The Stochastic Indicator

Jack,

Many of us, including myself, need an answer to the following question.

The winners generally take care of themselves. However, some of us are having difficulty recognizing the losers fast. I am talking about your rocket trades.

Could you tell us, SPECIFICALLY, how you exited today's (3/7) opening rocket trade? On the 5 min. chart, there was a rocket short around the open. If you did not enter a short here, tell us why. If you did enter short, PLEASE tell us how you exited.

This is the KEY for us. As I said, the winners take care of themselves. The problem is getting out of rocket failures, like today's opening trade.

Please answer.

 

Winners do take care of themselves for sure.

I think we have had many days of flat markets. So we have had many great opportunities to take care of learning a lot of stuff.

The four major things are noted.

Today's open is a very important one to have down once and for all. Aside from the source of this mess, we need to know how to handle all opens for every day anyway. Overnight news always impacts. In this case there was profound stuff in the evening and the schedule for Friday was going to have high impact too.

The general rule is to let the market synch before we enter. This is an end effect issue for all: beginners, intermediate and advanced.
If you watch the cash and index futures synch everyday before entering you are very well served for steadily making money. I can see some comments here carry a sort of theme of intensity or whatever. This is something to get past by having an attitude of steadily making money as time passes.

Everyday is going to start the same way for us. Get the end effects out of the way. We have durations of 14, 13, 10, and 5 bars to get past from the prior day. But this is not the primary end effect; the discontinuity of data is more important as one part and the lack of agreement of cash and index is the other.

We formally recognize this and operate accordingly. Our job is to make money flawlessly, steadily and with an increasing number of tools to do it with.

No one is able to start off fully equipped to do an excellent job. So our alternative is to do an axcellent job in a simple low risk easily defined place to have continuing success.

I feel we have done this and done it well under very flat market conditions. Everyone is doing well that is being thorough and letting go of past feelings and some knowledge that was inapproporiate.

Now just put in the picture what is done every morning at the open. Let the market synch by watching the csh and index values on the NYSE, or something you choose, come into price synch The formations on the 1 min will do this for you. This will happen coincidently after the 14,13, etc have passed to carryover from the prior day.

You can seethe Stocs working here today on the 1 min. See how the gap is wiped out and the day begins with a long trend. The very rapid rise of the Stoc lines to the 80 show this at the respective periodicity, 5 first, 10 second and 14 last.

Aftr viewing the synch on the 1 min, go back to the 5 min and prepare for the day.

You have a 1 1/2 hour "long" trade so far today.

I do see the market all over the place as a consquence of forces of news. When you are a pro at this, you will see very clearly all the means to really clean everyone's clock on this open. There is a true set of functions related to price and volume which will not let you down when I get you to that point.

Summary:

There is never a trade within 12 to 15 mins of open. You always get out of a failure to rocket, as a beginner with a "wash" (flat) trade. Once you are an intermediate, for now, you ride icebergs until they are extinguished by an iceberg on the other side of the trade.

today you entered long on the rocket after 11:00am when it started. For those looking inside the tape (20/80) you can see as an advanced trader that it was a BO off the 50% on the 14,1,3 Stoc.

 

Jack:

today's 11:00 trade:

i saw and entered, but the following happened:

1. at 11:50 the stoch(70.00, 80.32) AND (isn't this an exit signal for a failed rocket?)
2. the low of this bar was taken out AND
3. this 11:50 bar was ALSO a 5m MACD XO AND
4. at 11:52 the 1m XO Zero

so with all this info i exited at loss of -2.00.

Am reading the signals wrong and should not have exited?

What should have kept me in the trade. This is exacly where i get lost...this scenario makes no sense. Confused.

 

i lost my reply to this will do it over.

 

i will get back to you asap.

 

Jack you can click edit (next to reply button) to re-edit your post within 15m from last time you posted.

re-edit, kill button is just an alert to moderator it won't delete the post, to delete. click edit then check mark delete box then click delete now button.

 

All in all, not a good day. Most days I feel as though I've learned something - but not today.

The 1m MACD is my "best friend" on entries, but is killing me while in a trade! Frankly, I have no idea what the 1m Stochastic is supposed to be telling me.

Overconfidence did me in today...

01:19 Short @825.25
01:23 Out @825.25

Entered "early" on a cross of the 50% line, and just chickened out.

02:02 Short @822
02:09 Out @822.75

I "cheated" on this trade with the Histogram only at -.38 - chickened out AGAIN, taking 3/4s where a 1 1/2 should have been had.

03:21 Long @ 825.75
03:23 Out @825.75

Simply misread the numbers - it was not a signal. so I closed the trade.

03:29 Long @826
03:31 Out @825.50

The one-minute MACD did me wrong - should have been a gain of 1 3/4.

Bottom line: 4 trades - 1 win - 1 loss- 2 washes - plus 1/4

For the week: 12 trades - 6 wins - 3 losses - plus 5 points.

As far as I am concerned, it was a tough day, and a tough week. On the positive side, my losses are few, and small. But I continue to sabotage myself with a lack of discipline.

 

tampa,

This is not a personal attack. I just found the following a bit humorous:

HEHE

 

Here are two of dawg’s posts. Both have terrific points.

Point 1. How to stay in a trade.
Point 2. How sequences contribute to profits.
I copied the posts so they can b references for keeping.
Read the posts below:
Jack:

today's 11:00 trade:

i saw and entered, but the following happened:

1. at 11:50 the stoch(70.00, 80.32) AND (isn't this an exit signal for a failed rocket?)
2. the low of this bar was taken out AND
3. this 11:50 bar was ALSO a 5m MACD XO AND
4. at 11:52 the 1m XO Zero

so with all this info i exited at loss of -2.00.

