Making of a method

Quote from dbphoenix:

But all of this has to be defined and backtested (manually) and forwardtested (manually) before you begin to trade it, either for real or in sim. You appear instead to be trying to do all of this simultaneously, and while that's possible, it is highly unlikely, and, even if possible, will take an extraordinarily long time.
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Steenbarger talks about the importance of play in developing competence. My initial plan was to observe with intent. Through sim trading, I had hoped that play would strengthen intent. What I have observed so far has given me faith to endure future backtesting and struggle. I know it can be done.

I am grateful for your reminder to move on. It is time to define what I have observed and learnt so that formal backtesting can begin.
 
Quote from RCG Trader:

Point #3

Bullish pin bar example again.

You get the pin bar, with good volume, and you pull the trigger. Bulls are having trouble right away. What to do?

Watch volume. Pro rate it. If you are on a five minute bar and after two minutes volume is on a path to exceed the volume of the prior bar, and the bulls are losing, get out.

Wait for the next setup. The next setup will be an inside or outside bar. Act accordingly.
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I don't know what pin bars are but I get the gist of what you are saying. Thanks.
 
Quote from game:

Steenbarger talks about the importance of play in developing competence. My initial plan was to observe with intent. Through sim trading, I had hoped that play would strengthen intent. What I have observed so far has given me faith to endure future backtesting and struggle. I know it can be done.
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Depends on what one means by "intent". Those who have little or no trading experience will observe with the objective of determining what buyers and sellers are doing and when and why. Those who have some or a lot of experience will observe with the objective of determining where to enter and exit. The latter becomes a form of testing and defeats the purpose of observing.

I'll grant that the trader who has little or no interest in behavior will find this sort of observation boring and rather pointless. But then this sort of trader isn't going to be interested in trading price anyway. The trader who is interested in behavior, however, will gain enough from this observational phase to provide him with a sound basis for making RT decisions regarding entry and exit, regardless of whether or not those decisions exactly meet his predetermined criteria.

It doesn't take a master trader to see that nearly all of the I'm-having-trouble posts made in forums like this arise from the fact that the troubled trader has no idea what he's looking at. And if one doesn't know what he's looking at, he won't know what he's looking for. And if he doesn't know what he's looking for, he won't recognize it when he sees it. And if he doesn't recognize it, he won't be able to trade it. Therefore, the chief objective is to understand just what it is that he's looking at. Bare minimum here may be whether price is going up, down, or sideways. This is to a large extent the purpose of observation.
 
The back test plan:

Market: NQ
Time: 60 to 90 min from open

Conditions:
Trend
Range - should be at least 6 points wide

Strategies:

Continuations
Reversals

Tactics:

Retracements - enter between 0.75 to 1.5 points of RET trough/peak. RET is defined as one forming on the 1 min chart.

Breakouts (here breakout is being defined as placing a stop ahead of the recent high/low during a trend)

Exit conditions:
1st exit: DS line break
2nd exit: Last swing break
3rd exit: Major retracement of prior wave (50% or more)

Context:

Exits: Although the testing will involve only 1 lot, the different exit conditions will be used based on context. An overextended trend may be exited via a DS line break, while a more long term position will be given room till LSL break, etc.


Entries: Context will determine the trade. Range reversals may be breakout based, while trend reversals will generally be RET based unless other factors indicate a weakness that warrants taking the other side of the trend at the first hint of trouble.Two strategies times two tactics will give me a total of four possible ways to enter.
 
For the sake of communal understanding, a breakout is an exit from a range. It may be the genesis of a trend, but it is not in and of itself a trend or part of a trend.
 
Quote from dbphoenix:

For the sake of communal understanding, a breakout is an exit from a range. It may be the genesis of a trend, but it is not in and of itself a trend or part of a trend.
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I was trying to use it in the context of a tactic. What would be more appropriate when an entry is made out of the retracement zone - basically entering above the high or low?
 
Quote from game:

I was trying to use it in the context of a tactic. What would be more appropriate when an entry is made out of the retracement zone - basically entering above the high or low?
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A RET occurs after a breakout. Eventually. Sooner rather than later if one looks at smaller bar intervals to find one. A breakout has to do exactly that: break out. Exceeding an immediately-preceding swing high is just a higher high.

If price isn't breaking OUT OF something, then it's not a breakout. Otherwise, every move up or down would be a breakout at some interval, and would thus be useless as a strategy.
 
Quote from dbphoenix:

A RET occurs after a breakout. Eventually. Sooner rather than later if one looks at smaller bar intervals to find one. A breakout has to do exactly that: break out. Exceeding an immediately-preceding swing high is just a higher high.

If price isn't breaking OUT OF something, then it's not a breakout. Otherwise, every move up or down would be a breakout at some interval, and would thus be useless as a strategy.
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I am clear about the strategy. What I am trying to do is define two different entries within the same strategy. In a reversal, an entry can be made either on a RET or not. If an entry is made by placing a stop at a place price has not visited yet, then what would that be called?
 
Quote from game:

http://cdn3.traderslaboratory.com/f...653475-re-trading-off-daily-charts-image1.png


Example:

The second short is made by placing a stop at a lower low. I am just trying to differentiate these entries from those that occur within the retracement pocket for record keeping purposes. One is more aggressive than the other.
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You don't need a stop. If the trade doesn't work, just get out. Your second short here is the same BO, particularly coming as it does after the fakeout.
So play it as you would any BO.

And keep in mind that if you were trading with a 5m interval, all those bars would be one. At some point, you may develop the habit of "blending" bars in your head so that you know what the 5m people and the 15m people are looking at without having to display a bunch of extra intervals on your screen. I suspect that the 5m people are the ones who helped propel your second entry.
 
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