I use that term frequently; possibly I’m the trader to whom you refer. With regard to oil futures:
A defined uptrend in my given framework (a 5-min time chart) consists of a pattern where I can identify one swing low that’s higher than a previous swing low, followed by a move up that breaks the swing high between the two swing lows by at least as many ticks as the difference between the swing lows.
A well-defined uptrend consists of a move up that’s so strong the pullbacks fail to print a bar close below previous resistance levels. This usually occurs when price breaks through a high of the day by 10 ticks or more.
Reverse for downtrends.
Price can print a strong trending move without a definable trend being in play. For example, today oil prices were channeling down in pre-market on a 5-min time chart. At the start of the pit session price broke through two previous swing highs without a single pullback on the 5-min chart, then just as quickly sold all the way back to the swing low just before the pit opened. In the 5-min time frame, no trend asserted itself during those two strong moves.
As with all price action patterns, often times close is close enough, so if a value is off by a few ticks or price throws a little head fake at you then turns right back around, consider the trend intact until proven otherwise.
06-14-13 05:49 PM
Quote from RedSun:
i start buying SCO. No margin....
I still do not know why CL is >$98 now...
I trade technical price action, here's the scoop:
1. 60-min chart, connect the Tuesday low to the Tuesday overnight low to get a lower trend line. Thursday overnight action found support there, so...
2. Place a parallel channel line across the swing high in between, the high from Wednesday.
3. The dip to the 95.00 zone in pre-market yesterday found ready buyers, so the LTL is now confirmed for a 1-2-3 long setup.
4. Yesterday's high came within a few ticks of that parallel channel line.
5. The overnight session formed a bull flag with Wednesday's resistance holding as support (well-defined trend on the 60-min chart).
6. Calculate a measured move* off the bull flag (flags generate a measured move reaction more often than not), for a new high target of 98.26.
* 96.92 - 95.08 = 1.84 and 1.84 added to 96.42 flag low is 98.26
Hope that helps!
06-14-13 06:18 PM
Quote from RedSun:
NoDoji, thx.
Walter Zimmerman says something similar, good to explain the technical side of it.
But the correlations are broken down. CL shows the divergence from other markets....
If I watched other markets, or paid attention to the actual news reports, I'd never put on a trade because the price action in CL so frequently marches to its own beat.
As a beginning CL trader I once watched a strong trend for over two hours run two or three points without trading. I was waiting for a reversal signal because the inventory report was very bearish.
06-16-13 05:38 AM
Quote from Georgii:
To my way of thinking a statistically valid setup should always be traded even if that means you can end up down at the end of the day. The idea here is that long run you should end up more up if you take those setups.
My experience backs this up, no doubt.
Quote from Georgii:
It appears the main challenge here is to stay focused, and since I'm not a computer I'm going to be susceptible to making errors in judgement if my focus is off.
A couple ideas that helped me:
When price is consolidating or is choppy, it can reach a point where it's sooo tempting to say, "Screw this", take a break, find that you missed a fantastic move, then put on a trade without a valid signal in an attempt to somehow capture what you missed. So as soon as you have the thought of taking a break because it's been ugly for so long, tell yourself to focus 100% for just 20 more minutes and then set a timer. Most of the time you'll be present for a very tradeable move.
Take a brief active break to stretch or jog right after closing out a trade.
Quote from Georgii:
An approach I've begun experimenting with is that I take the first setup or two with size, and regardless of whether it goes well or not, I ratchet down my size, unless I see something that I really, really believe in.
What do you mean by "really, really believe in"? That seems problematic to me. You should really, really believe in any setup/context situation that your statistical analyses have proven is net profitable after commission and slippage. Anything else is irrelevant and should be discarded. That's just my opinion.
I frequently really, really believe price is going to do something despite there being no setup/signal whatsoever that meets my trading plan criteria. When that happens it's generally an awesome fade.
Quote from Georgii:
Breakout is a bit tough on me mentally. The problem though is that many trends I see in ES don't stop to give you room to get on board!
These is the "easy money" price action environment and it's one I really, really believe in. It's my primary setup.
As a 5-min trader, if you carefully study a 1-min chart, you'll see how to get on board. Price doesn't run in a straight unbroken line; it pauses, drawing in counter-trend traders, and you'll be able to identify specific patterns in the small time frame for entering a strong trend (or a strong trending move).
Study the 1-min price action immediately following three kinds of breakouts: 1) a breakout with conviction from narrow range consolidation (flag or triangle formation), 2) a break through a previous swing high/low in a well-defined trend, and 3) a weak/failed breakout where price then makes a 2nd attempt after a shallow reaction (Al Brooks would call this a "failed failure" and although most of the ET community makes fun of this concept, it's well worth studying).
Quote from austinp:
Now on the other hand if your mental approach is to capture max % of the day's range every day, you are going to eventually try and micro-manage each and every single trade to its utmost possible performance. And you will anguish over this one taken off too soon and that one left too long with too wide a stop.
