Making of a method

Quote from game:

RET strategy version 1

As you requested, I've looked this over and it is clear that you've put in a lot of work. I have a few comments and suggestions that you're free to ignore.

Conditions to use in:

Trending state: A state opposite that of chop. Chop defined as presence of HH & HL or a narrow trading range - generally less than 6 points.

I think you mean LH and HL. Otherwise, I want to emphasize that the most important consideration is trend. If you cannot recognize trend in real time, this won't work for you. You must be very clear about defining "up", "down", "sideways". Otherwise you'll get lost quite rapidly and it will all unravel. Writing it all out may be helpful to you, but it's not necessary. Writing out all the characteristics of beauty isn't necessary in order for you to recognize it when you see it.

For example, let's say the market has established support or resistance or both before the NY open. At the open, price busts through resistance. This is trend. It may last for only seconds and it may not go far, but buyers -- at least for the moment -- are in charge.

But then price reverses, perhaps for no discernible reason other than buying interest dried up. Price drops. It falls below what had been premarket support. This is also a trend only sellers are in charge. But that doesn't last long either, and price reverses to the upside.

At this point you have an opening high and an opening low and no trend whatsoever. So you do nothing until the market decides what it wants to do and shows its hand. You may decide at some point that you want to develop a set of tactics for trading chop, but none of that has anything to do with trading trend. At the moment in this example, you have no trend. So you do nothing because you have defined clearly for yourself what evidence you want to see of trend and you're not seeing it here. So you just sit.

Entry Tactics:

Time: Wait for at least the 3rd bar to form before placing stop. First is the move, second is the retracement, third/fourth,etc is the move in the direction of the stop.

By "stop" I assume you mean buystop. Take care to distinguish between buystop, sellstop, and coverstop (or catastrophe stop). Also consider the followstop. In any case, avoid falling back into bars and bar counting. Don't forget what you experienced when you were observing price movement in general and the 1t in particular. It isn't the bar that's important; it's the resolve of buyers. Depending on circumstances, one "bar" may be enough. A retracement may last for a minute or less or five or fifteen or twenty, though if it lasts that long one can assume that buyers have lost much of their motivation. Watch how price moves within the bars: is it repeatedly being pushed downward with little buyer resilience, or are buyers pushing back hard at each attempt of sellers to drive them back? These signals will tell you whether buyers are regrouping or they are giving it up and getting ready to allow price to continue falling to some lower level, at which point this may begin all over again.

Range: Smaller range preferable over larger. This is the range of the pullback and not the initial move. Ideally, looking for a range compression, a stark contrast between prior range and the small range of the hesitation.

Correct. Unless traders simply lose interest, this compression represents pent-up energy, which will bust out one way or the other before too much time has passed.

Pace: Speed with which a pullback is brought back. Hanging/stalling price also indicates quality of entry.

Extent of prior move: Do not enter the first immediate RET after a parabolic move. Do not jump into RET's if the best entries were missed earlier.

I assume you mean that by the time you know it's parabolic, it's most likely nearly over, which is generally true. Your comment about second-best and third-best and fourth-best entries is also true, particularly since by the third or fourth entry, the move is almost certainly over (this does not necessarily apply to daily charts since they are not nearly so laden with emotional trades).

Exit Tactics when trade is working:

1) Crossing of DS line
2) Break of a swing point or past S/R level.
3) 50% + RET of move.
4) When at an S/R zone that has shown an ability to bounce price off.

This may prove to be unexpectedly difficult, particularly if you're trading only one contract. Limiting yourself to one contract leads to a host of bad decisions. I suggest you simtrade five and specify the exit criteria for each.

For example, the first contract might be exited when the demand line is broken. This leaves four contracts. The next might be exited if price drops below the last swing point. OTOH, if price rallies instead and makes a higher high, you still have four contracts in play. Even if you're trading with real money, you can trade the one contract for real and the others in sim. Then as you become comfortable with this tactic, trade two for real and three in sim.

Note that the losses implied by scaling out this way will present themselves only if the entry was wrong to begin with. If the entry is correct, price will have moved far enough so that you can scale out and still remain profitable. If you make a spectacularly bad entry, then of course you have the option of getting out of everything in order to avoid a loss.

Exit tactics when trade is not working:

1) Breaking of immediate DS line
2) Moving past immediate S/R zone formed by the pullback

Context factors

S/R zones from the past and present
Structure of waves via steepness, duration and extent.

Try to keep track of the waves in your head. It is not likely that you'll have time to draw them, even if doing so would not in itself be a distraction. Look at how the extent and duration of the selling waves compare to the buying waves. When they begin to become equivalent, be on the alert. If they switch status, be especially alert, particularly if approaching major S or R.
More...
 
Rev Strategy version 1

Conditions to use in:

Trading Ranges greater than 6 points.
Trend meeting major S/R level

Reversal confirmed by either:

Ability to create a meaningful DS line in the direction of the Reversal
Making of LH or HL
Crossing of last swing point

Entry tactics:

Break of DS line
RET should occur on the opposite side of the DS line

Either straight Reversal or entry on RET. Straight is more aggressive via more information risk.

Time & Pace: Should not occur after an extended period of consolidation. That would be a breakout strategy.

Exit options when trade is working:

Break of DS line.
Break of swing point
Pulling back down to MP of range.
Reaching end of TR
Breakout failure out from TR.

Exit Options when trade is not working:

DS line break
Crossing of short term S/R formed by RET or by the last LH or HL level.
If HH or LL is made

All other relevant tactics and context factors applicable from RET strategy.
 
Day 1 of 20

http://www.sierrachart.com/image.php?l=1370500403889.png

Summary:

The first day of using 5 lots. What a difference in terms of reducing fear and hope. Helped me stay engaged with the entire move.

