Spydertraders

Jack Hershey Futures

Trading Journal
As compiled by

Pr0crast

Volume 3:
Gaussians, PV, and
Execution
March 2007
i

TABLE OF CONTENTS
Introduction ..................................................................................................................................... 1
Editors Note ............................................................................................................................... 1
Spyder tells it like it is ................................................................................................................. 2
The Journal...................................................................................................................................... 4
PV/Gaussians .............................................................................................................................. 4
WGTraders Gaussians Diagram ............................................................................................. 4
Spyder on increasing/decreasing volume ................................................................................ 4
Spyders Gaussian Drills ......................................................................................................... 6
Pr0crasts Gaussian/PV Drill ................................................................................................... 7
Pr0crast on PV ......................................................................................................................... 9
Tums on the importance of annotation .................................................................................. 10
Spyder takes some time to review basic PRV ....................................................................... 11
Ivo comments on some Gaussian logic ................................................................................. 11
A super PV sequence ............................................................................................................. 12
Spyders 3-02-07 ES chart w/ forest annotations .................................................................. 13
Mr_Blacks Gaussian example .............................................................................................. 14
PointOne answers a question on reversal bars ................................................................... 14
Spydertrader answers a question on intra-bar Gaussians and FTTs ...................................... 15
Spyder on the size of the forest again .................................................................................... 17
Mak notes volume is scaling back to normal ........................................................................ 18
Spyder answers a basic question on how we are using Gaussians ........................................ 19
Spyder on applying Gaussian formations to channels ........................................................... 19
Ivo and Steve on volumes role in flaws and FTTs ............................................................... 20
Spyder on always knowing your resolution .......................................................................... 21
Spyder on Point Threes.......................................................................................................... 23
Spyder on continuation/change signals for forest vs. trees traders........................................ 23
Spooztrader on widening channels ........................................................................................ 26
Spooz and Spyder on gaussians, synching, and incorrect channels ...................................... 27
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Spooz on change .................................................................................................................... 29

PointOne answers some basic questions ............................................................................... 31
Execution ................................................................................................................................... 32
Aurums Words of Wisdom .................................................................................................. 32
Spyder answers some personal execution questions ............................................................. 32
What do you do if you miss an FTT? .................................................................................... 33
Pr0crast loses his cool during an HVS .................................................................................. 33
Spyders 3-07-07 ES chart..................................................................................................... 36
Spyders thought process on tree-trading 3-07-07 ................................................................ 37
Bundlemaker on logic and reasoning .................................................................................... 39
Bundlemaker has another religious experience ..................................................................... 44
Ivo on using the RTL ............................................................................................................. 45
Spyder on the psychological effect of having money on the line .......................................... 46
Other .......................................................................................................................................... 47
Bundlemaker learns from his mistakes .................................................................................. 47
Ivo on the reliability of FTTs ................................................................................................ 48
Spyder on the different levels of trading ............................................................................... 49
The disciplined trader ............................................................................................................ 50
Spyder on trading FOMC days .............................................................................................. 51
Spyder on stalls...................................................................................................................... 52
Excerpts from books .............................................................................................................. 52
DKM and Spyder on intrachannel PT3s ................................................................................ 53

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INTRODUCTION
EDITORS NOTE
This summary document will not be as thorough as previous ones and will only contain key
posts. If I perceive a post or a chart to be especially valuable to someone that has fully absorbed
most of the information already included in volumes 1 and 2, I will include it here.
If you want the full effect, READ THE JOURNAL! This should be considered a reference tool
for those who have already read the material.
Also please note that there is a wealth of information on Gaussians in the previous two volumes.
If you havent read those yet, thats where you should start.
If you feel Ive missed anything that really belongs in here, please shoot me an email at
azcire@gmail.com and I will get it in ASAP.
Enjoy!
-Eric (Pr0crast)

SPYDER TELLS IT LIKE IT IS

I appreciate the contributions made thus far with respect to where everyone find's themselves in
terms of progress toward learning the methods discussed. Many have weighed in off thread from
both sides of the coin. On one hand, a number of people feel they have progressed far enough to
begin to add additional tools. The other side of the argument shows a lot of people still having
difficulty with basic concepts. I realize everyone has a strong desire to succeed, as well as, obtain
some measure of confidence at their current plateau. As such, I don't want to 'hold back' those
who feel they have reached a stage where they feel its time to advance. Nor, do I wish to add
another layer of practice for individuals needing additional time at their current skill set. As you
can see the choice was a difficult one to make, and one I did not take lightly.
My major concern stems from the lack of responses after yesterday's market close. On such an
historic day, I thought sure I'd see numerous posts detailing how well people either traded, sim
traded, or could 'see' the market as it unfolded (during monitoring). Based on our discussions
thus far, everyone (using the Forest Level guidelines only) should have picked up the Point
Three short at 10:00 AM Eastern Time (Bar Seven) and held short until 3:00 PM Eastern Time
when price finally broke through a right side trend line. That 5 hour trade captured 39 points per
contract.
Since I did not see any mention of this trade (except in another thread), I wondered if even the
people who think they are ready to move forward, really are.
A common theme among the feedback received so far pertains to a lack of understanding about
Gaussians. Since I haven't placed as much emphasis on gaussians within the thread itself, the
responsibility for individuals having some difficulty with Gaussians partly falls on my shoulders.
I plan to remedy that situation immediately.
After reading through the significant amount of feedback received and reviewing the PM's, IM's,
emails and chat logs of discussions surrounding progress made to date, I feel it best to delay
adding STR / SQU for another month. I have updated the syllabus accordingly (See Attached). In
addition to the YM and ES, we will spend the Month of March focusing on Gaussians and PRV.
For those of you who feel you are ready to advance, I do not want you to feel held back in any
way. Jack and others have posted about STR / SQU in other threads. However, before you go
and add STR / SQU because you think you are ready, I recommend taking a week and proving
to yourself by SIM trading at your current skill set. You may be surprised at what you find. For
those of you already trading real money, you already know where you need to focus.
Also, for those that do fully grasp the current skill set, I would appreciate it (and I am sure those
having difficulty would also) if you could take a moment or two and describe how you 'see'
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things unfold, what drills you used to assist your learning process, how you use PRV and how
you use Gaussians (Maybe Bob will even make a Gaussians Video).
Again, delaying the introduction of STR / SQU was not a decision I took lightly. However, it is
my firm belief that building a strong foundation remains a hallmark of success. As such, I feel I
have made the right choice.
Good Trading to you all.
- Spydertrader

THE JOURNAL
PV/GAUSSIANS
WGTraders Gaussians Diagram

Spyder on increasing/decreasing volume

Quote from z32000:
I was wondering how to determine what's considered increasing and decreasing volume...

You might find a review of Gaussians, as well as a review of my posts with respect to
4

'Determining the size of the Forest' helpful to your understanding. Gaussians always match the
channels - always. If they don't, then you are not looking at the correct channel (Forest) size. In
an up channel, From the most recent High across the channel back to the right trend line
volume will always decrease from the high back to the trend line - always. When price breaks
through the right trend line, volume increases. Increasing or decreasing volume does not always
refer to bar to bar analisys. If your channel (Forest) is wide enough, decreasing or increasing
refers to the channel as price traverses it - not bar to bar. If price requires 14 bars to retrace back
to the right trend line, then you will have decreasing volume from the Point where Price began its
retrace back to the trendline.
Quote from z32000:
A lot of times, I can see either 2 or 3 bars that are probably double the standard average
sized bar... and everything else is just mainly random...
"A lot of times" isn't a very accurate measure of the past. Besides, measuring the 'standard' sized
bar has nothing to do with the PV Relationship. What you call 'random' represents the market
acting within the confines of the PV relationship, but at a finer resolution - or smaller channel.
Quote from z32000:
also, does anyone have any idea where I can find the SPX, SPY or ES graphics beyond 1
decade? Free would be great if possible.

Someone feel free to correct me if I am wrong here, but didn't the SP E-mini Contract begin in
September of 1997? If so, you should experience some difficulty finding data 'beyond a decade.'

Good Trading to you.

- Spydertrader

Spyders Gaussian Drills

1. Fill in the price bars, channels, and FTTs (answer: January 26, 2007)
2. Fill in the volume histogram

Pr0crasts Gaussian/PV Drill

Quote from Tums:
amazing stuff we are learning.
can't wait for the next quiz.
Here's one...
Try to pick out at least 3 bars on which a forest-level FTT occurs. If you need to, use the blank
space to draw the channels.

Answers on next page (dont peek).

Pr0crasts attempt:

Spyders attempt:

Pr0crast on PV
Pr0crast: What really made PV "click" for me was a string of thought processes that was
triggered by one of Jack's posts in January (on page 81 of vol.1).
You may have dismissed this post as long-winded or cheesy, but look at it again and really try to
understand where he is coming from.
The mind and body of the market is on display, intimately.
There is a reason Jack always talks about the market in organic "metaphors." That is because the
market IS organic. It is the product of something organic (human psychology) and it behaves as
such. It is like the collective consciousness of all the participants. It is like a creature. It breaths
in and out. It has sentiments, and those sentiments change from time to time. If you take the time
to understand the beast you can harness its power. Conventional traders enter a master/slave
relationship with it, and abuse it at every opportunity, just waiting to jump on a perceived
weakness. Instead, what we seek is a partnership. We are not meeting force with force, but rather
taking the aikido approach and using what force already exists to produce the most efficient,
powerful result.
Having thought about all this, do you really think this creature is going to cooperate with you if
you keep it in a mechanical cage all the time? The answer is no. I doubt anyone would be able to
skillfully ride a horse, raise a child, or drive a racecar going only on a laundry list of instructions
and rules. Success requires understanding and being tuned in to what is going on. The next step
after becoming an expert at drawing mechanical channels by the book is to learn to understand
what those channels mean in the NOW. Do they reflect what is going on this instant (are they
"operating")? Are there any channels missing from your chart? Might your channels influence
future action? What do they mean to you? To the market? Is there an FTT coming up?
Gaussians help you to answer these questions. By witnessing the market breathing, we see the
context for its current state of existence. By understanding its natural sequence, through
monitoring it we can spot abnormalities (FTT, B2B, R2R, etc) and readily anticipate the
possibilities for what is to come next.
I've said it before and I'll say it again-- I think the most useful tool for ingraining the gaussian
sequences into your brain is to video debrief. Watch the market every day and make Camtasias
so you can watch them in fast forward. Drill the sequences deep into your subconscious.
Understand what these sequences are going to do for YOU.
Eventually you'll learn to spot the "critical points" that gaussians show us. Maybe the trough of
this gaussian is a point 1. Maybe the peak is a point 2 or an FTT. Etc.

