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Gozilla's Rough road to consistency.


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Gozilla's Rough road to consistency.

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  #201 (permalink)
 DbPhoenix 
Phoenix AZ
 
 
Posts: 470 since Dec 2012

Incidentally, about those arrows. They are there solely to illustrate their relationship to subsequent hesitations, consolidations, swing highs and lows. They are not actually drawn, much less drawn in advance. However, when price reverses direction, as it does in the chart in which those arrows are drawn, one should at least be aware of those swing points so that if and when price stalls along the way, the reasons won't be a complete mystery.

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  #202 (permalink)
 DbPhoenix 
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This is a blowup of the very beginning of the earlier chart. This is what you see when you open up your program:



Ignoring all that went before, you see that price is declining before the open, then reverses. After the reversal, it settles into a range. It's a very brief range and a very narrow one, but it is enough to serve as a springboard. It is where traders are finding value just before the opening bell. Price hits 59, drops to 56, hits 59 again. At the open, traders search for selling interest down toward 50, but they find buying interest instead, so price turns back up.



It is here where you implement the decisions you've already made. As you've already made them and have a sizeable database on which they were based, you don't have to think about what to do. All you have to do is press the key. And the decision is how far above this range does price have to reach before you know that the move has genuine intent behind it and is not just somebody trading something because it feels good? A tick? Two? A Point? Two? Three? If you wait too long, you'll run into profit-taking. If you don't wait long enough, price falls back into that range and you're in the red.

It is next to impossible to make these determinations in static charts. Looking at that first "breakout" bar, for instance, you don't know whether price falls to the low and finishes at the high, in which case you'd be fine, or it starts at the high and drops to the low, in which case a tight rein would prompt you to exit (if you have access to tick charts, you can determine these dynamics by examining that, but it's easier and more dynamic to use replay). But in this case, solely for the purpose of illustration, you can see that if you were to enter a point or two above the upper limit of that little range, your trade would never be in trouble. The lowest that 0934 bar gets is three ticks above the upper limit of that opening range. Hypothesizing that an entry 1pt above the upper limit of that range with an MAE of 1pt would keep you in this trade. This is far too tight, of course, and your hypothesis would have to be modified by the time of the next trade, but it serves to illustrate the process (tight entries and tight stops are emblematic of the fearful trader, but the chief purpose of all this is to remove that fear and enable the trader to be rational and logical in real time).

Now you do nothing until price makes a swing point, at which time you can draw a demand line:



(Incidentally, I don't know if these charts are resident here or not, so if you want them, I suggest you copy them in the event that they disappear at some point)

This line is broken at 0940 by four or five ticks, so you already know that your MAE may have to be modified. When price then makes a higher high, you know for sure that your MAE has to be at least five or six ticks.

When it does make a higher high, the DL can be fanned:



This line is broken by the very next bar, but by less than 3pts. Two bars, later, however, it drops as much as 3.25. Is this acceptable? Is it too much? Price does rally, so perhaps staying in the trade is desirable as opposed to exiting due to an MAE of more than 3. You subsequently have a lower high, but you can't know that in real time. So the central question is whether or not you want to and can remain in the trade. Your MAE will tell you that. And if you are presented with a lower high, that's a separate tactical decision.

In this case, the post-midnight high was 74.5 and you're at 74.5. Therefore, a decision to exit at this lower high, even though the break of your demand line may not have been deep enough to prompt an exit (which remains to be seen after many more examples), is not only reasonable, but it gives you the opportunity to short at the next retracement (my choice of emphasizing retracements in the SLA was not accidental).

Which brings you to the next decision: where to enter your short? Are you going to enter some distance from the high of the 0949 bar? From the right tick? From the low? And what will that distance be? A tick? Two? Four? Eight? And what will be the allowable MAE? In this case, if you were to enter your short a point below the LH, your MAE would have to be at least 4pts to prevent the following bar from prompting an exit. But if after your research you determine that the probabilities are in your favor under circumstances such as these (the halt at the post-midnight high, the break of the DL, the lower high), an MAE of four points becomes an acceptable risk and you don't have to think about it, which, again, is the purpose of all this: once these decisions are made, you don't have to think about any of them again until market conditions change, which is less often than people think, and you'll know quickly enough if they do because of the change in the results you achieve.

So price falls and begins ranging:



Now you return to MAE analysis. How far can price rise above this range before it indicates a reversal? How far can it rise above this range and still resume the downtrend? In this case, it doesn't rise above the range at all, thus providing no reason whatsoever to exit (and if you have to go to the bathroom, just place a stop above all this at whatever your predetermined MAE is and do your business). In other ranges, though, traders will poke above looking for buying interest. Sometimes they find it, and price rallies. That can throw you if you're not prepared for it. But if you know probabilistically how far price can go above such a range and still result in a continuation, you again don't have to think about it.

