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TimRacette

Fibs on ES and 6E

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I had a couple people ask me to start a Fibonacci thread so here it is. As you've probably heard me mention in other posts I enter at 50% lines I use a 6 tick stop on the ES and 8 pip stop on the Euro (6E). I trade in contracts of 2 and take half off at +2 on the ES +4 on 6E. I use a target of 23% past highs.

 

Be interest to hear how you trade using fibs.

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I tend to use fibonacci ret/ext on the IB and the whole day. I enter a trade purely on a fibo though. I use them in 2 ways. 1- to concrete in a structural framework and 2- for a guide on the relative strength of the market session.

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I had a couple people ask me to start a Fibonacci thread so here it is. As you've probably heard me mention in other posts I enter at 50% lines I use a 6 tick stop on the ES and 8 pip stop on the Euro (6E). I trade in contracts of 2 and take half off at +2 on the ES +4 on 6E. I use a target of 23% past highs.

 

Be interest to hear how you trade using fibs.

 

I recognize this strategy ;)

 

EDIT: I used to do the same exact thing, but I stopped with the scaling out because statistically it didn't work for me. I will occasionally peel off some at +4 on the ES, but only if I'm not feeling confident for whatever reason. -23% targets are sound and are good places to take profit.

Edited by bigsnack

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I had a couple people ask me to start a Fibonacci thread so here it is. As you've probably heard me mention in other posts I enter at 50% lines I use a 6 tick stop on the ES and 8 pip stop on the Euro (6E). I trade in contracts of 2 and take half off at +2 on the ES +4 on 6E. I use a target of 23% past highs.

 

Be interest to hear how you trade using fibs.

 

Do you mean you take half off at +2 points or +2ticks? What do you do with the stop on the remaining contract? Also, how big an area are you using for the trade? In other words, how much bigger is your target than your stop.

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BigSnack, picked up that scale method from David Halsey a few years ago, love it :)

 

Mighty Mouse,

 

For ES I use a 6 tick stop, half off at +2 ticks and stop goes to -4 ticks, initial target 10 ticks. 85.7% of my trades get +2 or better so my risk is extremely reduced right off the bat. For the

 

For Euro (6E) I use a -8 pip stop, half off at +4 pips and stop goes to -4, this puts me at break even and I just hold to the -23% target. Once we get moving I trail the 233 tick chart.

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BigSnack, picked up that scale method from David Halsey a few years ago, love it :)

 

Mighty Mouse,

 

For ES I use a 6 tick stop, half off at +2 ticks and stop goes to -4 ticks, initial target 10 ticks. 85.7% of my trades get +2 or better so my risk is extremely reduced right off the bat. For the

 

For Euro (6E) I use a -8 pip stop, half off at +4 pips and stop goes to -4, this puts me at break even and I just hold to the -23% target. Once we get moving I trail the 233 tick chart.

 

Tim,

 

The first leg of your es trade is a -$2/contract loser over the long run even if you attain 90% accuracy, given a normal distribution of wins and losses, taking into account normal commission levels, paying a 1 tick spread, and ignoring slippage. You would be better off trading only 1 contract and moving your stop to -4 ticks when it moves 2 ticks in your favor.The overall profitability of the trade will depend on how far the second leg of the trade goes. You can improve the profitability of that trade by changing your first scale to 4 ticks from 2. That would give you an $8 expectancy over the long run with an 80% accuracy rate, given the spread and commissions.

 

I know you didn't ask my opinion, but I figured I would point it out since it was staring me in the face. Keep in mind that I an mot questioning your accuracy; instead, I am taking it as given that you will be able to get 85%.

 

You can probably do your own study and of your actual trades that made 2 ticks and compare them to the trades that you got stopped out of. Over time it will approach something near the -$2 over time.

 

Good luck

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The problem with that math is that it doesn't take into account my trailstop and winning trades. My fault for leaving that part out. So 85% of trades go at least +2, I move my stop to -2 when we trade +4 and b/e when we hit +6. I have statistics for where my trades either get stopped out or take a profit and my #s along with my actual p/l show that it's very profitable.

 

In 10 trades I average 1.5 stopouts, two -2s and the rest of the trades are b/e or greater, that means (sticking with the #2 and using 2 contracts) in 6.5 trades I only have to cover a loss of $250 and according to my live trading statistics I have at least 2 trades of +10 or more per every 10 trades, that right there would cover losses and commission.

