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Volume 4:Stretch & SqueezeApril 2007

Spydertrader’s

Jack Hershey FuturesTrading JournalAs compiled by

Pr0crast

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T ABLE OF C ONTENTS Editor’s Note ............................................................................................................................... 1

Stretch & Squeeze ....................................................................................................................... 1

Spyder’s introduction .............................................................................................................. 1 Bundlemaker on setting up STR/SQU in Ensign .................................................................... 5

Bearbelly on getting STR/SQU set up for Quotetracker ......................................................... 7

DKM on getting a STR/SQU indicator working in Esignal .................................................... 7

Audkid1 on getting a STR/SQU indicator working in Tradestation ....................................... 8

Spooz posts a YM snippet ....................................................................................................... 9

Spyder on handling confusing low-volume periods .............................................................. 10

Ezzy on ensuring that Qcharts STR/SQU is running on time ............................................... 10

Spyder on sufficiency ............................................................................................................ 11

Spyder reiterates that STR/SQU is not an “always on” indicator ......................................... 12

Mak on eSignal’s limitations ................................................................................................. 12

Spyder answers a bunch of questions .................................................................................... 13

Excerpt from Channels for Building Wealth by Jack Hershey .............................................. 15

Bundlemaker on ideal FTT sequences ................................................................................... 15

On the uselessness of historically tracking STR/SQU .......................................................... 16

Mak on nailing the basics ...................................................................................................... 16

Some moral support from bundlemaker ................................................................................ 17

Ezzy on waiting for STR/SQU to synch ................................................................................ 17

Koamana posts his QC workspace for STR/SQU ................................................................. 18

Bundle notes a helpful tip from Spyder regarding execution ................................................ 18

Bearbelly on what kind of progress one should be making before adding tools ................... 18

Ivo’s AHA moment regarding FTT volume .......................................................................... 19

Help with getting mak’s spreadsheet to work ....................................................................... 19 PointOne’s Quiz .................................................................................................................... 20

Spyder posts a STR/SQU video ............................................................................................ 24

Spyder answers a question on what harmonics are ............................................................... 24

Spyder on washes and taking heat ......................................................................................... 24

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Bundlemaker on internal proof .............................................................................................. 25

Spydertrader makes some clarifications on STR/SQU .......................................................... 26

Spyder on “quick pops” and “sticky moves” ......................................................................... 27

Spyder on continuation, change, and Gaussians .................................................................... 27

Bundlemaker and Spyder have an exchange ......................................................................... 28

Spydertrader on sufficient data sets and intrabar tools .......................................................... 31

Nkhoi posts a tool to find faster qcharts servers .................................................................... 31

Spydertrader on trading at market open and using DOM ...................................................... 32

Spydertrader on High Volatility Stalls (HVS) ....................................................................... 33

Spyder answers Bearbelly’s STR/SQU question................................................................... 35

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EDITOR ’S NOTE

If you wish to read the April section of the journal on Elitetrader in its entirety, it can be accessedat this link:

http://tinyurl.com/3bmhzl

STRETCH & SQUEEZE

Spyder’s introduction

With the arrival of April (and oddly enough, April Fool's day), we move to the next portion ofour syllabus (http://tinyurl.com/3ccaqt) - Stretch / Squeeze.

What is Stretch / Squeeze (STR/SQU), and how does it work? Why does STR/SQU create adangerous situation for those individuals who choose not to use it correctly? How does onecalculate STR/SQU?

To understand STR/SQU, one must first understand how the futures and cash markets interact. Ina general sense, STR/SQU seeks to provide a 'signal for change' based on fair value (http://tinyurl.com/oylwu) in relation to the premium (http://tinyurl.com/38fp45). For Jack'sexplanation of STR/SQU, see this post (http://tinyurl.com/2pzz9k). For a detailed discussion

from last year regarding STR/SQU, review this discussion (http://tinyurl.com/37c9hc).

STR/SQU creates a dangerous situation for a trader who fails to use it correctly because doing so places the trader on the wrong side of the market. As I discussed in this post (http://tinyurl.com/2rwq6v), a trader on the correct Resolution Level only monitors change atcertain 'Action Points' throughout the trading day. Just as we have seen with all other tools, wealso need to use STR/SQU only at those same 'action points.' In other words, using STR/SQU atthe incorrect time can cause negative results.

To calculate the STR/SQU we use the following formula:

((YM07M -INDU) -'offset')

Several methods exist for calculating the 'offset' value. Some have chosen to use the 'premium'value from indexarb.com , while others, choose to simply use the offset created by the difference

between the YM and the INDU to 'zero out' the formula. In this fashion, one can chart theSTR/SQU value over time (using a one minute chart of Histogram design). Mak has used a third

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By example, if a trader had just entered short, a 'Squeeze' signal (below -2) on STR/SQU provides continuation . However, had the same trader entered long, the same 'Squeeze' signal(below -2) on STR/SQU, provides a signal for change . Keep in mind, we use STR/SQU only onour 'action points' as determined by our individual Resolution Level.

