Day-Trading 2.0 for small traders

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Hi jjvrat,
let's say i have an indicator that goes ahead of the HMA (stochastic for example) meaning the signal to enter long comes before the HMA changes it slope back up and let's say price analysis is ok (meaning Macro ok and the waves just made a HH and a LH before that)
do you consider it an invalid indicator because we enter a trade before we know a new wave had started?
if yes, does this mean the the entry must come AFTER the slope changed and a new wave had started in the dircetion of the trade?
if it is a valid indicator, and since we can't define the low as a HL because the new wave hadn't started yet how do we determine our stop? do we put it under last low? which can be very very far? do we wait for our indicator to make a reverse signal (e.g. a crossover against our direction in a stoch or MACD) and then we go out? do we use fixed stops?
thanks.
 
oh and another question
I find that the long WMA in a range cahrt 0.1 SPY tend to be more misleading then helpful mainly becuase of the gaps between days which pretty much detrmine the slope of the slow WMA a lot of times without any connection to the price action in the start of the day. also i find that since the range bar chart is pretty slow (about 2-5 minutes per bar) even a 144 WMA will be really lagging beyond the actuall trend...
I thought about not using it at all, and determine the trend just with waves analysis (HH LH for long etc) do you think it's against the PBP? do you have any other solution for this problem? how do you suggest to determine the overall trend in the start of the day?
 
Been lurking here a while, let's think about it: what moving crossover pair makes the most sense? Can't really answer because there are so many markets, each with a different tempo, pace, volatility. I would think that on currencies that breakouts would work, but much of the time they are rangebound. You could have a different set of MA's based on your risk tolerance. You could position trade a 1 lot or scalp 50 options on QQQQ's , the analysis I believe should fit the market and system.


TRO on the chart you posted I see three short trades, see where the ma becomes resistance. cool stuff!:cool:
 
Quote from rathodvg3:

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Thanks
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warning

I'm a newby here too, but would somebody please dump this guy's posts. this is crap salesman. 3 posts and all to peddle his little ad site (dump mine too if you want, )
 
Quote from flyinglead:

warning

I'm a newby here too, but would somebody please dump this guy's posts. this is crap salesman. 3 posts and all to peddle his little ad site (dump mine too if you want, )
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you're quite right, may the andministor delete it.
 
jim2py.png



This is almost scary!!
 
Ref"This is almost scary!!"

TRO, can you explain what specific combination you are seeing here that is significant?

Thanks,

Rob
 
let's say i have an indicator that goes ahead of the HMA (stochastic for example) meaning the signal to enter long comes before the HMA changes it slope back up and let's say price analysis is ok (meaning Macro ok and the waves just made a HH and a LH before that)
do you consider it an invalid indicator because we enter a trade before we know a new wave had started? (amitman)

From my first post:

“2. Price moves in Waves. Regardless of the instrument and timeframe and despite of the market direction or its condition (in a trend or in a range) markets always move in waves …”

a.What we don’t know about waves:
i.The exact beginning or end of a wave
ii.The potential height of the next wave

b.What we know:
i. Where we have less probabilities for a successful trade regardless of the direction or condition of the market

If price analysis is ok (macro ok and waves HH and LH) any indicator will be valid as a trigger. The real problem is that we don’t know the exact beginning or end of a wave so if you use price for wave analysis you have to be good really good to recognize mini bottoms and tops, not necessarily to place an entry in the exact reversal bar but to identify waves Highs/lows.

You said that waves made HH and LH before …I guess you are using price for wave analysis, aren’t you?. If that’s the case a stochastic is a valid fast option as a trigger and it is a valid indicator. If you are using a “normal” stochastic for wave analysis that’s a very different issue. Moreover, if you are trading before you know a new wave have started means that you are trading indicator signals not price.

if yes, does this mean the the entry must come AFTER the slope changed and a new wave had started in the dircetion of the trade?

