Pete's Place

Quote from TriPack:

So by these two arguments buying off from a support level, particularly a well-known support level improves the odds of catching a favorable move to better than random. At least they tend to improve the win percentage, but this doesn't necessarily improve the risk/reward ratio.
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Very excellent point. There are many ways a particular entry can differ from a random entry. I had been looking solely at the "cost" of producing MFE. But, what you mentioned is very important... in fact... I had noticed that trading "Trend Trader" was easy and fun, because you could tell right away if it was working, and there almost always tended to be at least a quick thrust in the direction of the trade.

Anyway I wish I had more ways to quantify the different characteristics of entries. When I go back to real $$ intraday I want to know exactly what the edge is.
 
Here is an example (going on right now) of a trading range that's formed, which includes a pivot point (R1, the upper blue line). Reject Trader could care less that it's a pivot point. It doesn't change what he does.
 

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Yes Peter I ment paper trading this week abd doing some backtesting over the weekend, then trading with small lots next week. But the backtesting will only happen if I finish preparing my tax information for my CPA I will have to put it off until next week.

bobdec
 
Quote from peterfigliozzi:

I draw S2 though R2 on my charts every day, but they haven't come into play for Reject Trader yet.

Here's Reject Trader's entry rules:

(1) Wait for a min 1 hr trading range to form, defined by at least two failures on one side, and one failure on the other.

(2) Wait for a breakout, followed by at least 10 min of trading outside this range, followed by a return to inside the range

(3) Enter opposite the original breakout. Safety stop is a tick past however far the failed breakout went. "Confirmation" is a a breakout of the first 5 min bar that trades back inside the range.
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This is very similar to a methodology I have been working on as of late. It seems to be pretty good as a tight range like the one you are describing is often accompanied by a false breakout before the true trend emerges. The only problem I have had with this so far is that the trade does not happen that often. I have also found that using volume in these trades is a helpful indicator as well.
 
Quote from TriPack:

When you buy at support you do two things that are positive:

First you enter at a relatively better price than if you were buying at resistance, for example. And because we are talking about this from the point of view of the index futures, which are prone to retrace, your odds of catching a favorable wave are higher in buying at support than buying at resistance, from a pure positioning standpoint. This observation is proved out when calculating win percentage of breakout systems versus win percentage of retracement systems.

Second you get the impact of other traders who also enter at or around support, which tends to create the self-fulfilling prophecy of a support level holding. The level holds, because those who believe it will "hold" buy at this level, propelling price up off from it.

So by these two arguments buying off from a support level, particularly a well-known support level improves the odds of catching a favorable move to better than random. At least they tend to improve the win percentage, but this doesn't necessarily improve the risk/reward ratio.
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Tripack, I'm afraid I disagree with number two. I use S&R levels that are not available widely, and they are unbelievably accurate. So it seems to me that S&R is mainly a function of internal market dynamics, and not popular belief in it.

I do totally agree with the first statement.

All the best,

Phil
 
Quote from splphil:

I use S&R levels that are not available widely, and they are unbelievably accurate. So it seems to me that S&R is mainly a function of internal market dynamics,
Phil
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So you know in advance where heavy volumes of trading will take place and price will turn around, but not many others know there will be a lot of supply or demand there? That doesn't make any sense. There is no such thing as a "secret" S/R level. Especially since most who trade S/R need to see prior action at that point anyway.
 
I had my jobs report 2 minutes before it was announced, you did too if you were watching the tape (NQ):

Here were the largest orders in the morning:

7:56 EST : 78 ctcs at the ask (1454)
8:24 : 47 ctcs at the ask (1462)
8:25 : 45 ctcs at the ask (1462)
8:28 : 195 ctcs at the ask (1462)
 
Quote from kserra:

The only problem I have had with this so far is that the trade does not happen that often.
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That's the same "problem" I have playing Hold'em poker-- I only get those pocket AA or pocket KK once in a while...


Heheh... the good stuff is rare. Not a problem, just a fact of life.
 
I've been reading Sklansky's poker books lately and they've had a big influence on how i'm thinking about trading.

Everyone knows every trade starts as a loss, because of the spread and commish. But I didn't realize how much it affected me until I took five minutes to crunch some numbers.. check this out..

As a measuring stick, consider a random entry. What are the chances to make "X" points while risking that same "X" number of points? It's not 50% because you have to make up for trading costs. But just how many points do you have to gun for, so the trading cost doesn't affect things too much?

For NQ, the spread is 0.5 points, the commish we'll say 0.25 points. Then, here are the odds of winning your 1:1 bet:

1 point : 12.5%

3 points : 37.5%

5 points : 42.5%

10 points : 46.25%

15 points : 47.5%

20 points : 48.1%

Holy cow!! I didn't realize, to even start making things fair, a trader needs to have setups that aim for 10 points. And actually 15-20 looks a little better for the long run.
 
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