Spydertraders

Jack Hershey Futures

Trading Journal
As compiled by

Pr0crast

Volume 4:
Stretch & Squeeze
April 2007

TABLE OF CONTENTS
Editors Note ............................................................................................................................... 1
Stretch & Squeeze ....................................................................................................................... 1
Spyders 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 eSignals 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
Ivos AHA moment regarding FTT volume .......................................................................... 19
Help with getting maks spreadsheet to work ....................................................................... 19
PointOnes 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

ii

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 Bearbellys STR/SQU question................................................................... 35

iii

EDITORS NOTE
If you wish to read the April section of the journal on Elitetrader in its entirety, it can be accessed
at this link:
http://tinyurl.com/3bmhzl

STRETCH & SQUEEZE

Spyders introduction
With the arrival of April (and oddly enough, April Fool's day), we move to the next portion of
our syllabus (http://tinyurl.com/3ccaqt) - Stretch / Squeeze.
What is Stretch / Squeeze (STR/SQU), and how does it work? Why does STR/SQU create a
dangerous situation for those individuals who choose not to use it correctly? How does one
calculate STR/SQU?
To understand STR/SQU, one must first understand how the futures and cash markets interact. In
a 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's
explanation 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 at
certain 'Action Points' throughout the trading day. Just as we have seen with all other tools, we
also need to use STR/SQU only at those same 'action points.' In other words, using STR/SQU at
the 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 the
STR/SQU value over time (using a one minute chart of Histogram design). Mak has used a third
1

method for
f STR/SQU
U comparingg the ES to YM
Y while addding some IF1IF2
I
logicc for good
measure.
Determ
mining whichh method to use
u for each individual trader,
t
best results
r
by,
determinning which method
m
workks within a sppecific charting platform
m (or Excel).
e
into a quotesheeet, and createe a
For Qchaarts users, Pllace the folloowing formuula (copy it exactly)
one minuute chart of that
t formula (in Histograam Style). Pllease note thhat I have myy chart set too
Histograam, rather th
han to 'bar chhart.' See atttached screen capture.
((YM07M
M -INDU) -7
72)

Please, reemember to recalculate the

t 'offset' value (at minimum) priorr to the beginnning of eachh
market day.
d On occasion, one wiill need to reecalculate thee offset intraa-day. Whenn you see thee
STR/SQU
U values 'skeewed' to onee direction orr another, yoou'll know itt is time to reecalculate.
I calculatte the 'offsett' value usingg the close of the 15:58 PM
P Eastern Time bar forr the YM annd the
close of the
t INDU. I recalculate during perioods of calm (e.g.
(
CCC orr no price moovement), when
w
noticing my histogram
m skewed aw
way from thhe zero line.
In an envvironment where the futuures lead thee cash, we saay STR/SQU
U provided a signal whenn we
see levelss exceed +2 (Stretch) or fall below -2
- (Squeeze)) on our charrt. In other words,
w
STR/S
SQU
provides both signals for continu
uation and change. Whhen STR/SQU falls within the -2 to 0 to
+2 zone, we say STR
R/SQU sits at
a neutral.

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 on
our '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 High
Volatility. Note also, how such a fine level monitoring (Bug Level) currently sits far beyond our
current focus. Take some notes to 'see' how STR/SQU acts around FTT's, Point Threes and Spike
Bars. 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 a
trader hasn't yet mastered PRV Volume, Price Channels and Gaussians, then one should not add
STR/SQU until completing the previously mentioned tasks - and practiced to an appropriate
level 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 is
that 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 and
futures 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 the
temporary differences which materialize from time to time, and not every wiggle, head-fake
and / or short term retrace (at this point in the learning process).

Quote from hypostomus:

Therefore your approach of periodically adjusting the offset is weak at best, and at worst
masks 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. More
importantly, 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 what
you can already see happening in price and volume.
Perhaps, we could agree to allow others to determine their own value, rather than, have someone
of dubious credibility proclaim the entire exercise 'a complete waste of time' each time I
introduce a new monitoring tool? After all, you have gone on record as saying your efforts
amount 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 word
which 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 because
doing so places the trader on the wrong side of the market. As I discussed in this post, a
trader 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 use
STR/SQU only at those same 'action points.' In other words, using STR/SQU at the
incorrect time can cause negative results.

