Question for Grob/Hershey

Discussion in 'Technical Analysis' started by Stalker, Aug 26, 2005.

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  1. Stalker

    Stalker

    Hey Grob,
    have enjoyed reading posts by you in different threads. Being a newbie I don´t understand more than half of what you say, but it has given me a lot of new thoughts on different topics, wich I find very valuable. I´m not so focused on who is right and who is wrong, I just wanna learn to look at the market from different angles.
    Anyway, seems to me like it´s your mission to answer questions here on ET so I thought you might be the right person to go to with some difficulties I´m facing:

    1. I´ve been looking at volume spikes til my eyes bleeded the last two days. It became obvious to me that there´s a high probability that a spike signals either a upcoming reversal or a congestion area (hope it´s the right term, being a swede i´m not sure, what I mean is price moving sideways for a while or a small temporary pullback), people taking profits before the price continues to move.
    My question is - is there some concrete information to look for to determine (or higher the probability) whether the spike is an early reversal signal or just a sign that the trend will take a temporary pause? I mean something that you can see almost everytime in this kind of situations. I don´t find indicators to be that reliable for this purpose.

    2. When using trendlines to get a clear picture of shortterm trends, which timeframe do you recommend? Which frame do you find most reliable?

    3. I find closing a position at the right level to be even more difficult than to enter at the right level. If price hits a r/s-level that you can see on the chart, or if it hit pivot levels or a area that has attracted high volume earlier, than it may not be so difficult. Problem is I seldom reach this levels, i´m chickening out too early. Reason is I can´t see the difference between a temporary pullback and a reversal. To sum it up - I can´t identify if a move is really out of fuel or not. Any suggestions what to look for and how to act?

    4. Continuing to look at the relationship between dji and mini-dow I´ve ended up in the middle between your believe and my former idé. I see a close range between the two as a sign of insecurity. Seems to me that they are close when the market is directionless, moving sideways or jumping, and that a breakout can go either up or down from there. Seems like there´s a 50/50 chance either way. Am I missing something?

    I would be very glad to hear your views on these subjects, if you have the time and motivation. PLEASE answer as simple and concreate as possible. Feel free to think of me as a monkey that you´re trying to learn how to fly a concorde if it helps you to simplify things.

    Thanks in advance!

    Friday, time to leave the table
    :cool:

    /Stalker
     
  2. I'm one of the people who reads your posts.

    I'll go over your Q's and focus on some direct brief responses.
     
  3. 1. How may I evaluate volume spikes for trading purposes?

    2. What timeframe is most reliable to use for getting a clear picture of short term trends?

    3. How can I use market information to make the most of each market movement that I am observing and then act appropriately?

    4. How can the relationship of the DJ cash and the YM be monitored to get impending signals of moves coming up during periods of very low price activity and volatility?

    These are your questions as I read them; this may be what you are interested in for the moment. If that is so, then I would like to answer you in the following order: 2, 3, 4 and 1.

    Getting 2, 3, and 4 straight takes care of most trading basic difficulties.

    2 put you in the right place and 3. allows you to get understood the hold and reversal orientation to the market.

    The other two questions are just passing details of how the market works. Knowing these two things takes a lot of emotion out of the market mnitoring.
     
  4. 2. What timeframe is most reliable to use for getting a clear picture of short term trends?

    The 5 minute time frame.

    It is a compromise among several factors:

    1. The efficiency of taking money out of the market.

    2. The personal calmness that can be maintained at all monitoring times.

    3. Being effective in continuing to cross all T's and dot all lower case i's. This means being able to play to the beat of the market and completely accomplish what you are responsible for.

    4. This periodicity givens a person a feeling of continuity. Enough of the past is seen and remembered simply and a person, from Now, can anticipate enough considerations in concert to play at an excellent level.

    All in all it is a nice and complete place from which to operate.
     
  5. 3. How can I use market information to make the most of each market movement that I am observing and then act appropriately?

    Learn to putt.

    1. you look at where the hole is.

    2. You check out how the ball is going to get there.

    3. Clean off your club.

    4. Mark and lift the ball, replace the ball so the inscription (the great circle you have drawn half way around it) is in perfect view of the initial direction in which the ball will travel.

    5. Use the precise amount of energy to putt out.

    See below for details.
     
  6.  
  7. 4. How can the relationship of the DJ cash and the YM be monitored to get impending signals of moves coming up during periods of very low price activity and volatility?

    Okay.

    I posted a way of logging the strech and squeese of the spread between the cash index and the YM. This illustrates that smart money moves first with out any question. That is just the fact of the matter.

    For times when you are in the quandary of this question do one thing. Check the volume of ES. If you are finished slaloming already by taking profits in congestion and convergence, just see that you are supposed to be sidelined.

    It is asimple matter to see that the volume in ES is too low at this time of the day.

    Sideline.

    That brings us to how to come off the sidelines.

    One way only. Let the market take you in.

    This is done with a bracket entry. The market decides and you DO NOT ever make the decision.

    When it happens you annotate all the price and volume charts and start putting again.

    Your Concorde example is funny. When i come down out of the Yukon I usually get to rideup front (At least before 9/11). there is nothing so unnerving than slipping in too close behind a heavy and having to put the brakes on to stretch out the separation. Two contra-rotating vortexes that are separated just a little more thana wingspan really make it intresting. hooray for Vancouver.
     
  8. 1. How may I evaluate volume spikes for trading purposes?

    Now that you have three rays for volume on the 5 min you see that when you get around to seeing spikes it is not in the volume ranges of trading trends. so these spikes are relative to the mid ray and the lower ray and all during relatively dull times of the day.

    Lets look ahead a little.

    Peaking volume on the 2 minute YM is interesting. Look there instead. You do not have to focus on spiking volume for making money. focus on making money and you will miss a lot on non signals from spikes.

    Once you putt for every hold period, you will be far away from seeing spikes as signals.

    If price is near a left line on the putting green on the right side of your screen, you are looking for a reversal back to the other side of the green.

    if you are on the left side of the green and you see a spike it is a part of a minute or so after your last reversal where you took profits. This is wher you go in with smart money and the herd "pushes" you as it spikes in.

    Price spikes are handled with the "2 pair" trading stuff. See elsewhere. May be someone will give you a red thing to get you there.
     
  9. Well I tried to keep it short and hit the keys right. Obviously my left hand has the edge.
     
  10. Jack is there any possible way you could post your squeeze and stretch figures for a couple of days so I can compare. Could be later in the day any time.
     
    #10     Aug 26, 2005
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