Keeping It Simple
- Thread starter dbphoenix
- Start date
It's impossible to divorce yourself from experience, so I can't honestly say that the gaps were the only reason. However, I'm leery of making entries in the direction of the gap unless there's been some sort of cataclysmic event. Mike said - if I remember correctly - that he never trades in the direction of the gap. I wouldn't go so far as to say "never", but fading the gap is generally more successful than trading in the direction of the gap. Note today, for example, how price dipped down a few points at 1015, then bobbed right back up again, like a cork. I thought that if that was a feint, there might be a blowout from the other side to fill the gap, but that never happened either. So I set my alarms and read a book.
--Db
I couldn't bring myself to backtest or forward test Db's strategy. It was just not right for me. I have been working on designing a strategy of my own, but until now, I haven't been able to write out the exact rules properly. I think I've got it now. Let me know if you have any questions. In order to use it, you must know what a swing is, and should be familiar with Stan weinstein's book "Secrets to Profiting in Bull and Bear Markets".
Twist= An exit stop which makes you flat. (most Stop and Reverse strategies I have seen do not have this)
1. Wait for first swing cycle to form. (swing up and swing down)
2. Enter short on first lower swing high.
-or-
Enter long on first higher swing low. (do whichever comes first)
3. Place initial exit stop.
-if short, just above lower swing high.
-if long, just below higher swing low.
4. Trail these exit stops behind every swing cycle. This is your safety net. Do this as Stan weinstein suggests in "Secrets to Profiting in Bull or Bear Markets." (trader stops)
5. Look for SAR areas. Meaning, if short, your SAR area is the first higher swing low. If long, your SAR area is the first lower swing high.
6. Only Stop And Reverse when you are positive that the swing is complete. Meaning if short, and considering reversing, make sure the down swing which is creating the higher swing low is definitely over. You would actually be entering on the start of the up swing in that example. Opposite for long.
7. When SAR trade is filled, place your new initial exit stop as described above. (see 3)
8. If exit stop is triggered, go back to step 2 for a new entry.
It's something to think about, at least for me. Any comments?
Banker
Twist= An exit stop which makes you flat. (most Stop and Reverse strategies I have seen do not have this)
1. Wait for first swing cycle to form. (swing up and swing down)
2. Enter short on first lower swing high.
-or-
Enter long on first higher swing low. (do whichever comes first)
3. Place initial exit stop.
-if short, just above lower swing high.
-if long, just below higher swing low.
4. Trail these exit stops behind every swing cycle. This is your safety net. Do this as Stan weinstein suggests in "Secrets to Profiting in Bull or Bear Markets." (trader stops)
5. Look for SAR areas. Meaning, if short, your SAR area is the first higher swing low. If long, your SAR area is the first lower swing high.
6. Only Stop And Reverse when you are positive that the swing is complete. Meaning if short, and considering reversing, make sure the down swing which is creating the higher swing low is definitely over. You would actually be entering on the start of the up swing in that example. Opposite for long.
7. When SAR trade is filled, place your new initial exit stop as described above. (see 3)
8. If exit stop is triggered, go back to step 2 for a new entry.
It's something to think about, at least for me. Any comments?
Banker
You know it's going to be a low because the swing is down. Every down swing results in setting a low. You wait for as many bars as you feel is necessary to determine the swing is finished and a new swing has begun. This is subjective in short time frames, in longer time frames you can analyze each swing like you would a trend, using a smaller time period chart. The individual bars are not focused on to determine what is a low, you have to focus on the swing itself. You would buy on the start of an up swing which is preceded by a down swing which ended at a higher price point than the prior down swing ended.
I guess you really need a complete understanding of what price swings are to even consider this strategy. It's definitely not for everyone. I designed it for myself, whether it even makes sense to anyone else is unknown.
Banker