Greetings Great Ones, I come bringing more guff and rubbish...
Apologies, I thought I had the formatting right but word wrap has got me so sentences below are broken... 'tis too late for me to repair it, should still be readable.
Wink Waffle
Has been busy busy busy at the daytime work and busy busy busy on the trading and learning front. Yaaaaay to busyness. Boredom sucks. Unfortunately, because of my second job (LOL, yeah I've started referring to my daytime employment as that) I have hardly been able to play on Hotcopper, as I kinda alluded to in the last waffle post... haven't even visited the Day Trading Diaries thread, and have done little more than pop my head in and wave my beard about, here on the XJo and in the FOREX forum. In some respects, prolly a good thing for you guys, as there is less of my "W0000t" and dribble posts so hopefully the quality ratio for yez is better.
I have started the ball rolling in terms of building a website so I can keep all the stuff I write in a central location, and do some more disciplined blog stuff, as well as the ultimate goal of putting all this into a book type form. Had a good chat with mrb (hotcopper admin) about copyright and stuff, so am pleased to be able to continue putting my waffle here, and hopefully will also be able to reach a larger audience in time.
Re the copyright thing... as far as I'm concerned, what I post here is public domain... that is for the use and dissemination of all.. I would ask if you are passing it on to other people that you mention where and from whom it came, so I can become all famous and stuff.
Trading waffle
Well golly gosh and I never and who'd a thunk it. The trading side has been going great guns... Admittedly, I made most of my moulah at the start of the week,and the last three days I basically ended up being just a tad under break even (that's just for the last three days, profits from start of the week still seeing me happily ahead. Been trying a new instrument (well it's actually an old one just at differnt times)Trading the spi (IGMarkets Aus200) at night. Despite a lot of folks cracking a sad about IG and their internal rorts, I do find that the spread and price movements pretty well reflect the actual underlying instrument, that is the current XJO futures contract, as I can see the depth queue and course of trades info of the contract via another platform. Needless to say, although my dabbles here have only been small profit bikkies when losers are added to winners,it has been quite insightful regarding suport and resistance reactions of price. It's a good training ground in the vaguaries of spread, as well, and am hopefullygoing to learn from that side so I can play some of the commodities contracts a little better, as spread and the apparent fluctuations in open positions can bea head wrecker for me, and it is a skill I wish to master.
Lovin it... at the same time, I have begun to look at the DAX (big heads up to Tadewi for his constant mentioning of it on the thread) and looks like it might become my interim night time market of choice, as for some reason the FTSE and I don't agree totally on how it moves...Nothing wrong with it, but it's sophistication is prolly a bit rich for this rough little black duck, Understandable, as in terms of a financial market it has been around for a very long time, being the old-school western financial market centre, and has been squeezing cash from blockheads like me for centuries.I still enjoy squeezing it back though... just the DAX "apparently" to my personal eyes... moves in ways, short term that I think i can take more advantage of...
As I say, my second job has been quite busy, however, this has given me the opportunity to hold positions overnight, and the theories about targets and trading the Whooshka With what I would regard as pretty awesome results, considering my small time player size. Basically in the last three weeks I have squeezed more coin out of the markets, than I have for the last three months, with less stress and less time actually trading. The market has tested me quite strongly, including making open positions appear to be on the verge of wipeout, despite my underlying "knowledge" and trading plan. Sticking to my guns and toughing it out has resulted in significant profits. All larger profits have been based on buying and selling on the Whooshka Extreme Histogram Targetting methodology. Short term scalps, using the Stochastic Oscillator combined with the MACD have also improved.
All in all though, going back on my record for the week, I have had about a 50/50 split on winners and losers in terms of individual contracts. The winner value, though, far outstrips the loser value. I beleive that is the way it should be.
That being said... still doing a lot of research on the psych side of trading and am somewhat mindful that overconfidence could well bite me on the bum. Stick to the plan, Wink. You are not a market god.
Trading methodology
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'Kay... gonna let you in on a bit of what I do here, but I do NOT recommend this for anyone else and have mentioned it to a couple of traders who actually make a primary living at this game to mixed reactions...
