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Trading the 6E Old School, With a Twist
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Trading the 6E Old School, With a Twist

  #11 (permalink)
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Thank you Cashish to turn my attention to best trading time and Pivots.
Nice price movment today.

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  #12 (permalink)
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There's no School like the Old School

Old School Homework 3

Sorry fellas, you're not getting the day off. The whole idea of trading is based on individual expectations and risk. I may believe, according to my analysis the market should go lower (my expectation). Another trader may have a bullish opinion of the same market, we both may be "right" depending on several factors, one being time. A long term trade for me is 4 hours, for the trader who takes the other side of my trade may plan on holding that position for 4 days. We both have an opinion of future market direction and we both are willing to risk a portion of our capital on the chance we both may make a profit. I want to minimize my risk and protect my capital in every possible way. This exercise gave me a guideline for evaluating price movements at the open and also assured me I didn't have to "risk the farm" on trades I entered at the open. Since my synthetic session starts at 2am and ends at 6am I only have to analyse 4-1hr bars. Below is a chart with a simple open, high and low study programmed to calculate for 2-6am. Look back over the last 20 trading days and retrieve the average of the smallest of the distances from the open to the high or the open to the low, the smallest of these two moves of the opening bar (1hr). Today's opening bar was 9 points up and 10 point down, so the short move was to the upside. This is called the failed move, false move I just call it the short move. While you are retrieving the average of the points in the short move of the opening bar of the last 20 session, also look at how many times the short move held throughout the entire 4 hour session. In this example it held, prices fell and never ticked higher than the 2am opening bar. Enjoy

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Last edited by Cashish; December 7th, 2011 at 07:08 PM.
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  #13 (permalink)
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Old School Homework 3

M6E between 10.nov - 6. dec :
64 % and average minimum move 10 ticks


Last edited by lemons; December 8th, 2011 at 05:40 AM.
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  #14 (permalink)
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lemons View Post
Thank you Cashish to turn my attention to best trading time and Pivots.
Nice price movment today.

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@lemons ,,,, I agree, nice price movement. That is about as perfect as it gets That's the kind of chart you would see at a Support and Resistance Workshop. Just before they tell you the indicator costs $3000.00


lemons View Post
Old School Homework 3

M6E between 10.nov - 6. dec :
64 % and average minimum move 10 ticks

Correct, 64% of the last 20 trades retained the 2am short move thru the entire 2-6am session. I failed to mention in the Old School Homework 3 that I calculate the 3,5,10 and 20 averages also. If you do, you will notice as I described previously (the nature of a short {fast} average) that the 3 ave is much larger than the (longer) 20 ave. This larger short average can come in handy on a day like today. If you keep a running average of these moves you may find they align themselves nicely with upcoming events like today's widely anticipated ECB rate decision and press conference. Most everyone agrees if you put enough lines on a chart something is going to line up. But there is one more (for now) worthy of an honorable mention, the mid point or simply the 50% line, not of the 2-6am session but the entire Globex Session. I have 9 significant levels on my chart right now between 3399 and 3414. I'm short with a target at 3389 and one at 3370 I'll bail out of both at 6am. This session was about as exciting as watching toenails grow.

Wow, that was exciting, I'm going to give the last one about 2 more minutes.
Edit: Bailed out at 3388


Last edited by Cashish; December 8th, 2011 at 06:21 PM.
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  #15 (permalink)
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There's no School like the Old School

A Quick Review

What's the meaning of all this crap, this short move that short move, this one held that one failed, this percentage that percentage. Why even bother with all this? The purpose of this weeks exercises were to enlighten traders of the bigger picture, hidden price levels in the market that can and often effect price movement, sometimes dramatically. I'm willing to bet, the formula for the trend reaction numbers are older than most traders here on futures.io (formerly BMT) and those numbers still have the power to stop a trend dead in it's tracks. These big moves that happen during this session or any other session stop for a reason. My job as a trader is to identify that reason calculate my risk and either enter or exit my trade. All the numbers we've discussed have the power to turn a market. The trend reaction numbers, BN, pivot SN, yesterdays O,H,L,C the prior day's O,H,L,C the H, L of the week, the contract H and L all these numbers need to be identified and respected. @lemons surely made that obvious with his excellent post. There are more numbers of course, but I feel these are the Old School numbers struggling aggravated traders must be aware of.