The missed long opp was interesting and something I need to think about. This is a situation in which fast buying pressure is exhibited in bringing back the RET. However, R was anticipated overhead due to the action around the previous swing at this level. So I have a RET situation that is anticipating a breakout.

These can be taken as long as the anticipated S/R does not manifest with force. If there is congestion or bounce back, trade can be quickly exited with full size. The strong buying pressure against the overhead R is setting up compression - which is always good.
 
Something I posted years ago regarding this scaling out business:

There need to be criteria for exits. But the nearly universal problem that beginning traders have with regard to exits is a desire to trade all in then all out. Add to that the fact that they are nearly always trading with one contract or one lot, and you have a doomed setup.

The solution to exits is a simple one: trade as if you were trading five contracts or five lots and abandon the idea of being able to exit with all of them at the exact top or bottom. The goal is to make money, not to prove to oneself what a superior trader one is.

Then determine in advance where each of those contracts will be sold. For example, if one is trading support and resistance, sell the first contract at one or the other. Sell the second contract, for example, at the lower high or the break of the trendline, whichever comes first. Sell the third at whatever you didn't sell at for the second. Sell the fourth, for example, at a breach of the last swing low. Leave the fifth, for example, at breakeven.

Then sell the first contract at whatever point you predetermined and paper trade the other four. Do this for several months. When it becomes second nature, carry the second contract for real. Sell the first and second contracts at your predetermined points. Paper trade the remaining three.

And so on.

Simple.

No wringing of the hands, no thumb-twiddling, no head banging.

For example:

6154d1208876220-riding-the-wyckoff-wave-image1.gif


Note that (as stated on the chart) this particular sequence is used for those situations where R is indeterminate. If R has instead been determined, the remainder of the trade is exited at the target. Then preparations are made for the next trade, either a continuation into a new range or a reversal back into the old one.
 
Quote from dbphoenix:

Something I posted years ago regarding this scaling out business:

There need to be criteria for exits. But the nearly universal problem that beginning traders have with regard to exits is a desire to trade all in then all out. Add to that the fact that they are nearly always trading with one contract or one lot, and you have a doomed setup.

The solution to exits is a simple one: trade as if you were trading five contracts or five lots and abandon the idea of being able to exit with all of them at the exact top or bottom. The goal is to make money, not to prove to oneself what a superior trader one is.

Then determine in advance where each of those contracts will be sold. For example, if one is trading support and resistance, sell the first contract at one or the other. Sell the second contract, for example, at the lower high or the break of the trendline, whichever comes first. Sell the third at whatever you didn't sell at for the second. Sell the fourth, for example, at a breach of the last swing low. Leave the fifth, for example, at breakeven.

Then sell the first contract at whatever point you predetermined and paper trade the other four. Do this for several months. When it becomes second nature, carry the second contract for real. Sell the first and second contracts at your predetermined points. Paper trade the remaining three.

And so on.

Simple.

No wringing of the hands, no thumb-twiddling, no head banging.

For example:

6154d1208876220-riding-the-wyckoff-wave-image1.gif


Note that (as stated on the chart) this particular sequence is used for those situations where R is indeterminate. If R has instead been determined, the remainder of the trade is exited at the target. Then preparations are made for the next trade, either a continuation into a new range or a reversal back into the old one.
More...


dbphoenix,

1) how would you go about scaling in on the very same chart with 5 or less contracts? or do you not recommend scaling in?

2)or would you do combination of both scaling in and scaling out at the same time with those 5 contracts?

thanks very much to both game and dbphoenix for the thread.

regards,
tihfa
 
Quote from tihfa:

dbphoenix,

1) how would you go about scaling in on the very same chart with 5 or less contracts? or do you not recommend scaling in?

2)or would you do combination of both scaling in and scaling out at the same time with those 5 contracts?

thanks very much to both game and dbphoenix for the thread.

regards,
tihfa
More...

On an intraday timeframe, particularly the first 90m to 2h, there's no time for that. And the logistics can be so confusing that one winds up doing the wrong thing at the wrong time and fucking himself up. And then he loses his internet connection . . .

There's no reason to scale in if one is crystal clear on his entry criteria. If he isn't, scaling in isn't going to save him.
 
Day 2 of 20

http://www.sierrachart.com/image.php?l=1370559814282.png

Summary:

Yesterday's experience led to a craving for movement, resulting in some trades that while falling within the strategy guidelines, were not very high probability within the larger context.

Better skill in exiting 5 lots when trade is not working would have minimized losses.

I am also aware of a tendency to ignore price movement occurring against the direction of the trade. During shorts, I want the price to go down, causing me to ignore what is happening in the present and thereby not recognizing the clues to exit the trade.
 
Day 3 of 20

http://www.sierrachart.com/image.php?l=1370630346301.png

Summary:

A lot to think about trade management from today.

Other than aggressive Reversals, it is fairly obvious what the general direction of the move is since the entries are based on pullback of the main move. Direction isn't the issue here, unless a big entry mistake has been made.

This method is based on immediate timing of the move and the trade management will have to address whether the range, pace and time of the entry is meeting the expectations derived from observation of successful moves.

My plan has the following rules for exiting a trade that is not showing much promise:

Exit tactics when trade is not working:

1) Breaking of immediate DS line
2) Moving past immediate S/R zone formed by the pullback

Instead of scaling out 1 contract on break of DS Line, I could scale out 3 immediately and leave 2 for the next exit level. Err on the side of caution when things are not showing promise.

There will be times when the trade works despite showing a lot of weakness in the beginning. But I have to exit these based on initial weakness. No hope or regret. I always have the option of re-entering.

The premise here is timing. So if I cannot time it, then I get out. If it goes up later, so be it.
 
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