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

  #431 (permalink)
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Everytime I cruise through the thread,

a golden nugget appears.

@Cashish #194


Quoting 
The purpose of the following chart is to show what is possible in a tight range bound market. This is no time for me to be surfing the web or typing in the chat box, I need to be completely and intensely focused on the price action. Any interruption of my focus (T.V., ringing phone, children or pets) can make the difference between a good day and a day I question my analysis and skill. Targets are tight and small, I find days like this very stressful but I've always believed I had to learn to trade what the market offers during the time I've set aside for trading. My suggestions to anyone attempting this is, get focused, tighten up your jock strap, get out on the end of your seat and hang on tight to your saddle horn.

I'm reposting this here on the back end of the thread. Why? Because I know from first hand experience "folks" like to skim the former and peruse the latter etc.

And I can say again from first hand experience he could not speak any truer (and harder) words to live by.

I guess in a nutshell how many times have I (we) said to myself how in the f*** did I miss that one? Plain as day, WTF? What happened? What was I doing? Oh yeah right. Damn it, son of a.....

It all reduces down to price action/ volume (participation.)

Keep the rubber side down.

-Bill


Last edited by WilleeMac; November 2nd, 2013 at 01:26 PM. Reason: clarity, emphasis
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  #432 (permalink)
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Do or Die

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-Bill_M

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

From Montana to Miami



In the Chat Box (#4) @WilleeMac asked, "Can you expand on the use of COT data please thank you" this post is my response to that query. First, forgive me for not commenting at all to your question before now, but my time at my trading computer has been spread pretty thin this weekend. I find that some answers to questions just create more questions, as this one may.

I want to drop back to basics first and touch on what the COT data reveals. It is a snapshot of what's going on "inside" the Open Interest, of ONE DAY. That day is Tuesday. Only the contracts that remain open at the close of trading on Tuesdays are included in the data, NOT the intra-day volume of all contracts traded. Why does the CFTC choose Tuesday, I have no idea. Although the data is released weekly, (Friday to Friday) the data only includes data for one day, the previous Tuesday. I hope I've made that clear. If anyone finds interest in this post please refer back to the "short forms" I posted. There is a line of data in the short form that compares the "Changes in Open Interest" to the previous report. This "change" remember is the change from Tuesday to Tuesday. Also, there is a line of data of the "Number of Traders in each Category" this again is the change from Tuesday to Tuesday. I've found most "Day Traders" (small retail) shy away for analyzing the COT data mostly because the data from Tuesday isn't posted and isn't available for personal analysis until Friday afternoon. By then many traders believe the data is "to old" to glean any significant or meaningful analysis that could be used in their short time frame day trading methods, I disagree.

For those willing to do the work required, all this data is available on the CFTC website; U.S. Commodity Futures Trading Commission on the right side of the Homepage is a link to Commitment of Traders, view our weekly report. As I said, this data is usually updated Friday afternoon, usually. Since the September 24, 2013 report the CFTC has NOT and still isn't current with the release of the reports! We all know the reason is due to the government shut down as why the data isn't current and is still trickling in. So why did Mr Cashish develop such a hard on for the data and HOPE the CFTC would post the current data at the next scheduled release date (on October 22) at the end of the shut-down and then back-fill the historic data, that's where this post is going.


FWIW, I find writing these posts difficult, I confess I've posted some pretty lame instructions, but remember this isn't as easy as writing directions on how to open a ketchup bottle!

I've posted before, know your market, I believe this is especially true when implementing the COT data. I guarantee you if you study this data, you will get to know your market on a much deeper level (than most traders). I put this post together and focused on one (maybe two) lines of data available in the COT short form. The numbers I watch and the timing of the Gov shut-down couldn't have come at a worst time, lets do this!


