brownsfan019

I didn't believe or understand the 80/20 rule till I was in a sales job. As a broker, my ratio was more like 85/15 where 85% of my income came from my top 15% clients. I would be interested to see the translation into full-time trading though... I guess you could break down each of your setups and see what kind of winning percentage results from those. For example, if the XYZ setup produces a profit 80% of the time; whereas the ABC setup only produces a profit 30% of the time, it may be best to focus your efforts on the XYZ setup. Of course, this type of analyis would require constant and detailed tracking. There's many ways you could break it down... by setup, by time of day, by day of week, by time of month, etc. etc. It could be very useful but would require detailed documentation over an extended period of time.

Franky - great question and one that many traders struggle with, myself included. I am very confident in my setups - where to enter and where to place the protective stop - but when to exit is always a losing game (as far as your psyche is concerned). If you enter 'too early' you beat yourself up for getting out at +10 when it goes +25. If you 'get greedy' and 'had' +12 but wanted +20, you can calculate the $$$ 'lost'... My point is that I think when to exit a trade is the most difficult part of this business and it has nothing to do with the $$$ involved - it's all about how your brain and mentality accept the exit(s) that you have chosen. I truly believe in trading that you are your own worst enemy. With that being said, I have been using WRB/Big Candles recently for exits. I started a thread here - http://www.traderslaboratory.com/forums/f34/wide-range-bodies-big-candles-1480.html I personally have found that having a set profit target is a tricky proposition and I am personally terrible at trailing stops. So, I needed a way to exit that made sense to me, and thus far, WRB's have done that. It's a work in progress, but I've spent quite a bit of time here lately on exiting with WRB's. As for scaling in/out, I personally enter every trade with the same amount of contracts (based on the market) and exit all at one level or exit half at one level and the remaining half at another level. With WRB's, I have been spending time looking at exiting all at one WRB or two. I personally like to keep things simple, so that may be the reason for the same amount of contracts being traded each time and a simple exit strategy. Watching 3-4 markets intraday on a smaller VBC chart is difficult, so I can't get caught up in minor details. I can't afford to miss a trade b/c I had too many steps to go thru on my current position.

Walter - glad to see you are coming around to VBC's. Here is the main reason why I moved to them - during quick moving markets, traditional candlestick analysis is useless. I will try to post some charts for examples this week, but basically during a quick move if you have a 3, 5, 10+ minute chart, all you may end up seeing is one giant candle. For me, that does nothing. I get to sit and watch all the action taking place. Then, once the action calms down, I can jump right in! ... Anyone see a potential problem there? I can see the arguments for a minute based chart with volume broken down in a histogram form. I used to do just that!! And as long as the market is acting 'normal' it's not too bad. But good luck around econ news, FOMC, etc. A couple giant candles do nothing for me. That's the key though - for me.

TradeStation has them.

Excellent points tor!! I don't know how all the programming and stuff works James, but I would start to categorize and organize now before you have to spend weeks doing it later.

sds - I attempted to write a response earlier and got an IE error and off it went... that is frustrating. I'll try to retype it again here... You will probably get a few responses, so make sure to read each one and you can see what you like. PRICE ACTION: For me, price 'action' simply refers to the amount of trading activity or lack thereof. The more 'action' the more movements we usually see. There's action going on all day, but some are more active than others. PRICE ACTION S/R: This would mean the amount of trading taking place at important levels. Many traders use Support/Resistance Levels, Pivot Levels, etc. to define areas of possible trade setups. Usually these are areas where good 'fights' and price action may occur. Pivot provided a great chart here: http://www.traderslaboratory.com/forums/attachments/34/1137d1174681663-wide-range-bodies-big-candles-2.png You can see that he annotated the first doji on high volume and then a subsequent hammer at the same level on high volume. This would show that the bulls are clearly defending this area and that the bears are not willing to push it down further. So, that would visually tell us that this level is important to many bulls. So many that they are willing to step in to a bear charge and fend them off. This in turn created the double bottom formation that many traders use. If interested in S/R levels, I would recommend reading some books from Steve Nison as he talks about S/R levels in conjuction with candlesticks quite a bit. And Pivot provided a real example here. Speaking more on this topic, I personally use VBC charts - http://www.traderslaboratory.com/forums/f34/volume-based-candles-how-profit-1414.html - in my analysis. I prefer charts like this, some like minute charts with volume broken out as in Pivot's example. JUDGING ACTION AROUND S/R: In Pivot's example, we see a doji and hammer at the same level with high volume. That would be reason enough for me to take the trade. How you filter the action around S/R levels is up to you. Some may add an indicator, some may add market profile, etc. etc.

