The "Flip" Trade (support and resistance changing roles)

[walterw 10]

Here is a very simple setup for new traders who want something easy, simple and efective... even a chimp can trade ¡¡

 

Support becomes Resistance and viceversa....

 

Once you have grasped the concept then you just have to make money...

 

One way you can time your entries is with a simple cci 0 line cross....

 

For exits maybe you want to take a cross of the lsma...

 

Trading can be as hard or as dificult you make it... make it simple, enjoy it, make money.

 

 

cheers Walter.

 

 

(example chart is a 55 Tick emini russell with : ema 100, ema34, lsma 25, cci 14, cci 6 ) charts from trademaven.

[brownsfan019 17]

Walter - how's this look on a trending day?

 

I appreciate the post and how 'easy' it looks, but you should carefully explain the pitfalls before a newbie jumps in. One trending day could literally take your entire account if simply playing the S/R flips. Throw in when the market can't make up it's mind around these areas, and you can be rapidly buying and selling over, and over, and over again. Your broker will love those trades though!

[walterw 10]

Brown : I noticed that in great momentum conditions a flip will show you a continuation trade.... the other alternative is that it will show you the reversal itself at the end of a big move... what I like from this trade is the good RRR that you can manage.... this trade is intended for small scalps... so you can walk out of the market every day with 100 bucks on the pocket per contract.... not bad... cheers Walter.

[brownsfan019 17]

Good charts Walter. Thanks for sharing.

 

It would be interesting to know what is the best exit method. As we know, the exits are so important and that can dictate whether a trader can make money with this.

 

A nice simple method coupled with a good exit strategy is something for consideration here.

[walterw 10]

yeap, I had been all evening today figuring out a nice exit method for this... the one I use on my M trades its not compatible for this flip trade, now looks like cci could give some hints on the +-100 extremes turn arround.... because the lsma gets to much noise some times... thanks for interacting Brown... I am open to some good Ideas... cheers Walter.

[brownsfan019 17]

Walter - I suppose, I would look at like this:

 

On counter-trend trades, consider getting some/all off after an acceptable move in your direction knowing that you are going against the flow. There's money to be made here, no doubt, but my personal opinion is that you cannot get greedy in counter-trend trades.

 

On trend trades, I would consider allowing the trade some more room to work for larger profit potential. I personally have found some great success with WRB's, so perhaps that's a consideration.

 

Of course, if you can scale out as well, that's another component for consideration. I am a big fan of scaling out if your account size and risk tolerance allows.

[walterw 10]

Walter - I suppose, I would look at like this:

 

On counter-trend trades, consider getting some/all off after an acceptable move in your direction knowing that you are going against the flow. There's money to be made here, no doubt, but my personal opinion is that you cannot get greedy in counter-trend trades.

 

On trend trades, I would consider allowing the trade some more room to work for larger profit potential. I personally have found some great success with WRB's, so perhaps that's a consideration.

 

Of course, if you can scale out as well, that's another component for consideration. I am a big fan of scaling out if your account size and risk tolerance allows.

 

yes Brown, I never take counter trend trades against momentum conditions..

 

when market is in cyclical mode (mostly) the extreme of the cycle or coil gives you a good place to trade, obviously thats counter but you are not going against a great strength in course, because there is no momentum...

 

I must say that most of the times you are in the right side of the market, the poor trend trader is just exhausted trying to beat the cycle conditions, he always gets late, he makes party when there is momentum, but that happens very few times per month....

 

so on cycle conditions you want to be counter... it takes ba...lls to trade in congestion, but when you get used, and have a method, cant stop trading it...

 

Now on this Flip trade we have diferent context situations, they may be trendwise wich would suggest the continuation of trend and maybe the buildup of momentum....

 

or counter, wich would cycle back to equilibrium on the average zone...

 

depending where you are in relation to the "average"...

 

For a momentum flip I would suggest to stay as much possible, for a cycle flip I would close the entire position on the area of the average...

 

cheers Walter.

[brownsfan019 17]

I see what you are saying. When I look at counter-trend vs. with trend, I am just looking at the current trend movement of that day.

 

Let us know how this goes, whether real $ or not. Always good to learn new things I suppose.

[tradingkevin 10]

I have a suggestion for exiting.

