Classic Geometric Patterns and Narrow Range Setups
- Thread starter inandlong
- Start date
Oddtrader, nothing to report statistically. And nothing on trades lasting longer than a day. However, I can say that, empirically, combining requirements produces a higher win ratio AND larger profits per trade. But I'll take trades that don't meet all of the requirements, so I cannot make a total profit comparison between taking more trades with less requirements versus fewer trades and more requirements.
That said, the following three criteria "tend" to produce some very nice daytrade winners:
1 - Low %ATR (contraction)
2 - NRID (consolidation)
3 - Higher beta (higher historical volatility)
Certainly there is no magic here. The above concepts aren't new or esoteric by any means.
It was mentioned previously that taking only those trades in the direction of "the trend" might be a requirement. That seems like a good idea. Avoiding trades that are going to run smack into support or resistance seems like another good idea. I like the idea of mean reversion. This has been used successfully by a well-published author.
As always, good entries are a plentiful. The tougher question is when to take the profit. I see GOOG broke out a little while ago. Using the 60 minute chart a logical entry would have been above 181.34. Maybe the trader has an aversion to .50's so he waited until it broke 181.50. The stock traded to within several cents of yesterday's high and backed off. There was well over $1 profit to be had anytime for quite awhile. Now I see it has made a new low for the day and all of the profit has disappeared. In hindsight it is easy to say 'well, I would have gotten out there when blah blah blah.' But in real time we all know that greed sneaks in and makes us think things like, 'man, if this things takes out yesterday's high it could....' Or am I the only one to exprience that thought?
That said, the following three criteria "tend" to produce some very nice daytrade winners:
1 - Low %ATR (contraction)
2 - NRID (consolidation)
3 - Higher beta (higher historical volatility)
Certainly there is no magic here. The above concepts aren't new or esoteric by any means.
It was mentioned previously that taking only those trades in the direction of "the trend" might be a requirement. That seems like a good idea. Avoiding trades that are going to run smack into support or resistance seems like another good idea. I like the idea of mean reversion. This has been used successfully by a well-published author.
As always, good entries are a plentiful. The tougher question is when to take the profit. I see GOOG broke out a little while ago. Using the 60 minute chart a logical entry would have been above 181.34. Maybe the trader has an aversion to .50's so he waited until it broke 181.50. The stock traded to within several cents of yesterday's high and backed off. There was well over $1 profit to be had anytime for quite awhile. Now I see it has made a new low for the day and all of the profit has disappeared. In hindsight it is easy to say 'well, I would have gotten out there when blah blah blah.' But in real time we all know that greed sneaks in and makes us think things like, 'man, if this things takes out yesterday's high it could....' Or am I the only one to exprience that thought?
GOOG did what one might least expect given recent volatility. The stock has traded in a range that is narrower than that of any single day for weeks. Not only that, but today is an inside day. Granted the extremes of today's trade make H-L stops for tomorrow less than desirable, but there are other stoploss and reversal methods available.
Several of the "high-flyers" I track and trade printed inside days today. It will be interesting to see if this leads to a reversal, or the beginning of a new move up.
That said, the following three criteria "tend" to produce some very nice daytrade winners:
1 - Low %ATR (contraction)
2 - NRID (consolidation)
3 - Higher beta (higher historical volatility)
Certainly there is no magic here. The above concepts aren't new or esoteric by any means.
You can add BBand width to that brew and see if it helps.
1 - Low %ATR (contraction)
2 - NRID (consolidation)
3 - Higher beta (higher historical volatility)
Certainly there is no magic here. The above concepts aren't new or esoteric by any means.
You can add BBand width to that brew and see if it helps.
Pat', great point... well at least imo it is because I do use that also, ie., when the bands have narrowed considerably, etc.
Oddtrader - Larry Connors. Okay maybe he's a better salesman than trader, I don't know. But I do know that he uses mean reversion in a simple and logical way... and it works.
Heck, it all works some of the time. After all, the name of the game - after diversification - is still "cut your losses short and let your profits run." Notice there is nothing mentioned about entry!