waveslider

Dogpile started into it with examining breadth. Declining issues heavily were outweighing advancing in both price and volume. I keep a screen up with these two ratios illustrated as a histogram. It's a good clue of direction. As far as higher time frames go, I use price channels and another simple method. If the market is trending (making new lows or highs, not expanding-ranging patterns) and it remains in the favorable 1/2 of the trend, then I expect the trend is still intact. That is one way I bias trades. I use a timeframe about 10x as large as the chart I enter on. So I use a 90 tick chart, look for trend on 900 tick chart. In this case, the congestion you noted on the chart above was occurring in the lower 1/2 of the impulse move down. It was also occurring below the 1/2 mark of the counter-trend move higher. Nothing high tech here, I'm just keeping it simple. Sorry this is getting off topic from market profile. My favorite parts of MP are the ability to see a range easily (like we're in now), and the VPOC - which I see as being very powerful. ws

To me, any entry approach that offers : 1. a good number of trades 2. participation in most (all) major moves 3. a good risk/reward profile is valid for use. Stand alone, any single time frame mechanical strategy (that we as individual traders are capable of following) is not likely to be successful in the long term. What brings the odds into the discretionary trader's favor is bias, and I see the most important bias in the higher time frames. Why? Because of what old Newton said, "an object in motion tends to remain in motion". In trading this would mean "a market in a range will tend to remain in a range" or "a trending market will tend to remain trending". Take this information from the higher time frame and bias your entries on the lower time frame. Dogpile, your parabolic system is just as good as any. If you were on friday to see on the higher time frames a range, or a downward trend, and bias your trades to the short side only, I'm sure the approach would have been successful. So this is the double edge sword - back to the topic of the thread. By biasing you are manipulating the results of the mechanical system. The challenge to discretionary traders is to see objectively and recognize things the computer may not. As many have said before, trading is an art more than a science. This is a skill that must be developed and practiced, an understanding must be developed of how markets demonstrate who is in control. I believe there are some very successful systems out there that trade 100% mechanically, but I don't think they will be as robust over the longer term as the skilled human mind. Personally I prefer to use just basic trendline analysis. Something as simple as this is really all you need. The way it leads to profitability is through discipline and consistency. The lack of these 2 traits is the true disadvantage to discretionary trading. ws

Interesting, yes. Seems to me the answer to why a market breaks out of an intraday range lies in the action on higher time frames. Look forward to seeing your analysis.

Dogpile, I think you have a valid idea. I have an entry method that statistically and logically works. I use discretion, looking at various things to bias myself direction-wise, then use a non-quantitative method of exit that is dictated by the market's reaction to my entry. The point is, you have to have a valid entry that works statistically. Even if just from a risk-reward point of view. As discretionary traders I think this mechanical entry is an immense value for us because it halts us from opening up positions just any old time the market looks good or bad to us. I had a tendency to overtrade, still do. By waiting for the method to play out, it increases my discipline. ws

There is a program called "market system analyzer" that can test all of these different money management techniques. I think they have a free one month trial. My opinion is that you add on one contract per trade after reaching $XX account value. Doubling position size almost always seems like a bad idea, so does pyramiding as you win if not done properly. In pyramiding your entry in the same position as you win you may end up with an inverted pyramid as you raise your average entry price. Subsequent entries should always be smaller in size. The trick to money management is to take a lot of trades, and manage them according to your individual approach. I see there being two approaches: You are either a high probability trader, or a trader who has larger average wins than average losers (high profit factor). A high probability trader wants to keep his maximum losers as low as possible. As long as the losers are not too big and the probability is high enough, the account will remain near its profit peak. High probability trading normally means your losers are larger than your winners. Your winners are small, but consistent. A high profit factor trader can have a low probability, but still be profitable as the size of the winners take care of losses. A high profitability trader has smaller losses and larger winners. The high profit factor trader may have more extended draw-down periods and more time in the market (exposure). So decide what your style is, and add size little by little as your account size grows. WS

Man, if this morning wasn't the most amazing advertisement for the rejection of the previous day's value area (in YM)... I couldn't find a better one.

Thanks for those specific and to the rest of you all for advice. Does it make sense to look for vertical spreads with short theta (combining your idea with tingull's). The strategies I have developed for ETFs take advantage of short term volatility, so I am thinking that spreads might be wide during times I would want to enter, is this true? Is it better to enter options trades in times of low volatility or can you stick a limit order out there that could get hit. In my investigation, there are quite a few ETFs which have options with decent volume. I will look at the Leitner interview, but it sounds like it might not be an exact fit due to the time frame he trades.

I manage some money trading ETFs. My trades are short term in nature (1-7 days), are long only. Sometimes I make multiple entries, but always one exit. I am attracted to options because of their leverage. Having more leverage enables spreading risk around through diversification. Can anyone tell me if there is an options strategy that might be appropriate for what I do? Thanks WS

"doubling and trebling of the IB range" that caught my eye. Alleyb, could you please slow down and describe what you are talking about in regards to your quantitative targets. Also, what do you use for current "hard right edge" analysis in the market to establish direction? (ie. aside from your targets, what do you use see what the market is doing here and now) Targets are one thing, in my experience reality can be completely different. Reiterating walter's requests - please use visual aids, and "keep it simple" thanks, slider.

