Spydertrader - Would it be useful for you to also plot the 50 moving average line? Many people use it (All those IBD people). And it appears that RNOW got support at the 50 for the last four days (including today). See my attached chart. 20 day is Blue. 50 day is Green. 200 day is black. It seems like I have seen some stocks that get more support at the 20 and some that get it more at the 50. If you look at the last downtrend for RNOW it got support at the 50.
Rather than post these points (and as a result, find myself involved in a flame war over accusations of hindsight trading), I'd rather provide you the 'quick and dirty' methodology behind both futures and equities. This way, you can 'see' for yourself as these signals develop (in both equities and futures). The process begins with drawing channels correctly. Now, I don't mean to suggest the 'Holy Grail' exists simply by drawing lines on a chart. However, I drew in yesterday both the dark blue (up trend lines) and the purple (down trend lines). I added the 'increased volatility' lines (also dark blue) as the market moved higher this morning. As you can see, whether price respects these areas of support / resistance often provides signals for anticipated future price direction. For those traders who enjoy the use of 'Pivot Points' in their trading, channels are nothing more than 'dynamic' pivot points. In other words, the support / resistance levels change over time. Next, add the 20 SMA to your charts if you haven't already done so. Time and time again (in both futures and equities) price finds itself influenced (one way or another) by the 20 SMA (thick bright blue line). Once you have the dominant trends in place, you then move onto looking for the traverses. I use red and green lines for the traverses (as seen on the chart). I cannot stress enough the importance of knowing where price sits with respect to the dominant trends. Without knowing where price falls within these trends, one cannot locate the FTT's (Failure to Traverse) - they key to trading the Hershey Methodology profitably. In the attached chart, we have two larger trends taking place- The dominant down trend (continued form the previous day) represented by thin purple lines, and the non dominant (at present) up trend (represented by dark blue thin lines). To locate an FTT within these specific trends, you need to see where price fails to traverse (FTT) when moving in the same direction as the dominant trend. Monitor the traverses (green and red lines), and when price fails to reach the other side of the channel, you have an FTT (again when moving in the same direction as the dominant trend). I have color coded the FTT ---> FBO / BO runs in order to more easily recognize the trends in which they occur. The Dark Purple, Light Purple, Bright Blue and Black FTT's mark the downtrend (thin dark purple lines). The Red and Orange FTT mark the up trend (dark blue thin lines). The yellow lateral channels (what Jack calls CCC [convergence, congestion and centering] in futures) represents areas normally found after a trending move. Many other tools have a place for assisting the trader to traverse the dominant and non dominant channels (DOM, Stretch / Squeeze, 2 minute YM Chart, MACD Histogram (5,13,6) Stochastics (5,2,3) and (14,1,3) and Time and Sales). However, I have not included those tools here, nor where one might find the most appropriate time to use these tools. Once you locate the FTT, you enter in the opposite direction of the trend. We do this, because when we have an FTT, we know either an FBO, or a BO (again in the opposite direction) follows. This set up occurs time and time again in both equities and futures. Once you can consistently locate the FTT, you can make money on a regular basis. I stopped the chart screen shot before the failed break out on the last FTT. Judge for yourself how I knew what direction price planned to take. Of course (As always) your mileage may vary. I apologize for the length of this post, but I do hope you find the information helpful. - Spydertrader
Thanks Spydertrader, it is helpful. I've been reading some of Jack's annotated charts on his blog and trying to make sense of them. I can't say that it's clear now, but it's getting there. I imagine I'll have to come back to this post a few times before everything sinks in BTW: I guess I'm flying against the rest of the traders here, but I'm still hanging on to SMSI. It isn't doing anything that makes me want to sell right now, and I'm ready to add more shares or get out when volume does come back.
Since everyone ismentioning their trades I might as well chime in. I sold my ANDE and PEIX today for some nice gains. Nailed NDAQ on unusual volume. I'm still holding ALJ. I have made a lot of money this week watching unusual volume of CANSLIM type break outs. LVS NDAQ CTRP GROW WYNN. The unusual volume has provided me with erlier entries than I would have got by buying at the pivot. Turning to futures though I am consistantly losing mountains of money trading index futures. Is there any source out there for Jacks methods of futures trading? When he is trading the ESZ futures what is he using for his volume indicator? Using the volume of the contract traded seems rather useless since the number of open contracts diminishes over time as the contract nears expiration.
No magic formula exists which enables one to simply 'get it' while trying to learn to trade a specific market. Like anything else worthwhile, trading requires practice (as does any other skill) in order to improve one's level of proficiency. I recommend practicing drawing channels on the ES in real time (or using delayed data) because the price and volume bars often look very different in hindsight, than they do as the data tiks on in. Looking back into the past, one can clearly see where the FTT's take shape, and as a result, how easily one can profit. In real time, the formations do not always form with such clarity. The same paradigm holds true with equities - only on a much slower time frame. Once you have the dominant and non-dominant trends in place, you simply trade the traverses one after the other. Trading in this fashion, allows you to move multiple streams of equity through various stocks as they arrive at specific points in their cycle. Only then does trading transition from enter and exit to (as Jack says) "taking water from a fountain." Good trading to you all. - Spydertrader
Some additional 'Out of the Box' Symbols for your review ... AEIS ANST BEBE EGLT KNOT SYKE ZUMZ Current (Cleaned Up) Final Universe ANEN BITS BTUI COGO CTRN DTLK DXPE EZPW FTEK GIGM GMXR GROW IAAC ININ LQDT MGPI MIKR NEU NVEC OMNI RACK SIRF SMSI TIE TWPG TXCO UCTT XING All above Symbols currently have Rank. - Spydertrader
Spyder re: your earlier posts. Are you trading each and every traverse and retrace in the channels of ES or just trying to ride the main channel? I have watched DOM, str/sq and tick charts extensively and have found it impossible to predict direction more than a tick or two. I realize the problem may lie within my little brain and if you say you are able to do so I will have to change my opinion as I believe you are an honest individual. On the other hand I am getting tired of banging my head against a brick wall trying to learn something that may not actually work.
