"The only way to trade with Fibonaccis" journal

[afto]

After a quick down and dirty look at this method, it seems as if it has considerable merit - with or without hedging.
The key, of course, is in identifying which swings are more likely to retrace than others. If you jumped on any or every swing then even if you hit a 60% win rate, commissions, slippage and the eventual nasty run of losses would kill you real soon.
However if you were to be a little more discriminating - as OP suggests - then it might well work.
For example, if you were to wait only for swings that moved from HH to LL via HL and LH (and vice versa) then you've increased your odds markedly.
I await the next installment with interest. Thanx for sharing.
JMO

 

[1a2b3cppp]

Quote from Boib:

What I was getting at was that as the distance between the high and the low increases so does the maximum loss you are willing to take.
So with a 5 point ES pread the max loss is aprox $1000 and with a 10 point spread the max loss is $ 2100 a trader with a small account say $10000 would have a sizable amount of his account on the line with any trade.

Oh, yeah. That's true.

For the futures it would be risky to trades this with a small account. Might work with an ETF but then you run into the Daytrade minimum.

Be interesting to see your swing trades.

You run into other problems besides PDT rule. Trading the S&P for example, you can buy 1 contract with $500 margin. Yet say you're trading SPY, and say for simplicity's sake it's at $100 per share. If you wanted to buy 100 shares you already need $10k right there, and that 100 shares would only get you $30 on a 30 cent price retracement. Minus commissions. And if you're scaling into that 100 shares, you're going to may multiple commissions which will almost assuredly be more than the $30 profit you make. (Day) Trading stocks requires a much, much larger account size and you still don't get the margin that you do with futures.

I swing trade stocks with a similiar strategy to this. The one thing I like much better about stocks is that you can use selective position sizes (eg. you're not locked into a minimum size of one contract with its tick sizes) which makes hedging a lot more comfortable. I don't usually hedge with equal sized positions in either direction because I have a bullish bias over time when it comes to the stock market. Using 2x ETFs makes this even more accessible if you're not worried about decay over time. I think I mentioned before, the majority of my wealth, including my entire futures trading account, comes from heavily averaging down into the weighted ETFs during the huge drop at the end of 2008. I modified the rules a little during that time, however.

 

[deanrumble]

After reading some of your thread it's pretty clear that it isn't necessarily the fib lines which make your strategy successful.
Would you mind elaborating on what criteria you use to decide on when to enter into your position.
Also, you've intrigued me on how you would use a hedging strategy along with this. It would be great if you could share that as well.

Thanks for showing how averaging down can work. You have opened my eyes to something which I always considered as "taboo".

 

[1a2b3cppp]

Quote from deanrumble:

After reading some of your thread it's pretty clear that it isn't necessarily the fib lines which make your strategy successful.

Glad you realize that

Fib lines don't have any special powers.

Would you mind elaborating on what criteria you use to decide on when to enter into your position.
Also, you've intrigued me on how you would use a hedging strategy along with this. It would be great if you could share that as well.

Yeah, I'm putting together a .pdf about all that stuff.

Thanks for showing how averaging down can work. You have opened my eyes to something which I always considered as "taboo".

It's taboo cuz most people can't do it. As long as you have clearly defined stop limits before you ever enter the trade and you know how much you can lose, it's not bad. People get into trouble when they KEEP averaging down and blow their account. As long as you fully understand the nature of what you're doing, and the risks that come with it, then it's ok.

 

[1a2b3cppp]

My apologies for not updating. My relationship with my fiance fell apart over the last week and I haven't traded in a while because I haven't been of clear mind. I'm actually a bit of a wreck right now.

 

[trackstar]

rough man, wish ya the best!

 

[mindtrade]

Quote from 1a2b3cppp:

My apologies for not updating. My relationship with my fiance fell apart over the last week and I haven't traded in a while because I haven't been of clear mind. I'm actually a bit of a wreck right now.

Sorry to hear that man, best of luck with whatever happens.

Thanks for this update though... I was wondering.

 

[SomeYoungGuy]

Ouch, had the same thing happen to me about a decade ago. Hurts for a little while, fogs up your thinking for much longer. All the advice I have is don't do anything you can't easily undo. Don't blow your life savings (I did that), don't burn bridges with the rest of the people you know esp. family (I didn't do that) and so on. Best of luck.

Back to trading, I said it early on that the magic with your system is not the voodoo fib lines, it's how you know when a move is going to retrace. You have some special talent for picking retracements. I still want you to share dammit!

For those of you who still believe in fib lines, take this system and compare to increasing every 10%. Try this as an experiment. instead of taking 3 cars at 33%, another 3 cars at 50% and 3 more at 66%; take 1 car at 10%, another at 20%, another at 30%, and so on up till you take your 9th car at 90%. Now compare the two strategies over a large sample size. Same results.

 

[1a2b3cppp]

Quote from SomeYoungGuy:

For those of you who still believe in fib lines, take this system and compare to increasing every 10%. Try this as an experiment. instead of taking 3 cars at 33%, another 3 cars at 50% and 3 more at 66%; take 1 car at 10%, another at 20%, another at 30%, and so on up till you take your 9th car at 90%. Now compare the two strategies over a large sample size. Same results.

Not exactly. That wouldn't put the average cost below 50% I don't think, although I haven't done the math.

Then again, your 3/3/3 example wouldn't, either. As you said, 3 @ 33%, 3 @ 50%, and @ 66% would put the average price at 50%.

Remember the reason behind why I average down the way I do.

 

[SomeYoungGuy]

Quote from 1a2b3cppp:

Not exactly. That wouldn't put the average cost below 50% I don't think, although I haven't done the math.

Then again, your 3/3/3 example wouldn't, either. As you said, 3 @ 33%, 3 @ 50%, and @ 66% would put the average price at 50%.

Remember the reason behind why I average down the way I do.

Dude, in your condition you need to just relax, sleep around (wrap that rascal), watch the game, have a few beers. Let us handle the heavy lifting, math-wise.

10+20+30+40+50+60+70+80+90 = 450 / 9 = 50
33.33+50+66.66 = 149.99 / 3 = 50

And no, I don't remember... ?