I hope you find the above clarification useful.

- Spydertrader

Bundlem
maker on setting upp STR/SQU
U in Ensiggn
Here is a PDF to show how to seet up for Ensign. Please PM
P if you haave questionns in order too
keep threead clean.

Bearbellly on gettting STR/S

SQU set upp for Quottetracker
Not possible with Qu
uotetracker. You
Y can usee Maks tool if you have Excel but itt does not
produce a histogram.. It is locatedd around pagge 350 of thee Question foor Grob/Herrshey thread..
[this verssion is the reegular str/squu version witth YM IND
DU] http://ttinyurl.com
m/3aznas
[this verssion is the sp
pecial version with no IN
NDU] http:///tinyurl.com
m/3dt447

DKM on
o getting a STR/SQ
QU indicatoor workingg in Esignnal
Quote froom optionprro007:
Greetinggs guys, Does anybodyy know how to get the sttr/squ indiccator workin
ng for esign
nal
?Thankss!

For esignnal users, herre is an efs that will plott str/squ in histogram forrmat. After loading the efs,
e
right clicck on the stud
dy pane entiitled "... Addd symbol", seelect edit stuudies, in the Value box for
f
Symbol1 type:
$
- 68
ym #f - $INDU
The valuue 68 is just an
a example offset
o
and shhould be adjuusted accorddingly. Be caareful with thhe
spaces. The
T histogram
m plots the close
c
of eachh interval e.gg. 1 min. Thee histogram time intervaal
will depeend upon thee interval of the chart, soo you will neeed to open up
u an advancced chart witth a
1 min intterval. Now I just need too be able to make some sense of it
Downloaad: http://tin
nyurl.com/22stacb
Downloaad the attachm
ment and save as
SymbolC
CompareAssHistogram..efs in the foolder
Program Files>Esign
nal>Formulaas>Downloadds
(n.b. this will involvee changing thhe file extennsion
from .txt to .efs
u a new 1 min
m chart of say ym #f
2. Open up
3. Right click
c
on the chart and seelect
Formulass>Download
ds>SymbolC
CompareAsH
Histogra
m.efs
4. The EF
FS should lo
oad as a new
w indicator paane below thhe chart
5. Follow
w the previou
us instructionns for enteriing the symbbol formula
ym #f - $INDU
$
- offeest
You shouuld now see the histograam
7

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 directly
into t-station as a new indicator.
You will need to set up a chart with @YM as data 1
and $INDU as data 2. You can then make the price
invisible if you like so that all you have left is the
indicator. (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 to
histogram and plot 2 thru 4 to line. then set the
colors to your liking and under the scale tab put the
indicator in subgraph 2. Then shrink subgraph 1
down to nothing in the chart window. That should
do 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);

Spooz posts
p
a YM
M snippet
Here's a YM
Y snippet around the time
t
of a sim
m-trade
entry (short) by me th
his morning. My timestaamp is
prolly off
ff +/- a few seconds due to
t the fact thhat my data
is timestaamped locallly (as opposed to the feeed's server).
Also, I was
w glued to the
t ES whenn this occureed and only
really noticed this sn
nippet duringg replay, postt-market
close. In other wordss, the ES got me in. But I thought I'dd
share thiss replay snip
ppet. My repplay is only accurate
a
to
the seconnd (not milliseconds). Soo, the replay could be a
bit off froom RT, I dun
nno. Enoughh caveats...
ows my RT YM
Y Premium
m
The bottoom pane sho
calculatioon, using 2 min
m bars. I know,
k
the insstructions
are to usee 1 min bars but I like my
m layout of price
p
+
volume + premium wth
w vertical alignment.
a
S I may
So,
have to change
c
this at
a some pointt. The greenn dash in
each bar shows wherre the Premiuum closes. I have no
idea if thhis is useful info
i
(knowinng prem bar close) at
this pointt.
Currentlyy, I do not bo
other myselff with Fair Value
V
(the
"offset").. If I type on
ne in, the panne is very sim
milar to a
histogram
m. But I've noticed
n
that "my
"
brain" does
d
a
decent joob of determiining what is Neutral. Tiime will tell
if I need to bother wiith Fair Valuue or not.
One last Premium deetail, the thinn blue horizoontal line
nt Premium (STR),
(
Discount
displays at the curren
(SQU), or
o Neutral at all times (asssuming I caan "see it", lool). As show
wn in this snipppet, what does
d
your braiin tell you? SQU,
S
right? No Fair Vallue/offset neeeded. I'm NO
OT saying too do somethhing
different than what has
h been instrructed, I'm just showingg my layout. Just food for thought annd
discussioon.
The other higher-leveel thing to loook at in thiss snippet is my
m PRV bluee "ghost bar". This mighht be
a good exxample of caapturing incrreasing red, based on PR
RV, very earlly in a bar. My
M PRV is
loosely physics-based
p
d, so I believve my PRV upon bar open is reasonable. I factorr in the pacee
coming in to new barrs and never reset PRV volume
v
to zeero. But this is a bit OT.