Your question describes (what Jack calls) SCT (Sustained Continuous Trading) on the ES . I do not yet have the skills to perform in such a fashion on a consistent basis. However, I do not recommend starting with SCT when one begins to learn - or even after one has reached the Intermediate Levels of Futures Trading. Instead, follow the examples shown by easyrider (and others - including myself) where one trades one specific aspect of SCT until one has learned both proficiency and consistency. In other words, reach a plateau level where you can regularly show profits before venturing forward. Without knowing a great deal about how you utilize the tools mentioned in your post, my only advice would be: Stop Using the tools, immediately. Each of the tools mentioned has a specific function - providing specific input at a specific time. Absolutely none of the tools mentioned has a universal use. In other words, one should not use all the tools, all of the time. Jack refers to the input of the specific parameters of each tool (occurring at a specific time) as Coarse, Medium and Fine Sweeping. Knowing when to sweep, and in what fashion, is similar to knowing when to use the gas pedal, and when to you the brake pedal on your car. Sometimes its an easy decision (a red traffic light for example calls for the brake pedal). While on other occasions (passing a truck in the middle of a snowstorm) the clarity of the situation appears more muddled. A four foot long (when printed) sweeps document outlines where to go (which tools to check) and what to do when sweeping (If someone has this document in digital format, please post it). Some people have found value in reading the document. Others (such as myself) have chosen to go the route of adding one tool at a time - once obtaining proficiency and experience. This route works quite effectively because using one tool at a time (before adding additional tools), allows the trader to train his / her mind in an effort to 'see' things clearly. Think about it logically for a moment. When Jack first started trading Commodities Futures, he didn't have a DOM, Stretch / Squeeze, Time and Sales, a bouncing ball or any of the other tools available from the high powered computers of today. Jack had a chart (hand drawn) and a phone. Doesn't it make sense to start looking at the markets the same way Jack did? Then, after a time, when you see the need for a specific tool to aid your decision making, you'll not only know the right tool to choose, you'll also know the correct context in which to apply it. So, I recommend you throw away all the tools for now. Forget about all of them for awhile. Focus on drawing channels and watching the interaction of Price and Volume. Occasionally, glance down at the indicators to confirm holding or waiting (I assume you have your ES chart set up in the same fashion as Jack recommends with Volume levels and Indicator Settings as recommended). Learn to spot the FTT. Even if you don't 'see' the FTT's right away, keep at it until you do. By the time you spot the FTT's and trade them profitably, you'll have realized you need to have another tool to help you with decison-making. Where to start - now that I have taken away all the tools? The answer is: Price and Volume. Learn to do two things with volume. One, learn to use PRV (Pro-Rata Volume) to correctly anticipate where volume finishes at the end of the bar. Beginners should see 500 contracts in 15 seconds, 1000 contracts in 30 seconds or 2000 contracts in the first minute, before entering into a trade. (Yes, Yes, I know. Volume often 'dumps' into the market later (3rd, 4th or final minute) in the bar, but a beginner doesn't worry about these things for now). These higher levels for PRV normally translate into the volatility required for beginning ES traders to profit (See Mak's Post regarding contract volume and price volatility). Two, Compare the anticipated Volume in the current bar to the known volume in the previous bar. Do you anticipate improved volume? Is the volume headed in the same direction (red vs black)? Beginners should want to see improving volume (Jokari Window) moving in the same direction (red to red or black to black) in an effort to catch those nice 'Rocket Trades' made famous by easyrider's posts. Now in the beginning, you will quickly realize how frequently a beginning trader spends way to much time on the input gathering and decision making process. Remember, following the paradigm of information gathering, decision making and executing timely action provides for improved results. As one gains experience, notice how much faster your brain moves through each of the three steps, and focus your efforts on improving the bottlenecks. With Price, I recommend 'sweeping for formations.' Watch for the Lateral Channel formations, as well as, the Pennants (flat top or flat bottom) and note when price does (and does not) break from these formations. As noted before, look for the FTT's and anticipate accordingly. Take your time at this step, no need to even punch buy and sell buttons on a simulator. You want to train your mind at this stage to begin to 'see' the market correctly. Practice the 'wash trades' (as Jack suggests) to learn when the market is asking you, "Are you sure?" with respect to your position. Lastly, I'll go ahead and give you one tool to watch (if you promise to use it only after you have completed the process above ). Only use the DOM (in conjunction with Time and Sales) at areas of Support and Resistance (Previous Day Highs / Lows, Pivot points, All - Time Highs / Lows, Intraday Highs / Lows). Note the differences in the DOM (I use a ladder DOM) and the changes in the DOM at these levels. As I have stated many times in the past, the differences are striking once you know what it is you need to look for (Look for a 'Wall' of contracts, and note the changes to that wall, and as a result, how those changes effect price). Monitor the time and sales for size at this point (I filter for 50 contracts and above). Did size move in? What happened to the bid / ask on the DOM? No size? what happened on DOM again? I realize a strong urge exists in everyone to obtain as many profits as possible in the most rapid amount of time. Everyone wants to trade at expert levels right away, and without any delay. However, with trading, the Journey really is as important (some claim more important) than the destination. Take the time now to train your mind, and you too will see what so many others now understand. Once again, I apologize for the long post, but I hope you find the above information useful. - Spydertrader