Optiontimer's Project

[optiontimer 10]

Agree with the idea in principle, Siuya, that several indicators can be interchanged/swapped because they are telling us the same things...But as a visual kind of concrete thinker, I NEED indicators to interpret what I am seeing. And it is possible that many traders are the same - it is no use talking to them about price action versus lagging indicators and so on as if they are the issue. What is essential to you, may be secondary to me and probably vice versa..

 

We all have a natural defensiveness at times to certain subjects in trading forums. In this case, I don't think SIUYA was in any way meaning to bring up the debate over price action vs lagging indicators. In fact, my post came far closer to that than his, and I certainly did not intend to open that can of worms.

 

I do think that what SIUYA was bringing up is a very important issue, the awareness of which might help you, me, or anyone of us following along here to keep on the right track when the all too human temptation to tweak and "make better" rises within our hearts.

 

SIUYA was pointing to the fact (and if you doubt it a fact, just start browsing through random threads here at traderslaboratory) that often times, traders, new and old, tend to seek to find an indicator or set of indicators that will allow them mechanically to implement a particular strategy. No problem with that, as that is precisely what we did here.

 

However, at some point, this quest can mutate, in the trader's mind, into the search for a set of indicators that will allow the implementation of the strategy without fail, i.e. eliminate losing trades and never missing a winning trade - hence SIUYA's reference to "the Holy Grail."

 

This quest for the Holy Grail is often sent into hyperdrive because we all now have computers and charting packages that give us access, literally, to hundreds of indicators that can be joined together into, literally, an infinite number of combinations. You know how this rolls: "I am using the slope of the 50 SMA to confirm the trend, but I am filtering the MA slope with Ehlers MESA cycle to confirm that there is indeed a trend, and even then I will only act on that trend when the ADX rise to greater than 50, and my entry will then be when the 9 RSI pulls back to less than 50, without violating the parabolic SAR, and I will further filter the RSI by switching to a Renko chart to see ..."

 

This is what SIUYA means when he says that our access to computers is more harmful than helpful. The quest goes from a simple "I want to identify when the market is in a major up or down trend, and then identify as entry points pullbacks against that major trend" to "I want to identify only those pullbacks in a confirmed trend filtered seven ways to Sunday, and I want to trade only those pullbacks that are guaranteed to result in the continuation of my hyper-confirmed trend and therefore avoid any and all trading losses whatsoever."

 

We do need to steel ourselves against the desire to seek the unattainable Holy Grail by seeking to pile indicator upon indicator, "filter" upon "filter". Remember this post from a mere five pages into this very new project:

 

Hi OT and all......

 

This is proving to be an interesting and informative thread. Hope it continues for some time yet.

 

Looking at the GU daily with the required emas and the RS indy that Ingot has kindly supplied, i see that the PA under the emas and the RS turning south from its current position. Im also trialling a 150ema as an extra filter....

 

You see that the temptation to seek the Holy Grail is strong, indeed. I do not mean to pick on rebyte2 at all. I too had succumbed time and again to this same desire when I was struggling to learn to trade. And I am sure there are at least a few others "out there," silently following along here, who have already tried to apply additional "filters" to this system. Access to the many thousands of "filters," i.e. indicators, makes it an easy temptation to which one may succumb.

 

If I were following along here in hopes of learning a thing or two about trading, I'd be keeping a notebook devoted to this thread, its system, and my trades, paper and real money, associated with it. And I'd print and post SIUYA's comments into that notebook, as a reminder that we already have all we need to be successful here. We need merely to work on ourselves, not our choice of indicators.

 

Call me old fashioned, but I still print out the daily chart and weekly continuation chart of any market I am preparing to trade (and in spite of carrying a $600 smart phone, I still use a Daytimer appointment book to write in pencil my schedule of appointments). So, as for me, I know that this strategy can be traded using nothing more than a paper chart and a pencil.

 

But I also know it can be traded using a computer and a couple of indicators selected not because they promise to prevent losses, but because they make our strategy clear and unambiguous to us - Trade with the major trend and against the minor trend, and accept the fact that while we cannot avoid losses, we can, through position sizing and a stop loss, avoid the big wipe out. We want to be able to withstand fourteen or fifteen losing trades in a row, and still have sufficient capital, and hopefully sufficient will, to stay in the game and win our losses back and return to profit.

