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1. Frequently Asked Questions
2. Glossary of Terms
Patterns, Set-ups, Analysis
What is the Short Skirt Trade?
A SHORT SKIRT is a quick scalp trade made in the direction of the short-term trend.
The setup occurs after the S&P has made a sharp "impulse" move. The pattern tends to look like a continuation flag on a 1-minute chart. We call it a "Short Skirt" because the trade usually lasts between 2 - 10 minutes. The concept is - "quick in and quick out without getting caught."
We try to look for Short Skirt setups that have the potential for a minimum of three points in the trade. An initial 3-point STOP is placed from the trade entry price. The objective for the trade is a retest of the previous swing high or low, even though the market often makes a new leg up or down.
How do you enter Short Skirt Trades?
We watch for a price retracement of 2 to 4 points from the most recently formed swing high or low. For an untrained eye, it may be useful to watch the 20-period exponential moving average on a 1-minute chart, though the price does not always retrace that far. Sometimes the reactions that go sideways instead of back to the EMA can be the best trades. The initial price retracement lasts about 5 minutes. When the reaction back starts to stall, we usually enter a market order. It is ideal to enter the trade BEFORE the price starts moving back in the direction of the original trend. It is also most efficient to work a bid or offer as the price is correcting back down, but sometimes the type of order used is a matter of personal style. Since the price has already corrected back 2-3 points when a trade is entered, it is rare that the initial 3-point stop is hit. We tighten the stop up after the trade moves off in our favor. After the trade starts to work, immediately pull your stop down to the last swing high or low in case the market does not make a full retest back down.
What is a Bull/Bear Flag?
These patterns are taken directly from classical charting (Schabacker, Edwards & Magee, etc.) and have withstood the test of time. Flags are a continuation pattern in a trending market. They are found on all time frames, all markets, and offer one of the better risk reward ratios for trade setups. A flag formation should be preceded by a "pole" or initial momentum move in the direction of the trend. The ensuing consolidation tends to be relatively shallow. Continuation patterns are much shorter than reversal patterns. The longer a "flag" goes sideways, the greater the odds that it will turn into a reversal pattern as opposed to leading to a new leg in the direction of the trend.
What is a "Grail" Trade?
The "Holy Grail" trade was originally described in my Street Smarts book. The setup occurs when the market's trend has been strong enough to cause a 14-period ADX to rise above 30. When the price then retraces back to the 20-period EMA, odds favor a retest of the most recently formed high or low.
What is an "Anti" Setup?
The Anti looks like a small bull or bear flag pattern that occurs either in the middle of a trading range or just after a market has reversed from a sustained trend move. Classic bull or bear flags are continuation patterns that can only occur in a market that has a well-defined trend. Sometimes an Anti will look like the middle retracement of an A-B-C pattern. Thus, we are able to get a measured move objective that is based off the prior swing. The Anti MUST be preceded by a short-term IMPULSE move. Buy Antis are more frequent than Sell Anti setups. The long trades will have the best odds of success if the prior up leg is GREATER than the previous down leg. Oscillator pattern recognition based on either the 3/10 oscillator or a 7-period %K, 16-period /%D combination of stochastics can also be used to identify this setup.
What is Momentum Pinball?
Momentum Pinball was originally introduced in the Street Smarts book as setup to indicate a Buy Day or a Sell Short Day ala George Douglas Taylor. Taylor looked to go short after 1-2 days of rally, and cover and go long after 1-2 days of decline. The pinball indicator is calculated by using a 3-period RSI of the daily net change. The "Street Smarts" book contains a complete and detailed description of this trade.
(Momentum Pinball, Anti, Holy Grail, 80/20 and 90/10 bars, and 2-period ROC signals are some of my ORIGINAL concepts. It is repeatedly brought to my attention that there are individuals on the internet offering newsletters and courses based on my original copy-write protected materials. Please note that I do not have any affiliation or association with these entities.)
What is an "Oops" Trade?
"Oops" is an expression originally coined by Larry Williams. The setup occurs when the opening price gaps outside the previous day's range. A buy (or sell) stop is placed just inside the previous day's range in case the market then closes the gap, indicating a reversal. The trade is best treated as a scalp trade and exited before the close. This pattern has no long term forecasting value.
What are the main indicators you use on your charts?
