Yes, I am absolutely seeing this, and this is exactly why it hasn't been done yet. I've had so many great ideas, but once I started digging in a bit, it fell apart. Now I didn't quite go through enough examples to see if there was still a positive edge, so perhaps I have always given up too soon. I of course know if I identify a set of trade parameters that has a 50% expectancy over 100 trades of hitting the profit target versus the stop loss, but the 50% that works leads to a profit twice that of the 50% that leads to a loss, its a solid setup. But alas, I've never gotten this far. Each setup started to look different. And to be honest, I am still battling an internal conflict between what Db does and what ND does. It seems to me that ND has analyzed this down to the tick and knows the stats of all her "setups". Db on the other hand looks more at the big picture, doesn't micromanage as much, and tries to capture the bigger swings. What I love about what ND is showing is very clean entries and profit targets, with potentially lots of possible trades in a day. What I love with what Db is showing is that trading less can very well lead to bigger profits, but his entries of just simple retracements aren't as clean, meaning they fail far too often I think unless its a strongly trending day like today. Now of course when I say fail, to me that means price just going against me 3 or 4 points, which in the whole grand scheme of things isn't a failure when you look at the big picture. But unless you got in on the first and best entry, each subsequent entry can cause problems. Anyway, so once again, in some ways, I'm running around in a circle and causing my own problems, but believe it or not, I am actually trying to move forward!
@k p did you notice that you have put the equations down, but have stopped short of solving it? Since we can safely assume that both @NoDoji and @dbphoenix do quite well with their trading, who's preventing you from integrating both their systems (entries/exists a la ND and moves a la db), so you can "have your cake and eat it too"?. If you go back and look at the explanation of the previous charts I posted, you may notice that my style is slightly different, but I tend to use both the works of ND and db. It'll require some work, but you'll end up in a good place should it resonate with you.
Oh absolutely this is on my mind as well, but the sheer amount of work that it seems like it will be to take bits and make something different is just daunting. I'm not scared of the work exactly, but when I got into this trading business, I thought that I could start small with something that works until I developed something a bit more robust. I also thought that learning to make a few points while I learned to risk a few points was going to be a great stepping stone to learning to gain more and go for bigger moves, but of course risk more as well. So by starting from the ground up, it almost seems like I'm going backwards by building a brand new system versus using something simple to start with. This is in fact what I liked about your style... I could see elements of Db in it very much and ND as well. Db has mentioned many times that you have to look at the big picture and don't lose the forest for the trees. Now saying this, I think that SLA can be sufficiently modified in just small ways with everything I've learned from ND. The frustrating thing about SLA was not knowing exactly where to exit. The entry is clear, but the exit wasn't, and a break of a trend line was never the best option (since maybe the break only happens at a consolidation), although Db did say its possible if the trader is extremely fearful. ND has introduced great ideas for exits and each one of her setups has a firm and logical exit, so at least I know have a much better grasp of where an exit could be based on price action. Further to this, I see that in a strong trend, even if a trendline breaks, taking the retracement in the opposite direction is very risky, so although SLA would say to do this, based on what I see ND teaching, you really need more confirmation of the reversal. So all of these ideas are excellent, but then once you start having filters for not taking each and every SLA trade, then you have to test all of these extra filters you're adding in, so I've gone from something simple to something complicated. But seeing all of this is of huge benefit and it will help the end result, its just that the road keeps getting longer and longer.
Hmmm when you actually follow the 5 SLA rules to the t regardless of stop size etc. I think you may have some different opinions. The exit is simple. Its the break of the line. What better option would there be? A swing point or 50% would be a worse exit than a sl/dl break. Once price does start moving in your favor based on whatever you like than you can give price more room looking at 50% levels and swing points and not have to worry about every little line break. Also SLA in my opinion chops you up less than anything I've tried. If only two consecutive trades don't go anywhere and you have a lh and hl then you are in chop i.e. Not trending so you are to wait for chop to clear. SLA is almost I'll say self correcting and that's why you can't use a hard stop with it. If the market is moving like it has been the last few days you can not use a hard two or even three point stop and expect to have success w the SLA. If you didn't scratch a trade in the last few days and exited on a line break you may get hit w a 4 or 5 point loss but look at the size of the wins etc. you can examine the instance of chop and trending days and look at how/where they are in relation to the bigger picture. So if price is trending where is it likely to go?
Hey Emini! Drawing the trendlines in real time is what I had a bit of trouble with. Just as an example, lets take Db's last slide you posted. I blew it up and show an alternate trendline which is think is more valid in realtime. Its drawn in red although it is of course a demand line. If you do in fact draw it along the lows, then you have a break only 3 points above the entry at about 38-39. Now I see how this bar that breaks the line ends up forming a low that Db uses as a swing point to draw his DL, but in real time, we simple didn't know what would happen. What if this bar ended up going even lower and never made a higher high to be able to fan the DL? So what I'm saying is that in real time, the way I draw the lines causes problems, but I am trying to draw it as precise as I can. See, in a way I am trying to follow rules... too well almost since I find my own problems! Now granted the low on that bar that broke didn't go below the previous swing low, but I still think that my red DL is legitimate given the way it would appear in real time. So what I'm saying is that you do have to be a bit loose, but then how loose you will be needs to be defined and there is that extra variable now that you have to test.
