Keeping It Simple II
- Thread starter dbphoenix
- Start date
Db,
I was just wondering, in times when you enter at +2 from the brkout point and the NQ maybe goes up a point or two and stalls and stays around +2 to -2 from entry, what is the wiser thing to do?
Do you wait for the follow through (or stopped out at initial stop), or get out at BE or slight gain?
This is obviously a question only a newbie would ask, so I'm sorry if this sounds silly.
Thanks again.
I was just wondering, in times when you enter at +2 from the brkout point and the NQ maybe goes up a point or two and stalls and stays around +2 to -2 from entry, what is the wiser thing to do?
Do you wait for the follow through (or stopped out at initial stop), or get out at BE or slight gain?
This is obviously a question only a newbie would ask, so I'm sorry if this sounds silly.
Thanks again.
When the trendline is broken, the stop should be moved to BE. Unfortunately, there are times (and there have been plenty of them over the last two months) when the TL is broken before one can get to BE.
When price breaks out, it ought to stay there. If it wants to race its engine in place, that's fine. But it shouldn't retrace the entire breakout, much less fall all the way back to the loss limit stop (which is there primarily for loss of connectivity). If you look at successful entries, you'll find that in the great majority of cases, the stop is not an issue. Price breaks out and takes off. It doesn't break out, then fall back eight points, then break out again.
Therefore, try keeping a very tight trendline. Unless the breakout is totally bogus, you ought to be able to get to the point where you are no more than a point or two vulnerable when this TL is broken (and it will be, simply because it's so tight). When it's broken, move your stop to maybe a point away from the bar. If the move is genuine, price should move on. If it isn't, you're not sitting there, powerless, giving away five points.
There will be occasions when you get stopped out and then price moves on anyway. You have to be prepared to re-enter at the next opportunity. But most of the time, if you get stopped out, it's because there wasn't enough power behind the breakout to begin with, in which case you don't want to be there anyway. You don't want to enter a trade on a breakout, then spend the next two hours in sideways congestion, not even far enough ahead to reach BE.
--Db
Thanks Db,
That's the reason I wanted to ask the question since I've noticed lately that there have been quite a number of times I've had to bail out at 1.5pts or 1pt from entry as the brkout seems to stall and starts hovering between +3 & -3 of entry.
Although, I've noticed in a number of occassions after I exit the NQ still moves in my direction albeit in a slow and weak manner and maybe reaching about +5 to +6 at times, which made me wonder if it was better to get out or let it wiggle a bit (though with the risk again of getting stopped out at a loss after already having a small gain).
That's pretty much up to you. Moves that took less than an hour two months ago are taking several hours today, which is ordinarily more of an annoyance than anything else. But when so few people are trading, the movements begin to take on a more random character, and if you're not comfortable with that, then exit and wait for another day.
One option is to adopt a retracement strategy, which is particularly useful when the market is characterized by weak breakouts. But that's outside the subject of this thread.
--Db
I've had good results with tightening my stop to 2.5pts (one tick inside the opening range) as soon as a completed 3min bar has completely cleared the opening range (that is, the bar's entire range is outside the OR).
I'm still in a mechanical testing process and papertrading, so I don't really want to bail out "manually" based on perceived weakness and discretion. This stop tightening procedure gives me an objective way to avoid coming all the way back to my initial crash stop (in most cases anyway) when BO's fail before a decent TL can be established.
Even with the tighter 2.5pt stop, it seems rare that the stop is taken out and then price turns back around for a significant profit. A few pts maybe, but not a real move right away (assuming the entry was legitimate in the first place).
I'm still in a mechanical testing process and papertrading, so I don't really want to bail out "manually" based on perceived weakness and discretion. This stop tightening procedure gives me an objective way to avoid coming all the way back to my initial crash stop (in most cases anyway) when BO's fail before a decent TL can be established.