Spyder on handling confusing low-volume periods

Anytime you find things confusing, head to the sidelines until you can figure out the 'right' side
of the market. If you have reversed a few times before having the realization the market had
entered 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 the
DOM 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 1-2-3
setups come faster after eachother than when there's more direction. Is this something you
can confirm?

In order to capture the smaller, shorter trends within a market lateral, one would need to move
down into finer levels of resolution. As such, change occurs on a more rapid pace. Your
observations with respect to today's market action mirror the same activity occurring normally on
a 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 are
running on time. Because the INDU opens after the YM, some might experience a problem with
the chart running behind time and not reading properly if you start Qcharts before the INDU
opens at 9:30.
If this happens there are several things that can help:
Close and Reload the chart
Change time frame and then back
Clicking 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

10

Spyder on sufficiency
Remember, sufficient data sets means obtaining the data needed to differentiate between
continuation 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 in
the bar while remaining on the correct Resolution Level for monitoring. In other words, we
want to remain on the Forest or Tree Level for monitoring, but we use tools that can provide the
opportunity to 'see' the change signal sooner in the bar. We do not want to use the finer tools to
catch every signal for change throughout the day - only those occurring at our individual 'Action
Points.' When a trader masters their current Resolution level for monitoring using all the tools
available (even those tools not yet discussed), then the time may be appropriate to move to the
next 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 Right
Trend 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 else
is going on. Once price approaches the right trend line, The Forest Level trader thinks, "What do
I 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) = continuation
Increasing Black YM Volume with Increasing YM Price = continuation
STR/SQU > +2 = continuation
Increasing Red ES Volume with Increasing ES Price (on a PRV basis) = change
Increasing Red YM Volume with Increasing YM Price = change
STR/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.

11

As you can see, the action required of the trader at any point in time changes based on the
context. However, the market's mode (continuation or change) remains the same irrespective of
context.
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 they
did not yet have the tools. While STR/SQU definitely holds no resemblance to a pick axe or a
sledge hammer, it isn't a scalpel either. As a result, I recommend using STR /SQU in a manner
more closely correlated to each individual's Resolution Level Monitoring, rather than, a stand
alone 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 indicator

It isn't an 'always on' indicator. When no information exists to indicate continuation or change on
the other tools (ES, YM, PRV, etc.), we look to the STR/SQU. Because we have not yet
introduced all of the available tools, we may find times when STR/SQU doesn't provide the
information we need as well. However, STR/SQU does give us the opportunity to have more
data sets available, and as a result, 'see' the signal for change earlier.

Mak on eSignals limitations

The problem with esignal is that it does not commit the extremes to memory. I haven't done the
catching 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, the
MIN 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 if
your 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. The
extremes are important because they tell you how prevalent the upcoming ES move will be...

12

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 the
analysis for the thought that cash sometimes leads?
The futs leads the cash until you see an inversion. On February 27, 2007, we witnessed the first
inversion 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 the
value.

