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Volume 3:Gaussians, PV, andExecution

March 2007

Spydertrader’s Jack Hershey Futures

Trading JournalAs compiled by 

Pr0crast  

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TABLE OF CONTENTS 

Introduction ..................................................................................................................................... 1 

Editor’s Note ............................................................................................................................... 1 

Spyder tells it like it is ................................................................................................................. 2 

The Journal...................................................................................................................................... 4 

PV/Gaussians .............................................................................................................................. 4 

WGTrader’s Gaussians Diagram ............................................................................................. 4 

Spyder on increasing/decreasing volume ................................................................................ 4 

Spyder’s Gaussian Drills ......................................................................................................... 6 

Pr0crast’s Gaussian/PV Drill ................................................................................................... 7 

Pr0crast on PV ......................................................................................................................... 9 

Tums on the importance of annotation .................................................................................. 10 

Spyder takes some time to review basic PRV ....................................................................... 11 

Ivo comments on some Gaussian logic ................................................................................. 11 

A super PV sequence ............................................................................................................. 12 

Spyder’s 3-02-07 ES chart w/ forest annotations .................................................................. 13 

Mr_Black’s Gaussian example .............................................................................................. 14 

PointOne answers a question on “reversal bars” ................................................................... 14 

Spydertrader answers a question on intra-bar Gaussians and FTTs ...................................... 15 

Spyder on the size of the forest again .................................................................................... 17 

Mak notes volume is scaling back to normal ........................................................................ 18 

Spyder answers a basic question on how we are using Gaussians ........................................ 19 

Spyder on applying Gaussian formations to channels ........................................................... 19 

Ivo and Steve on volume’s role in flaws and FTTs ............................................................... 20 

Spyder on always knowing your resolution .......................................................................... 21 

Spyder on Point Threes.......................................................................................................... 23 

Spyder on continuation/change signals for forest vs. trees traders........................................ 23 

Spooztrader on widening channels ........................................................................................ 26 

Spooz and Spyder on gaussians, synching, and incorrect channels ...................................... 27 

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Spooz on change .................................................................................................................... 29 

PointOne answers some basic questions ............................................................................... 31 

Execution ................................................................................................................................... 32 

Aurum’s Words of Wisdom .................................................................................................. 32 

Spyder answers some personal execution questions ............................................................. 32 

What do you do if you miss an FTT? .................................................................................... 33 

Pr0crast loses his cool during an HVS .................................................................................. 33 

Spyder’s 3-07-07 ES chart ..................................................................................................... 36 

Spyder’s thought process on tree-trading 3-07-07 ................................................................ 37 

Bundlemaker on logic and reasoning .................................................................................... 39 

Bundlemaker has another religious experience ..................................................................... 44 

Ivo on using the RTL ............................................................................................................. 45 

Spyder on the psychological effect of having money on the line .......................................... 46 

Other .......................................................................................................................................... 47 

Bundlemaker learns from his mistakes .................................................................................. 47 

Ivo on the reliability of FTTs ................................................................................................ 48 

Spyder on the different levels of trading ............................................................................... 49 

The disciplined trader ............................................................................................................ 50 

Spyder on trading FOMC days .............................................................................................. 51 

Spyder on stalls ...................................................................................................................... 52 

Excerpts from books .............................................................................................................. 52 

DKM and Spyder on intrachannel PT3s ................................................................................ 53 

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INTRODUCTION 

EDITOR 

’S N

OTE 

This summary document will not be as thorough as previous ones and will only contain key

 posts. If I perceive a post or a chart to be especially valuable to someone that has fully absorbed

most of the information already included in volumes 1 and 2, I will include it here.

If you want the full effect, READ THE JOURNAL! This should be considered a reference tool

for those who have already read the material.

Also please note that there is a wealth of information on Gaussians in the previous two volumes.

If you haven’t read those yet, that’s where you should start.

If you feel I’ve missed anything that really belongs in here, please shoot me an email at

azcire@gmail.com and I will get it in ASAP.

Enjoy!

-Eric (Pr0crast)

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SPYDER TELLS IT LIKE IT IS 

I appreciate the contributions made thus far with respect to where everyone find's themselves in

terms of progress toward learning the methods discussed. Many have weighed in off thread from

 both sides of the coin. On one hand, a number of people feel they have progressed far enough to begin to add additional tools. The other side of the argument shows a lot of people still having

difficulty with basic concepts. I realize everyone has a strong desire to succeed, as well as, obtain

some measure of confidence at their current plateau. As such, I don't want to 'hold back' those

who feel they have reached a stage where they feel its time to advance. Nor, do I wish to add

another layer of practice for individuals needing additional time at their current skill set. As you

can see the choice was a difficult one to make, and one I did not take lightly.

My major concern stems from the lack of responses after yesterday's market close. On such an

historic day, I thought sure I'd see numerous posts detailing how well people either traded, sim

traded, or could 'see' the market as it unfolded (during monitoring). Based on our discussionsthus far, everyone (using the Forest Level guidelines only) should have picked up the Point

Three short at 10:00 AM Eastern Time (Bar Seven) and held short until 3:00 PM Eastern Time

when price finally broke through a right side trend line. That 5 hour trade captured 39 points per

contract.

Since I did not see any mention of this trade (except in another thread), I wondered if even the

 people who think  they are ready to move forward, really are.

A common theme among the feedback received so far pertains to a lack of understanding about

Gaussians. Since I haven't placed as much emphasis on gaussians within the thread itself, the

responsibility for individuals having some difficulty with Gaussians partly falls on my shoulders.

I plan to remedy that situation immediately.

After reading through the significant amount of feedback received and reviewing the PM's, IM's,

emails and chat logs of discussions surrounding progress made to date, I feel it best to delay

adding STR / SQU for another month. I have updated the syllabus accordingly (See Attached). In

addition to the YM and ES, we will spend the Month of March focusing on Gaussians and PRV.

For those of you who feel you are ready to advance, I do not want you to feel held back in any

way. Jack and others have posted about STR / SQU in other threads. However, before you goand add STR / SQU because you think  you are ready, I recommend taking a week and proving 

to yourself by SIM trading at your current skill set. You may be surprised at what you find. For

those of you already trading real money, you already know where you need to focus.

Also, for those that do fully grasp the current skill set, I would appreciate it (and I am sure those

having difficulty would also) if you could take a moment or two and describe how you 'see'

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things unfold, what drills you used to assist your learning process, how you use PRV and how

you use Gaussians (Maybe Bob will even make a Gaussians Video).

Again, delaying the introduction of STR / SQU was not a decision I took lightly. However, it is

my firm belief that building a strong foundation remains a hallmark of success. As such, I feel I

have made the right choice.

Good Trading to you all.

- Spydertrader

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THE JOURNAL 

PV/GAUSSIANS 

WGTrader’s Gaussians Diagram

Spyder on increasing/decreasing volume

Quote from z32000: 

I was wondering how to determine what's considered increasing and decreasing volume...

You might find a review of Gaussians, as well as a review of my posts with respect to

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'Determining the size of the Forest' helpful to your understanding. Gaussians always match the

channels - always. If they don't, then you are not looking at the correct channel (Forest) size. Inan up channel, From the most recent High across the channel back to the right trend line 

volume will always decrease from the high back to the trend line - always. When price breaks

through the right trend line, volume increases. Increasing or decreasing volume does not always

refer to bar to bar analisys. If your channel (Forest) is wide enough, decreasing or increasingrefers to the channel as price traverses it - not bar to bar. If price requires 14 bars to retrace back

to the right trend line, then you will have decreasing volume from the Point where Price began its

retrace back to the trendline.

Quote from z32000: 

A lot of times, I can see either 2 or 3 bars that are probably double the standard average

sized bar... and everything else is just mainly random... 

"A lot of times" isn't a very accurate measure of the past. Besides, measuring the 'standard' sized bar has nothing to do with the PV Relationship. What you call 'random' represents the market

acting within the confines of the PV relationship, but at a finer resolution - or smaller channel.

Quote from z32000: 

also, does anyone have any idea where I can find the SPX, SPY or ES graphics beyond 1

decade? Free would be great if possible. 

Someone feel free to correct me if I am wrong here, but didn't the SP E-mini Contract begin in

September of 1997? If so, you should experience some difficulty finding data 'beyond a decade.'