 

The range on the euro is much more conducive and lucrative to this strategy, but the ES is so incredibly technical with extremely high first target rates.

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The problem with that math is that it doesn't take into account my trailstop and winning trades. My fault for leaving that part out. So 85% of trades go at least +2, I move my stop to -2 when we trade +4 and b/e when we hit +6. I have statistics for where my trades either get stopped out or take a profit and my #s along with my actual p/l show that it's very profitable.

 

In 10 trades I average 1.5 stopouts, two -2s and the rest of the trades are b/e or greater, that means (sticking with the #2 and using 2 contracts) in 6.5 trades I only have to cover a loss of $250 and according to my live trading statistics I have at least 2 trades of +10 or more per every 10 trades, that right there would cover losses and commission.

 

The range on the euro is much more conducive and lucrative to this strategy, but the ES is so incredibly technical with extremely high first target rates.

 

Tim,

 

I am not considering what you do after the first contract is scaled out. My comments above only concerned the first contract. If you take it off at +2 or -6 and increase your accuracy to 90% from 85% that trade is a -$2 loser over time. That means that at 85% it loses slightly more. So, if you remove that part of the trade, you automatically improve your profitability by $2 per trade. In the long run, that 2 bucks makes a very big difference.

 

If your first contract is not +2 or -6, then I am mistaken, but that is what I understood. If your system is profitable, the second part of the trade is carrying the trade and over compensating for the long term loss created by the first contract. Hence, my comment that you can improve the trade by not scaling out the first one at +2 ticks.

 

I am taking for granted that you are achieving the statistics you are reporting. Given those statistics, the first part of the trade is a drag on your overall trade. 85% sounds great. 90% is even better and at 90% the first contract is not profitable because of the costs.

 

MM

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MM

 

This was the same conclusion I came to when trying this strategy for myself. I found that my R:R overall was much better if I didn't scale out of the trade so early. I found that all the scale out did was add a little "mental" capital because I had locked in a tiny bit of profit. However, once I realized that if I had kept the second contract on for the full target I would have made way more $$$, the stats convinced me to stop.

 

Also, if you feel that good about those 2 ticks, why not toss a 20 lot on and take 18 off at +2? :cool:

 

Again, I'm a huge fan of DH, and I think he kills his strategy day in and day out, but the scaling didn't work for me.

 

I'm big on the -23% target though!

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I had a couple people ask me to start a Fibonacci thread so here it is. As you've probably heard me mention in other posts I enter at 50% lines I use a 6 tick stop on the ES and 8 pip stop on the Euro (6E). I trade in contracts of 2 and take half off at +2 on the ES +4 on 6E. I use a target of 23% past highs.

 

Be interest to hear how you trade using fibs.

 

Hi Tim,

 

At 50% you are trading the midband of the equivalent bands to your fib setting.

[ you may know bands as dochian channels ]

 

Yes, it is a good place to lie in wait and watch for a turn in price or a confirmation, in which case price will mostly run to the other band, but I seriously doubt whether fib has anything to do with things.

Mind you, if you are going to use midbands then you need to have done your homework first because if they are a turning point for price, it is highly likely that they were a previous S/ R or Supply/ Demand band

 

It is all about The Bands.

 

The same bands link supply/ demand and support/ resistance and tie the whole game together.

 

Even The Bands are only horizontal lines that we place on the chart.

 

However the basic to this game is that price crabs diagonally across the screen and we lie in wait in horizontal lines.

 

Everything else is just mumbo-jumbo, although volume has some merit providing that you tie it to time.

 

Even the bars we set and look at are synthetic, since price is determined through streaming order/flow at the bid/ask.

 

Basics Basics Basics, that is what I remind myself every morning before I open the charts.

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Makes sense MM, that's just what I do, allows me to take the setups that I see carefree. Been profitable month over month for the past few years so far.

 

That's great. Sounds like more people should do what you do.

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Some of my trading colleagues do Alg, another runs a hedge fund, a few others do option spreads for big firms downtown (Chicago). I couldn't trade they way some of them do and they probably couldn't trade the way I do. To each his own ya know, but so far this works for me.

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It is my understanding that the reason for the "breakeven" contract has to do with 'psychological capital' - not financial capital.

ie. in the case of the ES, 85% of the trades quickly become (stress free) "free trades."