13

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 to
spark an index arb. program. Considering an arb program cares not about direction and
throws an equal amount of money at both sides I've previously looked at these times as
moments where the market shows it's hand. One side of the divergence, cash or futs, will
have more conviction than the other and hold its ground. So in the context of this journal is
it correct to view the side that stays put as the right side and the side that gives up ground
to return str/sq to neutral the weaker side?
Another tool (not yet discussed) provides the signals for "which side is weaker" with respect to
the market and not STR / SQU.
All signals generated with respect to how one 'sees' the market exist within a binary paradigm. In
other words, we see them, or we do not see them. Once a trader views the market generating a
signal, one must move immediately to action. Often, other signals create the sufficiency needed
to act, and we never arrive at a STR /SQU observation. On other occasions, STR / SQU (and the
tools used previously) fails to provide any signal (for either continuation or change), and as a
result, we need to look to additional tools for our sufficient data sets. Currently, we do not yet
have the 'Fine Resolution' tools available.
For now, monitor STR / SQU in an effort to learn the behavior at your individual Resolution
Level 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 / SQU
simply brings the trader a step closer (with 3 steps left to go) to the point at which change occurs
in the market.
Think back to when we only had ES Price Channels and Volume Gaussians to determine a signal
for change or continuation. At that time, many individuals posted how they often found it
difficult to 'see' the FTT until a bar or two later. Adding the YM as a leading indicator of a
change signal on the ES decreased the time a trader needed to 'see' the signal for change. As a
result, many began to 'see' change occur closer to the actual bar the FTT formed. Now, with the
addition of STR /SQU, we start to have the ability to capture Intra-bar Gaussian shifts. Although
STR / SQU permits the trader an opportunity to see change signals develop within the bar itself,
it does not provide pinpoint accuracy.

14

As we add additional tools (later this year), we move closer to 'seeing' the change signal develop
even earlier than we do with STR / SQU.
Hopefully, the above information provides some additional clarity.
- Spydertrader

Excerpt from Channels for Building Wealth by Jack Hershey

The stretch and squeeze of the offset between the cash and index of the Dow Jones
industrials may be used as the direction leading indicator of price movement of the
Standard and Poors e-mini (ESXX). Depending upon which value is greatest (cash or
index) the stretch and squeeze means; the opposite or the same direction respectively.
As an example, use a long term positive market orientation. This means the natural
offset of the index is greater than the value of the cash. The DJXX and YMXX indexes
are traded by smart money and as a consequence the smart money moves in
advance of the cash and in advance of the ESXX standard and Poors e-mini. This
means that just before the ES advances there is a stretch in the INDU and DJXX offset.
This is a vector (directional) leading indicator. The extent of the stretch is a measure of
the pending intensity of the move that is beginning. The stretch then fades into a normal
offset value as the dominant traverse continues.

Bundlemaker on ideal FTT sequences

Here is the sequence that is ideal, keeping in mind that ideal is just that. The real world offers
varying tones to the palette.
You get FTT and then, while price traverses from FTT back to then current RTL, volume will be
decreasing just as usual for a non-dominant. Then, the RTL will b/o, and increasing volume will
be seen as a retrace (non-dom traverse) transforms into a reversal (dominant in new direction,
also known as "change").
My hunch is that the two different b2b (or r2r) that you see is because you're looking at a lower
resolution than full forest level. Keep this in mind: while the ideal picture is each bar in the first
half of a r2r (for example) is a red price bar with a volume histogram that is sequentially lower in
value, this rarely if ever happens. Flaws occur and sometimes things just aren't ideal. Bar to bar
or PRV is not where you need to be to see the forest level change in the biggest perspective. You
may have some black bars mixed in, the bars probably won't be sequentially lower. You may get
a spike somewhere in the middle. None of that changes the overall effect of the b2b.
In order to "see" the overall effect, you need to do one thing: match the number of price bars in
the traverse to the number of bars in the histogram you are referencing for determining
increasing or decreasing volume.

15

This is a gross processs. No sophiisitication orr delicateness is involvedd. I know firrst hand how
w easy
it is to NO
OT see whatt you can't seee. Looking back, I can'tt believe how
w stubborn my
m eyes werre.
Once youu get it, you'll say to youurself, "how the hell did I miss this",, it's that obvvious (once you
y
see it )
Hope thiss helps.