Good Trading to you.

- Spydertrader 

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Spyder’s Gaussian Drills

1. Fill in the price bars, channels, and FTTs (answer: January 26, 2007)

2. Fill in the volume histogram

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Pr0crast’s Gaussian/PV Drill

Quote from Tums: 

amazing stuff we are learning.can't wait for the next quiz.

Here's one...

Try to pick out at least 3 bars on which a forest-level FTT occurs. If you need to, use the blank

space to draw the channels.

Answers on next page (don’t peek).

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Pr0crast’s attempt:

Spyder’s attempt:

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Pr0crast on PV

Pr0crast: What really made PV "click" for me was a string of thought processes that was

triggered by one of Jack's posts in January (on page 81 of vol.1).

You may have dismissed this post as long-winded or cheesy, but look at it again and really try tounderstand where he is coming from.

“The mind and body of the market is on display, intimately.”

There is a reason Jack always talks about the market in organic "metaphors." That is because the

market IS organic. It is the product of something organic (human psychology) and it behaves as

such. It is like the collective consciousness of all the participants. It is like a creature. It breaths

in and out. It has sentiments, and those sentiments change from time to time. If you take the time

to understand the beast you can harness its power. Conventional traders enter a master/slave

relationship with it, and abuse it at every opportunity, just waiting to jump on a perceivedweakness. Instead, what we seek is a partnership. We are not meeting force with force, but rather

taking the aikido approach and using what force already exists to produce the most efficient,

 powerful result.

Having thought about all this, do you really think this creature is going to cooperate with you if

you keep it in a mechanical cage all the time? The answer is no. I doubt anyone would be able to

skillfully ride a horse, raise a child, or drive a racecar going only on a laundry list of instructions

and rules. Success requires understanding and being tuned in to what is going on. The next step

after becoming an expert at drawing mechanical channels by the book is to learn to understand

what those channels mean in the NOW. Do they reflect what is going on this instant (are they

"operating")? Are there any channels missing from your chart? Might your channels influence

future action? What do they mean to you? To the market? Is there an FTT coming up?

Gaussians help you to answer these questions. By witnessing the market breathing, we see the

context for its current state of existence. By understanding its natural sequence, through

monitoring it we can spot abnormalities (FTT, B2B, R2R, etc) and readily anticipate the

 possibilities for what is to come next.

I've said it before and I'll say it again-- I think the most useful tool for ingraining the gaussiansequences into your brain is to video debrief. Watch the market every day and make Camtasias

so you can watch them in fast forward. Drill the sequences deep into your subconscious.

Understand what these sequences are going to do for YOU.

Eventually you'll learn to spot the "critical points" that gaussians show us. Maybe the trough of

this gaussian is a point 1. Maybe the peak is a point 2 or an FTT. Etc.

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Spyder takes some time to review basic PRV

PRV (Pro-Rata Volume) compares Volume levels NOW in order to anticipate Volume Levels by

End of Bar. If one has 2000 contracts traded in the first 15 seconds of the Bar, then one can

anticipate seeing 40,000 contracts traded by End of Bar (four 15 second intervals per minute x 5minutes per bar x 2000 contracts = 40,000 contracts). Comparing this anticipated volume with

the previous bar actual volume allows you to 'see' continuation or change at finer resolution

levels. In addition, comparing Peak Level Volume levels can permit one to anticipate where an

FTT might form.

As discusssed earlier in this thread, Mak explains his use of PRV in this post. The linked post

references the attached spread sheet.

Ivo comments on some Gaussian logic

It's the easiest when you understand the logic behind the gaussians and what to expect. Imagine

an uptrend. You see an FTT. This FTT has usually red volume. So it's a bar preferably with a big

shadow on top that doesn't reach LTL. After that we should not have a lot of black volume.

There can be some black volume (retracement) or a lot of red volume. If 'there's a lot of black

volume just sell. Then RTL is broken (or not, then close position if you took one). I really prefer

 price to behave as if this RTL just doesn't exists. The buyers are gone after all so I prefer low

volume cause also the sellers have not many people to sell to.

Of course in order for price to continue going down we do need increasing red volume. We get

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some increasing red volume and often a retracement (point 2 was just formed). However on

strong moves (like the one of today to the upside at 9.45) this retracement may not be there at all.

So price retraces and the thing to look for is: Will our point 1 (the FTT) hold. Just when new

 buyers seem to come in and black volume increases the sellers come in and we have a red bar on

high volume. (or a black bar with big shadow on top and small body, whatever, as long as you

see a lot of selling or the start of it). This is our point 3 and moment to go short if you missed the

FTT.

So, if you expect price to continue to go up you need increasing black volume (maybe after some

decreasing red volume but NO increasing red volume) and if you expect price to continue to go

down we need increasing red volume (maybe after some small black volume but not a lot of

 black volume). If this doesn't happen, close position.

As a beginner I was and sometimes still am fooled by

the strength of the retracements. They tend to go furtherthan you think and actually just as far that you almost do

not believe in it anymore. At that moment sellers should

come in and if they don't then close the position.

I suppose experienced traders open position on FTT then

reverse on point 2 and are able to reverse again on point

3.

These are just my observations. Feel free to correct.

A super PV sequence

PointOne:

11:15 FTT

11:20 Pt1 confirmed

11:50 R2R

12:10 Pt 3

That was a super PV sequence.

Hold until 13:30 or 14:15 for about 15 points.

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Spyder’s 3-02-07 ES chart w/ forest annotations

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Mr_Black’s Gaussian example

PointOne answers a question on “reversal bars”

Ivo:  There's this FTT where you mention "A significant portion of this bar is red volume". What

exactly do you mean by this? I mean this information would support that it is not an FTT but it

was one. Also this bar ends higher than where it opened and ended almost at its high.

P1: I call these reversal bars: it dips down, does the FTT, pace pauses if you are lucky and then

PRV increases as it begins the reverse (red becomes black).

I color code bars that do this in real time so I get a heads up. From my limited experience they

are 'reliable'.

I want to be careful in my wording here: volume does not really have a color, price bars do.

Volume is volume - long and short is matched in every trade, obviously.

The important thing is at some point in the bar, when the selling had slowed, the supply of longs

was starting to be consumed faster than the supply of shorts - buyers were getting long at the

support level at the bottom of the bar and hardly anyone was hitting the bids with new shorts.

 Noticing that the bar was no longer continuing down buyers come in (often after a brief pause as

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this change in sentiment is processed) and PRV increases, begetting more price change and more

volume. (You can call this black volume if you want.)

Forget that the bar ended black - on my chart it is red (actually pink because it ended up far away

from its low and I color code it - think stochastics). It gave the same signal whatever its color.

I hope I haven't opened a can of worms, but sooner or later you have to look at the intra-bar

detail and think about supply and demand balances especially during change.

Hope that helps and you don't mind me jumping in to answer.

Spydertrader answers a question on intra-bar Gaussians and FTTs

Quote from ivob: 

There's this FTT where you mention "A significant portion of this bar is red volume".

What exactly do you mean by this? 

'Significant portion' means, "more than a small amount."

Quote from ivob: 

I mean this information would support that it is not an FTT but it was one.

I have no idea how you reached this conclusion, but you reached it in error. There is nothing to

support or disprove. We either have an FTT or we do not. Clearly we do.

Quote from ivob: 

Also this bar ends higher than where it opened and ended almost at its high.

1. It didn't and 'as high' though (not that it matters)

2. On my charts, it closed 1 tic higher - not exactly a ringing endorsement of change.

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Quote from ivob: 

Are you talking about red volume while the bar was being formed?

To be more precise, I'm speaking of the Intra-Bar changes which occurred in real time. A

Gaussian change occurred within the bar itself. Increasing red volume peaked and decreasing

 black volume began.

Quote from ivob: 

If yes, I suppose it would be wise to wait before entering (assuming you enter on FTT) until

two bars later which also was an FTT but with black volume.

On the Forest Level, you need a Point Three to enter. On the Tree level, you enter on FTT's but

(as a beginner) exit on an FBO. If you 'see' the bar in question as still part of the increasing red

Gaussian (then changing Intra-bar to decreasing black, you may better 'see' the market signals -in this case change (FTT) - change (FBO) - change (second FTT) - continuation (BO of RTL).