Waves are always given by price. Using a HMA can be useful (but not a mandatory requirement) to visualize waves because it’s not always easy to recognize the exact beginning or end of a wave. From a theoretical point of view when a lagging HMA slope changes (or any other indicator) this “new wave” already started way before this happens.

if it is a valid indicator, and since we can't define the low as a HL because the new wave hadn't started yet how do we determine our stop? do we put it under last low? which can be very very far? do we wait for our indicator to make a reverse signal (e.g. a crossover against our direction in a stoch or MACD) and then we go out? do we use fixed stops?

Yes, I do understand that there are indicators (like fast stochastics) that can give you “early signals” for the end/start of a new wave and as I said in my first post “…the later you enter a new wave the less probabilities you will have to be successful….”

However, the tradeoff between indicators/efficiency and price analysis/consistency is crucial to find a consistent and sustainable balance. If you are using stochastics for wave analysis, they will give many early valid signals but it will get really confusing to see the last low or high not in the stochastic chart but in the price chart meaning your stops will be hanging on air (especially in a trendy market). On the other hand, if you use a slower indicator as the HMA you may have some late entries but you will know where your stops should be placed.

In terms of entries and exits, the shortcomings of fast stochastic or slower indicators (HMA) for entries become virtues for exits and vice versa. For stops I will post something later when I finish the last post on indicators.

In any case, there are not perfect indicators. The longer it takes to accept this fact the longer it will be for a trader to be successful. In my opinion only when a trader starts trusting price and accepting that he/she will have losers regardless of the technical tweaks, he/she will pass to the next level in trading.

jjrvat
 
jjrvat, that's an excellent post.

The point about using pure price for wave analysis making it difficult to avoid mini bottoms and tops is a 'heart of the matter' observation.

However, whilst it might be true to say that "If price analysis is ok (macro ok and waves HH and LH) any indicator will be valid as a trigger.", I feel the issue of entries is more critical.

Let's say we have all price analysis correct, the macro and the wave analysis are in the right direction and confirming, and we have a new higher low representing a new up move and a valid long trade opportunity. We need a pivot low to mark the beginning of that move and we know there will be a pivot high some unknown time and distance away which marks the end of the up move.

The stop is going to be beneath the pivot low because it represents the only logical point at which price analysis is broken. The further into the move our entry occurs, the larger the distance back to the stop and the smaller the distance left to wherever our exit will occur. So the entry has a crucial effect on R:R. We know that over a large number of trades, R:R will assert itself and, if it is in the wrong proportion, our net result will be unfavorable even if we have a high proportion of winning trades.

So, assuming a valid signal in terms of macro direction and price/wave analysis, could we discuss the pros and cons of various entries based on price action?

I'd be interested to hear what process you have gone through in rejecting/accepting entry methods.

Here's a couple of entry examples. Entry (1): Say you are watching descending bars in a down move, waiting for a HL which, if it occurs, you know in advance will give a valid long trade opportunity. The first bar where a new low is not made will define the pivot low. A valid price-based entry would be above the high of that bar once it closes. However, that bar can, and frequently does, move a long way from the pivot low -- a valid entry but with the possibility of a large stop and a large chunk gone out of the eventual move -- potentially poor R:R.

So, Entry (2), you could place an order above the high of each descending bar, and cancel the order if the last bar low showed the the overall down move was going to be a LL. It is possible for the order to be triggered and the bar to go on to form a lower low than the previous bar, which would stop you out and show in hindsight that you entered before a new wave started. This, of course, will be an outside bar. But in the larger proportion of those trades, a bar with a higher high will also have a higher low and will thus mark the pivot low. And you have got an early jump on the move with a small stop, which compensates for the slightly higher failure rate.

everyone talks about risk as if it were a single-issue entity but, of course, it actually has two components -- the risk in terms of dollar amount and the risk in terms of probability. The above entry (2), compared to entry (1) lowers the dollar risk compoment but raises the probability risk.

It's finding the balance between those two components, measured against potential profit which holds the key to success over a large number of trades.

Rob
 
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