not to mention the time I thought I went home flat (and oooh was I mad. I mean I was fit to be tied. I didn't even close down the computer. I hit the button I thought got me flat and walked over to the surge protector and just switched everything off and split. I woulda shot myself but I felt my life wasn't even worth taking) and woke up with a huge profit. But here's the amazing thing. That happened to me twice! And that's when you start to wonder, "Who the heck is really running things around here?"
Here's another one Cathy. I was reading your posts about using Bollinger bands as profit objectives. So I decide one day to try it only I decide to use them both as profit and loss lines. That is. if I am short, I am not going to exit until price hits the lower band, win lose or draw. So everything is going swimmingly well until I get short and they announce a rate cut. Prices skyrocket, but the lower band just keeps going lower and lower. And that is my stop! But then an amazing thing happens. Prices drop like a rock, and slowly but surely I get closer to the lower band and I get out with a profit. And then the same thing happens on the long side. Afterwards, I think to myself, "An angel must have been trading for me today."
Even Mr. Bollinger emphatically warns that buying the lower band and selling the upper band is a losing strategy. The only thing worse is trying it with no stops. So I figured, if it is so obviously a loser, it must be a winner. Then I doubled my money scalping for 1 point using a 3 point stop. Another losing strategy. Then I was looking at everything backwards. I never averaged down, because that is how I went broke the last 3 or 4 times I went broke. But I have a new one I'm working on. 1. You wait for all 4 moving averages to be lined up in a perfect row. 2. Good strong chart pattern. 3. Stochastics are strong but not above or below 75/25 Then, you simply fade. The underlying principal is, "It just doesn't get any better than this."
I've done a little bit of backtesting not with BB bands, but with Keltner bands. I've found buying the low band and selling the high can be profitable. It's not that simple of course, I had to insert a bunch of filters, but it can be profitable I suppose.
Sometimes fading works and sometimes it doesnt... the only thing which holds universally is sound money management...
Corso, It's like this. I haven't read it, but I hear this is the crux of Gallagers "Winner Take All'. But It's how I see it. We are just running from the law of averages. If you stop and look back, they catch up with you. Good trading is what you can get away with. You can get away with that band strategy sometimes, but not anything most of the time. To me all trading problems are mental illnesses. This desire for a system which always works is really a desire for a world of no change, a life of stability, freedom from insecurity. I'm looking for the system just like every other trader, because I want freedom from insecurity, but I've never found it. Is it out there? Some say you can easily set it up on the computer. The only system I know is run, don't walk from whatever you are using that is working unbelievably well. Fade yourself when you are winning, because winners are betting on you when you are statistically underperforming a jackass.
Bollo Bands work well in range bound markets but cannot be used in trending markets except with alot of interpretation. When the market is moving strongly, it will ride the bollo band for a long time, back off and then resume right at the band again.
I think there may be something real here, at least for me. For the past couple of years, as I trade, I've realized that my eye works on the "trend-following" paradigm, lost in the moment, and dominated by the most recent move of the market. It must be genetic, the way our senses work (like an EMA, the last experience is worth a lot more than older ones.) And yet, I've learned to make money from trades that are driven by other principles: reversals (like price/macd/stoch divergence) and key levels of the day (e.g., previous day's OHLC, major intraday highs/lows, etc.) In both of those cases, I have learned to fade my natural tendency, which is to believe that the current trend will continue. It works for me. Make sense?