does anyone trade a simple more mechanical system??
Keeping It Simple II
Given the length of Keeping It Simple, it seems reasonable to start fresh so
that people don't have to work their way through pages and pages of posts, many
of which are repetitive.
Therefore, I'll start by posting the rules. These have changed slightly since I
posted them last in December and may change again, slightly, depending on how
the markets change over the coming months. But the underlying structure will
remain the same.
Don’t try to second-guess the "system". Maybe price seems a little tentative
at what you've pegged as the breakout point. And then bam! you're off to the
races only you didn't take the trade, and there you sit. You're better off,
then, taking every single legitimate trade in order to find out just what the
system does when you've made it as mechanical as you can. If it turns in a
performance which is acceptable to you, then you can trust it, and you don't
mind so much taking even two consecutive losses because you know that disaster
is not looming and your self-confidence is in less danger of being damaged.
The only way for anyone to learn this is to sit there and watch the charts in
real time, day after day, and see for themselves how price behaves, how the bars
form, how long it takes to get from one place to another, and make copious notes
of what they're seeing so that they have something to use at the end of the day
and so that they have a record they can refer to days or weeks later when a
light goes on and they think that they have stumbled upon a principle.
What may help is for me to separate the rules of the system from the
discretionary elements so that you have a clearer course and a better focus
(with my hat off to SnoSur4).
Use a 1m chart for the opening.
For the NQ, enter a trade using a stop-limit 2 points outside the opening range
(the opening range generally takes 15-20m to form; if there's a report due out
at 1000 and price has not broken out of the range by 0950, you may want to wait
for the report and use the reaction to it as the opening range). When filled,
place an initial loss-limit stop (I use 5pts). If price remains within the
opening range, there’s no trade.
As soon as a trend develops, switch to a 3m chart to draw a trendline. The 1m
won't be used further.
When this trendline is broken, move the stop to breakeven. An option is to use a
5/6pt trailing stop until breakeven is reached.
If and when the limit of the 10d average range (the average day's range low to
high for 10 days) is reached, tighten and trail the stop using the ends of the
bars, or, if you prefer, move the stop to the last reaction high/low, or simply
exit with a market or limit order when the target is reached.
If stopped out, do not re-enter in the original direction unless and until the
new high or low is exceeded by 2 points.
Take every trade.
Do not use any indicators or moving averages of any kind. But keep an eye on the
ES. If, for example, the NQ is close to triggering an entry but the ES isn't
anywhere near an entry point, the entry will nearly always fail.
And that's just about it. Everything else is discretionary.
For example, you may choose to ignore gaps and reversals, and that's perfectly
okay; there's nothing wrong with making a nice profit and quitting for the day.
You may choose to use an intial 5pt loss-limit stop, as I do, or you may choose
4pts. Or 8pts. Or 10pts (I suggest you use at least 4).
You may decide to use a 5m chart. Or an 8m. Or 12. Or 20. Or 34.
And if this seems as though you have a lot of choices to make, you'll find that
every system that touts itself as being "simple" requires a lot more decisions
that you’d expect.
REVERSALS
The reversal patterns I look for are nothing complicated: Ms, Ws, lateral (not
trendline) support/resistance, 2Bs. I focus on only a few
high-probability/low-risk setups and let everybody else fight over the others.
GAPS
If there's a gap of at least 1% but less than 3%, fading the gap is generally a
winning strategy, at least often enough to make the occasional stop loss
acceptable (if the gap is less than 1%, there's really no place to go). It pays,
however, to be alert to the feint, i.e., the price moves toward filling the gap
but reverses abruptly, stopping you out. In these instances, the probability of
a breakout to the opposite side of the range is increased.
Brandon Frederickson did a study on these and found that 71% of the average gaps
(1.2%) filled on the same day, but that as they grew larger, the percentage that
filled fell dramatically (only 36% of gaps of 2% filled the same day, only 23%
of 3% gaps, and only 5% of gaps of 4% or more). Therefore, the probabilities for
fades lie with smaller gaps.
In all cases, know in advance whether or not there will be an 0945 or 1000
report announcement which may affect your trade.
DB,
Thanks for reiterating the core rules in this new thread. The original thread
was just too massive to go through to find any specific points.
__________________
ham
rules
DB,
Sorry to be such a pain......
Quote
If and when the limit of the 10d average range (the average day's range low to
high for 10 days) is reached, tighten and trail the stop using the ends of the
bars, or, if you prefer, move the stop to the last reaction high/low, or simply
exit with a market or limit order when the target is reached.
End quote
Question 1:
use the ends of the bars.....which bars?...I am assuming you mean high and low
of bar (not open and close) do we go back to the last bar before? on the 3 min
chart? or when we observe the instant of range break do we use that very bars
low or high?
Question 2:
simply exit with a market or limit order when the target is reached. What
target? what do you use?
Michael B.
Thanks for summarizing the earlier thread...
How do handle the premarket data??
Thanks for reiterating the core rules in this new thread. The original thread was just too massive to go through to find any specific points.
__________________
fade that rally!
another rule question
DB.....
Quote
Do not use any indicators or moving averages of any kind. But keep an eye on the
ES. If, for example, the NQ is close to triggering an entry but the ES isn't
anywhere near an entry point, the entry will nearly always fail.
End Quote
What if we want to trade the ES instead....Can We? will this system have any
changes? besides point value? For example can we reverse the above to read the
ES is close to triggering an entry but the NQ isn't everywhere near the entry
point, the netry will nearly always fail.
Michael B.
Gap percentage and the ES
DB .......Thank you for this thread
I did not realize that 1% of the ES is 8.25 points and the NQ is 10 points. I
wonder if this study by Brandon Frederickson was accurate for the ES? Do you see
what I mean?
Michael B.
Quote
If there's a gap of at least 1% but less than 3%, fading the gap is generally a
winning strategy, at least often enough to make the occasional stop loss
acceptable (if the gap is less than 1%, there's really no place to go). It pays,
however, to be alert to the feint, i.e., the price moves toward filling the gap
but reverses abruptly, stopping you out. In these instances, the probability of
a breakout to the opposite side of the range is increased.
Brandon Frederickson did a study on these and found that 71% of the average gaps
(1.2%) filled on the same day, but that as they grew larger, the percentage that
filled fell dramatically (only 36% of gaps of 2% filled the same day, only 23%
of 3% gaps, and only 5% of gaps of 4% or more). Therefore, the probabilities for
fades lie with smaller gaps.
End Quote
Michael B.
Re: rules
Quote from ElectricSavant:
DB,
Sorry to be such a pain......
Quote
If and when the limit of the 10d average range (the average day's range low to high for 10 days) is reached, tighten and trail the stop using the ends of the bars, or, if you prefer, move the stop to the last reaction high/low, or simply exit with a market or limit order when the target is reached.
End quote
Question 1:
use the ends of the bars.....which bars?...I am assuming you mean high and low of bar (not open and close) do we go back to the last bar before? on the 3 min chart? or when we observe the instant of range break do we use that very bars low or high?
Question 2:
simply exit with a market or limit order when the target is reached. What target? what do you use?
Michael B.
Quote from rgowka1:
Thanks for summarizing the earlier thread...
How do handle the premarket data??
Re: another rule question
Quote from ElectricSavant:
What if we want to trade the ES instead....Can We? will this system have any changes? besides point value? For example can we reverse the above to read the ES is close to triggering an entry but the NQ isn't everywhere near the entry point, the netry will nearly always fail.
Michael B.
Re: Gap percentage and the ES
Quote from ElectricSavant:
DB .......Thank you for this thread
I did not realize that 1% of the ES is 8.25 points and the NQ is 10 points. I wonder if this study by Brandon Frederickson was accurate for the ES? Do you see what I mean?
I'm moving the retracement and 2B stuff over here since it's so recent.
Retracements and 2Bs
03-11-03 07:51 AM
I'm posting this in the event that anybody wants to get into simple ways of
trading retracements:
Here's one from Friday.
1. Price breaks the uptrendline.
2. Price retraces to the last reaction low (3).
A short can be placed under any of the bars in that little congestion zone.
Two other options:
4. Shorting the 2B (not a great 2B)
5. Shorting the failure to make a new high (one could short any of the bars in
this retracement).
Attachment:
http://www.elitetrader.com/vb/attac...=&postid=217273
03-11-03 09:58 AM
Here's one from yesterday.
1. Gap fails to fill, suggesting weakness in buying pressure.
2. Price drops below opening low, but not far.
3. Price rebounds above opening low, suggesting strength. However, it fails to
penetrate the downtrendline. A short could have been placed below this bar, or
below the bar two bars later which met resistance at the opening low level (the
"whump" came one bar after).
Attachment:
http://www.elitetrader.com/vb/attac...=&postid=217374
03-11-03 10:26 AM
Here's today's:
1. Trendline broken.
2. Price drops below previous high. A short could be placed two points below the
previous high.
3. A short could also be placed below the "reaction" high. A short could also be
placed below the reaction low at (1).
Attachment:
http://www.elitetrader.com/vb/attac...=&postid=217396
03-12-03 05:54 PM
Quote from arzoo:
Since you've mentioned the 2B reversal in some of your posts, I've been trying
to learn to spot them while they are forming (it's a lot easier to spot them
when you look back). Based on your experience with 2Bs how well do they do in
NQs?
I'm still having a difficult time in getting myself to get the 2Bs right because
it seems like kinda 'jumping the gun' before the breakdown happens... but I'm
sure this part is psychological on my part as I'm used to double tops/bottoms
more.