To monitor STR/SQU manually, feel free to use this log file (http://tinyurl.com/36yh6r).

O.K. So where do we go from here? Spend some time monitoring STR/SQU through the day.Learn how it can provide two different signals within the same bar during periods of HighVolatility . Note also, how such a fine level monitoring (Bug Level) currently sits far beyond ourcurrent focus. Take some notes to 'see' how STR/SQU acts around FTT's, Point Threes and SpikeBars. In other words, spend some time learning this new tool before working it into a regular

position within your monitoring paradigm.

Lastly, If a trader has not yet spent the appropriate time monitoring the YM and the ES, or if atrader hasn't yet mastered PRV Volume, Price Channels and Gaussians, then one should not addSTR/SQU until completing the previously mentioned tasks - and practiced to an appropriatelevel of proficiency.

I hope you all find the above information useful.

- Spydertrader

Spyder vs. Hypo Episode 4981786805

Quote from hypostomus: Permit me a comment, as I once implemented this idea in NQ. The fundamental problem isthat premium rises as price rises, and premium falls as price falls, all very slowly.

1. Your assertion above fails to account for several variables - one of which is when the cash andfutures invert. 2. The temporary changes in premium value provide superior signals during

periods of odd harmonics (See Jack Hershey, Grob109, Bubba7). 3. We seek to monitor thetemporary differences which materialize from time to time, and not every wiggle, head-fakeand / or short term retrace (at this point in the learning process).

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Quote from hypostomus: Therefore your approach of periodically adjusting the offset is weak at best, and at worstmasks the more subtle changes of premium on a faster scale that you are looking for.

Adjusting the offset from time to time places the formula back at the 'zero' line when signals become skewed in one direction or another. Adjusting does not mask subtle changes. Moreimportantly, adjusting the 'offset' (when needed), prevents the development of 'false' signals.

Quote from hypostomus: Ultimately I found the whole exercise to be a waste of time, as all it did was reinforce whatyou can already see happening in price and volume.

Perhaps, we could agree to allow others to determine their own value, rather than, have someoneof dubious credibility proclaim the entire exercise 'a complete waste of time' each time Iintroduce a new monitoring tool? After all, you have gone on record as saying your effortsamount to nothing more than dissuading others from learning what you so often already use.

Quote from hypostomus: Used alone, it is an absolute disaster, as it will shake you out of a run that still has legs.

Let's try 'reading for comprehension', shall we? Please link to the post, sentence, phrase or wordwhich indicated in your mind where I recommended 'using it alone.'

Quote from Spydertrader: STR/SQU creates a dangerous situation for a trader who fails to use it correctly becausedoing so places the trader on the wrong side of the market. As I discussed in this post , atrader on the correct Resolution Level only monitors change at certain 'Action Points'throughout the trading day. Just as we have seen with all other tools, we also need to useSTR/SQU only at those same 'action points.' In other words, using STR/SQU at theincorrect time can cause negative results.

I hope you find the above clarification useful.

- Spydertrader

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Audkid1 on getting a STR/SQU indicator working in Tradestation

Quote from ralphbass: Does anyone have the STR/SQU set up in TradeStation? Would you share your eld and

workspace?

As I've had a few requests here is the code in a text format. You should be able to copy it directlyinto t-station as a new indicator.

You will need to set up a chart with @YM as data 1and $INDU as data 2. You can then make the priceinvisible if you like so that all you have left is theindicator. (symbol format, style tab, check

box"make price data invisible") Go to format

indicator and put the offset amount into (input tab,value) then go to style tab and set STRSQZ tohistogram and plot 2 thru 4 to line. then set thecolors to your liking and under the scale tab put theindicator in subgraph 2. Then shrink subgraph 1down to nothing in the chart window. That shoulddo it.

input: offset (0);var: Spread (0), STRSQZ (0);

Spread = Close data1 - Close data2;STRSQZ = Spread - offset;

Plot1 (STRSQZ, "STRSQZ");

If Plot1 > 2 then setplotcolor (1, yellow);If Plot1 < -2 then setplotcolor (1, cyan);

plot2 (0) ; plot3 (2); plot4 (-2);setplotcolor (2, darkblue);setplotcolor (3, white);setplotcolor (4, white);

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Spyder on handling confusing low-volume periods

Anytime you find things confusing, head to the sidelines until you can figure out the 'right' sideof the market. If you have reversed a few times before having the realization the market hadentered into an HVS, go back to determine which mode the market signaled prior to the

confusion, locate a point where re-entry makes sense, and continue onward. Once we add theDOM and tic charts later in the year, trading within the HVS (or any lateral of sufficient range)

becomes much easier.

Quote from ivob:

I also have a question related to this. I notice when there's more lateral movement the 1-2-3setups come faster after eachother than when there's more direction. Is this something youcan confirm?

