Looking for "edge" ideas...
- Thread starter k p
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Quote from NoDoji:
I was confused about your "double bottom" edge. I thought you meant buying off a double bottom-type formation following a significant downtrend. But above you're talking about buying a pullback (retracement) in an uptrend, which is what I do, so you won't be trading against me, plus I only day trade futures, lol!
Also when I say I'm short into a double bottom it doesn't mean I'm shorting a double bottom. Price is clearly trending down and I'm shorting retracements in the downtrend. At some point the trend ends, and since V bottoms are fairly rare, the trend usually ends with a 1-2-3 double bottom formation which can be exact or it can be failed break of the last new low or it can be a higher low. When that happens I stop shorting, at least for a while because I expect a stronger pullback and a possible reversal into a new trend.
And yes, that's the Bob Volman and that's his superb book
No.. you had it right the first time. When discussing a double bottom, I was looking to buy after the second bounce. The idea as I've read is that the price hit a bottom the first time and bounced off... second time it hits the bottom at the same level and bounced off again... so it tested support twice and now will move up. Although it is true that buying a double bottom means that I would be buying in a bear phase, eventually that bear has to end and I've seen double bottoms often that lead to a price breakout.
When I talked about buying a pullback/retracement in an uptrend, this was the second edge I was talking about and that I thought I would do instead since the double bottom sounded like something that may not work as well based on you saying you wouldn't buy a double bottom.
So perhaps for a start, I will just buy retracements in an uptrend, really study the bars and where to get in and have this as my only edge or pattern that I look for. I know DbPhoenix really pushes for backtesting and lots of paper trading, but I think that since this seems to be an excellent tried and tested edge, I think with strict risk management it can prove decent. If I stick with a 2:1 ratio, $40:$20, then I can survive quite nicely for a while. What do you think? My comissions to buy ETFs are free, so only selling will cost me about $5-$6. Granted this wont make me rich, but I'd like to see where I am at after 20 or 30 trades.
PS. Whatever happened to geez? I see puddles still posts, and from the history it seems like geez is onto bigger and better things, but gosh, I'd love to read a follow up. Feel free to PM me in case you don't want to post it on here. (although I realize that right now I'm just as much of a stranger as everyone else!)
I like the double bottom idea and sometimes I do flip long very early when it sets up, but I've become such a trend-follower that usually wait for the 1-2-3 to fully confirm, meaning the first swing high breaks with conviction after the DB/FBO/HL (whichever one applies) and then price pulls back to the breakout. That's where I consider entering what is likely a new trend (at least for a while).
Geez quit posting because his journal got spammed. I hung out in a chat room with him for the rest of that year and some of 2010. I lost touch with him after that. He was a most amazing example of a trader's mindset in action, day after day.
I thought he was pretty incredible as well. I was impressed when he continually asked if anyone needed more help or further explanation and not once did he fight back when attacked. Such a cool guy and obviously an excellent trader. Oh... and the humor with his SLF and needing to use their computer! LOL
I will study some more over the weekend and I think I will try my hand at a journal next week to show my trades. I would be most humbled and appreciate if you shared your thoughts when I post a chart! When you say you could teach a 10 year old in 5 minutes... what setups would you have them look for? Its ummm... obviously not for me.... but.... a friend I know!
Wrong.
If you day-trade on the 5-min charts for example, 1 single day of data has more bars than an entire year of daily bars.
What's important is the number of bars you use in your backtest, not the number of years.
And what's even more important is the number of trades the system generated (live or on paper).
2000 trades generated during the past 3 months will give you much more statistical information (for backtesting purposes) than 10 trades generated during the last 50 years.
If you think that day trading on any time frame isn't impacted by the broader market environment represented by daily, even weekly bars, then you have a rude awakening waiting for you.
A common and often fatal error on the part of new traders is to forget that their strategy lives within the context of a much larger space, that can't be measured only in months.
As a day trader using a 5-min chart I found that the bigger picture is meaningless as to whether I'll be long or short at any given time. The PA concepts I use work fine in bull and bear markets as well as daily/weekly bull and bear swings.
The one area where I've had to adapt is when volatility increases or decreases significantly. However, the adaptation only relates to the size of stops and targets, not to the trade signals themselves.
Quote from k p:
I will study some more over the weekend and I think I will try my hand at a journal next week to show my trades. I would be most humbled and appreciate if you shared your thoughts when I post a chart! When you say you could teach a 10 year old in 5 minutes... what setups would you have them look for? Its ummm... obviously not for me.... but.... a friend I know!
I'll be happy to comment when I'm in the neighborhood
The core concept behind my trading is...when price prints a directional move as evidenced by at least two bars in the same direction (no inside or outside bars) and then price breaks the high or low of the last directional bar in the opposite direction, that's a signal to trade in the direction of the break or to fade the break.
Now, all you have to do is study this idea and cross reference a smaller bar interval (I use 1-min for cross-reference) and you'll eventually find many ways to extract a profit from this idea.