Making of a method

Quote from dbphoenix:
I really can't tell you what you should have done because your choices will depend on your own testing and how that jibes with your preferences and your risk tolerance and so forth. I trade by waiting for price to break either the support line or resistance line. Sometimes I'll exit immediately and sometimes I'll give it a minute or two depending on how active traders are. Similarly I will sometimes enter the other side immediately after a line is broken if the line runs straight through a retracement, but I prefer to wait for a retracement that occurs after the line is broken. Again, this is the kind of thing that can be determined only in real time (and if you're wondering why I don't just jump in after the line is broken, that hasn't worked for me; my win rate and profit % are better if I wait). The big advantage of this approach is that one can take the risk, knowing that if he's wrong, he can exit immediately with little or no loss (and by "loss" I mean a couple of ticks).

More...

Just wanted to remind you of the confusion caused when you used support and resistance and I interpreted them as horizontal zones instead of the DL and SL I had been reading about in the TL forum :)

Went over the past few days of this journal and followed your charts again. What a difference that makes!
 
Speculations on the why:

For Reversals:

Advantage of taking a position on a retracement after the DL/SL has been crossed is that the more time that is spent on the other side of the SL/DL line, the more trend momentum has slowed. Thus, if the trade is wrong, there is not enough momentum in the ongoing trend to create a big loss. Action has slowed, meaning more time and less movement to cause a big loss.

This is probably why the exp value of taking trades immediately after the line is crossed is not as high, since when price moves against the trade, it is faster and larger.

But for trades that work, there is no substantial difference between the two options. So the difference comes from the risk per trade.
 
Quote from game:

Just wanted to remind you of the confusion caused when you used support and resistance and I interpreted them as horizontal zones instead of the DL and SL I had been reading about in the TL forum :)

Went over the past few days of this journal and followed your charts again. What a difference that makes!
More...

Sorry about that. If people hadn't had so much trouble with the demand line/supply line thing, I would have left it alone. A better choice would be to use both terms together, e.g., demand/support line. Without charts, of course, it's all just gobbledygook. The charts, one hopes, makes it all self-evident.

There is, of course, an obvious difference between support line and support level, but I often just use the word "support", the result of having done this for so long. Those who are genuinely interested, like you, will ask. But then I should be more careful, as well.
 
Quote from game:

Speculations on the why:

For Reversals:

Advantage of taking a position on a retracement after the DL/SL has been crossed is that the more time that is spent on the other side of the SL/DL line, the more trend momentum has slowed. Thus, if the trade is wrong, there is not enough momentum in the ongoing trend to create a big loss. Action has slowed, meaning more time and less movement to cause a big loss.

This is probably why the exp value of taking trades immediately after the line is crossed is not as high, since when price moves against the trade, it is faster and larger.

But for trades that work, there is no substantial difference between the two options. So the difference comes from the risk per trade.
More...

The dynamic here does tend to provide temporary confusion. And if the trader knows exactly what it is that he wants/needs to do, he can do it with minimal slippage while everybody else is trying to figure out what's going on and what they want to do about it.

I'm sure you've noticed how tight those bars can get at the crests and troughs of retracements. Something like the hesitation at the top before the first plunge on a roller coaster.
 
5/2/13

Trade 1: -4.25
Trade 2: -0.25
Trade 3: -1.25
Trade 4: -2.25
Net: -8.00

Focus on:

1) Wait for compelling trades
2) Retracement entries


Pre market
R 2887
2nd R 2876
S 2868
2nd S 2871


8:37 Here is a retracement situation. Swing low is 2880 and price has retraced back to 2881.25.
I draw DL. Price still inside it. So here is an opportunity for a buy stop, unless price crosses the DL, then look for sell stop.

Set Buy stop at 2882.50.

Price not reaching buy stop. Momentum reducing and price crosses DL but is now again retracing up. Chance to set sell stop below retracement peak.


Set sell stop at 2880.25

8:38 Sell stop hit at 2880.25
If fails, give it room till 2881.25

Exit Buy at 2884.50
Kept waiting and price kept going higher.



8:44 The uptrend since open showing signs of topping. Price crosses DL. Look for retracement back up to put sell stop.

8:45 Retraced back up. The initial reversal from day’s high was about 5 points. The retracement has already taken up about 3 of those points. This is a situation where the retracement is more than 50% of the reversal. Do I put a sell stop? Give it more time.

8:46 Price goes up even more making a lower double top. Lower double to was at 2885.75. Set sell stop at 2884.25. The bar length is long so setting sell stop more distance away than just 1 point.

8:46 Sell stop hit.
If fails, give room till 2885.75

Exit Buy at 2884.50

9:49 The sell wave was not really a wave - has become a 4 point TR.

9:54 Another retracement situation. Price goes south and barely break S level is now retracing. Since the S level is so close by, a sell stop below this level might work.


Set Sell stop at 2881.50.

9:54 Sell stop hit.
If fail, give room till prior S level of 2882.50

Exit Buy at 2882.75

9:00 Price breaches TR. Wait to see if it stay outside TR. Buyers showing strength today with strong S at 2882. Look for retracement opps on the buy side.

Set Buy stop at 2887.75. Trough at 2886.75.

9:01 Buy stop hit

9:02 Exit Sell at 2885.50


Summary:

Plan is working, in so far as giving me an approximation of the reality of the situation. The reality being that I have only vague concepts at best.The lack of details show in the result.


Take the concept of entry within retracements.

For an up move:

1) Define what is a retracement (today every small dip, especially when following the line chart on the tick, looked like a retracement was setting up). I was seeing hesitations everywhere.

2) What is an ideal/acceptable range of price movement within a retracement? The range was playing havoc with my risk levels today.

3) I have no measure for what constitutes a failed trade. What should the If/then be within these retracements?
 
You must log in or register to reply here.
Back
Top