In order to capture the smaller, shorter trends within a market lateral, one would need to movedown into finer levels of resolution. As such, change occurs on a more rapid pace. Yourobservations with respect to today's market action mirror the same activity occurring normally ona much faster fractal.

- Spydertrader

Ezzy on ensuring that Qcharts STR/SQU is running on time

Also wanted to mention for Qchart users to watch their sqz/str charts and make sure they arerunning on time. Because the INDU opens after the YM, some might experience a problem withthe chart running behind time and not reading properly if you start Qcharts before the INDUopens at 9:30.

If this happens there are several things that can help:Close and Reload the chartChange time frame and then backClicking the "all session" box

One of these steps should reset the bars so the current ones are compared. Also leave a space on both sides of the "-" in front of the premium as some versions have issues with that.

Regards – EZ

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Spyder on sufficiency

Remember, sufficient data sets means obtaining the data needed to differentiate betweencontinuation and change . If the sufficient data sets needed can be observed using ES or YM,then a trader need not continue to STR/SQU at that point in time. The goal of adding tools as we

continue through the syllabus is to provide an opportunity to catch the change signal sooner inthe bar while remaining on the correct Resolution Level for monitoring . In other words, wewant to remain on the Forest or Tree Level for monitoring, but we use tools that can provide theopportunity to 'see' the change signal sooner in the bar. We do not want to use the finer tools tocatch every signal for change throughout the day - only those occurring at our individual 'ActionPoints.' When a trader masters their current Resolution level for monitoring using all the toolsavailable (even those tools not yet discussed), then the time may be appropriate to move to thenext level for monitoring and thereby increasing the number of signals received and trades taken.

By example, Forest Level Resolution Traders look for Point Three's and Breaks of the RightTrend Line. The only time a Forest Level Resolution Trader needs to use any tool (PRV,

Gaussians, YM, STR/SQU, DOM, T&S, Tic Charts) is at the right side trend line. As long as price remains within the channel, the Forest Level Resolution trader need not care whatever elseis going on. Once price approaches the right trend line, The Forest Level trader thinks, "What doI need for continuation, and What do I need For Change?"

Using one specific example of how the mental process needs to work ....

If an uptrend, then,

Increasing Black ES Volume with Increasing ES Price (on a PRV basis) = continuationIncreasing Black YM Volume with Increasing YM Price = continuation

STR/SQU > +2 = continuation

Increasing Red ES Volume with Increasing ES Price (on a PRV basis) = changeIncreasing Red YM Volume with Increasing YM Price = changeSTR/SQU < -2 = change

The trader then thinks, "O.K., I know what I need to see, now what do I see?"

The trader sees increasing PRV Volume with STR/SQU > +2

This sufficient data set says continuation , so the trader mentally moves to the 'Action Step'

which changes based on 'context.'

Is the trader already long in the uptrend? Then Continuation means hold .

Is the trader short in the uptrend? Then, continuation means reverse .

Is the trader sidelined? Then, continuation means enter long.

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As you can see, the action required of the trader at any point in time changes based on thecontext . However, the market's mode (continuation or change) remains the same irrespective ofcontext.

Some, may recall my warnings over attempting to perform brain surgery while using sledge

hammers and pick axes. Previously, traders attempted to trade at resolution levels for which theydid not yet have the tools. While STR/SQU definitely holds no resemblance to a pick axe or asledge hammer, it isn't a scalpel either. As a result, I recommend using STR /SQU in a mannermore closely correlated to each individual's Resolution Level Monitoring, rather than, a standalone signal by which we look to take every wiggle, head-fake, and pop.

I apologize for the length of this post, but hope many find the information useful.

- Spydertrader

Spyder reiterates that STR/SQU is not an “always on” indicatorIt isn't an 'always on' indicator. When no information exists to indicate continuation or change onthe other tools (ES, YM, PRV, etc.), we look to the STR/SQU. Because we have not yetintroduced all of the available tools, we may find times when STR/SQU doesn't provide theinformation we need as well. However, STR/SQU does give us the opportunity to have moredata sets available, and as a result, 'see' the signal for change earlier.

Mak on eSignal’s limitations

The problem with esignal is that it does not commit the extremes to memory. I haven't done thecatching up on the thread yet but in gleening through your indicator, it appears as though the

programing does not store the extremes. In a sense, you want to be plotting just like a HLC bar.That means, you always want to be plotting the MAX NEUTRAL OFFSET of the bar/fractal, theMIN NEUTRAL OFFSET of the bar/fractal, and the CURRENT NEUTRAL OFFSET of the

bar/fractal. Your indicator is missing the extremes and appears to plot the NOW which is fine ifyour sweeping is on top of the ball. However, if your sweeping does not efficiently spot the data,you will have missed the datapoint/signal, hence the need to capture MIN/MAX/NOW. Theextremes are important because they tell you how prevalent the upcoming ES move will be...

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Spyder answers a bunch of questions

Quote from ivob:

Do you relate bars to previous bars?