We use the same indicators on all markets, all time frames. We use a 20-period EMA (exponential moving average), a price oscillator, and a 14-period ADX. The oscillator that we use is the difference between a 3 and 10 period simple moving average, with a 16-period simple moving average of the 3/10. We also use Keltner Channels based on a 2.5 ATR centered around the 20-period EMA. Keep in mind that indicators are just a crutch to tell you what is already there on bar charts. Many traders do best when they learn to read bar charts without the use of indicators, oscillators, etc.
What is the "Breakout Mode"?
We use a "breakout" mode strategy when the market has had some form of range contraction. A trend day, or large range expansion day, often follows periods of range contraction, or small average daily ranges. When we are in breakout mode, we use strategies to enter in the direction the market is moving, instead of waiting for a reaction in the price.
How do you measure market breadth, put call ratio, and volume?
Market breadth is monitored by looking at the number of advancing issues minus the number of declining issues on the NYSE. Put/Call data is provided by the individual exchanges. We look at the equity only put call ratios, in addition to the index put call volume ratios. For put/call data updated every half hour, you can use this link to Chicago Board Options Exchange: http://www.cboe.com/MktData/default.asp We look at the volume on the NYSE and compare it to readings made at the same time on previous days.
What time frames do you look at?
Our initial nightly analysis is always done off the daily and weekly time frames. During the trading day, we use 15, 30, 60 and 120-minute charts. For the SP futures, 1 and 5 minute charts are also helpful. Most often, though, we tend to watch the "last price." A trader, who can monitor the basic support and resistance levels by watching the tape action, will often be one step ahead of the trader using bar charts. It is also easier to monitor multiple markets and market internals simultaneously when looking at a quote board instead of charts.
Please define TICK, TIKI, TRIN, and VIX.
TICK: This is the net change of all NYSE stocks on an uptick minus all NYSE stocks on a downtick. Plus or minus 1200 tends to be an extreme reading. in a trending market environment extremes in the ticks can be used as a momentum indicator indicating further price movement to come in the direction of the trend. however when the market is in consolidation mode, after it has already had a big move, ticks will mark the ends of the short term swings up and down.
TIKI: This is the difference between all DOW stocks on an uptick minus all DOW stocks on a downtick. Plus 24 or minus 24 tend to be extreme readings.
TRIN: The TRIN is also known as the ARMS Index after its creator, Dick Arms. It is computed as follows: (Advancing Issues/Declining Issues) / (Up Volume/Down Volume). We watch the direction TRIN is moving to indicate the overall trend of the market. For example, if the TRIN goes from .80 to 1.00, this would indicate selling is coming into the market.
VIX: This is the Volatility Index that is based on the implied volatility of the at the money OEX puts and calls
Most real time data feeds transmit these indicators. However, different data feeds may use different symbols. If you have any questions regarding symbol code, please contact your data vendor directly.
What is a "Z" Day?
A "Z day" is a consolidation day that often follows a trend day. The morning period is characterized by a testing back and forth in the price action. We use a different set of trade strategies on these days than we do on other days. one of our favorite trades is the bollinger band trade. see bollinger band explaination in the FAQ
What is an NR7 day?
An NR7 is a day in which the today's daily range (today's high price minus low price) is narrower than the previous six days. The significance of this pattern is that it represents a marked decline in price volatility. Range expansion and an increase in price volatility tend to follow an NR7 day. An NR4 day is similar to an NR7 day except that it represents a day in which the range is the narrower than the previous three days.
Toby Crabel originally presented the concepts of NR4, NR7, WR7 etc., in his Market Analytics Letter written in the 1980's. We give credit to him for initiating research in this area. His original articles were published in the magazine, Technical Analysis of Stocks and Commodities.
What is a WR7 day?
A WR7 is a day in which the today's daily range (today's high price minus low price) is wider than the range of the previous 6 days. The significance of this pattern is that it represents an expansion in price volatility. A trader can often buy or sell a test of the WR7 day's high or low, on the following day for a scalp trade.
What is the 2-period ROC?
The 2 period Rate-of-Change is today's close minus the close two days ago. For example, to get Friday's 2-period ROC, you would subtract Wednesday's close from Friday's close. The 2-period ROC is useful in highlighting a two to three day trading cycle as explained in the Taylor Trading Technique. Raw momentum is the only derivative of price that we have found to offer statistically significant results in our quantitative research. Our results with this indicator have proven to be durable and robust across all markets.
What is Average True Range (ATR)?