 

Thank you,

 

optiontimer

[optiontimer 10]

I am again unable to access my CSIData charts due to technical issues with my trading desktop.

 

Here is a chart of the EUR.USD using MT4 through OANDA, using our two EMA's as well as the stochRSI generously provided for MT4 by our very own Ingot - Thank you, Ingot.

 

 

As you can see, the EUR.USD has presented a short signal based upon our system - the 21 EMA is below the 65 EMA, and the stochRSI has turned down from 100 on a closing basis with the 20110715 close.

 

Using OANDA's chart, but Interactivebrokers prices, I entered a sell stop to open a 20K short position on stop 1.4091.

 

The order was filled at a price of 1.40906, and taking into account the commission charged, my average price is 1.40894

 

I will have more to say about this trade in a few moments, but I will conclude this post here.

 

-optiontimer

[optiontimer 10]

I entered a sell stop to open a 20K short position on stop 1.4091.

 

The 6E, EUR.USD futures, also issued a sell signal. However, as with all of the recent signals our system has issued, the required risk was too large for a small 25K account. The stop on this trade is nearly 200 pips from the entry, and thus, trading just one 6E contract, the risk would be nearly 10% of the account's equity. I may find myself in a 10% drawdown yet, but let's not all but guarantee it by risking it on one trade!

 

I did not want to pass up another trade, however. So I decided to take advantage of Interactivebrokers forex products, and, traded a 20K lot size. This will be a $400 +/- risk depending upon slippage and so forth. I'd prefer a 2% tisk to a 10% risk any day of the year.

 

The entry, again, with commission and slippage, yields an average price of 1.40894. The stop loss is currently 1.4283, risking 193.6 pips plus commission and slippage on the exit, should it come to that. This trade is worth about $2/tick, either way.

 

I will continue to monitor the futures markets as well, and when a situation presents itself with suitable risk, then I will take that trade.

 

For now, to assure some activity without assuming unnecessarily high risk, I will broaden our portfolio of tradables to include a basket of cash foriegn exchange pairs and cross rates. I will have more detail to provide as this week progresses.

 

Have a great week, and good trading to all,

 

-optiontimer

[Avarice 10]

[...]the StochRSI should be turned up at the END of the closing candle.[...]

 

This "computeOnClose" rule is what made me think of trading hours (see my previous post). If you apply this to the daily chart of a security that's traded almost 24/24 you get your close for the day at midnight -- at which time I'll be sleeping the sleep of the just. I have circumvented this difficulty by deciding that "my" trading day will close between 7pm and 8pm, so basically I will take the oscillator's value at that time of the day and decide on a trade from there. I concur with OT in that -- if I manage to follow this rule consistently -- it should not make a difference in the effectiveness of the entry setups.

 

[...]Too often the easy access to computers, programs and instant access to data is more harmful than helpful.

 

This is one of my biggest problems. Not in the way that I tend to proliferate the use of filters, but I find it very hard to apply "soft" rules to my trading systems. What I mean by this is that, even after reading (and wholeheartedly agreeing with!) Wyckoff, Livermore and now Kroll on the subjects of supply and demand, I find it VERY hard to give priority to support and resistance zones that are (often very clearly) visible on the charts over my computed stops. In a sense my IT-trained mind seems to have a lot more confidence in a computerized formula that spits out hard numbers without any real "knowledge" about the past than in what I am seeing on the chart. I envy traders that learned their craft 20 or 30 years ago: data acquisition might have been a lot harder but they were forced to concentrate on what really mattered instead of being lulled into a false sense of security by ever so capable computers. I for one feel that my next big step on this journey will be to detach myself from the mere mathematics of trading in order to make room in my head for a deeper understanding of what's really happening in a security. As in, what is its price action.

 

This is a difficult market to time long entries with reasonable stops, as after each entry, the market has managed to work itself lower. This situation will have to be addressed. We would not want to make nine consecutive losing trades in one market. With proper position sizing, we could survive it, but it would no doubt take quite a psychological toll

 

I have a mechanic in place that will stop me from trying to enter a market too many times if my timing is not right. In a nutshell: I have a set amount of money (currently 6% of total account equity) that I am allowed to lose over a moving window of 10 days. I sum up all my losses (exclude the winners!) over the past 10 days and if this running loss is larger than the 6% cutoff, I'm not allowed to trade the security until running losses are below 6% again. I found that these forced "sabbaticals" keep me out of markets that are unclear, and more often than not once the trade ban has been lifted the market has moved past its indecisiveness.

