"Another has to do with the swing point. Did it hit R of some sort, either a pivot level or the PDH or the day's average range (if you're trading eminis) or whatever? If so, you're more likely looking at a reversal setup than a pullback" I has to be something obvious but it doesnt come to my mind. What is PDH? Hamb
I like the general idea here, and I've been working on incorporating something similar using the IBD100 stocks as my starting point. Many of them are way extended and you are forced to wait for some kind of reaction to buy. I think you need to understand that different stocks react differently. It's a function of the sector, their size, their volatility adn who tends to own them. Stocks also tend to pull back for different reasons. There is a lot of difference in a pullback triggered by bad news and one caused by a general market consolidation. Looking at your proposed approaches, I don't see how youcan implement the ones based on intraday charts if you plan to leave premarket resting orders on TWS. Also, I think you will get many premature entries using 15 minute bars if you are looking for a daily reversal. Personally, I would keep it simple and use a combination of oscillator divergences plus MA cross on the daily, or MA cross alone or perhaps something like Larry Connors Undeniable signal. That uses weekly daily and I believe the criteria for a buy are a six week low that closes higher than the prior week. I think the key here will not be the entry method you choose, but rather will be the stock selection. Good luck and keep us informed how it goes.
I plan on placing my stop differently than T does. I think she would put it below the entry bar if memory serves. Or perhaps below the prior day's low (long). That was something which never appealed to me. Of course you are betting on the reversal happening right then, and it makes sense to get out if you are wrong, but it sounds like there would be a lot of whipsaws. At least that's what I saw when I would look at charts through "her eyes" and kind of mentally paper trade the stalking strategy. My idea of stop placement changed when my Uncle gave me a book recently. It looked pretty cheesy, but then again Stan Weinstein's book looked pretty cheesy to me when I first saw it. Anyway I was looking at "How To Take Money From Wall Street" by Tony Oz. Pages 75-78 to be specific. Tony was talking about how he likes to play "head and shoulders" bottoms. He draws a trend line connecting the low of the head, and the low of the right shoulder once the neck line has been crossed (pattern breakout). He places limit orders on the line value to buy. He's looking for the stock to pull back and touch the trend line. If it does, he is filled. The part that lit a light bulb in my head was where he placed his initial stop. He uses the low of the right shoulder (imagine just a single rally up from the neck line break and then a reaction which touches his trend line). So instead of thinking that his entry is THE reversal (like T does), he figures his entry is NEAR the potential reversal. This I feel is a big difference. So he is betting on the formation of a higher low. If that doesn't happen, he is gone. I'm not interested in doing exactly what he proposed, but the idea of placing an initial stop at that place was what I took away from his strategy. I don't know if you ever tried T's strategy with a different type of exit point if you were wrong. Anyway, seeing Tony's exit idea is what triggered me to move further in developing my "pullback" strategy. I will consider your entry ideas, thank you. Happy New Year, Banker
I definitely agree that different stocks react differently. I also agree that not all reactions are created equally. I was kind of thinking I would get late entries with the 15 minute bars. Let's say I found a pullback I like on the daily chart. I then see this pullback as a down trend on the 15 minute chart. If I were using the trend line break entry, I would draw the down trend line I plan to enter on break of. Each evening I would take the value of that trend line and use that as my buy stop price. If price crosses that line to the upside, my stop would trigger. I know that won't be perfect. It might be "late" because the line value could potentially keep creeping down during the day. With the change of trend entry on the 15 minute chart, I would have to find the 3 of the 1-2-3 and place my stop there in the evening. A problem with that idea is that these changes of trend can happen during the day, with no trigger visible in the evening. It's all a tradeoff in my mind. The MA cross would be similar to the trend line cross. I have never used an oscillator, so I wouldn't even know what a divergence would look like. 6 weeks seems like too large of a reaction for me to stalk. I was thinking more along the lines of a 6 day reaction. If I were to trade longer term trends, that 6 week idea might be worth exploring. Perhaps I can consider using it on the daily chart. If I pick one way to enter, it would make sense to choose my candidates based on that particular entry criteria. If I decide to use multiple entry ideas in my strategy, I would have to focus on selecting the right entry idea for each stock I trade. It will probably take a while for me to get good at this. I'll keep you informed on the progress. Maybe I will make a Journal thread once I'm up and running. Thanks for sharing your thoughts, and Happy New Year. Banker
I trade ES completely opposite of the way Phoenix does. I have never been able to make anything work with daytrading ES except pullbacks, or fading really major supp/resis and gaps. Trading ES on breakouts, etc requires a big stop to make it work usually. Entering a trend based on a move back to a moving average is a retracement strategy that works well with most markets imo, although many people would not consider this a pullback (it is). I use fibonacci, trendlines, and MA's, depending on the trade. I use 15, 5, and 2 min time frames. I do trade breakouts in euros and bonds. Once they break, they break! Jay
Well, if you don't trade retracements, thats what I assumed. Obviously, you are doing something else. What ever works for you is great. At any rate, the point I was trying to make, is retracements are my absolute bread and butter. Cheers, Jay