This is of course only the first hour, and there are more than enough opportunities in the chart I posted above to determine your MAE along with the most advantageous entry levels for breakouts and retracements. Once you have all that, you become a manager rather than an anxiety-ridden gambler.

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  #203 (permalink)
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DbPhoenix View Post
though technically it ought to be Maximum Adverse Incursion since it refers to price's coming back toward your entry

That is wrong.

MAE is the maximum price moved against you, not "back toward your entry". It is the opposite of "toward your entry". It is in fact "away from your entry".

Mike

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  #204 (permalink)
 DbPhoenix 
Phoenix AZ
 
 
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"Moving against you" will do for these purposes. "MAE" and "MFE" are merely conveniences. Any hanger will do.

But thank you for your comment.

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  #205 (permalink)
 Gozilla 
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Thanks for the detailed response, I think I have a better understanding of what to look at and will attempt work out the numbers and apply it too the backtesting I need to do over the next couple of weeks.

Gozilla.

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  #206 (permalink)
 DbPhoenix 
Phoenix AZ
 
 
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One note of caution: when it comes to these recoils, there are going to be times when you really have to clench your teeth and let the trade play out instead of exiting the trade immediately. Part of the difficulty lies in the entry. You have to know this almost perfectly. If your entries are sloppy, then you may face one stopout after another, whether automatic or manual (if manual, you may be tempted to give the trade "a little extra room", which would be even worse). That will not be calming.

Therefore, you will have to thoroughly understand trend and retracements at least. Ranges and breakouts can wait. You will have to be very clear of what you mean by "retracement" and test only that. If you use two bar intervals to define a retracement, you'll have to test both.

But even once you've found a workable limit for these recoils, you're going to have to place your stop -- automatic or mental -- where it should be regardless of where you actually enter. IOW, if you find that your best limit is 5, and you enter at N, and the entry should have been at N-1, your stop is going to have to be placed behind N-1, not N.

For example, if you enter a short at "85" and the short should have been entered at "84", your 5pt-stop is going to have to be placed at 79, not 80. That makes the stop 6pts behind your entry rather than 5. But that's not the stop's fault. It's the result of your having entered a point late.

What is more important is entering correctly, not the stop. If you enter correctly, the probability that the stop will be triggered is slim. Yes, it will happen. But that's trading. Losses are unavoidable. Just make sure that the losses are necessary.

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  #207 (permalink)
 Gozilla 
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DbPhoenix View Post
For example, if you enter a short at "85" and the short should have been entered at "84", your 5pt-stop is going to have to be placed at 79, not 80. That makes the stop 6pts behind your entry rather than 5. But that's not the stop's fault. It's the result of your having entered a point late.

I believe I understand the concept, stop should be based on ideal point of entry rather than actual entry if said entry is mistimed, but, I am not sure if I am misinterpreting the example, the way I read it, one would be stopped out of a short after a 6 point drop. Should the example be based on a long trade rather than a short?

I am assuming that different market conditions may have an affect on the MAE and these will have to be checked and tested on an ongoing basis. By different conditions I mean around holiday periods or over the summer months, I would suspect there might be more recoil when price finds itself around the mean of HTF ranges like the weekly or daily.

Should context be a consideration or would this be overkill as one will never know exactly when they will start or how long these periods of what seem like malaise will last.

Gozilla.

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  #208 (permalink)
 DbPhoenix 
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I was just testing you to see if you were paying attention

It's been a long day. It should read "for example, if you enter a short at "85" and the short should have been entered at "86", your 5pt-stop is going to have to be placed at 91, not 90." (sheesh)

As for the other, a good PA system is self-correcting and self-adapting. Therefore, when you find that what you're doing isn't working, whether your retracement tactics or your entries or your exits or whatever, back off for a while and go back to observation. Conditions will change throughout the year and throughout the cycle, but they aren't going to change as much as if you were to switch to another instrument. It's all part of the characterization process, but the chief objective of the process is to tie oneself to reality, i.e., verify the map.

There are only two people who are trading this in public. Everyone else avoids posting due to the trolls, so I can't say what "others" do because I really don't know. But I do know that Gringo avoids "middles", whether ranges or in trend channels. He'd rather wait for the extremes. But then he's learned a level of patience that is only dreamed about by most traders. 40D also prefers extremes, but as far as I know he has no rule about ranges. He's comfortable enough with reversals so that trading ranges is not out of the question.

For myself, I avoid ranges and I avoid middles, like Gringo. But I trade a far smaller interval than he does.

