Let's move back to the 13:55 bar for a moment. We see in this bar both retrace (within the channel) and reversal (break out of the channel). When we see such an event unfold, we first need to understand in what context we currently find ourselves. In this example, we find ourselves involved in a lower volume (lower volatility) period of the day (prior to 13:55). As such (again, prior to 13:55 PM) Volume doesn't appear to drive price one direction or another. Rather, Price feels as if it is almost drifting upward within the channel (Kelly Green). At 13:55 PM, we start to see increasing pace with respect to Volume and Price movement. As a result, Price breaks through the right side trend line (Again, Kelly Green). However, Pace again begins to slow down with the advent of the 16:00 PM bar. We see both Volume and Price Volatility decrease. Since we know decreasing red volume marks a retrace within an up channel, we know that we must still find ourselves within a Point Three formation. Since Price just exited a Point Three Uptrend (Kelly Green) we begin to look for another (more accurate) measure of the uptrend. As price comes up off the low of the 16:00 PM bar, we immediately start to think, "This must be the real (or new if you prefer) Point Three Channel!" and we draw in our lines (Olive Green). If one cannot 'see' this on the ES, the YM provides ample warning prior to the close of the 16:00 PM bar on the ES (within the 14:04 bar on the YM, price breaks upward). Since the YM leads the ES, one can 'know' in advance that we have a Point Three on the ES. With respect to how significant Volume needs to be for me to determine Price planned to continue to head lower, you are looking at the wrong bar. The 16:00 PM bar showed a deceleration in Pace (Volume) and Volatility (Price). Had we (on a PRV basis) seen increasing pace and volatility, we could have anticipated continuation and expected Price to continue to head lower. Instead, we viewed a signal for change, and since Price was headed lower, we expect Price to turn, just as it did. Now, it is important to note the following. We have no idea how long we can expect the new direction to last (after we received the change signal). However, we do not need to know. As long as we see continuation (increasing black volume and / or price remaining with the channel) we know to Hold until the next signal of change. I hope you find the above information useful. - Spydertrader
I dont think Mak's original IB PRV excel link ever got posted so here it is: http://www.elitetrader.com/vb/showt...=6&highlight=question for grob&pagenumber=417
For those having some difficulty 'seeing' how the puzzle pieces all fit together, take a look at this post. The individual changed his username, but after believing for quite some time Jack's posts contained nothing but nonsense, he has arrived at an interesting conclusion .... - Spydertrader
Thanks Spyder, most of what you posted makes perfect sense but...Still kinda confused with this one thing you commented on b/c I am looking at the YM and from 14:04-14:05 bar (the extra min we get on the YM before the ES 14:00 bar closes) and in that one minute I dont see any indication that the YM is going to move up. at 14:05 the YM is at 12660. Price only breaks upward on the YM around 14:05:25 ish after the 14:05 ES bar has already formed. PS I think you meant 14:00 bar rather than 16:00
Yes. I did mean 14:00 and not 16:00. Thanks for alerting me to the error. Please see the attched YM chart snippet for the area in question. Based on how I have annotated the snippet, can you now see how the YM provides an earlier signal for change? Hope this helps. - Spydertrader <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1372174>
Its not really clear to me why, I can think of several possibilities but none that are concrete and that I am comfortable with as a reason. I'm not sure why there is a channel drawn in there to have an FTT. Would you mind explaining? Thanks ST!
Hi Steve-- not sure what you are asking but I'll take a stab. There is a down channel drawn in there because of the dominant red volume-- it is clear that at the time, that is the trend. But notice how there is increasing volume in Spyder's highlighted area (that little vol spike) and yet price does not reach the established LTL. In fact, it finishes its attempted traverse and starts heading the other direction. This is exactly what you would expect from a change in sentiment. ON THAT BAR, you would be able to label it "FTT" and start looking for your pt.2 and pt.3 of the new, up channel. When you have a gaussian peak and price still can't get to where it needs to go, this is the clearest of all FTTs. If it's not clear for you right now, we will help you to get there.
In no particular order ... 1. The 14:00 bar forms an FTT (bar closes at 14:02) - change 2. The 14:02 bar shows Price having left the down channel -change 3. The 14:02 bar creates a 'taped' uptrend (bar closes at 14:04) - continuation 4. The 14:04 opens and price moves higher (even by one tic) from the open of that bar. - continuation 5. When price (in the 14:04 bar) reaches the high of the previous (14:02 bar), we see a flat top pennant - continuation 6. The 14:00 bar has less volume than the previous 'peak' bar (13:54 bar) indicating slowing of pace - change Although I have outlined the above in "laundry list" format, one should 'see' the entire picture in an instant. In real time, each of the above pieces of information provides a particular piece of data which indicates whether the market signals continuation or change. Ask yourself this question: "At what point do you 'see' (without peaking into the future, since we already know the outcome) where the market has provided a change signal? If one is sidelined, change means enter (in our case here - long). Once entered, we seek validation of our action by looking for continuation input. If one is short (because of our example) change provides the signal which tells us to reverse. Again, once long, we look for signals of continuation to validate our decision. The YM provided both change and continuation data in advance of the ES. However, we still see the slowing of pace on the ES as an impetus to go and look at the YM. At some point before the close of the 14:00 bar on the ES (before 14:05) the input (discussed in the post above) should have told you to expect change. At that point in time, if you looked at the YM, most of the above YM data Points would already have been in place. I hope the above post clarifies things for you. If not, please let me know. - Spydertrader
It does, thanks Spyder. I think my confusion stemmed from not fully understanding what to do in regards to the 1:55 ES bar which, in turn, screwed up my analysis of the situation on the YM. A snowball effect I guess. Thanks so much for the step by step breakdown, it gives me good insight into how one needs to approach things.