Kiwi brings up great points. Once this board reaches the maturation stage, exactly how it proceeds forward can be tricky. If nothing else James, take our advice for what it's worth, but like Kiwi, I've seen great boards turn to either a b*tch fest (like ET) or abandoned (kinda like T2W). Keeping an active trading board fresh so that the 'regulars' want to come back and keeping it interactive for all newbies (b/c there will always be newbies) is difficult. Perhaps trying to meet the demands of each group is simply not possible on one message board... Perhaps the thought process should be to be a 'niche' board vs. a 'jack of all trades' board. It's just like trading really - you can either attack the markets with a shotgun approach and see what you hit or you can finetune your strategies and become a sniper... Either you try to be all things to all people or realize that's simply not doable, so you move forward in one particular direction. We already know that a b*tch fest board exists, I think trade2win is rather dull and not active at all... so.... where will TL fit into the mix... only time will tell.

Looks like people are hearing about TL... So James, here's the question of the night - how do you plan to keep TL a great place to be, able to share ideas, and do so in a comfortable environment all the while continuing to grow the site? I'm sure we've all seen forums where it's nice while it's 'cozy' and things can turn sour quickly when there's too many fish in the pond; but you also want to grow the site, esp if building it as an additional business for James. Don't get me wrong, growing is good, but I think you should be aware of the growth and all that comes with it as the site gets more and more popular. Please don't misread my statements here, I just think we all enjoy the TL environment b/c it is in fact different from most other trading boards and it would kind of suck to see TL turn into an ET down the road.

Pivot - you'll have to keep us updated on this looks on the spot FX markets. I do not trade spot FX, but curious to know how you do there with these methods.

Nice chart Pivot! Question - when do you know when to go with the trend and when to go against it? So far, it seems like the majority of charts posted have all been counter-trend trades.

Good posts guys! As always, how a trader implements a strategy is up to that trader. I like what I am seeing with WRB's in my 'simple' form. More testing required...

Question for Mark, Pivot and others using WRB's - how do you define what a WRB is? I've read a few things the last few days and some say purely a visual thing and others have a defined formula.

Good discussion guys, thanks for the comments. Pivot - I have looked at exiting on a WRB based on my initial entry and VBC being used, but the problem I have found there is that since I am trading on a 'smaller' VBC, a WRB can appear rather quickly on this type of 'timeframe'. Which often causes a very quick exit. I bumped it to a higher VBC to stay in the trade longer. I've thought about multiple exits on multiple timeframes, but to be honest - that's a lot of charts to examine when trading 3-4 markets at the same time. I'm not willing to miss an NQ setup b/c I was starting at 3 different YM timeframes. The other thing I am noticing Pivot is that for me at least, the first WRB that shows is a pretty reliable exit level. What I mean is that since my stops are 'snug' there is a possibility that after I enter a trade and see a WRB form, price can retrace close to or at my stop level. Now, if my stops were larger I could possibly stomach that retrace (like the example you posted in another thread), but most often than not, my stop may be taken out. By exiting on the first WRB I see on a higher VBC chart, I'm not getting shaken out on my smaller VBC chart and still catching a good part of the move that is currently in front of me. Bramble - we've discussed candlestick trading in other threads. I understand how effective candlestick analysis is done as I've been trading candlesticks for years. Your comment - "You comment that you’re getting smaller profits using this method which is understandable, you’re not letting them run. If by using this method you’re also getting fewer losing trades then I suspect it may be an issue with the underlying system itself rather than this bolt-on exit criteria." First, I am comfortable with my entry method, so there is no 'issue' with the underlying system. Second, if I am getting fewer losing trades by trading this way, how is that a problem? By exiting on WRB's in the very simple fashion I have looked at, the vast majority of my trades are profitable and even when a stop out is taken, my stops are usually not more than 7-9 ticks on the YM. Mark - as always your posts are very welcomed here! I have no problem admitting that WRB's are new to me and I am learning here as well! With all that being said guys, I like to keep things simple. I've expressed that a number of times here. I have always wanted to perfect my exits even better than what I was doing, and right now, it looks like WRB's can work for me. More analysis needs done, but I at least wanted to get a discussion going on the topic. I should also mention that I am not trying to hit home runs here. I would love to hit singles and doubles all day. My goal in capturing a move is 30% - 50% of that move. Let me define that - I'm not talking about the entire move all day (partly b/c I only trade till Noon or so), but from my entry to the very low/high of that 'move' I would like to capture 30% - 50% of that. If that 'move' is 20 ticks, I'd like to take out 6-10. That's how I view my exits - what % of the move did I capture? And I think that's why WRB's may work for me. On higher VBC charts, WRB's happen to appear at the low or top of a move (or pretty close). That's all I'm going for each trade - I'm not looking to take one trade and ride it all day. I'd rather take multiple trades whether that is in the same direction all day or opposite directions all day.

