Dogpile

re 'complementing a discretionary style with some 'mechanical trade' ideas.' to a large extent this is what the Taylor technique is.... I have found this to be quite helpful. Just some simple tendencies to keep you thinking flexibly. don't know if you have checked out this other thread I started but this is kind of similar to the Taylor technique http://www.traderslaboratory.com/forums/f34/a-mechanical-strategy-journal-2488.html Can see how well this works on the long-side particularly. Sometimes, the market goes up relentlessly and it doesn't work. But a lot of the time, the market does not go up relentlessly and instead chops around in step with a couple of simple indicators (I like the 2-ROC, 3-ROC, pinball, cap-pattern etc...). This 5-day one is like another one of those potentially for me. Presently the market is in unusual position so the 5-day Collins strategy is not indicating much -- but it doesn't look like a great long here to me... we went up and up and up on no volume, then went vertical on big volume. As Dalton would point out, that is not the best support structure. But eventually we will get another 5-day buy signal to think long. If it just presses up and up and up --- then I will have to rely on my scalping --- but I like to expect the Taylor type of rhythm and adjust on the fly if the market isn't confirming that rhythm. Also, next week is one of the worst weeks of the year seasonally -- the September post-options expiration week has been down 14 of past 17 years. We could get a trend day down on one of those days and flush out all the people who bought AFTER the vertical move up.

ES -43.25 pts x 50.00 x 1 contract = -2162.50 NQ +32.75 pts x 20.00 x 2 contracts = +1310.00 ER2 +30.70 pts x 100.00 x 1 contract = +3070.00 net = +$2217.50

uh, no I am confused... was doing it x 12.50 (tick) rather than $50.00 (point)... will update too caught up in details, trees for the forest thing.... you know what I mean

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Update: Yesterdays short entries looking better as of today -- but a long way to go before a long trigger is possible. Close will have to be in bottom 1/2 of 5-day range to potentially get a long entry (no orders possible for tomorrow since we are already short and todays close was high in the 5-day range). Status: Realized + paper gain(loss) as of todays close ES: -43.25 pts = -540.63 (1 ES contract per order) NQ: +32.75 pts = +1310.00 (2 NQ contracts per oder) ER2: +30.70 pts = +3070.00 (1 ER2 contract per order) Net: +$3,839.38 Existing positions: Short 1 ES Short 2 NQ Short 1 ER2

<<Is the book by Art Collins worth reading? TIA.>> my view is that any book that teaches you 1 good thing -- even if it just inspires thinking on your own in a new way --- is worth reading. I would say I picked up a lot more than 1 thing in that book. it also taught me a slew of EasyLanguage tricks which you probably already know having a background in engineering. it was just cool to see how a 30-year trading veteran thinks. I don't use very much out of it mostly because it just isn't consistent with my discretionary/price-pattern style. nonetheless -- I am trying to add another dimension to my trading and think mechanical trading might be a nice complement -- especially on the long-side.

Summary for day: Market closed weakly yesterday and opened lower. We had 2 straight up days so Taylor rule says to look potentially for a down day. This was confirmed with down open --- value was starting to be built lower -- in-line with Taylor and a potential bearish day. The market spent opening few hours in a tight coil where PVP = VWAP = Price (balance). It faked down, then up, then impulsed down, formed a bear flag and proceeded to trend down and away from VWAP until it reached around ~10 pts below VWAP -- where it stopped going down and limped into the close. Volume was lower and does not suggest continuation without at least a test up. Profile shape shows range extension to the downside. This could just be a 'price spike' -- meaning value will not migrate downward to price and implying price reverting back toward 1536-38 -- the value zone of today. On the other hand, no good bottoming pattern occured such as an inverse H&S or a 'b' profile with a higher low. The market may be in the midst of an uncompleted down auction. So 'price spike' or continued auction? we will just have to wait until morning to see -- complicated by it being an options expiration Friday.

just noticed, we have a 3-bar daily 'cap' formation going into tomorrow. this has been a very good bearish signal in terms of reward potential -- particularly for NQ. Sometimes it takes until the 2nd day to play out -- but often it goes the first day if the 3rd bar (today) doesn't close too low. If it closes too low, it often needs that extra day to screw more short-sellers... EDIT: tomorrow is options expiration --- dangerous to do much overnight on short side. watched the market gap up a number of times on expiration fridays... last 2 fridays have seen gap downs (those obviously weren't expiration fridays). Location is no good to be short anyway.. gap up was my profile call based on 'symmetrical distribution' --- prolly just gonna wait until something clearer sets up.