 

Example, let's say 6% cutoff is $2000, window is 10 days (Wins are only mentioned to show that you do not take them into account) :

Day 1: Loss 1000 Win 200 Running Loss 1000

Day 2: Loss 500 Win 100 Running Loss 1500

Day 3: Loss 0 Win 100 Running Loss 1500

Day 4: Loss 500 Win 0 Running Loss 2000

Day 5: NOT ALLOWED TO TRADE, Running Loss 2000

Day 6: NOT ALLOWED TO TRADE, Running Loss 2000

Day 7: NOT ALLOWED TO TRADE, Running Loss 2000

Day 8: NOT ALLOWED TO TRADE, Running Loss 2000

Day 9: NOT ALLOWED TO TRADE, Running Loss 2000

Day 10: NOT ALLOWED TO TRADE, Running Loss 2000

Day 11: Loss 0, Win 2000, Running Loss 1000

Day 12: Loss 200, Win 0, Running Loss 700

Edited July 18, 2011 by Avarice

[russellhq 10]

Hi Optiontimer,

 

 

I've been trying to replicate your EUR.USD chart over at Barchart.com - Commodity, stock and forex; quotes, charts & analysis as they have the EMA and sRSI indicators but I can't get it to look like the one you posted from MT4 EUR.USD

 

I found the site very useful but just can't get it to tie up with what you've posted Can you see where I'm going wrong?

[SIUYA 11]

This is one of my biggest problems. Not in the way that I tend to proliferate the use of filters, but I find it very hard to apply "soft" rules to my trading systems. What I mean by this is that, even after reading (and wholeheartedly agreeing with!) Wyckoff, Livermore and now Kroll on the subjects of supply and demand, I find it VERY hard to give priority to support and resistance zones that are (often very clearly) visible on the charts over my computed stops. In a sense my IT-trained mind seems to have a lot more confidence in a computerized formula that spits out hard numbers without any real "knowledge" about the past than in what I am seeing on the chart. I envy traders that learned their craft 20 or 30 years ago: data acquisition might have been a lot harder but they were forced to concentrate on what really mattered instead of being lulled into a false sense of security by ever so capable computers. I for one feel that my next big step on this journey will be to detach myself from the mere mathematics of trading in order to make room in my head for a deeper understanding of what's really happening in a security. As in, what is its price action.

 

 

Not to get too far away from OptionTimers thread, but it is topical that you mention this especially in a trend following thread.

Personally I am old school and learnt the old way, and to a certain extent I envy you who can just rely on the computer. I have recently spent a lot of time effort and energy into trying to do so and have a few similar trading friends doing the same....trying to get the best out of both worlds......so dont feel like you are missing something

 

Point being and linking back to this thread as Optiontimer has mentioned and even showed in the recent trade where the stop was too far away that applying things in a mechanized way but with the addition of a few heuristic/rules of thumb does not need to be too difficult. It is the strategy thats important. In one of the original market wizards books (or an interview) I think I recall someone say the best way to see the trend is to just throw the charts on the floor get on a table and look at those that are trending.....now that is old school.....and then decide how much heat to have in the trade.

(pure day trading is different so as to not mix the two up and keep the focus here)

 

Think about it this way (and not to say this is right) - as a trend follower your DEFAULT position should be to take the trade and ride the position, but you can then override the finese of the entry or the exit somewhat using simple (dont make them complicated) levels of support and resistance to keep you out of trouble. Even the original turtle trend following rules had a few simple rules in them like this and they even had a fail safe get in the trade rule so that if they missed the 20 day breakouts they still took the 55 day breaks.

[optiontimer 10]

Hi Optiontimer,

 

 

I've been trying to replicate your EUR.USD chart ...but I can't get it to look like the one you posted from MT4 ... just can't get it to tie up with what you've posted Can you see where I'm going wrong?