So your answer I suppose would be to determine what yields the most profit with the least effort. If you can make two or three trades a day and you're pleased with what you earn, then the hell with it. If you find yourself getting sucked into fifteen or twenty or thirty, it's time to do a little post-trading analysis and see exactly where your greatest profits lie, then ignore everything else.

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  #209 (permalink)
 Gozilla 
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In a bid too find a way, or rather a reasoning to hold onto trades on a day where price might be trending, certain ideas need to be explored.

To start off with, a trend would need to be identified and understood, for that, we will need a straight line . When price is trending it will head in a general direction either up or down, but, price does not head straight up or down, instead, the move up or down is interspersed with counter trends, pull backs or retracements, the depth and time of these counter trend moves can vary but if the overall direction is intact and there is no HTF context to think about one can let the trade run.

Unfortunately, trends don't often behave as one might think they should and what I am going to look at is what happens when the line is broken, this is where the straight line comes in, it merely tracks the behaviour or stride of supply and demand and is referred to as SL (down) or DL (up). A break in the stride only indicates a change of behaviour and there are 3 possibilities that might stem from this change, reversal, range or continuation, I included a range as opportunities may arise in those ranges, but, eventually price will breakout and either continue in the pre-range direction or move against it creating a new trend.

The point of this exercise is to work out how far the stride can be pushed but allow the trend to remain intact or at what point an exit is justified given the unfolding PA, the intention is to get myself into a position where I can be confident in handling adverse PA by better understanding what I am dealing with and take the actions needed that were decided prior to the trade being opened.

I will measure from the line at breaking point in the example below, work out the average break value and see how it picks up on the change as I found a day where price trends up for a stretch, flattens out and drops later in the day. Second chart is a representation of what I might have done or thought as the day unfolded if I had been trading, there are also a number of trades in there that would not have been triggered, I left them out to avoid clutter.



Average MAE in rally was around 3.5 with the outlier going into the HOD, could this mean something? The lower high created after the HOD deviated below average, and from this aspect alone there was no heads up on price doing anything different. However, price flattening out is one hint that something is changing, plus the HOD is a point shy of the previous days high-low MP, whether or not this means anything will have to be worked out in further testing.

Gozilla.

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  #210 (permalink)
 DbPhoenix 
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Gozilla View Post

Average MAE in rally was around 3.5 with the outlier going into the HOD, could this mean something?

There's a way to deal with this in real time. Revisit this when you've completed this task.

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  #211 (permalink)
 Gozilla 
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I think a picture is starting to emerge, but, I have more to do before I can make any conclusions. I am tracking trending days in an effort to learn a better way of managing them, I am also looking for trending days that throw the odd curve ball in order to analyse what is happening when things change and how I can take advantage of it.

The first chart is started in the minutes leading into the open, but, before that there was a drop overnight from the previous days high, this drop came to a climactic end 135 points later creating the low for the day 70 minutes after open, price then starts trending up trying to claw back some of what it has lost.

Whilst the breaks themselves are not major, price moves up at a faster pace and when it retraces back to the stride, these retracements can represent large point changes, this might be what @DbPhoenix referred to when one should clench their teeth.

The larger breaks at the start of the up move after the climactic drop may be explained by the action that proceeded the rally, sharp moves can have sharp counter moves so it may take time for the volatility to die down and let the action go at more sustainable pace.

The second chart has a little more going on, but, I have explained my thinking on the chart.

Gozilla.


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  #212 (permalink)
 Gozilla 
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Some of these charts are going to look quite messy, but, not all days are clear cut and one will have to learn to deal with days like this.

The following charts will have periods of chop or indecisive PA which can make things a little hard to track, there will be times where a decision will have to be made as to whether one wants to sit out or jump into the grinder, nothing wrong with sitting on your hands until the picture clears up.

First chart opens with high volatility breaking both sides of the PM range before dropping 40 points off highs, high volatility seems to equate to big point break reversals, if price can reach the PM range one might use a different tactic and pick off the reversals in this area, but, for now the focus is on trend continuations and break reversals.

PA did not seem to settle down until the lead up to lunch when we had some small trends that could have been taken advantage of if one is not put off by the unfolding hinge and range. As there are a number of things that could be done, and one never knows what will happen next a thoroughly tested plan would dictate the course of action.


The next two charts are the same one with different time frames, one on the 1 minute and the other on 5 minutes, I did this to show myself that all that chop in and around the hinge does not look like that big a deal on the 5 minute. In fact in hindsight I think I over analysed the 1 minute, but, I would have done this in real time, even the initial breakout on the 5 minute seems a lot more straight forward.


The second break on the 5 minute is tracked from the initial break better viewed on the 1 minute, price eventually moved higher without testing this break and the MAE was only 4.25.

