What about in the present conditions? Kind of hairy when that swing hi/lo is 4-6 points away from your normal entry points. Of course the reward is proportionately greater but it takes some getting used to.
I am not sure I am following what you are asking. I use a standard three bar reversal, which "usually" identifies a swing being made in progress. Basically, what we have is three prior confirmed swings in the same direction. Current momentum and direction is then established and the set up is now on the table. A fourth swing is needed for entry and is 'assumed' to be in progress when a three bar reversal appears to be setting up. I then wait for the first bar out of that 3 bar pattern (fourth bar) to begin building and then breaks the third bar of the 3 bar pattern in the direction of the reversal pattern by one tick. At that instant I hit the ladder at the price approximate to the center of the third bar. If order is hit, I then move the stop down to two ticks above/below the center (high) bar of the three bar reversal pattern. In summary, the entry signal is when the fourth or fifth bar gives a one tick break of the third bar of the 3 bar pattern in the direction of the reversal pattern, but actual buy/sell is placed from the middle of the third bar. The only reason I have an initial 3.0 point stop set is because I use a ladder to place the trades which are preset to bracket buy/sell, stop, and target simultaneously. The 3.0 stop is nothing more than an emergency hard stop if the market turns before I get my bearings on the trade or have a computer failure (note, not all instruments accept preset global stops). A target is set at 3 points for no other reason than if price takes off and then abruptly reverses, I at least got a profit out of the trade, maybe. Rarely, if ever, is the preset stop/target ever left in place as it was placed once the trade is in progress. I have enclosed an attachment of todays ES 10k CV chart from around 11:30 to 12:30. No cherry picking, just another average trading day as close to real time as I am able to do. This is the keys to the bank vault. I do this day in and day out and have nothing to prove, I am simply sharing what I have learned over the years as you caught me in a good mood! When I read thirty page threads on how it is impossible to net one point a day on the ES, and then they post charts with 20 different conflicting indicators on each one, all I can do is shake my head in disbelief. One thing I might add is this method works on all time frames, day trade, swing trade, or long term. Price has no aversion to time. I notice some of you are using very fast charts. If you are struggling with this method, slow your charts down to allow your brain time to process the information. If you can't read a daily chart instantaneously, don't expect to be able to scalp successfully on a 1 minute chart. Learn to crawl before you walk, and then learn to run. This system, as simple as it is, takes a lot of screen time and concentration to master. All right folks, this is Aneks thread and I don't wish to step on his toes. He is on the right track, for those who decide to follow him, the payoff should be well worth the effort. For the naysayers or those too lazy to put the screen time in, keep funding your account from your day job. Anek and I can always use the extra money! st
Ooops, forgot the attachment. To the OP of my response, if I failed to answer what it was you were asking, I don't understand the question as posed. Another quick point, if price moves in my direction 5-6 ticks (ES), I will then move the stop to BE +1. Note that I do get stopped out quite often, but rarely have a loss more than 2-3 points, which the numerous BE +1 more than make up for over the course of time. Once again, preservation of capital is the goal, profit is secondary. st
Basically I was just asking if the present volatility had changed your normal pattern of trading. Thanks for the detailed explanation of your method. I will look it over this afternoon.
Yes, I was trading the ER2, but with this recent volatility, stops were having to be placed outside of my rule based targets, and or, I was getting my stops hit way too often. The ER2 was previously giving more bang for the buck, but the ES in this recent activity has been doing as well with better manageability. I base my rules on $10,000 for each contract regardless of what margins are being offered. The most I allow is 1.5% loss for the stop per contract. So to answer your question, if any trade, no matter what the instrument, doesn't allow these rules to be followed, I do not take the trade. If this becomes consistent, I look for something else to trade or stand aside. Clear as mud? st In edit: per your original question, my stops are never 4-6 points away from my entry. This is what confused me as to what you were asking. Hope this clears things up.
Nice work ST. On your chart where you have the green bar with the green dot ontop, you then have a red down bar, then another red down bar that breaks that previous down bar, then a green bar that breaks to the upside, in line with the trend. Any reason you didn't take that trade? It looks like your 123 bar reversal pattern.
For all practical purposes here, bar 2 should have a higher high and a higher low than bars 1 and 3 to be valid. These will typically give you the best moves with minimal failures. I should have been more clear on that The area you are referring to was 1444.25 @ 11:25 EST for reference. Note how that 1444.25 area held four times, and once broken, the distance of the move to the upside and how the actual entry was quite a bit better. Also, remember, it takes 3 confirmed swings in the same direction, and then the fourth is the setup and entry. So when questioning why a trade wasn't taken, ask yourself if the complete setup was there. Furthermore, we are not looking to take each and every scenario that "looks" like it might be a setup, we are only wanting to take the cream of the crop that history has shown to provide the best probabilities of success with minimal heat. A break of a three bar reversal where bar 2 has a higher high and higher low than 1 and 3 provides that best signal. There is no need to make twenty so-so trades a day when the market typically offers 3-5 great opportunities most trading days. As a side note, market internals are a big part of what I look at during the day, and may cause me to only trade in one direction even though I have the 4 swings in the opposite direction. Yes, this method is quite discretional, but the rules are quite clear and simple; trade in the direction of the trend. Hope this helps. st