 

Well, I would say you are not doing anything wrong at all. I just this evening received my new computer and I have begun the slow process of re-creating my price history database, charts, templates, etc. and so on. I have found that the set up I posted last night on the eur.usd is not showing on my CSIData charts, and what I had thought was a valid set up on the 6E was due to missing data causing an error in the calculation of the stochRSI on my old computer as it lay dying. Unfortunately, interactivebrokers does not make the stochRSI one of their avalable studies. I was therefore left with hastily downloading OANDA's MT4.

 

I cannot explain why OANDA's data yields the set up while it is not a signal elsewhere. It could have to do with weekend data and the manner in which OANDA collates it. It diesn't really matter. I am back with my CSIData, and I will be using that and only that going forward, save for when it moght be useful to post a chart from Interactivebrokers.

 

As the EUR.USD trade was not a valid signal, the trade was an error. I did the only thing you should ever do if you find you have intitiated a position by mistake - double down and hope for the best!

 

Actually, no, that is not what I did - I closed the position for a loss of $77.80 - whether it moves in an otherwise favorable direction or not, it does not matter. A trade entered in error, whatever the source of that error, must be cut short unless the trade, originally in error, has been subsequently signalled by your system. Today issued no such signal. Therefore, the right thing to do, having discovered the error, was to exit the trade at market.

 

I am not yet set up to take screen captures of my charts, but a cursory flip through a few charts has the GBP.AUD issuing a sell signal using both the stochRSI and the stochastic.

If anyone out ther is able to help, I'd appreciate a few examples of this chart using either/or/both of our oscillators to see if we are all coming up relatively close on being able to see the same thing at the same time.

 

Thank You,

 

optiontimer

[digibranco 10]

"And I am sure there are at least a few others "out there," silently following along here, who have already tried to apply additional "filters" to this system."

 

Assuming that this trading strategy is applicable to any market, I can use it to trade stocks.

 

But then I cannot help, but use a Market direction filter - trade with the major trend of not only the specific stock, but the market as well.

 

Would you criticize this complexity?

or

Suggest a method of gauging the Market?

 

I apologize as this may be slightly off topic as it was decided to implement the strategy on futures.

[optiontimer 10]

 

Assuming that this trading strategy is applicable to any market, I can use it to trade stocks.

 

But then I cannot help, but use a Market direction filter - trade with the major trend of not only the specific stock, but the market as well.

 

Would you criticize this complexity?

or

Suggest a method of gauging the Market?

 

I apologize as this may be slightly off topic as it was decided to implement the strategy on futures.

 

I was referring specificaly to adding additional indicators to the current set in order to further filter whether a set up is valid or not.

 

Certainly a stock trader would want to be predominantly long during bull markets and predominantly short in bear markets. That is not the same as adding an extra moving average or oscilator to the chart of IBM to decide whether or not to take a particular trade.

 

-optiontimer

[phantom 16]

I think I recall someone say the best way to see the trend is to just throw the charts on the floor get on a table and look at those that are trending.....now that is old school.....

 

I believe Ed Seykota is the man you're referring to. He'd pin his charts to the wall and then stand across the room. If he could see the trend from there, he knew he was on to something...

 

For those of you who are getting knocked out all too regularly due to bad entry levels, you may want to try waiting for a volatility breakout (extended range bar) of a 3-5 bar sideways channel in a trending market.

 

Just a hint.

 

 

Luv,

Phantom

[russellhq 10]

Hi Optiontimer,

 

 

I've attached the FOREX chart for GBPAUD from barchart.com with the sRSI, 21EMA & 65EMA.

 

It does indeed look like a short entry:

 

1\ 21EMA is below 65EMA

2\ sRSI has turned down from value of 1

3\ Price is between the EMAs

4\ Price is lower than previous days low

[mrcsidney 10]

Here is a chart from TOS (thinkorswim). The indicator is different than what I have seen in other examples. I have found the strategy and rules plus indicator very good. Thank you OT for the best suggestion / setup I have seen.