On the uselessnesss of histoorically traacking STR

R/SQU
Bearbellly: Isnt the only
o
thing thhat matters thhe spread at the momentt you need itt? I dont thinnk
the historrical tracking
g of it is much use.
Mak: YES!!!!
Y
EXA
ACTLY! Thee issue is thatt many timess, one's sweeeping frequeency is lagginng.
As a resuult you may miss
m the signnal. The worrkaround to this is to theen plot a tickk chart of thee
premium
m value to cattch up on thee recent extrremes...
Ivob: Exxactly. The only
o
thing thhat matters iss the value of
o the spreadd at importannt moments like
l
at RTL, FTT's
F
and po
oint 3's.

Mak onn nailing th

he basics
It is absoolutely imperrative to naill down the siimpler stuff.... Being effeective with simple
s
tools
enables one
o to sort ou
ut the pointss where finerr tools can be used. All the
t finer toolls are just more
icing on the
t cake. Th
he objective is
i to look at STR/SQU ONLY
O
WHE
EN the PV/C
CHANNELS
S
indicate that
t a finer level resolutiion is helpfuul. Otherwisee, there is noo need to drilll down to thhe
STR/SQU
U level. Indeeed, all workks together, but
b at any leevel, it is goood enough too know that what
w
you know
w about the level
l
is suffiicient (ie. forrest=>trees=
=>limbs=>brranches=>leaaves)...

16

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 from
misinterpretation of the situation. I enter at the wrong moment and run straight into an
FTT or I get a break of the RTL shortly after entry at what I believe to be a pt3 or I exit
prematurely 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 that
transformed my situation.
First, I followed Spyder's suggestion to NOT annotate an FTT UNTIL the bar AFTER the bar I
thought was an FTT closed. I did this for a good week or so. It quickly became painful to wait
that long, but it sure cured my earliness.
Second, once the above ocurred, the problem that was left was not being on the correct resolution
level. Now, mind you, I fought tooth and nail against that idea. I was SURE, ABSOLUTELY
POSITIVE, 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 for
them 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

17

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 possible
solution. 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 tick
at the extreme of the FTT. In other words, the best possible entry. Focus on that point instead of
your actual entry. This tends to help one to stop worrying about every tick back and forth. So
much 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 5
min 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 people
simming with everything up to and including stretch and squeeze without ever having made a
dime 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 was
making 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 too
hyper and I cant help but feel, after watching the 2 min ym for quite awhile that it, too, is too
hyper if you are not prepared for it. People are not going to the 2 min ym from the 5 min for
clarification but rather watching the 2 min and then going back to the 5 min. Going back to the 5
min 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 to
keep from burning out before they ever get a grip on this thing.

18

Ivos AHA moment regarding FTT volume

My AHA moment of the last few days is how price and volume behave after the FTT. After FTT
we need non-dominant volume to confirm the FTT but if price moves sideways and not against
the 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 if
you enter on FTT and you see a lateral thereafter it might be wise to reverse somewhere in the
lateral. This is just provisional from observing and no final conclusion. (nothing is final in life
after 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 maks spreadsheet to work

8833broc: I have 2 pictures that describe the problems that I am having getting Mak's
spreadsheet to work with IB. One problem is the SYMBOL ES_FUT_200606_GLOBEX_USD
in cell B3. I am not familiar with this syntax for eminis. I am assuming this will be changed to
ES_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 on
TWS.
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 it
should work fine).

19

PointOnes Quiz
Take a look at the attached Nikkei chart and tell me what happens next. The final bar shown is
complete and is in very dry-up.
No Str/Squ.

[answers on following pages]

20

Spydertrader:

21

Moz:

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

22

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

23

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.) = Continuation
Odd 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 this
also mean that that's the maximum heat you would take or are there moments when you're
down 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 to
say that price has moved a certain distance before I realise I misread the market. Sometimes, I
exit with a small profit. Other times, I reverse with a break even (wash) trade. Occasionally, I
reverse and take a loss because I wasn't paying close enough attention, or the market moved too
fast, 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 of
this thread the procedure is to reverse on point 3 up after this BO (I am not talking
beginners here, beginners exit on RTL break of course). However, this may imply you
could 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 market
correctly 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 I
take corrective action results from a factor of time. The faster I recognize my error, the more
likely I end up with a small profit or wash trade. The longer it takes for me to recognize my
error, the greater the opportunity for me to experience a loss. Those that have seen me trade live
often note how quickly I reverse position once I recognize me error. I do not play the game of
thinking, hoping or believing "it will come back." I take immediate action.
I hope the above post provides the clarification you were looking for.