We've discussed WRB's in a couple threads, but since this is something that has grabbed my interest, I was hoping we could discuss it here. I've been watching WRB's or what I 'see' is simply a 'big' candle and from a perspective of exiting a trade, they appear to be good. Now, I may be oversimplifying how they are supposed to be used, but here's what I've noticed and have actually used this past week... My entry and initial stop is the same as it's always been - using VBC's on 'shorter' timeframes. WRB's have NO impact on my trade setup. After in a trade, go to a 'longer' VBC chart and use WRB for exit. My version of WRB/Big candle exits is rather simple - when I see a big candle on my bigger VBC chart, I exit at the close of that candle. And I exit the entire position here using a market order. Here's what I have seen - since I use smaller initial stops, by exiting everything on the first big candle I see, I am able to exit trades quicker w/o a threat to my initial stop. In a bigger move I simply look for another trade setup and repeat the process. The other thing I have seen is that I am taking smaller gains more, but that is all the market was willing to 'give' me.... I believe we discussed this in another thread and I may be coming around... :p While getting 15 or 20 pts on the YM is nice, if I am able to get 12 with no problem, it may be best to take it while there. It's frustrating to want 20 and if it goes 18 and then reverses on you, was that 2 ticks worth it? Up until analyzing WRB's though, I did not have a good method for exiting trades. I attached a chart to this purely for illustration purposes. These were NOT actual trades, I just grabbed a YM chart off of quote.com since my TS is shut down for the night. You'll see that exits are not perfect, but I think they are pretty darn good. I'm curious to hear what is working for others who are using WRB's in their trading or at least watching them. Maybe we can even get the WRB guru (NihabaAshi) to share some ideas with us. Here's my biggest question right now - what is the theory behing WRB's and their practical use in trading? I am proving to myself by looking at actual chart setups as to whether I like what I see, but I don't quite have my arms around why these work and why they make for good exits... My idea right now is that a 'bigger' move may be followed by some 'correction' due to the supply/demand imbalance that happened during the WRB - while the WRB is being formed, that would show us that either the bulls or bears took control during that timeframe and sooner or later, they will have to take a breather. That's not to say that the current move will not continue, but some sort of breather and/or correction could happen; which could take a stop that is snug (like mine) out easily. SHORT HAND KEY: VBC = VOLUME BASED CANDLES (more info here: http://www.traderslaboratory.com/forums/f34/volume-based-candles-how-profit-1414.html) WRB = WIDE RANGE BODIES (info scattered throughout some threads) TS = TradeStation

Neal - in regards to VBC's, I can tell you that the setting depends on what YOU want the chart to do. In other words, if you want a chart that prints candles 'quicker' than you should start at 1000 or less (on the YM). If you want a 'longer' term chart, go above 1000. The exact number is not terribly important in VBC's. To see what works for you, simply open 3 YM charts and start one at 500 VBC's, 2500 VBC's and 5000 VBC's. From there, you'll 'see' what you like and then you can finetune it even more. If you like the 2500 chart, then run a 1000, 1750, and 2500 chart. And from there, you can narrow it down even more. Just keep in mind that whatever setting you choose, you need to use that setting each and every day. It's very easy to see that today a 1500 VBC chart was best and on Tue it was 500 and last week was 1000. You are never going to know exactly what setting is best for the day. The other option is to have 2-3 VBC charts open at the same time.

I think what Bear and I are trying to say is that there is no system that accurately predicts trend days vs. non-trend days with any consistency. And if that does exist, coupling that with when to exit the trade makes this a trader's holy grail. Know when we are trending and when we are not. And then knowing when to exit based on the type of day being predicted. You have to be right on both sides of that equation for that work. How many days have we seen where the market moves in one direction (trend) and then reverses (into another trend) OR simply pauses and continues the previous trend? We can all post charts illustrating that, but looking at charts that already happened does not help the argument. There's always a reason why the trend continued or why it stopped in hindsight. Great question and as far as I am concerned, there is no answer to this. And if you got it, you better lock it up tight and make millions off of it.

