Momentum reversals

Quote from mjbmedia:

...Yes I am looking for a possible improvement in results (arent we all) but not at the expense of taking on more losing trades...
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I really think you should post a few chart examples with entry/exit to show folks how you're using the stochastic indicator or explain the situation with charts to prevent misunderstandings (e.g. your initial message post didn't even mention the stoc indicator).

Also, it almost sounds like you're talking about the price action with stochastics movement while a particular interval is still active. For example, you're using the 15 min chart and the stochastic is changing it's position along with the price action every minute within the 15 mins until the interval completes.

Is that what you're talking about :confused:

First suggestion, don't make any trade decisions until the interval completes. Yeah, you'll miss some trade opportunities but that's life as a trader. Also, there will be times you'll determine the profit potential is lower because the reversal is moving too fast/too far prior to the interval completes...

You can either stay on the sidelines or reduce your position size (position size management) in situations like that to better manage the increased risk exposure.

However, you can also cherry pick your trades and wait for the perfect situation involving the stochastics and the price action. Yeah, fewer trade opportunities and more discipline is required.

By the way, you should consider using video screen recordings or data replay of continuous price action to help fine tune your use of the price action with stochastics instead of doing such via hindsight charts only. In fact, I'm not a fan of learning our trade methods via charts alone. I strongly believe using video screen recordings or data replay as the primary learning tool. This will help you better understand the price action itself and make you less dependent upon indicators.

However, if you're profitable via using the stochastics any where in your trade method...keep using it.

P.S. I'm talking about your trading and your charts...very curious to see what you're talking about. Not interested in hearing your complaints about what experts are saying about the stoc after the fact because it should be just common knowledge that something will look different as a particular interval changes until it completes regardless if you're using stochastics, another indicator or no indicators at all. :cool:

Too many guru bashing threads as it is here at ET and not enough education threads.

Mark
 
"you should consider using video screen recordings "

Now that is good advice and something I never even thought of, will be well helpful , cheers .
will come back on the other bits in a mo
 
I'd assume your platform has a way for it to interact with custom libraries, but you can test verification of this through excel, matlab, R, Scipy etc.. before you actually implement it. Try using Haar wavelets or some of the variants. What you're describing is a signal processing problem. Some people do well just using fourier transforms, but I believe wavelets more accurately depict multiresolution of time series data.

Edit:

I think this might be a good introduction if you know nothing of the subject.

http://www.bearcave.com/misl/misl_tech/wavelets/haar.html#Introduction
 
Quote from wrbtrader:


it almost sounds like you're talking about the price action with stochastics movement while a particular interval is still active. For example, you're using the 15 min chart and the stochastic is changing it's position along with the price action every minute within the 15 mins until the interval completes.

Is that what you're talking about :confused:
More...
yes it is what I am talking about and your advice below pretty much deals with it, its what I do at present, wait til next bar or whatever so yeh I lose out but I also dont go in when I then shouldnt (well OK I do but you know its less than it would be) , I was trying to eradicate the losing out on the start of profit without lessening the lower percentage poor trades I enter, but hey I dont think its possible without pure gambling using this method that I am happy with
First suggestion, don't make any trade decisions until the interval completes. Yeah, you'll miss some trade opportunities but that's life as a trader. Also, there will be times you'll determine the profit potential is lower because the reversal is moving too fast/too far prior to the interval completes...

You can either stay on the sidelines or reduce your position size (position size management) in situations like that to better manage the increased risk exposure.
More...
thanks great advice about lowering the position size or I sometimes trade a smaller time frame to reduce the total risk

Cheers Mark and everyone else.
 
Quote from mjbmedia:

with momentum reversals , after the event its easy to see , yes they have definitely reversed .
But when its live , they start to reverse, then maybe the price goes up again and the momentum 'stops' reversing and the line straightens out and maybe goes up again.
So if you use it as part of your signals (ie the long term time frame is bearish , wait for the shorter time frame to go bearish ) how long would you leave it until you were sure the momentum had reversed and wasnt just twitching.
I do this and I wait 2 or 3 bars to be sure but then miss out on the early profit and though Im not looking for perfection or being greedy (?) thought it may be an interesting point for discussion . needless to say by waiting a couple of bars it stops me getting in on so many losing trades .
So Im not looking for finite answers just discussion
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I look for points of building momentum after reversals or following trends. Once I found out how to identify momentum and where to expect momentum moves that made the difference. Strong market order driven order flow into decreasing order book resistance is the structure for the best momentum moves.

A good example from youtube [ http://www.youtube.com/user/MomentumTrading#p/u/5/ab-BpfKgr_8 ]
 
The DAX and CL have been filled with momentum trades and the ES and TF have been limited the last week. I want to get charts of Kospi 200 to see what momentum trades are possible each day. Silver has had many good momentum moves for intraday trading.

What are traders in thread using to confirm momentum for a trade entry?
 
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