 

enter with 2 units ( 1 unit could be 1 contract or 10 contracts or 100 contracts..thats up to your capital and risk i.e. max 1 to 2% of total capital)

 

exit unit 1 at 4x your initial risk whatever happens ( so even if wrong on second unit, the unit 1 will cover the loss on unit 2. example. risk 5pts initial risk. 5 pts x 2 units ( 1 cts per unit in this example) = 10 pt initial risk. If you exit unit 1 at 5 pts x 4 ( 4x initial risk) = + 20 pts profits. if you are wrong on second unit then + 20 pts - 5pts = + 15 profit. now if you are wrong on your entry you would get - 10 pts. but since you make a minimum of + 20 pts per entry you are still working at a 2 to 1 reward to risk which is not too bad ( i.e. you can be 2 times wrong and still be break even )

 

Exit unit 2. exit at minimum 8x your initial risk. that s a target but once it reached that level, you can do 2 things. exit right there or trail it since market is showing lots of strenght ( i.e. each new bar is big and full ...not much shadow on the candles ) . it's a judgement call.

 

Now if you exit unit 2 at minimum of 8x risk that would be 5 pts x 8 = + 40 on unit 2 and + 20 on unit 1 = +60 total profit for a risk of 10 origianaly . 60 / 10 risk = 6 reward to risk factor. so that means that for every trade you take, you can be 6 times wrong and still be at break even ( not lossing anymoney ) . This is a very favorable R/R factor.

 

You cannot control anything in the market but using this simple technique gives you confidence and a frame work to work with for you targets by putting the math in your favor. YOu can play areound with the Risk multiplier to... If for example your risk is +10 per contract and the the average swings are about 20 to 30 pts, you might lower your 1 st target to maybe a 3x risk or 2 x risk. and on the 2nd target a 5 or 6 x risk. that 's all up to you.

 

 

This idea is so simple that many people will overlook it but the simplicity of it makes it very stress free and builds your confidence over time since you know that you can be 6 times wrong and still not loss money for every trade that works out.

[walterw 10]

I have a suggestion for exiting.

 

enter with 2 units ( 1 unit could be 1 contract or 10 contracts or 100 contracts..thats up to your capital and risk i.e. max 1 to 2% of total capital)

 

exit unit 1 at 4x your initial risk whatever happens ( so even if wrong on second unit, the unit 1 will cover the loss on unit 2. example. risk 5pts initial risk. 5 pts x 2 units ( 1 cts per unit in this example) = 10 pt initial risk. If you exit unit 1 at 5 pts x 4 ( 4x initial risk) = + 20 pts profits. if you are wrong on second unit then + 20 pts - 5pts = + 15 profit. now if you are wrong on your entry you would get - 10 pts. but since you make a minimum of + 20 pts per entry you are still working at a 2 to 1 reward to risk which is not too bad ( i.e. you can be 2 times wrong and still be break even )

 

Exit unit 2. exit at minimum 8x your initial risk. that s a target but once it reached that level, you can do 2 things. exit right there or trail it since market is showing lots of strenght ( i.e. each new bar is big and full ...not much shadow on the candles ) . it's a judgement call.

 

Now if you exit unit 2 at minimum of 8x risk that would be 5 pts x 8 = + 40 on unit 2 and + 20 on unit 1 = +60 total profit for a risk of 10 origianaly . 60 / 10 risk = 6 reward to risk factor. so that means that for every trade you take, you can be 6 times wrong and still be at break even ( not lossing anymoney ) . This is a very favorable R/R factor.

 

You cannot control anything in the market but using this simple technique gives you confidence and a frame work to work with for you targets by putting the math in your favor. YOu can play areound with the Risk multiplier to... If for example your risk is +10 per contract and the the average swings are about 20 to 30 pts, you might lower your 1 st target to maybe a 3x risk or 2 x risk. and on the 2nd target a 5 or 6 x risk. that 's all up to you.

 

 

This idea is so simple that many people will overlook it but the simplicity of it makes it very stress free and builds your confidence over time since you know that you can be 6 times wrong and still not loss money for every trade that works out.

 

 

Thanks Kevin for the input, that would be truly a mathematical money management of the position, makes great sense from a RRR stand point of view...

 

I think it will work better on trending conditions, you need a trend to make this swings so you can get this x4 an x8 etc... so if momentum conditions are present I would suggest paying attention to this posible money management aproach...

 

If the market is in cycle mode, it will be dificult to have so hi 4x or even 8x RRR... so maybe you could lower it to a x1.5 and all in one 1 unit ( no runners ), because there is no running conditions to hold a runner...

 

thanks for inputs, please keep interacting, I will post soon some new technical exit techniques.... cheers Walter.

[walterw 10]

Here are todays first 50 minutes of flip trades.... already made $100 for the day... (with this technique yet on virtual money) cheers Walter.

 

 

PD: I took off the 34 ema, less noise on chart.

[tradingkevin 10]

I agree with what you said above but I think it also depends on ones initial risk and the average swing size.

 

If you initial risk is 5 pts per contract and the average swings are between 15 to 20 pts then a 3x or 4 x risk is possible on your first target... now if your initial risk is 10 pts per contract then a 2x risk would be more appropriate for the first target...