I couldn't agree more which is why I am saying that I am saying - there is no bullet proof way to know if you are trending or not. Just like a woman - you have no idea what you are going to get sometimes... Just when you think you have it pegged, you are quickly reminded that you can be wrong rather quickly.

Well said Tin! I am the same way - while hindsight trading looks great on the ER2, you must be very quick and nimble there. There's no waiting around for you to make a decision. The YM doesn't always move as 'fast' and you can take that extra second or 2 to get your order out there. I would also add the NQ to the equation as well. It's kind of a mix of the ER and YM - not too fast, but not too slow either. Some days the NQ is my bread and butter. Why do some people ignore this market? It can provide some great moves while waiting for the YM to do something. I also like the EC, so it has nothing to do with tick value since the EC is $12.50/tick.

Different strokes for different folks I suppose. Again, if ANY of these theories worked in real-time, you would be a multi, multi-millionaire with very little risk, aggravation, etc. Of course it's not 100%, but if you can bat 70%+ on your theory, then your account should reflect that. Knowing if we are in a trend or not within the first hour is the holy grail as far as I am concerned. You can ride out the entire day just watching your P&L skyrocket. And of course - knowing that we are in a trend or not is just ONE part of the equation. The next part is when to exit... But I suppose if you know when we are trending you will know when the trend is over vs. a brief rest or pullback. As The Bear said - it's very easy in hindsight to look at a chart and see a trend. Anyone can do that. Performing the same analysis in real-time and executing according to that analysis is the difference.

As long as you sent through a reputable bank or wire company the money cannot just disappear. I've had wires 'missing' but they eventually find their way. Just contact the firm you sent it through and ask them to do a trace. It could be sitting at your broker's general account but not sure where to go from there.

That is the million dollar question. With the answer to this question, you could become a multi, multi-millionaire rather quickly. Since this is not realistic, I think it goes to show that no one knows the answer to this (and probably never will). Some argue based on indicators, price action, etc. and I personally believe there is no answer. You don't know you are in a trend till 4:15pm EST. Until then, it's anyone's guess!

Pivot - I understand that your 'version' of candlestick trading is different than mine, I was simply pointing out what I saw. For those reading the thread, they can get a couple different points of view. Question though - would you have honestly held onto that first hammer through all the 'retracement'? It would take some guts to buy on the hammer with a fairly large stop, watch it retrace past the low of that hammer and then watch it go up. You are right that a candle by itself is not a valid signal, but in traditional candlestick analysis (what most will be starting with) that 2nd hammer is a beautiful setup. We should make it clear here that your analysis is based on work by Mark Perry (seen at elitetrader.com) and my analysis is more the 'traditional' candlestick analysis taught by Steve Nison. This is not to say that one way is better than the other, I just want to make it clear for those reading this thread wondering why we have different views and are looking at the same chart in the 'candlestick' thread. For me, candlesticks are primary and WRB's may be used in conjunction with them. With that being said, I am new to WRB's and learning more about them daily! Hopefully Mark will post in this forum and head shed some light on them for us!

Do share Walter what you have in mind. I will take a look!

Walter - actually in real-time that is not true at all. By applying VBC's, I can visually see when there is and is not volume. For example, today's volume is terrible. I did not need an extra indicator or anything to tell me that, all I had to do was look at my chart. Candles are taking longer than usual to print; therefore I already know the volume is weak today. I realize how this looks in hindsight, but until VBC's are applied to a real-time chart, it's hard to explain.

Pivot - here's my take on this particular chart - I place my stops at the 'logical' area. Why? B/c if that hammer low is broken, that hammer is no longer a valid trade in my opinion. The question then becomes how much lower do you go to place your stop away from the logical area? If today 5 ticks works, tomorrow it will fail. So then you bump it to 6, then 7... We've all been there. The other consideration is how big of a stop are you willing to stomach? I love hammers, but also know that some can result in very large stops (at least for me). A smaller chart timeframe will normally fix this, which is why I probably trade on smaller VBC's (Volume Based Candles). See my attachment for what I see... 1) Valid hammer that looks to have a large stop. It may have delivered a profit target depending on what you use to exit. 2) An even better hammer than the first - smaller stop needed, a better 'looking' hammer (nice clean line with a textbook looking hammer). The end result was no threat to your logical stop whatsoever. So I see 2 trades here with one that did not produce much and one that delivered nicely.