The notion of short moves that either held or didn't is IMO a direct reaction to these numbers, or combination of numbers. These short moves were identified using 1hr bars, who among us trades off 1hr bars, I certainly don't. The 1hr bars are a quick way to cover a lot of ground, now that these short moves have been identified I can drill down to the time frame I'm trading and look inside these 1hr bars, and see the "lines in the sand" these moves ran into. There are three reasons why prices either held or failed during the short move.

1. Continuation of the trend
2. Reversal of the trend
3. Consolidation

When I lower the time frame of the bars from 1hr down to a more common day traders time frame like 5m many of the short moves that held or didn't hold were right in the middle of a nice strong up or down trend. A few of the failed short moves are buried in an expanding contracting consolidation period, that even a Newbie trader wouldn't touch with a ten foot pole, and yet many pulled through and the short move held. And lastly, nearly as many were reversals plain and simple, several right off the numbers described above. That's the point of all these exercises, to become aware of price rotation around these price levels from yesterday, 2 days ago or a week ago. Another significant bit of data I can take away from all this is my markets average/normal size of rotation. If prices are rotating around a whole number unimpeded by yesterday's close or today's BN chances are the range will tighten up quicker, and leave the area sooner, in search of the next level of consolidation.

Old School Homework 4

No papers to turn in this time (but posts are most welcome), all self study. Look back over several days at random, calculate the trend reaction numbers and plug them into the following day's chart in the time frame you normally trade, take notice how prices react to these numbers. Do the same with the prior day's close, or any of the numbers we've discussed this week. One of Gann's 4 Essential Qualities is Knowledge, go get it!

I want to thank everyone who's peeked in at my ramblings this week, I especially want to thank Big Mike for the privilege he's given all of us, Thanks.

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  #16 (permalink)
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Cashish View Post
I have 9 significant levels on my chart right now between 3399 and 3414. I'm short with a target at 3389 and one at 3370 I'll bail out of both at 6am. This session was about as exciting as watching toenails grow.

Wow, that was exciting, I'm going to give the last one about 2 more minutes.
Edit: Bailed out at 3388

I'm posting a chart showing definitions of these levels. True, some of these levels are much more significant than others but I felt this was a good example of what can accumulate during a prolonged consolidation. This is only an example but several lines have been omitted, one that I probably should have added was Friday's settle at 1.3404, that was 5 trading days ago, and we're still sitting on the same number when I made the above quote! We'll probably be sitting on it again by morning.

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  #17 (permalink)
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Who would have figured ?


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  #18 (permalink)
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There's no School like the Old School

I'm finding it very difficult to put my opinions about the market into words. I hope the basic concepts are being presented in a way that is clearly understandable, yet thought provoking. I'm actually a very quiet introverted kind of guy.

I want to restate my intention, My intention with this thread is to help traders find their way through a lot of the nonsense and develop "Their Own" method/strategy for trading the (6E) market using Old School studies. Later, I'll add the "Twist." ......... and I've committed to this thread until the end of the year.

When I started trading I soon realized I needed a trading plan, the problem was I had no idea what that meant. All I knew was, I wanted to trade. I could write volumes from A thru Z of my stupid mistakes and warn you of the effects they may have on your trading, but I won't. Why, because we learn from our own mistakes, not from the mistakes of others.

Uncertainty

If I boil down all the adverse behaviors that have plagued my many years of participation in the futures market to one word, it's uncertainty. I know for a fact, for me to trade successfully I have to embrace uncertainty during every trading session, day after day after day. Let me clarify my distinction between uncertainty and risk. Simply, risk is a dollar value, uncertainty is the strength of my commitment to that risk. A simplified example may be, I enter a long and place my stop 20 points under the market, price goes up and the trade looks good. Then prices rotate a bit and take away all my profits, I dump the trade with a 5 point loss. Prices then turn again and move toward my original target, but I'm not in the trade, Why? Because I was not committed to my risk, I became uncertain about something, the market's direction, the time it was taking for the trade to unfold or (God forbid) the analysis I spent months perfecting!

