Is It a Reversal or a Pullback?

I think you need to realise that the method is the least of the problems losing traders face. You could give a solid methodology to most losing traders and they would fail because of their mindset. eg. Break rules, poor mm, overtrade, revenge trade. Fear and greed rules their mind and they are passengers in the market bleeding their accounts out.

what the 95%+ fail to realise is that the brain works differently when fearful. It tends to ignore opposing evidence to trade ideas, this is a self protection mechanism.

you see this phenomenon with posters who have basically 'gone rogue' in that every idea, every discussion, every poster is a loser, is a fake is a charlatan (many are). This is because their brains are protecting themselves from the emotional pain they would suffer if shock horror a small % of people do actually make good consistent money trading.

The first step for these people if they are not too far gone is to seek out professional firms closest to them to physically meet people who make money trading. This should cause a big shift in their core beliefs and they can get on with the job of finding out how to join the minority. Of course the brain will put up massive resistance to the 'gone rogue' traders in seeking out professionals. Again the same phenomenon.

GL.
 
londonkid said:
To make an assessment of whether a move is a pullback or reversal you should look to the higher time frames w.r.t. the time frame you are seeing the pullback/reversal on.

Personally I find trying to pick highs and lows sub optimal. I wait for more confirmation and for early entrants to be stopped. You can also watch correlated markets to aid your decision.
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rather than give hindsight examples here is a scenario that could unfold this week. See attached daily chart of spoos. I have marked out a key daily level. If we then watch the 15m timeframe after price touches this daily level (it may not touch) then I believe any pullbacks are more likely to be just that 'pullbacks' and not reversals. i.e. the trend up is likely to continue.

Obviously this is just one potential example and any small sample can have any result, it's the concept that I am illustrating.

disclosure - i don't trade like this it's purely an example to illustrate a concept.

spoos.png
 
londonkid said:
rather than give hindsight examples here is a scenario that could unfold this week. See attached daily chart of spoos. I have marked out a key daily level. If we then watch the 15m timeframe after price touches this daily level (it may not touch) then I believe any pullbacks are more likely to be just that 'pullbacks' and not reversals. i.e. the trend up is likely to continue.

Obviously this is just one potential example and any small sample can have any result, it's the concept that I am illustrating.

disclosure - i don't trade like this it's purely an example to illustrate a concept.

View attachment 161065
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This will sound like a cliché but you only need to know how to connect the dots. And, yes, know the difference between a reversal and a pullback. :finger:
 
schizo said:
This will sound like a cliché but you only need to know how to connect the dots. And, yes, know the difference between a reversal and a pullback. :finger:
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if only method works for you then kudos. For me mindset and method must be mastered before the hard won consistency can be achieved. GL.
 
i am nobody said:
I agree. But the bigger the timeframe the wider the range you need to take to have the same accuracy. Standard deviation will give much higher values resulting in a much wider channel, and returns will be much lower with higher drawdowns as the system will trade less trades with wider stops.
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This is definitely true for traditional SD but I'm wondering if it's true for custom formulations such as an adaptive length variant that changes with the fractal landscape. If such a formula could b created then it would enable keying or almost hand fitting the volatility bands to the terrain and thus reducing the volatility range until it's nearly perfectly aligned with current volatility.

I'm interested in your thoughts on whether an adaptive length formula keyed to change length as the price structure changes might be something viable? And whether you can visualize this and if u think the result might look significantly different than traditional standard deviation bands?
 
dratsum said:
This is definitely true for traditional SD but I'm wondering if it's true for custom formulations such as an adaptive length variant that changes with the fractal landscape. If such a formula could b created then it would enable keying or almost hand fitting the volatility bands to the terrain and thus reducing the volatility range until it's nearly perfectly aligned with current volatility.

I'm interested in your thoughts on whether an adaptive length formula keyed to change length as the price structure changes might be something viable? And whether you can visualize this and if u think the result might look significantly different than traditional standard deviation bands?
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I wrote in past already that a system should have subsystems. I first define the strenght of the trend. Depending on the strenght I have 8 subsystems. Each of these subsystems is optimized for that specific strenght of trend. It is logical, and after testing it was confirmed, that this gave a huge improvement in results, but also had less bad signals. If you can improve net results from 2 to 3 points in ES, you improve your result by more than50%. Combined with compounding the improvement will even be massively higher.

If you drive a car you first check the weather.

1. If it is very hot, you put summer tires
2. I fit is raining very hard, you put rain tires
3. I fit is snowing you put snow tires

For each condition you have statistically the best tires to drive.

Apply the same logic in trading.
 
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