A 2B is a type of double top/bottom, but is more "diabolical" in the way it
traps so many more people on the wrong side of the trade. Today's chart provides
an example of a 2B that fails and one that works. A 1m chart is used because my
3m is already marked up and I don't want to do it over, but there's no important
difference.
1. The opening high.
2. After a retracement, a new high.
3. Price breaks the uptrendline and drops below the previous high.
4. Price rebounds, working its way back above the first high (1). By my rules,
this nullifies the 2B, so I exit. This may have been a little early to take a
trade of this type, but the risk is minimal.
5. Price advances past the second high.
6. Another 2B effort is made, and this one succeeds.
There's always the possibility that a 2B can morph into an H&S. The right
shoulder should not come all the way back to the left, but it's important to
define the risk ahead of time. You may choose to exit if you dip underwater,
then short the right shoulder if price stalls. But it's not a good idea to wait
for the neckline for entry.
Attachment:
http://www.elitetrader.com/vb/attac...=&postid=218417
An earlier chart of a 2B:
02-27-03 11:21 AM
Since nothing's going on, I've uploaded a chart of yesterday's 2B.
Note that the uptrend is broken at "8:12". Price then makes a new high and drops
below the previous one (1001).
What makes this particular 2B higher probability than usual is that resistance
had been established at 1003 on three occasions during the previous two days. It
could, of course, have wound up being nothing more than a retracement on its way
to new highs, but that's what stops are for.
Attachment:
http://www.elitetrader.com/vb/attac...=&postid=210679
And a link to a discussion of 2Bs:
http://www.elitetrader.com/vb/showt...73&highlight=2B
--Db
Re: Re: another rule question
Quote from dbphoenix:
The target would also be less in pt terms: 16-18.
--Db
Re: Re: Re: another rule question
Quote from wally_:
16-18 ES pts? The daily range for ES these days is quite often less than that, so getting that much in one trade is simply impossible. 6-9 pts sounds more realistic.
ES statistics
I have counted 7 instances of the ES gapping up or down by 1% or more since
12/03/02(max was 1.40% since 12/03/02).
Michael B.
Here are the dates and #'s.
12/04/02 ohlc-913.00 925.75 908.75 918.75. gap filled plus 10.50
12/06/02 ohlc-895.75 916.00 893.75 914.75 gap filled plus 12.75
12/09/03 ohlc-904.75 909.00 889.00 889.50 failed minus 15.25
01/17/03 ohlc-906.25 909.50 897.75 903.00 failed minus 3.25
02/04/03 ohlc-848.75 860.00 838.25 849.25 gap filled plus 9.50
03/07/03 ohlc-810.75 829.75 809.00 828.50 gap filled plus 10.75
03/13/03 ohlc-815.25 833.75 808.50 832.25 failed minus 17.00
Michael B.
Re: ES statistics
Quote from ElectricSavant:
I have counted 7 instances of the ES gapping up or down by 1% or more since 12/03/02(max was 1.40% since 12/03/02).
Michael B.
Here are the dates and #'s.
12/04/02 ohlc-913.00 925.75 908.75 918.75. gap filled plus 10.50
12/06/02 ohlc-895.75 916.00 893.75 914.75 gap filled plus 12.75
12/09/03 ohlc-904.75 909.00 889.00 889.50 failed minus 15.25
01/17/03 ohlc-906.25 909.50 897.75 903.00 failed minus 3.25
02/04/03 ohlc-848.75 860.00 838.25 849.25 gap filled plus 9.50
03/07/03 ohlc-810.75 829.75 809.00 828.50 gap filled plus 10.75
03/13/03 ohlc-815.25 833.75 808.50 832.25 failed minus 17.00
Michael B.
db, what have your results been like trading this strategy since you started the thread? Points per week, month, days, etc., any other performance stats you can share.
Quote from traderkay:
db, what have your results been like trading this strategy since you started the thread? Points per week, month, days, etc., any other performance stats you can share.
Quote from traderkay:
db, what have your results been like trading this strategy since you started the thread? Points per week, month, days, etc., any other performance stats you can share.
Simple?
I've been trading stocks with success for a couple years, and have been
intrigued by all the talk about trading the S&P and the e-mini as a possible
complement to my primary system.
Because I like to keep things simple, I was drawn to these threads. But....duh!
You folks make space travel look like a cake walk!
If there is so much involved in pulling a few dollars out of trading a single
instrument, I think I'll pass.
Or...am I missing something? Is there truly a decent risk/reward ratio here?
__________________
Keep it simple.
Quote from Walther:
I would be also interested in results. Was this system ever backtested ? I saw several RB systems backtests and it would be interesting to compare.
Walter
Re: Simple?
Quote from lindq:
Because I like to keep things simple, I was drawn to these threads. But....duh! You folks make space travel look like a cake walk!
Re: Re: Simple?
Quote from spedblavio:
I think the stuff Db's talking about is about as elemental, tried-and-true basic TA as you can get.
The principles are so straightforward that they seem to lend themselves to making strict mechanical rules, but this is somewhat illusory and that's where it seems to get "complicated".
Probably should be tracked as mechanically as possible, but actual executions will be better with more experience and the ability to subconciously "drive the car" and be aware of various things without having to think about them so much.
__________________
-Biomech-
Trust those who search for truth, ignore those who have found it.
Re: Re: Re: Simple?
Quote from Biomech:
Today was obviously not a good test
Re: Re: Re: Re: Simple?
Quote from dbphoenix:
Why do you say that?
--Db
__________________
-Biomech-
Trust those who search for truth, ignore those who have found it.
Re: Re: Re: Re: Re: Simple?
Quote from Biomech:
Well, I guess I should say I'm not sure if today was a good test or not. It was a fairly atypical day compared to the last couple of months.
Quote from dbphoenix:
As for being a good test, that depends on what you mean by "good test". The opening low was 22, so the target was 50. Unfortunately, if you didn't play the gap, the entry point would have been two points above the opening high, or 46.5. If you've chosen to exit at the target, you'd have made 3.5. If you've chosen to use an end-of-bar stop, you'd have made a little less.
--Db
__________________
-Biomech-
Trust those who search for truth, ignore those who have found it.
Quote from Biomech:
it is hard for me to tell exactly when the opening range is established. That is one of the softer points of the strategy that takes some discretion
Quote from dbphoenix:
Doesn't have to be. If you're mechanically-minded, just set a time like Mike and Natalie did, say a 20m bar (0950) or a 30m bar (1000), then buy or short that bar. You don't have to exercise discretion unless you want to.
--Db
__________________
-Biomech-
Trust those who search for truth, ignore those who have found it.
Re: Re: Re: Re: Re: Re: Simple?
Quote from dbphoenix:
...Unfortunately, if you didn't play the gap, the entry point would have been two points above the opening high, or 46.5.
--Db
Re: Simple?
Quote from spedblavio:
You didn't find the range set before 9:49 (1022-1028.50) to be adequate to trigger entry at 1030.50?
Db,
a quick question about gaps and the ORB.
If the gap is being filled right before the open range was set and the trigger
is slightly above or below the trigger for the ORB.
Do you take the trade considering that the mkt at times just covers the gap and
stalls?
And in these cases, any signals to take note of that may hint that the move will
continue as in today, or if it will stall after covering the gap.
Thanks.
I can't give you an answer that will apply in all cases. You're going to have to
review charts yourself and make your own choices, but twenty or thirty ought to
be enough to enable you to work out some probabilities.
First, you have to look at the size of the gap. According to Frederickson, 71%
of gaps of 1.5% or less fill. Once they get wider than that, the fill rate is
cut in half. So you may decide that you're not going to play gaps that are
greater than 1.5% due to the probabilities.
Then, look at these gaps that fill and note how fast they fill. Do they all fill
by 1000?
Then, note how often the price fills the gap then fades. Note how often the
price fills the gap, retraces, then resumes its move, creating a trend.
Then, make some choices as to how vulnerable you want to be. Using a long as an
example, do you want to let price come all the way back to 5pts below your entry
price? Or do you want to set a much tighter stop in the event of a fade or a
retracement? If there's a fade, are you going to play it? How? If there's a
retracement, are you going to play that? How?
Filling a gap is not creating a trend. Filling a gap is almost autonomic, like a
sneeze or a hiccup. A trend requires a bit more conscious effort, which is
demonstrated when the gap is filled, price retraces, then resumes the original
direction rather than retreating back to a neutral position.
You may decide, however, that you just can't or don't want to screw around with
any of this so early in the morning. Lots of people don't. Which is why the
strategy lets the opening range form and does nothing until it's finished, which
usually takes about 20 minutes.
But don't take my word for it. Review the first half hour of the last thirty
charts. One thing you'll find is that it is extremely rare for a gap to fill and
rocket ahead without pause. Even today there was a lag of nearly 15 minutes
after the gap was filled before price resumed the advance.
If you're going to play the gap at all, you have to decide whether or not you're
going to fade it once it fills. If you're not, then all you have to do is place
your 2pt entry stop above the opening high (or below the opening low) and go on
from there.
--Db
Db, if you did not get short in the first few minutes this morning, would you have traded a BO of the 1073.00-1079.00 range that developed?
According to the current rules, entry would be at 71.
--Db
Break above 1069 a reversal trigger?
Depends on the kind of reversal setups you like.
--Db
Well, I didn't particularly like that one and was actually thinking more
about where my paper short from 1078.00 should've been stopped out, if at all.
