Rule of 10 Journal

[jagmot]

Quote from Billybob543:

Jagmot,

great journal you have here..I've been following it since day one.

I was wondering if you could go over in more detail how you are determining the reaction highs and lows. I'm still having a hard time seeing them since they are not always the exact Pivot Highs or Pivot Lows...maybe some pictures would be nice as well..

Thanks in advance.

Thanks Billy!

As far as reaction highs and lows it is a bit subjective as I'm learning. One I use the 5min chart, that way I can see the action. Sometimes on a 15min chart, you cant see a good reaction.

To me a reaction is at least 4 points and happens very quickly, say in the next 2 5min bars.

Lets look back at todays action.

At 9:25AM EST we had a reaction high at 1271.75. Notice how in the next two bars the price reacted much lower. Because of this, we would have had a long at 1261.75 waiting just in case it got there. We get filled in our long and as in the rules, we either get stopped or hit our target. During this time, we ignore price action per the self imposed rules I made.

We hit our target at 10:45AM EST. Now that we are out of the trade, I look for our next setup. Since we ignore price action in the trade, we see a reaction high of 1276.75 at 11:10AM EST.

Note some people here do not ignore PA during a trade and actually went short here. If you look back in the trade, where did price last react? You can see that price reacted quite quickly with 1266.25 (so people placed a short at 1276.25), which turned out to be another winning trade.

The hard part is why don't we use some bars. For example, why didn't we use the 11:25AM EST bar? This is more subjective, but look how the market retraced most of the move.

We could have used the 12:00PM EST bar, but we got entered into the trade at 12:10PM before we could see all the action. Here we could have possibly lowered the long and not have placed a trade.

We get stopped out in the trade at 2:20PM EST. The low here is 1263 (right after we get stopped out) and we would first setup a short at 1273.

However we see a new reaction at 1265.75 which is why I moved the short up to 1275.75.

The best advice I have is to just keep watching the charts and see how you would trade it. I've taken r10 and am trading it with most of Volente's rules intact, however I have made it my own.

Every trader should make the system their own because if you aren't comfortable, you are destined to lose. Constant 2nd guessing, not taking trades, taking profits too early, etc.

 

[Billybob543]

Quote from jagmot:

Thanks Billy!

As far as reaction highs and lows it is a bit subjective as I'm learning. One I use the 5min chart, that way I can see the action. Sometimes on a 15min chart, you cant see a good reaction.

To me a reaction is at least 4 points and happens very quickly, say in the next 2 5min bars.

Lets look back at todays action.

At 9:25AM EST we had a reaction high at 1271.75. Notice how in the next two bars the price reacted much lower. Because of this, we would have had a long at 1261.75 waiting just in case it got there. We get filled in our long and as in the rules, we either get stopped or hit our target. During this time, we ignore price action per the self imposed rules I made.

We hit our target at 10:45AM EST. Now that we are out of the trade, I look for our next setup. Since we ignore price action in the trade, we see a reaction high of 1276.75 at 11:10AM EST.

Note some people here do not ignore PA during a trade and actually went short here. If you look back in the trade, where did price last react? You can see that price reacted quite quickly with 1266.25 (so people placed a short at 1276.25), which turned out to be another winning trade.

The hard part is why don't we use some bars. For example, why didn't we use the 11:25AM EST bar? This is more subjective, but look how the market retraced most of the move.

We could have used the 12:00PM EST bar, but we got entered into the trade at 12:10PM before we could see all the action. Here we could have possibly lowered the long and not have placed a trade.

We get stopped out in the trade at 2:20PM EST. The low here is 1263 (right after we get stopped out) and we would first setup a short at 1273.

However we see a new reaction at 1265.75 which is why I moved the short up to 1275.75.

The best advice I have is to just keep watching the charts and see how you would trade it. I've taken r10 and am trading it with most of Volente's rules intact, however I have made it my own.

Every trader should make the system their own because if you aren't comfortable, you are destined to lose. Constant 2nd guessing, not taking trades, taking profits too early, etc.

Wow..that was a great explanation..it cleared up a lot of questions that I had...thanks a lot...I'll continue to watch and learn

 

[volente_00]

Quote from OldTrader:

Looks like it's working fairly well. And I think it's worth saying that as you attempt to "manage the trade", you may well cut off some of those 10 point winners as well. Law of unintended consequences.

OldTrader

you guys are missing the point still. Backtest jags trades



7 for 16 for 37.5 points


now how about

13 for 16 using a smaller target than 10 that gives you a 80% win rate and 50% more total points.

