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THREE SET UPS


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THREE SET UPS

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  #641 (permalink)
 vegasfoster 
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Cunparis and Shodson are on working on backtesting different stops and profit targets (I am assuming at this point they are going to share their findings?). So I was wondering if this works simply because enough people believe that an inside bar on at least a 15-minute bar has significance or does it work because trading breakouts of periods of consolidation is an effective short-term strategy on highly volatile instruments regardless of the confines of a specific price bar.

If so, then maybe there are other equally effective methods to capture the principle and create additional trading opportunities. To start, I was thinking of testing the same strategy for a sample period but using different session start times so the bars are staggered, e.g. 6:00, 6:05 and a 6:10, and see if the results are comparable and whether this increases opportunities or merely overlaps them. Then maybe try using range bars in different ways, both ignoring time and taking time into consideration. For example, if the price sits in a certain range for at least 10-minutes then maybe that provides a good opportunity, etc.

Does anyone have any other thoughts or ideas? Thanks.

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  #642 (permalink)
 Fat Tails 
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This is what is called "A Greater Fool Trade". Unfortunately you did not find a greater fool. You either take a trade outside in or inside out, but never would I take a trade outside out.

The bar had a second problem: the range was too large and it was not a NR4 bar.

So there are two strong arguments not to take the trade.



shodson View Post
I haven't had time to backtest this, but IBs that touch outside a Keltner seem to be more risky. My first on loss on Friday (a 44 tick loss) could have been prevented.


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  #643 (permalink)
 shodson 
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Jeff Castille View Post
You are trading during lunch time in NYC !!!! This isn't the best time to trade. I see half of al signals FAIL during this time period....So if you want to trade during this time period.....good luck with that.

As far as your other questions........I'm just focused on 15 minute charts so I can not say how the 15 min related to the 5.

Sure.....wickless inside bars......why not......that behavior usually shows some good activity.

THE MOST IMPORTANT THING........TIME OF DAY.

Yeah, today was a great day, too bad I didn't trade it. I would have had +48 on CL and +24 on 6E. At least I got a +9 tick winning gap trade on ES

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  #644 (permalink)
 aviat72 
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vegasfoster View Post
To start, I was thinking of testing the same strategy for a sample period but using different session start times so the bars are staggered, e.g. 6:00, 6:05 and a 6:10, and see if the results are comparable and whether this increases opportunities or merely overlaps them. Then maybe try using range bars in different ways, both ignoring time and taking time into consideration.

I was thinking exactly the same thing today. IBs on a time chart represent periods of consolidation which range bars unfortunately do not capture, unless you explicitly track the time spent in the bars.

I was thinking along a different direction though. How about using a 14 or a 13 minute bar so that we do not fall on the boundaries of multiples of 5s, 15s, 30s and 60s.

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  #645 (permalink)
 aviat72 
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Jeff Castille View Post
You are trading during lunch time in NYC !!!! This isn't the best time to trade. I see half of al signals FAIL during this time period....So if you want to trade during this time period.....good luck with that.

As far as your other questions........I'm just focused on 15 minute charts so I can not say how the 15 min related to the 5.

Sure.....wickless inside bars......why not......that behavior usually shows some good activity.

THE MOST IMPORTANT THING........TIME OF DAY.

Jeff, have you experimented with smaller targets during low volume periods? The dynamics of the breakout are still valid but the follow-through is often missing. A +4+8 (with a -4,-8 stop-size) would be interesting to back-test.

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  #646 (permalink)
 papa15 
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Jeff
I have not taken the time to thank you here for bringing these setups to our attention, and that is a mistake. For the last month I have concentrated on just the inside bar setup and it has made a world of difference in my trading. Stress is down, I am not trying to read something into the charts that isn't there, and best of all, the success rate is much higher, so from me to you, a heartfelt thanks.
Papa15

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  #647 (permalink)
 Jeff Castille 
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aviat72 View Post
Jeff, have you experimented with smaller targets during low volume periods? The dynamics of the breakout are still valid but the follow-through is often missing. A +4+8 (with a -4,-8 stop-size) would be interesting to back-test.

