Sorry for the gap. I will get my schedule readjusted shortly. as part of my sets of 1000 day life segments I am trying to finish up some stuff. The A/D can be done using any one of many alternatives. My fav is BOP by worden bros. The ratings by IBD work too. For a while I worked through on this to get some maths for an analysis project on the east coast ( Harvard). For me, the best result turned out to be a MACD using volume. Because all the stuff going on was in the category "too good to be true", we could not really come to good understandings without going through a terrific amount of analysis. As a fine point, for now, do this. Look at the cycle chart and see how the A/D is changing twice as fast as volume and see that volume changes twice as fast as price. Sit there and think. If you read all the ET posts by everyone and extrapolate, you conclude that a whole lot of people don't trade at a maximum potential. You simply see why too. They do not take advantage of the opportunities. You can clearly see that they do the A/D thing too frequently. In/out..in out..in out... This is what I speak of as the odd harmonics in the waveforms. This is the traversing of the channels. Think about it. dawg is a great person ... he showed us a lot as we started out. remember his expressions for what it takes to stay in the trade. He is growing into looking at the larger money making picture. The bridges he is building across his prior "early exits" are strong and remarkable achievements. If you lookat how a person has to go through "rockets"it is amazing too. Buying as it passes 80 is not in the books it turns out. Actually their is a dumb notion in the books to reverse then because of the "invention" "overbought"...lol. This is the A/D phenomena showing up in so many little places where people do not realize their potential. Since you and others are knocking down some money now, I am going to overhaul everything in a couple of weeks. The STOC is a good thing to learn low risk trading and staying sidelined. (These two factors are what lead to success) It turns out when you know what you are doing any trade is a low risk trade. I just read everything written here to see what people do not know. when we get the backtesters to learn how to do that stuff, then we will see a convergence of their results and they will have backtesting software that gets as long as the mechanical trading software. So far the forward trading is getting good results for one contract trading. you can divide days into trades and into profits and see a convergence of results. 3 to five trades a day will give more than 10 points usually. the # of trades will pick up as you "feel better". Everyone can now look back and see that they "simply could have done what they thought was called for". thatgets the trade level at a good operating point. The consequence is that you do make more money per day. simply take what you make per trade now and see that the additional trades give you more profits per day. If you get three times initial capital in the till , you have the right to make more money in two ways: trade in a more sophisticated manner and do 5 contracts from then on. This is all about A/D and when it's A and when it's D. We need to hold through other's shiftiness to realize all of each move. I will overhaul this beginning to get that in a groove for you. i attached a planning reminder.
Jack, thanks for your post and your insights. Today's trade: #1 long rocket Long 916.75 11:02 Sell 917.75 11:29 +1.00 Felt like exiting/reversing after it peaked at 11:11, at away side of channel, but there was no flaw so stayed in till channel was broken, rocket failed and MACD xed. Left 3 pt on the table. Week Jack, what are your thoughts on exiting/reversing at away side of channel, with wash if CCC, or reentry if trend is continued? I know your advice is to stay with the trend as long as there is no flaw, but you also mentioned slaloming a few times.
Didn't trade yest. I had a feeling... Today: #1 rocket -> point 3 -> entry Long 918.25 9:56 Sell 921.50 10:08 bounce off away side -> reverse +3.25 #2 reversal Short 921.50 10:08 Cover 919.50 10:15 on what looked like a new pt 3 but volume was low = too early, no flaws yet -> the 2nd point 3 came at 10:25. Happy with the two trades though. +2.00 #3 rocket reentry Long 923.25 11:01 Sell 925.50 11:17 on failure to traverse = too early, no flaws +2.25 Afternoon: saw an iceberg confirming after 13:35 but was not comfortable w/low vol and stayed out. Today I was too quick on the trigger trying to exit at the away side - will wait longer for a flaw to occur. Day +7.50 Week +19.00 19 days/48 trades +80.50. There's gotta be a losing streak around the corner :eek: ps. if I stayed in the first trade w/out reversing: Long 918.25 Sell 925.50 +7.25 - same result, one trade only. Hmmm.