My Grand Father once said, "Marriage is as simple as bacon and eggs, the chicken is involved, but the pig is committed!" I have to be committed to all my trades, if not I'm just exercising the industry, by providing liquidity for other traders, profits for my broker and the exchange. So how do I "man up" (sorry girls) and really commit to all my trades? First I have to define my risk, this is personal of course, but it also has to be realistically engineered around the volatility of the market I'm trading. And I have to be absolutely comfortable with my defined amount of risk per trade, not sort-of or kind-of, but absolutely. Furthermore, if for example I have an edge that generates a 60% win rate, on paper I should expect 4 losing trades out of 10 entries. Therefore, I have to be 100% absolutely committed to losing 4 trades in a row. I don't want to reinvent the wheel here so I'll make a book suggestion for further study and the best explanation I've seen anywhere. Trading in the Zone by Mark Douglas If you don't own the book, buy it. If you do own the book, read it again. If you're really cheap, go to the book store and sit and read the last chapter.

The whole idea behind everything I've written thus far in this thread is to aid in defining my personal risk. Let's look at one example, The Short Move. I identified these moves using 1hr bars, I can also gauge the height of these moves by the averages over (N) period. By drilling down to 5m bars I can see the rotation of price during this first hour of trading. I know only two outcomes are possible, price will go up or down. Price will either continue in the original direction or reverse direction. For the latter to happen price must do one thing,,, correct, cross the open. If the range of the first hour is beyond my risk, comfort level and I see no area to comfortably enter a trade, I stand aside, and wait for another opportunity. The short move (1hr) can be broken down to 12 5m bars or whatever time frame I'm trading, the idea is to enter a trade based on the price rotation and the surrounding significant price levels I have already identified, some (significant price levels) may be profit targets once the trade is underway. I hope this makes sense.

Old School Homework 5

Evaluate your thoughts about risk and uncertainty. Ask yourself and honestly answer hard questions regarding dollars and cents. Take a good look at your trading to date, are you realistically setting your stops based on price rotation, and do you let your trades work in the market to their predefined fruition? And lastly, what might need to change to make my trading more profitable/successful, my tolerance for risk or my commitment to my analysis/trades.

Thanks, enjoy your weekend


Last edited by Cashish; December 9th, 2011 at 01:19 PM.
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  #19 (permalink)
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volume....

any reading on Volume (meaning a book...) that you may recommend ?
have a great weekend and thanks.

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  #20 (permalink)
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rainbowchaser View Post
any reading on Volume (meaning a book...) that you may recommend ?
have a great weekend and thanks.

In no particular order (maybe age ), I believe these three men have contributed more in the area of market volume analysis than any others, Richard W. Arms JR, J.Peter Steidlmayer and Jim Dalton.

When these men first published their works, the markets and the data available to them was much different than the markets of today, but the underlying theories/concepts of their work continue to thrive. IMO, most all of the "newfangled" volume studies attracting traders today are based on (at lest in part) the work of these three men, but heavily "spiced" with the new refined/defined data that just wasn't available 30 or 40 years ago, or two years ago for that matter.

To answer your question and suggest A Book, I'd have to suggest, Perry J. Kaufman's 4th Edition of New Trading Systems and Methods. This book will offer inquisitive traders a limited yet detailed overview of all their works and the work of many other legendary technicians. With a thorough understanding of several basic concepts which appeal to you personally, further study can be directed to their latest publications. I believe my method had to be mine, and mine alone, I own it. It has absolutely no appeal to many traders, but it's my baby and I guard it as such.

I sense a bit of anticipation of things to come in your query, assuming so I sent you a PM containing a link you may find interesting, some of the theories align well with my intended presentation. Next week (I hope) I'll present a simple method based on today's available volume information to identifying trend continuations or reversals. I turned this information into an indicator I call "oil cans." I hope you stick around and continue to participate on the thread. Thanks @rainbowchaser


Last edited by Cashish; December 10th, 2011 at 10:57 AM.
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