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THREE SET UPS
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Created: by Jeff Castille Attachments:243

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THREE SET UPS

  #1 (permalink)
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THREE SET UPS

As some of you know I have been working for the last month on three set ups. I thought I'd take a minute and share the results of this effort. The win rate for these trades is over 90% in the last 30 days.

I have been trading CL using a 15 minute chart. These set ups are as follows: INSIDE BAR, OUTSIDE (ENGULFING) BAR AND REVERSAL BAR.

INSIDE BAR: This is the simplest set up of the three. If the current bar closes within the previous bar.....set a buy or sell stop 1 tick above/below the inside bar and put your stop at the opposite end +1 tick. The Reversals v4 indicator paints the inside bar yellow so you can't miss it. The psychology of the trade is that there is indecision in the market and you simply get on board when the market makes up its' mind which way it's going.

OUTSIDE BAR: On this set up you do NOT wait for bar close for your entry......you enter WHEN the previous bar is being engulfed. You still use a buy/sell stop and place your stop at the opposite end of the outside bar +1. The psychology of this trade is a CHANGE in sentiment.......first going one way and then the other.

REVERSAL BAR: This set up is a little tougher........the key is to recognize that this bar MUST occur AFTER an up/down move on higher volume. The wick on the bar (candle) must be approximately 2/3 of the entire bar. The psychology of this trade is that at extreme levels (after a good move) that prices will attract buyers/sellers.

NOTE: I didn't invent these trades........I actually read about them about a year ago and never really persued them until now. I didn't remember where I read about them but......thanks to Silvester 17 my memory has been refreshed !!! These basic set ups were presented by Malcolm Robinson ( a good trader and teacher.) He didn't invent them either ! lol These are well known Japanese Candlestick Patterns that have been around for centuries.

I'm posting yesterdays chart......which was good for 148 ticks on CL.

I've got Roonius working on an improved version of the Reversal v4 but I'll post the current version with the template that I am using.

If you have some experience trading these set ups I'd be interested in hearing from you.

Thanks, Jeff

Attached Thumbnails
THREE SET UPS-cl-07-10-6_15_2010-15-min-.jpg  
Attached Files
Register to download File Type: xml REVERSALS WITH VOLUME.xml (34.8 KB, 738 views)
Register to download File Type: cs CMICurrentDayOHLV7.cs (44.7 KB, 316 views)
Register to download File Type: cs CMIPivotsDailyDashV7.cs (54.5 KB, 277 views)
Register to download File Type: cs jtEconNews.cs (23.5 KB, 245 views)
Register to download File Type: cs TradingTime.cs (6.1 KB, 342 views)
Register to download File Type: cs @BarTimer.cs (9.1 KB, 242 views)
Register to download File Type: cs @VolumeUpDown.cs (5.5 KB, 258 views)

Last edited by Jeff Castille; June 16th, 2010 at 07:19 PM.
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  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary
Jeff intiated thread
Fatails FT
Shodsen Shod
Silvester17 Sil
Michael.H MH

page1
Jeff: CL with 3 bar setups used on CL and 15min with high success rate for him (5/17-6/16 92.24 winning %.) and ask for people with experience in trading these setups to share. https://futures.io/attachments/15549d1276722577

FT: not setups without other criteria such as trend (ES)
Jeff: to FT what timeframes?
Shod: post 15 pg PDF on Bar Patterns for trade Setups
Sil: posts ES 5 min chart with 3 winners 0 losers, reversals with vol
MH : suggests switching to non-time based charts
Jeff: to MH - did you use tick? did you try CL?
page2
MH: no not CL - uses tick > 900 adjusted to personality and with other rules
jeff: let's look at just inside bars (5/17-6/16) 15 minute CL 6-9 am PST to 10-11:15 am PST 46 trades 40 winners(at least +8+1),2 stop outsm 4 stop and reverse.


Last edited by aquarian1; January 15th, 2011 at 02:00 PM.
 
  #3 (permalink)
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Hi Jeff,

all three types of bars are very useful, but I would not call it a setup, unless you have additional criteria as a prerequisite and they become signal bars.

Inside bars

If an inside bar occurs in the middle of a trading range, it does not tell me much. Most of the inside bars are meaningless in a way that they do not show any significant price action. I actually prefer to use narrow range bars, I have coloured them on my charts. These bare, call them dojis, show a temporary pause in price action and you can eventually trade a breakout. They usuakky have good risk-to reward ratios, if you take them as signal bars. If you trade a long break out, you would enter a position on a buy stop above the doji and put you sell stop just below. The narrow range, means that your risk is low as well. For high probability setups you would want additional criteria, such as support and resistance and volume analysis.

Outside bars

Very nice setup, if the outside bar occurs in the direction of the prevailing trend and has trapped some countertraders. The trapped traders are rushing to exit their positions, which could extend the move. Enter near the stops of the countertraders. You would also need additional conditions here to define the setup, such as high volume and trend filter.

Reversal bars

This is a well known setup now, so there are many false setups. A real reversal bar (or two bars, known as a railway setup) should have high volume. If it does not it is just a trading range that fits exactly into the period chosen for the bar. Reversal bars can be valid signals if

- they occur outside a Bollinger Band or Keltner Channel
- they occur at a significant resistance
- they are a failed retest of a prior high or low (second entry)
- the reversal is a retracement / with-trend setup on a higher time frame

I would like to post some examples of successful and failed setups here, but I am not on my main machine, so will do this during the next days.