Bi9foot: I cannot emphasize enough how important it is to make sure the channel(s) you are
working with matches the Gaussians. The Gaussians will always confirm if your channels are
correct or wrong. When I occasionally find my gaussians don't match my current channels, I can
look around and find a missing channel that I had ignored to draw.
I mentioned this (not as clearly as pr0 ) earlier this month in this post here.
http://www.elitetrader.com/vb/showt...373#post1358373
Let me just throw out another possibility here for you. Lets assume that when the price
broke the RTL, we continued to see decreasing black volume. What does that tell you?
Basically price is operating within a much wider channel that is either drawn in your chart
or not drawn. If it is not drawn, you are basically going to start looking for the point 3 of
the wider channel and when you get the shift from decreasing black to increasing red you
have pt 3 of the wider channel and you can draw the channel.

Tums on the importance of annotation

Bundlemaker, thanks for sharing. You are so right (or should I say, your better half is so right),
we often fail because we trade what we "know", instead of trading what we see.
I should also share a lesson I learned: it is very IMPORTANT to annotate.
Not just drawing channels, but to annotate your analysis.
Not just annotate some of the points, but to annotate diligently on all the turns.
Annotation forces you to make an analysis on your Observation .
The act of writing a FTT on the screen is a commitment of your Analysis.
If you do not have strong enough a conviction to commit your analysis, your Decision to trade
might be ill concieved, and your Action might lead to flawed outcome.
After your action (enter the trade), the FTT annotation becomes a beacon, signaling you to move
into the next cycle of the trading process -- to observe again, to see if this is a Continuation or a
Reversal.
I have missed opportunities because I did not annotate. My analysis were flip-flopping back and
forth. My mind was drifting all over the places. After much research and review, I came to
realize the psychological importance of this seemingly "beginner's" task.

10

Spyder takes some time to review basic PRV

PRV (Pro-Rata Volume) compares Volume levels NOW in order to anticipate Volume Levels by
End of Bar. If one has 2000 contracts traded in the first 15 seconds of the Bar, then one can
anticipate seeing 40,000 contracts traded by End of Bar (four 15 second intervals per minute x 5
minutes per bar x 2000 contracts = 40,000 contracts). Comparing this anticipated volume with
the previous bar actual volume allows you to 'see' continuation or change at finer resolution
levels. In addition, comparing Peak Level Volume levels can permit one to anticipate where an
FTT might form.
As discusssed earlier in this thread, Mak explains his use of PRV in this post. The linked post
references the attached spread sheet.

Ivo comments on some Gaussian logic

It's the easiest when you understand the logic behind the gaussians and what to expect. Imagine
an uptrend. You see an FTT. This FTT has usually red volume. So it's a bar preferably with a big
shadow on top that doesn't reach LTL. After that we should not have a lot of black volume.
There can be some black volume (retracement) or a lot of red volume. If 'there's a lot of black
volume just sell. Then RTL is broken (or not, then close position if you took one). I really prefer
price to behave as if this RTL just doesn't exists. The buyers are gone after all so I prefer low
volume cause also the sellers have not many people to sell to.
Of course in order for price to continue going down we do need increasing red volume. We get
11

some increasing red volume and often a retracement (point 2 was just formed). However on
strong moves (like the one of today to the upside at 9.45) this retracement may not be there at all.
So price retraces and the thing to look for is: Will our point 1 (the FTT) hold. Just when new
buyers seem to come in and black volume increases the sellers come in and we have a red bar on
high volume. (or a black bar with big shadow on top and small body, whatever, as long as you
see a lot of selling or the start of it). This is our point 3 and moment to go short if you missed the
FTT.
So, if you expect price to continue to go up you need increasing black volume (maybe after some
decreasing red volume but NO increasing red volume) and if you expect price to continue to go
down we need increasing red volume (maybe after some small black volume but not a lot of
black volume). If this doesn't happen, close position.
As a beginner I was and sometimes still am fooled by
the strength of the retracements. They tend to go further
than you think and actually just as far that you almost do
not believe in it anymore. At that moment sellers should
come in and if they don't then close the position.
I suppose experienced traders open position on FTT then
reverse on point 2 and are able to reverse again on point
3.
These are just my observations. Feel free to correct.

A super PV sequence
PointOne:
11:15 FTT
11:20 Pt1 confirmed
11:50 R2R
12:10 Pt 3
That was a super PV sequence.
Hold until 13:30 or 14:15 for about 15 points.

12

Spyders 3-02-07 ES chart w/ forest annotations

13

Mr_Blacks Gaussian example

PointOne answers a question on reversal bars

Ivo: There's this FTT where you mention "A significant portion of this bar is red volume". What
exactly do you mean by this? I mean this information would support that it is not an FTT but it
was one. Also this bar ends higher than where it opened and ended almost at its high.
P1: I call these reversal bars: it dips down, does the FTT, pace pauses if you are lucky and then
PRV increases as it begins the reverse (red becomes black).
I color code bars that do this in real time so I get a heads up. From my limited experience they
are 'reliable'.
I want to be careful in my wording here: volume does not really have a color, price bars do.
Volume is volume - long and short is matched in every trade, obviously.
The important thing is at some point in the bar, when the selling had slowed, the supply of longs
was starting to be consumed faster than the supply of shorts - buyers were getting long at the
support level at the bottom of the bar and hardly anyone was hitting the bids with new shorts.
Noticing that the bar was no longer continuing down buyers come in (often after a brief pause as

14

this change in sentiment is processed) and PRV increases, begetting more price change and more
volume. (You can call this black volume if you want.)
Forget that the bar ended black - on my chart it is red (actually pink because it ended up far away
from its low and I color code it - think stochastics). It gave the same signal whatever its color.
I hope I haven't opened a can of worms, but sooner or later you have to look at the intra-bar
detail and think about supply and demand balances especially during change.
Hope that helps and you don't mind me jumping in to answer.

Spydertrader answers a question on intra-bar Gaussians and FTTs

Quote from ivob:
There's this FTT where you mention "A significant portion of this bar is red volume".
What exactly do you mean by this?

'Significant portion' means, "more than a small amount."

Quote from ivob:
I mean this information would support that it is not an FTT but it was one.
I have no idea how you reached this conclusion, but you reached it in error. There is nothing to
support or disprove. We either have an FTT or we do not. Clearly we do.
Quote from ivob:
Also this bar ends higher than where it opened and ended almost at its high.

1. It didn't and 'as high' though (not that it matters)

2. On my charts, it closed 1 tic higher - not exactly a ringing endorsement of change.

15

Quote from ivob:

Are you talking about red volume while the bar was being formed?
To be more precise, I'm speaking of the Intra-Bar changes which occurred in real time. A
Gaussian change occurred within the bar itself. Increasing red volume peaked and decreasing
black volume began.

Quote from ivob:

If yes, I suppose it would be wise to wait before entering (assuming you enter on FTT) until
two bars later which also was an FTT but with black volume.
On the Forest Level, you need a Point Three to enter. On the Tree level, you enter on FTT's but
(as a beginner) exit on an FBO. If you 'see' the bar in question as still part of the increasing red
Gaussian (then changing Intra-bar to decreasing black, you may better 'see' the market signals in this case change (FTT) - change (FBO) - change (second FTT) - continuation (BO of RTL).
Quote from ivob:
I just want to verify if I am seeing this correctly.
Note the attached chart. If you cannot 'see' the
bar marked as "This Bar" as having (initially)
characteristics associated more closely with the
'increasing red' portion of the Gaussian Curve,
then later changing (within the bar itself) to
characteristics more closely associated with the
next part of the Gaussian (decreasing black),
then you may inadvertently draw incorrect
Gaussians (blue arrows) leading you to believe
a change confirmation occurred - where none
yet exists. The only reason one even considers
this bar 'black' is due to the one tic difference
in price from open to close. The blue arrows
show B2B. However, this cannot be correct as
we currently find ourselves within the Orange
Forest. Using the correct Gaussians (black
arrow), we are able to more accurately assess
the Red Bar at the end of the chart 16

entertaining the idea that the bar has formed a Flaw (A Stall actually) rather than believing we
have encountered an FTT. This entire exercise shows you how easy it is to find yourself several
levels down into resolution levels when your intent was to remain at the Forest Level.
Monitor the Gaussians at the correct resolution level just as you do with price.
- Spydertrader

Spyder on the size of the forest again

Many of the charts posted over the last 24 hours missed what I have marked as the Blue Channel
on the attached chart snippet. Instead, the charts have only the thinner up and down channels
marked by the Green and Pink Arrows on the the attached chart snippet. Individuals who failed
to 'see' the Blue Channel are ignoring the 'fractal' nature of channels - where channels form
channels which form channels. In my post (several days ago) where I discussed determining the
'size' of the forest, I discussed using Gaussians as a guide for determining 'Forest Size. Even if
one considers the Green Up Channel as a Point Three Channel, The FTT which forms (Yellow
Highlight) creates a Point Three of a larger down channel (Red Lines) In this (Red) 'Larger
Forest' Context, Red Volume is dominant. In the Blue Channel sized Forest, Black Volume
dominates. How do we determine which Forest to watch? We use the Gaussians as our guide.
After the FTT in the Pink Down Channel, Price begins to move higher on decreasing black
volume. Such a phenomenon occurs only
in a down channel. Decreasing Black
Volume in an Up channels cause lateral
price movement. Last week, we had two
days with similar price movement (left to
right traverse). Another poster
commented on how the first day fooled
him, but not the second. When one sees
such price behavior, one must consider
the possibility of a down channel. When
price moves higher creating the second
Blue Channel FTT, connecting the FTT's
then illuminates the correct size of the
Current Forest. The errors in direction
result simply from a failure to 'see' the
size of the Forest in which one operates.
By operating in a smaller Forest, you
often miss the 'bigger picture.'