push down 'impulse' or 'price spike'? thinking this is a long very late in day -- the intraday move is bearish but its on low volume with symmetrical distribution and into support -- as you say... might need until tomorrow to bounce though... I did go long Yen (see attachment). I rarely trade currencies but for some reason, markets went down and Yen wasn't going up -- yen was delayed reaction --- so I entered with a tight stop thinking it was a free-trade if ES continued down and I could cover if ES bounced hard... Now indices are spiking down... look long ES into the close would be gutsy trade for a gap up tomorrow

yen has now backed off and the market feels like struggling to go down -- could be higher timeframe nibblers and could end in a move up near end of day... possibly. but keep eye on yen to see if there is residual momentum to the upside there. Note I played the short side but it ran out of gas, got divergence and I covered around the time you went long --- we are on the same page. this is good stuff.

<<I think my preference would be for a long position near the selling tail, gap, or 9/18 POC at 1533 or so for play towards 1544-1546 and maybe higher.>> thx ant, I have been on a roller coaster today.. down then up. interesting call --- could be a 'higher low' play coming up late today then

scratch last post... no play...

note JY (yen) is taking off -- have a sell stop to short 36.25 on ES / 818.50 on ER2... just seems like could carry to downside and scare a lot of late-to-the-party longs who filled at bad prices... if wrong, will stop out for a few pts -- if right, could run to 28-30.

Market is balancing with VWAP < VWAP[1] (building lower value) --- hopefully this breaks lower and offers an entry to short... If it breaks up, faces stiff resistance 43-46+ but might be worth a play... Maybe smaller size on a break up if get good entry and full-size if it breaks down with a good entry spot.

ant, the only reason I am still posting here is because you did a few of these ES summaries and I got a lot out of reading your posts so I was hoping you and I could collaborate more and maybe some other Dalton/LBR/Taylor type of disciples will join in too... <<Where did you get the 'TVOL Comparison' indicator?>> its just simple, 78 5-min bars in a day so it compares em (note it will be wrong on a holiday-shortened day): -------------- value1=(c-c[78]); Plot1(value1, "VolSum"); ---------------------- ---------------------- <<Another question, in your chart above, you show a bear flag, did you trade that bear flag because price was below VWAP or do you look at the wave structure in the 2min chart to set your bias? I'm assuming that your bias may change throughout the day. Is that correct? Thanks.>> Ant, very interesting question because you don't even know how long and hard I have thought about this type of dilemma. Do you go long on weakness or play a bear flag for another push down? You are building HIGHER value (higher timeframe is pushing market up) but the market breaks below VWAP (lower 'daytime' timeframe players have begun pushing price lower than value. Now you are in a conflicted situation. On the one hand, you can buy with good location on a bullish day if you go long. On the other hand, the market might just be beginning a 'down auction' and pulse down again and again and trap the earlier buyers. The short answer is that I did NOT take the 2-min bear flag -- although in retrospect that was the right trade. I don't know if it was a good ODDS trade but it was right nonetheless on this particular day. I was not looking to short today. But the break below vwap after a clean 'balance' (PVP=VWAP=price) is a warning sign to be careful on long side. The thing that threw me into confusion today was the bizarre action at 1546.00.... I haven't seen volume build like that before. You had a selling tail above and a huge wall at 1546.00 to get over --- so the structure was kind of difficult to be long except from well below 1546.00 -- as you stated in your intraday post. Now clearly if VWAP was lower than previous day, I would have aggressively shorted on that bear flag. -------------- <<I'm assuming that your bias may change throughout the day. Is that correct?>> Lately, I have only been only taking super-clean trades -- where VWAP vs VWAP[1] and the pattern (flag, ABC, anti) are in the same direction. The frustrating thing is like what happened today... I eventually got the long-pattern to go with my long bias. it was a 'buy-anti' but I missed filling by a single tick only to watch it march higher by 9 pts back to 1546.00 --- which clearly would have been the 'test' to exit on... I really have been screwing up a lot of trades lately. in terms of wave structure, I am watchting the 400tick, the 800tick and the 5-min 3/10/16 oscillators. I also watch the 2-min chart but just for trade management --- I don't watch any oscillator on that timeframe. I also love the 15-min chart -- particularly the first cross pattern. We have a First Cross sell that set-up late today.

