Keeping It Simple II

[Hambone]

Quote from dbphoenix:

Actually, I got in a little early. But even if I hadn't, there was a reaction high at 1064.0 at 10:36, and it didn't make sense to place the stop just a tick or two away from that. If one were nervous, it would make more sense to get out at a breach of the 11:03 reaction high and re-enter, or not move the stop to BE at all.

Note that in my revisions, there is no moving the stop to BE when X pts ahead. I don't move it to BE until the TL is broken.

--Db

If your new revisions don't move the stop to BE until the trend is broken, what happened to you on Friday? Did you enter on the breakdown at 1085.50 and stop out around 1086 when the sharp down TL was broke at 10:30 CST, or did you have some other TL drawn?
Did the triple bottom fake you out at all?
Did you play the following double bottom for a reversal?

 

[dbphoenix]

If you didn't play the gap, you'd have a long wait on this day for a BO of the opening range, if you define the opening range as what happens before 1000, and that didn't come until after 1100. Entry would be at 1084.5. The TL was broken around 1130, and you'd be out at BE. Or you could just exit when the gap was filled and wait for a re-entry or a reversal.

No reason for the triple bottom to "fake you out". If price returns for a third time, the support is likely to fail.

And, yes, I did buy the double bottom.

--Db

 

[wwatson1]

I thought this thread was about keeping it simple, it sounds like your system has so many factors and variables you would get in a right mess trying to trade it.

does anyone trade a simple more mechanical system??

 

[bdixon619]

Quote from wwatson1:

I thought this thread was about keeping it simple, it sounds like your system has so many factors and variables you would get in a right mess trying to trade it.

does anyone trade a simple more mechanical system??

wwatson,

I think it's simple enough. I've been tracking it using the rules and insights provided. It is easy work to track it. Thinking about mechanical systems...the only one to trade is one that adapts to changing market conditions. The drawback of such a system is that of constantly wondering if the signals you are seeing are worth taking or will soon be proved wrong by market dynamics. So, you pick 'em; a simple pattern based trading model or a model optimized on market dynamics as they were in the past or an adaptive system that doesn't deliver a consistently reliable signal. Db's system provides a good pattern based backdrop to market dynamics, one that can be used to trade itself or can be used as a reference for discretionary trading within a mechanical system to generate signals.

Bruce

 

[dbphoenix]

Quote from wwatson1:

I thought this thread was about keeping it simple, it sounds like your system has so many factors and variables you would get in a right mess trying to trade it.

does anyone trade a simple more mechanical system??

Like I said above, "if you want simple, go long or short a breakout of the first 30m bar. Period."

--Db

 

[dbphoenix]

Quote from bdixon619:

Db's system provides a good pattern based backdrop to market dynamics, one that can be used to trade itself or can be used as a reference for discretionary trading within a mechanical system to generate signals.

I don't know that I'd call it "pattern-based" except insofar as the patterns are based on what's going on with regard to demand and supply, e.g., double bottoms. This doesn't get into coils or flags or wedges, much less Gartley.

But I've read many threads that focus on this or that system, and I've read complaints about how difficult it is to make any money and I've followed various traders' results, and it's clear that not only do many traders know little or nothing about trend and the dynamics of an auction market, they don't really want to know. It's too "difficult".

As regards this particular strategy, unless one simply trades the breakout of the first 30m bar, he's going to have to understand - or want to learn - basic principles of demand/supply and support/resistance as well as understand how to determine the existence of trend, the direction of trend, and the strength of trend. If one doesn't understand any of that nor want to learn, then this strategy is completely inappropriate.

On the other hand, if one doesn't understand what are basic principles of market action, it's unlikely that he will be successful with any strategy for any length of time. Since most traders fail, this result should not be unexpected.

--Db

 

[bdixon619]

and it all gets done. Let's see: entries are possible 2 pts. above and below the opening range, check for trend, use an ATR target from the last 10 days either added to or subtracted from the Lo/Hi. Trail your stops until there is a break of the trendline and figure the party might just be over at that point. If you find the open has a considerable gap it is best to trade in the direction of a big gap and to keep a fairly wide stop to allow for 'creep'; small gaps can be faded until closed or nearly so, depending on the trend. At any rate, take some profit when these do close or begin to reverse. Look for opportunities to reverse at trend line violations, either 2B's or multiple tops or bottoms. Don't wait too long to follow up these opportunities. Other than that, don't be too quick to re-enter in the direction of the trend if you are stopped out, wait for a new high or low at least 2 pts. greater or lesser than the last high or low.

Bruce

 

[dbphoenix]

That's about it. This morning, for example, I did not take 49.5 because the ES wasn't making a new low and there was a great deal of hesitation. 49.5 may turn out to have been the best entry. But this doesn't look like I want it to look. This makes it more difficult than just entering at the 2pt break no matter what. But who said life was easy?

--Db

 

[dbphoenix]

Add. A 49.5 entry would have been SO here. This failure to drop says something. If one wonders what it says, this strategy will probably be successful for him. If he doesn't, it probably won't.

--Db

 

[spedblavio]

Quote from bdixon619:

...use an ATR target from the last 10 days either added to or subtracted from the Lo/Hi.

It might not actually be much different, but I wouldn't use ATR. All you want is the average daily range from low to high. ATR is a more complex calculation that takes into account gaps (and overlap?). ATR is of more interest if you're concerned with movement from day to day, but what you want here is simply average intraday range. Some programs have "ABL" or Average Bar Length. Calculated for 10 periods on a daily chart, this will give you the number you want. Or it's easy enough to do manually.

Trail your stops until there is a break of the trendline and figure the party might just be over at that point.

The system outlined does not trail stops before a TL break.

If you find the open has a considerable gap it is best to trade in the direction of a big gap and to keep a fairly wide stop to allow for 'creep'

Db mentioned how creep can tempt the trader to use wider gaps, he did not say you should (if we're talking about an initial stop anyway). The whole thing with creep is detecting it as early as possible (which means recognizing conditions that often lead to it such as yesterday's large gap which also opened below the low of an up day in an upswing) and getting in early or not at all. With creep, there's usually a small window in which to take a position that can be comfortably and reasonably held. If you miss that window, it's best not to torture yourself trying to find a sustainable entry.