The Average True Range ("ATR") was introduced by Welles Wilder in his book, New Concepts in Technical Trading Systems. ATR is a measure of volatility, and it is a component of the ADX indicator. ATR is calculated by finding the greatest value of:
1. The distance from today's high to today's low.
2. The distance from yesterday's close to today's high.
3. The distance from yesterday's close to today's low.
The main difference between ATR and the plain 'daily range' is that ATR takes into account gaps.
What is a divergence?
A divergence occurs when a momentum indicator or other instrument fails to confirm a move in the price action of the market under observation. For instance, if the SP futures makes a new low in price, but the 3/10 oscillator fails to make a new momentum low, then the SP is said to be diverging from the oscillator. Likewise, if the SP futures make a new low that is not confirmed by new lows in a related market or index (for example the SP versus the Dow Industrials, or the SP versus the TICK), this is also considered a form of divergence. Divergences are useful in that they warn of a loss of momentum and often precede a reversal in price.
What are Keltner Channels?
Keltner Channels are a form of trading bands plotted directly on top of a price chart, as opposed to beneath the price chart as in the case of an oscillator or volume. The bands are based on an ATR function centered around a moving average. We use a value of 2.5 ATRs added to and subtracted from a 20-period exponential moving average to create our bands.
What is the difference between Keltner Channels and Bollinger Bands?
Bollinger Bands are based on a standard deviation function. Very often, you will see times where the market is moving HIGHER but the lower Bollinger band is declining. This does not happen with Keltner channels. Though both are based on a volatility functions, Keltner Channels will maintain a more constant width than Bollinger Bands and thus we find them more pleasing to our eye. We also have had much better success in using range functions in our quantitative modeling as opposed to standard deviation functions, especially when creating short-term timing systems.
Bollinger Band trades
we use 2.5 standard deviation bands centered around a 20 period moving average to make trades on the day following a trend day. we do these trades in the morning session only. the concept behind this is that a push to the upper or lower band will setup a countertrend trade. the objective is a push back to the moving average. no stops were used in our testing, we just used an exit of whenever the trade hit the moving average or end of day in the worse possible scenario.
What is A-B-C?
A-B-C is a term borrowed from Elliot Wave terminology that denotes a three-wave corrective pattern that is often found in the middle of a trend. Waves A, B and C are often of the same magnitude in both price and time, and the pattern tends to have the appearance of a zigzag.
What are the parameters for the 3/10 oscillator?
To construct this oscillator, first subtract a 10 period simple moving average from a 3 period simple moving average. We often refer to this as the "fast line." Next, create a 16-period simple moving average of the "fast line" - we refer to this line as the "slow line." It is also useful to plot a horizontal line at the zero value. We plot all three lines together on our charts beneath the price. For some indicators, such as the 3/10 oscillator, we provide subscribers with downloadable TradeStation code files.
What is an EMA?
When we refer to the EMA, we will always be referring to a 20-period exponential moving average. This line can be thought of as a proxy for a "regression to the mean" in a trending market. It has little value in a trading range market. Unlike a simple moving average, which takes the average price of the last 'X' periods, the EMA method takes a weighted average of the most recent price and the average price from the bar before.
What size stops do you use?
In general, we use an initial stop of 5 points in the SP futures unless specified otherwise. For scalp trades in the SPs, we use a 3-point stop. In the domestic futures markets, we use a fixed $500 stop per contract unless specified otherwise. If there is an unusual expansion in volatility, we will use wider stops and lower our leverage. Stops should be tightened up as a market moves off in your favor.
In stocks, we recommend using stops to limit losses to no more than 2% of your working capital.
How do you enter positions?
In determining whether to use market, limit or resting stop orders to pull us into a trade, we assess the liquidity conditions and the type of market environment (i.e., trending, choppy, etc.) Each trader must ultimately find their OWN style that works best for them over time.
Do you have resting stop orders in the market?
The great majority of the time we keep our stop orders resting in the market. The exceptions tend to be when a gap opening is expected, in which case we let the market settle in first, and then place our stops just outside of the early morning range. The other exception is when current liquidity conditions are poor and we have a large position on. This has been the case in certain markets such as coffee, where it is preferable to let the broker work an exit order within a fixed time window.
How do you place your orders in the SP futures?
We call most of orders directly to the futures pit. However, over the past few years we have been using the e-minis with electronic order entry as well, especially as liquidity has been shifting to this market.
What do you mean when you refer to "premium"?