In other words, you will find yourself always wrong on just about every trade. Meanwhile, target shooting for a long-term mean has you cashed out, profitable, all done and out of the office, living your life
+++
06-16-13 09:32 PM
Quote from 1a2b3cppp:
The best places to go long and short are obviously at each high and low. Since you said I could do this in hindsight, I have labeled each buy and short entry with a green and red circle.
As I said earlier, I cannot identify them in real time.
We can never be certain in real time whether a particular price bar will print what eventually becomes a swing high or low. But we can identify the price action patterns that indicate a greater likelihood of a level holding as S/R or breaking out further.
On this chart, you noted a low, followed by a high. The low is not identifiable as a swing low until two or three subsequent bars close; the high is not identifiable as a high until two or three subsequent bars close. But you can assume the risk based on positive expectancy price action patterns and reap the reward more often than not.
Once that high printed and then pulled back, I’d expect the previous range high that broke out to hold as support. If buyers stepped in there and were able to push price beyond a previous 5-min bar high (excluding inside bars), then it’s likely the previous swing high will be at least tested if not exceeded.
.
There are two ways to play the pullback to the range high as new support: Anticipate that it will become support and place a limit order at the range high with a stop below the range low, or place a buy stop above a previous 5-min bar high IF the range high price is touched and appears to hold as support (again, I exclude inside bars) with a stop below the bar that breaks upside. If using a limit order, you’re filled during what looks like the 9:30 bar and take a small loss. If using a stop order, no trade is triggered.
So the limit-filled long looked promising for a moment, but the break of the inside bar produced no follow through and the range breaks downside with some conviction.
Technically, I’d now expect the range low to hold as resistance. Again, two ways to play this, either placing a limit to sell the previous range low that broke down, or sell stop just below previous 5-min bar low IF the range low price is touched. The bar where your red dot marks LH touches the range low, and either your limit is filled or your stop is triggered on the next bar. How you manage that one is up to you. I personally would bail for a scratch after the weak break of the first LL you marked, although holding with the initial stop loss in place keeps you in a fine short trade.
So that’s how, without knowing in real time whether or not a price will become a LH or HL, you can take a leap of faith that technical levels will hold and subsequent price behavior will trigger a profitable move more often than not, which is what positive expectancy is all about.
06-18-13 09:44 PM
For me the biggest advantage of day trading is no overnight surprises to wake up to (or have to hedge against). Also, I find that the most profitable moves occur during the first 3 hours of the RTH sessions, leaving me free for the rest of the day if desired.
Day trading is also the most difficult sort of trading because decisions have to be made far more quickly than with swing trading, you have to be able to clear the slate immediately upon the close of a trade and be prepared to trade again without the baggage of previous trades or current P/L, and you have to be good at staying very focused during price action that can feel like Chinese water torture at times.
Is it worth it? If you have a good trading plan and the ability to trade it, it's absolutely worth it, IMHO.
06-19-13 07:03 PM
Quote from jeredlbb:
"system"
generally
try
play reversals
Replace "system" with "thoroughly researched and tested business plan".
Replace "generally" with "precisely".
Read Trading in the Zone and trade your plan in a demo account until you can trade it with a trader's mindset.
Not sure what "try" means here. Do you have a disability that prevents you from seeing your setups and putting on and taking off trades in a timely manner?
With regard to playing reversals, what are your rules for trading a potential reversal?
06-19-13 07:42 PM
Quote from jeredlbb:
I trade pin bars as a reversal. I have attempted to filter out the pin bars that fail from the pin bars that lead to reversals. My filter is based on ATR and surrounding bars.
I guess in a way I am trading swings intraday. My time frames range from 15min to 4hour. I have been experimenting with tick bar charts as well.
I am starting to learn C# to try to begin to back test thoroughly. As of now I manually back test three or four months. I see that even that is subjective in some ways and can lead to errors. Your recommendations? I was using Tradestation, but recently changed to MultiCharts .NET
I am currently reading Trading in the Zone per Visaria's suggestion.
You're still experimenting (in the R&D phase), so avoid live trading until you have a plan, applied the rules to 500 appearances of your chosen setups and logged the results, then practiced in demo mode until you're consistently profitable and stick with your plan.
I manually backtested. I had a core setup and a method of entry and with my spreadsheet open I logged the stats surrounding every entry. The only filter during that phase was no trades withing 10 minutes of a major news release. Every appearance of the core setup had to be logged and evaluated.
Do you know the win rate % and risk:reward ratio of your pin bar strategy applied to, say, 500 appearances of the setup?
06-22-13 11:43 PM
Quote from 1a2b3cppp:
I have heard uptrends defined in the following ways:
1) a series of HH/HLs (some people say H/HL, some people say HH/HL, some people say HL/HH/HL, some people say HH/HL/HH/HL)
2) Anchor R becoming S
3) Trendlines
4) the slope of a MA
I have been unable to fine one that consistently works for me.