24

Bundlemaker on internal proof

I'd like to say a few words beyond simply agreeing with Spyder's comments, as it may well help
others. 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 pieces
together 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 least
3 weeks. I started again this Monday. My work didn't look pretty and I wasn't feeling too
confident. In the past, I would have sank into a semi-depressed state as I would mentally tell
myself 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). I
recovered 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 need
internal proof, satisfy yourself that YOU can do it. This is what most who fail lack. THere is
only one way to get internal proof: do it.
Spyders 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 have
repeatedly attempted to place the cart far in front of the horse. The systematic process
laid out before you requires a great deal of individual effort to learn. The reason for such
effort stems from the fact you are learning an entirely different way of looking at the
market and trading. Again, I encourage you to take the time necessary to insure your own
success, and review, practice (and review again if necessary) the key points discussed in
the many pages contained within this Journal.
I am confident other traders will agree with the advice I have given you here.

25

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 to
obtain 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 is
causing my confusion.
Anything in between +2 and -2 we consider as 'noise' and observe as 'no signal' given. values
greater than +2 and less than - 2 create a signal. The greater the extreme, the larger the
anticipated move. In other words, we expect a larger move on a value of +10 than we expect on a
value of +3.
I hope that helps.

26

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 briefly
while 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 is
some importance if it dwells >2 or <-2 for extended time.

Just as a stronger move in the STR / SQU represents a more pronounced move in ES price, so
too does a 'sticky' move (one that seems to linger) allow us to anticipate a more sustained Price
move compared to a STR / SQU 'quick pop' which immediately returns to the 'noise' area. In
other words, sustained and big are better than quick and small.
Many things in life seem to mirror this same paradigm.
- Spydertrader

Spyder on continuation, change, and Gaussians

Quote from PointOne:
You are short off the close of the FTT bar shown (doji). All looks good until the last bar
shown. This bar is complete and is in Dry Up volume. What do you need to see in the
opening of the next bar to hold, exit or reverse? What do you suspect actually happens?I
am hoping to learn from your insights.

What do you need to see for continuation (in this case short) and what do you need to see for
change (in the case reverse and get long)?
Assuming you used the FTT (Blue Doji Price Bar) as your signal enter into a short position, we
also know that you have chosen to hold through the apparent retrace of your red down channel
(nothing wrong with this, just setting the stage so to speak).
We note that Price exits the the red down channel on decreasing black volume. However, we
know Price only leaves a down channel on increasing black volume. In other words, our
Gaussians do not match our channel. The market has informed us that we do not have a correct
channel. In such a case we need to fan out our channel in an effort to create a correct channel.
Once you have a correct Price channel in place, PRV Volume provides an answer for where we
go next. If we see increasing black Volume, we know to reverse and enter long. If we see
increasing red Volume on a PRV basis, we know to hold and remain short.
Based on the fact that we currently see decreasing black volume (indicative of a non-dominant

27

retrace of a down channel), holding short remains the best course of action at this time. I
anticipate 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:

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

28

Here we are a couple minutes later. Increasing black now, at the prior RTL (based on PRV close
to a minute into the bar). Seems like reversing would be prudent here as for continuation (I was
short) we needed +red volume right then and there, but didnt have it. Until

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

29

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 right
traverse, a lateral or Even Harmonics. It all means the same thing - continuation. Since you either
have exited off the FBO or reversed off the FBO (depending on experience level), you either are
sidelined 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 (circled
Red). Remember, you have a red down channel so Red Volume is dominant and black volume is
non-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 then
signaling change or providing multiple
change signals within the same bar. We
often see multiple change signals within
the same bar during an HVS.
5. We do not yet have the next tool (DOM)
which would have shown a 'wall' which
did not deteriorate - indicating another
change signal.
6. Alternating Red, Black, Red, Black (or
Black Red Black Red) Volume while both
colors show decreasing represents an HVS.
While the number of bars involved could
range from 3 to 8 or more, Volume tells
the tale.
I hope you find the above information
useful.
- Spydertrader