You put it very succinctly. I will try to catch up om my posts by going backwards from the most recent ones that have been made by others. As skill develops, a person can add to their performance efficiency. Going from just rockets to trends is the first step. Rockets give you experience in netting profits and learning to get out when a rocket doesn't materialize. So you get to a place where you do stay in as a rocket unfolds and you make sure the STOC lines are entwined. This condition is complemented by high volume, and the MACD lines moving significantly off the neutral. This is the character of a strong, profitable trend. We often see the strength lessen as a new point three emerges and we stay in the trend. Most people work to learn to stay in at this point in their trading and as a consequence they pull down more profits as they stay in the market longer after each entry. We have, in effect, done a traverse from the left channel line to the right channel line and stayed in to follow the strong most profitable traverse that is coming along at that point. Let's consider some fine points. There is a greater money making efficiency at times to reverse off the left line then reverse off the right line as well. The trend's strength determines the value of doing this. The stronger the trend the less valuable a reversing strategy becomes. In a strong trend, you make money all the time and one traverse direction is very profitable and the other is just a weaker rate of profit making. As a trend goes towards a limit (like support or resistance), nowadays, you do look for lessening strength and as you say you begin to see possibilities regarding reversing. This is a similar exercise as that of doing wash trades (flat trades). The difference is you are focused on profits instead of just getting out even with no loss. Here is a consciousness element to learn to handle. If you have the "entwining", mathematically, there is a strength statement being made. The opposite of entwining is the concept of divergence. Entwining in terms of the P, V relationship represents "continuation" as in the "then" statement "then the trend will continue". Divergence is a statement that is contrary to "continuation". What is contrary to "continuation" in making money is "change". Thus you see that you are easing into the next higher plateaux of consciousness in market operation. The market either continues or changes. This is so far from the trite Bull and Bear stuff. A person emerges from various biases into a neutral bias for making money. As that occurs, the person begins to view the market "physically" as in physics or science. In nature, things continue or they change rather than just go up or down. You are transitioning into a rational place where the governing elements will now allow you to move to a level of making a hell of a lot of money. Some of the quiet people here "slalom"; they are patiently waiting for me to unload the fundamentals really nailing the opportunity that they play now. You see, now, that the trend is the continuation of movement (steadily making money). You see the nature of trends too. They are there in a spectrum of potential energies finally manifesting as kinetic energy also in a spectrum of values. As you get into it you see that, smoothly, the market varies within its trend. You want to harness this phenomena to make money more effectively. Go about it this way. Let the end of trends going into congestion be the guide for learning about how reversals work. Most people who are up and downers are also whipsawed types. The people on the next plateaux above them are using these people's limitations to siphon money from them as they trap themselves continually. The people who go out on stops are UDW's (up, down,whipsawed). Slaloming people are their counterparts who extract money from them. We are just looking at the players and we can easily notice that they are on differing intellectual and emotional levels. Loosers and winners, so to speak. I will focus on how to choose which side to play on from here on out. Let's go at this mechanically first, then tune it up with desecretionary stuff. fisrt we need to know how to pick the point where what is prevailing is what. Either it is "continuation" or "change". As long as we are in "continuation" we hang with the trend. When the modus switches to "change" then we go into a reversal strategy. The easiest backtest for the turning point is to log the shift from "entwined" to "divergence". I may have to give the maths for this to keep back testing on a par with our efforts. Use the 5 min today and pick out the point at 12:45 to see the "continuation" end and "change" begin. On tuesday observe at 14:35 to see the reverse: "change" goes to "continuation". For anyone into physics, we are playing the Newtonian game here, First Law. Someone mentioned Resnick here...lol..I met him last after a speech I gave at NSF. NSF, annually designates a "new program", i. e., recognizing something "new" in science. resnick got to hear "something new" from a former student withwhom he didn't ever get along...lol.
The essential ingredient of using a reversal strategy to make money is to only use it when the market is in a state of "change" as opposed to a state of "continuation". Trends represent "continuation" but is is not a sufficient condition to try to determine if a trend does not exist. This is because there are three kinds of trends: long, short and lateral. A state of change exists only when end effects of trends are becoming paramount. What this is all about is looking at where most people screwup and get emotional about things. The term parabolic is used here occassionally. This is a term for "oh oh, something is changing". VDU is another term for "this market is not functioning". We hear about "chop" too. "Chop" seems to describe "my algorithm isn't working again" when most people use it. As any one of the three possible trends dissappears and another of the three begins, we need to know how to trade. We can use a strategy based on change to achieve this. Reversals will be the intantaneous technique we use to get on the "right" side of the market. So far the warm up drill for this has been to sideline without loss. Because we know how to make a buck now, we are entitled to always keep on the "right" side of the market. rwd all the posts made in ET, they are a little thin in this arena it turns out.
You can classify a lot of the TA formations as "change" situations. traderkay is stuck on trading after the pennant ones; she has learned that she needs to not enter around pennants because of her risk. This is a defined risk area for her and it falls into the general category of market change, nontrend (lateral included) times. Another one that is always in the wings are gaps and their companion "retraces". Most people go through a lot of probability stuff on these two. It serves as a substitute for not having a technique of trading for them. "stay out" "if the probability is that you will screw up is high" is the guiding principle here. This is all nontrend (including lateral) stuff where "change " predominates over "continuation". By dealing with this important market condition, we get to develop and use another set of excellent tools in defined conditions. Th downside on this stuff is that it brings out two subgroups of people: the lurkers and the linguistic twerps. The fact is, however, that if you are ever going to extract all the potential money form the market, you simply have to know what is going on at all time and have a way to deal with it. One of the tests we can introduce is comparing profits per trading session with the potential of the session. I like to use the H/L range for the day and come up with a multiplier for it as a performance measure. Once you have trend following under control and then you deal with the nontrend (including lateral trends as part of trends) "change" intervals of market operation, you have a basis for making more money per day than just the traverse from one end of the daily range to another. Ultimately, the algorithms that people use become limited only by how effectively they link to the performance of the market.
Jack, Thanks for the great posts. The continuation-change concept is a killer - I believe it can greatly enhance one's perception of the market. I will aim to stay longer in strong trends and be wary of slower ones.