Now as you lot know I have been doing a lot of writing and researching about the so-called Whooshka. As previously stated, this is all my own work (though the initial research was prompted by Eldar Alexander in his "come into my trading room" book), is based on the MACD and the sub components of said, the histograms and moving averages, and concerns the concept of divergence. I have read ONE other treatise that parallels the stuff I have found (Bill Williams, Trading Chaos mentions something very similar, much to my delight).
So... when I write the following formula, it is unlikely that you will find it in books or other places on the net... yet... and so if you need backup from other sources, this shizzle is not for you.
The Whooshka Formula The formula is a four step "process"
1. Divergence between price and histograms occurs 2. divergence between price and moving averages occurs (same divergence as with the histograms) 3. A change in price trend/turn occurs. (a sustained, sometimes dynamic move opposite to previous trend) 4. Price will move back to the the support/resistance point directly prior to where price was when the histogram divergence occured. (Point four is relatively new, and has a few "wiggly bits" as far as determining where the histo divergence began)
A slightly more detailed description can be found here:
The formula APPEARS to work on all time frames, but so far I have only traded it on timespans up to the hourly. If the signals appear on a certain time span, they generally mean that the entire move will play out on large multiples of that time span... that is on a 1 minute chart, the move may take a few hours, on a five minute chart with signals, The move may take a day or more to complete, on the hourly the move may take a month (as did the last one which finished on Friday night)
A big switcheroo regarding my own personal trading returns happened about two months ago. I've been trading okay since about August last year... primarily based on Early Whooshka development, but still pretty nervous, and the old equity curve was a bit bouncy, catching those whooskas can be a pain.
Note.. huge big enormous caveat here... I have been studying this thing for over half a year now... I'd suggest I know what I am doing and can identify a whooshka better than most, I have personally watched and recorded hundreds of examples, pulled them apart, looked at historical data and written a lot of guff on them. To do what I describe below is fraught with dangerif you don't know what you are doing, and downright "ballsy" (read fraught with danger) if you do. On a personal note, I have raced motorbikes and jumped from aeroplanes (a lot) and have scars and bits of metal in me from some silly enjoyment of risk. This technique WILL kill your account if you don't know the possibilities and when to admit you are wrong and the markets can remain irrational a lot longer than you can remain liquid.. just ask Jesse Livermore.
One night I was trading the ftse and I was watching a whooshka unfold (5 minute chart)... the divergence on the histos occurred, then the divergence on the Mavs occurred, and I took a single contract position (was a downside Whooshka, so I sold a contract, A tiny little one available in IG) the market went up... and my position was now negative. What to do? Experience had shown me the Whooshka can be very hard to catch so that you are on it in a profitable position immediately. Prior to this time, I would have cut my loss and tried again. Instead, I sold another contract. The market continued up, signals still intact. So I sold another contract. then another, and another and another, til I had sixteen negative contracts. Each time I sold a contract, I only sold if the contract was at a higher price than the previous one. After the sixteenth contract, and my account getting close to margin limit... the market would not let me sell any more, price stopped going up. Then the whooshka occurred. After about two hours of selling into it, boom, the market collapesed and in a matter of 15 minutes my entire position was in profit. (not by a lot but after it being quite negative, even a little profit looked good, lol) and I closed the whole darn lot. And lay on the floor for a bit.
I had a look at the individual contracts closing value, and just over half of them had been closed with negative values, but the others had coompensated for this by the positive levels they had been closed at.
The market continued to go down (at this time I had no idea about targets) and all in all if I had held for a bit longer... all contracts could have been closed in profit. But that is not the major point... I had a very good insight on how to "fade" into a turn... Note though, that this could also be described as "averaging down"... an entirely unrecommended idea.
I have been refining this technique, and coupled with the targetting, a certain amount of conficence has grown in my trading... However.. I still reckon this technique is dangerous, and I also need to say, this is not for scalping, and considerations like MACD Mavs being at extremes MUST be considered, as well as what price is doing in larger time spans. MUST MUST MUST!!!!!
Personally, I am getting fairly confident at it... big point though... Friday's day and night action could well have seen a significant "drawdown" and I personally am only just prepared for such occurrences.
It will be nicer when I can learn how to fade into the turn once it occurs as well.