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  #213 (permalink)
 DbPhoenix 
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If you have questions, feel free to ask. Otherwise I'm going to leave you alone. I understand what process is about, and you should be given the opportunity to make your own discoveries. Fortunately, you don't have tons of strangers jumping in to give you advice that has nothing to do with what you're trying to accomplish.

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  #214 (permalink)
 Gozilla 
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DbPhoenix View Post
If you have questions, feel free to ask. Otherwise I'm going to leave you alone. I understand what process is about, and you should be given the opportunity to make your own discoveries. Fortunately, you don't have tons of strangers jumping in to give you advice that has nothing to do with what you're trying to accomplish.

Thanks for your help DB, I'm going to be churning these out for a while yet until I feel I have a varied enough sample size to test out.

Gozilla.

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  #215 (permalink)
 DbPhoenix 
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I should point out that you're doing superior work. This is what everyone should do and nobody does, or has done (except for Gringo and 40D), though lajax will get to it eventually (the need to do it becomes self-evident).

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  #216 (permalink)
 Gozilla 
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I knew I was home on the date of this chart and could not figure out why it seemed so familiar. I recalled watching the day unfold starting pre-market and right through to the close, I was studying ranges at the time so had no interest in actively trading, this however did not stop me mentally shorting the FBO of the PM range and riding nearly all the way to the close.

All that aside, this is another chart with a lot going on and there are certain issues that could come up that a trader could struggle with.

There is a lot of HTF multiday context that may explain why price stalls at certain levels, there is also the effect of price departing the line, at one point price departs line A by such an extent that it represents 40 points on the vertical, price rarely goes vertical unless something exceptional happens, by the time line A is broken it only represents 11 points from lows at the break.

With price departing the line by such a large margin it might be wise to track it, in this instance it does move a long way, but, the move eventually goes sideways until the SL catches up to it.


There are quite a few deviations that may represent micromanagement, but, that is what can happen on a 1 minute chart. Alternatively, once one has entered the trade and has the first retrace, switch to a higher time frame for management.


And a chart I posted elsewhere that might go some way into explaining some of the intraday action, I mentally exited this after the bounce off the 43 when price poked above a range at 57, in hindsight this was a mistake, but, it was all in my head.


Gozilla.

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  #217 (permalink)
 DbPhoenix 
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Gozilla View Post

And a chart I posted elsewhere that might go some way into explaining some of the intraday action, I mentally exited this after the bounce off the 43 when price poked above a range at 57, in hindsight this was a mistake, but, it was all in my head.

What might you have done to avoid this?

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  #218 (permalink)
 Gozilla 
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What might you have done to avoid this?

I think the answer is in the work I am doing, I knew at the time price was ranging, when it came back to the previous swing high it broke it by a point +/-. If I understood the MAE at the time and was disciplined in the application of this knowledge I would have held the short. I might have lost a couple more points out of the 90, but, once price resumed direction it dropped a further 20 points into the close, my exit based on fear took me out of the trade 35 points too early.

Gozilla.

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  #219 (permalink)
 DbPhoenix 
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Some will scream "curve-fitting" and "data mining", but there's nothing wrong with going over the chart again, and recording just how far price goes for you and against you in relation to the line and the swing points. It takes far less time than puzzling it out in new chart after new chart. The point is to give yourself something to practice, not make unnecessary work. In fact, there's nothing wrong with going over it several times until you've optimized the trades, when you get to that step. Then you have something to work with. Even though what you end up with will have to be changed through implementation, at least you again have something to start with, and you'll arrive at your rules much faster.

I go through replays myself. It's a form of practice, like a driving range or batting cage or fingering exercises or scales. It enables me to begin the day without having to think about how I'm going to trade (after I've done the prep). Beats trading by "feel".

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 Gozilla 
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Some of the reversals turn out to be larger deviations, but, as one never knows what will happen next one must follow what is happening now.

Gozilla.



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  #221 (permalink)
 DbPhoenix 
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Regarding your first chart, whether you exit trades due to deeper retracements will depend in part on how much faith you have in AMT and how much you want to avoid having to re-enter.

If you expect price to reach that red line and if traders have given every indication that they intend to get there, note whether these retracements come back to previous swing lows, the medians of previous ranges, or the apexes of previous hinges. All of these levels are "comfort zones" and don't necessarily spell trouble.

As to the second one, that first retracement is pretty severe. However, it doesn't come anywhere near the halfway level. Whether you want to wait and see if it gets there or exit and re-enter is your choice. But the apparent strength is illusory.

As for the "larger deviations" in the third, these generally indicate that you're nearing the end of the run. There's no guarantee. Sometimes traders are just resting. But there's little reason to exit unless you're at or near an extreme.

