulette or if the color is going to be red or black. Sure, at times he gets lucky, but it is a mistake to believe that one can do it in a consistent way. The same might happen to a lot of new traders and the worst thing that could happen to them is that as soon as they start trading they make money. Very few people can do it professionally and for many many years to come. There is a reason for that. If we could be accurate and consistent in our predictions more people would quit their job and trade from home in their underwear. You would think that this is quite obvious yet there is always someone who believes that a " good prediction" can be made.
Think of weather- no one knows *exactly* what it will be tomorrow, but that doesn't stop us from forecasting it. If you could forecast with a 60-70% probability from data the range of tomorrow's market, it would give you a great edge.
You're right. You can view the stock market as gambling and some people are better gamblers than others. But there is a huge difference, and that is DATA and COMPUTERS. If you try to go into a Las vegas casino with your laptop, they will kick you out. But no one is stopping you from using your computer to trade stocks. Since you mentioned Options; When you buy a "call" option, you are "betting" that it will go up over a specified period of time. Now, you said you cannot predict where a stock will go. I content that you can at least know where a stock is NOT going to go, and that is where you start the development of your trading strategy. For instance, would you buy a $30 Call option on Microsoft that is going to expire in 2 days. Not LIkely. Just keep stacking up a lot of things you would NOT do and you will have one heck of a good strategy. That is how I trade stocks, and with the right tools / ATS to keep track of all of the "don't do" rules, and throw in some good money management, then making money in the market is easy and predictable. I know many who do it. However, back to the normal stock trader. You're right, he doesn't have a prayer. He violates rules all over the place. The average trader couldn't even tell you that a 2-Day, call option ($7 out of the money) is a bad wager. The average trader doesn't even know that the DOW can be 100 points up while the whole market is selling off (instead, he is buying like crazy). The average mutual fund holder watched his portfolio get cut in half last year and didn't get out, even though 8 months ago over 95% of the stocks in the market where all heading down (simply the 5-Day Simple Moving Average was less than the 18-Day Simple Moving Average, a clear sign that the stock was in a long-term downtrend.) And this was true for almost every stock in the market. Just like driving, there are a lot of "don't do" things follow to avoid getting into an accident. However, if people drove their cars the way they trade the stock market, they would crash every day. Can you imagine driving up the Exit ramp of a highway during rush hour traffic and driving against the flow of traffic! You would crash for sure! Well, to me, that is no different than going Long while 99% of the stocks in the market are all clearly heading down. Can you imagine walking into your house, throwing your car keys over your shoulder, leaving 1 shoe in the garage, and the other in the bedroom. Well, welcome to the average trader. ha. I applaud anyone who takes control of his own trading and uses tools/indicators/rules to determine what to trade, instead of just letting people on TV tell him what to buy. Happy Trading! Ed
In my opinion is a bad analogy. You want to know about the weather for a variery of reasons, but mostly to know what to wear if you take a trip somewhere or if you plan to do something outside like a party, maybe for the weekend. In the worst case scenario, you and your guests get wet. When you try to predict the market and place trades on your predictions like the OP would like to do...well lol it is a LOT different when you are wrong.