Other than to insure I do not need to 'reset' the 'offset' value, no.

Quote from ivob:

Can conclusions be drawn from str/sq values over several bars or should we just look at the"now"? So is there something like a trend in str/sq?

I look at STR / SQU only in the now.

Quote from ivob:

Also I notice when price volatility increases str/sq bar length also seems to increase.

A very nice thing to notice.

Quote from C99:

First, are we working on the assumption that futs always lead cash, or is there room in theanalysis for the thought that cash sometimes leads?

The futs leads the cash until you see an inversion. On February 27, 2007, we witnessed the firstinversion in a very long time.

Quote from C99:

Second question is when we see values worth noting, does it matter which one, cash or futs,brings us back to neutral?

The value of STR/SQU is what matters, as well as, at what point in time the market generates thevalue.

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Quote from C99:

Is this an important sequence or am I making things up in my head?

Neither, determining who pushed or pulled whom doesn't assist the trader in generating profits.

Quote from C99:

Along the same line as previous question, Often we'll get a str / squ value big enough tospark an index arb. program. Considering an arb program cares not about direction andthrows an equal amount of money at both sides I've previously looked at these times asmoments where the market shows it's hand. One side of the divergence, cash or futs, willhave more conviction than the other and hold its ground. So in the context of this journal isit correct to view the side that stays put as the right side and the side that gives up groundto return str/sq to neutral the weaker side?

Another tool (not yet discussed) provides the signals for "which side is weaker" with respect tothe market and not STR / SQU.

All signals generated with respect to how one 'sees' the market exist within a binary paradigm. Inother words, we see them, or we do not see them. Once a trader views the market generating asignal, one must move immediately to action. Often, other signals create the sufficiency neededto act, and we never arrive at a STR /SQU observation. On other occasions, STR / SQU (and thetools used previously) fails to provide any signal (for either continuation or change), and as aresult, we need to look to additional tools for our sufficient data sets. Currently, we do not yethave the 'Fine Resolution' tools available.

For now, monitor STR / SQU in an effort to learn the behavior at your individual ResolutionLevel Monitoring (Forest or Tree). Note the changes in price which occur at those 'action points'as well. Remember, STR / SQU does not represent the 'silver bullet' of indicators, or the 'end all

be all' of signals. In addition, STR / SQU does not represent a 'confirming' indicator. STR / SQUsimply brings the trader a step closer (with 3 steps left to go) to the point at which change occursin the market.

Think back to when we only had ES Price Channels and Volume Gaussians to determine a signalfor change or continuation. At that time, many individuals posted how they often found itdifficult to 'see' the FTT until a bar or two later. Adding the YM as a leading indicator of achange signal on the ES decreased the time a trader needed to 'see' the signal for change. As aresult, many began to 'see' change occur closer to the actual bar the FTT formed. Now, with theaddition of STR /SQU, we start to have the ability to capture Intra -bar Gaussian shifts. AlthoughSTR / SQU permits the trader an opportunity to see change signals develop within the bar itself,it does not provide pinpoint accuracy.

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17

Some moral support from bundlemaker

Quote from dkm:

I have watched str/squ for several days but it makes no sense at all. It may that esignal

cannot display it as required or it may be just me.

I am taking probably 5 or 6 trades per day. Most of the problems arise frommisinterpretation of the situation. I enter at the wrong moment and run straight into anFTT or I get a break of the RTL shortly after entry at what I believe to be a pt3 or I exitprematurely because prv is not supporting the trade. Frustrating to say the very least.

Man, this sure sounds a lot like where I was roughly 5 or 6 weeks ago. I did two things thattransformed my situation.

First, I followed Spyder's suggestion to NOT annotate an FTT UNTIL the bar AFTER the bar Ithought was an FTT closed. I did this for a good week or so. It quickly became painful to waitthat long, but it sure cured my earliness.

Second, once the above ocurred, the problem that was left was not being on the correct resolutionlevel. Now, mind you, I fought tooth and nail against that idea. I was SURE, ABSOLUTELYPOSITIVE, that I was on the forest level. Ha ha ha, turns out I was jumping all over the place.

The cure for this comes in the form of recording a live chart along with your own commentary.Say a loud what you are thinking. Do this continuously for an hour or two on several occaisions.Then play it back. YOu might be real surprised about where your head is and where it isn't.

I suspect you are right on top of getting it.

Ezzy on waiting for STR/SQU to synch

You can't use the Sqz/Str for a few bars after the open. The futures and cash have to "sync" first.The YM has already been moving by the time the INDU opens. It can take 5 - 20 minutes forthem to catch up and settle into a stable spread. That's why you see Jack mention waiting for the

bar 4 break out.

After sync is when you want to set your offset. So don't read anything into it right after the open.