I was going over some older posts - you mention a MACD using volume for A/D. Can you elaborate on this please: is it a MACD based on volume, or did you mean using the MACD AND the volume? Thanks, vorzo
What we are beginning here at this point is to look at the market participants more closely and we are also beginning the process of separating the "smart money" from the "other money". There are a few creative practioners who have gotten to the essential babis for making money and they are complemented by a class of analysts who have made it their business to translate certain crucial parts of the investment process into very excellent signals. The entity traded is most ably characterised by value discrimination; the human element of the market is most closely interpreted by volume considerations. To link the two is the place where optimization begins. As you look at the history of market study and such, you can see the slow evolutionary progress being made. I watch MA's as an indication of the public progress. First their were long term MA's for price, then shorter ones showed up. IBD at some point introduced volume MA's for the DJ average. To make money you have to work to realize the potential of the market. At some point you become part of a smaller group who are doing quite well by the standards perceived among experts. That group distinguishes itself by a KISS orientation to the essential defining market character. The A/D aspect of the human element is a factor, when understood, characterized and monitored, puts you in a place that is ahead of the "smart money". The market is different than most things. I go by plateaux to articulate what is what. You will see comments by 4 out of 5 people who do not share my views. The primary reason is that they are simply in places that do not allow for a breadth of consideration that may be required. The land of opposites is "the mine field" of investing. Opposites do not apply to the upper reaches of the plateaux of investing. I introduced the time pair related to trends and change of trend. You can see how people go through this stuff. First some see nothing. Then it appears that there are up and down trends (This is the Bull and Bear levelcof living). Advertising and brokerage folk operate here and avoid understanding more by the tangential stuff called asset allocation and long term this and that. Some where lateral trends become part of the consciousness. Occassionally a person can see the sequence of congestion, convergence and centering. But usually the people go through having a congnicense of "patterns" and formations for specific "end effects of trends that fit into S/R factors or market "off to on" functions (pennants). It is hard to get to understanding there are three trends (up, down, and lateral) and also and just as important there are time intervals in the market process that are defined by "change". It is almost paradoxical to talk about trends as "continuation"; most people are simply stuck at a level where a trend is change (it is, of course, but in only one aspect of the market called price). To get to seeing stategically how to use market tools is a long gruelling trip for some. On the other hand for others it is an exciting segment of making money that is super enabling. The big chunk of information here is that you use reversal strategies during "change" periods and you use "optimization" strategies during "continuation" periods. To detect the time when you change strategies is best done using signals and indicators related to volume. (Actually a combo of price and volume is what the most accomplished analysts would use. Three of them are the P, V relation inventor, the RSI inventor and the BOP inventor. The combo of indicators that is best for illustrating the sequence in equities is a fast MAV 5, RSI (See Pring values that he adopted recently), and a slow MAV's (30). The two MAV's relate to an MACD for this. The signal sequence (minimums for an end of a down) is in that order. I have a limited paradigm for equities. This means that I cannot deploy more than a given amount of capital. No one can really and when they do they they limit making money. to normalize, I use shares as the capitalization determinent. My rule is: 100,000 shares max (think 30 dollars a share); never entering or exiting in blocks larger than T&S immediate average; never having cummulative amount of traded shares be over 10% day's volume. The ratio of blocks in to blocks out is 20:30. A prior stipulation is that ,at present I use the IBD recommended min/max float range (5:30MM)and a universe of 150 nominal as determined by adjusting the EPS and RS to highest values possible or 90/90 whichever comes firt. We are going to use this stuff for the ES mini. I will have to go through a few clarifications as the days go by. Markets don't always give you examples right off of situations you want to use. The nuances we will look for are those where we can be in fundamental trends but, because they are so slow, we will regard them more as tipped S/R ranges. Right now the most fundamental market driving phenomena is the general malaise of commission driven financial industry people trying to get money back into the market. because the NAZ is up 35% and the DJ over 15%, they types of people are getting to a point of steady commission income flow and it is acting as a narcotic it looks like. What I am going to do is use the indicators we have on hand and just presume that people have been making money and enough of it for a while. This is a condition where we can get to a KISS orientation and not have any significant "fear" type garbage driving performance. I think it is safe to assume that a person can make more per day than the H/L range. This is past the plateaux related to all the back testing and "edge" stuff and W/L ratios, etc. We want to, just understand market operation, and use a combo of strategies to optimize trends and also during "change" pahases learn to stay on the "right" side of the market. This lets you be in the market a relatively high percentage of the time and also sets up a continual accumulation of $. I equities today I am holding 5 items, I buy in multiples of 500 shares. It is a mixed market and the current daily profit I have on these 5 ranges from 4.15 min to 6.28 max. The maximum # of accounts where these multiples reside (under POA's in many cases) is 11. My point is that I do not care what the market is doing; it is simply my practice to continually grind away at making money. We need to get ourselves calibrated so we can "see" what is going on. The set up we have for ES has actually allowed for much of this to be out of the way. We need to pull down more than 3 to 5 points a day per contract. We had a real seige of folks here who say that they can't make any money. Now they are going to have to give up this orientation.