17

Mak notes volume is scaling back to normal

Note how volume is scaling back to normal. We still are seeing relatively good runs through
lunch which is more money in the bank. Relax if you don't see the big picture. If you see the
finer channels just think of the sequences of sub pt1, 2, 3 and forest level pt 1,2,3. If you don't
see the bigger picture it's because the market has not put in the bigger view, points yet. In other
words, the definition of the forest level is forth coming...

18

Spyder answers a basic question on how we are using Gaussians

Quote from optionpro007:
I still don't understand exactly how you guys use Gaussians in your analysis.

Gaussians permit you to understand the context in which Price operates - the 'size' of the Forest.
If, for example, you find yourself viewing a Price retrace of an Up Channel, one would expect
decreasing red volume to occur over the entire traverse. Knowing the size of the Forest allows
you to monitor for continuation and change while experiencing stress free trading because you
know where you are, and more importantly, you know what comes next. Just as we place
importance in drawing channels correctly, so too, must one monitor the Gaussian formations
within that same channel context. Too often, traders choose a finer resolution with which to
monitor Gaussian formations without even realizing it. I'll try to include some notations on
Gaussians in my ES Chart tomorrow.
Perhaps, Jack can post his thoughts on Gaussians as well.
-Spydertrader

Spyder on applying Gaussian formations to channels

Quote from FilterTip:

I don't see where the forest is for today so far..

Everyone needs to learn to apply the correct Gaussian

Formation with the correct channel. Note the
decreasing black volume across the entire blue down
channel (black arrows). Note also, the increasing black
volume (within that overall channel) applied to the
specific up channel (green arrows). Just like Channels,
Gaussians have a fractal nature to them as well.
- Spydertrader

19

Ivo and Steve on volumes role in flaws and FTTs

Steve: Had a nice aha moment just now, I'm watching the ym and spot FTT at 11:32 bar,
followed by pt 2 at 11:40 bar and pt 3 at 11:46. Ok got my channel. Now I am watching ES and
spot the FTT before it happens at 11:35 bar. find my pt 2 and 3 on the next two bars. Then comes
the aha moment. On YM I see price test (actually slightly break) my LTL on 11:54 bar. Next bar
is red dominant volume but price does not really go down. I think to myself, if we are going to
get a retrace, it should be on non dom volume back to the RTL. Instead I see dom volume. I
think I must be seeing a flaw. I then think to myself that I am anticipating a volitilty expansion
on the ES (as I continue to monitor what YM does in conjuction w/ the ES). Sure enough, price
ticks in one or two ticks and then shoot up strongly.
Although I dont know how to fully identify a falw, what I saw on YM bar at 11:56 seemed
different. I'm not sure if my analysis is correct but the market gave me info that I used to
anticipate what would happen next. Felt real good
Ivo: Nice. Similar to what I learned. Spyder mentioned after an FTT we should be seeing
decreasing non dominant volume.... I was reading this over and over and then today I suddenly
got it. Anything else means price will just continue.

20

Spyder on always knowing your resolution

Note the differences between the Gaussians of the 'Large' Forest
(Carryover Channel) from the previous day and the 'Smaller'
Forest or 'Tree' level Gaussians. Always know 'where you are'
and what context (resolution level) through which you currently
monitor the markets. (see right pic)
Just as a review, lets take a look at how the Gaussians always
follow their channels. In the attached chart snippet (left), our
Forest (Blue channel) shows decreasing red volume from the
high at 11:35 through 12:05 low. Across the entire area (11:35
- 12:05), we see
decreasing red
volume. At the
same time, we
see decreasing
red (as price
retraces) to
increasing red
(as price breaks
out) from the
Green Up
Channel (Tree Yellow
Highlight).
Note the two
red arrows at
11:40 and 11:45
Volume Bars. As we would expect in a down
channel, we see decreasing black volume when
price retraces (Green highlight) from 11:50 to
12:00 bars. The first third of the 12:05 bar
continues to show decreasing black until price
changes course and creates a point three down
channel. We see increasing red with this bar exactly as expected in a Point Three (another
Tree - Red). At the end of the 12:05 bar, we
note Price forming an FTT, and as Price retraces to the right side trend line, we again see
decreasing black volume (exactly as anticipated). At 12:10, we have increasing black volume as
Price breaks through the right side (red) trend line continuing to increase in both price and
21

Volume to the 12:20 bar. At the same time, we show increasing black volume across the entire
Blue Forest from 11:30 to 12:20 (Pinkish colored Volume Arrow).
When monitoring Gaussians and Channels, one must always make sure one monitors on the
correct resolution level. After all, the attached chart shows how easy it is for the market to draw
a trader in to ever finer levels of resolution without even realizing it.
I hope everyone finds the above information useful.
- Spydertrader

Quote from ivob:

Thank you, very useful as I had problems recognizing this. Exactly when did you consider
the 12:05 bar to be an FTT? For me this was not obvious until two bars later because I
think it could very well be that the 12:10 bar would continue the traverse. In general point
3 and FTT on the same bar is a little tricky IMO.

1. The Blue lines are the Forest. If you trade on the Forest, you do not need to locate FTT's.
2. If you were trading the trees, any point on the 12:10 bar where you recognized PRV volume as
decreasing black, tells you the you no longer have continuation down.
3. Same Bar FTT / Point Three formations do present some difficulty using our current tool set.
In the future, this will change as we add fine resolution tools (limb, leaf and bug).
4. Saying "could have continued its traverse down" implies prediction. Avoid falling into
prediction mode. Ask yourself, "What do I need to see for continuation? and What do I need to
see for change?" (Make sure you ask and answer on the correct resolution level) Then go look
for the data. Once you have a sufficient data set, take action. Often, you'll find the action to be
hold.
- Spydertrader

22

Spyder on Point Threes

Quote from KK70:
How/when could one have known that this was not a Point3 ? I keep having this recurring
problem. I nailed the Point 3 at 11:20 on the upward channel though.

The bar you marked as a Point Three, also turned into an FTT at its low. Easy to see based on
your view of the near past bars, how you could view the Price Action as a Point Three Down
Channel - espcially, if you missed the earlier Point Three Down Channel (See chart above). If
you note the YM during that same time frame (Attached), you see the YM within an up channel
during the same time period you mention above. However, even if you missed all of these clues,
the next bar (10:35 AM) gives you increasing black Volume. Even if you missed the increasing
black on a PRV basis, Price breaking through your RTL is the market's way of saying, the down
channel has ended.
After a Point Three, one must see increasing volume in the
same direction of the trend, and within the size of the current
Point Three Forest or Tree (continuation). When a trader
does not see a signal for continuation, then the only other
possible conclusion is change.
- Spydertrader

Spyder on continuation/change signals for forest vs. trees traders

Quote from cnms2:
Spydertrader, would you please elaborate on your statement?
The 12:10 decreasing black volume in the red down channel could also mean retracement,
hence continuation down, isn't it? Then, the 12:15 black rising volume seems like an
indication of the change.

23

Ivob asked the question, with respect to my previous example (Red Channel), 'At what point did
we know we had an FTT?'
If one searches for FTT's then a signal for change is the FTT (in this case decreasing Black
Volume confirms the FTT). In such an example, increasing Black Volume becomes
continuation - but only after the BO. If one searches for Right Trend Line Break Outs (or Point
Threes), then the signal for continuation is increasing black volume. In other words, if one
doesn't enter until a breach of a RTL, then one needs to see increasing black volume. If one
enters off an FTT, then one needs to see decreasing black volume followed by increasing black
volume to have continuation (hold).
It all boils down to what level of Resolution a trader chooses to monitor. In the previously posted
example, increasing red Volume would have meant continuation (down). If a trader chose to
monitor for FTT's, then the signal for change (FTT followed by decreasing Black Volume)
differs from a trader who chooses to monitor for RTL Breaks (Price exits the channel with
increasing Black Volume).
Since ivob asked, 'When did we know we had an FTT?' our sufficient data set (in this specific
example) becomes Failure of Price to Traverse, followed by, decreasing black volume.
I hope my answer provided some clarity, if not please let me know.
Quote from ivob:
I find the terms "increasing" and "decreasing" somewhat confusing. In this case
decreasing black volume confirms the FTT but I would like to have the term "decreasing"
clarified. Decreasing means "becoming less" but compared to what? Becoming less
compared to black volume before the FTT or becoming less in the bar(s) after the FTT? (I
suppose after the FTT)
"Becoming less" is relative and can also mean black volume is first high (after the FTT)
and then on a later moment in the same bar low or lower. Another option is that black
volume after the FTT is low and on a later moment even lower. This is also decreasing.
Am I seeing this right?
Also I remark that determining whether something is increasing or decreasing (or stable)
requires us to wait because this means comparing volume levels on different moments. One
cannot wait too long however.
regards,
Ivo