Just wondering if you thought it was a valid resistance point or if the whole
thing was too much of a V anyway.
My short entry was on a 1min retracement after break of the opening low of
1082.00 (a very early range), so I held through the subsequent congestion as it
mainly occurrd on the market's dime.
Initial stop was only 3pts away, above the retracement I sold. Moved it down a
point after making new low at 10:15, and down to a tick above BE on the next new
low.
After that I started wrestling with just the right balance between letting the
market do it's thing and not being too much of a chump needlessly.
I have the low target pegged at 1059.00, do you concur? (I don't know why, but
my daily range figures seem to vary a bit from what you've stated). How close is
close enough to start tightening?
I had stuff in my head about moving the stop to previous reaction highs when TL
breaks occur, but that's more for multiple contracts, right? Or was the nearness
to target and break below yesterday's low enough to start getting defensive?
I know this is getting into discretionary areas, not looking for absolute
answers but always interested in your thoughts.
On the one hand, i'm just about ready to buy into the all or nothing trade
management (after BE and until it reaches target, it's the market's money and
the market can do whatever it wants with it), but on the other hand if the
market is trying to tell me the jig is up and I can have whatever's left, I want
to listen.
Quote from spedblavio:
I have the low target pegged at 1059.00, do you concur? (I don't know why, but my daily range figures seem to vary a bit from what you've stated). How close is close enough to start tightening?
Quote from spedblavio:
I had stuff in my head about moving the stop to previous reaction highs when TL breaks occur, but that's more for multiple contracts, right? Or was the nearness to target and break below yesterday's low enough to start getting defensive?
Quote from dbphoenix:
Drawing any conclusions, much less formulating any hypotheses, is a waste of time on days like this. I stopped early simply because nothing was going on.
--Db
How you define the opening range is up to you.
--Db
GAPS
If one is going to play these, it makes sense, if trading more than one
contract, to exit at least one when the gap is filled, since filling the gap is
an "event", just as reaching the day's target is an event. This morning, that
would result in +10 to +11 pts depending upon entry.
If trading only one contract, there's the question of re-entry in anticipation
of further downside. If one just hangs on, this isn't a problem, though one
might give back all one's profits and end up at a loss. But if one takes the
profits at the gap, then re-entry is just a question of tactics.
--Db
re: Gaps
I was wondering what lesson the market was going to have for me today, maybe
that's it.
I've been looking at 5 period weighted MA bands (calculated off highs and lows)
for trailing stops after reaching target. Perhaps I'll do the same for filled
gaps of decent size.
You may find that a trendline will do you more good. When it's breached, the
party's generally over. If it's breached before you get to breakeven, it pays to
get out immediately, no questions asked.
--Db
Re: Simple?
Quote from lindq:
I've been trading stocks with success for a couple years, and have been intrigued by all the talk about trading the S&P and the e-mini as a possible complement to my primary system.
Because I like to keep things simple, I was drawn to these threads. But....duh! You folks make space travel look like a cake walk!
If there is so much involved in pulling a few dollars out of trading a single instrument, I think I'll pass.
Or...am I missing something? Is there truly a decent risk/reward ratio here?
Re: Re: Simple?
Quote from pretzel:
lindq,
Your system is definitely more simple than the one discussed here. The complicated part is in the selection of stocks for tracking. And imo, it takes a lot of guts to follow your system (catching a falling knife ?).
This is one of lindq's system. You can see more lindq-based scripts by doing
a search on "lindq" on the Wealth-Lab site.
pretzel
And what reason would one have to expect that the 20% stop-losses wouldn't
just pile up?
--Db
Quote from dbphoenix:
You may find that a trendline will do you more good. When it's breached, the party's generally over. If it's breached before you get to breakeven, it pays to get out immediately, no questions asked.
--Db
Quote from spedblavio:
I think it might also depend on whether I was specifically playing the gap itself or if I was just using the "gravity boost" as a vehicle to get to BE quickly and be positioned to ride any further continuation.
As far as a TL breach before getting to BE, am I correct that you would not draw a TL until you could do so on the 3min or 5min chart?
Quote from dbphoenix:
And what reason would one have to expect that the 20% stop-losses wouldn't just pile up?
--Db
Quote from pretzel:
That's why I say it takes a lot of guts to trade this system. This [ ] is an even simpler variation - only 7 lines of code and only 1 line for entry and 1 line for exit. Look at the unbelievable results
You can find the "details" of this ridiculously simple system
here. Dont even have to be glued to the monitor to trade this system. And, I
never asked anybody to switch - just showing another simple system - since this
thread is about simple systems.
I tried this system before but it's hard psychologically because you will be
catching a falling knife in actual trading, that's why I say "guts" .
BTW, the
opening bar breakout of the first 60 mins fares better than the breakout of
the first 30 mins in backtest.
Since you're on the lookout for simple systems, here's another one called
L/S Model with probably enough details to make sense.
pretzel
Quote from pretzel:
I tried this system before but it's hard psychologically because you will be catching a falling knife in actual trading, that's why I say "guts" .
DB,
Please refresh my memory on your position on gaps by telling me whether you took
the 1062.50 breakout today or not. I have a problem trusting an entry into a
breakout that's going in the direction of existing gap like it was today. The
gap, (by my figuring was already 2.47% at the opening so I didn't take the 9:22
(CST) breakout. Did you, and if so, did you hold it through the 10:33 rally to
1063.50?
__________________
ham
Since gaps that large have only a 36% chance of filling, I pass. I waited for
the downside.
Wasn't a great day, but it made 12 pts.
--Db
right
Quote from dbphoenix:
Since gaps that large have only a 36% chance of filling, I pass. I waited for the downside.
Wasn't a great day, but it made 12 pts.
--Db
__________________
ham
Actually, I got in a little early. But even if I hadn't, there was a reaction
high at 1064.0 at 10:36, and it didn't make sense to place the stop just a tick
or two away from that. If one were nervous, it would make more sense to get out
at a breach of the 11:03 reaction high and re-enter, or not move the stop to BE
at all.
Note that in my revisions, there is no moving the stop to BE when X pts ahead. I
don't move it to BE until the TL is broken.
--Db
Quote from dbphoenix:
Actually, I got in a little early. But even if I hadn't, there was a reaction high at 1064.0 at 10:36, and it didn't make sense to place the stop just a tick or two away from that. If one were nervous, it would make more sense to get out at a breach of the 11:03 reaction high and re-enter, or not move the stop to BE at all.
Note that in my revisions, there is no moving the stop to BE when X pts ahead. I don't move it to BE until the TL is broken.
--Db
__________________
ham
If you didn't play the gap, you'd have a long wait on this day for a BO of
the opening range, if you define the opening range as what happens before 1000,
and that didn't come until after 1100. Entry would be at 1084.5. The TL was
broken around 1130, and you'd be out at BE. Or you could just exit when the gap
was filled and wait for a re-entry or a reversal.
No reason for the triple bottom to "fake you out". If price returns for a third
time, the support is likely to fail.
And, yes, I did buy the double bottom.
--Db
Like to see you trade that system realtime champ
I thought this thread was about keeping it simple, it sounds like your system
has so many factors and variables you would get in a right mess trying to trade
it.
does anyone trade a simple more mechanical system??
Re: Like to see you trade that system realtime champ
Quote from wwatson1:
I thought this thread was about keeping it simple, it sounds like your system has so many factors and variables you would get in a right mess trying to trade it.
does anyone trade a simple more mechanical system??
Re: Like to see you trade that system realtime champ
Quote from wwatson1:
I thought this thread was about keeping it simple, it sounds like your system has so many factors and variables you would get in a right mess trying to trade it.
does anyone trade a simple more mechanical system??
Re: Re: Like to see you trade that system realtime champ
Quote from bdixon619:
Db's system provides a good pattern based backdrop to market dynamics, one that can be used to trade itself or can be used as a reference for discretionary trading within a mechanical system to generate signals.
One step at a time...
and it all gets done. Let's see: entries are possible 2 pts. above and below
the opening range, check for trend, use an ATR target from the last 10 days
either added to or subtracted from the Lo/Hi. Trail your stops until there is a
break of the trendline and figure the party might just be over at that point. If
you find the open has a considerable gap it is best to trade in the direction of
a big gap and to keep a fairly wide stop to allow for 'creep'; small gaps can be
faded until closed or nearly so, depending on the trend. At any rate, take some
profit when these do close or begin to reverse. Look for opportunities to
reverse at trend line violations, either 2B's or multiple tops or bottoms. Don't
wait too long to follow up these opportunities. Other than that, don't be too
quick to re-enter in the direction of the trend if you are stopped out, wait for
a new high or low at least 2 pts. greater or lesser than the last high or low.
Bruce
That's about it. This morning, for example, I did not take 49.5 because the
ES wasn't making a new low and there was a great deal of hesitation. 49.5 may
turn out to have been the best entry. But this doesn't look like I want it to
look. This makes it more difficult than just entering at the 2pt break no matter
what. But who said life was easy?
--Db
Add. A 49.5 entry would have been SO here. This failure to drop says
something. If one wonders what it says, this strategy will probably be
successful for him. If he doesn't, it probably won't.
--Db
Re: One step at a time...
[QUOTE]Quote from bdixon619:
...use an ATR target from the last 10 days either added to or subtracted from
the Lo/Hi.
It might not actually be much different, but I wouldn't use ATR. All you want is
the average daily range from low to high. ATR is a more complex calculation that
takes into account gaps (and overlap?). ATR is of more interest if you're
concerned with movement from day to day, but what you want here is simply
average intraday range. Some programs have "ABL" or Average Bar Length.