The fair value premium is the theoretical futures price minus the cash index price. 'Fair value' describes how far the futures contract should be trading above or below the cash index given expected dividend income for the stocks in the index, the number of days to expiration for the futures contract and the short-term interest rate. When the SPs are trading at a premium or a discount, we are referring to a situation where the futures are trading above or below their "fair value".
What is the historical volatility ratio?
This is the ratio between two different lengths of historical volatility (for example, the ratio between 25-day and 100-day historical volatility). We use this indicator to alert us to times when short-term volatility has declined below longer-term volatility by a certain percentage threshold. These signals are often precursors to increasing volatility.
What is the BO+/BO- on your trade sheet?
These are the parameters for a proprietary volatility breakout system that we trade during certain periods. A buy is triggered on a break above the upper number and short is triggered on break below the lower number.
What is the Golf System?
Golf is a proprietary system that enters the SP futures on the CLOSE. LBRGroup published this system in an advisory service between 1993 and 1998. We also traded it on a mechanical basis for our managed futures program. We stopped trading it mechanically when the overnight volatility became too great during the Asian crisis, though we still use it as a timing indicator. It is based in part upon the 2-period ROC and bar chart patterns.
What is the afternoon 2-point trade?
The 2-point play is not a chart pattern. It is something that we started doing real time in October 2004. It is not a mechanical system though either, since there is no fixed stop other then a time stop. The time stop is 24 hours. It is a tendency based on pattern recognition (number of days up or down along and degree of trend). It is something that we started doing for ourselves originally, and other members have started using it as
well. Trades are initiated on the reopening of the Emini contact after the market closes (i.e., the beginning of the Globex session). Very often the 2 point objective is hit in the Globex session, which is why we do not work these trades for the room, but just put in what they will be for your own knowledge. There have been times where the 2 point objective is not achieved until the day session the next day. Of course there will be a
times where the objective is not achieved at all, also.
What is the RAT trade?
The Rat trade is an afternoon breakout trade we make in the SPs on days where there is heavy institutional activity. It is not based on a specific chart formation, and the parameters and filters for this trade are proprietary.
What is the "Last Call" trade?
This is a trade made in the last hour of the day in the index futures. It is similar to the Push into the Noon Hour time frame that we make in the morning. (Members can reference this in the Trade Library Setup). The Last Call setup is based on a combination of bar chart pattern recognition and market breadth parameters.
What is a "Pivot Point"?
This can be a previous swing high or low, or visible chart point such as the high or low of a gap area. Globex highs and lows, along with the previous day's high and low are all forms of "Pivot Points." We do not use Fibonacci numbers or arbitrary calculations. We are interested in levels that ALL market participants are aware of, as would be the case with a key high or low.
What are the Red Green Red patterns on the bar charts that you post?
This color rule is based off an average true range function added or subtracted from the previous swing high or low. It is a variation of the parabolic stop and reverse formula published by Welles Wilder in his book, New Concepts in Technical Trading Systems. We find that it provides useful pattern recognition in highlighting the short-term swings on a bar chart.
ELD file | ELA file | ELS file
General Trading Related Questions
Tick Charts vs. Time Interval
on most software applications a 1600 tick chart of the sps would be equivalent to a 5 minute chart. and a 3600 tick chart is similiar to a 15 min time frame. we prefer to use these type of tick charts in the early morning session since they adjust the globex trading relative to the activity level. day session only charts on a 5 min interval can be too gappy, while 5 min charts on a 24 hours basis tend to be distorted.
What is "relative strength" and "relative weakness" that we talk about in the online trading rooms?
Simply put, a stock or sector that exhibits relative strength is performing better than a related index, such as the SP500 or Nasdaq. Relative weakness would be a sector or stock that is under-performing a benchmark index. With commodities, the relative strength leader is the one that is performing the best on the day. The early morning relative strength leaders usually continue to perform the best throughout the day.
What are the SPY & QQQ?
The SPY and QQQ are 'Exchange Traded Funds.' They represent a basket of stocks mimicking the composition S&P 500 and Nasdaq100 stock indexes. They trade on an exchange just like individual stocks and can be sold short on a downtick. In essence, they allow you to trade the entire stock index much like the SP or Nasdaq futures. However, unlike futures contracts, the QQQ and SPY do not expire and are not leveraged instruments.
How do you watch so many markets?
The majority of the time, we watch a quote board which gives us last price instead of watching charts on each individual market. This way we can monitor numerous price levels in addition to various market indexes and market internals. If we want to look at the charts on a particular market, we pull up a screen that has the 30, 60 and 120-minute time frames. The SP's and occasionally the bonds are usually the only markets where we will look at charts on a shorter time frame. Positions in most other markets are entered with the intent of carrying a winning position over night.