Regards – EZ

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Koamana posts his QC workspace for STR/SQU

For anyone still having problems setting up a chart for S/S in QCharts, here is a possiblesolution. Attached is a small workspace for QC 5.1 with the necessary stuff. One could open it,save the Layouts on their machine and then open them in their workspace.

http://tinyurl.com/2pakt6

Bundle notes a helpful tip from Spyder regarding execution

One other helpful hint from Spyder was this: upon entry, imagine that you entered at to the tickat the extreme of the FTT. In other words, the best possible entry. Focus on that point instead ofyour actual entry. This tends to help one to stop worrying about every tick back and forth. Somuch of my resolution problem was related to trying to make sense of every tick of movement.

Bearbelly on what kind of progress one should be making before adding tools

I would like some input on the best way to progress here. It is my understanding that you should be making cash money on a fairly consistent basis using only the 5 min ES chart with channels,volume and prv before moving on. You just watch and annotate the 5 min. You then sim the 5min until you get consistent results. You then trade the 5 min realtime. When you become

proficient at this level THEN you move to the next level. Mak burned this into my brain awhile back and it makes a great deal of sense to me. In the chat room there are a number of peoplesimming with everything up to and including stretch and squeeze without ever having made adime and I cant help but feel that this is a huge mistake. Having jumped ahead several times over

the course of this thread I understand where they are coming from but I did realize that I wasmaking a mistake and backed up all the way to the beginning again. More is not neccessarily

better if you are not equipped to handle it. Jack has mentioned that the one minute is way toohyper and I cant help but feel, after watching the 2 min ym for quite awhile that it, too, is toohyper if you are not prepared for it. People are not going to the 2 min ym from the 5 min forclarification but rather watching the 2 min and then going back to the 5 min. Going back to the 5min only has slowed things down considerably for me and I am doing better. I am posting this,not to criticize, lord knows Im one of the worst about jumping ahead, but to try and get others tokeep from burning out before they ever get a grip on this thing.

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Ivo’s AHA moment regarding FTT volume

My AHA moment of the last few days is how price and volume behave after the FTT. After FTTwe need non-dominant volume to confirm the FTT but if price moves sideways and not againstthe dominant trend then expect a point 3 with the trend, not against. Of course you have to check

for +PRV. Even if the trendline is broken I notice this. (providing the lateral continues). So ifyou enter on FTT and you see a lateral thereafter it might be wise to reverse somewhere in thelateral. This is just provisional from observing and no final conclusion. (nothing is final in lifeafter all :-)

The funny thing of these AHA moments is we already know it deep inside or we read it already.But that's something different from really understanding it and acting accordingly.

Help with getting mak’s spreadsheet to work

8833broc: I have 2 pictures that describe the problems that I am having getting Mak'sspreadsheet to work with IB. One problem is the SYMBOL ES_FUT_200606_GLOBEX_USDin cell B3. I am not familiar with this syntax for eminis. I am assuming this will be changed toES_FUT_200704_GLOBEX_USD ( the 04 is for april). Is this correct?

Spyder: ES_FUT_200706_GLOBEX_USD, YM_FUT_200706_ECBOT_USD

Try those. You'll also need to enter your USERID.

PointOne: ES_FUT_200706_GLOBEX_USD, YM_FUT_200706_ECBOT_USD

This also works for any IB ticker:SGXNK_FUT_200706_SGX_JPY

You should have already allowed for DDE and ActiveX under the Configure-API menu onTWS.

I assume you do fill in cell B2 with your userid (the same as the login for TWS) and have just blanked it out for posting here?

Open the worksheet with macros disabled, don't update values, make these changes then save,then reload and let the macros run and allow updates. The first time you load with new tickers

leave it alone for at least 5 minutes to run through one whole bar (the next time you open itshould work fine).

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PointOne’s Quiz

Take a look at the attached Nikkei chart and tell me what happens next. The final bar shown iscomplete and is in very dry-up.

No Str/Squ. [answers on following pages]

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Spydertrader:

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Moz:

R/R: The dominant trend of the forest is down. The break out of the RTL (brown) does notshow a strong B2B relative to the previous volume levels and goes into a lateral with decreasingvolume. This does not represent continuation of a dominant uptrend therefore the latest action islikely a larger retrace creating a new point 3 (down) of the forest as its channel is widened. SoIMO the RTL will be broken and price will resume down.

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PointOne posts the answer: Here is what happened. At the time I thought the market can onlydo one thing next, given the context and sequence.

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Spyder posts a STR/SQU video

http://tinyurl.com/33w7sj (just str/squ demo, no chart or commentary)

Spyder answers a question on what harmonics are

Even Harmonics = Lateral (CCC, HVS, etc.) = ContinuationOdd Harmonics = Spikes (STR / SQU picks these up for you) = Change

Spyder on washes and taking heat

Quote from ivob: You mentioned on washed trades you take a max of 1-2 tick loss (occasionally 3). Does thisalso mean that that's the maximum heat you would take or are there moments when you'redown more and price goes back to your 2-3 ticks and you get out?

