Spydertrader's Jack Hershey Futures Trading Journal

Today's YM Chart

- Spydertrader

 

I was drawing this channel starting bar 8. I don't know why but it just seemed to match better but I don't draw my channels immediately but wait a while. Maybe it has to do with volatility decreasing after the 7th bar.

It's just an up channel that goes from very past pace to fast and then sideways. This often gets me in trouble because you seem to see FTT after FTT but it's just the explosive opening move slowing down IMO. (pls correct me if I am wrong).

regards,
Ivo

 

Here is a quick shot of my channels on a 5-min ES chart I drew live this morning. I do not add all the extra lines or abbreviations, I just look for the general channels and FTT which is the easiest thing for me to look for at this stage as well as breakouts.

TOday was very easy to define channels and some FTTs (in my head based on how I did it of course). This was my first day so it will not look like yours, but I simplified it to match the way I see things to make it easier to know when to get in and out.

 

With all due apologies to those who hate long posts…I tried to make it shorter but couldn’t.

I have received many thankyou’s for the channels video, and I am appreciative. A number of pm’s asked me questions like “how long did it take for you to trade this method?” I am currently LEARNING this method, not trading it. There is a HUGE difference between reading about something, learning it, doing it and finally mastering it. I’m telling you all this as a precursor for a very important lesson I received today.

I have been drawing channels close to daily for 3 months now, with time off for bad behavior, LOL. I thought, reasonably, that if I can do such a convincing job on creating a video that teaches this stuff I should AT LEAST be able to sim trade some forest level FTT’s. I took two trades that failed and missed the first good trade of the day to boot. I did my damnedest to prove to Spyder that I did it right and something was missing from my understanding of the method. I was as convinced as dirt that I was doing it right.

Then, with what can only be called a ridiculous amount of patience on his part, he lead me to a place where I could recognize what was there but I couldn’t see. Guess what? I TOTALLY missed drawing what should have been a simple channel annotation. Why? Because when I got in traffic (took the trade) I forgot what to do with the steering wheel and pedals (drawing the channel) and I crashed (lost money).

How many of the nay-sayers of this method just might be guilty of what I am admitting. And I work damn hard at this. Think about how easy it is to prove something doesn’t work when you don’t want it to in the first place.

The bottom line is I learned I do not have what I call unconscious competence in drawing channels. You experience unconscious competence every time you drive and all of a sudden realize 3 or 4 mile markers have passed you by and didn’t realize it. It is a form of hypnotic or altered state. I was missing being in that state. I completely ignored what I instructed you to do in the video. It became glaringly apparent that I still cannot do channels in my sleep (that is, unconsciously without having to even think about it).

As some of you know, my wife sits and learns along with me for hours and hours a day. She presented a powerful metaphor which I’d like to share. How many of you, experiencing frustration or doubts, feel like what Spyder is teaching is totally discretionary, guesswork, or art? I certainly have at times. I kept thinking how if it’s art it’s not objective, it’s not mechanical, it can’t be repeated or transferred.

Then the smart one in my marriage, who is an artist, basically told my I was full of s***. She explained how drawing is taught and how even the masters start a painting. Art, is at the most basic level, not so artful. When learning to create a painting, you don’t draw objects, you draw shapes. It’s squares and triangles and circles; NOT tea cups and apples and landscapes. It’s a straight-forward, repeatable process to create a painting of whatever. She said, “You draw what you SEE, NOT what you KNOW.” All of a sudden my excuse for bad trades was taken away. Think about how that made yours truly feel. This ain’t art. It is repeatable. But to add ANYTHING (like sim trading, stretch squeeze, whatever) to the mix before you can do the most basic thing at an unconscious automatic level is to invite pain and perceived failure.

I’m happy I sim traded for that single afternoon, it was the fodder for a great life lesson. I hope you can learn from my error.

 

It's the easiest when you understand the logic behind the gaussians and what to expect. Imagine an uptrend. You see an FTT. This FTT has usually red volume. So it's a bar preferably with a big shadow on top that doesn't reach LTL. After that we should not have a lot of black volume. There can be some black volume (retracement) or a lot of red volume. If 'there's a lot of black volume just sell. Then RTL is broken (or not, then close position if you took one). I really prefer price to behave as if this RTL just doesn't exists. The buyers are gone after all so I prefer low volume cause also the sellers have not many people to sell to.

Of course in order for price to continue going down we do need increasing red volume. We get some increasing red volume and often a retracement (point 2 was just formed). However on strong moves (like the one of today to the upside at 9.45) this retracement may not be there at all. So price retraces and the thing to look for is: Will our point 1 (the FTT) hold. Just when new buyers seem to come in and black volume increases the sellers come in and we have a red bar on high volume. (or a black bar with big shadow on top and small body, whatever, as long as you see a lot of selling or the start of it). This is our point 3 and moment to go short if you missed the FTT.

So, if you expect price to continue to go up you need increasing black volume (maybe after some decreasing red volume but NO increasing red volume) and if you expect price to continue to go down we need increasing red volume (maybe after some small black volume but not a lot of black volume). If this doesn't happen, close position.

As a beginner I was and sometimes still am fooled by the strength of the retracements. They tend to go further than you think and actually just as far that you almost do not believe in it anymore. At that moment sellers should come in and if they don't then close the position.

I suppose experienced traders open position on FTT then reverse on point 2 and are able to reverse again on point 3.

These are just my observations. Feel free to correct.

regards,
Ivo

 

Bundle, thanks for sharing. You are smart because you were simtrading, making errors and learning from it.
regards,
Ivo

 

Spyder said the answer to the drill is January 26, 2007.

Would someone with the ability to snag data older than 10 days post a 5 min chart of the subject day? I don't think I missed it, sorry if I did.

 

bm: thanks for sharing. you are so right (or should I say, your better half is so right), we often fail because we trade what we "know", instead of trading what we see.

I should also share a lesson I learned: it is very IMPORTANT to annotate.
Not just drawing channels, but to annotate your analysis.
Not just annotate some of the points, but to annotate diligently on all the turns.

Annotation forces you to make an analysis on your Observation .
The act of writing a FTT on the screen is a commitment of your Analysis.
If you do not have strong enough a conviction to commit your analysis, your Decision to trade might be ill concieved, and your Action might lead to flawed outcome.

After your action (enter the trade), the FTT annotation becomes a beacon, signaling you to move into the next cycle of the trading process -- to observe again, to see if this is a Continuation or a Reversal.

I have missed opportunities because I did not annotate. My analysis were flip-flopping back and forth. My mind was drifting all over the places. After much research and review, I came to realize the psychological importance of this seemingly "beginner's" task.

 

what do you guys do if you miss an FTT?
i stop and reverse if the price breaks the last reaction low if its going up or the last reaction high if the price is trending down.

any other failsafe's you guys have? i can usually spot an ftt after the third bar after has formed. but on an explosive down move that can be too late