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Anyone use my method?
- Thread starter no_pm_please
- Start date
This thread is slowing down, but I thought I would ask anyone who is having success with this trade, how the hell you decide how much divergence is necessary to enter a trade. First of all, I have been adapting this technique to stocks and I think this method is really good and when executed properly it is nothing but a moneymaker at any timeframe (5min, 30min, daily, etc.). But that is the kicker....executing effectively. Everyone knows that working with the 5min charts that if it ends up being a trend day then it is a loser for that day. But most days are not going to be trend days so that is why it is a money maker. However, stocks do trend periodically and that is why the system works. The question though is, how much divergence is necessary? What I mean is, how do you know when you are at the top? Waiting one bar that does not make a high does not always do it. I have seen a number of occurences where there is really good diveregence and of course adx is above 30 and everything is in motion. Then the stock makes a new high and I get stopped out. At some point though, maybe after making 2 or 3 more highs, the trade will actually work. The key is to get it right at the top and then it works great. Now I know you can't always get it rgiht at the top 100% of the time, but in order to have 70% successful trades you have to get it at the top a lot. Np_pm's latest rule is to not enter another trade if you are stopped out for fear of a trend day. Problem is that again, you have to get it right 70% of the time and it seems like it is not that easy. I have seen the divergence and then get stopped out and then re-enter a trade, and it works or I might get stopped out again and then it works on the next one, but it is hard to get ahead when you do it that way.
Thanks for any help.
Thanks for any help.
Quote from rgn2000:
This thread is slowing down, but I thought I would ask anyone who is having success with this trade, how the hell you decide how much divergence is necessary to enter a trade. First of all, I have been adapting this technique to stocks and I think this method is really good and when executed properly it is nothing but a moneymaker at any timeframe (5min, 30min, daily, etc.). But that is the kicker....executing effectively. Everyone knows that working with the 5min charts that if it ends up being a trend day then it is a loser for that day. But most days are not going to be trend days so that is why it is a money maker. However, stocks do trend periodically and that is why the system works. The question though is, how much divergence is necessary? What I mean is, how do you know when you are at the top? Waiting one bar that does not make a high does not always do it. I have seen a number of occurences where there is really good diveregence and of course adx is above 30 and everything is in motion. Then the stock makes a new high and I get stopped out. At some point though, maybe after making 2 or 3 more highs, the trade will actually work. The key is to get it right at the top and then it works great. Now I know you can't always get it rgiht at the top 100% of the time, but in order to have 70% successful trades you have to get it at the top a lot. Np_pm's latest rule is to not enter another trade if you are stopped out for fear of a trend day. Problem is that again, you have to get it right 70% of the time and it seems like it is not that easy. I have seen the divergence and then get stopped out and then re-enter a trade, and it works or I might get stopped out again and then it works on the next one, but it is hard to get ahead when you do it that way.
Thanks for any help.
As far as i understood (been a long time since i read the journal) i thought NPP was using +-100 CCI breaks as his top or bottom. Might be wrong but in my observation +-100, 160 and 200 are good choices to try and pick tops or bottoms. I personally use +-160.
As far as trends go....that can be difficult. Everyone has their own meathod for trying to see them in the making. Iv'e found success with having a 10 minute CCI up as well as my 5. The 10 minute has been good at confirming bottoms (when it dips below +-200)for 5 minute signals. Combined with $TICK it can help verify when the trend is possibly over and about to reverse.
If i get stopped out of a possible bottom iv'e found drawing simple trendlines works to help avoid getting stopped out again.
I'll wait till the trendline is broken and if it pullsback and i get another re-entry signal...i'll usually try again.
Quote from rgn2000:
...What I mean is, how do you know when you are at the top?...Np_pm's latest rule is to not enter another trade if you are stopped out for fear of a trend day. Problem is that again, you have to get it right 70% of the time and it seems like it is not that easy. I have seen the divergence and then get stopped out and then re-enter a trade, and it works or I might get stopped out again and then it works on the next one, but it is hard to get ahead when you do it that way.
Thanks for any help.
As ER9 mentioned...one solution is to use a confirmation signal.
* Market Breadth Index (ex. TICK, VIX, AD Line et cetera)
NPP mentioned before he was using TICK to help identify exhaustion (loss momentum) although he didn't make any specific reference to it as a filter or confirmation signal...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=60313&perpage=5&pagenumber=31
You could also use the VIX because someone once said about one of NPP losing trades that the VIX didn't confirm the setup...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=60313&perpage=5&pagenumber=46
However, I think the key is NPP use of the word exhaustion.
