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In my backtests I didn't find a breakout of the outside bar profitable. A BO of the inside bar seemed to work better.
Can you post some of your charts with your trades? How long have you been doing this?
My theory is that this will work at specific points, mainly near S/R and/or professional activity and may not work elsewhere. and when it works, it's more due to the S/R and/or pro activity and would probably work even without the inside bar. That's just my hunch..
Can you help answer these questions from other members on NexusFi?
I've been trialling this for about a week but I do need to test it for much longer. You may be right about your hunch.
Attached are two trades in the past hour or so, the CL chart also has an OCO order placed but not filled at that time but was later - still in progress.
First, in response to a post later on, I really am NOT a programming genius, not even much beyond beginner. I have ideas occasionally, some of them quasi-original (usually just improvements on the hard original work done by others) and get help (usually from NT forum) turning those ideas into something. For example a RangeBarHighLow plot (several different ones now but mine was the first), a BuySellVolume (now there are many many and things like Gomi's Ladders which are a whole different class or three up), multi-option Bands, RPM and most recently the dynamic PVP (which I later gather exists on several other platforms). But I didn't supply a single original idea really and couldn't have coded a single on of them to save my life. For example right now I would really like to have a vwap that starts at a certain time and/or day that can be called as such in other indicators so I could study skews and suchlike. Can't do it.
You asked about charts: if you go to my journal/blog every day the past month or so I have been posting them. Today's offering attached.
Someone else mentioned that you can see the PVP at any time. This is true. But in terms of reviewing different approaches, you can't, also you can't see the evolving story at any time, i.e. rising PVP's, jerkily changing PVP's etc. etc. Having the dynamic plot is extremely helpful, at least for me. My percentage profitable trades has greatly improved since having the dynamic PVP and I don't ever want to trade without it again!
Finally, seems like we are all on same or similar page about indicators and perhaps I could offer a sort of philosophy about them:
Even though they may or may not be helpful in automated strategies (though I suspect patterns like Fredy's at beginning of thread are both easier to test and give more concrete results applicable in trading without over-optimization quotient), for discretionary day-trading they should not be used as entry criteria, i.e. when Indicator X is like so and Indicator Y is like so, then buy/sell etc.
There are several main types of trades (I think).
1. Breakout of previous SR (highs/lows).
2. Pullbacks during strong moves (often to previous SR or SR-P levels)
3. Post-move Scalps fading recent strong move, basically going with the floor traders doing post-battle cleanup, i.e. after big/fast upmove, usually they take it back down and clean out all the recently-entered longs who now have BE stops (which is why I have my 'SR-P' price always in mind since price has a strong tendency to come back to these prices before resuming move again and making LL/HHs.
Each of these types can be filtered with indicators, i.e. only take breakouts in direction of longer term trend however you determine it, or go long only when breakout up & vwap is rising etc.
But in terms of simple non-indicator based price action, I think this thread is on the right track in that
a) discussion started with a basic price pattern, one of many which could be studied.
b) additional volume criteria.
In terms of b) I would like to suggest/state that I find the PriceVolume Histogram extremely helpful in terms of giving very clear visual read on most important support/resistance levels in current session and often in places that are no so easy to discern using price bars alone since they tend to highlight the key congestion areas.
Many regard congestion areas as dangerous, money-losing traps, which they often are. However, seeing very clearly where they are and not only the range but the key price level around which the congestion area is congealing, so to speak, is very helpful.
It is possible that finding that up bars with decreasing volume are good to fade etc. but I suspect it won't give consistent results unless there are many other contextual conditions, and the more you add the less meaningful the results.
So I suspect the simplest way to study this in a manner that is effective for daytraders like us is the following:
1. Identify some decent patterns with no other filters (including volume) that yield decent statistics with reasonable money-management. For example Fredy's first pattern which is breakout of previous OVB. His first example was daily OVB, later we had 4 hour and other OVB's. But OVB breakouts are relatively easy to test in a strategy from which to get statistics. And there are other simple patterns too such as IVB, Triple Touch at SR, SR Breakouts etc.
