I never have backtested the breakout model. I have traded like this since before we traded with computers. I do know that authors like Douglas and Elder talk about both of these methods as being very high percentage trades. There are probably too many nuances to program trade my way. I am not to sure about the reversal method though as I rarely trade reversals. Not saying anything bad about reversals just I personally don't do it. I am sure if you watch Romik in this forum you will catch on to it fairly quick. Romik knows what he is doing and calls his trades live. You won't find very many guys that do that. Good trading to you.
***Easy Money***
- Thread starter romik
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I never have backtested the breakout model. I have traded like this since before we traded with computers. I do know that authors like Douglas and Elder talk about both of these methods as being very high percentage trades. There are probably too many nuances to program trade my way. I am not to sure about the reversal method though as I rarely trade reversals. Not saying anything bad about reversals just I personally don't do it. I am sure if you watch Romik in this forum you will catch on to it fairly quick. Romik knows what he is doing and calls his trades live. You won't find very many guys that do that. Good trading to you.
4re,
and/or Romik,
What kind of time frames do you suggest using with this type of trading? I trade the ES and I'm going to look into this a little more. I still need to figure out and re-read how you are coming up with your S/R lines. I know earlier you said something about it being based on visual observation. But is this visual observation based on the previous day's charts, previous week's, month's, etc?
Romik,
What exactly do you mean by "do not use breakeven and do not scale out" ?
From what I take, your method involves taking chances on major areas but very small risk due to tight stops.
For example....
If a key support level is approached, you short it with a tight stop because if its broken the downsize should be huge ?
And...
If a key resistance area is reached you buy underneath because if its broken the upside will be huge?
Makes sense but the problem I see here is that a LOT of games are played at these levels.
Looking forward to your reply.
What exactly do you mean by "do not use breakeven and do not scale out" ?
From what I take, your method involves taking chances on major areas but very small risk due to tight stops.
For example....
If a key support level is approached, you short it with a tight stop because if its broken the downsize should be huge ?
And...
If a key resistance area is reached you buy underneath because if its broken the upside will be huge?
Makes sense but the problem I see here is that a LOT of games are played at these levels.
Looking forward to your reply.
If you Do want to benefit from potential large moves, than you would not be scaling out after 10 points gain and you would not be closing position @ entry after you've seen some green, a stop is a stop, if you had it on initially, why cancel it? One of the things which is not perfect here is a stop, as I recommend using tight stops and somebody like B1S2 will say it would fall within 'noise' and WILL get triggered. He is right and I am right, as his stop might be too wide for most of us to tolerate and my tight stops might be triggered more often, though will keep one out of a potentially large loss. So if you are shorting ES than a proper stop could be 20 pts away from entry, which would be the one to use, but I would use a 2 point stop. If it takes 10 attempts to finally break that level (as you have mentioned yourself re-'games') than in theory you have used a 20 point stop same as a person using initial 20 point stop, apart from commissions. which I don't have to pay, so it is a valid negative point, it just doesn't apply to me
So this is your worst case scenario, where you will be banking on a break of a major level and you try every time and it has taken 10 times to do it and price reverses and you feel like strangling you mother-in-law. There are 2 ways to prevent loss here. 1. Hedge by buying calls if you are selling market and vice versa, now that obviously makes it more complicated as you would need to work out ratios, I will not go into that one. 2. Trade short term alongside your longer term position. If you are trading ES go for anything the market will be ready to offer you at that time and use break even on short term trades and don't be too greedy, don't forget it is a major level and momentum will be there most times, got 1 point and RSI on 1 min is kissing floor below 30 - BANK IT, if it is 3 pts - BANK IT, etc. But before doing anything, research it, open a weekly chart of a liquid instrument and a 1 minute chart alongside it, see if there is benefit there for YOU. You will quickly see potential benefit on a weekly chart, but you need to establish whether this type of trading is for you, due to sometimes multiple consecutive small losses.
When I referred to ease of automation I meant manually seeking out major levels, then logging in entry/stop/conditions of re-entry & stop. That is not full automation, but I need to be at least partially in charge. Open lots of charts and do your own research. If somebody comes up to you on a street and offers you some sort of great money making scheme - you ain't going to jump at the opportunity, same here
No, this is going with a trend, not against it.
Examples:
If price's been declining for the past 3 months and is approaching a major support, then short that support level when the Ask goes through that level.
If price's been advancing for the past 3 months and is approaching a major resistance level, then buy that resistance level when the Bid goes through that level.
For short term traders money can be made MOST times when shorting a major level upon price declining towards it and by buying resistance upon price advancing towards it. When shorting Ask has to hit that level & when buying Bid has to hit that level.
Examples:
If price's been declining for the past 3 months and is approaching a major support, then short that support level when the Ask goes through that level.
If price's been advancing for the past 3 months and is approaching a major resistance level, then buy that resistance level when the Bid goes through that level.
For short term traders money can be made MOST times when shorting a major level upon price declining towards it and by buying resistance upon price advancing towards it. When shorting Ask has to hit that level & when buying Bid has to hit that level.
Romik, so you basically use the S/R as a binary decision system. If a stock (or ES, whatever product it is) breaks a major resistance, supported with other technical indicators, then you go long the stock. If it appears that the stock does not have the strength to break the resistance, you go short. Vice versa for support. Please correct me if I am wrong.
I do find this method works very well. But here are some downsides I found. Despite the comission problem
1.) It is very subjective to call resistance and support of different time-frames...what about moving averages and bollinger band (I assume you use fib. levels too in a trend day)? if you are to include these two you will have a lot of levels and traders will be tempted to over-trade.
2.) Just like many technical analysis, this is very easy to be faded out or losing its effectiveness once it gets the popularity. I guess that is the major reason why I found this works particular well sometimes but at the other time it sucks.
Anyone open for discussion of what oscillator(s) complement best with the S/R strategy?
I do find this method works very well. But here are some downsides I found. Despite the comission problem
1.) It is very subjective to call resistance and support of different time-frames...what about moving averages and bollinger band (I assume you use fib. levels too in a trend day)? if you are to include these two you will have a lot of levels and traders will be tempted to over-trade.
2.) Just like many technical analysis, this is very easy to be faded out or losing its effectiveness once it gets the popularity. I guess that is the major reason why I found this works particular well sometimes but at the other time it sucks.
Anyone open for discussion of what oscillator(s) complement best with the S/R strategy?