[tradingkevin 10]

Here are todays first 50 minutes of flip trades.... already made $100 for the day... (with this technique yet on virtual money) cheers Walter.

 

 

PD: I took off the 34 ema, less noise on chart.

 

 

 

=======

 

Which way do you know to trade i.e. long or short ? is it based on the trendline ?

[walterw 10]

I agree with what you said above but I think it also depends on ones initial risk and the average swing size.

 

If you initial risk is 5 pts per contract and the average swings are between 15 to 20 pts then a 3x or 4 x risk is possible on your first target... now if your initial risk is 10 pts per contract then a 2x risk would be more appropriate for the first target...

 

yes Kevin, 5 ticks could be the average stop on this time frame of 55 Ticks... taking a stop on a swing of the oposite failed pivot... so you would be looking as per your aproach for 15 to 20 ticks... well on russell you need momentum conditions for that kind of movement... if you have momentum, wich I use to read it on a 110 Tick chart with a keltner band 50 exp 3.5 atr, ( see example) being outside the outerbands (momentum conditions ) this 15 to 20 ticks target would perfectly apply....

 

if dont have this momentum condition (inside keltner), you will sit and wait for a move that is very unprobable.... so here we should have a diferent plan to take just a small scalp return.... we know statistically that the market will not travel 15 to 20 ticks on my favor.... so maybe taking 6 to 8 ticks will be a good exit... wich would represent a 1.5 RRR.... but you have there a nice overall performance of the flip technique....

 

So exits should be treated diferent depending on momentum conditioins...

 

any way your idea of taking a fixed target from a mathematical RRR point of view is valid, I think the RRR target should be adapted depending on the momentum conditions.... say x1.5 or x3 or x4 etc...

 

I atach 110 Tick climate detector chart... with keltner 50 exp 3.5 atr....

 

cheers Walter.

[walterw 10]

=======

 

Which way do you know to trade i.e. long or short ? is it based on the trendline ?

 

Kevin, here I attach an excel explanation... tell me if you understand it... cheers Walter.

The Flip Trade Formation.xls

[walterw 10]

For the greedy lunch traders here we have the lunch coil been broken with a nice flip... the most tested level is the one in this case we take into acct...

 

cheers Walter.

[walterw 10]

Ok, here we have todays first hour flips... cheers Walter.

 

 

 

pd: I took of cci 6 ( more clean chart) and added +-50 lines to cci for posible timing usage...

[walterw 10]

I have a nuance to add here : when a level was previously tested twice or more, we can have a more solid flip in front.... cheers Walter.

[walterw 10]

So as the lunch Coil breaks (very common pattern ) we have a nice flip giving a very good competitive entry before the rally...

 

in this case the flip is inside the coil, in some other ocassion the flip happens outside the coil...

 

we must understand that there are two types of coil breaks pullbacks, inside and outside the coil (see example).... cheers Walter.

[walterw 10]

Today I decided to take some cofee and follow the session to its end and see if more flips will come in.... well a very nice came in, made me stop first but on the second atempt worked out perfectly well...

[walterw 10]

Hello ¡ Todays first 45 min of session delivered this nice cool flip... kind of coil break type... with pullback outside coil... but it did flip ¡¡ cheers Walter.

[free84 10]

thank you Walter to share with us its a great technique best regards Thierry

[walterw 10]

thank you Walter to share with us its a great technique best regards Thierry

 

thank you for your kind words Thierry and welcome aboard... should I remind you this method its still on beta, It looks like it has some future...

 

The overall flip argument its crystal clear...

 

but there are some topics like timing, stops and exits still to be clarified...

 

we keep working on it and feel free to interact ¡¡¡ cheers Walter.

[walterw 10]

Ok as we wait today for the feds number we have more flips on the move...

 

The first chart is the 55 Tick chart where we monitor for flip formations... you will notice how clearly we broke resistance to then become support , giving us some flip trades...

 

I am experimenting some other timing alternatives to make timing easier....

 

1rst experiment : instead of waiting 0 line cross, we can take +-100 recross for timing... for this we can also see with more detail the exact same information on a 22T chart... (can help more precise timing ) its the same cci from 55T...

 

2nd experiment : we had a zlr type timing for the last flip, so we can take the zlr at the 22T crossing the +50 line making more easy the entry...

 

 

I am using cci 14 from 55T chart, the exact same cci will be a cci 35 on a 22T chart... this breakdown is to help more precise indicator reading...

 

dont forget I am a left brained guy.... cheers Walter.

[Blu-Ray 10]

Walterw

 

Great thread, I'm watching closely and also playing around with the cci50 indicator you kindly gave me.

 

Just a quick question, have you ditched tradestation now?

 

Cheers

 

Blu-Ray