 

[xednise]

Quote from volente_00:

you guys are missing the point still. Backtest jags trades



7 for 16 for 37.5 points


now how about

13 for 16 using a smaller target than 10 that gives you a 80% win rate and 50% more total points.

In the past you have stated that posting trades provides absolutely no value to anybody. Given the fact that what you advocate for this system is discretionary, I contend the only way to show it in that manner is to post exits as they occur. Doing it a couple of hours afterwards when it becomes obvious it didn't hit the initial target does no one any good(hindsight). I'm not bashing here, just questioning.

 

[Now is Now]

Quote from volente_00:

you guys are missing the point still. Backtest jags trades



7 for 16 for 37.5 points


now how about

13 for 16 using a smaller target than 10 that gives you a 80% win rate and 50% more total points.

Now we are getting somewhere.....this is the data I was hoping Jagmot may be able to provide ...a breakdown of each trade showing max. profit and end result , consecutive losses (complete knockouts) vs 3 point potential profit for adjusted stops to breakeven.

I don't have the facility to help with backtesting, but if Jagmot needs assistance maybe somebody can step forward.

 

[volente_00]

Quote from xednise:

In the past you have stated that posting trades provides absolutely no value to anybody. Given the fact that what you advocate for this system is discretionary, I contend the only way to show it in that manner is to post exits as they occur. Doing it a couple of hours afterwards when it becomes obvious it didn't hit the initial target does no one any good(hindsight). I'm not bashing here, just questioning.

WTF are you talking about ? I am pointing out something that will make jag's method much more profitable. By using a fixed 10 point target he is keeping his win rate way down. This is fine, but he is also limiting the ability to let the trade run for more than 10 point. There is a simple adjustment that will yield more profit. Yes he will have to give up getting 10 points max on the trade but in doing so the win rate will nearly double and the total points captured will jump nearly 50%. By decreasing his target to 3 points, he will have the same exact points gained as he does now but with a 80% win rate. Now your homework is to figure out where between 3 and 10 allows this strategy to go to 80% with 50% more total points gained. This can be clearly shown if you backtest his posted trades.

 

[xednise]

Quote from volente_00:

WTF are you talking about ? I am pointing out something that will make jag's method much more profitable. By using a fixed 10 point target he is keeping his win rate way down. This is fine, but he is also limiting the ability to let the trade run for more than 10 point. There is a simple adjustment that will yield more profit. Yes he will have to give up getting 10 points max on the trade but in doing so the win rate will nearly double and the total points captured will jump nearly 50%. By decreasing his target to 3 points, he will have the same exact points gained as he does now but with a 80% win rate. Now your homework is to figure out where between 3 and 10 allows this strategy to go to 80% with 50% more total points gained. This can be clearly shown if you backtest his posted trades.

There is a tremendous difference in results between backtesting and actual trading with real entries and exits as I or anyone who has traded for any length of time can attest to. I was just under the apparently mistaken impression that the rules for this system were much more concrete. Good trading to all.

 

[mitsubishi]

Thanks for this journal jag, it kicked off a few ideas to add to my existing strategies.Guys, i think you should take note of what jag is saying and apply the idea in your own way.To attempt to follow another traders' system exactly is almost guaranteed to lose you money (imo)- demonstrated by the confusion here as to entries/exits. Personally i am using r10 and applying it to prev ohlc. Nearly all ohlc's are connected by fibs and r10 seems to fit in well with that. I would also point out that price and TIME should be given equal weight.For example how many times have you seen a reversal from 2.30pm into the close? Today 1264 (sp cash) around 2.30pm target 10 points- close 1274.5

 

[volente_00]

Quote from jagmot:

My trade setup and journal is really just a framework to get started not the holy grail by any means.

R10 is far from the holy grail. It is just another tool to put in your box if you can grasp some basic concepts. In the end is up to each individual trader to put together what works for them. When this volatility dries up and the ranges contract, most of you will not stick to the principles. When es trades in a 6 point range all day long, what will you do ? Adapt or die. Til then CARPE DIEM.

 

[volente_00]

Quote from xednise:

There is a tremendous difference in results between backtesting and actual trading with real entries and exits as I or anyone who has traded for any length of time can attest to. I was just under the apparently mistaken impression that the rules for this system were much more concrete. Good trading to all.

There is also a tremendous difference between trading real money and paper trading the strategy like jag is doing. I have traded real money with this strategy in es and ym since 2004. It still works to this day for me.