NPP's Divergence and Breakout Method

Quote from version77:

Since you are using Tradestation, have you backtested your
system? Or is it possible to backtest your ideas with TS?

And as far as cutting profits short, why not take 1/2 off and let
the other 1/2 run with a trailing stop while moving your stop to
BE or BE+?

And don't let anyone tell you that you are trading with scared
money. That's just a psyche ploy to keep others down... :cool:
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I don't backtest with tradestation. The reason is obvious..if I lose money and get a feeling the environment is changing I look to change my approach. Right now this is a new method for me. I don't have all the rules down in black and white. If it gets to the point where it can be systematized maybe somebody with a interest in trading it long term will backtest it.
 
Great journal.... and I sincerely wish you lots of luck and $$$


Thanks for taking the time to post and explain everything. It is very much appreciated :D
 
Hi Nopm:
Your changes to the "old" divergence system are interesting. I am using the original system with good results. In fact, as I mentioned to Lescor, I have been able to improve on the basic system by changing the money management protocol. I thought it was very kind of you to share the system in the first place. If you would like to discuss the changes I have made, send me a note. Regards, steve46
 
Quote from steve46:

Hi Nopm:
Your changes to the "old" divergence system are interesting. I am using the original system with good results. In fact, as I mentioned to Lescor, I have been able to improve on the basic system by changing the money management protocol. I thought it was very kind of you to share the system in the first place. If you would like to discuss the changes I have made, send me a note. Regards, steve46
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Thats ok, steve. The idea was to show the method and let everyone do their own thing with it. If you're happy with it I wish you great success. This method is more complicated, however I think it will outperform the other two methods easily. I'll start with realtime trading tomorrow and finsh up on the indicators.
Hopefully I'll be able to put something solid into a list of trading rules to help make this a little easier to follow.
 
Getting ready to trade the Emini today. To get a feel for what to look for I'm checking the screens.

I have last Friday's high at 1138.80 and low at 1132.00.
We're currently trading above the high so I need to check for a possible breakout to the upside today.

As I look at screen 3 I see the CCI Ave. is above +100, the ADX is above 25, and RSI is 58.5. On screen 2 I don't see a positive divergence from Friday. What this tells me is the market is likely to stall near the open (ADX > 25), the high of the day may be seen early (CCI > +100 is danger area for longs), and only breakouts to the upside should be considered (RSI > 50).

I'm going to be looking to see if the market stops moving higher early. If it does I'll be looking to go short. I'll watch on screen 1 the tick to see if it gives a exhaustion spike at +800 or more or a volume spike on the Emini screen. Those would be early signs to go short. If not, I'll use the risk measurement to go short from the highest point of the early move.

If the high moves away from Friday's high then I'll be waiting for a retest of the high before placing a long trade.

During the first minute I switch my timeframe on screen 2 to 1 min. bars so that I can write down the stop loss amount for the day LE - LL.

Be back after the open.
 
Started with a difficult trade for me. The open upward momentum stalled near the open as expected. The stop loss point for today is 2.46 or 2.50 pts. Taking it from the high of 1040.80 = a short entry area of 1038.30. The chaikin osc. got me all flustered. It started dropping like a rock from the open which is not what I expected. When it dropped below 0 I thought maybe I should be looking for a bounce off the high and be a buyer. Very stressful.

Just got stopped out at 1040.75 btw.
 
Quote from no_pm_please:

Started with a difficult trade for me. The open upward momentum stalled near the open as expected. The stop loss point for today is 2.46 or 2.50 pts. Taking it from the high of 1040.80 = a short entry area of 1038.30. The chaikin osc. got me all flustered. It started dropping like a rock from the open which is not what I expected. When it dropped below 0 I thought maybe I should be looking for a bounce off the high and be a buyer. Very stressful.

Just got stopped out at 1040.75 btw.
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If you post 5 min chart of what did you see from 9-10:00 I can fix your problem. Your method is basically sound but need a few refinements to be ready for everyday use, as seen today morning .
You can pm me if you feel that you need my help.
Walter
 
Made some mistakes this morning and got myself all worked up. I don't mind losing money when the market wacks me. I do mind when I make trading mistakes. I'm not going to trade anymore today so that I can settle down and be better prepared for tomorrow. Here's the walkthrough on the trade and my mistakes.

At point 1 there was divergence between the last bar on Friday and the first bar today. I was prepared to short as I described in the pre-market.

I couldn't help notice the steep plunge on the Chaikin Osc. I couldn't make sense of it and I became fixated on it. At point 2 the market touched my sell stop and it was filled. Notice by this time the divergence was gone so I should've cancelled the order.
I don't consider that a mistake because I try to be disciplined about my entries. It could've just as easily kept going south.

Now for what I consider mistakes.
At point 3 the market retested the low and notice the positive divergence on the Chaikin Osc. I should've bailed at that point but I was busy typing my earlier post. Then on the the next bar (point 4) when I got stopped out I was still not paying attention. On that bar there was both a ES tick volume spike and a Tick spike of around 1000. Had I been ready to trade I would've looked to enter after the next bar as it didn't make a new high. That would've given a short around 1041 with only a 1.25 point stop (very little risk). Instead I missed it. The last mistake was to not take the short at point 5 when it touched the new 3:1 reward to risk entry point. I was still emotionally whacked from the earlier trade and was trying to figure out what happened.

I expect the market to drift lower as the day goes on and eventually test the 1032 area. I'm taking the rest of the day off to get back in the right frame of mind for trading tomorrow.

Be back tomorrow.
 
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