24

Palinuro: Ivo, I'm sure Spyder will have a better explanation, but since he's probably sleeping
now, I'll give it a try.
Volume increases throughout the dominant traverse (and it will be predominantly dominant
volume). Keep in mind that there are 3 possible ends to a dominant traverse. As volume peaks,
price :
1 - hits the LTL,
2 - FTTs, or
3 - creates a volatility expansion.
After 3 price may continue (with more volume), but after 1 or 2 price changes direction as
volume peaks. So color and direction change, but volume stays high, and then decreases as price
makes the nondominant traverse. Whether that happens intrabar or over a series of bars depends
on market pace and the resolution you're monitoring.
I don't think it makes sense to compare black volume before and after the FTT, as you suggest.
Assuming we're in a down channel, a black bar before the FTT would occur within a subchannel,
whereas black volume afterward would be the nondominant traverse of the main channel--a
different resolution level.
Regarding waiting: yes, but I think the goal is to tune yourself well enough to the ebb and flow
of volume and the interaction of the various levels of channels that the lag becomes unimportant.
To reduce lag at one level you need to have the ability to monitor accurately at the next lower
resolution level, etc.
FWIW, I found yesterday after the drop especially tough because there were so many periods of
fairly flat volume and price, followed by sudden spikes which were hard to anticipate. Before the
spike I didn't know what direction to take, and after it seemed too late to enter.... Perhaps that's
why Jack talks about bracketing CCC periods, though Spyder seems to do "OK" without doing
that.
Hope that helps.

25

Spooztrader on widening channels

Attached is my hindsight view of the ES today. My real-time chart was similar but I forgot to
take screen before I closed my App, lol.
My recent AHA and current struggle is this: Channels Widen. Traverses often "operate" without
much widening required. But, the cool Forest channels often BO the RTL for a while and then
begin more dominant traverses. I'm working hard to find and stay in these wider channels but it's
been challenging for sure (for me anyway).
Obviously, the wider channels are easier to see in hindsight. The steep traverses that don't widen
are fairly easy to see in real-time, at least some of them .
The chart shows my new Channel GUI. These chart "objects" were inspired by Jack's "Golf
Posts" in one of the older threads. Sorry, no Guassians because I don't have the tools working in
the Volume pane, yet.
The Volume At Price distribution (blue, to the right of price) is OT but is interesting. And my
volume is a bit off right now, so please ignore it .

26

Spooz and Spyder on gaussians, synching, and incorrect channels

Since we're still in the month of Gaussians and PV, I wanted to post while we're still on topic.
From Jack's "Building Minds for Builiding Weath", PV is:
If the Volume trend is UP, then the Price trend will CONTINUE, or,
If the Volume trend is DOWN, the the Price trend will CHANGE
When I apply the above statements to channels and Gaussians, I read them as follows:
If Price is in an operating UP channel and the dominant Gaussian peaks (B2R's) are decreasing,
then anticpate CHANGE, or,
If Price is in an operating UP channel and the dominant Gaussian peaks (B2R's) are increasing,
then anticpate CONTINUATION.
And of course, similar for operating down channels:
If Price is in an operating DOWN channel and the dominant Gaussian peaks (R2B's) are
decreasing, then anticpate CHANGE, or,
If Price is in an operating DOWN channel and the dominant Gaussian peaks (R2B's) are
increasing, then anticpate CONTINUATION.
By "operating", I mean you have found Gaussians that sync well to your channels. I believe this
is an important statement. Gaussians should validate your channels. But these are my opinions.
If I understand PV and have described this properly, Increasing/Decreasing DOMINANT
Gaussians are important to recognize. Although this is probably true at any fractal, I'm really
talking about Gaussians that are wider than a bar or two. Sure, tapes operate, but I'm talking
about Gaussians we see in the trees and Forest.
I've attached a "theoretical" Gaussian/PV chart. In the Up channel, there are 3 "wide" Gaussians.
And the dominant peaks are decreasing. What's happening here? Well, Price is moving higher on
lower/decreasing BLACK volume. Right? And note the channel is "operating". PV says
anticipate CHANGE when the Price trend is UP and the Volume trend is DOWN (decreasing).
So, anticipate CHANGE.
In the down channel, there are again 3 wide Gaussians. But this time, the dominant peaks are
increasing. Price is moving lower on increasing RED volume. PV says a Price trend will
CONTINUE if the Volume trend is UP (increasing). So, anticipate CONTINUATION or NO
CHANGE.
Of course, this isn't cookboook or mechanical. It's more of an Art, in my opinion. Volume could
come in at any time in the opposite of the anticipated direction. And news can wreak havoc, as
we all know. But this is my interpretation of PV. And I hope I got it right...

27

I didn't annotate the FTT's, FBO's, BO's, R2R, etc. Exercise for the interested reader
Sorry for the long post. I'd appreciate any feedback, especially if i'm on the wrong page...

Spydertrader: With respect to your interpretation of the Jokari Matrix (See Attached), you
appear to have the correct understanding with respect to the Price-Volume Relationship. In
addition, your charts provide a clear example of the phenomenon of 'overlapping trends' and how
this overlap validates the various resolution levels. However, I caution your viewpoint with
respect to 'operating channels.' Channel - Gaussian Synchronization exists within a binary
framework. Channels and Gaussians either sync, or they do not sync. If they do not sync, then
you have an incorrect channel. No varying degrees of Synchronization exist. Just as we see the
fractal nature of channels on your chart, so too, do Gaussians exists within this same fractal
framework.
By example, if Price exits a right trend line on decreasing volume, you have a clear indication
and signal from the market. The signal says, "You have an incorrect channel." Even if no
possible signal existed prior to that point in time, even if no logical method of drawing the new
(or fanned in this case) channel existed before this current point in time, the market has spoken
28

loud and clear.

Gaussians and Channels must always exist within a state of Synchronization. If they do not, a
mistake exists somewhere, and requires an immediate fix. Either, the trader has drawn in an
incorrect channel, or the trader finds themselves monitoring on an incorrect Resolution Level.
Instead of viewing Synchronization as a 'better or worse' phenomenon, try making the ever-soslight shift to a binary paradigm. Doing so may help provide some extra clarity as to how the
market unfolds, as well as, how price heads in a direction because it can only head in that
direction.
If you don't see the bold type yet (as you view the market), don't worry, you will.
Again, nice work with the Jokari Matrix and your charts.
- Spydertrader

Spooz on change
Mr_black:
Change or not change that is the ????

29

Spooz: Cool, we're still talking PV & Gaussians. Here's my debrief on the first snippet...
Starting with 2 bars, you've drawn in tape. If you're glued in RT, this is how one can start to
build a channel. In snippet 1, we don't have any CO's or overall NOW sentiment. In other words,
the NOW is the tape. And the tape ftt on bar 3 has so far done it's job as price has retreated back
to the tape RTL.
If this is all I have to go on, I'm thinking that price has gone higher for 3 bars on decreasing
black volume. If this tape is a dominant traverse, my interpetation of PV has me thinking
CHANGE. Of course, price could be in a wider down channel and this tape the B part of a R2B.
I don't automatically think price is in a down channel when I see price rising on decreasing black
volume, but maybe I should.
Now, keep in mind, we're zoomed in here. Price is operating in a tape. Sure, there are times when
a tape RTL holds and price continues in the current direction but we usually see volatility
expansion (VE) in this scenario, right? And we're not seeing VE on these 3 bars, at least yet.
We're seeing price moving higher on decreasing black volume.
If no VE, then another scenario, which jives with zoomed-in PV is that the tape will widen.
Channels widen, right? Tapes widen for sure, IMO. Bar 3 might be the beginning of a Flaw
sequence. Maybe a hitch, stall, etc, or a lateral.
Does the tape ftt on bar 3 signal "wider"/zoomed out sentiment change? Well, IMO, no. IMO, a
FTT at any resolution has me anticipating, "price should retrace back to the operating RTL". The
key word is "operating". In this snippet, the tape RTL. If increasing red comes in, we should see
a R2R at the tape resolution. If low vol comes in, price prolly will "walk out" and the tape will
widen.
Regardless, unless another shot of black volume comes in on the next bar (bar 4), price will
prolly have a hard time continuing in the dominant direction, at least in the operating tape.
Change? Or, maybe another way to look at it is, "not continuation".
As shown in snippet 2, price BO'd the tape and the next bar went lower in decreasing red
volume. And another tape. Cool, this time, a short tape.
In the short tape, price is attempting to go lower on decreasing red volume. Granted, we're
zoomed in big time but I've only got 4 bars to work with in the NOW. PV has me thinking
CHANGE (or maybe Not Continuation) in this tape. Agreed? Using the same analysis as above.
Increasing black comes in on the next bar and we now have a candidate "new point 3" (long).
And we get follow through. Now, we can go back and "fix" our gaussian, as annotated in snippet
2. A B2R. And we're finally in a traverse, a bit closer to the Forest .
So, to summarize, did we see CHANGE in the 2 tapes, at the tape resolution? If all I had in the
NOW were the 2 tapes, then yes, IMO. But at the tape resolution, nothing more. But, as snippet 2
shows, this CHANGE was brief and really No Change after the wider channel is built.

30

Comments?
I'm not sure that I answered the question. And I had to zoom in, slightly OT to the Forest, sorry.
We don't have the tool set to trade at this resolution, right? But I attempted to debrief using my
knowledge of PV. Of course, just my opinion and as always, I could be wrong. But
Change/Continuation is the key at all resolutions, right?

