Monday, March 21, 2005

Voodoo Trading

Trading by targets. Look at this nice Euro move from this night
110 ticks for all who took the trendmove from 1.3350 short

The new Targetcalculator spreadsheet tells you where you are and what moves are probable. (To open you will need Excel)

The sequence is always the same:
Trendmove, countertrendmove, trendmove, countertrendmove...
On the spreadsheet the red arrows describe a downmove, the blue ones an upmove

Of course as we all know, sometimes a countertrend changes it's label and becomes the first leg of the next trend move. And the spreadsheet takes care of that, when you look at the dotted lines.

For this spreadsheet to work you need to know 3 things:
1. How far does a trendmove go in this particular contract.
2. How far does the countertrend move go.
3. Where was the last major Daily High or Low

To determine the trendtarget I started with Antiicc's Euro trendtarget of 110 ticks. I don't know, how he calculates his trendtarget so I thought about a way to determine the Trendtarget. Using the Average True Range of the last 22 days on a daily chart seemed to be as good as anything else. I'm open to other suggestions. Only thing necessary: The target needs to be smaller than the average daily (high - low). The average true range seems to give me numbers which are about 68% of the average daily range and which proved to be a good start, as at least on Euro, when i calculated the spreadsheet it gave me the anticipated 110 ticks.

The countertrendrange is usually (in a somewhat trending market) betwenn 38% and 40% of the trendrange. On Euro I got the 44ticks Anti uses by using 40% of the trendrange of 110 ticks.
Last you take a daily chart and look for the last major high (MSH) or low (MSL). Enter it in the yellow fields on the spreadsheet and you get a row of trendtargets calculated your numbers. Now you confirm one of the trend targets you got with the reality and see, if you can confirm the calculated trendtarget with the chart. If it's hit by a few ticks, best if it is exceeded by a few ticks, before a countertrend started you got it. If not, you might need to adjust the countertrend percentage number, until you got it right. By adjusting the percentage number you flatter or steepen the slope of an uptrend or downtrend.

Enter this trendmove target you can confirm on your trading chart in the yellow Pivot box and you are ready to start Voodoo Trading.

First determine, where you are:

Are you in a trendmove or in a countertrend move.
Then expect support or resistance at the minor S/R levels indicated on the spreadsheet.
A consolidation usually will have 2 levels as range boundaries.
If a trend continues, targets, especially trendtargets will get exceeded.
If countertrend targets are exceeded by 50% then a trendreversal has started.

I will keep you posted when I find more answers.

Relaxed trading

3 comments:

Globetrader said...

Some Targetcalculator explanations I gave david today:

