Trading with price action
- Thread starter inandlong
- Start date
Flier, it works on anything. And for that matter any time interval. Of course the shorter the interval the smaller the profits and the more frequent you will trade.
And for the ES and NQ, as with all otheres, if you wait intil you have a 40 crossing combined with an macd divergence on say the 5 or 15, you will be in a very good position. You can use simple stoploss techniques like exiting the trade if the low of the bar you entered or the bar previous is violated in the case of a long for example.
T'kay, I am the sloppiest trader when it comes to back-testing etc. I have written a simple code for excel that selects 40 sma crossovers. A huge reason that I have not backtested this is I recognize the very large difference between profit opportunity - max excursion I think it is called - and that which is returned trading this mechanically.
IBM and GM though have been very good mechanically. Like IBD, I have probably overused the following charts, but if you look at EXPE and GM and IBM on a daily chart using 12mos of data you can see exactly everything I am talking about... re: divergence, price crossing, etc..
And for the ES and NQ, as with all otheres, if you wait intil you have a 40 crossing combined with an macd divergence on say the 5 or 15, you will be in a very good position. You can use simple stoploss techniques like exiting the trade if the low of the bar you entered or the bar previous is violated in the case of a long for example.
T'kay, I am the sloppiest trader when it comes to back-testing etc. I have written a simple code for excel that selects 40 sma crossovers. A huge reason that I have not backtested this is I recognize the very large difference between profit opportunity - max excursion I think it is called - and that which is returned trading this mechanically.
IBM and GM though have been very good mechanically. Like IBD, I have probably overused the following charts, but if you look at EXPE and GM and IBM on a daily chart using 12mos of data you can see exactly everything I am talking about... re: divergence, price crossing, etc..
"If prices hold here and reverse That's bullish, but if they break down through this line that's bearish." And you trade accordingly.
"Why doesn't everybody just buy until the buying stops, and sell until the selling stops ? "
"I use only the 40 sma for entry and reversal. It is simply this, when the price crosses the 40 and is going to close on the new side, I get in... "
Ahaaaaaaa!!! Someone posted the holy grail of trading!
Oh wait...wait...just a minute....
None of this advice will work for a new trader.
None of this will backtest profitably either.
Why?
Because what makes these simple systems
profitable is the top secret, never mentioned,
indicator these guys are using.
Its called.... drum roll please....
The SOMP inidicator. (Seat of my pants indicator for
those of you who dont read ET enough )
Yup its true... a new trader will be KILLED trying
the above, yet these guys can make money using
these simple systems.
Problem is... you only get the SOMP indicator from tons
of practice and losing a nice chunk of $$$ until you
finally "get it".
One guy did in fact mention the SOMP accidently.
Look at this quote closely:
""If prices hold here and reverse That's bullish, but if they break down through this line that's bearish." And you trade accordingly."
See...the end says "And you trade accordingly". This
is the SOMP indicator, and precisely where this trader
is getting an "edge".
If you dont have the SOMP.... prepare to die using
these simple systems.
peace
axeman
"Why doesn't everybody just buy until the buying stops, and sell until the selling stops ? "
"I use only the 40 sma for entry and reversal. It is simply this, when the price crosses the 40 and is going to close on the new side, I get in... "
Ahaaaaaaa!!! Someone posted the holy grail of trading!
Oh wait...wait...just a minute....
None of this advice will work for a new trader.
None of this will backtest profitably either.
Why?
Because what makes these simple systems
profitable is the top secret, never mentioned,
indicator these guys are using.
Its called.... drum roll please....
The SOMP inidicator. (Seat of my pants indicator for
those of you who dont read ET enough )
Yup its true... a new trader will be KILLED trying
the above, yet these guys can make money using
these simple systems.
Problem is... you only get the SOMP indicator from tons
of practice and losing a nice chunk of $$$ until you
finally "get it".
One guy did in fact mention the SOMP accidently.
Look at this quote closely:
""If prices hold here and reverse That's bullish, but if they break down through this line that's bearish." And you trade accordingly."
See...the end says "And you trade accordingly". This
is the SOMP indicator, and precisely where this trader
is getting an "edge".
If you dont have the SOMP.... prepare to die using
these simple systems.
peace
axeman
And what do you do if they gently whipsaw around that line like 5 times (cause that's what happens most of the time; it doesn't bounce or break nicely and cleanly)? Act Accordingly?
axeman is right. it took me a long time to realize this. unless you don't realize this, it will drive you insane seeing someone trade with very simple price bars and one stochastic when you "fall apart" trying to do the same. that's the "wonder" of discretionary trading.
Further....
When you fail using these simple systems, and
post a chart pointing out your perfect entry
using this simple system, which then caused you
a loss..... the SOMP trader will respond:
"Ah well... I would not have taken THAT signal....because
of so and so....its not 100% you know".
So you show them another failed example and the
response will be...
"Ah well... I would not have taken THAT signal....because
of so and so....exception #2, its not 100 you know%".
After showing them 100 examples, and calculating that
the percentage of trades which are profitable
are 50%, and commissions and getting stopped out killed
you, then , and ONLY then will you realize, that their
edge is not at all in their simple system.
All those "exceptions" they use when trading their
simple system is precisely the SOMP indicator which
they gained through lots of painful experience.
You will get destroyed without it.
Not sour grapes... just a heads up to newbie traders.
peace
axeman
When you fail using these simple systems, and
post a chart pointing out your perfect entry
using this simple system, which then caused you
a loss..... the SOMP trader will respond:
"Ah well... I would not have taken THAT signal....because
of so and so....its not 100% you know".
So you show them another failed example and the
response will be...
"Ah well... I would not have taken THAT signal....because
of so and so....exception #2, its not 100 you know%".
After showing them 100 examples, and calculating that
the percentage of trades which are profitable
are 50%, and commissions and getting stopped out killed
you, then , and ONLY then will you realize, that their
edge is not at all in their simple system.
All those "exceptions" they use when trading their
simple system is precisely the SOMP indicator which
they gained through lots of painful experience.
You will get destroyed without it.
Not sour grapes... just a heads up to newbie traders.
peace
axeman
Quote from traderkay:
And what do you do if they gently whipsaw around that line like 5 times (cause that's what happens most of the time; it doesn't bounce or break nicely and cleanly)? Act Accordingly?
axeman is right. it took me a long time to realize this. unless you don't realize this, it will drive you insane seeing someone trade with very simple price bars and one stochastic when you "fall apart" trying to do the same. that's the "wonder" of discretionary trading.
Quote from traderkay:
...And what do you do if they gently whipsaw around that line like 5 times (cause that's what happens most of the time; it doesn't bounce or break nicely and cleanly)? Act Accordingly?
This is what I do: If I'm convinced she's gonna bust through a certain level, I just keep ponging one contract back and forth until it either breaks or fails miserably. Then add more contracts accordingly.
Sometimes you'll see a certain S/R level tested many times before it gives. Trouble is, you don't know WHEN it's gonna go and me personally, I don't like chasing a run almost as much as I don't like missing one. You know most of the time there's only 1-3 good moves a day (NQ) and if looking at a chart after the fact, it looks so easy where one should've gotten in... but of course it's not.
Axeman is 100% correct in everything he says, and you will pay, I know I have and still do. There are a lot of people on this board who say that SOMP trading doesn't work. That's a load of crap. It's just probably the hardest discipline to learn.
I can't help but wonder what's more difficult: understanding demand and supply and applying that understanding to a chart, or applying three sets of stochastics and two sets of MACD and several MAs and Bollinger Bands and so forth and trying to make a decision based on all these lines?
--Db