What I'm looking for here is what many traders call an "over crowded" market, over crowded by the amount of willing buyers or willing sellers on either side of the market. Of course we can boil this down (and many traders do) to any time frame we choose, hence, order flow and market delta spring to mind. I have yet to post my full blown rant against these studies but I'll say, IMO these studies require (me) to assume the correctness of to many variables. It is in this assumption that the COT data has the upper hand, nothing is assumed, the data reveals how many contracts are being held long, how many are being held short, the percentage of Open Interest they make up and the number of traders holding these positions. This data is revealed once each week, for all to see.

So what is an over crowded market, this is where you have to get your hands dirty. Look back at the turning points on a daily chart in the 6E over the last 12 months (1 year). Then, locate the "Tuesdays" around these turning points and pull up the data from the correlating COT report. Focus your attention (for the purpose of this post) on the percentage of Open Interest of the long positions and the short positions. Generally, what you will find is when one side (either longs or shorts) begin to accumulate positions that equate to levels around the "mid" 40% of the total Open Interest,, the market is indeed over crowed and a move in the opposite direction, ain't far behind. Now, I'm going to go back once again to the fact the COT data is collected only on Tuesdays, and posted on Fridays. This is a snap shot of the week, it's all we're given, but the data is still there, on Monday, Wednesday, Thursday and Friday,,,, we, just don't get to see it. So, what I'm saying here is if I see shorts holding 46% of the Open Interest on Tuesday and price continued to trade within a range around the lows of that day (Tuesday) on Wednesday and Thursday it is possible the total amount of percentage of Open Interest held by the shorts could have exceeded 50% or more,,,, just by the luck of the draw (COT data collected on Tuesday) we didn't see it! This is where an understanding of reading the Daily Open Interest and Volume can be very helpful. I don't want to get off topic here but the simplest "read" of the daily data is what I call, "The Trifecta" Price is Rising, Volume is Rising and Open Interest is Rising the UP TREND is strong and will continue. Turn that around for a "Trifecta" in a down trend.

OK, all this brings me to September 24, 2013. On Friday 9-27-13 the COT data showed Large Spec were holding 51% of the Open Interest Long. From that report it can also be noted this is an increase of 28,899 more long contracts from the previous Tuesday. This increase in long holdings also raised the Total Open Interest of LONGS to 129,862 contracts, the highest (reported by COT data) this year.

Then the Government shut down and I (we) were left in the dark for 16 days (with only Daily Volume and Open Interest data) until October 25, 2013 when the CFTC released the data for Oct 1, 2013. This chart shows where the COT data STOPPED with Longs holding 51% of the Open Interest. The small box is the days of the shut down, the large box shows all the data that was/is being delayed, STILL. One important note here, the data we got on Friday (for 10-22-13) shows Large Spec added 15,734 more contracts at this level, raising their Total to 137,061 contracts Long. As a closing note, when the data for 9-24-13 showed longs holding 51% of the Open Interest ,,, this triggered a signal as the Highest level of participation of either side of 2013, not since the lows of November 2012 has the COT report (which is Tuesday only,,,remember) showed levels in the 50s. Am I saying buy/sell every 50% reading of the COT data, NO, what I'm saying is a turn is near. These levels are Yearly Highs, IMO they have to be tested, it's like driving from Montana to Miami and not going to the beach.


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  #434 (permalink)
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WilleeMac View Post
Daily /6E

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-Bill_M


This seems like a good spot to consolidate (1.3460ish up to ???? 1.3650???) to me, Bold or stupid bulls might step in here (or stop running out the door), but I wouldn't want to fall asleep with a trade on. Lots of data coming out this week capped off by Mario and NFP. Plenty of time to take some profits if you were a lucky short, and plenty of time to adjust positions,,,, I believe there are still a lot of them on both sides. Let the battle begin !!

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  #435 (permalink)
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@Cashish


Quoting 
but my time at my trading computer has been spread pretty thin this weekend. I find that some answers to questions just create more questions, as this one may.

If I have questions I'll make damn sure they count


Quoting 
First, forgive me for not commenting at all to your question before now

I certainly understand and thank you for taking the time to put this (the whole frig'n thread) together.