Why do you look at so many stocks?
Stocks that are market leaders can often turn before the stock index futures do. This is particularly true of the high beta 'momentum' stocks. Monitoring individual sectors and relative strength can add valuable information regarding the overall technical condition of the market. We limit our database to only the top 250 trading stocks.
What kind of broker should I use?
Avoid brokers with 'browser-based' order entry systems. Use a broker that offers a fully integrated trading platform ('stand alone' software) with point and click order routing and execution. You will have to do your own research in deciding which company to do business with. If you are not happy with your current broker, it is very easy to try another. We maintain accounts at multiple firms and feel that it is important to have multiple relationships in case there is ever a problem with one firm or a geographic disruption in one part of the country.
What data feed and software programs do you use?
How can I see what happened each day in the online trading rooms?
For LBR Futures Live and LBR Stock Beat, we post transcripts of each day's activity on our website. These transcripts are available in the Members Services section of our website.
For LBR Currencies we do not archive transcripts. However our Currencies room will be open 48 hours, giving members the ability to easily reference the previous day's information.
I want to join your service. What do I have to know about the stock market?
Though prior knowledge and experience are not strictly required, it is important that you understand that trading involves risk. Our online trading service is educational in nature and will be of best value to you if you can monitor the markets real time.
I still have another job. Can I trade part time?
Yes. You decide on the pace of your learning. You might start out part-time and decide later on whether this could be the start of a new career for you. Remember that the time and energy you put into learning will pay off down the road. However, we have yet to come across a trader able to consistently support themselves by trading part time. Ultimately trading is a full time job, and many people new to the business are often surprised by the long hours professional traders devote to their study of the markets.
How many trades do we make each day?
There is no normal day, and the number of trades varies with the volatility of the stocks and futures contracts that we are trading. However, we find it better to be patient and wait for a few well thought out high probability trade setups, than to settle for marginal trades. We find that when traders start overtrading, they get sloppy and make mistakes.
I can't be near a computer all day - do you have any other suggestions for me?
Our Basic Online membership offers set-ups and trading ideas that can be implemented without the need for watching the screen during the day. These trades include option plays and longer-term stock swing trades.
How long does it take to learn to trade successfully?
In our experience, the average length of time it takes for a person to be able to trade with the consistency and confidence necessary to make a decent living is about three years. Some people are never able to do this, as they are unable to master the mental side of the game. A few people have been able to find their niche quickly and show consistent profitability after just 6 months. This is the exception though.
What are the most important things a day trader needs to succeed?
What methods are available for accessing the chat rooms?
We offer all members two methods for accessing our live chat:
1. Stand-alone software method
2. Browser based method
Both methods offer the same connectivity speed and deliver the same information. We find that most people prefer the stand-alone software method for its features, such as multi/single window viewing modes.
After you login (click on Futures Live, Stock Beat or Currencies buttons located in the upper left side of our home page) you will come to a page with complete information for accessing both methods, including instructions for downloading our stand-alone chat software.
Note: our live chat system will not permit running both methods simultaneously. Nor can you run our chat system on two separate computers, simultaneously.
What is the "video" feature all about, and how do I access it?
Begining in June 2006, we upgraded our stand-alone chat software to include a direct video feed into Linda's computer. All members of Futures Live and Stock Beat will have access to this feature, at no additional cost. This feature enables you to see the actual charts and indicators Linda and her staff uses as they set up trades and make calls in the chat rooms. For mor information about this feature, click here.
Do I need the latest version of your chat software to access the video feature?
Where do I download the latest version of your chat software?
The latest version is available by clicking on either the "Futures Live" or "Stock Beat" buttons located in the upper left side of our home page. After you enter you username and password, you will be given an opportunity to download the program file.
Can you show me in more detail how to log on to the Browser Based chat system?
For full instructions, click here.
How do I get web links (aka "hyperlinks) to work in the chat window? I click on them, but nothing happens.
When you place your mouse over a link in the chat rooms, the link will not change its appearance like you would normally see on a standard web page. Do not be alarmed, this is normal. You need to place your mouse directly over the link, and then double click. Your Internet Explorer browser should then open. ALSO -- the link must be all on one line in the chat window. If the link is broken up over two lines, then simply re-size your window to get the link back to one line of text.