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  #4 (permalink)
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Fat Tails View Post
Hi Jeff,

all three types of bars are very useful, but I would not call it a setup, unless you have additional criteria as a prerequisite and they become signal bars.

Inside bars

If an inside bar occurs in the middle of a trading range, it does not tell me much. Most of the inside bars are meaningless in a way that they do not show any significant price action. I actually prefer to use narrow range bars, I have coloured them on my charts. These bare, call them dojis, show a temporary pause in price action and you can eventually trade a breakout. They usuakky have good risk-to reward ratios, if you take them as signal bars. If you trade a long break out, you would enter a position on a buy stop above the doji and put you sell stop just below. The narrow range, means that your risk is low as well. For high probability setups you would want additional criteria, such as support and resistance and volume analysis.

Outside bars

Very nice setup, if the outside bar occurs in the direction of the prevailing trend and has trapped some countertraders. The trapped traders are rushing to exit their positions, which could extend the move. Enter near the stops of the countertraders. You would also need additional conditions here to define the setup, such as high volume and trend filter.

Reversal bars

This is a well known setup now, so there are many false setups. A real reversal bar (or two bars, known as a railway setup) should have high volume. If it does not it is just a trading range that fits exactly into the period chosen for the bar. Reversal bars can be valid signals if

- they occur outside a Bollinger Band or Keltner Channel
- they occur at a significant resistance
- they are a failed retest of a prior high or low (second entry)
- the reversal is a retracement / with-trend setup on a higher time frame

I would like to post some examples of successful and failed setups here, but I am not on my main machine, so will do this during the next days.

Hey Fat Tails,

Thanks for your comments.

One of the reasons that I have been using the 15 minute chart is that it seems less prone to the failures that you are referring to. The 15 minute chart also keeps me from over trading.

Jeff

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  #5 (permalink)
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Have seen a number of false reversal bars on the 15-minute chart for ES, I am also using this timeframe.... will post them.


Jeff Castille View Post
Hey Fat Tails,

Thanks for your comments.

One of the reasons that I have been using the 15 minute chart is that it seems less prone to the failures that you are referring to. The 15 minute chart also keeps me from over trading.

Jeff


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  #6 (permalink)
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If you like inside and outside bars you might like this.

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Fat Tails View Post
Have seen a number of false reversal bars on the 15-minute chart for ES, I am also using this timeframe.... will post them.

At a quick glance of the 15 minute chart of the ES.........(which I do not trade) I noticed that there were failures during the time period that is known as "GRIMREAPER" this is from 11:30 am to 12:00 PST......this is when the bond market is closing and NOT a good time to be trading the indexes. So I hope that your examples of "failed" trades will consider "time of day"

Also, I do NOT trade 15 minutes before or after the release on high priority news. I would venture to say that the reason many traders fail is that they do NOT give the proper respect to dangerous times to trade........at the open.....at the close.....either side of major news....lunch time in NYC.....bond market closing......Bernanke or Geithner speaking etc.

If examination of charts does NOT include "time of day" then the reasearch is worthless.

Jeff


Last edited by Jeff Castille; June 17th, 2010 at 02:07 AM.
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  #8 (permalink)
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today I had 3 reversal trades that met all the necessary criteria. using a 5 min chart for ES. couldn't find a single loser.

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  #9 (permalink)
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i posted about this in another thread... you were i think were i was about 2 years ago...

I would get alot of false signals when trading using 5 min bars... so i switched to higher time frames, and that killed alot of false positives... Unfortunately, when you do that, you have to take alot more heat, and most of the times you'll get in towards the end of the move, unless you are disciplined enough to catch those high runners that happen only a few times a month... I suggest you switch to non-time based charts.... when you play around with it you'll notice that its actually better. Its still cuts out most of the noise, but you don't have to wait 15 min to see if its a failed reversal, or a hammer, or whatever pattern your looking at. ( I personally gave up on candlestick patterns since after backtesting i found very little positive results).
When market slows down, less bars form, so you stay away from chop. when markets move fast, you get more signals, and trade more since there are more opporutnity's....

Hope this helps

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  #10 (permalink)
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Michael.H View Post
i posted about this in another thread... you were i think were i was about 2 years ago...

I would get alot of false signals when trading using 5 min bars... so i switched to higher time frames, and that killed alot of false positives... Unfortunately, when you do that, you have to take alot more heat, and most of the times you'll get in towards the end of the move, unless you are disciplined enough to catch those high runners that happen only a few times a month... I suggest you switch to non-time based charts.... when you play around with it you'll notice that its actually better. Its still cuts out most of the noise, but you don't have to wait 15 min to see if its a failed reversal, or a hammer, or whatever pattern your looking at. ( I personally gave up on candlestick patterns since after backtesting i found very little positive results).
When market slows down, less bars form, so you stay away from chop. when markets move fast, you get more signals, and trade more since there are more opporutnity's....

Hope this helps

Hey Michael,

I would be curious to find out ......when you switched from time based charts to non time based charts......which market were you trading and did you switch to tick charts? Did you try the candlestick patterns on CL?

Jeff

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