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  #222 (permalink)
 Gozilla 
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DbPhoenix View Post
Regarding your first chart, whether you exit trades due to deeper retracements will depend in part on how much faith you have in AMT and how much you want to avoid having to re-enter.

If you expect price to reach that red line and if traders have given every indication that they intend to get there, note whether these retracements come back to previous swing lows, the medians of previous ranges, or the apexes of previous hinges. All of these levels are "comfort zones" and don't necessarily spell trouble.

As to the second one, that first retracement is pretty severe. However, it doesn't come anywhere near the halfway level. Whether you want to wait and see if it gets there or exit and re-enter is your choice. But the apparent strength is illusory.

As for the "larger deviations" in the third, these generally indicate that you're nearing the end of the run. There's no guarantee. Sometimes traders are just resting. But there's little reason to exit unless you're at or near an extreme.

Ideally when it comes to the AMT aspect I would like to be able to hold on as long as the trade is viable, this is mainly down to a history of getting tied up in knots on re-entering and getting chewed up, however, trusting it may take some practice. I'm not using a great deal of context when it comes to looking at how the day unfolds, but, when I zoom out it often comes as no surprise that price reacts how it does at certain levels.

As you noted on the second chart, the first retrace was severe and would have been enough for me, just now, to take an exit. I checked the retrace (left it off the chart to avoid clutter) and could see in the scheme of things that it failed to make back 50% of the move, from either the start of the move or the breakout, this alone might suggest further weakness that is evident in what happened next.

I'm noticing a lot of the larger deviations that do continue trending struggle to break past the swing point that anchors the last fanning of the line.

When it comes to my plan and testing, I am really going to have to give a lot of thought as to what I can tolerate, the damaged trader in me wants to exit at any adverse action, the logical part understands that price will ebb and flow and a good understanding of this behaviour along with a plan can accommodate this.

Gozilla.

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 DbPhoenix 
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A large part of the problem with what one can tolerate stems from the number of contracts one trades. If one is going through these tests trading only one contract, then it's all or none, yes or no, in or out, and if you make the wrong decision, then you are either fussing with multiple re-entries or you're just standing aside watching price take off without you. Trading multiple contracts expands the array of choices to an extent that enables you to take risks that you might otherwise be too cautious to take.

For example, if you are trading two contracts and find yourself in the situation provided by chart 2, you can exit one at whatever level your plan so far tells you and leave the other at breakeven. Thus if price does falter and continue at or before the halfway level, you're still in with at least something. If you're trading three contracts, you can determine a reasonable target for one of them from your MFEs and continue with the other two, exiting one at a signal such as mentioned above and leaving the other at BE.

The challenge here is that entering with two or three contracts prompts a lot of the old fears. In order to do it, one must have absolute confidence in his entries and his criteria for determining the success of those entries. He must also accept the inevitability of the occasional loss. This is going to take some practice. Maybe a lot of practice. But if one has through his testing determined that there is a high degree of confidence in a successful trade that the entry must be at A and the stop must be at B, the idea of trading multiple contracts is less likely to dredge up the old fears.

If you haven't begun keeping track of your MFEs, I suggest you do so. By that I don't mean the ultimate MFE but the initial impulse or thrust, i.e., how far can you expect price to go before it backs up on you and starts threatening your entry? 3 points? 5? 7? Whatever it is, that can be the target for one contract, and, when reached, the other contract can be moved to BE. Thus the only way to lose is if you enter incorrectly and price "stops you out" before the first target is ever reached. And if this occurs only, for example, one in ten, then at least you know what to expect. And if you lose through no fault of your own, there's no reason to beat yourself up over the loss.

You're at the point where you can begin playing with this while continuing to collect data on entries and retracements and MAEs and so on. They all work together synergistically, so trying to test each of them in isolation is difficult anyway. Better to test at least two or three together making one variable independent and the rest dependent, then switching things around to view the problem from different angles.

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  #224 (permalink)
 Gozilla 
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I've always seen trading with multiple contracts as a faster way to lose money when one is consistently losing so have never really given much thought to the benefits and flexibility that good management on an additional contract might offer, I never used to be an all in, all out trader, in the past I would add and reduce size depending on what was happening.

I have for a long time now been a 1 lot trader, if the trade is not working get flat, if it is working.... get flat. This time as a 1 lot trader has changed my thinking, its very black and white, you're in or you're out, reducing size has always felt like using a crutch, if its not working why leave some in, and if it does work you miss out on getting your size on.

There is more to it and there are threads that discuss the virtues of both in depth, but, I have to accept that I am a damaged trader that often struggles in those opening moments when price swings from positive to BE/negative or vice-versa and I will admit that I would most likely relax a little during an adverse move that I know will come if I "locked" some of the positive move in. I would consider using this tactic as a confidence building exercise.

