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YMH2, (3, -1) formula, 3x Stretch, profit, 20 January 2012

20 January 2012: Unlike the past couple of trading sessions, the March $5 Dow (YMH2) futures printed, nearly exactly, the (3, -1) formula. The first price move of the Stretch calculation from unchanged reversed at 12553 (12557 = unchanged - Stretch = 12557). This represents the (-1) of (3, -1). Following this counter trend correction, 12553 + 30 + 30 + 30 = 12643 (12668 = high 20 January 2012). Settlement: 12650. 90 x $5 = $450 per contract = +80% basis intra-day $500 margin, ... if you were trailing stops with an OCO LIMIT at 12643. If you weren't, which is entirely a trading discipline conversation, you could have easily made a healthy addition to your trading account. The (3, -1) fade at the Stretch below unchanged produced a strong tradeable probability that risked $25 and projected a price objective of +$450, i.e., 18 : 1 reward : risk ratio.
Hey Hunter,

I feel galactically obtuse about this, but I've tried to get a grasp of actual application on these posts you've shared. And I find myself totally confused. Any trading strategery can be described in a way that is cogent and with clarity ... it's about how it's communicated I believe. Do you have a post that lays out this trading strategery in the way I've alluded to? If so, please provide a link to it if you would.


The Funky Monkey
Just to get a very basic start on this ... mypivots has the ES "stretch" calculated as 3.58 (so I assume it'd be 3.5 ES points). Toby used to typically take a position as a Breakout beyond this price (also taking into account his analysis of what kind of daily bars lead into it, ie. ID, NR4 etc.).

As I understand it so far, you take that opening stretch and multiply it by the fib 1.618 to arrive at another number, in this case the 3.58 stretch X 1.618 = 5.79 ... call it 5.75 ES points.

So, we're looking at the RTH OPEN PRINT +/- 5.75 ES points for an entry point? And that entry would not be a "breakout" trade in the direction of the initial move as Crabel's description provides, but instead a price to enter as a FADE trade in the opposite direction?

To summarize my (mis?)understanding, a position would be entered to fade at the OPEN PRINT on Monday's RTH session +/- 5.75 points ... the 1.618 times the "stretch."

Lemme know if I'm on target here as I've run through over a year's worth of your posts using the search function.

If I'm on target so far, then what would be the initial stoploss ... and secondly, what would be the targeted profit exit price?

I just re-read your assumption of RTH (regular trading hours) and Tony Crable's breakout get long / short strategy.

In reverse order,... I'm fading a price move fron unchanged rather than Tony Crable's strategy of waiting to get long / short at the breakout. If I mis-understood his applications to trade the Stretch, please correct me. Thank you.

Nope, ... I enter into my trades during the A session, never the B session which is where I exit the (-1) of the (3, -1) formula strategy. However, and this is just an example, following a Gravestone (rally failure) candlestick on the daily chart, price rotations tend to roll around 1.618% of the Stretch and 2.618% of the Stretch price rotations with many Stretch rotations within those two. When those few 1.618% of the Stretch rotations start printing between the 2.618% of the Stretch rotations, waiting to fade the 2.618% Stretch rotations is necessary as a risk management tool.

I think that should clear up some of my poor communication skills. If it doesn't please ask.
PM'd ya so as to get into details that I hope can provide a lucid description of what you're posting. Looking forward to having it described, at least the basics, in a way that I (and hopefully others) can understand. It's all about sharing here ... especially in a way that folks can understand. And sometimes it just comes down to rewording and/or re-oredering the explanation of a strategery with the approach of teaching a teenager in a way that he/she can comprehend. Kinda like how newspapers write at the 6th grade level. It's not about dumbing down, but simply the goal of sharing in a way that's understandable by the spectrum of folks and their level of trading from one end to the other, newbie to seasoned expert.
I replied, a few times, to your PM with details, price reversals and strategies for the measuring objectives. I didn't finish high skehwl, and failed Algebra three times. So my lack of communication skills should be relatively easy to decypher. There are other members who have contacted me, ... and I reply to them too.

I don't think the 24 January trading day will print a (3, -1) pattern. That said, I'm trading the 1.618% of the Stretch, 2.618% of the Stretch and 4.25% of the Stretch calculations basis above and below the previous settlement. Oh yeah, and include the Stretch calculation from the previous settlement also. Do this daily as a measuring check list (tool), so that when the (3, -1) formula doesn't ultimately print the price measuring objective, you'll probably have a good tradeable probability if your trailing stops are profitable.

Look at the daily March $5 Dow (YMH2) chart. The 23 January high to low print, 12709 to 12611 was a 98 point decline. 0.618% of that decline is 60 points. From the 12611 low, up to the 12675 (12:46, 12:47 and 12:48PDT) that rally into the last hour was 64 points. This is where prices began to decline into the close and follow through into the next A session is printing as we speak. So now you're looking for follow through lower, because a Fibonacci correction, i.e., those 64 points of the larger sell off from the high to the low, started a correction (approximately the Stretch calculation) going into the close. Got it? Big one down, ... reversed up 2/3 of big one down, and slipped going into the close which projected a little follow through to begin in the immediately following A session.

Now start measuring 2.618% of the Stretch (12675 - 76 = 12599) from that 12675 reversal high. This correlates to unchanged less 1.618% of the Stretch at 12603. I'm looking for larger price swings lower, with a lower close.