Quote from ivob: 

I just want to verify if I am seeing this correctly.

 Note the attached chart. If you cannot 'see' the

 bar marked as "This Bar" as having (initially)

characteristics associated more closely with the'increasing red' portion of the Gaussian Curve,

then later changing (within the bar itself) to

characteristics more closely associated with thenext part of the Gaussian (decreasing black),

then you may inadvertently draw incorrect

Gaussians (blue arrows) leading you to believea change confirmation occurred - where none

yet exists. The only reason one even considersthis bar 'black' is due to the one tic difference

in price from open to close. The blue arrowsshow B2B. However, this cannot be correct as

we currently find ourselves within the Orange

Forest. Using the correct Gaussians (blackarrow), we are able to more accurately assess

the Red Bar at the end of the chart -

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entertaining the idea that the bar has formed a Flaw (A Stall actually) rather than believing we

have encountered an FTT. This entire exercise shows you how easy it is to find yourself severallevels down into resolution levels when your intent was to remain at the Forest Level.

Monitor the Gaussians at the correct resolution level just as you do with price.

- Spydertrader

Spyder on the size of the forest again

Many of the charts posted over the last 24 hours missed what I have marked as the Blue Channel

on the attached chart snippet. Instead, the charts have only the thinner up and down channels

marked by the Green and Pink Arrows on the the attached chart snippet. Individuals who failed

to 'see' the Blue Channel are ignoring the 'fractal' nature of channels - where channels form

channels which form channels. In my post (several days ago) where I discussed determining the'size' of the forest, I discussed using Gaussians as a guide for determining 'Forest Size. Even if

one considers the Green Up Channel as a Point Three Channel, The FTT which forms (Yellow

Highlight) creates a Point Three of a larger down channel (Red Lines) In this (Red) 'Larger

Forest' Context, Red Volume is dominant. In the Blue Channel sized Forest, Black Volume

dominates. How do we determine which Forest to watch? We use the Gaussians as our guide.

After the FTT in the Pink Down Channel, Price begins to move higher on decreasing black

volume. Such a phenomenon occurs only 

in a down channel. Decreasing Black

Volume in an Up channels cause lateral 

 price movement. Last week, we had twodays with similar price movement (left to

right traverse). Another poster

commented on how the first day fooled

him, but not the second. When one sees

such price behavior, one must consider

the possibility of a down channel. When

 price moves higher creating the second

Blue Channel FTT, connecting the FTT's

then illuminates the correct size of the

Current Forest. The errors in direction

result simply from a failure to 'see' the

size of the Forest in which one operates.

By operating in a smaller Forest, you

often miss the 'bigger picture.'

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Mak notes volume is scaling back to normal

 Note how volume is scaling back to normal. We still are seeing relatively good runs through

lunch which is more money in the bank. Relax if you don't see the big picture. If you see the

finer channels just think of the sequences of sub pt1, 2, 3 and forest level pt 1,2,3. If you don'tsee the bigger picture it's because the market has not put in the bigger view, points yet. In other

words, the definition of the forest level is forth coming...

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Spyder answers a basic question on how we are using Gaussians

Quote from optionpro007: 

I still don't understand exactly how you guys use Gaussians in your analysis.  

Gaussians permit you to understand the context in which Price operates - the 'size' of the Forest.

If, for example, you find yourself viewing a Price retrace of an Up Channel, one would expect

decreasing red volume to occur over the entire traverse. Knowing the size of the Forest allows

you to monitor for continuation and change while experiencing stress free trading because you

know where you are, and more importantly, you know what comes next. Just as we place

importance in drawing channels correctly, so too, must one monitor the Gaussian formations

within that same channel context. Too often, traders choose a finer resolution with which to

monitor Gaussian formations without even realizing it. I'll try to include some notations on

Gaussians in my ES Chart tomorrow.

Perhaps, Jack can post his thoughts on Gaussians as well.

-Spydertrader

Spyder on applying Gaussian formations to channels

Quote from FilterTip: 

I don't see where the forest is for today so far.. 

Everyone needs to learn to apply the correct Gaussian

Formation with the correct channel. Note the

decreasing black volume across the entire blue down

channel (black arrows). Note also, the increasing blackvolume (within that overall channel) applied to the

specific up channel (green arrows). Just like Channels,

Gaussians have a fractal nature to them as well.

- Spydertrader

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Ivo and Steve on volume’s role in flaws and FTTs

Steve:  Had a nice aha moment just now, I'm watching the ym and spot FTT at 11:32 bar,followed by pt 2 at 11:40 bar and pt 3 at 11:46. Ok got my channel. Now I am watching ES and

spot the FTT before it happens at 11:35 bar. find my pt 2 and 3 on the next two bars. Then comesthe aha moment. On YM I see price test (actually slightly break) my LTL on 11:54 bar. Next baris red dominant volume but price does not really go down. I think to myself, if we are going to

get a retrace, it should be on non dom volume back to the RTL. Instead I see dom volume. Ithink I must be seeing a flaw. I then think to myself that I am anticipating a volitilty expansion

on the ES (as I continue to monitor what YM does in conjuction w/ the ES). Sure enough, price

ticks in one or two ticks and then shoot up strongly.

Although I dont know how to fully identify a falw, what I saw on YM bar at 11:56 seemed

different. I'm not sure if my analysis is correct but the market gave me info that I used to

anticipate what would happen next. Felt real good

Ivo:  Nice. Similar to what I learned. Spyder mentioned after an FTT we should be seeing

decreasing non dominant volume.... I was reading this over and over and then today I suddenlygot it. Anything else means price will just continue.

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Spyder on always knowing your resolution

 Note the differences between the Gaussians of the 'Large' Forest(Carryover Channel) from the previous day and the 'Smaller'

Forest or 'Tree' level Gaussians. Always know 'where you are'and what context (resolution level) through which you currentlymonitor the markets. (see right pic)

Just as a review, lets take a look at how the Gaussians always 

follow their channels. In the attached chart snippet (left), our

Forest (Blue channel) shows decreasing red volume from the

high at 11:35 through 12:05 low. Across the entire area (11:35

- 12:05), we see

decreasing red

volume. At the

same time, we

see decreasing

red (as price

retraces) to

increasing red

(as price breaks

out) from the

Green Up

Channel (Tree -

YellowHighlight).

 Note the two

red arrows at

11:40 and 11:45

Volume Bars. As we would expect in a down

channel, we see decreasing black volume when

 price retraces (Green highlight) from 11:50 to

12:00 bars. The first third of the 12:05 bar

continues to show decreasing black until price

changes course and creates a point three down

channel. We see increasing red with this bar -

exactly as expected in a Point Three (another

Tree - Red). At the end of the 12:05 bar, we

note Price forming an FTT, and as Price retraces to the right side trend line, we again see

decreasing black volume (exactly as anticipated). At 12:10, we have increasing black volume as

Price breaks through the right side (red) trend line continuing to increase in both price and

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Volume to the 12:20 bar. At the same time, we show increasing black volume across the entire

Blue Forest from 11:30 to 12:20 (Pinkish colored Volume Arrow).

When monitoring Gaussians and Channels, one must always make sure one monitors on the

correct resolution level. After all, the attached chart shows how easy it is for the market to draw

a trader in to ever finer levels of resolution without even realizing it.

I hope everyone finds the above information useful.

- Spydertrader

Quote from ivob: 

Thank you, very useful as I had problems recognizing this. Exactly when did you considerthe 12:05 bar to be an FTT? For me this was not obvious until two bars later because I

think it could very well be that the 12:10 bar would continue the traverse. In general point

3 and FTT on the same bar is a little tricky IMO. 

1. The Blue lines are the Forest. If you trade on the Forest, you do not need to locate FTT's.

2. If you were trading the trees, any point on the 12:10 bar where you recognized PRV volume as

decreasing black , tells you the you no longer have continuation down.

3. Same Bar FTT / Point Three formations do present some difficulty using our current tool set.In the future, this will change as we add fine resolution tools (limb, leaf and bug).

4. Saying "could have continued its traverse down" implies prediction. Avoid falling into prediction mode. Ask yourself, "What do I need to see for continuation? and What do I need to

see for change?" (Make sure you ask and answer on the correct resolution level) Then go look

for the data. Once you have a sufficient data set, take action. Often, you'll find the action to be

hold.