(11:45 AM) david_uk_2005: well croc, basically I think I understand what you do (certainly when it comes to trading the 'counter trend') but where I still am unclear about are the very basics: namely...
(11:45 AM) david_uk_2005: namely how do you establish your trend and ct ranges and secondly how you go about entering any figures into the yellow box in your 'calculator'? Have you got time to perhaps go over that now, or is later better for you (either I can pop off now for 30 mins) or I can do my errand later)
croc_1: no problem right now
croc_1: the trend ranges are calculated from the average daily ranges
(11:46 AM) david_uk_2005: great ... should we start at the method you use to arrive at your 'ranges'?
croc_1: yes
(11:46 AM) david_uk_2005: how do you do that?
croc_1: as I say I use the average true range on daily charts
(11:46 AM) david_uk_2005: how do you arrive at these 'averages'?
(11:47 AM) david_uk_2005: is there an 'easy' way or do you do it manually?
croc_1: I calculate a 22, a 10 and a 5 ATR, now I look at them to see if the ranges are increasing, remaining flat or decreasing
croc_1: david ensing does it for me of course
(11:47 AM) david_uk_2005: how is this actually done by you croc?
croc_1: I have a template for it
(11:48 AM) david_uk_2005: ah ... OK ... I was sure there had to be a way ... just that I had no idea what that way was ...lol
croc_1: which gives me the ATR and then the average ATR which is (ATR22+ATR10+ATR5)/3 which I usually use as my trend target in the spreadsheet
(11:49 AM) david_uk_2005: OK ... so that gives you your 22 / 10 / and 5 ATR averages ...and what aspects are you inspecting (when it comes to 'fine tuning' your ranges)?
(11:49 AM) david_uk_2005: croc, may I ask a question here?
croc_1: yes
(11:51 AM) david_uk_2005: first point is why do you select 22 / 10 / 5 and why not say 20 / 10 / 5 since the latter are exact halves and quarters?
croc_1: because 22 representsd the average trading month, 10 is 2 weeks and 5 is 1 week
(11:53 AM) david_uk_2005: OK ... second question is why7 add them up and then divide by 3 why not compare the averages of each grouping and see whether there are any signs of a new trend developing (something you would first see in the 5 day ATR and then the 10 day ATR? ie could this give you a kind of 'heads up' that your prior range of 110 and 44 say on the Euro was changhikng?
(11:54 AM) david_uk_2005: excuse the several typos lol
croc_1: I have all numbers on the screen, so I actually compare them and do what you suggest. Only when I see no bias I go with the /3 average. Otherwise I might adjust the target to take care of certain developments
(11:56 AM) david_uk_2005: ah ok ... so what then is your next step having established the ATRs as above?
croc_1: the countertrend target is a percentage of the trend target
croc_1: I start with 40% and adjust it as necessary
croc_1: I look at the daily chart and determine the last MSH or MSL (major high or low) depending whether we are in a daily uptrend or downtrend
croc_1: now I put this number into the corresponding yellow box on the spreadsheet
croc_1: and I get the calculated trendtargets from there
(11:59 AM) david_uk_2005: croc, can we take the euro or the Dax as an example pl of these steps?
croc_1: these I confirm on my eg 5000V chart on the euro (which I use as trend chart)
croc_1: on Euro I use 1.3500 as msh
(12:01 PM) david_uk_2005: croc, why 1.3500?
croc_1: btw you might need to download the spreadsheet again, as there was a typo in the formula calculating the trend targets
(12:01 PM) david_uk_2005: rounded from 1.3510 on 11th March?
croc_1: yes, give it a bit of exceed and on 11 march 1.35 futures was 1.35 cash as well
croc_1: so it was a real nice resistance
croc_1: forming a good trend target for the upmove
(12:03 PM) david_uk_2005: croc, OK so that 1.3500 gives you the recent near term High (MSH) but on the globetrader bolg and the calculator link thereon ... what is in the yellow box is 1.3860??
croc_1: so the trend targets on the downswing as calculated were:
croc_1: 1.3434, 1.3363, 1.3292, 1.3221, 1.3150
croc_1: interesting for us is 1.3221
croc_1: which I put into the yellow box right of Pivot
(12:04 PM) david_uk_2005: sorry I was looking at the hsi!!!! stupid me
croc_1: here is the link to what I'm talking about
croc_1: http://charts.dacharts.com/2005-03-22/Screen018.png
croc_1: as was obvious for everyone this target 1.3221 got exceeded yesterday
croc_1: by a wide margin
(12:08 PM) david_uk_2005: croc, the figures in your dacharts post differ from the figures I get using the calculator linked from your Blog ... is this because you have since modified your calculaator and if so where is your 'up to date' calculator now?
croc_1: actually we went down below 1.3177
croc_1: I have uploaded the calculator again, just download again using the link in the blog
croc_1: http://www.futures-trader.net/Targetcalculator_Details.xls
croc_1: here is the link
(12:10 PM) david_uk_2005: ok ... let me do that now then ... few moments pl
(12:13 PM) david_uk_2005: croc, I went to the site suggested but got different figures (slightly) to yours ... now I am on your website ... where is this calculator located? I can't seem to see it anywhere?
croc_1: there is no link from my website
croc_1: just download using the link I posted above
croc_1: tested it right now and I get the same spreadsheet I have locally here
(12:18 PM) david_uk_2005: yes croc, I get it on this computer (your figures as posted on Dacharts) but for some reason not on my other copmputer ... but let me sort that out later ... can we perhaps proceed?
croc_1: ok
croc_1: on Euro I use as trend target 115 ticks or 0.0115
croc_1: I have entered the 1.35 MSH
(12:19 PM) david_uk_2005: yes
croc_1: and now I look for the correct countertrend target