Even with the tighter 2.5pt stop, it seems rare that the stop is taken out and then price turns back around for a significant profit. A few pts maybe, but not a real move right away (assuming the entry was legitimate in the first place).
I think that's a legitimate tactic. It may seem as though you're locking in a small loss, esp if you end up re-entering very soon thereafter, but that beats a 5pt loss, or no stop at all.
This all sounds as though the tactics are chosen according to one's "comfort level", but the fact remains that the breakout should not violate the reaction high/low or "stairstep", nor should it fall back into the range. It can do these things and succeed, but doing them nonetheless constitutes a sign of weakness.
Are you using Dunnigan at all?
--Db
It may seem as though you're locking in a small loss, esp if you end up re-entering very soon thereafter...
Under my current rules, I will not immediately enter a secondary BO after a stop-out loss unless support/resistance is demonstrated outside the OR on the retracement. I may end up loosening that requirement depending on my testing, because I can easily imagine a retracement just taking out my stop a tick inside the OR and then breaking out successfully. But I haven't observed that happening yet, at least not on the first retracement.
Are you using Dunnigan at all?
Not specifically or consciously, other than general principles of price action that are not unique to Dunnigan. What did you have in mind?
I'm not clear on his concept of "thrust" exactly, I think because when he got to his "One Way Formula" he had abandoned that, or maybe it's more accurate to say he built it into his rules in an integrated way. I haven't looked at the earlier parts of his work for a while.
In what ways do you incorporate Dunnigan's ideas?
Under my current rules, I will not immediately enter a secondary BO after a stop-out loss unless support/resistance is demonstrated outside the OR on the retracement. I may end up loosening that requirement depending on my testing, because I can easily imagine a retracement just taking out my stop a tick inside the OR and then breaking out successfully. But I haven't observed that happening yet, at least not on the first retracement.
Are you using Dunnigan at all?
Not specifically or consciously, other than general principles of price action that are not unique to Dunnigan. What did you have in mind?
I'm not clear on his concept of "thrust" exactly, I think because when he got to his "One Way Formula" he had abandoned that, or maybe it's more accurate to say he built it into his rules in an integrated way. I haven't looked at the earlier parts of his work for a while.
In what ways do you incorporate Dunnigan's ideas?
Under my current rules, I will not immediately enter a secondary BO after a stop-out loss unless support/resistance is demonstrated outside the OR on the retracement.
Could you provide an example?
I'm not clear on his concept of "thrust" exactly, I think because when he got to his "One Way Formula" he had abandoned that, or maybe it's more accurate to say he built it into his rules in an integrated way. I haven't looked at the earlier parts of his work for a while.
In what ways do you incorporate Dunnigan's ideas?
The thrust is a signal that you're on your way. The 2pts above the OR serves the same function in that 1 to 1.5 doesn't always signal intent, and 3 is too extended. In all the review I've done, 2 seems to be the best compromise.
As to how I'm using his ideas, that may be best left to chat since it's nowhere near "simple", at least in the spirit of this thread. How do you feel about the chatroom here?
--Db
Could you provide an example?
I'm not clear on his concept of "thrust" exactly, I think because when he got to his "One Way Formula" he had abandoned that, or maybe it's more accurate to say he built it into his rules in an integrated way. I haven't looked at the earlier parts of his work for a while.
In what ways do you incorporate Dunnigan's ideas?
The thrust is a signal that you're on your way. The 2pts above the OR serves the same function in that 1 to 1.5 doesn't always signal intent, and 3 is too extended. In all the review I've done, 2 seems to be the best compromise.
As to how I'm using his ideas, that may be best left to chat since it's nowhere near "simple", at least in the spirit of this thread. How do you feel about the chatroom here?
--Db
db "simple" is relative. the ideas discussed here so far have been very simple. very good, but simple. let's move on to "advanced tactics" (for want of a better word). this thread of yours is freaking great, i'd like to see further expansion and analysis.
thanks for your contribution here.
thanks for your contribution here.