steve46

LOL..okay so we missed this one, and we might as well post it now..it is a pattern that is called a "cap" reversal.... because the action of another market reaching a temporary termination point "caps" or stops (for the moment) a move up or down... In this case the middle chart shows the DAX reaching (testing) a distribution line...as it does price on the other charts pauses..and ultimately rolls over... This illustrates the utility of having a valid reference system like our distribution lines so that you can see where reversals (both to take profits and to initiate new entries)...

Hello Here is a pattern that we characterize as an "RTH typical long entry pattern".... It consists of an initial move down to probe for sellers & stops, followed by a countermove at 6:45am PST, that is usually a small scale response as "informed" buyers move in to take advantage of slightly better prices.....these are the folks to watch as they position themselves betting on the possibility that price will continue north to retest previous highs.... At or near 7am (usually just after) we see what is called "the turn" and that is characterized by a sustained move to retest either the local high or a previous high number..and it is the move that usually produces a signficant profit... If we have time, we will also post yesterdays pattern, which was nearly identical....these are patterns worth taking the time to learn (from our thread on characterizing markets) Good luck folks

Hey GOB, thanks for the kind words... I have always like trading the Globex overnight market...for me its very simple and straightforward....and because it all takes place late at night (local time) I can have a life and do this in the evenings when eveyone is asleep...and finally as with all things, if you do it well, you make money on a pretty regular basis.. The prep is simple...I put my distribution lines in place and then go to Forex Factory and look at the schedule of economic reports...the two makets I like to trade are the DAX at 2300 hours local and London at Midnight....of the two London is by far the easiest and most profitable for me... The plan is simple...I watch the open and enter on a pullback from the recent local trend...for the London open this usually occurs about 12:15 (about 15 minutes after the opening bell)... The attached chart shows my screen...as can be seen there are three markets on the screen..at the far left we have the NQ....in the middle the DAX and on the right side the ES I take my signals from the DAX & ES charts and enter on the NQ chart....this one occurred right at 12:15....lol, and if I had been more vigilant I might have noticed that on the reversal, on the ES chart price tested my distribution line, providing another sell signal (that I missed)....oh well...on to the next trade... Although this one reversed on me, I like it because it is relatively low risk and even when it doesn't continue down, it still provides a nice little pop to begin the evening....

In this example we have a signal from the ES market (on the far left) as it tests and then retraces to retest the distribution line at 9:03am PST. Green up arrows mark the entries in both markets..... Seeing that retest, and in the context of a confirmed trending market, we enter the NQ....the result is a nice pop to the upside So what we see here is an added benefit of using this system...and that is that you can use both the ES and the DAX to provide entry signals as they test their distribution lines...if you are trading the NQ (as we have been lately), this allows us to generate entries in addition to the tests of the NQ lines themselves...on a trend day, this allows the trader who may have missed an entry at the NQ lines to have a second (maybe a third) chance to get on board and make some money. Best to all

Here are today's trade entries Previous posts displayed entries based on price moving within a range (congestion or "horizontal development")....here is an example of how the distribution lines work in a trending market...

Just teasing kind sir, and you are very patient to put up with it....Hope you find what you are looking for.. Best of luck to you

and here is the follow up to that DAX trade As you can see price reversed and comes back to take out the distribution line.... Now depending on whether or not the trader took partial profit....he/she could have simply scratched the trade and gone on to the next one...if they didn't take partial profit, they would have been faced with a choice......get out with a very small profit, or perhaps at break even, or hold it hoping for a bounce back up...personally I would have closed the trade...