In the long run, using the numbers Mr. Hasley provided some time ago, the cost for this psychological tool are the commissions which is considered part of the cost of doing business.

 

The more I learn about the critical role of emotion/psychology (from classic and neuroscience perspectives) the more I appreciate this very practical technique - although it doesn't work for me.

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Yeah I totally see its place. The thing is, by the time my trading improved to where I expected to get those 2 ticks, I was actually averaging 8-12 ticks per trade. At that point I figured it would be worth it to hang on to the extra car.

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Makes sense MM, that's just what I do, allows me to take the setups that I see carefree. Been profitable month over month for the past few years so far.

 

So do you track your performance? If so, could you post some statistics on what you achieve? I would be interested in net gain, profit factor and draw-down. I can get a good sense of just about any approach just by net gain vs. draw-down. What I have found is that profitable traders are usually in a very well defined range of performance. In other words the market has an effective inefficiency and once that is tapped into most traders see that "edge".

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Ya, my first targets on the ES (+2 ticks) has an 86.7% achievement rate at which point my stop moves to -4. This reduces my risk down from -6 to -2 per contract (I start with a 6 tick stop). From there my target is either +10 or in most cases, the 15-min target from where I entered.

 

This keeps my reward/risk ratio greater than 1:1 with the bulk of my stop outs being limited risk. The real value of the strategy comes on the euro 6E futures where I use a -8 pip stop and at +4 move the stop to -4. Since the euro's range is much wider than the ES I can get to break even and then manage the trade for 30, 50 or sometimes even 100+ pips by trailing my stop.

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Ya, my first targets on the ES (+2 ticks) has an 86.7% achievement rate at which point my stop moves to -4. This reduces my risk down from -6 to -2 per contract (I start with a 6 tick stop). From there my target is either +10 or in most cases, the 15-min target from where I entered.

 

This keeps my reward/risk ratio greater than 1:1 with the bulk of my stop outs being limited risk. The real value of the strategy comes on the euro 6E futures where I use a -8 pip stop and at +4 move the stop to -4. Since the euro's range is much wider than the ES I can get to break even and then manage the trade for 30, 50 or sometimes even 100+ pips by trailing my stop.

 

Do you have any deeper statistics than the starting 86.7% stat? That is what I was wondering about, but for the targets as well. I'm trying to get a sense for how well people are able to handle the risk / reward and what they consider a real good trading approach. I'll give an example:

Gross Profit: $86,000

Gross Loss: $61,000

Profit factor: 1.4 (86,000 / 61,000)

Percent Profitable: 47%

Drawdown: $4000

This means from any new profit peak, the most I went down again was $4000. Overall 1.4 is my "edge". Below 1 is a losing system. Percent profitable is really not very important, what matters is how much on average you get in gains vs. losses. Or put another way, take the net profit, $86000 - $61000 = $25,000 / drawdown = 25000 / 4000 = 6.25 is my reward / risk factor. Anything above 3 is good.

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I just converted over to StockTickr for uploading all my trades and am really liking that functionality. I will get back to you when I have more data dumped from Infinity, so far I have September's trades and some of August.

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Hi, TimRacette. Can you tell me what do you mean -23% profit target. Do you mean 123% of swing, or you mean 23% IN swing? If 123% then risk:reward ratio is better than 1:1, but if you mean 23% of swing then risk:reward ratio is smaller than 1:1.

 

I testing this system right now and i can't say that market really respect 50% level, sometimes it bounce 61,8% much better.

 

Which timeframe or tickchart you use to draw fibs at ES and 6E?

 

Sorry for my english)

 

Thanks)

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Hi wskeal, in my charting platform I have the 50, 61.8 and -23 % lines enabled. The -23 is also the same as a 123% on some charts. Either way it's 23% past the highs or lows in the direction of your trade.

 

As for the tick chart, I use a 512t to trade the ES and what that means as compared to a time based chart is 512 ticks will complete to form 1 bar. Today is a poor example of 50% retracements due to the wedge that we seem to be in on the larger 15-min time frame. Nonetheless with a structured set of rules, criteria for entry, and scale out methods I find them to be very profitable for my own trading.

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I just converted over to StockTickr for uploading all my trades and am really liking that functionality. I will get back to you when I have more data dumped from Infinity, so far I have September's trades and some of August.

 

Hey Tim, lots of time has passed since the above post and I was wondering if you could post some more of your results/stats regarding your Approach?

 

Thanks

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