ES Journal Archive (2009 - 2010)

[NoDoji]

Quote from ChkitOut:

What do you consider to be the difference between 'reversal' and 'counter trend'. Just wondering because I see that you often trade 'reversals' with success.

Also, what made you think the 15:30 and 15:35 bars indicated support?

Thanks

Counter-trend is when you short a strong thrust upward in a trend (fade the move up, or sell into strength). Vice versa for buying against a down trend. It's usually not a good idea until 2 pushes in the trend have already transpired. Also, it's a good idea to be stingy with your stop, move it b/e pretty quickly, and take off at least part of the position pretty quickly in case the pullback is shallow. Many traders keep fading the strong move by averaging into a position as it runs against them. This can be a reliable source of income if you have an advance trading plan and a max loss at which you have the discipline to exit. Knowing when to fade an overextended move can result in a good-sized position to profit from the pullback. I do this with CL all the time in my sim account, but wouldn't dare try it live unless I had a mid 6-figure account to play with.

Reversal signal is when a double top/double bottom, or lower high/higher low is put in after 3 or more pushes in a trend. The key reversal bar gives you a counter-trend entry with a high probability of success, and is often the start of a new trend. (I'm a day trader off a 5-min chart so I'm looking at micro-trends, actually).

The 15:30 bar did not react "properly" to the 15:25 bar. An inverted hammer (shooting star) off the falling 20 EMA in a micro-trend to the downside usually results in a red bodied bar without much wickage. The 15:30 bar quickly found support to the tick of the 15:20 bar's low, instead of dropping to or below that low and leaving a decent bear body. This is what placed me on alert for a possible surprise move.

Then the 15:35 bar also failed to break and found support once more. Sellers weren't buying into this short setup with any kind of conviction, and day trading shorts needed to cover before the close. It just seemed ripe for a reversal, and if you look at the reliable micro-downtrend that started off the 14:00 bar, the 15:35 bar appears to be putting in a higher low as long as price doesn't drop back down, and so I figure a break through that bar's high will be a signal for shorts to cover, and when a setup in one direction fails, the opposing camp comes back in as well.

Or I could be making all this up and, in reality, I tossed my lucky coin and it came up heads.

 

[tomahawk]

Quote from NoDoji:



Then the 15:35 bar also failed to break and found support once more. Sellers weren't buying into this short setup with any kind of conviction, and day trading shorts needed to cover before the close. It just seemed ripe for a reversal, and if you look at the reliable micro-downtrend that started off the 14:00 bar, the 15:35 bar appears to be putting in a higher low as long as price doesn't drop back down, and so I figure a break through that bar's high will be a signal for shorts to cover, and when a setup in one direction fails, the opposing camp comes back in as well.

Or I could be making all this up and, in reality, I tossed my lucky coin and it came up heads.

Notice also your long was confirmed by the WRB setup (5pt+ body on 50k vol) that I mentioned before, at the 15:40 bar. Late to the party, yes ... but 9 pts to the upside from 15:45.

 

[NoDoji]

Quote from tomahawk:

Notice also your long was confirmed by the WRB setup (5pt+ body on 50k vol) that I mentioned before, at the 15:40 bar. Late to the party, yes ... but 9 pts to the upside from 15:45.

Did you take that trade? Tell me you did and that you'll get on Skype with me Monday and convince me to take those trades, too

 

[tomahawk]

Quote from NoDoji:

Did you take that trade? Tell me you did and that you'll get on Skype with me Monday and convince me to take those trades, too

Ha, you got me ... unfortunately entering a new position on a Friday at 3:45pm is not within my personal trading guidelines.

I did however get involved in the earlier 9:35 WRB, jumping in ahead of the signal, but sadly out a little too quick. Logically the early ones are easier to take since you have the whole day to make it back if stopped out.

 

[austinp]

Quote from petty1978:

And a jovial rule of thumb: If I can not fully automate the trading model/theory to test it and then trade with it, and my developers look at me and scratch their heads and I have to call MIT to get the proper mathematical formulas I don't trust it and move on!

Have a great weekend

I've known a few guys who do fairly well running systematic models only. But all of the guys I know who make what I consider big $$ retail ($250,000 min to seven-figures annually range) are all discretionary traders.

The emotional need for 100% mechanics is just one stage of the development as a complete trader. Fine to stop right there and extract any edge that lasts, but unfortunately pure systems trading demands continual tweaking and adjusting (aka discretion) as markets eternally ebb, flow and evolve.

 

[ChkitOut]

Quote from NoDoji:

Counter-trend is when you short a strong thrust upward in a trend (fade the move up, or sell into strength). Vice versa for buying against a down trend. It's usually not a good idea until 2 pushes in the trend have already transpired. Also, it's a good idea to be stingy with your stop, move it b/e pretty quickly, and take off at least part of the position pretty quickly in case the pullback is shallow. Many traders keep fading the strong move by averaging into a position as it runs against them. This can be a reliable source of income if you have an advance trading plan and a max loss at which you have the discipline to exit. Knowing when to fade an overextended move can result in a good-sized position to profit from the pullback. I do this with CL all the time in my sim account, but wouldn't dare try it live unless I had a mid 6-figure account to play with.

