Thanks for the thread and continuing to post. Has this strategy worked better then you originally expected? I recall your first thread starting out stating that if fibs actually worked then this would be a holy grail of sort. Almost got the impression that you were expecting this method to fail, which would prove that fibs are garbage. You then started saying this is the only working fib strategy where everything is revealed, also stating that the results would be close to the same no matter what level you chose to enter and average down at. I may have read it wrong though. Sarcasm is sometimes hard to detect over the internet I do like idea of averaging down on the emini as long as you have a set stop loss. When I was trading ES I would get my best results averaging down once or twice. I would also get a large loser that would eat away most of my gains but my method was way more random then yours. Good luck I hope the wins continue!
Not really. I pretty much knew it was gonna work already since I had been doing something very similar for a while now. Well, if fibs are magical, then price will always reverse at a fib number and I'll make a million dollars. lol. But I usually make money anyway due to the nature of price action. It really has nothing to do with fibs. I just happen to use them for my entries in this system. If price reverses at a fib, awesome. If not, awesome. Thank you
No trades today cuz I was gone all day. But look at today's chart... Look at all those pullbacks. I would've had many successful trades today. Oh well.
Change of plans. I'm taking a little trip and won't be trading or able to update this thread for a few days. Since I've gotten a ton of PMs, I will be working on a .pdf that explains this method, including things such as "how do you know where to draw the lines", and most likely another one that explains hedging. Or maybe I will combine them into the same document. See you guys soon!
In theory this doesnât look like too bad a strategy; If you have coin toss results you should come out ahead. I did find that when you factor in commission and slippage that the spread between the high and the low has to be quite wide. Allowing for $5 per round trip and 1 tick slippage when you get stopped out I found you need a minimum of 4.25 ES points to break even with a 50 / 50 win loss ratio. That is putting about $1000 at risk. By increasing the spread between the high and the low you increase the amount you might make with a 50 / 50 win /loss ratio. But by doing that you also increase the % of capital you have a risk on any one trade. At 5 ES points you have $ 1162 at risk. At 10 ES points you have $ 2167 at risk. This is over 2% of a 100K account. Breakeven on the YM is 30 points. Both calculations only assume 1 tick of slippage. Iâve had worse fills in panic markets. Point Iâm getting at here is that you should be well capitalized to use this strategy unless there is some proof that the win loss ratio is greater than 50% I also thought I read somewhere that when price retraced to the 62% level the odds were greater that it would get to the 100% retracement than to return to the starting point.
Well as with any trading, the wider the range that you are trading the less important slippage is. If you're scalping for a few ticks, slippage will ruin you. If you're swing trading for 10-50 points, who cares about a tick or two of slippage. That being said... The percentage between winners and losers is always the same regardless of the spread of the fib lines. Remember that if it gets to 62% it has less room to go to get to the 100% than to get to the starting point, so you're probably right. I cannot predict price, I don't know where it will go. That's why I average down. If it gets to 62% it probably will go to 100%, but if it doesn't, I make a lot more money. Combine with hedging the other way and you can make money regardless of which way price goes. Well, sometimes your wins are reduced a bit, sometimes your big loses are reduced by a lot, and sometimes both sides win, which is awesome. Imagine as price is drawing down to the first 3 fib lines and you're averaging down, you're closing out trades for profit on the other side (in another account). I do this more on swing trades with index ETFs in my Scottrade account because I can get more control of position sizes than with futures, but like I said, more on this later when I have more time.
What I was getting at was that as the distance between the high and the low increases so does the maximum loss you are willing to take. So with a 5 point ES pread the max loss is aprox $1000 and with a 10 point spread the max loss is $ 2100 a trader with a small account say $10000 would have a sizable amount of his account on the line with any trade. For the futures it would be risky to trades this with a small account. Might work with an ETF but then you run into the Daytrade minimum. Be interesting to see your swing trades.