Charles

[russellhq 10]

Feeder Cattle looked LONG tradeable today:

 

1\ sRSI turned up from yesterdays 0

2\ 21 EMA > 65 EMA

3\ Price was < 21 EMA

4\ Todays high went higher than yesterdays high

 

See attached chart (2 month)

[russellhq 10]

Hi Optiontimer, I'm not sure exactly what you mean by the points in bold in the quote below and it's leading to me getting a little confused when I'm reviewing the charts:

 

When the 21 EMA is above the 65 EMA, we do not want to be short, and we may be looking for a long entry signal. Only oversold readings of the stochRSI are relevant, and they are relevant if and only if price has retraced back to a level between the EMA's or even slightly below. A long entry is signaled when stochRSI has turned up on a closing basis, and entry is made the next day if price makes a higher high than the prior day.

 

I have extracted the following conditions from the above paragraph and condition 1 & 4 are clear but condition 2 & 3 are not crystal clear for me :

 

1\ 21EMA > 65EMA

2\ Price is <21EMA or even slightly less than 65EMA

3\ sRSI was at 1 and has retracted

4\ On trading day, Price makes higher high than previous days high

 

In condition 2, when you refer to price are you refering to the days close or high or other? And which day is it, when sRSI is at 1 or when sRSI has retracted?

 

In condition 3, are you saying that on Day 1 the sRSI must be 1, Day 2 the sRSI must turn down and only on Day 3 we enter the trade if conditions 1, 2 & 4 are good and can now ignore the sRSI?

 

Sorry if this is obvious but I'm really not 100% on the system. Thanks again!

[optiontimer 10]

Hi Optiontimer, I'm not sure exactly what you mean by the points in bold in the quote below

 

The day that closes with either the 7stochRSI or the 8stochastic turning down is the signal day. The next day will see us open a position if price on that day makes a lower low than the low of the signal day.

 

For example, yesterday, 7/18/2011, the price action and close of the GBP.AUD caused that to be the signal day.

 

Today, price made a lower low than yesterday, so a short entry was made. It looks like the 8stoch made yesterday the signal day, while the 7stochRSI makes today the signal day. That will happen from time to time.

 

So, going forward:

 

A short signal day occurs when the 7stochRSI or 8stochastic tunrs down from overbought. A short entry occurs if price makes a lower low than the signal day.

 

7stochRSI is overbought at 100 (must close with a 100 print).

 

8 stochastic is overbought when +80, or if a +80 signal had been given, follwoed by a higher price high, but a sub 80 stochastic reading (commonly reffered to as "divergence").

 

Reverse instructions for longs.

 

-optiontimer

[russellhq 10]

A short signal day occurs when the 7stochRSI or 8stochastic tunrs down from overbought. A short entry occurs if price makes a lower low than the signal day.

 

 

Thanks, that's clear up most of it. But the final point where the price must be between the EMA's (or slighly above/below), is that the signal day low price (for short entry) or the signal day close price?

[optiontimer 10]

Thanks, that's clear up most of it. But the final point where the price must be between the EMA's (or slighly above/below), is that the signal day low price (for short entry) or the signal day close price?

 

We are trading with the major trend and against the minor trend.

 

Price must have retraced the major trend back to a point between the EMA's or slightly above, for a short (or slightly below, for a long).

 

The reason for this is I want only to take signals where price has tested prior support as resistance (in the case of a downtrend) or prior resistance as support (in the case of an uptrend).

 

My assumption is that if price retraces back to those two EMA's or slightly beyond the 65 ema, it will almost certainly have reached some S/R level.

 

We do not want to take a signal simply because an oscillator bwecome overbought/oversold. We want it to be overbought at resistance or over sold at support.

 

Note: I do not consider the ema's themselves to be support/resistance. I am assuming that actual s/r levels will be found within or just beyond these two ema's.

 

This criterion has nothing to do with which day, etc. and so on. It is likely that at least a poertion of the signal day's price action will fall within the range of these two ema's however, it is not necessary that it does, so long as price did retrace back into that range, at least partially, at some point during the technical reaction against the major trend.

 

Does that help?

 

-optiontimer

[Ingot54 13]

I am continuing with my method of entry as mentioned before, even though it falls outside the strict guidelines set in the rules. See posts #66 and 67. I do this in the interests of consistency, though in time I may think twice about it, and conform to tighter rules.

 

This has not been without loss, as I have had three of my past 5 trades go into loss because of this.

 

One of the things I am noticing is that even though for short entries, the 7StochRSI does tick down at the open, occasionally it will NOT still be in the "down-tick" position 24 hrs later. In some cases I have been ahead in pips by taking that signal - and made significantly higher gains: eg the EURAUD and GBPAUD have both been short from 1.3294 and 1.5133 respectively.