I thought this was pretty cool....here is tonight's DAX open at 2300 hours What I like about this is that price opens and probes down to find sellers...down to 2789.75 almost to the tick...then reverses....I don't trade this market but if I did this entry is no different than any other...price tests the distribution line, tries unsuccessfully to "take it out", then reverses, and the entry is on the open right at the line...no idea if it will prove successful however as of this moment, this setup is providing a 2 point initial profit....so in theory the trade is "risk free"... As mentioned I don't trade this one (maybe I should have taken it), but I will be trading London Open in about 40 minutes Best of luck

Regarding trend confirmation....I want to get on the same page as the big players who have the capital (and the interest) necessary to move markets....a couple of ways to do this...you can simply use a daily chart and "look back" at the previous 5-20 days action...on a shorter time frame you might simply look at the previous couple of days action using 30 minute candles...... Sorry I can't go into all the detail (its very time consuming) to create my distributions, but I can say that I use daily bars as well as volatility measures taken from the options markets...and of course there are several methods for creating distributions...its not rocket science....if you decide you want to explore that method (and you have basic math skills) its not that difficult to learn. As for corellation, I don't have information about equities and the effects that other markets may have on them, sorry...I trade futures only..... "Programmed"?.....did you really understand what I wrote?....there are only two possible conditions...either a "1"...meaning you have a valid setup.....or a zero ("0")....meaning you don't have a valid setup...if you find that math challenging, this may not be the right system for you..

Amazing comments In order to find a way to make money in the markets you need some pre-requisites (very similar to taking classes at a college)...I assume you are working on the basics 1. General knowledge of the markets 2. Ability to use a spreadsheet 3. Basic math and statistics 4. Understanding of how to use your software. 5. Basics of Risk Management. After that you will want to study your target market, and by that I mean you want to try and find underlying patterns of behavior that you can exploit...this is called "characterization" or "pattern analysis".. What you may find if you do this right, is that markets exhibit repetitive behavior based on both time & price.....For example markets tend to "test" specific prices that some folks refer to as "key reference areas"....some of these key reference areas might include the open, high and low from the previous day, week, month...(just some examples) Some traders make a business out of trading "price action"..some examples are entering long on retracements to a central reference point (like a 20 period moving average for example) Others (like myself) like to wait for price to move to an extreme, based again on some reference or framework...at that point we enter looking for price to reverse back to a central reference point. You have a lot of choices....so the first thing to do (just one man's opinion) is to begin doing research.... Good luck

We are fast approaching the end of my process here....I've already pointed out most of the significant elements of this system....the initial attempt to approximate the process of creating the distributions seems to be working, although after only two days I am still reserving my opinion... I notice folks talking about lack of volatility and other issues that they believe are make trading markets more difficut...actually (speaking from several decades of experience) not much has changed...sure there is more automated execution, and the price behavior is a bit different but thats what we signed up for, in return for the opportunity to make a hell of a lot of money in a short time (an opportunity that in this economy, is very difficult to find anywhere else).... I am experimenting with a small account to determine what the limits are for a retail trader trying to make some money..so far I have only confirmed what I thought would be true...that it takes the kind of discipline that most folks just don't have...especially when they are starting out.... What I will do is post tonight and perhaps another day or two and then call it quits....I'll trade using the approximated distributions for the next few months, and try to confirm that this simplifed method is consistent....for the folks who took my first class, I owe them a "first look" at how this system trades....depending on how that works out I'll make a decision as to where to go from there... Although I haven't posted as many charts, the system is working equally well for the London open at Midnight PST....so I assume it can be traded in the overnight as well as RTH sessions.

Good for you.....any time you make money, above expenses, you are on the right track... I see you are incorporating horizontal lines (of some kind) into your charts...hope that continues to work well for you..

Many ways to quantify price action, the simplest is to use binary values (on/off =1/0) For example...I have a system that requires price to act in a specific way as it tests a distribution line...the following conditions apply 1. Pre-existing trend agreement one time frame higher 2. Price at or near a distribution line 3. Agreement from one additional market (for example, if I am trading the NQ, then I need to see similar movement from the DAX or ES) If conditions are met as shown above, binary value is 1 (ON) and an entry setup is valid If any one of the conditions above are not met, binary value is 0 (OFF) and the entry setup is invalid

Finally some common sense....for the gentleman posting, I was taught to figure about 1.5-2x the expected system drawdown as a "realistic" figure....which could be expected to occur at any point in time.....cash on hand had to be above that line in the sand at all times....until recently I maintained that amount on deposit with my broker in bonds...

Here are three charts of the same trade entry showing 10, 3 and 1 min views. As you can see, if you make decisions based on small time periods, you are more likely to get chopped around... I prefer 3 min, and frankly I am leaning toward using the 10 min....there's always a compromise (you do miss some entries) but I think you save a lot of money on commission and losers while you wait to get on board a winning trade..