No. I do not 'take heat' in the sense most people use the term. When I say I 'take a loss' I mean tosay that price has moved a certain distance before I realise I misread the market. Sometimes, Iexit with a small profit. Other times, I reverse with a break even (wash) trade. Occasionally, Ireverse and take a loss because I wasn't paying close enough attention, or the market moved toofast, or I was just plain too stupid to react quicker. The resulting reversal then provided me the'loss' for that particular trade.

Quote from ivob: For example on downtrend and you are short, if there is no FTT but price does break RTL.So there is just a normal non-dom traverse. You mentioned somewhere in the beginning ofthis thread the procedure is to reverse on point 3 up after this BO (I am not talkingbeginners here, beginners exit on RTL break of course). However, this may imply youcould be down more than 2-3 ticks or am I wrong.

I don't make error's based on P & L. When I make an error, I have failed to read the marketcorrectly for whatever reason. In such a case, I immediately recognize my error and immediately take action to fix the incorrect action I previously made. The distance price has moved before Itake corrective action results from a factor of time. The faster I recognize my error, the morelikely I end up with a small profit or wash trade. The longer it takes for me to recognize myerror, the greater the opportunity for me to experience a loss. Those that have seen me trade liveoften note how quickly I reverse position once I recognize me error. I do not play the game ofthinking, hoping or believing "it will come back." I take immediate action.

I hope the above post provides the clarification you were looking for.

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Bundlemaker on internal proof

I'd like to say a few words beyond simply agreeing with Spyder's comments, as it may well helpothers. Roughly 4-6 weeks ago I felt like I was really starting to get this whole deal. Scratch that,

I was getting it. Several weeks of daily chart work after having put the bigger puzzle piecestogether appeared to be paying off. Not in $$$ and cents but in confidence and knowing I can produce results.

Then, I had a major personal interuption in the form of a move. I didn't look at a chart in at least3 weeks. I started again this Monday. My work didn't look pretty and I wasn't feeling tooconfident. In the past, I would have sank into a semi-depressed state as I would mentally tellmyself how this system or that just didn't work, how I couldn't do it, etc etc.

This time, I handled it differently. I just did it, sans all the internal noise (me talking to myself). Irecovered about 90% of where I was in just 3 days and am ready to progress further.

What's my point? For anyone still on the fence and still wishing to do this, but feel they need proof or whatever, my sincere invitation is to just do it. External proof won't help. You needinternal proof, satisfy yourself that YOU can do it. This is what most who fail lack. THere isonly one way to get internal proof: do it.

Spyder’s original comment: As you no doubt read during the beginning of this Journal,I advise spending a great deal of time observing the market.

As others have advised, you need to focus on learning the methods at this point in time.Concerning yourself over the profitability of others, or focusing on entry and exit points,

provides a recipe for your own failure. I've watched (through your posts) as you haverepeatedly attempted to place the cart far in front of the horse. The systematic processlaid out before you requires a great deal of individual effort to learn. The reason for sucheffort stems from the fact you are learning an entirely different way of looking at themarket and trading. Again, I encourage you to take the time necessary to insure your ownsuccess, and review, practice (and review again if necessary) the key points discussed inthe many pages contained within this Journal.

I am confident other traders will agree with the advice I have given you here.

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Spydertrader makes some clarifications on STR/SQU

Quote from dougcs: Do you consider the extreme values or just the closing value?

I consider all values. You use STR / SQU in the NOW. Whatever the value is when you go toobtain the data is the important value.

Quote from dougcs: When is an appropriate time to use it. In a recent post you mentioned it works at "spikes"and I'm not sure I know what you mean by a "spike".

Check the STR / SQU value near trend lines. See the attached .gif file for examples of 'spike' bars.

Quote from dougcs: In my charting I see +/-2 values on almost every bar so maybe it may be my data source iscausing my confusion.

Anything in between +2 and -2 we consider as 'noise' and observe as 'no signal' given. valuesgreater than +2 and less than - 2 create a signal. The greater the extreme, the larger theanticipated move. In other words, we expect a larger move on a value of +10 than we expect on avalue of +3.

I hope that helps.

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Spyder on “quick pops” and “sticky moves”

Quote from dougcs: Another question, I've noticed sometimes the S/S hits an extreme but only very brieflywhile at other times it dwells for extended (at least it seems that way on a 1 min chart) time.

Does dwell time have any meaning. My observations, limited as they are, show there issome importance if it dwells >2 or

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retrace of a down channel), holding short remains the best course of action at this time. Ianticipate continuation of the short channel once the market reveals the correct down channel.

Let me know how it went.

- Spydertrader

Bundlemaker and Spyder have an exchange

Bundlemaker:

I’m short at this point from the FTT (labeled in blue) of the thin green up pt3 channel.. Therewas no +blk at the RTL, the pt3 channel has broken, and SS registered -5 just before I labeled theFTT.