- Spydertrader

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Spyder on Point Threes

Quote from KK70: 

How/when could one have known that this was not a Point3 ? I keep having this recurring

problem. I nailed the Point 3 at 11:20 on the upward channel though. 

The bar you marked as a Point Three, also turned into an FTT at its low. Easy to see based on

your view of the near past bars, how you could view the Price Action as a Point Three DownChannel - espcially, if you missed the earlier Point Three Down Channel (See chart above). If

you note the YM during that same time frame (Attached), you see the YM within an up channel

during the same time period you mention above. However, even if you missed all of these clues,

the next bar (10:35 AM) gives you increasing black Volume. Even if you missed the increasing

 black on a PRV basis, Price breaking through your RTL is the market's way of saying, the downchannel has ended.

After a Point Three, one must see increasing volume in the

same direction of the trend, and within the size of the current

Point Three Forest or Tree (continuation). When a traderdoes not see a signal for continuation, then the only other

 possible conclusion is change.

- Spydertrader

Spyder on continuation/change signals for forest vs. trees traders

Quote from cnms2: 

Spydertrader, would you please elaborate on your statement?

The 12:10 decreasing black volume in the red down channel could also mean retracement,

hence continuation down, isn't it? Then, the 12:15 black rising volume seems like an

indication of the change.

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Ivob asked the question, with respect to my previous example (Red Channel), 'At what point did

we know we had an FTT?'

If one searches for FTT's then a signal for change is the FTT (in this case decreasing Black

Volume confirms the FTT). In such an example, increasing Black Volume becomes

continuation - but only after the BO. If one searches for Right Trend Line Break Outs (or PointThrees), then the signal for continuation is increasing black volume. In other words, if one

doesn't enter until a breach of a RTL, then one needs to see increasing black volume. If one

enters off an FTT, then one needs to see decreasing black volume followed by increasing blackvolume to have continuation (hold).

It all boils down to what level of Resolution a trader chooses to monitor. In the previously postedexample, increasing red Volume would have meant continuation (down). If a trader chose to

monitor for FTT's, then the signal for change (FTT followed by decreasing Black Volume)

differs from a trader who chooses to monitor for RTL Breaks (Price exits the channel with

increasing Black Volume).

Since ivob asked, 'When did we know we had an FTT?' our sufficient data set (in this specific

example) becomes Failure of Price to Traverse, followed by, decreasing black volume.

I hope my answer provided some clarity, if not please let me know.

Quote from ivob: 

I find the terms "increasing" and "decreasing" somewhat confusing. In this case

decreasing black volume confirms the FTT but I would like to have the term "decreasing"

clarified. Decreasing means "becoming less" but compared to what? Becoming less

compared to black volume before the FTT or becoming less in the bar(s) after the FTT? (I

suppose after the FTT)

"Becoming less" is relative and can also mean black volume is first high (after the FTT)

and then on a later moment in the same bar low or lower. Another option is that black

volume after the FTT is low and on a later moment even lower. This is also decreasing.

Am I seeing this right?

Also I remark that determining whether something is increasing or decreasing (or stable)

requires us to wait because this means comparing volume levels on different moments. One

cannot wait too long however.

regards,

Ivo

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Palinuro: Ivo, I'm sure Spyder will have a better explanation, but since he's probably sleeping

now, I'll give it a try.

Volume increases throughout the dominant traverse (and it will be predominantly dominant

volume). Keep in mind that there are 3 possible ends to a dominant traverse. As volume peaks,

 price :

1 - hits the LTL,

2 - FTTs, or3 - creates a volatility expansion.

After 3 price may continue (with more volume), but after 1 or 2 price changes direction asvolume peaks. So color and direction change, but volume stays high, and then decreases as price

makes the nondominant traverse. Whether that happens intrabar or over a series of bars depends

on market pace and the resolution you're monitoring.

I don't think it makes sense to compare black volume before and after the FTT, as you suggest.Assuming we're in a down channel, a black bar before the FTT would occur within a subchannel,

whereas black volume afterward would be the nondominant traverse of the main channel--adifferent resolution level.

Regarding waiting: yes, but I think the goal is to tune yourself well enough to the ebb and flowof volume and the interaction of the various levels of channels that the lag becomes unimportant.

To reduce lag at one level you need to have the ability to monitor accurately at the next lower

resolution level, etc.

FWIW, I found yesterday after the drop especially tough because there were so many periods offairly flat volume and price, followed by sudden spikes which were hard to anticipate. Before the

spike I didn't know what direction to take, and after it seemed too late to enter.... Perhaps that's

why Jack talks about bracketing CCC periods, though Spyder seems to do "OK" without doingthat.

Hope that helps. 

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Spooztrader on widening channels

Attached is my hindsight view of the ES today. My real-time chart was similar but I forgot to

take screen before I closed my App, lol.

My recent AHA and current struggle is this: Channels Widen. Traverses often "operate" withoutmuch widening required. But, the cool Forest channels often BO the RTL for a while and then

 begin more dominant traverses. I'm working hard to find and stay in these wider channels but it's

 been challenging for sure (for me anyway).

Obviously, the wider channels are easier to see in hindsight. The steep traverses that don't widenare fairly easy to see in real-time, at least some of them .

The chart shows my new Channel GUI. These chart "objects" were inspired by Jack's "GolfPosts" in one of the older threads. Sorry, no Guassians because I don't have the tools working in

the Volume pane, yet.

The Volume At Price distribution (blue, to the right of price) is OT but is interesting. And my

volume is a bit off right now, so please ignore it .

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Spooz and Spyder on gaussians, synching, and incorrect channels

Since we're still in the month of Gaussians and PV, I wanted to post while we're still on topic.

From Jack's "Building Minds for Builiding Weath", PV is:

If the Volume trend is UP, then the Price trend will CONTINUE, or,

If the Volume trend is DOWN, the the Price trend will CHANGE

When I apply the above statements to channels and Gaussians, I read them as follows:

If Price is in an operating UP channel and the dominant Gaussian peaks (B2R's) are decreasing,

then anticpate CHANGE, or,

If Price is in an operating UP channel and the dominant Gaussian peaks (B2R's) are increasing,then anticpate CONTINUATION.

And of course, similar for operating down channels:

If Price is in an operating DOWN channel and the dominant Gaussian peaks (R2B's) are

decreasing, then anticpate CHANGE, or,

If Price is in an operating DOWN channel and the dominant Gaussian peaks (R2B's) areincreasing, then anticpate CONTINUATION.

By "operating", I mean you have found Gaussians that sync well to your channels. I believe thisis an important statement. Gaussians should validate your channels. But these are my opinions.

If I understand PV and have described this properly, Increasing/Decreasing DOMINANTGaussians are important to recognize. Although this is probably true at any fractal, I'm really

talking about Gaussians that are wider than a bar or two. Sure, tapes operate, but I'm talking

about Gaussians we see in the trees and Forest.

I've attached a "theoretical" Gaussian/PV chart. In the Up channel, there are 3 "wide" Gaussians.

And the dominant peaks are decreasing. What's happening here? Well, Price is moving higher on

lower/decreasing BLACK volume. Right? And note the channel is "operating". PV saysanticipate CHANGE when the Price trend is UP and the Volume trend is DOWN (decreasing).

So, anticipate CHANGE.

In the down channel, there are again 3 wide Gaussians. But this time, the dominant peaks are

increasing. Price is moving lower on increasing RED volume. PV says a Price trend will

CONTINUE if the Volume trend is UP (increasing). So, anticipate CONTINUATION or NO

CHANGE.

Of course, this isn't cookboook or mechanical. It's more of an Art, in my opinion. Volume could

come in at any time in the opposite of the anticipated direction. And news can wreak havoc, aswe all know. But this is my interpretation of PV. And I hope I got it right...

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I didn't annotate the FTT's, FBO's, BO's, R2R, etc. Exercise for the interested reader

Sorry for the long post. I'd appreciate any feedback, especially if i'm on the wrong page...

