Spydertrader's Jack Hershey Futures Trading Journal

from chat room this AM

Spydertrader (Feb 5, 2007 10:15:22 AM)
FTT sirf (short term sentiment change in YM)

 

You caught me giving one away.

For clarification, Marketsurfer had coincidently just entered the ET Chat Room and announced he was short the YM. I simply was trying to inform marketsurfer of what the YM was saying at that point in time - and it wasn't "Go Short!"

- Spydertrader

 

the chat room will be filled to the brim with eavesdropper tomorrow !!!

 

I believe this has been discussed before in other threads. The answer to this question is that smart money causies the YM leading the ES phenomenon.

I am only relating my belief, which in turn, was motivated by Jack's explanations. If you don't believe or agree with this, that's fine by me.

 

After reviewing many of the posts in the last 24 hours it appears as if we have two questions before us. 1. Does the YM really lead the ES? and 2. If so, why does the YM lead the ES?

As to the former, clearly the YM leads the ES at times of change. I have posted several examples from numerous trading days where one can easily see the YM make the turn prior to the ES - often more than a few minutes ahead of time. Other traders have also posted their observations where they see the YM leading the ES in times of change. As such, we can all (or most, or many of us) can agree that the YM does indeed lead the ES.

Having answered the former, we can turn to the later: Why does the YM lead the ES?

Many have provided their opinions as to why this phenomenon takes place. ETLURKER posted a wonderful mathematical model, Jack Hershey has, in the past, explained his views, and many traders provided various observations as to their reasons why the YM leads the ES in times of change.

As to my own viewpoint, allow me to put it as succinctly as possible:

Who cares?

Seriously. I am not being trite when I say this, but really, let someone else worry about the 'why?' Does knowing 'why?' put any additional money into your pocket? Does knowing 'why?' make you a better trader? Does knowing 'why?' help you 'see' the FTT any sooner?

Many people have already provided their opinions. They might all be right in some fashion or another, or they could all be wrong in some fashion or another. Does it matter? Not to me. We could spend the next 17 pages of this thread debating "Why the YM leads the ES?" without arriving at a consensus. And, even if we all arrived at the same viewpoint in the end, would it have put one additional penny into your pocket? Doubtful.

Focusing too much on 'why?' is sorta' like going to the ballgame and wondering what company made the paint covering the seats. I mean it's nice to know that Dupont made the paint and Monsanto planted the grass, but does knowing those things help you to learn how to hit? Do baseball players really need to learn fluid dynamics, drag coefficients and the physics angular velocity to hit a curve ball?

Understand, I don't intend to stifle the debate. Rather, I hope to encourage everyone to keep the debate within its proper context. In other words, let's keep our eye on the ball.

- Spydertrader

 

I don't know where you got the impression that I don't believe the YM leads the ES. I have observed it and believe it: it's almost cheating.


WISTYI I'm fascinated as to why it works out this way - it's one of the best breaks we've been given as the "not-so-smart-money" and I'm surprised it hasn't been totally ironed out by the arbs. There must be good reasons why it can't be. I think it is very important to understand the other players in the market, their motives and operational limitations. Jack could help our understanding here. For now I'm just happy it works.

I have read a lot of Jack's post on this subject. I did not mean to give the impression that I was totally new to this concept. For example, here's a snip of something he wrote previously (which I have filed in an electronic 3-ring binder):

I know we'll be getting on to STR/SQU in good time (the cash INDU and futures YM premium comparison). I'm very curious to know what the YM equivalents are for the Nikkei and DAX, I'm starting to feel exposed out there without all the tools.

 

I care. Knowing why it works conceptually means you will know its limitations and times when it could cease to work (if it ever does). If you don't want further discussion about this on your thread, fine.

 

Re-read the last paragraph of my post.

- Spydertrader

 

Spyder,

“who cares” could be extended to “is it important?”

My immediate thought/reaction was echoed by Pointone. I like to use the automobile analogy: does a profound knowledge of car mechanics make you a better driver? Not necessarily, but you will know the limitations of your vehicle, specifically, what it (and you) can and can’t do.

Similarly, it isn’t unusual to see questions re the validity of knowledge of the greeks, for example, when discussing options. Will this enable you to make more money? Maybe not, but importantly, it allows for the identification of risk (and reward) and where it lies. In other words, it may not make more money but it will identify more appropriate strategies for a certain expectation or outlook and therefore reduce potential losses.

To extend the point, there are numerous legendary traders with only basic education, as there are with maths Ph.D’s. But what percentage with a basic education fail compared to those with a higher education? I don’t know, it’s an open question.

Grant.

 

pre open channels, thank to Steve for passing along tip; carry over channel shouldn't have any bar piercing it.
ps. YM point down so look like the red channel will be use, let's see