Calculated for 10 periods on a daily chart, this will give you the number you
want. Or it's easy enough to do manually.
Trail your stops until there is a break of the trendline and figure the party
might just be over at that point.
The system outlined does not trail stops before a TL break.
If you find the open has a considerable gap it is best to trade in the
direction of a big gap and to keep a fairly wide stop to allow for 'creep'
Db mentioned how creep can tempt the trader to use wider gaps, he did not say
you should (if we're talking about an initial stop anyway). The whole thing with
creep is detecting it as early as possible (which means recognizing conditions
that often lead to it such as yesterday's large gap which also opened below the
low of an up day in an upswing) and getting in early or not at all. With creep,
there's usually a small window in which to take a position that can be
comfortably and reasonably held. If you miss that window, it's best not to
torture yourself trying to find a sustainable entry.
Re: One step at a time...
Quote from spedblavio:
The system outlined does not trail stops before a TL break.
I think it would make sense to move initial stop to BE after the TL clears
the entry point enough to make that possible.
This should have the same result as waiting for an actual breach to move the
stop, but has the advantage of additional protection in case of disconnection
(my ISP has been dropping me repeatedly since last Thursday).
Re: Like to see you trade that system realtime champ
Like to see you present a more mechanical system that is simpler, but doesn't
have huge drawdowns or gut-wrenching stops, or overnight holds, or entries that
only exist in backtesting, and that has a better risk/reward performance and
doesn't encourage over-trading.
I don't think it's possible, since what's being described here is simply how to
identify and exploit trend in a way that balances cutting losers short and
letting winners run based on the market's nature rather than aribitrary notions.
The deciding factor, perhaps, is whether or not one wants to or wants to
learn how to trade by price action. There are very few people here who are
interested in the subject. Not that I care one way or the other. But this
strategy is unlikely to hold any attraction for anyone who would rather take the
indicator or pattern route.
--Db
Quote from dbphoenix:
The deciding factor, perhaps, is whether or not one wants to or wants to learn how to trade by price action. There are very few people here who are interested in the subject. Not that I care one way or the other. But this strategy is unlikely to hold any attraction for anyone who would rather take the indicator or pattern route.
--Db
Note that the target coincides with the top of the gap.
--Db
And the pause here at yesterday's high is not unexpected. Failure would not be a surprise either.
reversal exit
DB, quick question about when you exit a reversal. Do you use similar rules
to what you use to get out of your opening trade? Do you have a target in mind
or do you just use the break of a trendline to pull your stop in tight?
Thanks.
__________________
-Biomech-
Trust those who search for truth, ignore those who have found it.
Re: reversal exit
I use the same rules for exit. I want the price to move. If it doesn't,
nobody's scared. I'd rather get out and wait for a better entry.
As for targets, no, unless we make a 100% retracement. I just use TLs and
reaction levels.
Reversals are just extra money. Don't be greedy.
--Db
Quote from dbphoenix:
This failure to drop says something.
--Db
59. I generally go for the breakout on the first move, then trade
retracements on the reversal. That's mostly because the markets have been so
weird, agonizingly slow on the initial wave, herky-jerky on the reversals.
It's all so difficult, all so complicated
--Db
How about yesterday?
DB,
Just curious. Did you do anything with yesterdays first ORB? What about the rest
of the day?
__________________
ham
I bought it, even though it was fairly late, largely because the New Home
Sales report usually doesn't move the market much. But I got stopped out at BE.
There was a W reversal around 1130 and an H&S around 1320.
--Db
Re: Re: Like to see you trade that system realtime champ
Quote from dbphoenix:
Like I said above, "if you want simple, go long or short a breakout of the first 30m bar. Period."
--Db
Re: Like to see you trade that system realtime champ
Quote from spedblavio:
I know this is a huge complication, but I would suggest using a 33min range on days with 10am reports.
Quote from dbphoenix:
Not a big complication. This is included in the rules:
For the NQ, enter a trade using a stop-limit 2 points outside the opening range (the opening range generally takes 15-20m to form; if there's a report due out at 1000 and price has not broken out of the range by 0950, you may want to wait for the report and use the reaction to it as the opening range).
But it does complicate entering the breakout of the 30m bar. If one wants it mindlessly simple, he may have to pay a price.
--Db
You're correct about the 30m bar. It gives price time to resolve those
initial buys and sells, which generally take until around 0950. If that's to be
faded, the 30m bar also provides time for the fading to get done.
People who want simple, though, don't want to hear this. They just want rules to
follow.
What you're looking for is an "N", or the mirror-image of one. You want price to
make a high (or low), then a low (or high), then watch what happens next. But
many people have difficulty allowing this to develop.
As for retracements, I've found them to be of greater value in this environment
than in the usual since it's so much more difficult to get anywhere unless you
enter very near the point of trend reversal. But that's a separate strategy.
--Db
My personal preference is definitely for simple rules that are as mechanical,
objective and unambiguous as possible. The less the seat of my pants is
involved, the better.
But I insist that those rules be based on very solid principles of price action,
or at the very least on observed phenomena with statistical verification (such
phenomena serve only as entry exclusions, not triggers or foundational
principles). And I also must understand the principles or phenomena underlying
the rules, not simply accept any rule whether it came from someone else or from
my own hypothetical scheming.
Strange that the only trade today was the reversal in the last hour, and I'd
given up on the day. Just happened to get back from the library when the new
high attempt failed. Good for seven to nine pts, though, depending on how it was
played.
--Db
Quote from dbphoenix:
Strange that the only trade today was the reversal in the last hour, and I'd given up on the day. Just happened to get back from the library when the new high attempt failed. Good for seven to nine pts, though, depending on how it was played.
--Db
I wasn't interested in that short partly because there was no target and
partly because it took too long. If there hadn't been a 1000 report, I might
have babysat it. But the probability that the report would drive price up was
greater than that it would drive price down since there was so much anticipation
of a falling price. After that, the "N" was awfully sloppy, with great wide
overlapping bars.
As for the afternoon, you have to stop thinking about all the reasons not to
take the trade. The only reason not to take the trade is that you're trying too
hard to make it look better than it is. But this particular failure looked just
the way it's supposed to, TL break and everything. And your stop could have been
extrememly tight, if you use the end of the bar. Your "vision" of the trade
reversing on you can be as damaging as a vision of the trade being spectacularly
successful. Look to the setup and don't visualize any consequence. If you've
evaluated the setup properly, the odds are in your favor.
--Db
OR within PD OR
I think it's interesting to note that today's OR was entirely within
yesterday's OR.
This might not seem all that significant considering that yesterday's OR was
quite wide (ended up almost being the day's total range). And it's just another
way of describing sideways congestion.
Nevertheless, it's something I haven't observed before (within the last 3 weeks
or so anyway, since I've been tracking OR's). There have been other periods of
sideways congestion, but the OR's have been overlapping or staggered, and/or the
previous day's OR did not contain most of price action as it did yesterday.
It will be interesting to watch the next time this happens.
Edit: I should note that by OR I specifically mean the 30 or 33 min "timed"
variety.
Did you short the lower high at 1020?
--Db
Quote from dbphoenix:
Did you short the lower high at 1020?
--Db
Quote from spedblavio:
Did you pass on the BO long at 1030.00, and if so why? Because of the expansion bar?
At what point did you start to sense that today would be a mess? Any
cautionary hints going into the open, any specific measures you take under such
conditions?
Regarding "ammunition" saved for a better day, do you have any specifically risk
management related rules or limititations on "ammunition"?
In the previous plan I was testing, I had a limit of 2 losses per day and would
generally quit after one win. There were similarities to what I'm working on
now, in that it just doesn't typically generate more than a couple-three
legitimate trades per day, and if one is getting more then something's not being
done right (within the context of the specific rules I'm testing, which are
based on the simple 30/33min ORB idea, with no supplemental trade specific to
gaps but does do reversals).
And, similarly to my results before, my current testing supports the idea that a
third trade doesn't present often (assuming earlier legitimate trades have been
taken), let alone one that helps the day's results. So, I'm considering a 2 loss
daily limit.
By the way, what kept you out of any of the "secondary BO's" like the second
poke after that first xbar, or the second try at ORB later on in the afternoon?
For me, the former was because it did not demonstrate support above the OR high
on pullback (not to mention it was twitchy and the pullback just a doji, but
those aren't specified in the rules) and the later would be because of nearness
to test of PD high (I felt the earlier ones were far enough away from PD high to
get a running start and likely opportunity to tighten stop, so I didn't count
them out for that).
As to your first question, when the NQ fell only a few pts then segued into an
hour-long congestion, during which volume disappeared, I figured we were in for
more of the same. I want to get this done quickly. I don't want to sit around
all day long trying to squeeze out a few points here and there. I'd rather wait
for a wide-range day with decent volume.
Don't know what you mean by your second question.
As for the various and sundry reversals and BO attempts, these tend to get
weaker and weaker as the day wears on. The bars overlap more, the reaction
points don't hold, and you wind up in creep. I don't trade creep, esp when
volume is so low.
I know that looking back on the day it seems like a set it and forget it. But
that's hindsight. Even if one had entered on that 1130 reversal, he'd be more or
less at BE by now. And then you get into complicated exit strategies that try to
catch a greater part of the move.