As for the MFE, I am assessing entry criteria, I have been trailing my entry a bar behind the live bar and usually a point below/above, but, when it comes to ranges I will tag the live bar if I see the reversal in the right tick and at the extreme. I have been using the MAE tracking more for the management, in particular, management of trending days, whilst I have an idea of where and how to enter, these have been lower on the priority, I will try to track the impulse MFE on the entry leg.

Gozilla.

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  #225 (permalink)
 Gozilla 
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Had to chop up a chart a little to avoid cluttering it up, point A in the first chart is covered in the last chart and goes some way into explaining why price comes back on itself by as much as it does.

Gozilla.





EDIT: Just realised I covered this already.

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 DbPhoenix 
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Do you see these charts in toto before you begin or do you start at the left edge without knowing what's going to happen next?

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 Gozilla 
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Do you see these charts in toto before you begin or do you start at the left edge without knowing what's going to happen next?

At the moment I am looking at the charts in full, once I have a good idea of what numbers to move forward with I will go left to right and see if it matches up with expectations, then I'll do replay, then if things look on track, sim. I'm trying to slow things down a bit as I all to often get ahead of myself and then get disappointed when the results don't meet expectations.

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 DbPhoenix 
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All of which is fine, but if you're looking at the charts from beginning to end before you start, keep in mind that the figures you're coming up with will change once you begin tracking price from left to right with no idea what the outcome will be. It's easy to have faith in AMT if one knows the future. If one doesn't, the path becomes rockier.

This is not to say that this data should not be collected the way it's being collected, much less that it should not be collected at all. Everything you're doing will become valuable, even essential. Just don't be discouraged if things don't go as expected when the simtrading begins. All of this will play a part, even though it may not seem so at the time.

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 Gozilla 
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I have been analysing the days as a stand alone without any context in the frame, I've just been curious as to what may have caused price to do what it does during the day, as far as the AMT goes, I think I could get myself in to a little trouble with it.

Its not difficult to see AMT at work when price is bouncing off range extremes that are clearly identifiable, at some point something changes and price moves on, if one is reliant on AMT when this change happens they might find themselves getting into trouble. Whilst I did not know about the DB at the time of analysis, if I had done I might have relied on the AMT a bit more than I should have, The question is, what would I have done if price failed to get to get to the level highlighted?

I believe most likely that I would have gotten chewed up, SLA gives one a heads up when things are changing, the size of that change which I am working on would suggest continuity or reversal. AMT is more about where that change might most likely happen.

I'll change how I assess the charts, I am not sure if I should be concerning myself with entries and exits at this point, but, I will continue to track TBC, TBR and what I consider to be entry leg MFE, I will look at context from a pre market preparation perspective and I will have only the data up to the date showing so I am not biased towards the outcome in anyway.

The other thing I will look at is the swing points in the trend and how price reacts to them should it get back that far, more specifically the swing points that lead to the fan.

Attached the 60 minute chart as I thought the most recent move was interesting, Price goes from one extreme to the other, but, it has most recently reacted to the MP and found itself trying to break out. This rejection of the MP is also evident on the weekly and daily in their respective trend channels.

Gozilla.

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 DbPhoenix 
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Gozilla View Post
Attached the 60 minute chart as I thought the most recent move was interesting, Price goes from one extreme to the other, but, it has most recently reacted to the MP and found itself trying to break out. This rejection of the MP is also evident on the weekly and daily in their respective trend channels.

Keep in mind that the lines are made possible by traders' behavior, not vice-versa. If they hadn't traded the way they did, the lines would not have been possible.

Also note that after your breakthru, price begins to form a range. This projected range has a median, which apparently is where the last print landed.

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 Gozilla 
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I have spent a lot of time recently trying to accumulate stats regarding certain criteria in regards to entries and management of trades, I have struggled at times and I have often been distracted by watching the market as it happens and seeing how the numbers stack up. Though it has been tedious I have found it interesting trying to differentiate between the trades that work versus the trades that don't, it has very much been a case of looking for examples of something and trying to figure out what happens next.

The biggest observation (which is nothing new but it reinforces what I already know) to come from this is more to do with behaviour around entries, what do I expect to see in this situation, if there is intent behind the move it goes, it just goes, there is no waffling or confusion over what is happening the behaviour is clear and decisive.

One would have to question what they are looking at against what they expect to see, if a trader for example is trading a breakout and price has done enough to get them involved does the subsequent PA behave as a breakout should, and if it is not one would have to ask if this is a trade they still want to be in.

So back to the numbers, application with discretion springs to mind when it comes to moving forward and I will detail thought behind each number.