One of the current edges working well in trading the Eminis is to use Oil Index as a Market Breadth Index to identify price action exhaustion in the Eminis.
Although this is an old edge that's been around for decades...its been excellent as a market breadth index since mid November 2003 especially for filtering out false divergence signals in the Eminis.
Mark
Thanks for the replies.
Well I am adapting this to stocks so the tick and vix won't work necessarily. It may if the particular stock is moving with the market.
ER9....you say use a cci above 160. Should that be at the point when divergence is beginning or does it have to be above 160 when you are entering the trade (after some divergence)?
Rob
Well I am adapting this to stocks so the tick and vix won't work necessarily. It may if the particular stock is moving with the market.
ER9....you say use a cci above 160. Should that be at the point when divergence is beginning or does it have to be above 160 when you are entering the trade (after some divergence)?
Rob
Quote from rgn2000:
Thanks for the replies.
Well I am adapting this to stocks so the tick and vix won't work necessarily. It may if the particular stock is moving with the market.
ER9....you say use a cci above 160. Should that be at the point when divergence is beginning or does it have to be above 160 when you are entering the trade (after some divergence)?
Rob
In my experience theres less false signals if its reached at least +-160 before looking for a reversal. Doesn't have to be that value....thats just my personal preference.
Anyone here tried to code this to TradeStation or other system to make it mechanical method and back tested it?
What is a reliable or more quantifiable way to determine the divergence ? After I take a quick look at the past posts in this thread, the most discretional part is the determination of divergence. In some of the examples, when the chart is posted, the divergence is clear AFTER FACT. However, if I cover up later portion of the charts, I feel I would not be too sure divergence happened and when I am sure divergence happened, it usually is too later to enter.
What is a reliable or more quantifiable way to determine the divergence ? After I take a quick look at the past posts in this thread, the most discretional part is the determination of divergence. In some of the examples, when the chart is posted, the divergence is clear AFTER FACT. However, if I cover up later portion of the charts, I feel I would not be too sure divergence happened and when I am sure divergence happened, it usually is too later to enter.
Quote from ww_nyc:
Anyone here tried to code this to TradeStation or other system to make it mechanical method and back tested it?
What is a reliable or more quantifiable way to determine the divergence ? After I take a quick look at the past posts in this thread, the most discretional part is the determination of divergence. In some of the examples, when the chart is posted, the divergence is clear AFTER FACT. However, if I cover up later portion of the charts, I feel I would not be too sure divergence happened and when I am sure divergence happened, it usually is too later to enter.
yeah i agree thats why i stopped trading it.
Quote from ww_nyc:
Anyone here tried to code this to TradeStation or other system to make it mechanical method and back tested it?
What is a reliable or more quantifiable way to determine the divergence ? After I take a quick look at the past posts in this thread, the most discretional part is the determination of divergence. In some of the examples, when the chart is posted, the divergence is clear AFTER FACT. However, if I cover up later portion of the charts, I feel I would not be too sure divergence happened and when I am sure divergence happened, it usually is too later to enter.
You can manually backtest the Pattern Signal if you can't figure out a way to code it in TradeStation or in any other software that allows coding.
NPP does have a discretionary aspect of this method that can't be backtested via his use or mentioning using in this thread and a prior thread about a confirmation of exhaustion to correlate with the divergence.
Simply, there's a Pattern Signal and a Confirmation (entry) Signal.
You can manually back test both but I highly doubt you can code both the Pattern Signal and Confirmation Signal as one method in the code...reason why its a discretionary method that can't be coded.
With all the coders involved in this thread and NPP other threads...
I've only seen parts of the Pattern Signals being coded but not one person (maybe I missed a post) has taken the time to manually backtest the Pattern Signal (rule based) with the Confirmation Exhaustion Signal (discretionary aspect) nor has any of the coders been able to put both together as a code.
I see a lot of my chart don't look like your chart type of posts.
As for a reliable or quantifiable way to determine divergence...
Approach your research without indicators and you'll have a better chance to finding your answer (big hint).
P.S. Aspects from NPP indicator methods has sparked some price action only methods involving sub-group candlestick patterns.
That's my interest in this thread as a price action only trader that doesn't use indicators.
Mark