What it all comes down to is trading intrarange, which is difficult enough with
good volume and volatility. This is not a scalping strategy, nor is it any good
for trading intrarange. But even the strategy I use for trading intrarange
requires volume. The best one can hope for is a good initial thrust and a good
reversal. Anything more than that is gravy. But if you want thrusts, you've got
to have people trading. Apparently there are only six people trading.
--Db
Quote from dbphoenix:
I know that looking back on the day it seems like a set it and forget it. But that's hindsight. --Db
This morning appears to be another good example of when to pass on a 33min
ORB entry.
I took the long at 1064.00 (on paper only), but knew as I did it that I would be
writing a rule to disallow it.
The rule will be something like "no zag, no entry".
In other words, there was only one swing in one direction for the first 33
minutes, no counterswing, no serious pullback, no TL breach. It zigged, but
didn't zag until after entry (fully expected). Just too extended to be a
reasonable entry.
Certainly may be an argument for not being rigid about defining the OR, but for
now, for testing and development, I want to stick to the mechanical "timed"
definition I'm using.
These patterns no longer bother me. If you backtest this stuff, you'll find
that days when price takes off and never looks back are rare. Trying to
accommodate them affects the strategy, which must be applied every day, not just
on those days when price behaves in an unusual way.
There are places to jump in during these moves that are compatible with the
strategy. If they don't happen to occur on a given day, so what? Look for a good
reversal setup.
--Db
If you backtest this stuff, you'll find that days when price takes off and
never looks back are rare.
Right, which is why I don't think it's a good idea to take an entry which relies
on that happening to work.
Trying to accommodate them affects the strategy, which must be applied every
day, not just on those days when price behaves in an unusual way.
I agree. What I'm suggesting is not trying to accomodate a rare situation, but
rather not to be suckered into something that might act like a rare situation
but most likely turn out not to be; a procedure that should not come into play
in typical conditions.
To me, passing on entry due to an uncorrected single swing OR is very similar to
passing due to an xbar gobbling up most of the OR and hitting entry trigger at
it's end.
So, I am not clear... are you suggesting that the 1064.00 BO entry should've
been taken systematically regardless of the one-directional OR?
Quote from spedblavio:
[Bare you suggesting that the 1064.00 BO entry should've been taken systematically regardless of the one-directional OR? [/B]
4/2
Quote from dbphoenix:
No, no opening range was established, unless you consider the first trade of the day as the opening range low. If you did, the first opportunity to enter would be 2pts above the 1012 bar, which would be 40pts into the move. Sometimes you just have to use common sense.
You could, of course, just buy the open and hope, but that's not part of this particular strategy.
--Db
__________________
monee
Re: 4/2
Quote from monee:
Great mindset D.B.
For the sake of accuracy, I suppose I shouldn't say this rally is just like
the one on the 13th. This is, for example, an island reversal on the NQs, which
carries a bit more weight.
But you know what I mean. This rally is an emotional response to news, like the
13th.
--Db
A plan keeps one from getting into trouble.
I have found that based on the dailys I have certain strategies
that I am looking to use at certain times of the day.
A true key to success, is being able to see moves that happened without fitting
into ones strategies,and not being upset and deviating from your plan.
Like I said in a previous post if I can obviously see there is no setup for me
that day I will leave the house.It's always on my mind that my strategies work,
so don't be impatient,or be a pig trying for something I shouldn't.
Kind of hard to trade if your not in front of your trading computer.
I also setup another computer in a room with no tv,no charts accessible and no
trading screen.
D.B your insight on the discipline end of trading?
__________________
monee
I understand what you're saying. Teresa would often comment about days like
this, how non-trading folks would look at EOD and say "wow, you must have had a
great day today!" when in fact it would be hard to explain to them that there
just weren't any good opportunities to enter and it wasn't a good trading day.
But ("snort"), my rules backtested for 39.5 pts on the 13th with no special
tricky exceptions, very straightforward. I did not catch it in real time (I
wasn't testing the same rules at the time), but I came damn close with 2 stabs
and quit just as the 3rd stab would've done it.
I just think that, unless and until my data shows otherwise, with a Lrg gap
(maybe 1.8% and larger) or "Potential Trend Day" conditions (gap above/below
previous day's high/low, in direction counter to swing on daily chart), the odds
favor continuation away from the gap. It may only be a creeper day for sure, but
if the early entry window is caught that's ok. In any case, I ignore any
triggers into the gap, unless price action builds a very strong case for it
(which probably would mean building a staircase into the gap, demonstrating
support/resistance outside the gap-ward edge of the OR).
Today and the 13th are both Lrg gaps and PTD, a strong combo. Unfortunately,
today didn't set up a nice entry like the 13th did. And as much weight as I may
give the gap and PTD, closing my eyes and buying the open is not in my plan
either. One can see from the 13th that there needs to be a solid entry plan in
place.
Quote from monee:
A true key to success, is being able to see moves that happened without fitting into ones strategies,and not being upset and deviating from your plan.
That's true. The 13th was a stairstep day (I used it as an example in the
Determining Trend thread) and there were multiple entry points. Today, however,
there's been only one stairstep entry, and if one had taken it, he'd be stuck in
congestion right now as just about the breakeven point (if one had taken the
pullback entry after 1000, he'd be around three pts ahead, which is a far cry
from forty).
Note that volume has dried up and there's no selling pressure, and we've been in
this range for around 90m. So I'm not on pins and needles for any big reversal.
--Db
Quote from spedblavio:
I agree with that, though I might quibble about whether it's a key to success or a byproduct of it... I'm not sure.
Quote from dbphoenix:
Note that volume has dried up and there's no selling pressure, and we've been in this range for around 90m. So I'm not on pins and needles for any big reversal.
Db,
I was just wondering, in times when you enter at +2 from the brkout point and
the NQ maybe goes up a point or two and stalls and stays around +2 to -2 from
entry, what is the wiser thing to do?
Do you wait for the follow through (or stopped out at initial stop), or get out
at BE or slight gain?
This is obviously a question only a newbie would ask, so I'm sorry if this
sounds silly.
Thanks again.
Quote from arzoo:
Db,
I was just wondering, in times when you enter at +2 from the brkout point and the NQ maybe goes up a point or two and stalls and stays around +2 to -2 from entry, what is the wiser thing to do?
Do you wait for the follow through (or stopped out at initial stop), or get out at BE or slight gain?
This is obviously a question only a newbie would ask, so I'm sorry if this sounds silly.
Thanks again.
Quote from dbphoenix:
When the trendline is broken, the stop should be moved to BE. Unfortunately, there are times (and there have been plenty of them over the last two months) when the TL is broken before one can get to BE.
--Db
Quote from arzoo:
Thanks Db,
That's the reason I wanted to ask the question since I've noticed lately that there have been quite a number of times I've had to bail out at 1.5pts or 1pt from entry as the brkout seems to stall and starts hovering between +3 & -3 of entry.
Although, I've noticed in a number of occassions after I exit the NQ still moves in my direction albeit in a slow and weak manner and maybe reaching about +5 to +6 at times, which made me wonder if it was better to get out or let it wiggle a bit (though with the risk again of getting stopped out at a loss after already having a small gain).
I've had good results with tightening my stop to 2.5pts (one tick inside the
opening range) as soon as a completed 3min bar has completely cleared the
opening range (that is, the bar's entire range is outside the OR).
I'm still in a mechanical testing process and papertrading, so I don't really
want to bail out "manually" based on perceived weakness and discretion. This
stop tightening procedure gives me an objective way to avoid coming all the way
back to my initial crash stop (in most cases anyway) when BO's fail before a
decent TL can be established.
Even with the tighter 2.5pt stop, it seems rare that the stop is taken out and
then price turns back around for a significant profit. A few pts maybe, but not
a real move right away (assuming the entry was legitimate in the first place).
Quote from spedblavio:
I've had good results with tightening my stop to 2.5pts (one tick inside the opening range) as soon as a completed 3min bar has completely cleared the opening range (that is, the bar's entire range is outside the OR).
I'm still in a mechanical testing process and papertrading, so I don't really want to bail out "manually" based on perceived weakness and discretion. This stop tightening procedure gives me an objective way to avoid coming all the way back to my initial crash stop (in most cases anyway) when BO's fail before a decent TL can be established.
Even with the tighter 2.5pt stop, it seems rare that the stop is taken out and then price turns back around for a significant profit. A few pts maybe, but not a real move right away (assuming the entry was legitimate in the first place).
It may seem as though you're locking in a small loss, esp if you end up
re-entering very soon thereafter...
Under my current rules, I will not immediately enter a secondary BO after a
stop-out loss unless support/resistance is demonstrated outside the OR on the
retracement. I may end up loosening that requirement depending on my testing,
because I can easily imagine a retracement just taking out my stop a tick inside
the OR and then breaking out successfully. But I haven't observed that happening
yet, at least not on the first retracement.
Are you using Dunnigan at all?
Not specifically or consciously, other than general principles of price action
that are not unique to Dunnigan. What did you have in mind?
I'm not clear on his concept of "thrust" exactly, I think because when he got to
his "One Way Formula" he had abandoned that, or maybe it's more accurate to say
he built it into his rules in an integrated way. I haven't looked at the earlier
parts of his work for a while.
In what ways do you incorporate Dunnigan's ideas?
Under my current rules, I will not immediately enter a secondary BO after
a stop-out loss unless support/resistance is demonstrated outside the OR on the
retracement.
Could you provide an example?
I'm not clear on his concept of "thrust" exactly, I think because when he got
to his "One Way Formula" he had abandoned that, or maybe it's more accurate to
say he built it into his rules in an integrated way. I haven't looked at the
earlier parts of his work for a while.