-Bill

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  #436 (permalink)
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Just the numbers 'Mam, just the numbers

But they be all whacked out - thank you THUR and FRI

6E M30

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Last edited by WilleeMac; November 5th, 2013 at 10:28 AM.
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  #437 (permalink)
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Just the numbers 'Mam, just the numbers



WilleeMac View Post
But they be all whacked out - thank you THUR and FRI



Thanks @WilleeMac for your questions and comments, I wanted to follow your lead and post a little more about the Rally and Decline Numbers. I've added a couple charts for reference for those who care to get their hands dirty. The term "whacked out" in your post caught my attention, sounds like something I'd say, and maybe I did. IMO, the hardest part of any project is getting started, the content of these posts is no exception.

I'll choose this old statement as my Opener, "Nothing works all the time." This "ain't no cop-out" it's a fact. Now, with that being said the calculations of the numbers and the levels defined on the the chart are exactly correct. These numbers are averages you can use any average you wish, I use an average of 3 days, why, because it aligns with the 3 Day cycle outlined in the Taylor Method (which I "agree" with). I've looked at averages of these numbers from 3 to 50 days and for my purposes retain the 3 day average. The chart below shows exactly what is being calculated. After the close of the current day (Today) subtract the Low of Today from the High of Yesterday (previous day). To get a 3 Day average, of course I have to go back 4 days. In this example the moves from Yesterday's High to Today's Low (going backwards) are, 76, 149 and 260 (red lines). Once these numbers are identified I find the average of the three periods, which is 162 (ticks) this is on this chart in white, only as a reference. This is the Decline number, the level is marked on the chart (in yellow) for tomorrow's trading session by subtracting this average (162) from Today's High (the current day that just closed).

What is being identified here is the notion that if the market stages a Decline, price may begin to find support or be supported at this level.

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Now let's not let common sense elude us here, these numbers are much more accurate in sideways markets or during consolidation periods, THAT is the intention of their use. By habit I chart them every day, some days I give them very little consideration, but they're on my chart none the less. This post is an example of this average at this time being "out of whack" with the market. REMEMBER, these calculations are based on the distance from High to Low over 2 days and THEN averaged over a 3 day period. Also remember, the Taylor 3 Day Cycle Sell Day (or Buy Day) can often be expanded 1, 2 or 3 days as described in his Book Method. Below is a similar chart showing the same process of calculating the Rally number.

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So what do I use in these "whacked out" periods of the 3 day averages, common sense first and foremost, and many others like the Big 3 (the High, Low and 50% level) and the Pivot, Buy and Sell Numbers. Keeping an eye out for Highs and Lows of inside days (like today) can often "make my day" in a single trade.


Last edited by Cashish; November 6th, 2013 at 09:02 AM.
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  #438 (permalink)
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Here's something I put together for showing the "numbers" as support and resistance or both. Please ignore the right most AVG4 columns, something I'm experimenting with.

My reasoning for how the spreadsheet is laid out is traditional resistance above pivot and support below. Hence resistance to the left of pivot & mid of the four numbers and support to the right.

What can be misleading is the traditional lingo of yesterday's high, low, close (pivot)

Actually the way @Cashish calculates it is today's high, low, close

Obviously we don't have today's numbers at 2am etc but by the way the numbers are put together we have today (yesterday) and yesterday (two days ago)

Anyway the purpose of the screen shot is to demonstrate that the "numbers" do work and do have validity

(Not that I ever doubted you Mr @Cashish. Actually I believe in you so much that I wrote a study for TOS that plots these numbers, screenshot[s] above.)

-Bill

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If anybody would like a copy of this spreadsheet, just let me know


Last edited by WilleeMac; November 6th, 2013 at 12:03 PM. Reason: clarity
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The Numbers

Giggity, giggity - Oh yeah

-Bill

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Last edited by WilleeMac; November 6th, 2013 at 12:01 PM. Reason: Add chart
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Say, Hallelujah

In forty (40) short days the C.F.T.C. gets current with the COT data




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