Amen. The two minute MACD divergence yesterday morning was pretty clear to me for a change. I entered a short sim trade shortly after the cross down, and since SPM can provide guidance to reading price action on multiple timeframes, I referenced the 4 hr. chart and held 'til end of day. And btw, the constant volume bar charts are pretty cool to watch. Anyway, it must be noted that I traded two contracts and scaled out of the first and then moved the second contract stop to breakeven. This was the first time that I ever held a trade so long and paid such close attention to multiple timeframes. Thank you so much to everyone who's contributed positively to this thread. As for stops and taking profits, this is something of an issue for me also. So far I've been trying to sim trade two contracts and exit the first at support and resistance areas or when price seems to stall. After exiting the first contract I'll move the second stop to BE. The back and forth flow of price often seems to come back and get me out for a wash. It's good not to take a loss on that second contract, but on the other hand, there's got to be a better way, especially because price often takes off in the initial direction of the trade.
Hi Sandy, thanks for your comments. We have a similar learning path and shared appreciation for the SPM framework. Since SPM seems to be ultimately about learning to read price action and trading profitably, I hope it's not outside the scope of this thread to ask if you could elaborate on your divergence entry methods. Divergences have proven difficult because it's common for me to identify them during strong trends and subsequently end up on the wrong side of the action. Would you recommend the divergence courses to others? Thanks.
SPM has nothing to do with divergence trades. "Divergences have proven difficult because it's common for me to identify them during strong trends and subsequently end up on the wrong side of the action" For this reason alone they should not be used as a criteria for entering trades, for they represent nothing more than market noise in the moment. The reality is that if traders could learn to do one thing right you would probably succeed in trading the markets profitably. SPM provides a framework for doing that. *** You people can do what you want, but don't start confusing divergence trades with SPM, because the two have nothing to do with each other.
I found this post interesting and I'd like to clarify a few points. There are two ways to measure the R/R ratio: 1 - Compare the stop and profit targets. 2 - Trade 100+ trades and then calculate it by dividing total win $ by total loss $. When you say you haven't seen trader make it with an inverted R/R ratio, which are you referring to? Isn't this true of any system, not just systems with inverted ratios? Let's say you have a system that is 80% win rate and 0.80 Reward/Risk (note I don't put them in the same order as the OP). And another system that is 50% with 2.0 ratio. They both have basically the same equity curve which is almost a straight line up. Either one could stop working due to changing market conditions. It seems to be that the circumstances given above that lead to financial ruin would apply to both systems, not just the one with the lower reward/risk ratio. In the first system (80 0.80) if you suddenly found larger losses than normal then you could re-evaluate the system and decide if this is just normal drawdown or if maybe the system changed. In the second system, it would fail in another way. Instead of larger losses, it would just have more losses more often. In other words instead of breaking down in the R/R ratio, it would break down in the win rate %. Instead of 50% winners it'd be 25% and that'd make the system lose money. It seems to me the R/R ratio isn't really a factor here. I think the evaluation of a system should be based on the expectancy & the number of trading opportunities. This is what influences the equity curve. As I've shown before the equity curve can be a straight line whether you have a 0.80 ratio or 2.0.
I have been investigating SPM and earlier on I saw a post where someone backtested it and they determined that their implementation of the SPM strategy (which may differ from what others are doing) worked really well in the current conditions, but didn't work in the past. So I tried writing up an algorithm for it and did my own testing. My results were the same. In the past 3 months my implementation worked very well but prior to that it was not profitable. I'm curious if others have investigated this and if there were any conclusions. I'd like to continue working on SPM, but I'm afraid it will stop working once the volatility settles down. Thanks
I agree on backtesting. But I am a programmer so it's much easier and quicker for me to work out my ideas (and more importantly to rule them out) programming them and backtesting them. I think if a strategy backtests ok it might work in the future. But if it backtests negative it probably won't work in the future. The challenge is that certain things are easy to do by a human and really difficult to program. I will rerun my test on TF and see what happens. Thanks for the tip.
One conclusion seemed to be that the Russell is better, as are other more trendy futures. ES can be very efficient at times. The second was that the art of trading this can beat the raw signal taking that can be coded, unless you are a coder like Jahajee who seems sophisticated and was able to code some things I couldn't. As for me I continue to use SPM as my guide post in the scalping stocks I already was doing. It is nice to see a weak stock at the bottom of it's day range and then SPM give a nice trend continuation. I find signal "failures" to be an excellent reversal.