Am reading the signals wrong and should not have exited?

What should have kept me in the trade. This is exacly where i get lost...this scenario makes no sense. Confused.
Quote from dawg:

Jack is always talking about sequences and i think this i what he is talking about.

in a short rocket----->1m MACD Divg. (9:51 and 9:59)---->1m MACD XO zero(10:00)---->5m bullish engulfing bar---->5m MACD XO (10:00-10:05)---->5m MACD XO zero (10:20)

the rocket fails but this turns into a kickass MACD Rev trade

i think of this as a potential sequence for a macd reversal.

Just thought i would throw this out there. Jack any comments?


The two go together once you get to the point of doinf sequences to perfect making as much as you can on a trade.

The principle is this: By doing sequences you see all the relationships. As a consequence you stay in trades properly.


The 11:00 plus exit was uncalled for if you were a little beyond a mechanical approach. Dawg is looking at the trend and seeing to stay in but he is definitely sticking with the letter of the law. All this is very good on his part.

Lets improve things. We have collateral ways of doing this. By looking at all our indicators (we will cut back later) We see that the middle 2 ones (5,2,3 and 10,2,3) are smoother than the 1’s (14,1,3). It is that 1 that is getting to dawg’s precise use of the rules. This is going to take him out on the “entwined” rocket often.

Okay change of subject for a sec. Regarding sequences, we are seeing them now. The word comes up and they are also being mentioned textually. They, at first are short linked things often just pairs of stuff,

I could go through a sequence of ways as to how the sequences build from pairs to more and more connected trains. In the end you “see” them.

After that they have uses. The final use is to make trees of them. At branch points they take you through decisions.

At the KISS level, you see that the thing that happens is related to either: “what wasn’t that?” and “Here is a flaw!”

What you are doing is eliminating the other path at a branch so, if fact, you are just left with what to look for next in the remaining branch.

NOW BACK TO DAWG DISCOVERIES.


Dawg is building sequences. They get built in 5 min for each indicator. The streams can be merged and integrated. Add in volume as a leading indicator too. And last price formation do work into the picture.

Once they are beginning to show up, you will see that the market appears to slow down somewhat, meaning that you are getting ahead of the curve. This means instead of catchup ball you are anticipating according to your experience and you are “seeing” sequences.

We can add in the 1 min at crucial places. The big break you find is that the 1 min works the same as the 5 and it happens sooner than the 5. Not many breaks in life like this.

For the 11:00 first post.

You can see the following:

1. We have a trend on Stoc 14,1,3.
2. It is “entwined and a volatile “entwining on the !’s (14,1,3 and smooth on the 2’s (10,2,3)
3. We have MACD moving “away”
4. Histogram shows Divergence is there and steady.

As time passes.

1. we see MACD stays “away” and entwines (low volatility). Channel of price is “taping” on the five min.
2. We see volume is steadily declining , This is a leading big deal indication.

Dawg is glued to it here. I think this is the time that gets to be a lot of pressure. What is definitely going to happen at this point is that things are going to change.

Just before Noon.

1. Go to 1 min. Why? Because we are seeing everything get to a branch point in sequence. We need to look ahead.
2. And for DAWG, he is at breakeven it turns out.

What we see:
1. everything is “short” on the 1 min.
2. VOLUME is in DU (DRY UP)

The P,V relationship says that that with decreasing volume there is going to be a change in what is going on for price.. A change from what?

IF you do not know, then you need to be bracketing to let the market tell you. But if you do know then you can proceed to make money.


Bygoing to 1 min you look at a tiny microcosm coming to and end so a change can occur. The microcosm “short” is not what is working. It is going to be hit by a leading market item that always comes into play. The only one that ever comes into play. What is is? IT is always volume stopping being DU or even better stopping being VDU (very).

In the microcosm increasing volume pushes the change. Pushes change not pushes the stall and centering and low volatility.

Most important to all of us is that this is the point 3 of setting up the “long” channel. Very important here.

We came out of a symmetric pennant previously. This means we are setting up for the next formation. For any trend we look to get three points to define the channel by two parallel lines. Point 1 is first on the right side; point 2 is “away on the left. What we need last is the second point on the right side. It is point 3.

DAWG wasn’t looking for point three. He is still ( and I feel for him) trying to “not loose money”.

Here is the picture that can never be erased. In new trends look for point three. It comes as trend bumps off the right line for first time. This always happens on increasing volume after aDU or VDU.

This repeats itself time after time in a trend.


Looking at the rest of the trend.

Once you see the trend in place then you are looking after that for end effects using your sequences.

What is the critical point of focus for dawg. He really created it perfectly. He needed point 3. he is actually sitting right on it, appraising everything, just in a perfect place to get this post and move on.

Okay, he will always handle trend setups from now on . I think he will see point 1 easily too
And he will look for point 2 immediately after point 1. We are on our way here and doing quite well.

Second post of dawg.

I did all this type up before and lost it.

If you sequence the 10:15 spike using both 5 min and 1 min I think the whole thing will be a perfect example of the market doing everything right. It shows a 20 point example that you will do soon.


Just cut to the chase using volume and price on the one min after synch of the open. The gap retrace had three volume BO’s leading the channel formation. There never can be any dobt in your mind when volume is not sustaining that a BO like that can be maintained. You had about three minutes to pick your reversal and ride it to the bottom of the gap overshoot.

Okay we now have volume in the picture from now on. We also have a way to get channel trends set up too. And we can do better sequences that link the indicators, volume and price.