A simple price action approach

Quote from wrbtrader:

Sadly, very few discretionary traders will develop what you've described as needed to be consistently profitable.

Mark
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Sure, that's why so few people are profitable. They simply do not treat this business as seriously as it deserves.

There are indeed many profitable systems out there, but system being profitable for it's author does not mean anyone who is going to try following it's basic rules will be profitable from the start.

Usually, there are many, many nuances.

Chess rules are also very easy to learn. Anyone can learn them. But what is the difference between grossmeister and a newbie? Skill!
 
As for discretionary trading:

In my opinion, discretionary trading is NOT trading without a rule based system.

It is trading WITH the rule based system, but with addition of multiple micro nuances, which become obvious for a trader after a lot of time is spent observing and trading the given rule based method.

Those nuances can seem subjective and really small, because they are hard to be expressed in the form of "sub-rules" (which they really are), but they can make a huge influence on trader's p&l.

And it is not something mystical, simply our brain perceives way more information, than we consciously recognize it does and this information, kept and processed on the "dark side of the Moon" of our mind expresses itself as "intuition".
 
Mark, good post as usual. I think I understand what you are saying about intuition. I believe it is very hard to seperate random results and role of luck from intuition. In your football touchdown example, for every one success there are nine other failures, which we never hear about.

NoDoji gave a great example of emotion overriding the subconcious mind.

I believe your football coach is right, I will not make money from trading, earn a living by following my gut feel. I may have a good chance to earn a living, a doctors lawyers type salary by following a well tested methodology.

The following is a good way to practice self-delusion and put a big hole in your trading account. I have done research into akashic records, without years and years of formal training, not possible.
Discretionary Intuition Trader (DIT) - Will say something like if price breaks above the trendline...I will buy.


I don't mean this as a disrespect, just experssing my useless opinion. imo the premies of this thread is extermely misleading. Its title should be 'A simple Price Action approach to deceive yourself'
 
Hey, I got a pm to come check put this thread.

There was indeed a lot of ambiguity in the jjrvat thread, including the normal "guru" type of stuff:

- Cherry picked charts

- Example charts with different time frames with no explanation of why one might be 50 ticks and another 1 minute or x number of volume

- avoiding specific questions

But that is to be expected on this forum. I've seen very, very few people who give 100% straightforward answers to questions here... especially about losing trades. 1a2b3cppp is one such person, but while I don't think his trading style suits me, we've certainly had some informative pm convos. That dude is smart, and probably has even less tolerance for bullshit and ambiguity than me. Lol.

That is not to say jjrvat is a "guru". He was the first person to open my eyes to the idea of price action, and while he may be a successful trader, perhaps he just wasn't able to convey everything he wanted in the thread, or maybe part of his trading is intuition, which he could not quantify.

But there was too much vagueness in his answers, so I decided to extrapolate from that thread concrete, 100% mechanical rules for a trading system. I'll post them if you want.
 
Quote from cornixforex:

As for discretionary trading:

In my opinion, discretionary trading is NOT trading without a rule based system.

It is trading WITH the rule based system, but with addition of multiple micro nuances, which become obvious for a trader after a lot of time is spent observing and trading the given rule based method.

Those nuances can seem subjective and really small, because they are hard to be expressed in the form of "sub-rules" (which they really are), but they can make a huge influence on trader's p&l.

And it is not something mystical, simply our brain perceives way more information, than we consciously recognize it does and this information, kept and processed on the "dark side of the Moon" of our mind expresses itself as "intuition".
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I agree with your post, well said.

The way I see it, most of the "nuances" include so many variable factors that a computer can't process that like the brain can. Reading market context the way the brain can , can't be easily programmed if at all. I can look at 12 markets on my screens at the same time and see where major s/r is, toggle timeframes , look at volume, volatility, see where the money is flowing, process the herd sentiment for the day, see how quickly a level may have been taken out or bounced off of. ect. I can process the context of the market in about 30 seconds and even if I had a billion dollars there is no way I would pay someone to try to program a computer to do what my brain just did.

Yet just because you can't program it does not mean you can't trade discretionary with a rule based system. Like you said there are just tons of "micro nuances"
 
I find few of the potential channel trades I come up with in 6e 5-min charts actually make it to the target. So I've been more aggressive about exits if a winner looks like it could be reversing. From my experiences thusfar it seems that entering with a hard stop and holding until stopped out or target is reached will yield poor results. Not sure if the same is true on higher timeframes... this could be happening because the 5-min chart has more chop to it. Or maybe I just need a lot more practice in picking out the good trades. :)

I also never know whether to draw a line across the tops of wicks or through the wicks and across the tops of the bodies, so in the case of decent size wicks I draw both TLs. If price starts to react off one and I enter, then I'll copy it into a channel.
 
Quote from bigsnack:

While you are here, you might as well (if you don't mind of course).
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Well I posted the rules in the other thread but here they are again.

The only discretionary stuff is what timeframe to use. So pick whatever you're comfortable with.

Indicators:
240 period wma (slow ma)
21 period hull moving average (fast ma)

These values were more or less arbitrary. They're what I used. theres no magic, I'm sure 238 and 20 would work just as well. Don't be one of those morons who thinks there are certain special number to use because of some voodoo stock market secret or whatever. In fact, due to the random nature of the market, it really doesn't matter what period ma you use, and I can explain why, but thats another topic for another time. For now, this is what I used.

You go long when:

Both mas are sloping up, but only after a HH and HL. By definition, the earliest you can enter is the first bar after the slope of the fast ma changes. It is impossible to enter on the bar where the slope changes, because the slope direction is not final until the bar closes. No one understands this for some reason, until they trade live.

Stay long until the first tick of the first bar after the slope changes back to down.

so in other words, when the slow ma is up, and when price makes a high, a HL, and then turnaround back up, you go long as soon as the fast ma turns up again.

Opposite for going short.

Special rules:

No opening new trades in the last 30 min of the day.

No trading on options expiry day.

Trade the day before options expiry at your own risk.

So you only go long after HH and HL, and short after LL and LH, but if the last high or low was the same level, so neither higher nor lower, you can still take the trade. I did, in my testing.

Notes:

In chop you will have multiple losses, but following HH HL and LL LH will help reduce this a little.

Sometimes you will miss random huge trends that didn't follow HH HL or LL LH patterns. But overall they won't make up for the losing trades you avoid, so do not worry.

Sometimes price will go against you a lot. Stay in the trade until the slope changes. Sometimes it will reverse and go in your direction.

I think that's everything. Let me know if you have any questions. The rules are specific for 100% of situations so there is no ambiguity ever.
 
I only back/forward tested it for a few month a few years ago. there are charts and equity curves in that thread. No promises about it being profitable or not. It was profitable back when I was working with it during the period I tested it on the YM, but I don't use it anymore for what that's worth. It's possible the market conditions then were different than now. Or maybe it would still be profitable now.

I dunno.

But anyway that's it. It makes money when price moves in waves, loses money in chop, and tends to stay out when price does HH LL type stuff.
 
Quote from IronFist:



The only discretionary stuff is what timeframe to use. So pick whatever you're comfortable with.

but only after a HH and HL.

I think that's everything. Let me know if you have any questions. The rules are specific for 100% of situations so there is no ambiguity ever.
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How do you programatically define HH and HL?
 
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