I can't get the chat software to work.
If you are using any kind of 'pop-up' blocker or firewall devices on your computer, this may adversely affect and possibly even prevent the chat software from functioning.
Check to make sure you have the latest Java Runtime Environment (JRE) installed. The latest version can be found here.
Note our minimum system requirments:
- High Speed Internet Connection (DSL or Cable modem) suggested
- Win98, NT, 2000, XP
- Java-enabled Internet browser (may require Microsoft Java Virtual Machine to be updated or installed or the SUN Java Runtime Environment: http://java.sun.com/getjava/)
NOTE to System Administrators: Our live chat applications were designed to use direct Internet connection. If you are using NAT and/or a firewall system, it should permit outgoing connection to the port 8523 of our server (lbrgroup.com). Also port-mapping may be used on your Internet gateway.
What are Open Forum rooms used for?
Open Forum rooms are special rooms just for members to talk amongst themselves. These rooms will have a blank text field beneath the window, where you may input your comments. After typing, to send your comments to the room, simply hit your Return or Enter key on your keyboard.
How do I send a 'private' message?
You may send private messages to other members as well as to the room moderators. Simply place your mouse over the name of the person you wish to send a message to, and right click. Then select 'Private Session.' This will open up a new window for you to send and recieve your private message. After typing your message in the text field located at the bottom of the chat window, hit your keyboard's return key to send the message.
Note that the list of member names and moderator names will only apear in the Open Forum rooms, on the right hand side.
How do I adjust the font size?
Both the stand alone and the browser based chat methods allow you to adjust your font size. Simply place your mouse over any text area within the transcript window, then right click your mouse. You can then select a custom font size from the list.
What other user-controlled adjustments can I make on the stand alone software?
In the stand alone software, place your mouse over the small blue icon located in the upper left hand corner of the chat window.
Next, select any of the following controls:
- Multi Window mode: changes from single window mode to multi-window mode.
- Always on Top: keeps the software from becoming obscured by other software applications running on your computer.
- Play Sounds: turns on and off all room audio sounds.
- Play EMA: turns on and off the subtle "typing" sound when messages are being broadcast into the main rooms.
How do I enable the copy, cut and paste functions in the chat applications?
This requires adjusting the security settings on your web browser (Internet Explorer). Please click here to access a PDF file with detailed instructions for changing these settings. File requires Adobe Acrobat viewer.
General Website Questions
How can I cancel or change my service?
In the Member Services area of our web page, you will find links to Modify my Profile.
How do I ask questions?
Sending us an email is the easiest way. Please see the Contact Us area of our web site.
How do I print text found on your web site pages?
To print the class transcripts, guest lectures or other text items (without also printing all the formatted headers and other content on the page) here's what you do:
1. Simply select the text with your mouse (i.e., highlight the area you want to print).
2. Right click your mouse and select 'copy.'
3. Open up Microsoft Notepad (look under Start-->Programs-->Accessories-->Notepad) and then simply 'paste' in the text (right click mouse and select 'paste').
4. Voila -- you are ready to print the text (make sure you're printer is turned on!)
5. For charts simply place your mouse on top of the chart - then right click - and 'save as' to your hard-drive. Go to the saved file, click on the file to open it, and proceed to print.
How do I print Charts?
1. Right click your mouse on top of the chart you want to save, and select 'Save Picture As.'
2. Save the chart image file to your harddrive.
3. Open chart image file by double clicking on file, then select Print from the Edit menu of you software.
Why do charts print with such a dark background color?
Virtually all charts on this site are created with Aspen Graphics software. We realize that they do not print well with a dark background. We apologize for the inconvenience. The trade off is that we are able to manipulate the color rules and write our own formulas to show you unique and useful trading patterns.
"Why does it say "no gaps" on some of your charts in the Daily Educational Charts?"
These charts are generated by Aspen Graphics. "No gaps" means that the data is compressed to eliminate holidays where the markets are closed. If this function is not turned on, a "gap" will appear in the data for the holiday session.
ADX: Trend strength oscillator originally developed J. Welles Wilder Jr. that fluctuates between 0 and 100.
BEAMER: Nickname for IBM
BEAR FLAG: Classic bar chart pattern that occurs in a trending market, a bearish continuation pattern.
BEAR TRAP: A bear trap occurs when the market breaks below chart support, bringing traders in on the short side, then quickly reverses, trapping traders with losses.
BREADTH: The difference between the number of advancing issues and the number of declining issues on the NYSE.