Okay.. that's one technique, entirely unrecommended, successful for me with a bunch of caveats, and you can check the forex forum for an example of when I traded using it whilst chatting with another FOREX head ANDREWONHC here, just to show ya it's not total bs:
A very interesting thing as part of my apparent success with this particular trading methodology is that it heralded further insights into cycles and the nature of oscillators. (The subcomponets of the MACD, particularly the moving averages are a form of osciallator)
Cycles
we have some amazing people here and their cycle work fascinates me and is undeniable in its efficacy, and I beleive it should be added to my toolkit...
Again, being a man with a hyperactive brain, I am happier looking into stuff that I can see occur in front of me, and so cycle stuff I have been delving into has been more asssociated with intraday rather than the huge brain stuff of Whyme2, Volt, robbbbb, cyclichigh, ninelives and others that I neglect to mention, specifically here on the XJO thread.
The other biggy that helped with the insights into the cycle stuff, was my very recent observations of the stochastic oscillator, for which big ups go to Treggs and JamesDoran.
Okay.. 'cos I'm a lazy bu... person, the following stuff is lifted from what I have written in e-mails to a few heads recently, specific big-ups to BY50, who raised some pertinent questions about lagging indicators that got me at a really good brain active, body passive time...
Price is constantly moving in cycles on various time spans...it goes up it goes down then it goes up then down.... repeat forever.
If we regard the market as cyclic, at whatever level, intraday, weekly, monthly, 71.t yearly, wotever... then one can either plot this as a sine wave type thingy, with time on the x axis, or... it can be plotted as a circle (cycle) (think YinYang symbol, such a beautiful thing in this context). This concept of a cycle represented as a circle is key to my latest insight, and soz, but to explain the concept here would take a few more pages, so will need to be accepted without full justification at this stage.
Cycles, oscillators and lagging indicators
Ultimately, and hard to get ones head around, but cycles suggest that anything that lags is also front running. LOL thought I'd just charge in and throw that on the table.
As an example, if you have two mice running around in a circle (cycle), which one is in front and which one is behind? It all depends on your perspective...
Cycles occur in price over time and oscillators are a derivative of price and time. (That is they are a calculated graphical representations based on these base concepts of price and time)
With oscillators and other indicators... you can say they are lagging compared with price. The concept of entry signals being too early when an oscillator first enters an overbought or oversold region is well known.
Going back to that which lags in a cycle can also be front running...and using the cycle/circle analogy
If you have an oscillator and price in the same cycle (circle), which one is in front and which one is behind?
What the oscillator can tell you, is that price has REALLY gone to an extrem.. in a downside example, so far down (oversold) that the oscillator is bangin its head on its feet... Our knowledge of the cyclic nature of markets, and the cyclic nature of oscillators tells us that if the oscillator is really lagging, and it is saying that price is going to go down so far that it will run up its own bum and dissapear....
well... as that is not likely to happen, then it is a reasonable expectation that price will now go up.
I look for extremes of the oscillator, knowing that if indeed thay are saying we have gone down to an extreme and then some... well... upside in price might be on the cards.
To take this one step further... let us say that we understand that an oscillator lags... the oscillator is saying we have gone down heaps, yet price is falling still... I have found that it is now the time when one can start to think that price will be turning "soon"... and often enough you will find that an oscillator is at an extreme as price approaches a historical point of resistance or support...
And therein, I beleive, lies a huge mental flag in what I have read in the way a good trader works, and the shift in wink's trading methodologies and success. When I buy when prices are low, and sell when prices are high, it would seem that proportionally my trade success increases... this is not buying or selling breakouts in the existing direction of the major trend people... though I do not suggest such a technique is not valid.. I do suggest that such a tequnique is not the be all and all, and personally I have had more failures trying it than otherwise.
Back to the Whooshka Formula:
Vis (and this is for an expected downside move, and read it as though each point is happening one after the other, as shown in the charts at the last page of the attached pdf):
1 Price rises while MACD Histograms fall (divergence between price and histograms) 2 Price rises while MACD averages fall (divergence between price and moving averages) 3 Then the downside occurs
After point two, and if the formula is correct... you could start selling contracts through out the rise in price, while it is divergent from the mACD Mavs...
