Fade a trade or not.

[NoDoji]

Quote from gifropan:

If I try and relate this concept to my post the identification of the trend would be the "SetUp" and how you approach the entry would be the "trigger", Am I correct in understanding that in your reply and most of the others' here SetUp and Trigger happen simultaneously?

The setup can be many things. Say you've identified an up trend and want to join the trend. The setup can be a) price pulling back to the trend line (pullback), b) price consolidating in a narrow range after a strong move (flag), c) price channeling down in an orderly fashion after a strong move (flag), d) price narrowing within the boundaries of a containment bar off the previous high (triangle).

The trigger is the price at which the bulls re-assert their dominance for a breakout to a new high.

For a) buyers bid price above the level of a pullback bar.

For b) buyers bid price above the upper boundaries of the range.

For c) buyers bid price above the descending channel line high (channel breakout).

For d) buyers bid price above the containment bar's high.

There are many other valid trigger points, but these are my favorites.

Pure breakouts (price breaking through the latest high of a trend, such as a high of the day) are very low risk/high reward trades for certain trading instruments such as energy futures, currency futures, as well as momentum stocks like AAPL, AMZN, and NFLX.

All these setups/triggers apply to downside action as well. As they say, Bulls climb the stairs and bears jump out the window

 

[Arthur Deco]

Quote from gifropan:

Thank you complementing my English. As it happens English is not my native language, however, I have always tried to learn to speak properly and write correctly. So any advice in that direction is also welcomed.

Now to trading.... I once was at a presentation by Jack Bernstein. In his talk he explained the concept the a trade has two parts to it. Setup and Trigger. If I try and relate this concept to my post the identification of the trend would be the "SetUp" and how you approach the entry would be the "trigger", Am I correct in understanding that in your reply and most of the others' here SetUp and Trigger happen simultaneously?

My compliments, Gifropan. I have been writing English for over 60 years and I can't always do as well.

IMO the idea of a trigger separate from a setup is bullshit. A pretty concept. But so difficult to test as to be useless. Because it is two different events, one conditioned on the other. To verify it you have to optimize the setup, then optimize the trigger, then iterate until you converge on a result. Or you must optimize both simultaneously, which is even harder. Optimizing the expectancy of one event is hard enough. The bullshit is in the fact that the trigger assumes that the setup resumes its validity after the trigger occurs, so in some optimization space the setup was a good trade. IntradayBill is spot on. Trade the setup.

Look at NoDoji's triggers above. 'Nuff said. (That's bad English).

 

[gifropan]

Quote from Arthur Deco:

My compliments, Gifropan. I have been writing English for over 60 years and I can't always do as well.

IMO the idea of a trigger separate from a setup is bullshit. A pretty concept. But so difficult to test as to be useless. Because it is two different events, one conditioned on the other. To verify it you have to optimize the setup, then optimize the trigger, then iterate until you converge on a result. Or you must optimize both simultaneously, which is even harder. Optimizing the expectancy of one event is hard enough. The bullshit is in the fact that the trigger assumes that the setup resumes its validity after the trigger occurs, so in some optimization space the setup was a good trade. IntradayBill is spot on. Trade the setup.

Look at NoDoji's triggers above. 'Nuff said. (That's bad English).

Hi Arthur

I intuitively seem to feel that what you say does make a lot of sense. Many a good trade I have lost because the pull back never happened and, when it did, it was much more than a pull back!! I would be interested, provided you agree, to be able to email you directly. I tried to send you an emal but the system tells me that ytou do not accept emails throuth this board. If you are interested perhaps you can send me one and we discuss trading methodology further.

 

[Arthur Deco]

Quote from gifropan:

Hi Arthur

I intuitively seem to feel that what you say does make a lot of sense. Many a good trade I have lost because the pull back never happened and, when it did, it was much more than a pull back!! I would be interested, provided you agree, to be able to email you directly. I tried to send you an emal but the system tells me that ytou do not accept emails throuth this board. If you are interested perhaps you can send me one and we discuss trading methodology further.

Thank you for your kind offer to dialogue privately. But I am intensely socially phobic. I suppose today they call it "avoidant personality." In my day we just said shy, or reticent or reclusive. Hermetic comes closest. I get panic attacks from even this distant interaction. Any closer would separate mind from body and I would be up in a corner of the ceiling watching from a safe remove. But I am pleased to continue talking in public for the dubious benefit of all. I have been mugged by both PM and e-mail, and so am wary. Close human interaction is so sticky. I much prefer the company of my other internal personalities.

 

[NoDoji]

Quote from Arthur Deco:

The bullshit is in the fact that the trigger assumes that the setup resumes its validity after the trigger occurs, so in some optimization space the setup was a good trade.

Waiting for a setup to be validated via a trigger point costs more but reduces risk.

If you have a limit to buy into an uptrend at the trend line and the trend line holds up, you got one of the best entry prices possible, but if price slices right through it after your order is filled, you have to take a loss or hope price at least comes back to your entry. If the trend has ended, that may not happen.

If price puts in a strong move up and consolidates in a narrow range, narrow down channel, or narrowing triangle pattern, you have a setup that frequently indicates a measured move up is coming. You can get in anywhere and place a stop below the range low, channel low or containment bar low. If the setup never validates and the trend reverses, you take the loss or hold and hope that price comes back.