BREAKOUT TRADE: A trade that occurs when the market breaks above or below some pre-define range, usually a nearby support or resistance levels such as the previous day's high or low, or the last 60 minutes high/low. Breakouts are often associated with low volatility readings.
BULL FLAG: Classic bar chart pattern that occurs in a trending market, a bullish continuation pattern.
BULL TRAP: A bull trap occurs when the market breaks above chart resistance, bringing traders in on the long side, then quickly reverses, trapping traders with losses.
BURNING DOG: This is the phrase used to describe the tendency for the SPs
to retrace back into a gap area by N- amount after a gap of N-amount.
Though we make trades off this pattern in the futures room in the morning
after a gap on certain days, this phrase describes a tendency only, and is
not a mechanical trade setup.
COMPRESSION METER: LBRGroup's proprietary volatility index used to signal potential for longer term breakouts.
COWS: Nickname for the Live Cattle futures
CREEPER MARKET: A market that slowly creeps higher without a significant retracement. One of the strongest types of trending action that does not catch people's attention.
DISCOUNT (SP's): When the price of the future is trading lower than fair Value
DIVERGENCE: A divergence is indicated when momentum fails to confirm a new low or new high in the price. Divergences usually show up best with oscillators such as the 3/10 and 5/35 MACD.
EDGE: Term used to describe when a trader has the advantage or a favorable margin. It is even better when this margin can be quantified statistically.
EMA: Exponential Moving Average. We use a 20-period setting
EQUILIBRIUM LEVEL: The point at which buyers and sellers are in balance. Coincides with a neutral chart point that is often at the end of a consolidation period.
EVENT RISK: The risk that some unexpected event will cause a substantial change in the market value of a security. For example, missed earnings, lawsuits, crop failures, war, etc.
FADE: A countertrend trade
FAIR VALUE: Fair value reflects the relationship between stock index futures and the index's current levels. It is a theoretical estimate of where the futures should be trading based on their underlying cash index with short-term interest rates and dividends factored into the calculation. Determining the fair value relationship between the S&P 500 futures contract and the underlying S&P 500 index requires adding the cost of borrowing the money to buy the S&P 500 stocks, while subtracting the gain these stocks pay in dividends.
FILL OR KILL: This means do it now if the stock is available in the crowd or from the specialist, otherwise kill the order altogether.
GOLF: A mechanical trade that is made in the SP futures that is entered on the close of the day.
GRAIL: A trade set-up based on a pullback to the 20 period EMA after the 14 period ADX has risen above 30. Pullback in rallies are bought, and pullbacks in declines are sold short. This pattern was discussed at lenght in Street Smarts.
IMPULSE: Increase in the market momentum. Impulse moves tend to happen in the direction of the trend. On a bar chart they have the appearance of a sharp markup or markdown.
INSTITUTIONS: Mutual funds, pension funds, banks, and large commercials
KELTNER CHANNELS: A 'trading band' indicator that is displayed on top of price charts. Similar to Bollinger Bands but calculated differently, using true-range rather than standard deviation.
LAST CALL: Trade that setups up in the last hour of a trend day
LOAD THE BOAT: Use full line of leverage
MACD: An oscillator based on the difference between two moving averages. We use the difference between a 3 and 10-period simple moving average
MARK UP: A Wyckoff term, used to denote the phase of the market where prices rise, from the beginning of a bull market to its top.
MARKET LEADERSHIP: Market leadership refers to those sectors and industries that are currently bringing in the best returns.
MARKET ORDER: An order to buy or sell a stock immediately at the best available current price. A market order guarantees execution.
MIT: Market-if-touched order. An order which becomes a market order if the specified price is reached.
MOC: Market-on-close order. A buy or sell order which is to be executed as a market order as close as possible to the end of the day.
MOMENTUM: The difference between the last price and the price N-numbers bar. A 2-period Rate of Change (ROC) is the same as a 2-period Momentum.
NAZDOG: Nickname for the Nasdaq100 index.
NAZDOGGIE: Name of Linda’s adorable little Pomeranian. See photo gallery.
NR7: The narrowest high-low range of the past seven days.
OODA: The OODA Loop, often called Boyd’s Cycle, is a creation of Col. John Boyd, USAF (Ret.). Col. Boyd was a student of tactical operations and observed a similarity in many battles and campaigns. He noted that in many of the engagements, one side presented the other with a series of unexpected and threatening situations with which they had not been able to keep pace. The slower side was eventually defeated. What Col. Boyd observed was the fact that conflicts are time competitive. According to Boyd’s theory, conflict can be seen as a series of time-competitive, Observation-Orientation-Decision-Action (OODA) cycles.