PointOne answers some basic questions

1. What is the difference between a retrace and a reversal?
All reversals begin with a retrace.
The gaussians show sequences of the form RBRB2B or BRBR2R.
In other words decreasing volume is a retrace and increasing volume in the same direction, after
a retrace, is a reversal.
2. What is the leading indicator of a trendline BO?
FTT, retrace, PRV+.
3. How does the price test R or S?
In waves. If there is a WALL then the line will hold. You often seen quick retreats from S or R
and the bars form spikes as the line holds. If the wall is chipped away enough (after more than
one attempt usually) and PRV is high enough or the wall is withdrawn, then the line will be
broken.
4. How do you know a BO is going to fail.
PRV fades. A true BO requires PRV+ (frantic covering).
5. How do you know when a BO has failed?
PRV fades (as above), DU (a momentary pause), reverse, back into original channel.
6. If R is broken where do you look for the new value of S and vice versa.
Glib answer: R forms new S, S forms new R. (For good reasons.) Look for Pt 3 at the slope to
match the market pace (expect a retrace to Pt3 before resume). Pt3 may well be within the old
channel as channels overlap.

31

EXECUTION
Aurums Words of Wisdom
It's time to get it out of your head "Price would have gone against me." Price, NEVER goes
against anyone. Price doesn't know you exist. We are looking for one of two things. "Continue"
or "Change". This is all there is, and all there will be. You may miss a signal for change. You
may think you have change, instead of continuation. But you can NEVER have price go against
you. Price doesn't know where you entered, and price doesn't know where you exited.
This isn't a battle. It's a symbiotic relationship. We are not at war with the market, but rather, our
goal is to become the best of friends with it. Get to know it's moods. When it is sad, we want to
be there with it, and ride it down. When it is happy, we want to be there and ride it higher.
(Attributed mainly to comments made by Spyder in chat)

Spyder answers some personal execution questions

Quote from chasedream:
1. How many trades in average do you make per day?
2. Win/lose ratio?
3. Ticks per winning trade?
4. Ticks per losing trade?

In terms of average numbers of trades, The market decides for me. A flat (tight range day)
provides more opportunities, but each opportunity provides less profit. On the flip side, a day
like 3 weeks ago provided fewer trades (by a huge amount) but each trade provided much bigger
profits. In addition, someone trading at a different resolution level than myself, would have a
completely different number of trades. Fine Resolution (bug / leaf) has more trades; Coarse
Level Resolution (Forest / Tree) would have fewer trades. I have had days were I only made 4
trades and days where I made 32 trades (and everything in between).
I consider the wash trades as +/- 2 tics or break even. Over time, the wash trades even out. Some
days, I have multiple wash trades in a row. other days, I have none. Occasionally, I have a loss of
3 tics, due to my inability to react fast enough to a swift market movement, or my own confusion
about 'market context' (which side is right?, and is this an FTT or an HVS?)
In terms of profits per trade, that too depends on volatility and range. Three weeks ago we had a
single bar which spanned 12 points. During Friday's in late summer, the entire range might only

32

reach five points. I have had days where I only walked away up 2 points, and I have days where I
banked an extraordinary amount of capital (and everything in between).
I also leave plenty of money on the table - meaning I do not normally extract three times the
daily range. I have done so a few times, but again, it is more the volatility and range of the
market which dictates the amount of available profit, rather than, my skill as a trader.
I haven't yet fully (and correctly) used all the available tools (Tic charts for example) in my daily
trading. During the day, I only use the tools currently being discussed in the Journal, but monitor
the next tool throughout the day. In this fashion, I can answer questions more easily - based on
what everyone else has available to them. After all, nobody wants to hear me say, "Oh don't
worry about that. If you were using STR / SQU, you'd have caught that spike." Such a response
isn't helpful with respect to assisting people learn the methods being discussed.
I hope you find the answers above helpful. If not, please let me know.

What do you do if you miss an FTT?

Ivo: You watch price going to RTL and break it. Then wait for 1-2-3 setup and get in on pt 3. If
it doesn't break wait for next FTT.

Pr0crast loses his cool during an HVS

I like the idea of debriefing some real trades this month that either turned out well or not. I know
some of us (myself included) are playing around with execution (sim trading, real trading, etc),
and as many have mentioned, it is a bit different when you're really in there pressing buttons.
You really see what still needs work and
what is gelling.
In my case, I am having a tough time
"staying cool" during HVS/flaw type things.
I SUSPECT that's because these past few
days there has been so much volatility that
an HVS is 2-4 points tall.
Here is an example of a trade I made today
where my "lost my cool" and exited for a
wash, when had I somehow stayed in it I
would have netted 8-9 pts. I entered on the
same bar as the FTT, then exited on the

33

third bar after that, where the HVS lashed back at me. Is it reasonable to exit like this? Should I
have placed some sort of limit sell order just outside the very bottom of the HVS to catch the
potential down move after I closed my initial position? If I am supposed to be holding here, what
is my thought process as the 2.5 pt bar slaps me in the face?
My entry is perfect here. I can't help but to think that if I was able to "see" that this was an HVS
somehow, that I would have made the 8-9 pts that were on the table for this quick trade.
Comments or suggestions?
JDAndy: FWIW, I was in the exact same trade, short at 1410.25. The next bar had a small
move and retrace on lower volume, so I held. When price broke toward the RTL (the black line),
I annotated the down channel (I know, not forest level). When price broke the RTL and came
back up, I was thinking FBO and exited at 1408.75. What I did not do was take a look at the
volume. That may have kept me in the trade. The next black bar had me patting myself on the
back. What I failed to do was continue to watch that RTL for another break which would have
gotten me back into the short.
I had a similar problem this morning just before the 10:00 announcements. Was long from the
FTT/RTL break on bar 5 with a nice profit. Knowing that there were numbers coming out at 10, I
bailed toward the end of bar 6, forgetting the "continue" or "change" rules. We know what
happened after that. So...while I am happy to be up for the day and doing a fairly good job of
annotating, I know that I can do better. I did spend a hour or more going over the day, rechecking
the volume gaussians, etc. before I wrapped up.
Bundlemaker hit the nail on the head with his post. The key is to learn to recognize these
opportunities to improve. JD
Tums: If it is not a reversal, it is a continuation. Stay on until it become risky to do so. (i.e.
another FTT.)
Ivo: When the second bar of the HVS did not close higher than the first one you could have
known it was an HVS. Even if you didn't notice the HVS you should have held it as there is no
signal of change. (no FTT + no RTL broken)
If you draw a tape from the FTT down, that tape was not broken.
Spyder: The Forest has no flaws.
Price does not know where you entered, and therefore could not have 'lashed back at you.' The
market knows only two words - continuation and change. Change on one resolution level
(flaws) mean continuation on another. Rather than base your monitoring off your entry, listen to
34

the market. You appear to have monitored on a lower resolution than planned. If you found
yourself within an HVS, then you attempted to monitor with tools not designed to handle such a
fine resolution. The tools you do have, ES, YM, Price, Volume Channels and Gaussians provide
input at the Coarse Level resolution.
In short, you attempted to perform brain surgery with a pick axe and shovel when you needed a
scalpel and scissors.
You learned a valuable lesson today. You learned you need to build a stronger foundation before
attempting to head off the reservation. See how easy it is to be sucked down into the the abyss?
Next time you attempt to SIM Trade, monitor the market and not your P & L. Act as if you
caught the exact tic that provided your entry signal (FTT or Point Three). Then see what the
market tells you to do from the Coarse Level.
There'll be time anuff for countin', when the dealin's done.

35

Spyders 3-07-07 ES chart

I've added some extra annotations after market close in an effort to show those still struggling
with Gaussians how to 'ignore' the fine detail (for now) while remaining focused on the larger
picture.
Judging from the number and quality of posts today, it does appear that most enjoyed a pretty
good day. Nicely done. Keep up the great work.

36

Spyders thought process on tree-trading 3-07-07

Long @ 9:30
Actually, the signal is after 9:30 AM. ES Price forms an FTT on the Red carryover channel from
the previous day. At approximately 9:32:15 we see Price begin to head higher on the YM (also
forming an FTT on its carryover channel. Ym also shows increasing black volume.
Reverse short @ 9:50
Again, it's a bit past the open of the 9:50 bar when we have ES Price break the tape of our up
channel. In fact closer to the close of that bar than the open. A little passed 9:54 on The YM,
Price begins to head lower confirming a YM FTT. ES shows decreasing red volume here as well.
(Answering another posters question about this trade) As I often try to do with situations such
as these, I prefer to take you back to what I knew (or thought I knew) at the point I made my
decision.
We start the day with an FTT on the ES (Point One). Over the first four bars of the day, we see
increasing black volume. As such, my brain thinks - uptrend. After all, we expect to see
decreasing volume in a retrace. Here, we have increasing black volume as price improves. In
addition, I already have an uptrend developing with the YM. When price begins to pull back on
the ES (Point two, my brain says), and the YM shows an FTT, I expect to see decreasing red
volume as price retraces back toward my anticipated Point Three on the ES. When price breaks
the 'uptrend thin green channel' on my previous charts, combined with red volume (with less
volume showing on a PRV basis than the 9:45 bar), I feel pretty confident that everything is
going to progress exactly as I expect. My sole concern developed as time moved closer to the
end of the 9:50 bar. At this point, I see significantly lower volume than I would normally expect
to see at an FTT. Now, I entertain the idea that I may actually have a flaw of some sort
developing. However, since I do not have anything (YM Price / Volume, ES Volume or ES Price
signaling 'change' I reach the conclusion that I have 'continuation' and continue to hold. The 9:55
bar on the ES then confirms my decision to hold by bushing Price even lower (and creating a
small volatility expansion). At the 10:00 AM bar, I see Price begin to slow in its downward pace,
as well as a reduction in volume. As a result, I begin to think 'change' should be upcoming (after
all, we did just have a Volatility Expansion, and I am now on the look out for an FTT). I also
notice Price failed to make it to the left trend line (skinny red lines) and I begin to look for a
possible trend change. When Price again fails to reach the left trend line on the 10:05 bar, and
begins to head higher, I already see an FTT on the YM and PRV volume on the ES tells me to
expect increasing black once again. All that remains to complete my data set is to see Price
breach the right side trend line of this down channel. When it does, one enters long.
The above description went a little farther than your question, but I wanted to show how the
process really doesn't require any sort of hyper activity. In reality, we had more than enough
information to reach a conclusion at almost every step. One didn't need to go check the YM, but
it certainly was nice to see it confirm everything as we walked through the morning's opening
bars.