Spydertrader: With respect to your interpretation of the Jokari Matrix (See Attached), you

appear to have the correct understanding with respect to the Price-Volume Relationship. In

addition, your charts provide a clear example of the phenomenon of 'overlapping trends' and howthis overlap validates the various resolution levels. However, I caution your viewpoint with

respect to 'operating channels.' Channel - Gaussian Synchronization exists within a binary

framework. Channels and Gaussians either sync, or they do not sync. If they do not sync, then

you have an incorrect channel. No varying degrees of Synchronization exist. Just as we see thefractal nature of channels on your chart, so too, do Gaussians exists within this same fractalframework.

By example, if Price exits a right trend line on decreasing volume, you have a clear indicationand signal from the market. The signal says, "You have an incorrect channel." Even if no

 possible signal existed prior to that point in time, even if no logical method of drawing the new

(or fanned in this case) channel existed before this current point in time, the market has spoken

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loud and clear.

Gaussians and Channels must always exist within a state of Synchronization. If they do not, a

mistake exists somewhere, and requires an immediate fix. Either, the trader has drawn in an

incorrect channel, or the trader finds themselves monitoring on an incorrect Resolution Level.

Instead of viewing Synchronization as a 'better or worse' phenomenon, try making the ever-so-

slight shift to a binary paradigm. Doing so may help provide some extra clarity as to how the

market unfolds, as well as, how price heads in a direction because it can only head in that

direction.

If you don't see the bold type yet (as you view the market), don't worry, you will.

Again, nice work with the Jokari Matrix and your charts.

- Spydertrader

Spooz on change

Mr_black:

Change or not change that is the ????

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Spooz: Cool, we're still talking PV & Gaussians. Here's my debrief on the first snippet...

Starting with 2 bars, you've drawn in tape. If you're glued in RT, this is how one can start to

 build a channel. In snippet 1, we don't have any CO's or overall NOW sentiment. In other words,

the NOW is the tape. And the tape ftt on bar 3 has so far done it's job as price has retreated back

to the tape RTL.

If this is all I have to go on, I'm thinking that price has gone higher for 3 bars on decreasing

 black volume. If this tape is a dominant traverse, my interpetation of PV has me thinkingCHANGE. Of course, price could be in a wider down channel and this tape the B part of a R2B.

I don't automatically think price is in a down channel when I see price rising on decreasing black

volume, but maybe I should.

 Now, keep in mind, we're zoomed in here. Price is operating in a tape. Sure, there are times when

a tape RTL holds and price continues in the current direction but we usually see volatilityexpansion (VE) in this scenario, right? And we're not seeing VE on these 3 bars, at least yet.

We're seeing price moving higher on decreasing black volume.

If no VE, then another scenario, which jives with zoomed-in PV is that the tape will widen.Channels widen, right? Tapes widen for sure, IMO. Bar 3 might be the beginning of a Flaw

sequence. Maybe a hitch, stall, etc, or a lateral.

Does the tape ftt on bar 3 signal "wider"/zoomed out sentiment change? Well, IMO, no. IMO, a

FTT at any resolution has me anticipating, "price should retrace back to the operating RTL". The

key word is "operating". In this snippet, the tape RTL. If increasing red comes in, we should seea R2R at the tape resolution. If low vol comes in, price prolly will "walk out" and the tape will

widen.

Regardless, unless another shot of black volume comes in on the next bar (bar 4), price will

 prolly have a hard time continuing in the dominant direction, at least in the operating tape.Change? Or, maybe another way to look at it is, "not continuation".

As shown in snippet 2, price BO'd the tape and the next bar went lower in decreasing red

volume. And another tape. Cool, this time, a short tape.

In the short tape, price is attempting to go lower on decreasing red volume. Granted, we're

zoomed in big time but I've only got 4 bars to work with in the NOW. PV has me thinkingCHANGE (or maybe Not Continuation) in this tape. Agreed? Using the same analysis as above.

Increasing black comes in on the next bar and we now have a candidate "new point 3" (long).And we get follow through. Now, we can go back and "fix" our gaussian, as annotated in snippet

2. A B2R. And we're finally in a traverse, a bit closer to the Forest .

So, to summarize, did we see CHANGE in the 2 tapes, at the tape resolution? If all I had in the

 NOW were the 2 tapes, then yes, IMO. But at the tape resolution, nothing more. But, as snippet 2shows, this CHANGE was brief and really No Change after the wider channel is built.

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Comments?

I'm not sure that I answered the question. And I had to zoom in, slightly OT to the Forest, sorry.

We don't have the tool set to trade at this resolution, right? But I attempted to debrief using my

knowledge of PV. Of course, just my opinion and as always, I could be wrong. But

Change/Continuation is the key at all resolutions, right?

PointOne answers some basic questions

1. What is the difference between a retrace and a reversal?

All reversals begin with a retrace.

The gaussians show sequences of the form RBRB2B or BRBR2R.

In other words decreasing volume is a retrace and increasing volume in the same direction, aftera retrace, is a reversal.

2. What is the leading indicator of a trendline BO?

FTT, retrace, PRV+.

3. How does the price test R or S?

In waves. If there is a WALL then the line will hold. You often seen quick retreats from S or R

and the bars form spikes as the line holds. If the wall is chipped away enough (after more than

one attempt usually) and PRV is high enough or the wall is withdrawn, then the line will be broken. 

4. How do you know a BO is going to fail.

PRV fades. A true BO requires PRV+ (frantic covering).

5. How do you know when a BO has failed?

PRV fades (as above), DU (a momentary pause), reverse, back into original channel.

6. If R is broken where do you look for the new value of S and vice versa.

Glib answer: R forms new S, S forms new R. (For good reasons.) Look for Pt 3 at the slope to

match the market pace (expect a retrace to Pt3 before resume). Pt3 may well be within the oldchannel as channels overlap.

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EXECUTION 

Aurum’s Words of Wisdom

It's time to get it out of your head "Price would have gone against me." Price, NEVER goesagainst anyone. Price doesn't know you exist. We are looking for one of two things. "Continue"

or "Change". This is all there is, and all there will be. You may miss a signal for change. You

may think you have change, instead of continuation. But you can NEVER have price go against

you. Price doesn't know where you entered, and price doesn't know where you exited.

This isn't a battle. It's a symbiotic relationship. We are not at war with the market, but rather, our

goal is to become the best of friends with it. Get to know it's moods. When it is sad, we want to

 be there with it, and ride it down. When it is happy, we want to be there and ride it higher.

(Attributed mainly to comments made by Spyder in chat)

Spyder answers some personal execution questions

Quote from chasedream: 

1. How many trades in average do you make per day?

2. Win/lose ratio?

3. Ticks per winning trade?

4. Ticks per losing trade?

In terms of average numbers of trades, The market decides for me. A flat (tight range day) provides more opportunities, but each opportunity provides less profit. On the flip side, a day

like 3 weeks ago provided fewer trades (by a huge amount) but each trade provided much bigger

 profits. In addition, someone trading at a different resolution level than myself, would have acompletely different number of trades. Fine Resolution (bug / leaf) has more trades; Coarse

Level Resolution (Forest / Tree) would have fewer trades. I have had days were I only made 4

trades and days where I made 32 trades (and everything in between).

I consider the wash trades as +/- 2 tics or break even. Over time, the wash trades even out. Some

days, I have multiple wash trades in a row. other days, I have none. Occasionally, I have a loss of

3 tics, due to my inability to react fast enough to a swift market movement, or my own confusionabout 'market context' (which side is right?, and is this an FTT or an HVS?)

In terms of profits per trade, that too depends on volatility and range. Three weeks ago we had asingle bar which spanned 12 points. During Friday's in late summer, the entire range might only

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reach five points. I have had days where I only walked away up 2 points, and I have days where I

 banked an extraordinary amount of capital (and everything in between).

I also leave plenty of money on the table - meaning I do not normally extract three times the

daily range. I have done so a few times, but again, it is more the volatility and range of the

market which dictates the amount of available profit, rather than, my skill as a trader.

I haven't yet fully (and correctly) used all the available tools (Tic charts for example) in my daily

trading. During the day, I only use the tools currently being discussed in the Journal, but monitorthe next tool throughout the day. In this fashion, I can answer questions more easily - based on

what everyone else has available to them. After all, nobody wants to hear me say, "Oh don't

worry about that. If you were using STR / SQU, you'd have caught that spike." Such a responseisn't helpful with respect to assisting people learn the methods being discussed.

