[jperl]

Originally Posted by cooter »

Did it not revert back to the mean?

Eventually it did, but would you hang on that long.

[jperl]

Originally Posted by O66 »

wasnt easy today
in the afternoon we had vwap below pvp but price action above. Shorts didnt work.

Yes, today was a day for breakout trades against the skew. We haven't discussed that yet. Coming up next.

[dbntina]

Jerry,

Looking forward to that as I think that will be very enlightening.

Today I saw the first short with the skew on the NQ would have worked.

As it came back up a short at the 1SD and then the VWAP would have been stopped.

Then the skew still existed and if you took 2 new shorts...probably would not have worked out for you...then the rest of the day PVP and VWAP pretty close.

Very interested in knowing how to tell when to abandon trades with the skew and favor trades against skew (breakout)...chart included.

Looking forward to the next thread...Jerry,

Great information,

dbntina

[Dogpile]

let me add something here dbntina. Linda Rashke rule is that 'Retracement trades' (entering on a pullback -- such as shorting at the -1SD level) after the market makes a very large opening gap is very dangerous. Believe me, I learned this the hard way a while back.

when you have a really large gap (like todays) -- this implies a large increase in volatility -- as investors will be very emotional. The dynamics of the morning session are different when you have a big gap and I would always be very careful after a big gap.

my point is that gaps call for a different mindset. I trade nasdaq a lot and can tell you that trading the morning session on NQ can be very tricky as it trades quite differently than ES.. add a monster gap in, and you should expect some serious spikes. trading a retracement with a wide stop is just not a good strategy for that type of environment. The market was trading FAR below recent value and was set-up to make a low and trade up after such a large move. The market was trading at a huge discount to the previous days price already.

[jperl]

Originally Posted by dbntina »

Today I saw the first short with the skew on the NQ would have worked.

As it came back up a short at the 1SD and then the VWAP would have been stopped.

Then the skew still existed and if you took 2 new shorts...probably would not have worked out for you...then the rest of the day PVP and VWAP pretty close.

Very interested in knowing how to tell when to abandon trades with the skew and favor trades against skew (breakout)...chart included.

dbntina

I was going to wait until a later thread to discuss this, but since you brought it up here, dbntina, I will talk about it now. The question is, when price action retraces to the 1st SD or the VWAP which is a signal to pull the trigger, how would you know not to do it?
I use a simple technique due to Larry Pesavento which he calls the "Shapiro Effect". The Shapiro Effect states "If a trade is good now, it will be good in 5 minutes".
Don't take this statement literally, but use it interpretaively. I use it in the following way. Let say you are looking for a short entry on a retrace to the 1st SD or VWAP. The first UP BAR that touches the SD is your signal. Don't pull the trigger yet. Apply the Shapiro Effect. Wait for a down bar that confirms the signal. A confirmed signal would be one that drops below the low of the signal bar. Then pull the trigger.
Look at the attachment. This is the same 2 minute chart of NQ for Aug 10 that you posted dbntina.
At point "a" we get a signal to go short at the 1st SD. Apply the Shapiro
Effect. There is no confirmation of the low on the next bar. Don't pull the trigger. It took 7 bars later to confirm that low, which was below the 2nd SD. I usually don't trade there.
At point "b" (the VWAP) we get a signal to go short. Apply the Shapiro Effect. 2 bars later there is a confirmation of the low of the "b" bar. Pull the trigger short.
At point "c", we get a short signal at the 1st SD. Apply the Shapiro Effect. There is no confirmation of the low. Don't pull the trigger.
At point "d" we get a signal to go short. But there is no confirmation of the low. Don't pull the trigger.

You can see how this works. Applying the Shapiro Effect will keep you out of most bad trades. The downside of course is you might miss some good trades.

[dbntina]

Thanks JPERL makes alot of sense...Shapiro effect combined with the knowledge of when to look for breakouts and avoid what happened today should be very helpful...thanks for the reply!

Dogpile good info as well...you make a good point gaps fill more than they don't and large gaps and large volatility is another cause for caution...good points.

These are wonderful threads Jerry and I am learning alot of good guidelines...thanks for sharing your market wisdom and everyone's comments.

dbntina

[walterw]

Originally Posted by dbntina »

No problem Blu-Ray...will send it tomorrow morning...would like to get some people to test it out...and I can make changes if we need to and get it documented and once we get the bugs out I will post for everyone here...next version I will get the histogram put on and then we are in business...then the following version will have an option to combine multiple days of data as an option...then I am through with this....

dbntina

Hi dbntina, thanks for great contributions here, as you may notice TL is a very diferent forum for the level of collaboration and quality of content... I think we are all priviledged to have Jerry with us... so far all this threads had been evolving wonderfully..

My question regarding to your indicator now including dynamic PVP, when would this be available, would love to try it too ? thanks in advance, Walter.

[dbntina]

Walter,

No problem...the code plotting the actual tick by tick pvp is finished and plots on a minute chart with the VWAP and SD bands like the chart I posted earlier for example.

Blowfish and a few others are testing it out. Blowfish even made some changes to the code that will allow it to run even faster. He made it so it only checks the current tick for a change rather than running through all the arrays every tick...good thinking on his part. Should be very efficient now.

I will forward to you Monday morning unless I head into work this weekend. The code is for TS however, I think Blowfish altered the code to work on Multicharts also.

Cheers,

dbntina