30

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 sets. 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 uptrend
while you held a long position, and you saw a -10 on STR / SQU would you immediately
reverse?" 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 that
multiple Intra-bar signals (in opposite directions) can occur within a single bar (due to the
volatility you spoke about). In other words, we continue to monitor Intra-bar to make sure no
other signals develop prior to the bar close. We then move to bar-to-bar tools (PRV) to make
sure we see what we need to see, and finally, we move back to the Coarse Level tools to continue
our '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 additional
clarification.
- Spydertrader

Nkhoi posts a tool to find faster qcharts servers

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

31

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 wait
for the first move of the day and begin trading with the ftt that ends that move. Spyder can
you 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 allows
the Futures markets to 'sync' with the cash and affords a trader the opportunity to 'see' the market
as 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's
sentiment, and enter a position accordingly. On most days, we can easily see change (or
continuation) of the previous day's sentiment (either AH or pre-market) by simply monitoring
YM - before the opening bell. However, occasionally, we see where the market hasn't quite made
up its collective mind with respect to continuation or change. On these days, we see the market
open inside the previous day's final bar (or final several bars). In such a circumstance (what
some professionals refer to as 'a split open'), I wait for the market to 'break' in one direction or
the other.
On Friday, the market appeared to be saying change from the previous day, and then on bar
two, the market said change again. Once one recognizes the market hasn't created an FTT, but
rather an HVS, we (as beginners) needed simply to 'wait' for direction to reveal itself. More
advanced level traders would have traded each bar (or even Intra-bar) 'slaloming' back and forth
until Price exited the lateral. As beginning traders, we want to spend more time observing than
trading. we want to learn from Friday's open how we can handle such an environment in the
future. We need to make sure we use all the tools available to us and find a sufficient data set
which 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 an
HVS. 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 connection
from 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, and
you have all the information you need to stay on the right side of the market.
I hope you find the above information useful.
- Spydertrader
32

Spydertrader on High Volatility Stalls (HVS)

Since a number of people appeared to have missed the HVS Continuation on Friday, I wanted to
take 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 the
concept of "holding through lateral Price movement." Why then, do we often see such confusion
with respect to the HVS Price formation? Perhaps, the answer resides from confusion over which
direction Price initially entered the lateral channel.
As discussed previously, we can distinguish an HVS from other Price formations based on the
Volume data. We see both decreasing black and decreasing red volume within an HVS (See
Yellow highlighted area of attached chart). Once recognized, a beginning trader simply holds in
the 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? The
answer resides in Price.
How Price enters the lateral channel determines how Price exits the lateral channel (unless an
overriding signal for change develops within the lateral channel itself). In other words, If Price
enters the lateral channel long, Price exits the channel long. If Price enters the lateral channel
Short, price exits the lateral channel short. In both cases, the lateral channel represents
continuation: (Hold).
We see two such examples on the attached chart snippet (pinkish arrows). Example One: At the
open 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. At
the end of the HVS (Bar 13), Price heads lower breaking out of the lateral channel. Again, the
lateral 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 Volume
Formations) 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 Lateral
from the short side as our FBO becomes a Point Three of the down trend. Had we annotated
correctly, even if we missed seeing the 10:05 Bar (Bar Eight) as an FBO, everyone can most
certainly 'see' it is a Point Three Down Channel. Clearly, a long position, in such an
environment, 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
33

channels. Determining which trend one needs to follow, and how one arrives at the right side of
the market, results from careful consideration of Price. Even if one believes they 'see' the market
correctly, 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

34

Spyder answers Bearbellys STR/SQU question

Quote from Bearbelly:
Where Im having a problem is interpreting extreme stretch as bullish and extreme squeeze
as 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 you
describe, the STR / SQU moves back into the Neutral Zone. Unless the Programs 'over do it' (for
lack 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 Programs
have pushed too far. However, once the current bar closes, we head back to our normal
monitoring routine. Increasing Volume (based on PRV), Price remaining within the current
Trend 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 the
vortex. Much later in this Journal (sometime in the fall), I'll begin to move the discussion
down into the lower levels of the rabbit hole.
- Spydertrader

35