But if you wait until buyers get excited enough that they pay more than the previous high price paid before the pullback or consolidation range occurred, you get the added cushion of stops triggering and taking your position into immediate profitability so that even if the breakout then fails, you can exit the trade break even or with a very minor loss.

The better entry price obtained by "just trading the setup" is offset by the added risk of a loss on the trade should the setup fail to produce the expected result.

The additional cost of entering the trade only if price triggers renewed buying strength is offset by fewer losses.

I imagine if you compared two groups of experienced traders trading each method (anticipatory vs. confirmed entries), the end result would be similar.

 

[Arthur Deco]

In my practice when I see an adjective or adverb I want to know the underlying quantification. The use of quantifiers without quantification suggests that the writer doesn't know the facts. Not to pick on you specifically, but pontifically, you used the non-quantified words:

best, strong, narrow, narrowing, frequently, measured, minor, better, added, expected, fewer.

For many months, on and off, I have been advising you to teach yourself to want to be able to make fully quantified statements like:

"If NQ made a ten point up move in the first hour of trading and broke out by one point from a three point range lasting longer than twenty minutes during the period 10 AM to 11:30 AM PT, take a long with a two point stop and a ten point profit target and expect to net an average of $121."

 

[NoDoji]

Quote from Arthur Deco:

In my practice when I see an adjective or adverb I want to know the underlying quantification. The use of quantifiers without quantification suggests that the writer doesn't know the facts. Not to pick on you specifically, but pontifically, you used the non-quantified words:

best, strong, narrow, narrowing, frequently, measured, minor, better, added, expected, fewer.

For many months, on and off, I have been advising you to teach yourself to want to be able to make fully quantified statements like:

"If NQ made a ten point up move in the first hour of trading and broke out by one point from a three point range lasting longer than twenty minutes during the period 10 AM to 11:30 AM PT, take a long with a two point stop and a ten point profit target and expect to net an average of $121."

I was forced to quantify everything I do when I asked my resident Geek to automate my trading. There were many weeks of conversations like this:

NoD: "You want to look at a previous pivot low and---"

Mr. NoD: "Define 'pivot low'."

NoD: "You know, the low of the last pivot point."

Mr. NoD: "Quantify 'pivot point''.

NoD (sighing forcefully): "You know, the place where price was going down and then it started going up."

Mr. NoD: "Define 'place', 'down', 'started' and 'up' in a form I can code."

NoD (exasperatedly): "Just look at a chart and you'll see a place where price was dropping and then it started going up and it went higher than the previous down bar's high and closed higher, then started going up some more---"

Mr. NoD: "Quantify 'started going up some more'."

NoD: "Here, come in my office and look at this! Just look at the f*cking chart---"

Mr. NoD: "Define 'the'."

NoD (preparing to slam door): "I'll be back later. I'm going to have a glass of vodka with my friend Arthur."

 

[jack hershey]

Quote from NoDoji:

Put on your position when the pullback finds support at/near the trend line or 20-period moving average (these are generally in sync with each other) and place your initial stop below the pivot low of the move. You should be entering off a higher low (or the bottom of a consolidation range/channel following a strong move up).

One good way to know that the pullback is not a trend reversal is to trail a buy stop as price pulls back. As each price bar in the pullback move closes, place your buy stop just above the high of the closed bar. The advantage of this is that you'll be positioned in the event the pullback is shallow and never makes it back to the trend line/20 MA. The other advantage is that price action (buying strength) will sweep you into the trade in the direction of the trend (up).

Alternatively, you can place a limit buy order at the trend line/20 MA with your stop below the previous pivot low. This is an anticipatory method of entry and carries a bit more risk; however, as long as the trend is intact, it gives you a better entry price.

Once you're position is on, if you have the leverage to add, you should place another buy stop just above the previous high (previous resistance). This allows you to use your unrealized profit at that point to buy entry into the expected breakout to a new high. If the breakout fails, you can exit quickly for at least the profit you had on the first position, and if the breakout succeeds, you've got decent size throwing money at your account

Attached is a chart that establishes the conditions of the theme of the OP and the additional details added by nodoji

The above paragraph addresses what happens after the conditions that are the OP theme.

Is it possible to consider what happens BFORE the OP gets into his quandary?

 

[jack hershey]

Quote from jack hershey:

Attached is a chart that establishes the conditions of the theme of the OP and the additional details added by nodoji

The above paragraph addresses what happens after the conditions that are the OP theme.

Is it possible to consider what happens BFORE the OP gets into his quandary?

Of course it is.

Path 1 is the technical path and path 2 is the trader's mind repair path.

I put in B as a point where the countertrend began. It is either point 2 or and FTT.

Nodoji points out what could happen if it is point 2 or if it is the FTT.

By adding two prior points to point B the OP can always "know that he knows". Now as a beginner, he doesn't know that he knows when he gets to where the head of the arrow is located. I put the additional points on the chart as A and C just sitting at the top. According to Nodoji A and C could go in one set of places or another set of places. It turns out, these two different circumstances cannot be confused, ever.

The guy who lectured was Jake and not Jack.

 

[stock777]

jacks stuff is almost Aristotelian in its brilliance and most here on ET have benefited greatly and profoundly by his offerings.

I'd like to see just a handful of realtime trades from the master, if only to silence the few detractors he has left.