2. Then look at the VolumePrice and Volume Indicators in a more or less discretionary fashion around those particular patterns to see if some situations give a much better probability of success than others.
However, I do not think these things can be automated or made into rigid rules because there are too many variables: is it close to a report or just after? is it a big or narrow day? Is it the first hour or the last hour, is it near yesterday's low or high or near new monthly highs/lows. Etc. etc. etc.
But the main point I am making in my long-winded way is:
1. Work on simple patterns as introduced in this thread but maybe we could focus on a few and maybe a skilled programmer could write them out and we can get stats on each individual pattern.
2. Work collectively on volume-related stuff but without attempting to get overly rigid in defining rules or trying to code them too much, unless it's very, very simple. Otherwise the variable quotient will result in over-optimization and reduction of meaningful output not to mention large waste of time!
In my Journal I intend to keep an eye out for some of these things now and note them there and link them here. I have already noticed several things around the dynamic PVP that seem more or less reliable, for example. But I will also try to keep an eye out for OVB/IVB (i.e. simple pattern type) setups that seem to work better or worse when certain volume situations are also present/absent.
To follow through with this in my way, will be posting attached pic in my Journal with some comments. I do not do that here because I think it would be hijacking your thread and not quite the same topic since my work centres around SR with little emphasis on bar patterns per se apart from a couple that use the bars to determine SR levels.
But I offer here because some of them might be considered patterns worthy of study such as:
breaking through SR levels
retracement to SR levels
IVB in bear/bull markets
etc.
The notes in the chart are mainly self-explanatory but to clarify for those interested:
Negative skew flip = when PVP flips to new price and the vwap is now underneath versus previously above it. Then we got a half-hearted test of current DH to the tick which immediately reversed. Now I am looking to go short.
Schapiro Sell is from Jerry Perl: the 'Schapiro Effect/Rule' is that if a trade is good this bar it should be good next bar. In practice it means that if you are looking to short, wait for an up bar then enter at low of the up bar. Simple. I also look for a nice SR-P level to short from higher up if I can get it. Often you can't, especially if a new move is about to break open.
SR-P (SR Pattern) is the point at which a new move started following a simple pattern breakout of a previous bar high. I place the SR-P at 2 ticks above that high. (bullish example)
SR-R (SR Retrace) is a pullback to a recently broken SR, the line/price usually drawn at 3 ticks below the broken SR on the theory that a sell entry below would have been 2 ticks below the SR, so a retrace gives it an extra tick. In the example on far right mkt failed to make that price by a tick. That often happens and sometimes I lower the entry based on DOM volume. In this case I was touched but not filled (in SIM) about 5 times at the SR-R price. Not foolproof, but often works. (bearish example)
We are on the wrong road
Check this out - we have to start study astrology
4shared.com Astro Cycles guess written by who ? Larry Pesavento, I was "in out" when saw that
There's stuff on my journal. But basically am using DValueArea and BetterVolume2 and Vwap. Sometimes CCLFibBands but mainly for fun and/or to help contextualise day-session open/early going levels viz. Yesterday Close, Yesterday PVP or whatever. Nearly all the horizontal lines are drawn manually except weekly/daily pivot type thingies. So just a volume histo below, BV2 paintbars with a few custom additions I'll share soon, and the DValueArea VolumePrice Panel 1 histogram.
After looking at 1000 indicators I too looked into the "price action only" approach. Like everything else it has it merits and I certainly learned a thing or 2 from reading Al Brooks "Reading Price Charts Bar by Bar". But there is no panacea and staring down a chart for 7 hours a day reading bar by bar is a gruesome process so I've gone back to my indicators with audible alerts carrying some new setups but no holy grail.
I just want to say you don't have to do it like brooks. You can just trade breakouts, reversal bars, whatever. Brooks says to start out one should just trade one setup, and he recommends H2/L2 at the EMA. it's really simple and if price isn't near the EMA you can go about your other work.
I find if I have a well defined setup, like waiting for divergence, a new cycle, or a volume pattern, I don't have to watch every tick. That lets me do other things and not stress and overtrade. Sometimes I play piano while waiting for a setup.