Maybe this will help......
Look at the daily March $5 Dow (YMH2) chart. The 23 January high to low print, 12709 to 12611 was a 98 point decline. 0.618% of that decline is 60 points. From the 12611 low, up to the 12675 (12:46, 12:47 and 12:48PDT) last hour high rally was 64 points. This is where prices began to decline into the close and follow through into the next A session is printing as we speak.

Now start measuring 2.618% of the Stretch (12675 - 76 = 12599) from that 12675 reversal high. This correlates to unchanged less 1.618% of the Stretch at 12603. I'm looking for larger price swings lower, with a lower close.

Fading the first move away from unchanged (that's from the previous settlement) is buying if prices decline or selling if the first price move from the previous settlement is up by the Stretch calculation (or 1.618% of the Stretch). Determining if the price level to fade, i.e., sell if price is up, or buy if price moves down first, is identified by watching real time prices on the 1 minute, 5 minuet and 15 minute charts, at the same time. I recommend candlesticks because they interpret investor psychology.

Just keep track of the Stretch calculation, 1.618% of the Stretch calculation, 2.618% of the Stretch calculation, and 4.25% of the Stretch levels below and above the previous settlement, i.e., the previous settlement for the 24 January trading day is the 23 January settlement, i.e., 12654.

The correlating aspect measures the last price rotation of the previous day as prices traded into the B session settlement.

That's it in a nutshell. Easy is right. Simple and straight forward.
[STRETCH CALCULATION (The Stretch for 24 January 2012 is 29).
The Stretch is calculated by taking the 10 period SMA of the absolute difference between the Open and either the High or Low, whichever difference is smaller.

For example, if the Open is 1250, the High is 1258, and the Low is 1240, then we would take the value of 8 for that day because 1258-1250 is 8 which is smaller than 1250-1240 which is 10. We then add together all of these values for the last 10 trading days and divide this by 10 to get the 10 day SMA. This value will then become the Stretch.]
If you have a question, ask.

Hi MM,
That's 1000 x 1000 (1,000,000). I post some of my trades at my home page on Facebook, or on R.p.Callahan's "Pajama Traders" group on Facebook. I trade only the e-mini $5 Dow futures, and look at no other markets, except for entertainment value.

The trade set up is a real time decision. The 23 January A session lower gap open, 12654 to 12633, was a dozen points above (unchanged - Stretch = 12654 - 33 = 12621). So, ... I waited.

At 16:17PDT 22 January 2012, which is the A session for 23 January, I posted a March $5 Dow (YMH2) long at 12628. This long was entered between the two 12619 low prints, i.e., 16:14PDT and 17:55PDT).

Unchanged - Stretch = 12621. The current low is 12619 as of 20:05PDT. 12619 was tested twice and I went long inbetween the two prints.

Price measuring objective basis the (3, -1) formula strategy:
12654 - 33 = 12621
Low + 33 + 33 + 33 = "hopium" rofl.... 12619 + 33 + 33 + 33 = 12718.

Stop Loss strategy: one of the Fibonacci ratios of the Stretch calculation, i.e., 0.618%, 0.382% or 0.236% of the Stretch. Less is good. lol I can trade my way out of a smaller intra-day loss than a large intra-day loss, e.g., if the loss is early in the trading day. After this type of a (stop loss) breakdown I start measuring a further breakdown by the Stretch and then a Stretch to 1.618% of the Stretch bounce after let's say a 2.618% of the Stretch decline from either the previous day's settlement or from unchanged.

Let me clarify that breakdown pattern. If the breakdown occurs, prices will usually drop by the Stretch (and a few more, i.e., one of the lesser Fibonacci ratios of the Stretch), before bouncing close to the breakdown. Violated support must be re-tested before prices continue lower. Right? Right.

Here's where the correlating measurement comes into play. Because the 20 January last minutes declined into the close after a 2.618% rally, start measuring objectives lower from that high, i.e., 12668. And also measure the move from the next A session's unchanged to levels than nearly match. (Like ... a previous session 1.618% Stretch lower would correlate with a Stretch decline from the new A session unchanged.) Got it?

Are you following me? If not reply.

I'm not measuring the Fibonacci ratios of the previous day's price range. But I do pay attention to the previous day's settlement and the pivot point.

My trading acumen, model and focus is intra-day trading the $5 Dow futures with price levels that measure Stretch (and the respective Fibonacci of the Stretch) rotations, as well as the first moves from unchange that lend themselves to the (3, -1) formula.

Did I forget something? I'll go back and look at your questions. I hope this helps.
09:03PDT) January 26, 2012 and the March $5 Dow (YMH2) futures opened at 12694 and 12688 was the previous settlement. 12656 is the low. If you had Limit at 12688 - Stretch = 12654, which is too low for a fill12688 - Stretch = 12654 ... but if you weren't greedy and placed a MIT a few ticks higher, 12660, (12694 - 34 = 12660). The long woud have been the (3, -1) formula. The (3, -1) formula strategy fades that first move and counts three of those Strtch calculations in the opposite direction. The (3) of the (3, -1). Formula did print and YMH2 had move higher 12656 + 34 + 34 + 34 = 12756. Where to count the fad, from the open or the previous settlement is beyond me.