What are your thoughts?
As Took2Summit stated, "...you can draw the trend line however you want, but you have to be consistent."
You can use any framework for trading as long as it --- and your trading rules surrounding it --- are consistent.
All the ideas you list above for defining a trend do indeed define a trend. None of them, however, can predict whether the current trend --- definable at that moment in time --- will continue.
When you say you have been unable to find a trend definition that consistently works for you, what is your definition of "consistently works"?
All the ideas you list above for defining a trend work for me with excellent consistency, meaning I have rules for trading off these trend definitions that have produced net profit over series' of trades for years now.
Consistency is not certainty. All your threads seem to indicate a quest for certainty. Consistently profitable trading is based on positive expectancy, not certainty.
Your trading plan based on research and testing over a large sample size (such as applying a set of trade entry and trade management rules to 500 appearances of a particular setup and finding enough positive expectancy to produce a net profit after slippage and commissions) will provide the consistency you seek without any need for certainty in predicting the outcome of any individual trade.
Think of a well-researched and tested trading plan as a car that will take you through the streets of the Market City each day as you look for potentially profitable opportunities. If you took the car to a good mechanic and got the seal of approval (research, development & testing phase) before buying it, the chances of a breakdown are reduced. If you drive mindfully and safely, and wear a seat belt (stay focused and patient, follow your setup/entry rules, and honor your risk management plan), your chance of getting killed in an accident is quite low, and your chance of being available to take advantage of every opportunity is high.
I know several traders who have absolutely everything they need to extract ample profit from the market every week. They have well-researched and tested trade ideas with specific rules for entry and exit, yet they're unable to realize their dream because of common bad habits related to fear of uncertainty and/or a never-ending quest for certainty (usually in the forms of further testing, changing rules, adding/removing indicators, testing other markets, and so on).
There is a level of certainty in trading and if I were to express it in terms of tossing a coin for a living, it would look much like one of these scenarios:
1. You toss a fair coin. For every head you receive $130; for every tail you pay $100.
2. You toss a coin that is balanced to come up heads 60% of the time. For every head you receive $130; for every tail you pay $130.
3. You toss a coin that's balanced to come up heads 30% of the time. For every head you receive $500; for every tail you pay $180.
4. You toss a coin that is balanced to come up heads 90% of the time. For every head you receive $50; for every tail you pay $250.
If you could choose any of these coins and toss it for a living based on the risk:reward plan, would you do so?
06-23-13 10:04 PM
My mentor taught me classic TA patterns for free. These patterns are available for free (http://www.daytradingcoach.com/dayt...ysis-course.htm), and in inexpensive books.
I have an individual method of trading off these classic TA patterns. I've posted my strategies via annotated charts here on ET. I've taught my strategies to several others. None of the people I've taught them to have been able to make a living off them. It has nothing to do with their trading plans (all good plans); it has to do with their inability to trade their plans because of a desire for more certainty.
These strategies have been working for the 3 years I've been trading them and they appear to have worked for my mentor for many more years than that. Since they've been around for at least a few decades, I can see they've been working at least that long.
The only adaptation I've had to make to my core TA-based trading plan is when the volatility died down last year in the instrument I trade, I reduced my stops and targets accordingly.
Every one of these patterns are ambushes at times and always have been.
That's what risk management rules are for.
06-23-13 10:12 PM
Quote from marketsurfer:
No, it's not and can not be predictive. Even the MTA disagrees with you ( to the best of my knowledge). If it was predictive, why wouldn't the super computers that search non stop for such patterns, find them, exploit them and cause them to cease being predictive?
My personal hypothesis is that all the programmed trading has made them more predictive than ever. I'm often astounded at how many times in a row a particular setup will hit my profit target before hitting my stop.
Keep in mind that the big money that moves price can't just jump in and out all at once; they have strategies for building positions and exiting positions. These strategies become apparent when you study price action and develop your own plan around it.
I don't need to trade 50, 100, 500, or 1000 oil contracts at a time, so I don't have to worry about becoming the "mark" for market makers or about outsmarting another large entity that has to trade that kind of size to scale in and out of longer term positions/hedges.
I can trade my piker size, latching onto the big bad sharks like a little remora:
"The remora benefits by using the host as transport and protection, and also feeds on materials dropped by the host."
06-23-13 10:29 PM
Surf, I'm curious about something. If you believe there's no way to predict the odds of a directional price move based on the technical analysis of what price has been doing, then why do you think certain patterns repeat so much more often than they fail?
I'm looking at a daily chart of the ES going back to June 2012 and I see price pull back down to the rising 50-day moving average on 6 consecutive occasions and result in a directional move of 50 handles or more without closing below that 50EMA, meaning very low risk for significant reward.
How is it a pattern can repeat that often without a fake-out or "ambush" or outright failure?
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