37

Reverse long @ 10:10

Looking at the ES, Price breaks our down channel with this signal. However, by monitoring the
YM, we see an FTT appear much earlier and know the market plans to head higher. Even if one
wasn't watching the YM, we should already see a 'Point Three up channel on the ES. From 10:10
to 10:15, we also see increasing black volume on the ES. Clearly this is a long signal.
Reverse short @ 10:45
FTT on the ES after two volatility expansions combined with decreasing red volume.
Exit @ 11:40
ES price breaks through the right side trend line signaling an exit. I gave credit here for missing
the FTT which occurred on the ES red down channel at 11:35 AM. Again, I tried to make things
as realistic as possible - including slippage, missed signals and late recognition.
Long @ 11:50
A second FTT within the Red Down channel forms a Point Three Up Trend (blue). The
Gaussians also show a forming B2B. We enter long on such signals even at the most coarse
forest levels.
Reverse short at 13:55
FTT of the most steep channel on the ES. Break of the right side channel tape. One may have
chosen to exit here in an effort to 'bank' profits on the day. If so, the next short wouldn't come
until 15:05 or later (whenever one recognized the Point Three red down channel). As a side note,
we already went well past normal Peak Volume levels. In fact, many probably felt the 13:35 /
13:40 bars were forming an FTT, but based on Volume we could tell this was a flaw. If anyone
was fooled here, don't fret it. With time and experience, you won't be - red volume levels were
way too low for it to be an FTT, and you'll recognize that in the future (if you didn't already).
Exit @ close
Actually, the exit occurred when ES Price broke through the most steep down channel (orange)
Right Trend Line, but because the cash market closes at 4:00 Pm Eastern, we would have exited
on the close.
The above signals / decision points were based on someone who switches resolution levels
between a 'Forest' and 'Tree' level resolution. In other words, a trader who feels comfortable
entering both on an FTT and on a Point Three. However, all traders on the 'Forest' Level
Resolution should have at least caught the Point Three Entry at 11:50 AM on the ES.
Hope that helped.
- Spydertrader
38

Bundlemaker on logic and reasoning

OK, this may sound crazy unless you get what I'm talking about. If it clicks, this is for you, if it
doesn't, place on back burner if you find yourself frustrated later.
When monitoring and annotating charts, we often, almost continuously, find ourselves having to
identify something. "Is this increasing?" "Is this decreasing" etc etc. I find this a very difficult
exercise, because usually the answer is not black and white. Uncertainty rules and then emotions
can take over easily.
The solution is to give yourself a different question to ask. This can make all the difference in the
world for some of you. Change the question from "is it this or that" to "is it more like this or
more like that"? That might seem like a meaningless shift. It isn't. It takes your mind to a
different place of reasoning. Try it.
In addition, try reversing the logic of your reasoning. Move from deduction to induction. Don't
look at a piece of chart and ask "what does this mean". Instead try "if this is a point 3 of a new up
channel, then volume should be doing such and such." Assume your conclusion is correct
(instead of questioning yourself to death) and then ask what the data RIGHT NOW must be to
support that conclusion.
This boils down to testing your conclusion with new data and keeps you in the NOW.
Continuation.....change.....continuation....change. Use the thought process I just presented and it
HAS to keep your mind on continuation versus change.
Pr0Crast's Sim trade provides an excellent segue into what I hoped to discuss this evening falling into the clutches of the next lower (or beyond) resolution level and not making it back.
Attached, I have shown two different Gaussian formations - one much larger than the other in an
effort to assist you in determining:
"How Large is the Forest?"
First some reminders. When you find yourself in a Point Three channel, you need to know which
color bars dominate. It seems simply enough, yet too often we 'forget' which side controls the
day at this point in time. Note the first highlighted area of the attached chart. We begin where
Price breaks through the 'sea' green up channel (left side of chart) providing increasing volume as
Price heads lower. Good so far. As we approach Point Two, we see a black volume and Price
Bar. Uh oh? Is it a flaw? Is it an FTT? Is it a WTF? We tense up and wonder if the trend has
ended because we forget Price is about to do (or more accurately going to attempt to do) exactly
39

as we should expect - retrace back and form a Point Three. In this example, Price never makes it
back to the right side trend line. In fact, price heads even lower on the next bar. Only later does
price actually make it to the right side. Note the black volume bars - they are decreasing (just as
expected). Price even helps us out by instantly reversing as it formed a Point Three - heading
lower quite quickly - and showing increasing red volume (again, as expected) all the way down.
No need to worry about mysterious black bars within this Forest. It's simply Price doing (or
attempting to do) what it does all the time - attempt to retrace to form a Point Three.
The above red Point Three
Down Channel formed the
Final Leg of our 'Kelly' Green
Point Three (Big Red Circle).
From there, we see (first)
decreasing black (as
expected), and then in one
large bar, we traverse the
entire channel for the break
out. While certainly
unexpected, we to receive
increasing black volume
every step of the way - all the
way, to the top.
Now, here is where it starts to
get a bit messy. In the third
highlighted area we have a
Point Three red Downtrend
once again (Medium Red
Circles). If you watch the red
volume bars within the
highlighted areas, you see
exactly what we would
expect, decreasing red volume, for our retrace. However, these increasing black volume bars
often confuse us and make us wonder, "Did we do the right thing here?"
Again, Price is doing nothing more than what we would expect. Price is attempting to retrace
through this channel. Fails. Continues on, and attempts the process once again. On A Tree Try
level, we have FTT to FBO over and over again. When you find yourself confused as to direction
(such as in this case here) ask yourself, "What is my context?" Down channel? Retrace? Of a Big
Kelly Green Forest? Oh well then, I have nothing to worry about until I see a Point Three

40

(opposite direction) or an FTT. IF you do not understand the size of the Forest in which you find
yourself operating, you will freak out, lose your cool or just plain exit out of frustration.
After we hit Bottom, the blue arrow takes us back up to the top where we repeat the process
when encountering an FTT.
However, just so you understand about the size of the Forest. Note the Brown Arrows among the
Gaussians. This Very large Kelly green Forest shows us how we go from Retrace to Reversal
(small red circle in volume pane) over an hour and 15 minute period of time. This is important to
note due to what happened just before the last highlighted area. Had you forgotten to note the
decreasing black volume, you may have seen the price formation as a Point Three Uptrend
(14:30 - 15:05) and found yourself on the wrong side of the market.
Had you drawn in that formation (See dotted pink lines), the bar just before the Point Three of
the Down Channel would have ben your FTT. Now decreasing black volume would have told
you in advance of the FTT (pink circled) that this simply wasn't right providing you ample
opportunity to reverse and catch the express train lower. Note again how over the 'big picture' we
see decreasing to increasing red volume - just as we see it on a smaller scale.
Always know your context (How large a Forest in which you currently find yourself operating)
and avoid a very common error - ending up on the wrong side of the market.
- Spydertrader

The elephant in the room

PointOne: I've mentioned this to Spyder already:
The elephant in the room is: how will you perform when real money is on the line. The
detractors focus on this while we are learning; they have a point although they are also normally
very close minded, damaged and negative (for whatever reason).
I'm suggesting a rationed use of real money or paper trading (for fun) say once or twice a week
for everyone. If you lose 2 points - stop. If you have 2 points profit going into a FTT then
reverse. Wash as often as you like. Something like that. See how you do, how your heart rate and
breathing responds etc. Then do debriefs and real time monitoring, return to calm. Eventually
you should find this calm monitoring state when real money is on the line.
For me I can ace the paper trading all day, I mean it is ridiculous. Then I open my account and I
sometimes freeze when I see the FTT (the detractors will jump on me now - I don't care).
41

I wait for just a little more confirmation - it's real money you see. Then it moves as anticipated
and my emotions get inflamed (a little) and if I don't chase this move I'm off balance for the next
one (probably counter trend and more risky to boot). I've got FTTs marked on my Nikkei chart
as I type this that I did not trade this morning: 270 points missed (conservatively) and its only 90
minutes into the session. Maybe I need to decide more clearly if I am just monitoring (MA) or
trading (MADA) for the day (apologies for thinking out loud).
I don't want to get to October and not have more experience in the line of fire.
Without detracting from Spyder's very well structured and thought out syllabus, does anyone else
think this is a good idea? I know we are all free to do whatever we want!
Spyder: Some may chose to view the following post as rude or negative. It is my hope, that you
will see it for what it really is - a frank assessment of where many find themselves. Please read
the following words a few times before responding, and allow my thoughts to sink in an effort to
make sure you received the correct message.
While everyone here is an adult, and welcome to choose their own path, I wanted to remind
everyone of my initial desire to take two full months per syllabus topic to give everyone enough
time to develop the skills necessary when this thread first began. Back then, few would have
understood such a rationale. After all what could possibly take two full months to learn?
Over the last two days, I have seen many people make numerous errors indicating they have not
progressed nearly as far as they believed. The rationale behind the errors ranged from the
ridiculously absurd to the enlightened. Baggage from past attempts at profitability, bad habits
and failed efforts to focus on mastering the fundamentals have infected the subconscious of
many participants. While some here have progressed far enough to warrant Sim, or even real
dollar trading, many have not.
I do not believe the elephant in the room is how people will do when they are ready to trade. I
believe the elephant in the room resides further back down the path - well in advance of the time
when real or sim trading begins. The elephant resides in the area of basic fundamentals far
removed from placing trades. Drawing channels correctly, focusing on Gaussians, monitoring for
continuation vs change: these are the areas where effort needs to be applied. If one cannot master
each of these areas now, no amount of SIM trading is going to push you into profitability.
I encourage everyone to take stock of their own efforts. Take a long hard look in the mirror and
determine where the difficulty resides. Be honest with yourself and find the answers needed to
move you forward. In my experience, when learning a new concept, obstacles develop from one
(or more) of three basic areas:
42