I hope you find the answers above helpful. If not, please let me know.

What do you do if you miss an FTT?

Ivo:  You watch price going to RTL and break it. Then wait for 1-2-3 setup and get in on pt 3. If

it doesn't break wait for next FTT.

Pr0crast loses his cool during an HVS

I like the idea of debriefing some real trades this month that either turned out well or not. I know

some of us (myself included) are playing around with execution (sim trading, real trading, etc),and as many have mentioned, it is a bit different when you're really in there pressing buttons.

You really see what still needs work and

what is gelling.

In my case, I am having a tough time

"staying cool" during HVS/flaw type things.

I SUSPECT that's because these past few

days there has been so much volatility that

an HVS is 2-4 points tall.

Here is an example of a trade I made today

where my "lost my cool" and exited for a

wash, when had I somehow stayed in it I

would have netted 8-9 pts. I entered on the

same bar as the FTT, then exited on the

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third bar after that, where the HVS lashed back at me. Is it reasonable to exit like this? Should I

have placed some sort of limit sell order just outside the very bottom of the HVS to catch the

 potential down move after I closed my initial position? If I am supposed to be holding here, what

is my thought process as the 2.5 pt bar slaps me in the face?

My entry is perfect here. I can't help but to think that if I was able to "see" that this was an HVS

somehow, that I would have made the 8-9 pts that were on the table for this quick trade.

Comments or suggestions?

JDAndy: FWIW, I was in the exact same trade, short at 1410.25. The next bar had a small

move and retrace on lower volume, so I held. When price broke toward the RTL (the black line),

I annotated the down channel (I know, not forest level). When price broke the RTL and came

 back up, I was thinking FBO and exited at 1408.75. What I did not do was take a look at the

volume. That may have kept me in the trade. The next black bar had me patting myself on the

 back. What I failed to do was continue to watch that RTL for another break which would have

gotten me back into the short.

I had a similar problem this morning just before the 10:00 announcements. Was long from the

FTT/RTL break on bar 5 with a nice profit. Knowing that there were numbers coming out at 10, I

 bailed toward the end of bar 6, forgetting the "continue" or "change" rules. We know what

happened after that. So...while I am happy to be up for the day and doing a fairly good job of

annotating, I know that I can do better. I did spend a hour or more going over the day, rechecking

the volume gaussians, etc. before I wrapped up.

Bundlemaker hit the nail on the head with his post. The key is to learn to recognize these

opportunities to improve. JD

Tums: If it is not a reversal, it is a continuation. Stay on until it become risky to do so. (i.e.

another FTT.)

Ivo: When the second bar of the HVS did not close higher than the first one you could have

known it was an HVS. Even if you didn't notice the HVS you should have held it as there is no

signal of change. (no FTT + no RTL broken)

If you draw a tape from the FTT down, that tape was not broken.

Spyder: The Forest has no flaws.

Price does not know where you entered, and therefore could not have 'lashed back at you.' The

market knows only two words - continuation and change. Change on one resolution level

(flaws) mean continuation on another. Rather than base your monitoring off your entry, listen to

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the market. You appear to have monitored on a lower resolution than planned. If you found

yourself within an HVS, then you attempted to monitor with tools not designed to handle such a

fine resolution. The tools you do have, ES, YM, Price, Volume Channels and Gaussians provide

input at the Coarse Level resolution.

In short, you attempted to perform brain surgery with a pick axe and shovel when you needed a

scalpel and scissors.

You learned a valuable lesson today. You learned you need to build a stronger foundation before

attempting to head off the reservation. See how easy it is to be sucked down into the the abyss?

 Next time you attempt to SIM Trade, monitor the market and not your P & L. Act as if you

caught the exact tic that provided your entry signal (FTT or Point Three). Then see what the

market tells you to do from the Coarse Level.

There'll be time anuff for countin', when the dealin's done.

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Spyder’s 3-07-07 ES chart

I've added some extra annotations after market close in an effort to show those still strugglingwith Gaussians how to 'ignore' the fine detail (for now) while remaining focused on the larger

 picture.

Judging from the number and quality of posts today, it does appear that most enjoyed a pretty

good day. Nicely done. Keep up the great work.

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Spyder’s thought process on tree-trading 3-07-07

Long @ 9:30 

Actually, the signal is after 9:30 AM. ES Price forms an FTT on the Red carryover channel from

the previous day. At approximately 9:32:15 we see Price begin to head higher on the YM (alsoforming an FTT on its carryover channel. Ym also shows increasing black volume.

Reverse short @ 9:50

Again, it's a bit past the open of the 9:50 bar when we have ES Price break the tape of our up

channel. In fact closer to the close of that bar than the open. A little passed 9:54 on The YM,Price begins to head lower confirming a YM FTT. ES shows decreasing red volume here as well.

(Answering another poster’s question about this trade)  As I often try to do with situations such

as these, I prefer to take you back to what I knew (or thought I knew) at the point I made my

decision.

We start the day with an FTT on the ES (Point One). Over the first four bars of the day, we see

increasing black volume. As such, my brain thinks - uptrend. After all, we expect to see

decreasing volume in a retrace. Here, we have increasing black volume as price improves. Inaddition, I already have an uptrend developing with the YM. When price begins to pull back on

the ES (Point two, my brain says), and the YM shows an FTT, I expect to see decreasing red

volume as price retraces back toward my anticipated Point Three on the ES. When price breaksthe 'uptrend thin green channel' on my previous charts, combined with red volume (with less

volume showing on a PRV basis than the 9:45 bar), I feel pretty confident that everything is

going to progress exactly as I expect. My sole concern developed as time moved closer to the

end of the 9:50 bar. At this point, I see significantly lower volume than I would normally expectto see at an FTT. Now, I entertain the idea that I may actually have a flaw of some sortdeveloping. However, since I do not have anything (YM Price / Volume, ES Volume or ES Price

signaling 'change' I reach the conclusion that I have 'continuation' and continue to hold. The 9:55

 bar on the ES then confirms my decision to hold by bushing Price even lower (and creating a

small volatility expansion). At the 10:00 AM bar, I see Price begin to slow in its downward pace,as well as a reduction in volume. As a result, I begin to think 'change' should be upcoming (after

all, we did just have a Volatility Expansion, and I am now on the look out for an FTT). I also

notice Price failed to make it to the left trend line (skinny red lines) and I begin to look for a possible trend change. When Price again fails to reach the left trend line on the 10:05 bar, and

 begins to head higher, I already see an FTT on the YM and PRV volume on the ES tells me to

expect increasing black once again. All that remains to complete my data set is to see Price breach the right side trend line of this down channel. When it does, one enters long.

The above description went a little farther than your question, but I wanted to show how the

 process really doesn't require any sort of hyper activity. In reality, we had more than enoughinformation to reach a conclusion at almost every step. One didn't need to go check the YM, but

it certainly was nice to see it confirm everything as we walked through the morning's opening

 bars.

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Reverse long @ 10:10

Looking at the ES, Price breaks our down channel with this signal. However, by monitoring the

YM, we see an FTT appear much earlier and know the market plans to head higher. Even if one

wasn't watching the YM, we should already see a 'Point Three up channel on the ES. From 10:10

to 10:15, we also see increasing black volume on the ES. Clearly this is a long signal.

Reverse short @ 10:45

FTT on the ES after two volatility expansions combined with decreasing red volume.

Exit @ 11:40

ES price breaks through the right side trend line signaling an exit. I gave credit here for missing 

the FTT which occurred on the ES red down channel at 11:35 AM. Again, I tried to make things

as realistic as possible - including slippage, missed signals and late recognition.

Long @ 11:50

A second FTT within the Red Down channel forms a Point Three Up Trend (blue). The

Gaussians also show a forming B2B. We enter long on such signals even at the most coarse

forest levels.

Reverse short at 13:55

FTT of the most steep channel on the ES. Break of the right side channel tape. One may have

chosen to exit here in an effort to 'bank' profits on the day. If so, the next short wouldn't come

until 15:05 or later (whenever one recognized the Point Three red down channel). As a side note,

we already went well past normal Peak Volume levels. In fact, many probably felt the 13:35 /13:40 bars were forming an FTT, but based on Volume we could tell this was a flaw. If anyonewas fooled here, don't fret it. With time and experience, you won't be - red volume levels were

way too low for it to be an FTT, and you'll recognize that in the future (if you didn't already).

