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THREE SET UPS


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THREE SET UPS

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  #931 (permalink)
 shodson 
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cunparis View Post
I think entry triggers are great because we can relax a bit while waiting for the trigger and potentially monitor several markets. But once it triggers, in my opinion, discretion is required. The reason is it's very difficult to have an exit trigger. Many edges only have a few ticks net edge (many only have 1 tick net edge). If discretion can get an extra tick out of it then that can increase the profit by 50% (or double it).

I give you an example: When I scalp, I look to get as much as I can. But if price stops moving in my way I'm out. Sometimes I get a couple ticks and sometimes more. But I try not to let it come back to my entry.

Now if I tried to automate that I'd have to pick a target and that would be making a lot of sacrifices. Let's say the target is 8 ticks, market goes 6 ticks in my direction and then pulls back 3. I can get out with +3 ticks. An automated system would get out with 0 assuming a "breakeven stop" is triggered. Now let's say the market moves 12 ticks and then pulls back 2. I could get out with 10, once again beating the automated method.

I quit messing with automation for this reason. I remember back when I was backtesting another strategy with Jeff, I optimized and came up with an optimal target that was bigger than Jeff's +8/+16. I forget what it was but I told Jeff that it's better to wait for the "optimal" target. I don't remember his exact words but it was something like "just because it has hit that in the past doesn't mean that it'll continue doing so". Which turned out to be exactly right. Over the next few weeks the "optimal" wasn't optimal.

So to conclude, backtesting entries can be good to find entry triggers. But in my opinion, discretion should be used once in the trade.

I hope you found this post useful. I wish several years ago I had known this and spent my time learning to trade with discretion instead of programming & backtesting.

These are great comments, and a very viable way to trade, but it may not be suited for everybody. I consider this style favorable to those that need to frequently feel "right". With this approach you probably have a very high win rate, but you probably don't get very many large runners that are winners, except for those times where the market goes parabolic.

I'm interested, if you enter, and immediately it doesn't move in your direction, or even starts moving against you, do you then get out as well for a small loss? Or do you wait for the stop loss to hit? I'm just curious as to how much room you give a trade before bailing on it.

Many people make good money with low win rates, because they are holding on for the big moves. It just all depends on what style fits your personality, and that's why there's no "one size fits all" trading style. As for my IB backtesting, I'm finding best results with targets about 1.7-2.0x the size of my stop loss, so I don't mind having a < 50% win rate. Also, on CL, checkout out IBs on the 20min time frame, works better than the 15min, per my testing.

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  #932 (permalink)
 shodson 
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shodson View Post
As for my IB backtesting, I'm finding best results with targets about 1.7-2.0x the size of my stop loss, so I don't mind having a < 50% win rate. Also, on CL, checkout out IBs on the 20min time frame, works better than the 15min, per my testing.

Also, I like the 1hr time frame on 6E best, London hours only though

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  #933 (permalink)
 cunparis 
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shodson View Post
These are great comments, and a very viable way to trade, but it may not be suited for everybody. I consider this style favorable to those that need to frequently feel "right". With this approach you probably have a very high win rate, but you probably don't get very many large runners that are winners, except for those times where the market goes parabolic.

I'm interested, if you enter, and immediately it doesn't move in your direction, or even starts moving against you, do you then get out as well for a small loss? Or do you wait for the stop loss to hit? I'm just curious as to how much room you give a trade before bailing on it.

Many people make good money with low win rates, because they are holding on for the big moves. It just all depends on what style fits your personality, and that's why there's no "one size fits all" trading style. As for my IB backtesting, I'm finding best results with targets about 1.7-2.0x the size of my stop loss, so I don't mind having a < 50% win rate. Also, on CL, checkout out IBs on the 20min time frame, works better than the 15min, per my testing.

I definitely agree with your point of view. That's the key to trading, everyone has to find what works for them. There's no single way or no secret setup. To answer your questions, my stop depends on what kind of setup I'm entering on. Some have 3 ticks on ES while others 6-8 ticks. On crude that's the one I just bail if it doesn't go my way. Keep in mind I'm going for scalps right now so I'm not worried about big runners. They're hard to get and I find just getting 1 pt reliably can yield more than getting that one big runner and stopping out on all the others. My goal is to get consistent with 1 contract with tight stops getting 4 ticks and then I can add a 2nd and go for 6-8 ticks. In fact I'm in that phase now trading bund & ES with 2 contracts. Then when that is consistent I can add a 3rd and go for more on the best setups.