In what ways do you incorporate Dunnigan's ideas?
The thrust is a signal that you're on your way. The 2pts above the OR serves the
same function in that 1 to 1.5 doesn't always signal intent, and 3 is too
extended. In all the review I've done, 2 seems to be the best compromise.
As to how I'm using his ideas, that may be best left to chat since it's nowhere
near "simple", at least in the spirit of this thread. How do you feel about the
chatroom here?
--Db
db "simple" is relative. the ideas discussed here so far have been very
simple. very good, but simple. let's move on to "advanced tactics" (for want of
a better word). this thread of yours is freaking great, i'd like to see further
expansion and analysis.
thanks for your contribution here.
__________________
"Be master of your petty annoyances and conserve your energies
for the big, worthwhile things. It isn't the mountain ahead that wears you out -
it's the grain of sand in your shoe." - Robert Service - footnote:who the f*ck
is this Bob Service guy?
ditto longshots' comment. I'd certainly join a chat if there's interest in putting one together to elaborate on the evolution of our trading plans. I know I've certainly picked up some ideas from the thread that have made their way into my trading process.
Shall I assume that nobody's interested in posting to a journal?
--Db
Quote from dbphoenix:
Shall I assume that nobody's interested in posting to a journal?
--Db
__________________
"Be master of your petty annoyances and conserve your energies
for the big, worthwhile things. It isn't the mountain ahead that wears you out -
it's the grain of sand in your shoe." - Robert Service - footnote:who the f*ck
is this Bob Service guy?
What would be the advantage of posting in 2 places?
This is not a journal. It's not appropriate to discuss individual trades, or
at least that's what I was told by the moderator. Plus a journal has a much
narrower focus. This thread is open to any simple means of trading futures. If
one wants to focus on any one system or strategy, then a journal seems to be the
preferred venue (though Jack Hershey has taken over the Stochastic Indicator
thread to expound on one specific method, so I guess it depends on the
moderator).
--Db
Ah, I see.
What do you have in mind? Different folks posting their trades based on their
version of "the system"? One person posting trades deemed to be legitimate per
the posted rules? Or just a different place to post where it would be
appropriate to discuss specifics and to focus on a defined strategy, but not
necessarily keeping up a systematic log of every trade?
Since hardly anyone posts here, I doubt that there would be much posting to a
journal. That's why I suggested the chatroom. But I don't see any particular
need to come up with another system or a set of rules for anything. I'm content
to explain what I look for and have another set of eyes look for more or less
the same thing (I tend to drift off when I get bored). If somebody else wants to
look for other things, that's okay by me. If it's too far different from what
I'm doing, I can just not pay attention.
--Db
Under my current rules, I will not immediately enter a secondary BO
after a stop-out loss unless support/resistance is demonstrated outside the OR
on the retracement.
Could you provide an example?
Yes, I'll try to get to that later
How do you feel about the chatroom here?
Not sure, only just checked it out for the 1st time yesterday. I noticed today
that one can apparently set up new rooms? Do you know what's involved? I assume
you'd set up a room, not use the Elite Trader room.
I'll look into setting up a separate room tomorrow. No password. I like this
particular chat setup. Very simple. And it doesn't seem to draw much memory.
--Db
In the meantime, I'm providing an example of what I look for in retracements.
I use only trendlines and reaction highs/lows.
In this example, there are only three entries, two of which aren't as clean as
I'd like.
The first is after price makes a reaction high at 69.5. It pulls back,
consolidates for five bars (sloppy), then advances. The advance stalls (also
sloppy), then does nothing for eight bars (also sloppy). It then breaks below
the last reaction high (69.5), but it does find support at the TL (already
drawn), and at that consolidation between 67 and 68. This is double sloppy
(finding support at the TL is okay). Even so, the stop can be fairly tight, so
for some it may be worth the risk.
The second is at 1074. Here you can see that price retreats back to the previous
reaction high and also finds S at the TL. I like these double support points.
On the way down, more sloppiness, but not a terribly risky entry. Price breaks
TL3, then TL2, then finds R at TL2 (the down-sloping TL can't be drawn yet). All
of this also finds R at 80, which is heavy R left over from the end of March,
and the stop can be tight.
--Db
Sounds good.
I got the reversal short, so refreshments are on me.
Re: an example of my not taking a secondary BO if support/resistance hasn't been
demonstrated outside the OR, I thought I had a couple of good examples, but
looking back over them there's other factors going on.
Today has an example, though maybe not the best as again there are other
factors. At 1:30, price broke the morning high by 2pts. Now, there were probably
various reasons not to take this "secondary BO", but the one that was most
clearly defined in my rules is that before the BO there was no demonstration of
support above the original OR top at 1073.00. I suppose my intent here is to
offer some measure of protection against a fake-out poke. It's a potential trap
situation, so I want to see price build a stong case for continuation.
But, I did take the next "BO" at 1079.00. It felt pretty crazy, and price had
been acting weakly. Nevertheless it had pulled back cleanly above the OR and was
developing a trend. There were plenty reasons that this was probably a foolish
entry, but it just wouldn't die and I'm testing the extremes of my plan anyway
and I gave it a shot. I moved my stop to BE when it failed to go above 1082.00
on the second try. I knew that it was 2pts from target, but more importantly it
was at resistance on the daily and at the top of the gap from the 24th.
I don't SAR, so I didn't get the aggressive entry on the reversal, but I put a
sell stop under the ledge that developed.
Quote from dbphoenix:
In the meantime, I'm providing an example of what I look for in retracements.
--Db
Quote from spedblavio:
Today has an example, though maybe not the best as again there are other factors. At 1:30, price broke the morning high by 2pts. Now, there were probably various reasons not to take this "secondary BO", but the one that was most clearly defined in my rules is that before the BO there was no demonstration of support above the original OR top at 1073.00. I suppose my intent here is to offer some measure of protection against a fake-out poke. It's a potential trap situation, so I want to see price build a stong case for continuation.
Quote from spedblavio:
How do you enter? Stop-limit above the retracement bar that finds support? Do you trail the retracement bars with an entry stop, or do you wait for evidence of thrust and enter at market/limit?
Quote from dbphoenix:
Stop-limit, two pts above the high of the lowest high.
--Db
I got sick to death of trying to pick the most clever, stealthy spot, and
getting stopped out of retracements that become more complex before they resume
the trend, or turned out not to be retracements at all.
Ditto. It's real easy to trip over your own feet by trying to be too clever. One
can do amazingly well by following basic principles. It really isn't necessary
to be clever as well.
Also, right now for me it's a slippery slope to start taking trades inside
the OR (other than reversals near the edges). Certainly there are higher finesse
trades that I'm going to miss, but snosur4's original idea is an effective way
of keeping one out of chop. Trying to pick the sneaky move out of the range was
often a downfall for me. I can see that smaller ranges can be defined within the
original OR; it's not a question of legitimacy just an area that is not
specifically defined in my rules yet.
I'm hoping that having more than one pair of eyes watching this stuff will help.
I'm having a real problem with boredom these days. What used to take an hour now
takes all day. And I get inattentive. I don't think the TL/Ret setups I've
posted are all that difficult, but they're easier to explain by example than
with words and rules and blahblah. Unfortunately, they are also easier to see in
hindsight than in realtime, especially when one is nodding off. Ordinarily, I
detest chatrooms because I couldn't care less about who entered where or how
much money they made. But this one has a nice Ignore feature, so I don't have to
be distracted by all that. We'll see how it goes.
--Db
Quote from spedblavio:
Trying to pick the sneaky move out of the range was often a downfall for me. I can see that smaller ranges can be defined within the original OR; it's not a question of legitimacy just an area that is not specifically defined in my rules yet.
Once you establish a chat room, please post it in this thread so everyone will no where it is.
__________________
ham
Room is set up. Called KIS. Click Chat at the top or bottom of the page, then
Log In, then Rooms.
--Db
[QUOTE]Quote from dbphoenix:
[BDitto. It's real easy to trip over your own feet by trying to be too clever.
One can do amazingly well by following basic principles. It really isn't
necessary to be clever as well.
[B]
On attached chart circles 1 and 2 looked like good breakouts as I understand
this kis setup. Was it a basic principle that made you pass them up or just your
feel for the market not being a breakout type of day.
I somehow had the impression you were mostly a breakout trader, tossing in an
occasional reversal or pullback entry.
Quote from redzuk:
On attached chart circles 1 and 2 looked like good breakouts as I understand this kis setup. Was it a basic principle that made you pass them up or just your feel for the market not being a breakout type of day.
I somehow had the impression you were mostly a breakout trader, tossing in an occasional reversal or pullback entry.
db
the ES was clearly lagging the NQ today and was not making a new low at this
time so why do you suggest a valid setup occurred?
Some days ago I recall you avoiding a trade just for this very reason.
__________________
"Be master of your petty annoyances and conserve your energies
for the big, worthwhile things. It isn't the mountain ahead that wears you out -
it's the grain of sand in your shoe." - Robert Service - footnote:who the f*ck
is this Bob Service guy?
pivot
pivot- recent high/low where price reversed.
Re: db
Quote from LongShot:
the ES was clearly lagging the NQ today and was not making a new low at this time so why do you suggest a valid setup occurred?
Some days ago I recall you avoiding a trade just for this very reason.
Re: pivot
Quote from redzuk:
pivot- recent high/low where price reversed.