The line is just meant to track so if what you are seeing in real time appears to be a threat to your trade by all means exit if it's part of your plan or you become confused or fearful etc. So basically if your DL allows you to better judge the balance or imbalance between supply and demand than it is serving its purpose but if its causing you to question every little tick you might be better off not even using them if that makes sense. If you are asking yourself in real time if this line is drawn correctly than your focus is on the wrong thing. How your line would break would be of importance also not just the fact that price traded a little below the line. You would still need a RET to take the other side anyway. Myself I've tried using targets with the SLA but too many trades were exited far far too soon and caused a slew of other issues. I also think focusing too much on the lines causes you to get more into "pattern mode" than focusing on the flow of price movement. Just sharing my personal experiences with the SLA. I've tried something that was actually a pretty big help in riding myself of the lines and bars. When a line can be drawn and a trade is entered (in sim) make your price bars the same color of your background and just watch the ticker move in relation to that line. Focus on the pace and changes from acceleration to deceleration. It was a very interesting experience lol. Keep working hard I am interested to see what you come up with.
Well you know, you bring up excellent points. You're absolutely right, as Db says, the lines can be a hindrance, and an exit should be based on more than a line break such a previous high or low. I have also noticed that usually, there is always a better exit at a better price if you want to get out, you just have to be a bit more patient. Rarely does price completely turn on you in a V reversal and keep going the other way. So many times I have entered a trade, have it go against me right away for 3 points, but I kept holding, and when price came back towards me I would exit for a 1 tick profit, but then price of course went in the direction of the original trade. So I am with you, not focusing on the lines is better, if you know what to look for and, importantly for me, can hold on for more than a few minutes!
A - Before the open, I would be inclined to short here. First, I have a double top with the OH, and 2nd, I've got a trading range low around 3824 as a possible target area so this could be good for 6 points. B - At the open I have this 5 min DL drawn in, but since we are already so close to it, its hard to give this too much emphasis. We do break below, and I suppose the short as marked could be considered given the RET and bounce off the OH. C - We only make it down this far, sure enough, it matches up perfectly with the little spike down below the range low half an hour ago. (I marked my range low not with the lowest low, but where most of the bars touched). D - A big move up, no problem going above the OH this time and we consolidate here. E - Here is our RET and a place to go long. Now on the one hand I am a bit worried because this isn't just a simple RET. We had 5 mins of consolidation, a mini trading range, and then we dropped below, so I wouldn't call this an ordinary RET. But on the other hand, taking the long as marked at around 36, I've got enough room to get out if we only make it to the previous high. I got this from ND and it makes wonderful sense. I am always actually scared of RETs for the very simple reason that they might double top or double bottom. But with enough airspace like this, it seems safer. F - Sure enough, we essentially double top. G - On the way down, we have some hesitation here at the previous low, but when we do break below, its solid. H - Here is the break below the new 5 min DL, but no short setup yet. I - Now we have a beautiful RET up to the breakout level of the 5 min DL. Now here is the thing... is this why price rose, just because every trader knew a 5 min DL broke and wanted to test it? I hardly doubt it. I also doubt that most traders, or who ever supplies most of the volume, is using 5 min charts. But for whatever reason, perhaps its just a simple RET, going short below these bars is a solid trade. Luckily the fill happens below the next bar which is shorter, so a stop above this bar is less risk at 25 versus a stop above the bar right below "I" at 27. Price of course just drops after this. J - Well we stop here, below the OL, but above the PDL. K - As we climb back up, I note that we go right past the 3 min consolidation area to the left. But although we are climbing quick, we need a RET somewhere. L - Sure enough, we get it here, and a long above here is a legit trade. It does well, and we can also draw in a new DL. This is of course our perfect 123 setup. After such a strong down move though, taking any 123 isn't the smartest I think, but I like this one more because we broke through that little 3 min range I pointed out to the left of K. This too is something ND taught me. M - This is another simple RET to go long. I am still mindful of the strong downmove, and we are hovering around the 50% level, but lets just mark it in. N - We only make it this far, but it is a few points above that 50%. What I should have done is drawn in a 5 min SL connecting the highs at F and now here at N... this would have helped me later as price came back up. P - On the way down, we break through the DL.... Q - But we stop short of the previous low. On a higher time frame chart, the low at J is a double bottom on the hourly and the daily as well. So coming down to Q this time I think would mean either a solid reversal or a solid penetration. R - I mark in this hinge. You know, my desire is just to take them. The longer I wait for a setup, the longer I wait for confirmation, the worse my price is. After this, its a great 20 point move up. Above here is also where the 5 min SL would break had I drawn it in, and I can clearly see the RET that would allow me to get a fill at 3821 around 10 mins after R. The low on that signal bar is 16 mind you... so this is a 5 point risk trade... but it works really well. SUMMARY I will follow up in the next post with where I'm at now in regards to the trading plan.
Oh man... so just as I'm trying to make my next post... MultiCharts stops working.... it literally just says my licence expired and the price ticker stopped moving!!! Now I am using the free version, but when I talked to them last week they said I could continue to use it, they just weren't updating it anymore. If I end up going with the version for IB customers, there is a big limitation in that when I update my charts, it doesn't update the data from the server, only from the cache that is stored on my computer..... so what's the point of reloading data I already have without reloading it from the server? You see, the SE version, which was based on the full version, has the Quote Manager which allows me to make changes to the data and such. This dumbed down version of MultiCharts TWS is for IB custombers, but they took away the Quote Manager and hence is a bit problematic. Of course the full version is over $1,000, and I'm not exactly making money on this as you all know to justify the price. Even if I go with a monthly plan at $50 plus taxes, this is the dumber thing in the long run. And I'm still not happy how I keep having to monitor the bars because they still don't display as accurately as IB charts. So why not just use IB? Well their charts suck... soooo not intuitive to use, and I love how I can use the DOM in Multicharts to drop my trades down with the exit strategy auto attached. I guess IB could do this as well, but I just don't like the look. Aye... well.... I guess I could call them but I'm not happy how it just cut out in the middle of the day when I was told it would keep working.
Check the pricing on Multicharts. I think it is $30 a month for the IB one. Not too bad if you can make a few points to over it.