Probability Bands
- Thread starter protradingsys
- Start date
- Status
Steve I totally agree with you. You can have the best system in the world and your fear of loss or greed can cause you to not execute it properly and lose money.
Probability bands are not a guaranteed way to make money in the markets, nothing is. They are simply ONE more tool which can give a trader a greater edge and a low risk entry. I have found Van Tharp's books and courses are very useful and money management is THE most important thing a trader can learn.
Any support/resistance area that frequently causes reversals can be a great place to place a trade because if you are wrong you can get out with a relatively small loss. If you've read Tharp I will refer to this as a 1R loss. The reason that probability bands are useful is because they are a 1 to 2 Std Deviation volatility move.
They often are the high or low of that index, sector, or stock and by getting in with a small stop and potentially holding the position till the end of the day you will see when you evaluate probability bands that you can create a positive expectancy system with them.
There are many ways I use probability bands. I use them for the indexes and sectors to spot reversals. If I see a sector or index at an extreme I may watch for many things before I take the trade (such as a tick spike, ticki spike, buy/sell program hitting the market, or even basic methods like stochastics cross or divergences in RSI, MFI, or stochastics). I also look at the hourly charts and if the index, sector, or stock is also below its bollinger band on the hourly chart I often will just take the trade a bit early. Again if these levels do not hold I IMMEDIATELY get out. Often, if I am a bit early, I will get out with a small loss and then jump back in again a few minutes later.
My stops are 10 cents on most NYSE stocks, 20 cents on more volatile NASDAQ stocks, 10 cents on QQQ, and 15 cents on SPY and DIA. I almost always enter the stop loss as I have found one of my trading flaws is my need to be right is so great that I often will not get out manually once my stop gets broken and this has lead to some large losses.
That is why I agree so much with what Steve said above, understanding yourself and learning to either fix or find ways to minimize your personal weaknesses is the key to being successful as a trader. Good luck trading.
Perhaps your wrong about this guy, at least he does not make wild claims. He of course wants more business for the brokerage, but he is not making wild promises, and is talking sense (I could put another ET handle in his place and not recognize it was snakeoil).
Michael B.
P.S. Now don't take this wrong DB, All your points are true and I can't argue your points.
Michael B.
P.S. Now don't take this wrong DB, All your points are true and I can't argue your points.
it should be pointed out that what you are offering is no different than the following:
1. sigma bands
2. bollinger bands
3. keltner bands
4. pivot points
5. standard volatilty bands (varible standard diviation)
when used correctly they all have simular semitry and can be calculated at various intervals.
you will also find that on occassions they will all meet up at the same price around the same volatility points with simular volume peaks and valleys.
now i will save you all some money:
use the above bands as trend following indicators and not contrarian indicators and you will realize greater profit possibilities on your intraday trades.
again i repeat that there is nothing new under the trading sun.
1. sigma bands
2. bollinger bands
3. keltner bands
4. pivot points
5. standard volatilty bands (varible standard diviation)
when used correctly they all have simular semitry and can be calculated at various intervals.
you will also find that on occassions they will all meet up at the same price around the same volatility points with simular volume peaks and valleys.
now i will save you all some money:
use the above bands as trend following indicators and not contrarian indicators and you will realize greater profit possibilities on your intraday trades.
again i repeat that there is nothing new under the trading sun.
Wrong. Most of the bands you are referring to are offset from a simple moving average of intraday price movement. The pivots are based on the average of the High/Low/Close and sometimes the next morning opening and the S1,S2,R1, and R2 levels are projected off the pivot based on the previous day's high and low.
Probability bands use the previous day's close and the indexes, sectors, or stocks volatility which is derrived from options prices. This indicator uses a completely DIFFERENT data source to calculate these bands. It is unlike any of the SIMPLE bands you discuss above. Also unlike the bands above these levels are available at the beginning of each trading day and DO NOT CHANGE all day long.
These are not new but they definitely are misunderstood. I hope this post clears it up.
I have used all of the other bands you mention but the reason I like Probability bands the best is none of the other bands will let me use tight 10 to 20 cent stops like they do.
The presence or absence of wild claims has nothing to do with whether or not he's advertising. Fair's fair, and if this guy can advertise with impunity, why should ESignal or TradeStation or (fill in the blank) pay? The more free advertising that's allowed, the less likely paid advertisers will be to continue paying. And what happens to ET then?
If this guy is as professional as he claims to be, he'll contact Baron and at least get permission to hawk his software and services. If he isn't, or doesn't . . .
Protradingsys,
Hey, I got to ask. How do we get our hands on your work, without becoming a brokerage customer? Please don't yell at me, I know this takes lots of guts to ask you.
Michael B.
Hey, I got to ask. How do we get our hands on your work, without becoming a brokerage customer? Please don't yell at me, I know this takes lots of guts to ask you.
Michael B.
As I have said before, I didn't create these bands and I personally don't think they are even our best feature, however they do work and can enhance most people's trading.
My original post was meant to open discussion of probability bands and their uses. I have read many of the discussion forums here and few people share any specifics of how they trade and instead bash other users. I have and will continue to explain how I use them.
One way I use them is to short stocks that open at or above the 65% probability band high. I only place shorts on stocks that are in downtrends on the daily chart and stocks that move more than 80 cents per day and have over 500k avg volume. I will hold 5 to 15 mins and sometimes longer if the volume is high and the stock continues to fall.
If anyone is interested I will publicly post my stock and entry levels for tomorrow morning BEFORE the market opens to prove that these bands can be used in various ways to improve your trading. Many people on here talk but I am willing to prove that these work. I haven't seen anybody do that before. I have been trading with them for nearly two years, I know they work.
- Status