I used to trade Div/Conv setups many years ago using the stochastic indicator. I learned from one on one tutoring from Mr. George Lane, whom many consider to be the authority on Stochastics. Over time, I've come to realize that the indicator you use isn't that important. What is important, is keeping your losses small, and try to make about 3 times the amount you're risking. So, if you're risking 4 ticks, try to capture 12 ticks. I don't trade this method anymore, because many times you'll find yourself trading against the trend, which I don't feel comfortable doing. Also, one last warning... seeing setups in hindsight, and seeing them in real time are two totally different worlds. In other words, it's a very subjective method. If you're just starting out, you'll probably be better off just fading breakouts, which is what you'll soon realize you're basically doing anyway, just minus an oscillator. Hope this helps and good luck!
I hate to ask this, but could you give me an explanation of what is meant by "Fade a breakout". I have never really understood this term.
No problem...I remember when I didn't know what a future was! These are breakouts of the 30 period price channel. As you can see, if you had gone short instead of long, you might have done very well on these 4 trades. Fading a breakout just basically means doing the opposite of what you're supposed to do.
Thanks alot Breakout. These would have been "short" signals for me too, the difference is that I am more hesitant to take this position on a strong uptrend day. Is this the type of system you trade regularly? Judging from your handle that is. What is the time frame on your chart for the "30 periods"? Again, thanks for taking the time.
I tried SL and TP levels of -3 and +3, and -4 and +4. Don't recall now which was more effective. Suggest you do some testing of your own. ---------------------------------------------------------------------------------Ram - What were SL and TP levels for the 3M charts? This is interesting, I am taking a look at it.
Thanks for a chart. Where do you place buy(sell) orders ? I am thinking, high(low)of the penetration bar ? Thanks again, Walter
If it was me, I'd just go short as soon as the price bar breaks the channel, and have a 4 or 5 tick mental stop in. If the trade went my way 3 or 4 ticks, I'd lower my stop to breakeven, then try to capture 12 to 15 ticks.
Of course, a lot depends on the market. For example, so far today, going with the flow would been the better choice.