Here is a full screen look at today's trades...lets see where have we seen this before....oh yeah back on the 28th Sept (post #269)....same movie different time frame (10 min vs 3 min today) Best of luck folks

and I am going to take profit and cut this one short right here....looking to the left on my chart you can see why as the DAX hits the lower distribution boundary...this is where it is likely to reverse on me, taking the NQ with it....so I missed my 10 point target, but I got close enough Done for the day...As usual I need to get some sleep Best of luck to everyone

and here's a third entry, that I thought would be a loser as it came back on me and pressed my entry...I am still in this one..

Two trades off the opening bell this morning... The operative rule is "trade tests of the lines, and stay out of the middle...." thats what we did Short entry off the morning high produced 10 NQ points Long off the test of the lower dist line produced the same....

Same entry using 3 min candles As can be seen, the 3 min shows a bit more granularity, but in the end its about discipline so it shouldn't matter much... Once again this approximation process seems to be working pretty well....this time I did the calcs both ways and the differences were negligible....probably came within a percent or so of the original but it only took about 20 minutes to do the simplified math...we have a ways to go yet but so far so good... The vertical line is the London Open, and as can be seen they opened with a probe down, looking for sellers and couldn't find them, so up we went instead...three basic rules.... 1) entry on the first open after price takes out the dist line...OR wait for price to take out the line & retest.... Best of luck

I have really been enjoying trading this.....the attached chart shows the London open with 10 min candles Same basic rule set...you wait for price to test, and take out the dist line, with entry on retest or as close to the line as possible. Once you get a valid signal these seem to be good for about 10 NQ points (about $200 USD/contract). Using a 2 pt stop at this point...

Thanks for the charts Sure is a lot easier to place a trend line using Renko bars....If you have a moment, perhaps you could say something about how you determine "brick size" for the market you trade? Good luck tomorrow Steve

Charts are labeled at the top left hand corner......currently trading NQ futures... Attached we have today's trades based on my first "approximation" of the distribution lines Because am I uncertain as to whether the approximation process will work, all trades are small (3 contracts) scaling out at 2 and 5 and 10 points....if I still have contracts out and it comes back to the original entry I simply get out.... 3 losers, 4 winners...got chopped up at the beginning with 2 consecutive losses, then did a good job of staying disciplined through the day until 10am sequence where price behavior changed from trend to sideways congestion...(losing trade at 10:15) .. From my point of view, this worked well.....I should have put both distributions in place comparing how they would have worked side by side....simply put, I did not have the energy or the time to do both....I am going to get some sleep...in the process I am learning about trading a small account...and that is a real experience for me as well....based on what I am seeing today, a small retail trader could make this work however he/she would really have to be disciplined, and be willing to wait for tests of the distribution lines....in the current market if you start to freelance and get into the middle of congestions....you are going to pay...at best you will drift back & forth from small profit to breakeven, and then the expenses will bleed the account....if there is a lesson to be learned from this, it is that you have to wait for your entries and then hold profitable positions long enough to get a minimum profit (for the NQ, I would say at least 5 and preferrably 10 points)...per position.

Yes Steve, people who live in glass houses shouldn't throw stones. I enjoyed that contribution because no matter how much you think you know about trading there is always something else you don't know. Don't knock this guy, he makes a lot of sense even though we have heard it all before our minds always need reinforcement of the basic ideas. by all means gentlemen carry on.....I am still waiting for any person who trades using the Rumpled One's guidance and has never lost.........to say so.....

I think this will be the final post for tonight...I really need to focus on business As can be seen this one (if you entered at approx 89) gave you 10 NQ points.... The primary reason(s) we stayed with this one were as follows A.) we got a valid entry on retest of a distribution line followed by a strong initial move down. B) we saw that the ES market was not exhibiting strength....and C.) news out of Asia and Europe was either neutral or negative, favoring continuation of the existing trend So far what we have is a partial profit of 2 points followed by a second partial profit of 7 points (based on the ES test of the next lower distribution line)... We won't post a gain tonight... Good luck in the markets tomorrow Steve