Hey Aviat72,

No, I have not experimented with smaller targets during low volume times..........I've had it drilled into me NOT to trade at low volume times........sometimes I regret it when I see a monster move at lunchtime in NYC but......I don't have the patience to wait on the slow moves the USUALLY occur at low volume times......I like to get in an get out!!

Minimum exposure........

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  #648 (permalink)
 Jeff Castille 
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Here's an excerpt from an article by Al Brooks.......I've posted this before.........there are really only a limited amount of hours where there are good opportunities to trade. So.......why would I want to trade at what are NORMALLY low volume times.........well......I don't ......I think trading at low volume times is for losers. Believe me......if I thought I could make money at low volume times......I would do it.

Notice how he starts the article....."ALTHOUGH EVERYONE KNOWS THAT THE FIRST HOUR OR SO IS THE BEST TIME TO TRADE....."

Best Time to Trade Although everyone knows that the first hour or so is the best time to trade, many traders miss too many of the trades because they happen too fast and the change of directions occur abruptly. The market is going up very strongly and then on the next bar it falls with just as much momentum. By the time you accept the reversal, you have missed the trade. However, if you train youself to focus intensely during the first hour, you should be able to see about four strong setups. Even if you choose to scalp them, you can do well. Remember, either the high or low of the day usually occurs in the first hour or two, and this means that the market will eventually run away from that area very far by some point in the day. If you can learn to take those entries, you can do very well with swing trading. On most days, you will have to take 2 - 4 entries while attempting to catch a big swing but it is worth it. And it is hard to do. Some traders live for those first two hours and then don't trade for the rest of the day. One very successful trader told me that he analyzed his trading and discovered that he made 90% of his money in the first hour or two and decided to no longer trade the rest of the day.

The next best time to trade is in the final hour or two. The market often has nice trending swings going into the close.

The single worst time to trade is in the middle third of the day where the market usually is spending a lot of time in the middle third of the range, near the EMA, forming lots of Barb Wire and chopping swing traders to pieces. Yes, great price action traders can make money there, but until you are consistently profitable, you should avoid it.

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  #649 (permalink)
 gtichauer 
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shodson View Post
Yep, one trade scenario a pattern does not make.

I think the problem I have is when the IB is much larger than my target, usually because it follows a large expansion bar. While it's a pause, relative to recent price action, the IB may still be much larger than normal volatility and the market may still be trading violently.

shodson given u have the ability of coding why don't u filter your trades for Narrow Range bars? This way should reduce the size of your stop and enhance the r:r ratio....once u have code it u should check which parameter work best.....4,5,6,7,etc.....

another way I am looking to this, although not able to backtest, is to look for reversals only after 3 consecutive bars on the same direction....ie three red bars and then IB to hte short side only.....

Both this methods will for sure decrease the amount of signals but should work on efficiency of the ones taken.....but u can solve this by adding markets...

GT
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  #650 (permalink)
 shodson 
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I created an IB indicator that paints the bar black if it's a "good" IB and orange if it's a "bad" IB

A good IB is

- inside a Keltner
- NR4
- the range is < ATR(14)

We can debate or modify what we think a good IB is or not, but this is a start.

You can modify the settings on the Keltner, the NR look back, and the ATR period. If you want to ignore any of these criteria then set their related parameters to 0 and the rule will be ignored. If you are filtering for Keltner channels it will draw the channel for you.

I also added a "GoodBar" DataSeries so if you want to trade good IBs in a strat on bar close look for

 
Code
indicatorObject.GoodBar[0] == 1
After having reviewed this a bit a good strat might be to take a breakout of a good IB, target ATR and put your stop loss at the bottom of the IB, therefore target is always greater than stop loss, so you only need a 50+% win rate to be profitable. Add in the right instrument, time of day, and avoid bad times to trade and you're set.

If you have any other potential filters that you think would be worthy to add let me know. Thanks to Fat Tails for recommending the first 2.

It's in the Elite Downloads section, for Elite members only


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