Ghost of If You Can Draw A Straight Line

[r3algood]

Regarding Thursday's (4/17) session, one bigger picture (if a 5m chart can be called 'bigger picture') that kept me focused on measuring the differences between supply and demand was the trend channel I identified before the session started (the green TC lines). As the session progressed, I was able to draw the blue lines seen on the chart that better encapsulated the TC.

What these two TC's did for me from a trading perspective was to demarcate the potential shifts in supply and demand around the edges of the TC, as well as some limited 'action' around the mean of the TC (TC means are something I still need more in-depth work on).

Did anyone else use the TC's I have marked on Thursday? And if so, how did you use them?

 

[dbphoenix]

Regarding Thursday's (4/17) session, one bigger picture (if a 5m chart can be called 'bigger picture') that kept me focused on measuring the differences between supply and demand was the trend channel I identified before the session started (the green TC lines). As the session progressed, I was able to draw the blue lines seen on the chart that better encapsulated the TC.

What these two TC's did for me from a trading perspective was to demarcate the potential shifts in supply and demand around the edges of the TC, as well as some limited 'action' around the mean of the TC (TC means are something I still need more in-depth work on).

Did anyone else use the TC's I have marked on Thursday? And if so, how did you use them?

You can't draw accurate trend lines or trend channels if you leave out two-thirds of the data.

 

[eminiman414]

Hey DB I have a question. I want to research/test a few things/study and drive all of these principles we have all discussed home. I would like to do this through replay and not a backtest. I want to treat this almost like I am back in college. I have found some actions that throw me off/keep making the same mistake/just want to get better at reading price. For example today I did a replay and paused it repeatedly analyzing, digesting, and thinking about what's going on. It's helped a lot. I am currently replaying June however my question is although I know what has happened from January to present day, should I be replaying days that are closer to the current market conditions?

For instance, if I placed a 3 point stop in June it rarely gets hit based on the range of activity and I know for certain that the same 3 point stop gets hit more often during present day activity. Say I wanted to look at "x" amount of days would it be wiser and more informative to do those x amount of days backward from present day?

 

[dbphoenix]

Hey DB I have a question. I want to research/test a few things/study and drive all of these principles we have all discussed home. I would like to do this through replay and not a backtest. I want to treat this almost like I am back in college. I have found some actions that throw me off/keep making the same mistake/just want to get better at reading price. For example today I did a replay and paused it repeatedly analyzing, digesting, and thinking about what's going on. It's helped a lot. I am currently replaying June however my question is although I know what has happened from January to present day, should I be replaying days that are closer to the current market conditions?

For instance, if I placed a 3 point stop in June it rarely gets hit based on the range of activity and I know for certain that the same 3 point stop gets hit more often during present day activity. Say I wanted to look at "x" amount of days would it be wiser and more informative to do those x amount of days backward from present day?

Since the course of each day is unknowable, I wouldn't worry about it. Just look to the left and trade to the right.

 

[bmwhendrix]

Friday post mortum: I am becoming more aware of the midpoint of ranges and it really does add a bit of clarity when you see price respond to a mp after departing from a range. Price was left at an interesting place on Friday.

 

[bmwhendrix]

Fearful......less fearful?

When I read the fearful/less fearful scenarios for exiting a trade, I find myself asking "So if a fearful exit at the slightest line break will result in smaller profits, will being less fearful result in more or will the larger losses on trades negate the larger moves that one would capture.

If we look at 3 typical exit strategies: line break, previous high/low, 50% retracement failure, should one be the primary strategy for maximum profit, or should they each be used depending on the context?

Like many things in trading, once I start looking at it closely, there a so many variables that my little mind is soon spinning.

FWIW, as a Sunday morning exercise on manual backtesting, I seem to be finding that neither of them is the way to go, at least not initially. I seem to do better utilizing a smaller stop inititally, but no more than the last swing high/low or not more than 3-4 points. If stopped, immediately trailing price with another entry until it is clear that a continuation is probably not going to happen.

Once ahead by a swing high/low, the plan changes, since we can now switch from minimizing loss to maximizing profit mode. Now trailing high/low pivots seem to be best, untill we see an acceleration in the move, typically 4 pushes, then exit on a line break.

Of course reversal action or hitting a channel boundary calls for a bit of discretionary thinking.

Any major flaws in this?

Ok, more coffee now. Happy Sunday to all.

 

[SIUYA]

Fearful......less fearful?