Re: Re: pivot
Quote from dbphoenix:
How do you define "reversal"?--Db
Re: Re: Re: pivot
Quote from redzuk:
You're confusing me now.
for high:
Price makes Higher High than previous two bars. The HH is where it failed moving that direction (pivot). And price makes a LL, failing to make another HH for atleast two following price bars.
On the chart I posted the first red line marks what I considered the opening
range break. The rest of them marked what I considered important REACTION HIGHS
and REACTION LOWS. It basically shows prior support and resistance, right? You
draw horizontal lines off of RH and RL. If you want to incorporate time you
connect the RH and RL with diagonal lines. Combined with other price levels I
think RH/RL become more important.
1. Daily RH/RL
2. Percent retracement (fib levels)
3. "pivot" calculations from daily high, low and close
4. Gaps
5. Daily moving average's
6. average range plus high/low (system target)
7. Anything else??
How important can these fluctuations be on a 3 or 5 minute chart, without
combining them with the above? Thats what i'm trying to get at. Maybe I should
have posted to the "determining the trend" thread.
I posted the chart hoping to get any discussion on what makes a one RH more
important than any other one. To me the price action at RH/RL levels defines the
trend (blue circles on my chart). With all the overlapping and failure to follow
through there was no trend. Of course trading would be very easy if we always
knew what kind of day we were going to get. And I think that is the key to
discretionary daytrading.
Consecutive RH when the RL does not overlap previous RL makes a nice stairstep
trend. Is trading a breakout this simple:
1. wait for a RL that is higher than preceding RL, to enter a breakout RH.
2. don't trade breakouts on low volume days.
3. daily range contraction will lead to a trend day eventually. Traders often
mention narrow/wide range of 4 or 7 days, are these important to you?
If you can add any insight on defining RH and RL please do.
As far as "diagonal lines" or trendlines, they really don't have anything to
do with incorporating time. They're there. Time is not an issue.
As to your items one through seven, 2-6 are not incorporated into this
particular ORB strategy. One begins by determining the opening range, then he
enters the breakout, then he either exits before the day's target is reached if
conditions (as he defines them) warrant, or he exits at the target. And that's
it. Gaps and reversals are not part of the strategy. One can trade them, but one
can also take the money off the ORB trade and quit.
Trading gaps is not especially difficult, but it's not as simple as the above.
But, in any case, it is a separate issue and doesn't have anything to do with
the ORB strategy.
Trading reversals is also an option. However, reversals are considerably more
complicated than what is required by the ORB strategy. They can be made simpler
by making choices, but they are not inherently simple. Therefore, they are not
included in the ORB strategy either.
As to your chart and what makes one reaction more important than another,
keeping it simple entails avoiding the issue of "importance". I look at
higher/lower and little else. I also don't work the day to death.
Your chart begins with a move downward, a reaction, and a downward break through
the opening range. It then makes a low. It then makes a lower low and reaches
the target. For most people trading this strategy, that's the end of their day.
If, however, you choose to have a wide stop or are hoping for a range expansion,
you might choose to stay in.
If you exit and trade the reversal, the double bottom is a legitimate trade.
Whether you buy the inside low or buy a breakout of the RH is up to you since
trading reversals are not part of the ORB strategy. If you had bought the
breakout of the RH, you would have been SO quickly.
But that would have been that. When you start trading reversals of reversals,
much less reversals of reversals of reversals, then you're almost guaranteed to
be trading chop. It's not necessary to know what kind of day you're going to
have. The task is to decide what sort of day you're having, i.e., understanding
what's in front of you in real time.
As for your last three questions, if the first one is directed toward entering
on retracements, that's what I'm doing now due to the low volume breakouts, but
that's my choice; retracements are not part of the ORB strategy. As to the
second, volume is not a consideration in the ORB strategy. As to the third,
range contraction does lead to wide-range days, but the idea that you can count
the number of days leading up to a WR day is largely nonsense. And, again, it's
not a part of the ORB strategy.
The ORB strategy is extremely simple. One can massage it until it is almost
entirely discretionary and thus considerably more complex and complicated, but
then there's little point in developing the strategy in the first place. The
strategy is for getting in, getting out, and doing something more productive
with the rest of your day. It's not about scalping or trading chop or squeezing
out every available point.
What I personally am doing on any given day is largely irrelevant. This thread
is not my journal. It's about simple ways of trading futures. The ORB strategy
is only one of those ways and I'm happy to answer questions about it if I can do
so. However, I have no interest in maintaining a journal. Anyone who's
interested for some reason in what I'm doing is welcome to join me in the chat
room if I happen to be there.
--Db
Whether you buy the inside low...
Db, by "inside low" do you mean buying a break of the high of a down bar that
makes second low of the double bottom (like T's 2b entry)?
______
I know it's not in the ORB context, but for redzuk I would point out that on the
3min chart this double bottom was not very "crisp" for want of a better term. To
me, a good reversal pattern should trigger with some "oomph", and not after
dilly-dallying around. This one took a while to work it's way back up to the RH
at the middle of the "W". This wouldn't necessarily be a deal-breaker if it did
so in a constructive way, building stair-steps and indicating potential emerging
trend. But this one neither "popped", nor did it build a convincing case for
anything other than sideways correction.
But please don't take me as any sort of authority. I'm mostly trying to clarify
for myself in a way that is more objective and definable why I wasn't interested
in that potential reversal.
Whether we're talking about ORB, or our perception of the way Db trades, you are
not going to see attempts to trade every "signal' or squeeze every move out of
the NQ. Since I began trading futures intraday, one of the principles that I've
adopted is that it is not like longer term swing trading on a continuous
extraday chart. Certainly the same principles of price action and TA can be
applied, but I find it significant the way each day is it's own self-contained
little "drama". And just like in the movies, there are a limited amount of basic
plot-lines that you'll see, and in any given plot line a limited number of major
plot twists or key events.
My point is not to try to predict which basic story is going to play out on a
specific day, but to approach it with the idea that there will or may be certain
specific opportunities to position ourselves to exploit the plot line as it
emerges. And if one steps back and looks at numerous days, one can see that
within the context of trying to let winners run and letting our actions be
determined by price action rather than grabbing profits prematurely, you just
don't see more than 2 or 3 prime entry opportunites and profitable moves per
day.
It's like the difference between growing, storing and processing food so that
one can eat 2 or 3 good square meals a day without stress, versus hunting and
gathering, eating many small snacks throughout the day but expending so much
energy to obtain them that one is barely keeping up with needed nourishment.
I thought this simple strategy went well beyond the ORB trade. In fact my post had nothing to do with the initial ORB trade. But you're right when you try to choose between reversal, breakout or retracement it can get very complicated. One trade, possibly one reversal and thats it, done for day. That has much appeal over trying to explain every intraday move. Guess i put my post in the wrong place though. Thanks for the reply anyway.
Quote from redzuk:
That has much appeal over trying to explain every intraday move.
Quote from redzuk:
I thought this simple strategy went well beyond the ORB trade. In fact my post had nothing to do with the initial ORB trade. But you're right when you try to choose between reversal, breakout or retracement it can get very complicated. One trade, possibly one reversal and thats it, done for day. That has much appeal over trying to explain every intraday move. Guess i put my post in the wrong place though. Thanks for the reply anyway.
Quote from spedblavio:
Whether you buy the inside low...
Db, by "inside low" do you mean buying a break of the high of a down bar that makes second low of the double bottom (like T's 2b entry)?
What I mean in this particular case is entering above the lowest high,
deep inside the "V" of the second half of the W...
Thanks, thought so. Just to clarify for anyone who might misread your comment
(and correct me if I'm wrong), but in this case "lowest high" refers to a single
bar high, not a reaction high.
Good point about the megaphone. That ties in with what I was saying about the
behavior of the last leg of the "W". We were able to draw a preliminary UTL
there, but the move up was very messy, basically just a couple spurts seperated
by totally sideways, overlapping bars. So on the way to "breaking out" above the
middle high, it didn't do anything to invalidate the megaphone condition,
implying that it was not a reversal but just the beginning of chop.
(though I'm not yet sure if this should be done if the bar is an inside bar)
Ah, those pesky inside bars. Always seems like a toss up between the benefit of
early entry and the risk of... well, early entry. In the context of retracement
entries and moving away from what I was attempting to do months ago, I am
leaning towards not trying to "sneak in" on inside bars and instead letting the
retracement tell it's story. In the context of reversals, what comes to mind
right now is Dunnigan's approach of ignoring inside bars. Trying to enter on
those smacks too much of "cleverness" to me, at least at the moment.
I agree about the IBs. This doesn't come up often enough to be able to draw
any statistically significant conclusions, but it does seem as though entering
off an IB is generally not a good idea. The reason for this is that the IB
represents a sudden change in sentiment, doji or no doji. Entering off of it is
much like entering off a coil in terms of probability of direction.
--Db
Was there an NQ short breakout trade at 10:50 Eastern at 1085.50 (2 points
below the morning low)?
If the trade was not taken, would it be because of the large gap up from
Friday’s close? 100*(1093.5-1050)/1050 = 4%
The ES was not breaking out of its morning range, so this could be a reason not
to take the NQ breakout trade.
Thanks for the insight!
Quote from jimmy_ddd:
Was there an NQ short breakout trade at 10:50 Eastern at 1085.50 (2 points below the morning low)?
If the trade was not taken, would it be because of the large gap up from Friday’s close? 100*(1093.5-1050)/1050 = 4%
I was a little ticked. I did get back in time to watch the retracement under
the mid-day range, and my rules, strictly interpreted, triggered a short at
1075.50 (about 2:52).