croc_1: I start with 40% of the trend target
croc_1: and then I try to confirm the calculated trend targets with reality on a 5000V chart
croc_1: I don't look at exact hits I want a trend target as well as the countertrend target exceeded by a few ticks
croc_1: if it matches fine, if not I adjust the ct percentage up or down
croc_1: what this actually does is changing the slope of the up- or downtrend
croc_1: trading is one big step forward, a smaller step back, a big step forward, a smaller step back
(12:23 PM) david_uk_2005: croc, on 11th Marc we had our 1.3500 level ... so the next day thereafter what were you doing? Dont we need to follow the train of thought from that point till today?
croc_1: once you have determined the big step length, by adjusting the smaller step length you determin how far you go in a certain number of cycles
croc_1: david that's the exception, it's the trend reversal
(12:24 PM) david_uk_2005: croc, sorry I am now slightly lost
croc_1: maybe you should first understand the trend moves and how they are calculated
(12:24 PM) david_uk_2005: ok
(12:24 PM) david_uk_2005: lets try that
croc_1: I have plugged in the 1.3231 pivot number
croc_1: I know we are in a downtrend
croc_1: so I would expect once 1.3221 get's hit a countertrend move to start to 1.3265
croc_1: that's the red arrow up
croc_1: from there it goes down to 1.3150
croc_1: to the next trend target
(12:30 PM) david_uk_2005: croc, I understand (lower highs and lower lows) on the 5000 vol chart that we are in a downtrend ... but where did you get the 1.3221 figure from?
(12:30 PM) david_uk_2005: as the pivot??
croc_1: look to the right the colum swith 1.35 at the top
croc_1: it shows 1.3221 as trend target
(12:31 PM) david_uk_2005: let me check pl a moment
croc_1: so this is a calculated trendtarget
croc_1: I know from yesterdays trading that 1.3220 was a point where a lot of trading took place
croc_1: right now 1.3221 acted as resistance
(12:32 PM) david_uk_2005: croc, you are talking about the figures listed in your Excel column 'V'?
croc_1: yes labelled daily MSH
(12:33 PM) david_uk_2005: right ... with you now
(12:34 PM) david_uk_2005: croc, so OK I see now why you have put 1.3221 into the yellow 'pivot' box in your calculator ... so now what do you look for?
croc_1: yesterday I would have looked for a Countertrend to start around this number and go to 1.3265
croc_1: same what I did today with DAX when I told you about the trend target of 4306 and the countertrend target of 4323 afterwards
croc_1: but yesterday we got a big trend exceed
(12:37 PM) david_uk_2005: croc, but since we are in a 'downtrend' are you looking for 1.l3150 as a target?
(12:37 PM) david_uk_2005: 1.3150 target today?
croc_1: so now on Euro we need to wait, whether the old countertrend target will still get taken out and the downtrend continues afterwards to 1.3150 bringing Euro back in the old range or if we got a range shift
croc_1: might also just go down to 1.3150 and from there it continues as usual with a countertrend to 1.3194
croc_1: I currently use the levels seen in the spreadsheet in the box to the right of the Pivot as support or resistance numbers for shorter scalp opportunities
(12:39 PM) david_uk_2005: croc, so in short you use your diagram and price levels as a kind of 'route map' ... the euro may or may not 'oblige' but those are the kinds of trend and ct targets ... correct?
croc_1: as we have FED day today this might be the best course of action today
croc_1: absolutly correct
croc_1: I match reality against the map. Sometimes the map has to be redrawn
croc_1: but usually it tells me where I am and what to expect next
(12:40 PM) david_uk_2005: which figures for support or resistance croc? Your Daily MSH (col V in your Excel sheet)?
croc_1: let's look at a possible trend reversal
croc_1: no the numbers in the D14 to I22 box
croc_1: with targets at J12 or J 24 to the up and downside
(12:41 PM) david_uk_2005: OK ... understood now which are your scalping supp and res figures
croc_1: if 1.3292 is hit today we have changed to an uptrend, if 1.3150 is hit the downtrend continues
(12:42 PM) Coop03: well Croc you would not have learnt all of that in Woodies room LOL
croc_1: S/R levels I use are 1.3265, 1.3243, 1.3221, 1.3199, 1.3177
croc_1: Fitzy no obviously not
(12:43 PM) Coop03: hehe
croc_1: for a trend reversal
(12:43 PM) david_uk_2005: they are the counter trend figures arrived from the currently chosen pivot level of 1.3221 and you are making no biased assumptions as to whether we are headed upwards or downwards ... you have merely highlighted 'crunch' l;evels should we get to either of those levels? Correct?
(12:44 PM) Coop03: i have supp at 3205 upwards to 3225
croc_1: yes
croc_1: I ewatch the chart to tell me whether a calculated level will work as S/R
(12:44 PM) david_uk_2005: Coop03, are you Fitzy?
croc_1: like my earlier trade when 1.3199 got taken out
croc_1: went long 3200 for 12 ticks
croc_1: I missed the reentry as we started this presentation, but it tells me the support 1.3199 is real
croc_1: which means the map is fine sofar
(12:47 PM) david_uk_2005: croc, this is all very interesating especially since I now think I have a clearer understanding of what you are doing and how you use your amazing calculator ... I shall try and watch it all with a lot more interest and maybe continue this kind of discussion another time ... but thanks a million croc for your patience and clear explanations

Globetrader said...

The Spreadsheet got adjusted.
Now you can enter either a TrendTarget or a Countertrendtarget and let the Spreadsheet calculate the further targets from these numbers.
Please make sure you have just 1 number in the 3 colored boxes.

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