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SPY vs. SPY


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SPY vs. SPY

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  #1 (permalink)
Market Wizard
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This journal is about a trading method that I learned while attending my 1st and only workshop that cost me $XX00.00 It was exactly 3 years ago when I was an attendee. This method is nothing new to the trading community, it is trading one time frame against another larger one. The instructor a 40 year veteran of stock trading then futures trading, traded the 2 minute chart against the 8 minute chart. 4X. His assistant traded the 5 minute chart against the 15 chart minute. 3X. They traded the ES and it was about finding 2 to 3 trades a day, RTH morning hours, for 2 to 3 points.

When I was a kid, I didn't read comic books, but I did read MAD magazine.



And such, instead of trading the ES, I am going to trade SPY. And if my experiment with SPY vs. SPY is successful, I will graduate to the ES with this trading method.

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  #3 (permalink)
Market Wizard
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and the template:



The Chart:

as we, start the experiment.

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Market Wizard
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I am posting this chart as a warm up into next week for the SPY vs. SPY thread. I am using the Double Stochastics because that was the mainline in the futures workshop. So that is with, what I will start. I may experiment with my favorite indicator such as the Schaff. Whether the Double Stochastics or the Schaff, they are cyclical in nature and illustrate a mathematical quality of price. Just as long as the plotted indicator mirrors the price action and trend. I am using CCI (14) bars and they paint as if the CCI was plotted as an indicator. I am so use to seeing these painted bars, that I always use them and they do reflect price action. I suppose, I could remove both double stochastics and just use the two charts, but the double stochastics will be more like a filter so not to over trade. The flooded background is a Zero Lag MA that I found on Sharky's teaching tread, it floods the background when the trade is A1 prime. So I like to know that aspect of price action. I will review the chart to come up with some trading rules.




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Market Wizard
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working on a rule set:



Charts have all time frames and indies moving in the same direction with the same qualities:



I like that both DSs came off the bottom, almost together.


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Continuing from the last set-up, this set-up had the 8 min DS still in a rally cycle phase while the 2 min DS revisited the bottom of Panel 3 and cycled higher again.

When the 8 min DS was moving higher and the 2 min was moving lower the ES was sideways. In between the trade set-ups.


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Market Wizard
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On the RTH market open, the market was slow and sideways so I clicked from SPY to ES. And later the market picked up steam to the downside. The template illustrates some good relationships between the 2 and 8 minute double stochastics. I am studying these patterns to draw a few basic conclusions.




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going out on a limb. on the 2 min chart there is a lot of overlap on the ZLEMA so I think we are nearing a reversal of sorts.



And then I looked at the 3 min chart and see divergence.



lets see what happens


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the bottom on the previous post didn't hold. Incorrect. The divergence on the 3 minute chart didn't hold, but now we have divergence on the 2 minute chart with the double stochastics with some green bars and blue DSs.




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One last post in this series of today, as I watch the market action with the double double stochastics. As we go into the close, the Big Boyz remain short, GS said so. The 2 min DS followed the dips following the last post. The 8 min DS remained blue and refused to turn red as price chopped lower and now the some shorts are covering.




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Market Wizard
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need to nail down some patterns this week:

here is one: both DSs moving down (up) but not together from the top (bottom), 2 min catching up with 8 min.


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Market Wizard
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I am posting these examples so I can learn and recognize them. Obviously these are sell patterns, and the reverse would be buy. I like to take a position in the flooded background. You can anticipate the flooding as the price bar pushes against a greater sloping Bollinger band. I like to stop myself into the market by placing a STP or STPLMT order just beyond the completed price bar. Currently, I am waiting for the first colored bar in like color flooded background. Then I put my (safety) stop on the opposite end of the price bar and work down the bars. Price always returns to the ZLEMA and price bars always go white (neutral). That's just how I am "doing it" currently as there are a dozen ways to trade these charts.

If the Double Stochastics is cyclical and the 8 min DS is one cycle, than the 2 min DS is a quarter cycle. A bull cycle will skew right and a bear cycle will skew left. In a strong move, the quarter cycle can disappear. If this theory is valid, then I hope I interpreted it correctly. So the pattern that I am really looking for is when both DSs leave the OB/OS zones together as a completed half (or whole) cycle.

#1 maybe this is the completed half (whole) cycle. the 2 min was early and by the time the background flooded, the 2 min was on the lower half of the DS panel.

#2 the DSs are opposite and the price is sideways.

#3 (the open) the 2 min peaks and reverses and chases the 8 min to the bottom.

#4 both DSs are at bottom going OS


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Market Wizard
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To finish the day, as the 8 minute cycle turned up. The other indie such as the ZLEMA can act as a filter.

#5 8 min DS turns up as does the 2 min with white bars and a red ZLEMA, no trade

#6 both DSs up with blue ZLEMA and background, green bars, a short lived trade

#7 with a down 2 min DS in an up cycle produces sideways prices. maybe a trade in the red background. No, white bars and blue ZLEMA filter ...."No"

#8 short lived long, all indies up

#9 no trade with the blue ZLEMA


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Market Wizard
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Just to post and maybe learn something. Today, I flipped back to SPY; hot for a trade off these charts. I was looking for both DSs to come from the zones (OB/OS) together to get into a trade. Didn't happen.




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Market Wizard
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Okay yesterday I was looking for both to come from the zones together. It pretty much happened pre-RTH, just before the RTN open. So there it was and I don't like to trade the exact open. So I didn't. Maybe I need to adjust my view of DS patterns since there were other good trades. (risk - reward) in retrospect.


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