Trend break continuations: 3 points.
I expect a rally or drop to break its stride as it progresses, 3 points is the average the line can be pushed with the trend remaining intact. I did say 4 points earlier would work but I went looking for more examples and the average dropped to 3.

The breaking of the stride by more than 3 points does not signify a change of trend, it is only more likely that a change will happen. Watch how price interacts with the swing points that constitute the break.

Trend break reversal entry leg: 7 points.
Price has now broken stride and has retraced forming a lower high or higher low, one takes the trade per entry criteria, how far can a trader expect price to move before it comes back on the entry. I plan on entering trades with 2 lots and taking the first off on the entry leg and managing the other, However I will be tracking the alternative of this versus an all in all out approach.

A traders entry is irrelevant the measurement is from swing point to swing point, depending in how one enters the trade the first contract might be taken off after 3 or 4 points or less. Even though a 7 point move might be expected it does not mean that it will, watch how price interacts with the previous swing points, price may range.

Range poke: 1.5 points.
How far can a range or swing point be pushed but hold, 1.5 points, beyond that and one moves into the territory of breakouts and continuations, an order to trade breakouts could be left 7-8 ticks beyond the range extremes to catch a breakout.

Very important to pay attention to what happens next, price can move beyond 2 points then stall and hang around sometimes for hours, however, when there is intent behind the move it does not. If price gets to an extreme the move away is often decisive, if it is not, one would have to question their participation in the trade.

Breakout entry leg post retrace: 11.5 points.
Had a harder time defining the MFE to a breakout, a lot of the breakouts would often BO by 1,2 or 3 points before making a retrace of some kind (rarely noticeable on a 5 minute chart) but seeing as entries would boil down to a 1 minute chart I felt I had to include the rets as part of the breakout.

It seems a large number but I guess it is a reflection of traders intent to move on and find value.

I will start applying this 1 bar at a time on my next posts.

Gozilla.

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FilthyMcNasty
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Great work, thanks...

Personally I have the same problems collecting the necessary data, you described.
Lack of time (Did not hire myself yet to do the job, as DB recommends) and distraction basically.

What I ask myself is how the Setups DB showed at Traderslaboratory [sorry not able to post a link due to board regulations] could be integrated.

The most obvious for me is the number of price waves combined with a reversal setup (stride broken by X points) and a potential swing point.

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 Gozilla 
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Great work, thanks...

Personally I have the same problems collecting the necessary data, you described.
Lack of time (Did not hire myself yet to do the job, as DB recommends) and distraction basically.

What I ask myself is how the Setups DB showed at Traderslaboratory [sorry not able to post a link due to board regulations] could be integrated.

The most obvious for me is the number of price waves combined with a reversal setup (stride broken by X points) and a potential swing point.

Putting all this together will take time and I will make mistakes but, there are a few things I am picking up on.

I am at a point now where I don't try to rely on the lines as much as I have, a 2 point break of stride is more likely to result in a continuation, but, I still watch what price is doing, the fact price has broken stride is a warning that there is a change happening, I watch to see if it forms a LH/HL or a DT/DB or even if price pushes the previous swing point confirming a continuation that then rejects forming a DOG.

There is also context to consider and how price gets there (AMT), does it grind its way there or is there a frenzy of activity, and how does it behave when it gets there. It all comes down to the tactics one chooses to use as the day unfolds.

I push myself to think differently to how I have done in the past, I don't want what I think should happen to blind me to what is actually happening, the opportunity can pass in an instant whilst one struggles with their bias.

Gozilla.

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FilthyMcNasty
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Gozilla View Post
I am at a point now where I don't try to rely on the lines as much as I have, a 2 point break of stride is more likely to result in a continuation, but, I still watch what price is doing, the fact price has broken stride is a warning that there is a change happening, I watch to see if it forms a LH/HL or a DT/DB or even if price pushes the previous swing point confirming a continuation that then rejects forming a DOG

Even after following DBs stuff for several years now I never really understood that the amount of points after a break of a line could be a main ingredient that has to be backtested. So thanks for that...

At the end this should create a framework wherein one can act. And acting means watching in real time, listening to the tells of the market and also simply being available. And then doing it over and over again. This apart from the process of development for me is the hardest part...

Keep up the good work!

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 Gozilla 
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There's a way to deal with this in real time. Revisit this when you've completed this task.

@DbPhoenix This was a question pertaining to larger breaks of a DL/SL, I observed that one would often see increasing breaks and a flattening of PA once price gets to an area of context/AMT, but outside of context how would one deal with this in real time?