Well, after a long slow slide down -- higher timeframe buyers did come back and push the market back up to just tick the 1546.00 level one more time. The action at 1546.00 today was pretty bizarre. Maybe its something option related but the market traded a 'sh_tload' in the 2-pt range of 44.75 to 46.75. Thus, as outlined previously, there are a lot of players who watched the S&P's go up and then entered at marked-up prices. The profile was very fat and we have a selling tail over 1546.00. On the plus side, we built higher value. But we ended up closing below VWAP. A gap down would mean we will begin building lower value. This could start a 'down auction' that could feed on itself as weak-longs stuck at bad prices get tested and many capitulate. This idea is consistent with a Taylor Sell-short day that has lined up for tomorrow. That said, there could also be enough residual momentum to keep the market afloat. We will just have to see.

I do not live trade this strategy yet... I am in study mode on this one. I am working out the mechanics of it while I also have to get used to the pain it often brings in the short-run. Mechanical trading is a lot mental -- as pointed out in Art Collins book. Good systems work but traders heads can screw them up. I may get started on a few shares of IWM/SPY/QQQQ just to have a little skin in the game and start to get used to the swings. I am also working on enhancements. ie, I converted the code to intraday charts and going to see if I can improve results by using closing VWAP rather than closing price in the set-up. I also have idea around using 'weekly MACD histogram' as a filter to help screen out some short trades. finally, something calendar-based might add some value given the tendency of hard corrections to occur between May and September. ie, if weekly MACD histogram has not been below zero in 6+ months then turn short-sale strategy on and turn it off when weekly histogram turns up. Or, turn on short-sale strategy if haven't touched lower daily -2.5 keltner channel in 13 weeks and turn it off 8 weeks later.... something like that.

well, new short orders triggered (NQ & ER2) so short everything now... tough location IMO to short but I will see this through... Existing: Short 1 ESZ07.D Short 2 NQZ07.D Short 1 ER2Z07.D

we coiled/balanced and broke lower. would expect the higher timeframe to run this back up and then for a lower high to eventually be put in... that said, the extremely fat volume at 1546 is weird and not sure what to think of that.

Very unusual amount of volume at 1 particular price today. Generally 40-60k contracts traded at one price represents the peak for the day. today, we already have > 100k contracts traded at 1546.00 and its only noon EST. Note that PVP=VWAP=Last price, we are in perfect balance as I write this. We have an 'excess low' below - the unfilled opening gap. We have an 'excess high' above -- the selling tail. So this makes for tough structure. A break up might lead to a 'lower high' -- under a selling tail. A lower high UNDER a selling tail would be bearish -- but might not play out until very late in day or overnight. Also watch for Head & Shoulder top --- but these usually don't play out until very late so be careful. The profile does not suggest continuation at this point. We have a 'fat profile' (very, very fat) and a selling tail above. However, we are building higher value so this is just not bearish.... net net, this is just a conflicted structure. The main point was just to post how unusual this volume distribution is --- extremely high volume at a single price so early in the day. First Thumbnail is the distribution at 10:36am EST Second Thumbnail is the distribution at 12:08pm EST

why a 5? good question. I feel like a 5-day buy system will catch those hard 1-2 day pullback sell-flushes that occur during an uptrend. 5 is a fib number. I played around with 8 too (another fib number). 9-days works well too. 5 works well. 8 works well. the concept is just plain powerful on the long side (range expansion off opening price). my preference on looking at all of them was that following the 5-day lines up best with my existing strategies. My current strategies are all about 'going-with' the intraday trend but being more careful if it coincides with a 'daily trend'. I believe in choppy markets if looking at them on a 2-4 day basis... but those 6-8 day consecutive moves do happen so I have built-in rules so I don't get run-over when those do occur. the strategy just needs the recent close to be closer to the bottom of the range than the top of the range -- so it fits in with my 3-5 day buying/selling cycle thesis. it doesn't have to make a 5-day low or high, it just has to be closer to that side. I am just trialing the 5-day --- I have also thought about doing some combination like: long 9-day ES long 8-day NQ long 5-day ER2 and leaving the short-selling to my own scalping -- I do extremely well on the short side as is... your comments are greatly appreciated.