Someone boot this guy.

Find a simulator, practice, practice, practice. Then trade really really small. You are beginning an education that can take longer than becoming a doctor, and not at all guaranteed. You may not make a profit for years. Sure you wouldn't rather be a doctor?

Does anyone have continuous contract symbols for TS? I can find canada but that's about it.

Also, which currencies provide the most liquidity? The Canadian dollar trades beautifully, but looking at the continuous contract of the Dollar it looks weird, maybe I have the wrong time settings...

Alex- Looking at the charts I agree with you 100%. Maybe the leverage isn't as good, but the bid/ask is tight. I you trade forex futures, what time frame to you look to enter on?

Hi, My main point was just that you don't do a trailing stop on a range trade. You do a trailing stop on a trend trade. So if you bought at the bottom of the range and exited on a WRB inside the range - you did the right thing. Don't worry about missing out on the trend part that came later, there was a trend entry for that move anyway! Sorry if I wasn't too clear.

I think the answer was in looking at the higher time frames to determine whether you should have been trading trend or range. (I'm looking at YM) 1. Price gapped below the previous day's low. This is rare, and can often lead to a trend day in the other direction. 2. Gap failed immediately and demonstrated a stop run, a potential bullish engulfing day in a range on the daily chart. 3. Price was still in a range until 8:30 (PST) when the downtrend from the previous day was broken. Price then moved sideways and made a trend move higher to the exact 38% mark of the range we've been in since the 24th.. Brown, if you are using WRB as an exit in this situation (not an exhaustion bar at the end of a trend move), your entry should be on weakness at the edge of a range. If this was the case your exit was correct. However, if you were looking to get a trend move out of it, you should be trailing and looking at a WRB as a confirmation of your position, not an exit. (Unless it is an exhaustion bar at end of trend). If you were fading for your entry in a range, then don't worry about missing a trend move, it is a different type of trade altogether. It is proper to exit on an WRB if in a range. What a killer day for trading! Hint - the gap down below the PD low and a rejection was a major clue. If you know what a wolfe wave is, that was another clue.

Not a level playing field at all.. I guess that's why I've heard people say that they play longer moves, to overcome some major slippage.

So is .2 basis points too much slippage? What broker do you use notouch? TS says they get the best quote from multiple large banks, is that just BS in your opinion? thanks

Thanks Cooter (is that from dukes of hazzard?) Here is an email from TS I got regarding forex. I just moved to Canada from the Us so am much more interested in hedging b/w currencies now. Any comments on this email? Tighter spreads with no markups/markdowns Fixed spreads are a way for FCMs to markup or markdown the best bid or offer. This is usually done to hide their fee into the price of the currency pair instead of displaying their best quote. Of course, there are costs incurred in transacting trades, so when you see an FCM claim they have “no commission” you should be aware they are making money with the built-in markup/markdown in the spread. TradeStation Securities has nothing to hide. We understand traders need the tightest possible spreads, and with the release of TradeStation 8.3 will offer tighter spreads with no markups/markdowns and openly display a low commission rate. With our new upfront commission pricing you’ll know exactly what you’re paying for — and allow us to offer you narrower price spreads. New Forex Commission Structure We quote the best bid/offer from multiple large banks and charge a separate transparent commission, which include exchange and regulatory fees. TradeStation Forex EXAMPLE #1: 100,000 EURUSD = $2.67 (0.00002 X 133,333*) EXAMPLE #2: 100,000 GBPUSD = $4.00 (0.00002 X 200,000**) EXAMPLE #3: 100,000 EURJPY = $2.67 (0.00002 X 133,333***) * Assuming fill price of 1.33333 ** Assuming fill price of 2.00000 *** Assuming fill price of 160.000 and conversion rate = 1 USD : 120 JPY

Thanks for the response. What are the margin requirements/leverage for futures vs. spot?

"Don't get too cocky, kid" - Han Solo

I dont' trade stocks anymore, but the LSS method of generating daily range is very accurate in many cases.. stock traders would do well to program that. It was George Angel's work I think... search for LSS method. PM for tradestation code..

My opinion is that the POC and VPOC are much more powerful than static pivot point formulas.. These represent true "price magnets" within the market. However I don't use any kind of strategy fading the pivots. I DO use them to establish trend direction for the day, sort of as a filter. So if close is above the 15 minute range and PP is within the range or below this 15 minute range, bias is up.

correction - sorry, they were not limit orders, but market orders

Hi, I have never traded forex before, and don't really understand the pricing / fees. I want to set forward a system to see if it is actually trade-able with slippage and commissions. Since Forex trades 24 hours, it looks like liquidity would be the main issue with the system. Does anyone trade forex with tick or volume charts? That might alleviate the problem a bit. Anyway, this system is set to a ten minute chart trading the USD/CAD. Over the past 4 years the avg. winning trade is approx. $150, the avg losing trade is $250. This is trading one contract. The entries and exits are on limit orders. Can I expect that the winners would be seriously eroded by pip spreads? My broker is Tradestation if that makes a difference. Thanks is advance for your advice!