If the formula is true, then the OscillatorIMACD Mavs) and histogram combination is pre-empting the next turn (the fall) in price. (step 3)...
not lagging but front running...!!!
Then.. if you can target the point unto which the fall will occur.. well... you'd be a happy little wink wouldn't you, lol!
'Kay enough of the how happy Wink might be and how his brain is changing and how one day he'll have a clue, lets look at some charts!!!
T/A Waffle
The XJO
IgMarkets representation
Firstly... targetting methodology is still kicking goals.
i have been saying for a while now that I thought the whole run up from the November lows was corrective and needed to retrace. Mind you I have also been saying that I think we need to go to 4100 or there abouts as well based on a historical perspective... I always hedge my bets on T/AA stuff, cos I ain't all that good with cycles yet.
So lets ignore the bit about the upside for the moment and concentrate on the downside, as that will make me look better.
The Whooska Formula (yeah I know... getting sick of the repition...) 1. Divergence between price and histograms occurs 2. divergence between price and moving averages occurs (same divergence as with the histograms) 3. A change in price trend/turn occurs. (a sustained, sometimes dynamic move opposite to previous trend) 4. Price will move back to the the support/resistance point directly prior to where price was when the histogram divergence occured. (Point four is relatively new, and has a few "wiggly bits" as far as determining where the histo divergence began)
The following chart show the hourly based price, from the november lows:
1. The matched red lines show the divergence between price and the MACD Histograms 2. The matched green lines show the divergence between price and the MACD Moving Averages 3. The retrace is pretty obvios 4. The blue cross hairs show the target
Quick zoom in to the previous november lows and beginning of divergence on the histos on the hourly:
As per the targetting methodology, vertical line on extreme histo peak to intersect price... Followed by Horixontal (target) line at the point of previous historicla resistance/support prior to the vertically intersected price.
Zoom back to where we are now... same line...
Big Fat Lol! And truly really, I have mentioned this specific target to others before we hit it, as well as saying but not demonstrating in the past that I expected it all to retrace at some time.
So where too from here?
Lets have a look at the hourly again... zoomed in at the right to observe current action:
Of great interest to me is the channel marked in orange...
Next stop is around the 3400 mark I reckon, top of the channel...
The red marked pair of lines show us divergence on the hostograms, and the Ellipse shows a crossover on the mavs, also note mavs are at (current) extremes.
But... if this is a whooska we only have signal 1... that is, price falls while MACD Histos rise... the second signal price falls while MACD Mavs rise has NOT occurred.. so if this rise is not whooshka based on the hourly... is the whooshka the be all and end all? tis in my world, lol but I am but a little man... in a big world.
Okay, so lets have a closer look at recent price action:
Soz charts getting a bit full o squiggles here...
Okay, first the paired thick redlines and paired thick green lines (Apologies for the other thick red sticking in there, a hangover from the hourly) Upside target potential here, based on thin blue cross hairs gives us just a tad shy of the 3450 mark, and coincides with the top of the channel (orange line).
Of greater interest though on this time span, is what appears to be a whooshka (downside) developing on the 5 min... note this is during after hours time, so signals can be a bit whack... still....note the thin paired lines and Further zoom:
Green dotted arrows give target of around 3300 Note also, the ellipse on the stochastic osciallator highlighting an approch into overbought...
Also note, that XJO futures market closed prior to US Futures market and US futures market was exhibiting downside in the last hour or so... Also note some more, XJO futures market is closed for the Australia day holiday (Go Us Aussies w000t!) and so this retrace may not be visible as real trading stuff...
Okay... looking at the time... now 3:20 am, I realise I have just spent five hours writing this so...
I'm outta here!
Executive summary...
Wink's trading is going okay.
Wink's targetting is going okay.
Wink likes cycles, the yinyang symbol and mice.
Upside in next few days to 3400 or so
Downside in future time, below november lows. Wink has no life... lol!
Cheers and beers all y'all.. and hope you have a fantastic Australia day.
And of course...Big love to every one and ... Big ups to the Mods...
;)
A copy of this post as a pdf can be found at the link below, soz, not well formatted but I am too tired.
(20min delay)