Exit @ close

Actually, the exit occurred when ES Price broke through the most steep down channel (orange)

Right Trend Line, but because the cash market closes at 4:00 Pm Eastern, we would have exitedon the close.

The above signals / decision points were based on someone who switches resolution levelsbetween a 'Forest' and 'Tree' level resolution. In other words, a trader who feels comfortable

entering both on an FTT and on a Point Three. However, all traders on the 'Forest' Level

Resolution should have at least caught the Point Three Entry at 11:50 AM on the ES.

Hope that helped.

- Spydertrader

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Bundlemaker on logic and reasoning

OK, this may sound crazy unless you get what I'm talking about. If it clicks, this is for you, if it

doesn't, place on back burner if you find yourself frustrated later.

When monitoring and annotating charts, we often, almost continuously, find ourselves having to

identify something. "Is this increasing?" "Is this decreasing" etc etc. I find this a very difficult

exercise, because usually the answer is not black and white. Uncertainty rules and then emotions

can take over easily.

The solution is to give yourself a different question to ask. This can make all the difference in the

world for some of you. Change the question from "is it this or that" to "is it more like this or

more like that"? That might seem like a meaningless shift. It isn't. It takes your mind to a

different place of reasoning. Try it.

In addition, try reversing the logic of your reasoning. Move from deduction to induction. Don't

look at a piece of chart and ask "what does this mean". Instead try "if this is a point 3 of a new up

channel, then volume should be doing such and such." Assume your conclusion is correct

(instead of questioning yourself to death) and then ask what the data RIGHT NOW must be to

support that conclusion.

This boils down to testing your conclusion with new data and keeps you in the NOW.

Continuation.....change.....continuation....change. Use the thought process I just presented and it

HAS to keep your mind on continuation versus change.

Pr0Crast's Sim trade provides an excellent segue into what I hoped to discuss this evening -

falling into the clutches of the next lower (or beyond) resolution level and not making it back.

Attached, I have shown two different Gaussian formations - one much larger than the other in an

effort to assist you in determining:

"How Large is the Forest?"

First some reminders. When you find yourself in a Point Three channel, you need to know whichcolor bars dominate. It seems simply enough, yet too often we 'forget' which side controls the

day at this point in time. Note the first highlighted area of the attached chart. We begin where

Price breaks through the 'sea' green up channel (left side of chart) providing increasing volume as

Price heads lower. Good so far. As we approach Point Two, we see a black volume and Price

Bar. Uh oh? Is it a flaw? Is it an FTT? Is it a WTF? We tense up and wonder if the trend has

ended because we forget Price is about to do (or more accurately going to attempt to do) exactly

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as we should expect - retrace back and form a Point Three. In this example, Price never makes it

 back to the right side trend line. In fact, price heads even lower on the next bar. Only later does

 price actually make it to the right side. Note the black volume bars - they are decreasing (just as

expected). Price even helps us out by instantly reversing as it formed a Point Three - heading

lower quite quickly - and showing increasing red volume (again, as expected) all the way down.

 No need to worry about mysterious black bars within this Forest. It's simply Price doing (or

attempting to do) what it does all the time - attempt to retrace to form a Point Three.

The above red Point Three

Down Channel formed the

Final Leg of our 'Kelly' Green

Point Three (Big Red Circle).

From there, we see (first)

decreasing black (as

expected), and then in onelarge bar, we traverse the

entire channel for the break

out. While certainly

unexpected, we to receive

increasing black volume

every step of the way - all the

way, to the top.

 Now, here is where it starts to

get a bit messy. In the thirdhighlighted area we have a

Point Three red Downtrend

once again (Medium Red

Circles). If you watch the red

volume bars within the

highlighted areas, you see

exactly what we would

expect, decreasing red volume, for our retrace. However, these increasing black volume bars

often confuse us and make us wonder, "Did we do the right thing here?"

Again, Price is doing nothing more than what we would expect. Price is attempting to retrace

through this channel. Fails. Continues on, and attempts the process once again. On A Tree Try

level, we have FTT to FBO over and over again. When you find yourself confused as to direction

(such as in this case here) ask yourself, "What is my context?" Down channel? Retrace? Of a Big

Kelly Green Forest? Oh well then, I have nothing to worry about until I see a Point Three

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(opposite direction) or an FTT. IF you do not understand the size of the Forest in which you find

yourself operating, you will freak out, lose your cool or just plain exit out of frustration.

After we hit Bottom, the blue arrow takes us back up to the top where we repeat the process

when encountering an FTT.

However, just so you understand about the size of the Forest. Note the Brown Arrows among the

Gaussians. This Very large Kelly green Forest shows us how we go from Retrace to Reversal

(small red circle in volume pane) over an hour and 15 minute period of time. This is important to

note due to what happened just before the last highlighted area. Had you forgotten to note the

decreasing black volume, you may have seen the price formation as a Point Three Uptrend

(14:30 - 15:05) and found yourself on the wrong side of the market.

Had you drawn in that formation (See dotted pink lines), the bar just before the Point Three of

the Down Channel would have ben your FTT. Now decreasing black volume would have toldyou in advance of the FTT (pink circled) that this simply wasn't right providing you ample

opportunity to reverse and catch the express train lower. Note again how over the 'big picture' we

see decreasing to increasing red volume - just as we see it on a smaller scale.

Always know your context (How large a Forest in which you currently find yourself operating)

and avoid a very common error - ending up on the wrong side of the market.

- Spydertrader

The elephant in the room

PointOne: I've mentioned this to Spyder already:

The elephant in the room is: how will you perform when real money is on the line. The

detractors focus on this while we are learning; they have a point although they are also normally

very close minded, damaged and negative (for whatever reason).

I'm suggesting a rationed use of real money or paper trading (for fun) say once or twice a week

for everyone. If you lose 2 points - stop. If you have 2 points profit going into a FTT then

reverse. Wash as often as you like. Something like that. See how you do, how your heart rate and

 breathing responds etc. Then do debriefs and real time monitoring, return to calm. Eventually

you should find this calm monitoring state when real money is on the line.

For me I can ace the paper trading all day, I mean it is ridiculous. Then I open my account and I

sometimes freeze when I see the FTT (the detractors will jump on me now - I don't care).

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I wait for just a little more confirmation - it's real money you see. Then it moves as anticipated

and my emotions get inflamed (a little) and if I don't chase this move I'm off balance for the next

one (probably counter trend and more risky to boot). I've got FTTs marked on my Nikkei chart

as I type this that I did not trade this morning: 270 points missed (conservatively) and its only 90

minutes into the session. Maybe I need to decide more clearly if I am just monitoring (MA) or

trading (MADA) for the day (apologies for thinking out loud).

I don't want to get to October and not have more experience in the line of fire.

Without detracting from Spyder's very well structured and thought out syllabus, does anyone else

think this is a good idea? I know we are all free to do whatever we want!

Spyder: Some may chose to view the following post as rude or negative. It is my hope, that you

will see it for what it really is - a frank assessment of where many find themselves. Please read

the following words a few times before responding, and allow my thoughts to sink in an effort to

make sure you received the correct message.

While everyone here is an adult, and welcome to choose their own path, I wanted to remind

everyone of my initial desire to take two full months per syllabus topic to give everyone enough

time to develop the skills necessary when this thread first began. Back then, few would have

understood such a rationale. After all what could possibly take two full months to learn?

Over the last two days, I have seen many people make numerous errors indicating they have not

 progressed nearly as far as they believed. The rationale behind the errors ranged from theridiculously absurd to the enlightened. Baggage from past attempts at profitability, bad habits

and failed efforts to focus on mastering the fundamentals have infected the subconscious of

many participants. While some here have progressed far enough to warrant Sim, or even real

dollar trading, many have not.

I do not believe the elephant in the room is how people will do when they are ready to trade. I

 believe the elephant in the room resides further back down the path - well in advance of the time

when real or sim trading begins. The elephant resides in the area of basic fundamentals far

removed from placing trades. Drawing channels correctly, focusing on Gaussians, monitoring for

continuation vs change: these are the areas where effort needs to be applied. If one cannot mastereach of these areas now, no amount of SIM trading is going to push you into profitability.