I was complacent I guess, and part of why I didn't take it was due to the daily
avg range. But that's dumb because I've already decided that is not generally a
deal-breaker for me (although, it's more likely to be if it's this late in the
day).
I understand and agree with not trading against those probabilities, and that's
why my rules passed on the ORB in the morning. But having passed on one trade,
nothing lost, it was probably worth a shot on the afternoon breakdown.
I just didn't "see" it going much further than yesterday's high. But I try to
remember that anything can happen, and even though today was an unusual
situation, a lot of times some big wins come from being where good rules suggest
being, at the right time.
Of course, that's my tweaked version of ORB. The basic one as stated in this
thread could've been short all day from 1085.50. It would've been a heroic
effort to hold through that, but I think I could argue for not moving the stop
to BE to soon.
Anyway, it's kinda funny in the end. "Hey, you never said it was gonna be a
Trend Day down!"
Thank you so much for your help.
After the morning breakout period and possible gap plays are over, what
technique would you use to trade later in the day?
You have emphasized the importance of staying with the trend using trend lines
and making the occasional reverse using M’s/W’s, 2B’s, and support/resistance
(lateral, not trendline). Do you have any advice for staying out of the chop
while looking for the decent later-in-the-day trends that seem to occur every
other day?
Thanks again.
Quote from jimmy_ddd:
Thank you so much for your help.
After the morning breakout period and possible gap plays are over, what technique would you use to trade later in the day?
You have emphasized the importance of staying with the trend using trend lines and making the occasional reverse using M’s/W’s, 2B’s, and support/resistance (lateral, not trendline). Do you have any advice for staying out of the chop while looking for the decent later-in-the-day trends that seem to occur every other day?
Thanks again.
did u guys get screwed today?
Actually, I made a point. But then I didn't buy that afternoon breakout.
--Db
But then I didn't buy that afternoon breakout.
Looking back at my charts, I realized that was the first case of buying an
afternoon BO like that. There were other pm BO's, but they were passed due to
other pre-existing rules, and one was taken but after retracement, again for
reasons of an existing rule.
Anyway, if I'd had that review fresh in my mind I would've gone ahead and
required retracement entry for late BOs like that (especially knowing that it
didn't mean going back to revise past trades).
I didn't get the reversal in RT, but by my rules it should've been taken at
1053. It didn't turn out to be much, but I think I might've held out at BE and
exited maybe around 1048 just before NY close.
So, +5pts woulda shoulda, -2.5pts in RT.
did u guys get screwed today?
I have a couple smart-ass replies to that setup, but I'll pass
Why do you ask?
I think he probably didn't do very well.
--Db
well the reason i asked is the day was a classical range day, especially in ES. and im wondering what kind of stuff you guys might have done to make money on a day like this.
You're welcome to join us in the chat room.
--Db
Db,
I was just wondering if the chat on the KIS room has a log. I usually leave at
around 12nn est and would like to be able to peruse what was discussed after I
leave.
Thanks.
Meditations on the ORB
When I started looking at the ORB strategy, I did not get discouraged by the
recent lack of successful ORBs because early on I began to incorporate ideas
from my earlier work, from things I’d learned elsewhere, and from things being
discussed here. So almost from the beginning, I had various restrictions on
taking ORBs that kept me out of most of the failures.
Seeking simplicity, I started with a plan more like snosur4’s original approach,
including an “arbitrarily” timed opening range. Interestingly enough, this led
me in a roundabout way to dealing with the OR in a more “natural” way.
ORBs I will not take:
(note: OR used in this case is 30 min timed version, 33min when there’s a 10am
report.)
-ORB away from an unclosed regular gap of fade-able size (about 1%-1.7%).
-ORB into a large gap (about 1.8% or larger) or a regular gap in a potential
trend day situation (for example, gap above the high of a down day in a down
swing on the daily).
-ORB that occurs in coincidence with test of previous day’s high or low (wait
for retracement that demonstrates support/resistance outside the PDH/PDL).
-ORB entry triggered by expansion bar(s).
-ORB occurring after an incomplete or ill-defined range (any of the following:
V-shaped, single swing, a grind drifting in one direction, narrow swing-less
clutter, BO from sideways congestion, or BO at or near an untested opening
price). Look for reversal or “ORB Fade”, or if BO occurs, wait for retracement
demonstrating S/R outside the OR. Note: any of these range restrictions might be
waived to take a trade away from a large or PTD gap, or into an unclosed regular
gap, when a better or earlier entry has not been available.
-Late ORB, occurring in afternoon or going into lunch (wait for retracement, be
ready for reversal).
What I’ve ended up with is an “ORB system” that takes very few ORBs. And while I
originally defined it as an arbitrarily timed opening range (as opposed to one
based on price structure), the range restrictions I’ve included are in fact a
bunch of exclusionary conditions dancing around the definition of a
single affirming condition: the “N”. I still find it useful to
mark off the 30/33min range though, and it seems to get me to the same place in
the end (or in the N). Eventually I’ll have to deal with N’s occurring
before 30min, but that hasn’t been happening in this market.
The high rate of passed or failed ORBs leads to the possibility of exploiting
these through reversals, or specific ORB fading tactics. I have an idea that
some kinds of early ORB failure or abortive BO, while not in themselves
sufficient reason to jump in expecting reversal, may be an element supporting
more aggressive reversal trades that might not otherwise be taken. I have much
more study to do on this though.
Regarding reversals, I’ve always been weak at identifying and exploiting
traditional reversal patterns per se, and the more obvious they were the more I
distrusted them anyway. So I’m working on defining/understanding reversals in
more generic terms of essential chart elements like TL brk, tests, LH/HL, R/S at
key levels or stair-step tests, etc.
I’m starting to see all trades in these terms. I’m starting to think that this
way of trading might be made quite systematic by breaking down price action into
specific, objective actions on the chart, and specifying for example how many or
which of these “elements” one needs to see to take a particular type of trade.
For me, the ORB itself from a mechanical “recipe” perspective has not been the
answer. But studying it has helped me to understand better how to map out the
landscape each day and have a better and more timely sense of how the day’s
story is unfolding and which events are significant (and for that matter, which
“events” are not really events at all).
Combined with basic techniques of trend identification, TL use, observation of
reaction highs and lows, looking for stair-step structure, discrimination about
retracements, etc, this process has me segueing from a mechanical emphasis to a
more “organic” way of following price action that still fits within a framework
of objective rules, but where those rules by themselves could never be enough
for someone else to follow without having done their own work of verifying and
discovering principles and making them their own.
Trading ideas must be put to the test objectively and systematically (paper
trading, back and forward testing). I believe this work is so essential for each
trader because it is not only about verifying potential rules, but it is by
doing this work that the trader gains the understanding, familiarity and
confidence necessary to actually apply principles and tactics correctly, to
execute them consistently, and to discover new potential tactics.
Does this work need to prove statistical probabilities in a precise mathematical
framework over decades of data? No, I don’t think so. Especially if starting
with basic timeless principles already verified over the decades. The trader
just has to do what is necessary for them and what they have the resources for,
and part of the task is honestly and truly coming to terms with just what is
necessary for them to acquire the confidence and skills needed to succeed. In
any case, it certainly needs to be methodical enough that one is seeing all
possibilities objectively and not just making a collection of noticed examples
that worked.
In closing, let me say that… dig it man: I have stared into the ORB in
contemplation and I saw reflected in it all that was not-ORB, but
revealed with new clarity. Gazing deeper, I even had glimpses of myself.
The perceptions afforded by searching into and beyond the ORB
revealed/refocused/synergized essential principles for me. The work that remains
is to translate these principles into the language of TLs, LRH and LRL, thrust,
tests, etc, and to express them through a ritual of execution and management
that is true to my best, most honest observations, and practiced with
discipline, confidence and intimacy.
Pass the eggs and praise the fertilizer, amen.
Re: Meditations on the ORB
Quote from spedblavio:
. . . those rules by themselves could never be enough for someone else to follow without having done their own work of verifying and discovering principles and making them their own.
. . . it is by doing this work that the trader gains the understanding, familiarity and confidence necessary to actually apply principles and tactics correctly, to execute them consistently, and to discover new potential tactics.
None of my rules have been working the last few days, and not just the ORB
stuff.
It's been a little discouraging, but aside from some adjustments to details, I
don't think my rules are invalid. More like this market is invalid.
The NQ the last few days has been acting like a zombie, staggering relentlessly,
but not showing healthy vital signs (that is, sound, reasonable entries) because
it is just a re-animated corpse. There've been "profitable" moves, but to trade
them meant doing things that on most days would be ill-advised, from my point of
view.
So I wait for the sun to come out and give us the special-effects treat of the
zombie body dissolving before our eyes.
This does not mean I am a perma-bear expecting failure to the upside and a big
short opp. I wouldn't be surprised at all to see it rally from here.
I just think that if this move to the upside were "real", it would've been
harder to get in, instead of this constant teasing that's been going on. Crappy
setups "working", and legit ones failing.
I am not going to start buying 50% retracements or widening my stops just to try
to partake of some zombie meat. Yuck.
Anyone else get the feeling that my posts are like pep-talks to myself? lol
Anyway, I think I might've seen a ray of sunlight. The zombie is on it's knees.
But then again, you know how the monster/psycho killer always comes back one more time after you're supposed to think it's dead...
All times are GMT. The time now is 01:14 AM