1. The Instructor
2. The Material
3. The Student
If you feel I (or anyone else who offered assistance) hasn't provided the material with enough
clarity, speak up. If you feel the difficulty of the material itself falls beyond your understanding,
speak up, so that someone can provide additional clarity.
If you find no problems with the first two, then perhaps its time to look at this from a different
point of view (a different mindset or vantage point). On Tuesday, following the basic Forest
Level guidelines netted you 39 points as price failed to breach a right side trend line for over 5
hours. If you did not 'see' this develop, if you did not SIM Trade it, If you did not place real
dollars into it, then the bridge you need to cross exists way before SIM trading.
The elephant in the room you need to deal with is you.
For those who have already progressed far enough to know (and you know who you are) where
you reside on the learning curve, you don't need anyone's permission. You know where you need
to go to focus, and you know when the time is right to move forward. For the rest of those
following along, cross the bridge in front of you, before worrying about the one several miles
down the road.
Again, I hope all receive this missive in the spirit intended. As always, Good trading to you all.
- Spydertrader
Ivo: If you are not sure you cannot perform the same (that is: follow the same rules) then you're
not ready to use real money or trading too big because unconsciously you're not convinced the
method works if you follow the rules.
If you lose 2 points - stop. If you have 2 points profit going into a FTT then reverse.
IMO that's tampering with the rules and from one thing comes the other. If you stop when you
lose 2 points you will beat yourself up missing a great opportunity after that, then you will take
an opportunity that's not really an opportunity, etc etc. My opinion is we have to follow the rules
exactly. If you follow the rules, feel good about it. If you could have made more but you did
follow the rules, feel good about it. If you could have made a profit getting out at some point but
you had a small loss but you did follow the rules, feel good about it. If you made a profit but the
rules told you to get out (you saw a clear FTT but held on to it), feel bad about it.

43

If we simtrade, real trade or the size we trade is not part of the rules. For me personally I
honestly think trading one real ES contract at this moment is too much to remain objective so I
prefer 50 SPY or simtrading. I need some successes first and increase size little by little and I
don't care how small the successes are as long as it is consistent which means no losses on a
daily basis.

Bundlemaker has another religious experience

Im pretty sure I have received a religious experience, although mine has been strung out over
a few days.
This mornings chart work made something very clear. Some days ago, Aurum suggested that I
was predicting. I swore I wasnt. Yet, a deeper part of me knew I was. This morning an epiphany
occurred: I recognized PREDICTING behavior WHILE I WAS PREDICTING.
I believe once you feel what thats like in your body, you will recognize it forever. Now, how do
you go about recognizing it? There are probably as many ways as there are humans, but this was
my process...
First, I needed to do EXACTLY as Spyder instructed, NO modifications whatsoever. This itself
needs some time and patience to implement, as ones ego certainly will try to combat this.
Second, just try to notice when fear, doubt, frustration, or the like; comes into your reality. Those
emotions are clear, unambiguous signals that you ARE predicting. Period. No matter what you
think is going on. Think about it, and youll realize this HAS to be true by definition.
To stop predicting is almost impossible, UNLESS you first notice youre doing it. Then its easy.
Very few people have been raised to notice their emotions, really notice them, in real time and
acknowledge they are there. If this sounds too eastern for you, Im sorry. Ive crossed the bridge,
been where it hurts, and I know the path to comfort. Its in the noticing.
Once you notice, you do just one thing: get off the single data element you were stuck on! I
promise you, if you were feeling those emotions I mentioned, you were stuck on a single data
element. Jack talks about repeating these four steps: Monitor Analyze Decide Act. Ive
heard him say it until I got nauseaus. Now I get why you do this. It keeps you out of prediction.
So, the sequence Im suggesting is: notice negative emotions. Get off single data element to
full data set. Analyze by asking yourself what should be next based on the now data set.
Is that happening?..... rinse and repeat.

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Jack: Frame this.

The emotions of data sets and the routine using NOW are: support, comfort and confidence.
Bob (bundlemaker) is on the mark. The CW emotion set appears from incomplete sets and sub
looping with single data elements.
When you depart from observing the taking of the data set, you now longer have the support of
your belief; you lose the comfort of knowing how to know; and you no longer make each pass of
the routine a building on success which is where your confidence comes from.
Frame this post of Bob's.

Ivo on using the RTL

Mmm. Well if price crosses RTL by 2 or 3 ticks we should get out (if we didn't get out earlier
already for example if we did spot the FTT). I prefer to actually set the stoploss automatically 2
or 3 ticks away from the trendline. Then I move it every 5 minutes depending on the slope of the
trendline. It stops me from waiting and waiting longer to see if price will go back or to get out 1
tick better etc etc. (all these human things that usually get us in trouble..)
Also Jack mentioned using the RTL for stoploss but I recall he calculates the average nr of ticks
of the spikes of that day and then draw another trendline on the right (or left, depending if you're
long or short) the number of average that you found away from RTL. Pls correct me if I am
wrong.
One Aha moment recently I had is that you HAVE to get out when RTL is broken because
something is going on. The forest is not as anticipated and you have to avoid loss and wait and
let the market tell you what's going on preferably from an objective position (= no position).
Mak: Really awesome post. This is so exciting to see these type of posts of how folks are
getting it! As for Jack and his spike offset, I understand why he does it. Part of it has to do with
having some wiggle room in the trendline itself. The other is matter of possibility. Take for
example, what if you saw that there's has never been a 5M bar with 15 points of volatility and
you wanted to incorporate this fact. Well would you could do is that at the point of entry, you
can set a stop that is 15 points away. By doing this, what you fully expect is that within the next
5M, you do not expect to get stopped out. So for Jack and a few others, it's an anti hyper thing
but more importantly, it is a characteristic of the actual instrument you are trading. This is the
whole point of letting the markets do the telling instead of traders doing the predicting. The
spikes on a given chart are the extreme movements. On a psychological level, spikes can be very
45

good at shaking people out of a trade that they may have just put on. Given this knowledge, if
you don't want to be shaken out by spikes, then it makes sense to find the extreme spikes and
place your stops outside of these extreme so that you don't get shaken out of what is usually a
perfectly good trade... This the point of Jack's stop offsets. You are placing yourself to be in a
position not to be shaken out of the assets naturally extreme spikes... If your offset got violated,
then chances are as you have said, that something is definitely different...

Spyder on the psychological effect of having money on the line

Does the market know you traded real money vs SIM? Of course it doesn't. Only you do.
Altering your decisions based on having real money in the market is a direct cause of focusing
on your P & L or entry / exit points. Stay focused on the market and concern yourself with
proper execution. When you do, you'll notice nothing changes.
The psychological aspects of having real money on the line only gain importance when the
trader places emphasis on it. Scientific studies have shown the brain cannot tell the difference
when an olympic athlete 'visualizes' performing at their sport compared to actually participating
in the sport. The same synapses fire off. Don't allow fear and greed to enter the equation, and you
can avoid most of the self created hurdles other traders face.

46

OTHER
Bundlemaker learns from his mistakes
With all due apologies to those who hate long postsI tried to make it shorter but couldnt.
I have received many thankyous for the channels video, and I am appreciative. A number of
pms asked me questions like how long did it take for you to trade this method? I am currently
LEARNING this method, not trading it. There is a HUGE difference between reading about
something, learning it, doing it and finally mastering it. Im telling you all this as a precursor for
a very important lesson I received today.
I have been drawing channels close to daily for 3 months now, with time off for bad behavior,
LOL. I thought, reasonably, that if I can do such a convincing job on creating a video that
teaches this stuff I should AT LEAST be able to sim trade some forest level FTTs. I took two
trades that failed and missed the first good trade of the day to boot. I did my damnedest to prove
to Spyder that I did it right and something was missing from my understanding of the method. I
was as convinced as dirt that I was doing it right.
Then, with what can only be called a ridiculous amount of patience on his part, he lead me to a
place where I could recognize what was there but I couldnt see. Guess what? I TOTALLY
missed drawing what should have been a simple channel annotation. Why? Because when I got
in traffic (took the trade) I forgot what to do with the steering wheel and pedals (drawing the
channel) and I crashed (lost money).
How many of the nay-sayers of this method just might be guilty of what I am admitting. And I
work damn hard at this. Think about how easy it is to prove something doesnt work when you
dont want it to in the first place.
The bottom line is I learned I do not have what I call unconscious competence in drawing
channels. You experience unconscious competence every time you drive and all of a sudden
realize 3 or 4 mile markers have passed you by and didnt realize it. It is a form of hypnotic or
altered state. I was missing being in that state. I completely ignored what I instructed you to do in
the video. It became glaringly apparent that I still cannot do channels in my sleep (that is,
unconsciously without having to even think about it).
As some of you know, my wife sits and learns along with me for hours and hours a day. She
presented a powerful metaphor which Id like to share. How many of you, experiencing
frustration or doubts, feel like what Spyder is teaching is totally discretionary, guesswork, or art?
I certainly have at times. I kept thinking how if its art its not objective, its not mechanical, it

47

cant be repeated or transferred.