OOPS TRADE: A term originally coined by Larry Williams which refers to a market that gaps below the previous day's low (or above the previous day's high) and then quickly reverses its direction.
OOZE: Down trending price action that slowly inches down without any upward reactions of any magnitude. One of the strongest forms of trending action.
OPENING BULGE: Period after the opening when the public has a tendency to pay too high a price.
OPENING PLAY: The markets first tendency of the day
OUCH SETUPS: When a market Closes in the upper 75% of its range but then gaps lower the next day around the previous day's low (vice versa to the upside).
OVERHEAD SUPPLY: Are where the market had found support in the past but the price is currently trading lower.
PEA SHOOTER DAY: Our SP broker's affectionate term for when the institutions are absent and the majority of the paper in the SP pit consists of 1's and 2's.
PIVOT: A market reference point. Our most frequently used pivots are swing highs and swing lows such as the high and low of a daily bar or the highs and lows of the hourly cycles.
POWER BUY/SELL: A retracement formation that combines two time frames. For a chart example of this setup, members can reference the trade library setup.
PREMIUM (SP's): When the price of an index future is trading greater than Fair Value.
PUSH INTO THE NOON HOUR TIMEFRAME: Trade that setup around 11:00 EST on a trend day
RAT TRADE: An afternoon breakout trade that is made in the LBRFutures Room
RESISTANCE: Area where Sellers have come in the past.
ROBUST: Refers to a method or system that is profitable across a variety of markets, time frames and parameters. It is the opposite 'curve-fit' or 'optimized.'
SCALP: A Short-term trade that capitalizes on the market's smaller fluctuations.
SHAKEOUT FAKEOUT: A sharp downward move following an area of distribution that quickly reverses itself and comes back up through the distribution area.
SHORT SKIRT: The name of a very short term pattern trade taken on a one-minute S&P and Nasdaq futures charts. A form of pullback trade on a very short time frame.
SKIDS: Slippage or the difference between the price that a stop order was placed and the actual fill price.
SLOP AND CHOP: Action in the market when institutions are absent and liquidity is poor.
SMA: Simple Moving Average
SPRING: Originally a Wyckoff term, is used to denote an impulsive move often associated with a test of support. See also 'Upthrust.'
STOP ORDER: An order that becomes a market order when the price touches that level.
SUMTICK: LBRGroup's proprietary summation Tick index
SUPPORT: Area where buyers have stepped in the past.
SWEET STUFF: Nickname for the sugar futures
THREE PUSHES: A characteristic pattern that occurs near important turning points. Usually three distinct 'test' of a high or low level, followed by a reversal.
3 O'CLOCK JIGGLE: A scalp trade that sets up in the SPs around the time that the bonds close.
TICK: Smallest increment that a price can change. 1 tick on an e-mini contract = .25 points, which is the equivalent of $12.50.
TICKS: The difference between the number of issues on the NYSE that are trading UP from the last trade versus the number of issues that are trading down.
TICK CHART (EQUITICK): Click here for an explanation of this chart type.
TREND DAY: A day where the market opens on one end of its range, closes on the opposite end, shows range expansion and has an increase in volume.
TRIGGER: Level at which a trade will be initiated if a market trades to that price.
TRIN: The TRIN (also know as the Trading Index and the ARMS Index) was invented by Richard Arms in the 1970s. It is calculated as follows: (Advancing issues / Declining issues) divided by (Advancing volume / Declining volume). If the index is above one, the average volume of stocks that fell on the NYSE was greater than the average volume of stocks that rose. If the index is below one, then the converse is true.
UPTHRUST: Originally a Wyckoff term, is used to denote an impulsive move often associated with a test of resistance. See also 'Spring.'
VIX: VIX is a weighted measure of the implied volatility for 8 OEX put and call options. VIX represents the implied volatility for this hypothetical at-the-money OEX option.
VOLATILITY: The range of the price action over N -Number of bars.
WEDGE: A low volatility point in which a triangle type formation can be drawn on the bar charts. The market can break out in EITHER direction from this formation.
WHIPSAW: Is when the market rapidly reverses its direction several times in succession.
WIRE: Nickname for the Copper Market
"Z" DAY: A consolidation day that typically follows a trend day.