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 DbPhoenix 
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Gozilla View Post
@DbPhoenix This was a question pertaining to larger breaks of a DL/SL, I observed that one would often see increasing breaks and a flattening of PA once price gets to an area of context/AMT, but outside of context how would one deal with this in real time?

It's been so long that I had forgotten, and I didn't know that you had returned to your journal. If you have questions, you'll have to ask them in my thread or use my name somehow.

What I probably had in mind was introducing some flexibility into your exit, or at least your stop. Of course, if you're trading multiple contracts, it's not a big deal. Otherwise, you want to stay as long as possible.

The tapering on the chart that I was referring to when I made that statement is easy to see, even in real time. If nothing else, your demand lines keep getting broken. At some point, though, the break will be more severe, and at that point you have some choices to make.

If you're including AMT in your trading, you'll have at least some idea of how far you can expect price to go without introducing hope into the equation. I believe in that case it was the HOD. Good enough. If price goes sideways, which it often does, particularly if it's forming a springboard to a further advance, you can move your stop to N points -- 3.5 again, if you like -- below the new range. If instead price comes back toward you, you can allow it to make a swing point if you can stand it (if you can't, then just exit), then place your stop below that swing point. If it rallies back to the level where it broke the demand line in the first place, fine. But if it chokes and resumes its decline, taking out your stop in the meantime, also fine. You've made enough. Don't be greedy. The goal is to stay in the trade as long as possible. The objective is to do it with as little potential damage to yourself as possible.

Time of day is also a factor, of course. If it's late in the day and you're reaching the HOD, to hell with it. Just take it and be happy, unless you're in the special position of being at a spot where holding overnight makes sense, like if you just rejected an important extreme.

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 Gozilla 
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It's been so long that I had forgotten, and I didn't know that you had returned to your journal. If you have questions, you'll have to ask them in my thread or use my name somehow.

What I probably had in mind was introducing some flexibility into your exit, or at least your stop. Of course, if you're trading multiple contracts, it's not a big deal. Otherwise, you want to stay as long as possible.

I think I got a little sidetracked in the intraday thread looking to see how the stats stack up live, whilst they held up well, I am increasingly waiting to see if the trend can remain intact. The numbers I have collected only allude to what is most probable not what is definite.

I guess when it comes to the crunch a lot of it comes down to an individuals risk tolerance and how much they can endure a pullback that might break the trend.

I am planning on starting another thread for testing the plan as I don't want to bury my thread in charts, and I will look to do around 200 trades (possibly more) detailing everyone I take. Starting with a bar by bar backtest then moving onto replay then sim and if the results stay on track back to the live ring.

Its not so much the plan that needs to be tested, I need to be tested as well, as it will not do as well as I think it will if my wheels keep dropping off.

Gozilla.

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 DbPhoenix 
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Gozilla View Post
I think I got a little sidetracked in the intraday thread looking to see how the stats stack up live, whilst they held up well, I am increasingly waiting to see if the trend can remain intact. The numbers I have collected only allude to what is most probable not what is definite.

I guess when it comes to the crunch a lot of it comes down to an individuals risk tolerance and how much they can endure a pullback that might break the trend.

I am planning on starting another thread for testing the plan as I dont want to bury my thread in charts, and I will look to do around 200 trades (possibly more) detailing everyone I take. Starting with a bar by bar backtest then moving onto replay then sim and if the results stay on track back to the live ring.

Its not so much the plan that needs to be tested, I need to be tested aswell, as it will not do as well as I think it will if my wheels keep dropping off.

Gozilla.

I don't know how many times I said it in the book, but the SLA is intended for beginners and fearful traders. As long as one follow the rules, he'll make money. As one might imagine, fearful traders have far more difficulty with this than beginners do. But one who pursues it eventually leaves it, just as one who is living at home eventually -- one hopes -- leaves it and strikes out on his own. I've assumed from the beginning that one who studies it and applies it rigorously will learn enough about how price moves -- even if that learning is largely unintentional -- so that he can begin to explore the nuances of it, nuances which are beyond the reach of the intended audience. A beginner -- at least at the beginning -- is not going to concern himself with enduring pullbacks, nor is he expected to. A fearful trader isn't even going to try. It is only those who have moved past all that who will pursue the "why" and begin to explore the nature of price movement itself, which will eventually involve the study of behavior, particularly fear (which brings us back to Appendix F).

What you're doing is moving beyond the SLA toward areas that most won't even bother with. But that doesn't mean that the SLA serves no purpose. The SLA is, again, training wheels. One expects those who stick with it to take them off at some point and move more freely.

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  #239 (permalink)
 Gozilla 
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Started another journal as I wanted to avoid burying this one in charts from backtesting.



It is little basic but I will use the time to look at certain aspects and refine it as I move forward.

Gozilla.

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