I encourage everyone to take stock of their own efforts. Take a long hard look in the mirror and

determine where the difficulty resides. Be honest with yourself  and find the answers needed to

move you forward. In my experience, when learning a new concept, obstacles develop from one

(or more) of three basic areas:

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1. The Instructor

2. The Material

3. The Student

If you feel I (or anyone else who offered assistance) hasn't provided the material with enough

clarity, speak up. If you feel the difficulty of the material itself falls beyond your understanding,

speak up, so that someone can provide additional clarity.

If you find no problems with the first two, then perhaps its time to look at this from a different

 point of view (a different mindset or vantage point). On Tuesday, following the basic Forest

Level guidelines netted you 39 points as price failed to breach a right side trend line for over 5

hours. If you did not 'see' this develop, if you did not SIM Trade it, If you did not place real

dollars into it, then the bridge you need to cross exists way before SIM trading.

The elephant in the room you need to deal with is you.

For those who have already progressed far enough to know (and you know who you are) where

you reside on the learning curve, you don't need anyone's permission. You know where you need

to go to focus, and you know when the time is right to move forward. For the rest of those

following along, cross the bridge in front of you, before worrying about the one several miles

down the road.

Again, I hope all receive this missive in the spirit intended. As always, Good trading to you all.

- Spydertrader

Ivo: If you are not sure you cannot perform the same (that is: follow the same rules) then you're

not ready to use real money or trading too big because unconsciously you're not convinced the

method works if you follow the rules.

“If you lose 2 points - stop. If you have 2 points profit going into a FTT then reverse.”

IMO that's tampering with the rules and from one thing comes the other. If you stop when you

lose 2 points you will beat yourself up missing a great opportunity after that, then you will takean opportunity that's not really an opportunity, etc etc. My opinion is we have to follow the rules

exactly. If you follow the rules, feel good about it. If you could have made more but you did

follow the rules, feel good about it. If you could have made a profit getting out at some point but

you had a small loss but you did follow the rules, feel good about it. If you made a profit but the

rules told you to get out (you saw a clear FTT but held on to it), feel bad about it.

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If we simtrade, real trade or the size we trade is not part of the rules. For me personally I

honestly think trading one real ES contract at this moment is too much to remain objective so I

 prefer 50 SPY or simtrading. I need some successes first and increase size little by little and I

don't care how small the successes are as long as it is consistent which means no losses on a

daily basis.

Bundlemaker has another religious experience

I’m pretty sure I have received a “religious experience”, although mine has been strung out over

a few days.

This morning’s chart work made something very clear. Some days ago, Aurum suggested that I

was predicting. I swore I wasn’t. Yet, a deeper part of me knew I was. This morning an epiphany

occurred: I recognized PREDICTING behavior WHILE I WAS PREDICTING.

I believe once you feel what that’s like in your body, you will recognize it forever. Now, how do

you go about recognizing it? There are probably as many ways as there are humans, but this was

my process...

First, I needed to do EXACTLY as Spyder instructed, NO modifications whatsoever. This itself

needs some time and patience to implement, as one’s ego certainly will try to combat this.

Second, just try to notice when fear, doubt, frustration, or the like; comes into your reality. Those

emotions are clear, unambiguous signals that you ARE predicting. Period. No matter what you

think is going on. Think about it, and you’ll realize this HAS to be true by definition.

To stop predicting is almost impossible, UNLESS you first notice you’re doing it. Then it’s easy.

Very few people have been raised to notice their emotions, really notice them, in real time and

acknowledge they are there. If this sounds too eastern for you, I’m sorry. I’ve crossed the bridge,

 been where it hurts, and I know the path to comfort. It’s in the noticing.

Once you notice, you do just one thing: get off the single data element you were stuck on! I

 promise you, if you were feeling those emotions I mentioned, you were stuck on a single data

element. Jack talks about repeating these four steps: Monitor – Analyze – Decide – Act. I’ve

heard him say it until I got nauseaus. Now I get why you do this. It keeps you out of prediction.

So, the sequence I’m suggesting is: notice negative emotions…. Get off single data element to

full data set…. Analyze by asking yourself what should be next based on the “now” data set….

Is that happening?..... rinse and repeat.

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Jack: Frame this.

The emotions of data sets and the routine using NOW are: support, comfort and confidence.

Bob (bundlemaker) is on the mark. The CW emotion set appears from incomplete sets and sub

looping with single data elements.

When you depart from observing the taking of the data set, you now longer have the support of

your belief; you lose the comfort of knowing how to know; and you no longer make each pass of

the routine a building on success which is where your confidence comes from.

Frame this post of Bob's. 

Ivo on using the RTL

Mmm. Well if price crosses RTL by 2 or 3 ticks we should get out (if we didn't get out earlier

already for example if we did spot the FTT). I prefer to actually set the stoploss automatically 2

or 3 ticks away from the trendline. Then I move it every 5 minutes depending on the slope of the

trendline. It stops me from waiting and waiting longer to see if price will go back or to get out 1

tick better etc etc. (all these human things that usually get us in trouble..)

Also Jack mentioned using the RTL for stoploss but I recall he calculates the average nr of ticks

of the spikes of that day and then draw another trendline on the right (or left, depending if you're

long or short) the number of average that you found away from RTL. Pls correct me if I am

wrong.

One Aha moment recently I had is that you HAVE to get out when RTL is broken because

something is going on. The forest is not as anticipated and you have to avoid loss and wait and

let the market tell you what's going on preferably from an objective position (= no position).

Mak: Really awesome post. This is so exciting to see these type of posts of how folks are

getting it! As for Jack and his spike offset, I understand why he does it. Part of it has to do with

having some wiggle room in the trendline itself. The other is matter of possibility. Take for

example, what if you saw that there's has never been a 5M bar with 15 points of volatility and

you wanted to incorporate this fact. Well would you could do is that at the point of entry, you

can set a stop that is 15 points away. By doing this, what you fully expect is that within the next

5M, you do not expect to get stopped out. So for Jack and a few others, it's an anti hyper thing

 but more importantly, it is a characteristic of the actual instrument you are trading. This is the

whole point of letting the markets do the telling instead of traders doing the predicting. The

spikes on a given chart are the extreme movements. On a psychological level, spikes can be very

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good at shaking people out of a trade that they may have just put on. Given this knowledge, if

you don't want to be shaken out by spikes, then it makes sense to find the extreme spikes and

 place your stops outside of these extreme so that you don't get shaken out of what is usually a

 perfectly good trade... This the point of Jack's stop offsets. You are placing yourself to be in a

 position not to be shaken out of the assets naturally extreme spikes... If your offset got violated,

then chances are as you have said, that something is definitely different...

Spyder on the psychological effect of having money on the line

Does the market know you traded real money vs SIM? Of course it doesn't. Only you do.

Altering your decisions based on having real money in the market is a direct cause of focusing

on your P & L or entry / exit points. Stay focused on the market and concern yourself with

 proper execution. When you do, you'll notice nothing changes.

The psychological aspects of having real money on the line only gain importance when the

trader places emphasis on it. Scientific studies have shown the brain cannot tell the difference

when an olympic athlete 'visualizes' performing at their sport compared to actually participating

in the sport. The same synapses fire off. Don't allow fear and greed to enter the equation, and you

can avoid most of the self created hurdles other traders face.

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OTHER  

Bundlemaker learns from his mistakes

With all due apologies to those who hate long posts…I tried to make it shorter but couldn’t.

I have received many thankyou’s for the channels video, and I am appreciative. A number of

 pm’s asked me questions like “how long did it take for you to trade this method?” I am currently

LEARNING this method, not trading it. There is a HUGE difference between reading about

something, learning it, doing it and finally mastering it. I’m telling you all this as a precursor for

a very important lesson I received today.

I have been drawing channels close to daily for 3 months now, with time off for bad behavior,

LOL. I thought, reasonably, that if I can do such a convincing job on creating a video that

teaches this stuff I should AT LEAST be able to sim trade some forest level FTT’s. I took twotrades that failed and missed the first good trade of the day to boot. I did my damnedest to prove

to Spyder that I did it right and something was missing from my understanding of the method. I

was as convinced as dirt that I was doing it right.

Then, with what can only be called a ridiculous amount of patience on his part, he lead me to a

 place where I