Plugged formula into a 'ShowMe' function in Tradestation Radarscreen to automate the calculations and can post them after the opening price prints. Today we will get 'sell-long and go-short' signals at the following prices: NQZ07.D Short 4 Contracts on Sell-Stop @ 2066.75 ER2Z07.D Short 2 Contract on Sell-Stop @ 819.90 note: ESZ07.D - Already short and no buy signal can trigger today (since already long, the NQ and ER2 trades are actually 'Stop And Reverse' trades whereby you would short 4 NQ and 2 ER2 -- first to sell long, then to go short) ------------- I really don't like these potential short orders -- not to say there isn't downside, there will likely be a good flush down today or tomorrow... -- its just that we have no prospect of covering these orders until we close low in the 5-day range -- which won't be for a while most likely --- seems like a tough trade but I will follow them here anyway. Meanshile, I will be working and thinking on some filters for the short-side code. Have a couple of ideas -- need to work out the code for them.

OAC, I think the composite profile stuff is good to keep in mind but I am focused on just the recent auctions for actual trading. it should be pointed out though that a 'P' is not a bearish profile, whether it is composite or individual day. It is not a strongly bullish profile either --- but it is consistent with how the market goes up a lot of the time. It pushes up and runs out of gas as some sellers come in, it pushes up again and sellers come in -- it does this for a multiple days as it marches up --- then it flushes down for a day or two to rinse out some of the longs and then it reverses (often in a 'b' daily profile), bottoms and churns up again. In terms of trading, I think the telling action is the action of the current auction. markets maybe go up very quickly (like yesterday) or it may creep up. generally though, markets go DOWN quickly --- so a 'b' profile -- which indicates lack of seller conviction actually has bullish implications. I haven't found the 'P' to be all that useful for trading. Definitely look hard at b's though. Note, we had a b-like profile on Monday -- indicating lack of conviction at lower prices and potential for reversal. One of my set-ups in fact is to look for a 'b profile with an afternoon higher low' actually -- this may often resemble an inverse head & shoulders sometimes too. I have found this to be a very good profile set-up. That was actually the reason for the 'higher low' line I drew on that days summary in this thread. Can see it here: http://www.traderslaboratory.com/forums/attachments/6/2922d1190071005-es-trading-for-9-17-rest-es-profile-shape-sep-17-2007.png Markets tend to go down fast and hard when they want to go down -- the market may coil in the middle of the day and then break down hard in the afternoon -- but the afternoon higher low often completes a downside auction, IMO.

<<That's a good way to operate if you can cut losses in the trends.>> waveslide, I can see in the strategy orders that some of the orders fly right in the face of a few core principles I abide by. ie, tomorrow, it looks like we will very likely get short based on the strategy rules. I would not want to get short BELOW the opening price given the set-up going in. Above the open might be a short tomorrow -- but I do not want to short on weakness with all the likely residual momentum in the market. I have noticed this type of order --- in the face of a potential breakaway gap --- being a problem for this strategy. So already I can see that this short-strategy as it is written just isn't right for me. Perhaps I will only take the longs and rely on my own existing short-scalp strategies to make money on the short side. The long-side strategy looks good. I actually went long RUS today and thought of keeping 1 on in line with this strategy. I wimped out and scratched the order -- big mistake.

<<so have you traded any of these threads you have here?>> I trade for a living every day. I participate here partly to try to help explain to myself what is going on and treat it as kind of a trading journal as I can look back at the profile shape from past days or my comments and see what I was thinking at the time. The other part is in hopes of finding other traders to interact with. I have daytime contacts so I don't necessarily 'need' other traders -- but it would be nice. This is kind of a homework site for me. This particular thread is more about 'context' -- I kind of juggle my trade set-ups based on the context. I have been trading lightly lately but anticipate far more trading now as the market opens up its range and volume (money flows) come back. I just think in terms of price action relative to VWAP (ie, 'value'). I define patterns relative to VWAP/value. I don't know anybody else doing it this way. Everybody seems to have their own way. This way just speaks to me. I will check out the candlestick thread.