Then the smart one in my marriage, who is an artist, basically told my I was full of s***. She
explained how drawing is taught and how even the masters start a painting. Art, is at the most
basic level, not so artful. When learning to create a painting, you dont draw objects, you draw
shapes. Its squares and triangles and circles; NOT tea cups and apples and landscapes. Its a
straight-forward, repeatable process to create a painting of whatever. She said, You draw what
you SEE, NOT what you KNOW. All of a sudden my excuse for bad trades was taken away.
Think about how that made yours truly feel. This aint art. It is repeatable. But to add
ANYTHING (like sim trading, stretch squeeze, whatever) to the mix before you can do the most
basic thing at an unconscious automatic level is to invite pain and perceived failure.
Im happy I sim traded for that single afternoon, it was the fodder for a great life lesson. I hope
you can learn from my error.

Ivo on the reliability of FTTs

I have a question about FTT's. A very important part of this method is identifying the FTT's.
Is there anything you can say about the FTT's. What kind of FTT's are reliable and which ones
are more likely to be a flaw? There must be a difference between them.
For example I like the FTT where a bar stops like two ticks before LTL and then quickly snaps
back. I like it because (for me) it is obvious and risk is (IMO) limited because when price does
touch LTL you can get out immediately and this is not far from your point of entry. Also I like
FTT's that have much higher volume than the bar before it. I don't like FTT's when there's
another peak in the same channel and the FTT goes exactly as far. These often end up in laterals.
I have problems identifying FTT's that are stretched out over several bars. I find FTT's where the
bar is taller than the bars around it reliable. I dislike FTT's in a channel that was just formed one
bar before it (these often are not FTT's). I like FTT's with a large shadow on one side. I do not
like FTT's when price stays on the same level a for a long time (after all how good can the trade
be if everyone can get in)
These are just my observations. I am very interested in reading your opinion about this so pls
share.

48

Bundlemaker on the YM leading the ES

I wanted to make a separate post on the YM leading the ES and how I was finally able to see
that. Frankly, I didn't have any doubt about YM leading ES, I trusted Spyder, but I just wasn't
seeing it.
What I did, to focus on that part of the YM that gives you this leading information was to skip
drawing any channels on YM EXCEPT the tapes. By doing that I end up ONLY focusing on that
small part of the YM chart that has bearing on my current decison process.
I have my chart windows overlapping, so usually I can't even see the YM. That keeps me off that
fine resolution tool when I shouldn't be there. When I need to see YM, I just click on the little bit
showing to bring the chart up front.
When I think I see an FTT on the coarse level (for example, the high of the 15:15 bar today) I
jump over to the YM, throw on the current tape (an up tape at that point) and watch for the tape
to break to the down side.
This procedure caught three forest level FTT's today. As I recall, all FTT's were called withing 3
ticks of the best price.

Spyder on the different levels of trading

In an effort to assist those following along, I have altered my annotation style to include only
The Forest Level Resolution. Keeping in mind my previous post with respect to "How Big is the
Forest?" Note the Gaussian changes which occur. Are they different on my chart when compared
to your own? Do you 'see' things as they are, or as you'd want them to be? Are you monitoring
on the correct resolution level, or do you only think you monitor correctly? In an effort to assist
you to know the proper resolution level, I have added the following guidelines for data
gathering.
Forest Level - Point Three Channels and Gaussians
Tree Level - FTT's (and the above)
Limb Level - Tapes (and the above)
Leaves Level - FTT's of Tapes (and above)
Bug Level - Intra-bar Changes (and above)
If you find yourself confused about a bar changing color halfway through a five minute period,
are you really focused on the Forest? 'Cuz it sounds an awful lot like you are looking for bugs,
49

on a leaf, on a limb, on a tree, in the Forest.

Stay focused on your current resolution level to allow you to properly learn about the next finer
resolution level. From the Forest, you can learn about FTT's and flaws without concern for loss.
From the Trees, you can learn about the tapes and how they contain temporary micro-trends
throughout the day. Everyone must build a strong foundation at their current level of expertise,
before moving forward.
I hope you find the above information helpful, and I'll post today's charts after adding some
requested information.

The disciplined trader

JDAndy: I ran across this tidbit in 'The Disciplined Trader' by Mark Douglas, and for a moment
there I thought I was reading a Spyder/JH book
There is another characteristic of our nature that supports our need to learn. Whenever we learn
a skill, the steps involved in the operation of that skill drop down to an unconscious level of
operation, so we are then free to learn something new. To learn a skill, we usually have to break
the skill down into a series of small steps and concentrate on each individual step until we can
put all the steps together into a series of effective movements. By concentrating on each small
step, we narrow our focus of attention to the point where we are oblivious to anything else going
on in the environment.
For example, think of a time in your life when you were trying to learn a new skill, say, in some
sport, and while you were trying to put all the movements together, someone was attempting to
get your attention on some completely unrelated matter. In such a situation we would find it
extremely difficult, if not impossible, to stay focused on one without destroying our concentration
on the other. However, after we have successfully made the skill a learned resource, we could
easily perform the movements while focusing our attention elsewhere.
Without this characteristic of our nature, where our skills drop to an unconscious level of
operation, we would find it nearly impossible to move beyond the performance level of a typical
infant. Just think what it would be like if we had to concentrate on all the movements necessary
just to pick something up the way a typical infant does. We didn't always have the eye/hand
coordination that we take completely for granted. We had to learn it. We learned it because we
were attracted to things in the environment we wanted to experience with our sense of touch. As
we learn each skill, we can automatically access the series of movements to execute the skill so
we don't have to concentrate on any of the individual steps, which then frees our attention to
explore and continually expand what we can become aware of.
May this be the week that course monitoring becomes unconcious

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Spyder on trading FOMC days

Quote from optionpro007:
On FOMC days, do you hold a position into 14:15 or do you bracket the market moments
prior?

I trade the morning / midday until

volatility and volume drop off
significantly. Just before the
announcement, I'll place a bracket
order. Do not place the order too early,
as usually you'll see a 'fake out' move
just prior to the actual move.
- Spydertrader
WGTrader: Can you give us an idea
of how you set-up your bracket (OCO)
order this afternoon? For example, how
soon before 14:15 did you place your
order? Also where did you set your
triggers for your initial buy/sell prices
and were those based on the ES or the
YM? I think it would be educational for
us to know how you did it and your
reasoning for why you did what you
did. Thanks.
Spyder: Note the attached chart snip. The Pink Lines represent the most recent range just prior
to FOMC. Since the range outlined by the Pink Lines represents a (near) 2 point spread, I set my
bracket to enter short 2 points below the close of the 2:10 bar (circled red). On the flip side, I set
my long orders to trigger 2 points above the same circled area. You may have to adjust these
levels slightly as price jumps around a bit just before the close of the 2:10 bar. Setting such a
wide spread keeps me out of any 'fake out' type deals that happen right around the announcement
time (See earlier post). I try to set the bracket as late as possible taking care not to wait too long
and miss the whole deal.
Others probably set their brackets slightly differently than I. Perhaps, they can chime in at this
point.
- Spydertrader

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Spyder on stalls
A 'Stall' represents a temporary slowing of price movement in the direction of the dominant
trend. Usually represented by an opposite color Price and Volume Bar (but not always) a stall
normally falls 'inside' the previous Price bar and has significantly lower Volume than the
previous Volume bar.
Quote from Tums:
is a lateral simply multiple stalls?
and CCC = multiple laterals?

Yes and No. Even though CCC presents itself most frequently in a lateral formation, CCC results
from extremely low volume levels. Laterals occur with decreasing volume in the same color of
the dominant trend. However, one can view an HVS as 'multiple stalls in a row.' Although an
HVS can occur in the form of a lateral, an HVS represents multiple stalls which occur in
opposite directions one after the other - and does so at higher volume levels (for the most).
Individuals trading on the Forest or Tree Resolution Levels do not need to differentiate between
the various types of 'flaws' as all flaws require the same action - Hold.
- Spydertrader

Excerpts from books

-CME Course on Market Profile

-Tom Williams , Master the Market.

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DKM and Spyder on intrachannel PT3s

This may be obvious to many so please bear with me. I have pondered on why I tend to miss
many pt 3's and I have come to the following conclusion. When a pt3 occurs outside the previous
channel we have the benefit of having seen (a) the FTT, (b) the RTL BO, (c) the r2r or b2b
volume thrust through the RTL, and (d) the formation of the new pt 2 with a retrace on reducing
volume as pt 3 is approached. Attention to tapes and the behaviour of volume at this time will
frequently identify the new pt 3 in a timely manner. However, when a new pt 3 is formed inside
the previous channel then we have the FTT followed by the anticipated reducing volume as price
makes its way to the RTL and then we see the RTL BO, volume thrust etc, and I am left thinking
"oops" that was a new pt 3 back there. When Spyder first described the Forest Level rules he
stipulated that the trader should wait for the break of the RTL. I assume therefore that when a pt
3 forms inside the previous channel that the FL trader should not attempt to trade it. If one
chooses to do so, then it will require a little more patience before prv arrives to validate the trade.
I hope that makes sense.
Spyder: A while back, I showed how a person (on the Forest Level Resolution) may choose to
follow the new point three channel created when two FTT's formed within a previous channel. A
forest level trader may choose to begin to trade the new channel in this case, instead of waiting
for the RTL Break of the old channel. However, Following this guideline is optional.
Unfortunately, I no longer recall the chart I used to discuss the example (Editor: see page 17).

53