Reversal signal is when a double top/double bottom, or lower high/higher low is put in after 3 or more pushes in a trend. The key reversal bar gives you a counter-trend entry with a high probability of success, and is often the start of a new trend. (I'm a day trader off a 5-min chart so I'm looking at micro-trends, actually).

The 15:30 bar did not react "properly" to the 15:25 bar. An inverted hammer (shooting star) off the falling 20 EMA in a micro-trend to the downside usually results in a red bodied bar without much wickage. The 15:30 bar quickly found support to the tick of the 15:20 bar's low, instead of dropping to or below that low and leaving a decent bear body. This is what placed me on alert for a possible surprise move.

Then the 15:35 bar also failed to break and found support once more. Sellers weren't buying into this short setup with any kind of conviction, and day trading shorts needed to cover before the close. It just seemed ripe for a reversal, and if you look at the reliable micro-downtrend that started off the 14:00 bar, the 15:35 bar appears to be putting in a higher low as long as price doesn't drop back down, and so I figure a break through that bar's high will be a signal for shorts to cover, and when a setup in one direction fails, the opposing camp comes back in as well.

Or I could be making all this up and, in reality, I tossed my lucky coin and it came up heads.

Good stuff as usual. I've been counting pushes per your idea and wont look for a reversal until at least a 3rd push up or down. Seems to put the odds more so in your favor.

 

[petty1978]

Quote from austinp:

I've known a few guys who do fairly well running systematic models only. But all of the guys I know who make what I consider big $$ retail ($250,000 min to seven-figures annually range) are all discretionary traders.

The emotional need for 100% mechanics is just one stage of the development as a complete trader. Fine to stop right there and extract any edge that lasts, but unfortunately pure systems trading demands continual tweaking and adjusting (aka discretion) as markets eternally ebb, flow and evolve.

I understand your viewpoint. Its valid.

I'm a math guy. I'm heavily into technology. This allows me to trade for numerous clients. Most private-side traders do not not operate like I do from a business standpoint. I trade discretionary as well, but it is still heavily oriented towards geometry and price action.

The return I make for myself and everyone involved are staggering. I do not know how dicretionary trading for large groups of people could return large % year in year out.

My success has been created through countless hours, connections and failure. I always tell people, "To each his own. " And that seems pretty reasonable to assume.

 

[petty1978]

Quote from austinp:

I've known a few guys who do fairly well running systematic models only. But all of the guys I know who make what I consider big $$ retail ($250,000 min to seven-figures annually range) are all discretionary traders.

The emotional need for 100% mechanics is just one stage of the development as a complete trader. Fine to stop right there and extract any edge that lasts, but unfortunately pure systems trading demands continual tweaking and adjusting (aka discretion) as markets eternally ebb, flow and evolve.

Side note: my price action based systems are never "tweaked" per say. I create new ones and variations of them and most are valid back as far as mid 90's. Some farther. I have been trading them live for years, starting out manually, and my success has allowed me to grow my business by reputation and impliment heavy technology.

But, I have many discetionary/manual based systems in my quiver. Maybe I should start sharing some those? And discussing their validity? They involve a few indicators, MA's, BB, etc etc.

What I wanted to do was show this forum some very simple trading models that work incredibly well and can simplify any trading regimin for those that are seeking.

 

[Now is Now]

Quote from austinp:

I've known a few guys who do fairly well running systematic models only. But all of the guys I know who make what I consider big $$ retail ($250,000 min to seven-figures annually range) are all discretionary traders.

The emotional need for 100% mechanics is just one stage of the development as a complete trader. Fine to stop right there and extract any edge that lasts, but unfortunately pure systems trading demands continual tweaking and adjusting (aka discretion) as markets eternally ebb, flow and evolve.

You are right , but if one can develop a sound mechanical system ( We trade 2 for Euro) it is very convenient as it trades while I am sleeping...the "tweaking" is limited to review of optimal levels....profit target, stops on a weekly basis...decisions made...trades accordingly until next review... Btw, system has a couple of "safety valves'...

In turn it provides opportunity to focus on our discretionary ES trading...ideally would like to automate when we are satisfied with consistent performance.

I never trusted the concept of automated systems, but now do see the real advantages and "relief" of doing it...

NiN

 

[petty1978]

Quote from bighog:

how can anyone say they are heavy into technology as retail traders. What possible advantage can that be?

One advantage is I am able to trade for 20 clients, fully automated. I have an infrastructure built that supports all of this. Bighog its ALL technologically based and without it, I would be a guy trading just for myself and make less money. That was not what I wanted.

I am heavily business oriented. Trading just for myself was not challenging enough for me.