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Here we are a couple minutes later. Increasing black now, at the prior RTL (based on PRV closeto a minute into the bar). Seems like reversing would be prudent here as for continuation (I wasshort) we needed +red volume right then and there, but didn’t have it…. Until…

Oops. Is this a finer tool issue? A user problem ☺ ? or what? This is a recurring theme for me asI get closer to picking off the actual turns.

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Spydertrader:

1. Add your 20 SMA. Doing so shows why your Point Two turned into an FBO of the Red Down Channel. The 20 SMA often acts exactly like a trend line in wider Price Channels.

2. Where you have marked an FTT is really an HVS (High Volatility Stall). Call it a left to righttraverse, a lateral or Even Harmonics. It all means the same thing - continuation. Since you eitherhave exited off the FBO or reversed off the FBO (depending on experience level), you either aresidelined or short. Continuation would mean wait if sidelined, hold short if short.

3. You have a \/ - B2B Gaussian with no corresponding Point Three or RTL Break Out (circledRed). Remember, you have a red down channel so Red Volume is dominant and black volume isnon-dominant until you leave the red down channel.

4. Intra-bar tools (Str / SQu / DOM, T&S,Tic Charts) can change within the bar

itself first signaling continuation, and thensignaling change or providing multiplechange signals within the same bar. Weoften see multiple change signals withinthe same bar during an HVS.

5. We do not yet have the next tool (DOM)which would have shown a 'wall' whichdid not deteriorate - indicating anotherchange signal.

6. Alternating Red, Black, Red, Black (orBlack Red Black Red) Volume while both colors show decreasing represents an HVS.While the number of bars involved couldrange from 3 to 8 or more, Volume tellsthe tale.

I hope you find the above informationuseful.

- Spydertrader

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Spydertrader on sufficient data sets and intrabar tools

Quote from Vista: Are you saying, that if you were LONG and saw a STR/SQU reading of -10 you would"instantly" reverse to a SHORT position no matter what price was doing? If yes, at what

other levels would this action occur ........ -4, -5, etc. ?

We look for sufficient data set s. As such, we do not make decisions off single data elements. Now, if you alter the question to say, "If Price was sitting on the left trend line of an uptrendwhile you held a long position, and you saw a -10 on STR / SQU would you immediatelyreverse?" The answer would be a resounding, Yes .

Now having said that, Once a trader uses an Intra -bar tool, they must stay with that tool(continue monitoring) until the bar closes. The reason we do this stems from the fact thatmultiple Intra -bar signals (in opposite directions) can occur within a single bar (due to thevolatility you spoke about). In other words, we continue to monitor Intra -bar to make sure noother signals develop prior to the bar close. We then move to bar-to-bar tools (PRV) to makesure we see what we need to see, and finally, we move back to the Coarse Level tools to continueour 'sweep' of the data ("What do I need for continuation and What do I need for change?")

I hope the above paragraphs provide some clarity. Please, let me know if you require additionalclarification.

- Spydertrader

Nkhoi posts a tool to find faster qcharts servers

http://www.qcsoftwarehelp.com/Essential_Tools.htm

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Spydertrader on trading at market open and using DOM

Quote from Bearbelly: I attempted to sct trade on simulator Friday but got discouraged right off the bat as I got

chewed up in that HVS at the open. It appears to me that you might be better off to waitfor the first move of the day and begin trading with the ftt that ends that move. Spyder canyou give any insight on what you are looking for on your first entry of the day?

Jack often recommends waiting until bar 4 of the day before beginning to trade. Waiting allowsthe Futures markets to 'sync' with the cash and affords a trader the opportunity to 'see' the marketas it begins to unfold before taking a position.

As to what I look for at the open, I want to see continuation or change of the previous day'ssentiment, and enter a position accordingly. On most days, we can easily see change (orcontinuation) of the previous day's sentiment (either AH or pre-market) by simply monitoringYM - before the opening bell. However, occasionally, we see where the market hasn't quite madeup its collective mind with respect to continuation or change. On these days, we see the marketopen inside the previous day's final bar (or final several bars). In such a circumstance (whatsome professionals refer to as 'a split open'), I wait for the market to 'break' in one direction orthe other.

On Friday, the market appeared to be saying change from the previous day, and then on bartwo, the market said change again. Once one recognizes the market hasn't created an FTT, butrather an HVS, we (as beginners) needed simply to 'wait' for direction to reveal itself. Moreadvanced level traders would have traded each bar (or even Intra -bar) 'slaloming' back and forthuntil Price exited the lateral. As beginning traders, we want to spend more time observing thantrading. we want to learn from Friday's open how we can handle such an environment in thefuture. We need to make sure we use all the tools available to us and find a sufficient data setwhich allows us to reach a conclusion of continuation or change.

