As you can see, there was clearly an opportunity to enter that short... quite a few opportunities if I peek at the future. But, all you can do is learn to see up to the actual entry event, and sometimes the entry event repeats itself over and over. The subsequent won't be ideal, and the further along the higher the risk becomes (stop) so the available reward must be worked to get to at least a 1:1. Since we never know if we will get it, we can decide to move to a BE at the best opportunity, and more forward as long as we have clear areas of resistance to stay behind. Otherwise, leave the stop alone, and just concentrate on recognizing the end of the move. When the lower band starts to hook up, or when the bars start to come off the band, then this is your first hint that maybe it will consolidate, or even start to roll up.
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As you can see from the pic, using RJ bars clearly points out where entries would be for scalping a "mostly" sideways range, and where you would take a bigger loss should it suddenly trend.
In actual trading, using RJ bars would not be like these replay results because of the false nature of the bar structures. So, in unison with a true range bar type, you could respond better to the visual clues offered by the RJ bars and the band restrictions it provides.
As a hint, any range bar that touches the bands must have a wick for a short, or a tail for a long. Add that the bands must be mostly sideways, and that when flaring occurs do not take counter trend trades, then you would have a nifty little mechanical system for scalping.
Another rule of range bound trading is that it is 1, 2, and done. This means it can trend suddenly, so you want to recognize your opportunities and act. I usually take one or 2 scalps from the bands back in to the opposite band, and call it done. This is not a trend following strategy, but it can be useful as such with a lot of practice recognizing the expansion of the range.
Last edited by Jaguar52; February 27th, 2013 at 04:25 PM.
Reason: finger foibles
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I wonder if I can ask you to share with us the reasons that make you change your market of reference. Many traders are concerned about when (and how) changing their plan, and very often they are unable to understand what's the right moment to do it. They basically risk to be lacking either of patience or of a proper understanding of their own efficiency in trading.
When first starting out, about 10 years ago, the ES was a very different animal than it is today. With the introduction of robots and HFT, many well paced and trending instruments started becoming extremely choppy and lost a lot of their characteristic movement. I learned on the ES. But over time, it took longer and longer to achieve the results I had been getting. Simultaneously, I was introduced to the CL, FDAX, and 6E. I started to develop more trend following strategies as these are trending instruments. Up until very recently, the CL was my mainstay instrument, and I could always get 4 ticks per trade with my eyes closed. Not so anymore. So, once again I am at a crossroads.
You are correct about the dangers of jumping from one instrument to another. Unless you have specific strategies developed for each instrument, (they could be similar just tweaked to make them unique for that instrument) or your strategies are completely mechanical and only the money management is customized, then trying to fit every instrument into the same strategy can be costly. Initially the switch for me did cause draw down, but after a bit I adjusted better and got more screen time with the other instruments. In this business, R&D does not come for free.
As far as generalizing the reason to either or scenarios to fit traders into a category, I would caution your opinion on this. Successful traders are a rare breed. It is never like anything you read in books, or anything like what the industry sells to entice new participants. There is a lot of miss-information provided to supply inventory to the market. If there were a right moment to switch, then it is a very long moment. It is never a light bulb switch where today your trade the ES, and after 5 years you stop cold and switch on the CL, or anything close to that. Changing instruments is done over a pretty long period of time until eventually you are consistent with the additional instruments. Many traders actually start the switch, and never really drop the former instrument. They just add another option to their trading hours; if for nothing else to hedge or to reduce the amount of time trading.
Last edited by Jaguar52; March 6th, 2013 at 08:03 AM.
Reason: more thoughts
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Trend trading, scalping, position, swing...they are all just names.
We call our trading something based on our intention for each trade entry, but in hindsight that description may need to be changed to reflect the true outcome and reality of what we do once we are in a trade.
So, for me, every trade starts with a RR that I want, but winds up with an RR that I can live with. Since my purpose is to make money consistently, most of my trading winds up falling into the scalpers category. What I want is a trade with an RR of 5:1. What I get 70% of the time is a trade with a 1:1, and for 5% of the time my trades are profitable with an RR of 1:2. The other 25% of the time, my trading winds up with a 2:1. Oh how I wish I could always get those 5:1's! So, no matter what words accurately describe your trading, do not allow yourself to get hung up with the definition. Who cares what category you fall into, as long as it is in the only category that makes it all worthwhile. Can you tell me what that is? It is the winning category. As long as you are making consistent profits, just keep trading the way you trade, and let the onlookers make their judgements. Everyone has a basic need to understand and define themselves. Unfortunately, almost everyone wants to put others into a box so they can gauge themselves by comparison. The only thing that matters is to trade well, and prosper.
Last edited by Jaguar52; March 16th, 2013 at 02:21 PM.
Reason: adjust %
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I find it hard to believe that getting 4 ticks per trade on the CL has become a tough proposition? What has changed so much? Volatility is still high enough. I am a bit sceptic. Can you elaborate a bit more.
Getting 4 ticks is probably not the issue. It's how much you have to risk to get them that is the issue, if I had to guess.
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