.....................
......
FWIW, as a Sunday morning exercise on manual backtesting, I seem to be finding that neither of them is the way to go, at least not initially. I seem to do better utilizing a smaller stop inititally, but no more than the last swing high/low or not more than 3-4 points. If stopped, immediately trailing price with another entry until it is clear that a continuation is probably not going to happen.

Once ahead by a swing high/low, the plan changes, since we can now switch from minimizing loss to maximizing profit mode. Now trailing high/low pivots seem to be best, untill we see an acceleration in the move, typically 4 pushes, then exit on a line break.

Any major flaws in this?

IMHO - unless you can show that doing more trades has a substantial advantage - all other things considered equal the best option is to always go for the strategy that has less trades.
This results in less decisions to mess up and less chances to over trade, lower costs, less focus required, less stress (fear) and the chance to really capture larger trends with very little additional risk.

 

[bmwhendrix]

Ah, and so enter the forementioned variables. So are you saying you support staying in a trade until the 50% retracement has been violated, nevermind that it may cost you 10 points or more?

Thanks for the response.

 

[dbphoenix]

Fearful......less fearful?

When I read the fearful/less fearful scenarios for exiting a trade, I find myself asking "So if a fearful exit at the slightest line break will result in smaller profits, will being less fearful result in more or will the larger losses on trades negate the larger moves that one would capture.

If we look at 3 typical exit strategies: line break, previous high/low, 50% retracement failure, should one be the primary strategy for maximum profit, or should they each be used depending on the context?

Like many things in trading, once I start looking at it closely, there a so many variables that my little mind is soon spinning.

FWIW, as a Sunday morning exercise on manual backtesting, I seem to be finding that neither of them is the way to go, at least not initially. I seem to do better utilizing a smaller stop inititally, but no more than the last swing high/low or not more than 3-4 points. If stopped, immediately trailing price with another entry until it is clear that a continuation is probably not going to happen.

Once ahead by a swing high/low, the plan changes, since we can now switch from minimizing loss to maximizing profit mode. Now trailing high/low pivots seem to be best, untill we see an acceleration in the move, typically 4 pushes, then exit on a line break.

Of course reversal action or hitting a channel boundary calls for a bit of discretionary thinking.

Any major flaws in this?

Ok, more coffee now. Happy Sunday to all.

You're mixing rational and irrational approaches. Trade management should be rational. I exit when price does this. However, fleeing the trade because you can't stand the level of fear you're experiencing and leaving it up to the market to decide whether you remain in the trade or not is not trade management but an irrational emotional response.

Most of you focus on line breaks in and of themselves rather than on what the line break means. If it's just some trade out of nowhere, it can be ignored. If it represents a shift in the balance between supply and demand, then it should be addressed rationally. If one believes based on observation (pace, extent, duration) that a more significant counter-move may be in store, the rational response would be to exit and look to take the other side at some point. If he's wrong, then the rational choice would be to re-enter the original trade in anticipation of a continuation.

Nearly all of you view the trade as being over once you've exited or you've handed over the responsibility for the trade to the market and let it decide. But exiting a particular trade is only a preliminary step, unless you've decided to quit for the day. And if you're determining all these exits based on how fearful you are, then quitting for the day, or until you've dealt with these fears, is probably the better choice.

 

[SIUYA]

Ah, and so enter the forementioned variables. So are you saying you support staying in a trade until the 50% retracement has been violated, nevermind that it may cost you 10 points or more?

Thanks for the response.

not at all.
if you are testing various measures to see how active you wish to be then all I am saying is that unless there is a substantial PL reason to be more rather than less active, the better option is to try and limit your trading. If it means giving up 10 points occasionally v 10 lots of 1 points for the same PL result, then you are better to trade less. If you exit quickly then you need to have a re-entry level as well. My guess is this will cause more chop, more fear, more irrational thoughts. Occasionally you will get a v reversal and will give up 10 points.....more likely you will have other opportunities to exit.

Going with what DBP says - you have to understand what you are watching and trading, and seeing what is happening. This is when it tells you to exit, enter, leave.

Your backtesting for ideas should probably include a measure for when a trade entry is a long way away from the place that would indicate the trade is wrong - hence you might wish to pass on that trade.....or wait for a better opportunity to enter.
Or if running a trade, then you simply have to watch and wait with some rules for when to exit......as v reversals imho opinion are rare, then you will be given plenty of other reasons to exit without getting too jittery for the hell of it.

I dont want to derail things anymore than to reiterate this = overtrading and making more rather than less decisions will likely made it harder to follow a system successfully than a system with less decisions and trades. - jittery fingers kill accounts.