I can say, having the DOM as a tool does assist the trader to 'see' not necessarily the HVS sooner, but rather, the signal for change sooner, and as such, provides the ability to 'slalom' through anHVS. Even if you choose to simply hold through an HVS (as I often do), having the ability to'see' price bounce between two extremes in a single bar (and knowing those extremes in advance)instantly alerts your brain to the fact "a possible lateral is forming here." After you 'see' this

phenomenon unfold enough times, you (and your brain) automatically makes the connectionfrom lateral to HVS to flaw to hold (or for more experienced traders, slalom).

Combine DOM with STR / SQU and Volume which shows decreasing red and black bars, andyou have all the information you need to stay on the right side of the market.

I hope you find the above information useful.

- Spydertrader

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Spydertrader on High Volatility Stalls (HVS)

Since a number of people appeared to have missed the HVS Continuation on Friday, I wanted totake a moment, and hopefully, provide some points of clarification.

As we know, an HVS results from lateral Price movement, or as Jack says, an 'Even Harmonics'situation. We also know (as beginning traders), lateral price movement means continuation requiring the trader to take the following action: Hold . Certainly everyone can understand theconcept of "holding through lateral Price movement." Why then, do we often see such confusionwith respect to the HVS Price formation? Perhaps, the answer resides from confusion over whichdirection Price initially entered the lateral channel.

As discussed previously, we can distinguish an HVS from other Price formations based on theVolume data. We see both decreasing black and decreasing red volume within an HVS (SeeYellow highlighted area of attached chart). Once recognized, a beginning trader simply holds inthe direction of the current trend. Now, that sounds easy enough, but how (in real time) can a

beginning trader determine which direction (long or short) the current trend represents? Theanswer resides in Price.

How Price enters the lateral channel determines how Price exits the lateral channel (unless anoverriding signal for change develops within the lateral channel itself). In other words, If Priceenters the lateral channel long, Price exits the channel long. If Price enters the lateral channelShort, price exits the lateral channel short. In both cases, the lateral channel representscontinuation: ( Hold ).

We see two such examples on the attached chart snippet (pinkish arrows). Example One: At theopen on Friday, we see Price gap down and immediately enter into an HVS. On Bar Four, Price

heads lower as it exits the lateral forming an FTT on bar Five. Example Two: On Bar Eight,Price creates an FBO as it bounces off the 20 SMA, reverses, and heads lower into an HVS. Atthe end of the HVS (Bar 13), Price heads lower breaking out of the lateral channel. Again, thelateral channels represent continuation of the Price Trend in both examples.

Unless the market provides an overriding signal of change (FTT / FBO) within (or at the end of)a lateral channel, the same dynamic operates at, around and within all Lateral Price Channels.

As always, annotating correct Price Channels (which always match Gaussian VolumeFormations) place the trader in the correct mental framework (mindset for lack of a better word)to 'see' the current trend. Note the Brown Down Channel on the chart snippet. This channel

represents a 'steeper' carryover channel (and one I neglected to annotate on my original chart).By annotating this 'steeper' Point Three Channel, we can easily see how Price enters the Lateralfrom the short side as our FBO becomes a Point Three of the down trend. Had we annotatedcorrectly, even if we missed seeing the 10:05 Bar (Bar Eight) as an FBO, everyone can mostcertainly 'see' it is a Point Three Down Channel. Clearly, a long position, in such anenvironment, places the trader on the incorrect side of the market.

In summary, Lateral Channels may represent left to right traverses of both Up and Down

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channels. Determining which trend one needs to follow, and how one arrives at the right side ofthe market, results from careful consideration of Price. Even if one believes they 'see' the marketcorrectly, a trader needs to remain mindful of the possibility something remains amiss. However,if we note the direction Price entered the Lateral Channel, we can anticipate the correct exit.

I hope everyone finds the above information helpful. If anyone needs additional clarification, please let me know.

- Spydertrader

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Spyder answers Bearbelly’s STR/SQU question

Quote from Bearbelly: Where Im having a problem is interpreting extreme stretch as bullish and extreme squeezeas bearish because I thought that beyond a certain point the programs would come in cause

a temporary reversal in the futures to bring them and cash back in line. Comments please.

Program Trading often does unfold exactly as you observe. When such an event occurs as youdescribe, the STR / SQU moves back into the Neutral Zone. Unless the Programs 'over do it' (forlack of a better phrase), and push STR / SQU back across to the opposite extreme, we do not have a signal for change . Since we always follow the rule: "Once we start to monitor Intra -Bar,we stay Intra -Bar - until the current bar closes, we have plenty of time to 'see' if The Programshave pushed too far. However, once the current bar closes, we head back to our normalmonitoring routine. Increasing Volume (based on PRV), Price remaining within the currentTrend Channel, or any of the many other signals we interpret as continuation now hold priority.Some time may pass before we even need to look at STR / SQU again.

Basically, it all depends on how far one wishes to go down into the rabbit hole. For our current purposes, by sticking to the Forest / Tree Level of Resolution, we avoid being sucked into thevortex. Much later in this Journal (sometime in the fall), I'll begin to move the discussiondown into the lower levels of the rabbit hole.

- Spydertrader