In my opinion context is the most important thing in trading and just taking inside bars without regards to context is not going to be optimal. And context is very discretionary. So if we're balanced or imbalanced I'll trade differently.

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  #934 (permalink)
 shodson 
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cunparis View Post
I definitely agree with your point of view. That's the key to trading, everyone has to find what works for them. There's no single way or no secret setup. To answer your questions, my stop depends on what kind of setup I'm entering on. Some have 3 ticks on ES while others 6-8 ticks. On crude that's the one I just bail if it doesn't go my way. Keep in mind I'm going for scalps right now so I'm not worried about big runners. They're hard to get and I find just getting 1 pt reliably can yield more than getting that one big runner and stopping out on all the others. My goal is to get consistent with 1 contract with tight stops getting 4 ticks and then I can add a 2nd and go for 6-8 ticks. In fact I'm in that phase now trading bund & ES with 2 contracts. Then when that is consistent I can add a 3rd and go for more on the best setups.

In my opinion context is the most important thing in trading and just taking inside bars without regards to context is not going to be optimal. And context is very discretionary. So if we're balanced or imbalanced I'll trade differently.

For scalping, being "right" frequently is definitely very important.

As far as context goes, it definitely helps, but the reason I think you can still succeed without context is that an IB is a pause, and most of the time the next move of the market is 50/50 and if your loss is x and your profit target is y where y>x, on a 50/50 setup, over time, you make money. The key is time frame: how long of a pause is a good pause? It has to be long enough to allow larger time frame traders to push the market in the next direction. If it's too short then your moves won't have enough energy behind them to matter.

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  #935 (permalink)
 shodson 
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I've been looking at reversals for a while, and for these you definitely need context. I figure I need at least 3 lower lows to precede a long reversal bar, or 3 higher highs to precede a short reversal bar. Here's a SIM trade I took on CL today, though it didn't work out, but almost did. Also, as far as volume goes, it seems that if the reversal bar has higher volume than the previous bar, it doesn't work out as well. Otherwise if you get big volume in your trend bars and you get a nice reversal bar with less volume that those tend to work out better. What think ye of my thinking on this trade?


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  #936 (permalink)
 LukeGeniol 
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shodson View Post
I've been looking at reversals for a while, and for these you definitely need context. I figure I need at least 3 lower lows to precede a long reversal bar, or 3 higher highs to precede a short reversal bar. Here's a SIM trade I took on CL today, though it didn't work out, but almost did. Also, as far as volume goes, it seems that if the reversal bar has higher volume than the previous bar, it doesn't work out as well. Otherwise if you get big volume in your trend bars and you get a nice reversal bar with less volume that those tend to work out better. What think ye of my thinking on this trade?

This is good, but the SL is better some ticks under the low of the reversal entry bar, and it would work.

Take your Pips, go out and Live.
Luke.
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  #937 (permalink)
 shodson 
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LukeGeniol View Post
This is good, but the SL is better some ticks under the low of the reversal entry bar, and it would work.

I thought I had my stop below that wick, but it looks like it was filled right at it or even just above it!?!?!

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  #938 (permalink)
 Bookworm 
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cunparis View Post
We want to trade the most liquid month, so when the new month becomes more liquid that's when we change. one can trade a less liquid month but you're more likely to have slippage and violent price moves against your position.

Yes agree 100% which is why I said "should" and not "is". The link I posted simply makes it easier to know when to start looking for the rollover.

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  #939 (permalink)
 BDawg 
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I just wanted to say a big THANKS to all who have contributed to this thread.
I'm gonna try to code some of this up in Tradestation.

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  #940 (permalink)
RiskControlMaster
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cunparis View Post
I definitely agree with your point of view. That's the key to trading, everyone has to find what works for them. There's no single way or no secret setup. To answer your questions, my stop depends on what kind of setup I'm entering on. Some have 3 ticks on ES while others 6-8 ticks. On crude that's the one I just bail if it doesn't go my way. Keep in mind I'm going for scalps right now so I'm not worried about big runners. They're hard to get and I find just getting 1 pt reliably can yield more than getting that one big runner and stopping out on all the others. My goal is to get consistent with 1 contract with tight stops getting 4 ticks and then I can add a 2nd and go for 6-8 ticks. In fact I'm in that phase now trading bund & ES with 2 contracts. Then when that is consistent I can add a 3rd and go for more on the best setups.

In my opinion context is the most important thing in trading and just taking inside bars without regards to context is not going to be optimal. And context is very discretionary. So if we're balanced or imbalanced I'll trade differently.

This is exactly the point, have to view every setup in the context of bigger picture, with the connection of news and other fundmentals

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