 

On the other hand, premature entries have cost me pips, and I have either nipped them short before they ran to too much loss, or I have purposely allowed them to run, as is the case right now with a couple of erroneous entries, in order to learn what I can from the error.

 

(This is off-topic I know) but I have always learned more by allowing errors to fully play themselves out, than by cutting them short and never knowing what might have happened. Consequently, I am looking to see what happens, because at some point, we are going to see some trend reversals, and unless I have an interest in the trade (albeit a demo situation) I would never follow the activity long enough to refer back to entry, and learn what may have been a warning sign along the way.

 

I hope that makes sense.

 

At the moment I don't feel that there is much to be gained by posting losing trades, unless they are examples of false signals. But I will post the EURUSD chart, because it was a failed trade, and at time of writing it is losing 54 pips. I am remaining in this (demo) trade because it is still:

 

a) within 130 pips loss

b) still on the "correct" side of the long term trend

 

Note: If this trade suddenly reverses and moves into profit, it *could* teach me erroneous trading methods by rewarding poor habits . But keep in mind I am aware of this, and simply using this as a learning exercise, to try to prevent such premature entries in future. On the other hand, strict adherence to the rules might also have seen this trade closed a day earlier, or not entered at all.

[Ingot54 13]

Here is a trade I entered - also prematurely.

 

The entry at the opening of the new daily candle showed the 7StochRSI was ticking down. The indicator later that day returned to overbought, as price rallied.

 

However 24 hours late the price had closed lower again, and the entry according to the strategy rules, was then valid. I didn't really gain much by "jumping the entry."

 

The trade remains in profit, and I expect it will also go on to make good pips yet., though nothing is guaranteed.

 

I am enjoying the input by other contributors - thank you for your questions. The answers from OT are very useful to me, and I am certain, others who read, but are not yet contributing. Those unasked questions can sometimes be the key that opens big doors.

 

I am fortunate to be using the MT4 platform that has the 7StochRSI available, but as OptionTimer said, the 8.1.1 Stochastic is just as useful, so don't lose heart over that issue. As long as you are consistently following an indicator, the long term results should be similar.

 

I have to say that since using OptionTimer's method, I have reached levels of trading profitability on demo (sim) I have never achieved in the past. Can you imagine how that might feel? I am planning on getting some more experience at the selection process before going live in a small way at first. I have traded both "sim" and "live" in the past, so understand already that there is a huge difference in the psychology.

 

The issues I still have relate only to entry timing, and whether I will persevere with early signals or not. So far this has not made itself clear to me - over the course of many trades I will know.

 

One thing I do want to do, is avoid situations where I experience unnecessary draw-down. But draw-down is a function of risk:reward, so to me it becomes not a question of how much draw-down, but one of managing it.

 

What I call "unnecessary draw-down" is draw-down that is outside system requirements - ie entries that are not system entries (timed incorrectly perhaps), or holding on to trades that have failed.

 

The EURAUD attached explains how I could have suffered "unnecessary draw-down."

[Avarice 10]

Here is a trade I entered - also prematurely.

The EURAUD attached explains how I could have suffered "unnecessary draw-down."

 

Hm Ingot, I'm not sure that the bar you point out to be the correct entry would indeed be the correct entry... Shouldn't that bar rather be the entry signal? Trade entry then would be made via a stop at the signal day's low (.1ATR10 below the low, really) which hasn't been taken out yet -- so you wouldn't be in this trade at all.

 

Correct me if I'm wrong. It's early morning over here and I'm still half asleep, gonna make a cup of coffee now...

[youri 10]

Here is a trade I entered - also prematurely.

 

The entry at the opening of the new daily candle showed the 7StochRSI was ticking down. The indicator later that day returned to overbought, as price rallied.

 

However 24 hours late the price had closed lower again, and the entry according to the strategy rules, was then valid. I didn't really gain much by "jumping the entry."

 

The trade remains in profit, and I expect it will also go on to make good pips yet., though nothing is guaranteed.

 

I am enjoying the input by other contributors - thank you for your questions. The answers from OT are very useful to me, and I am certain, others who read, but are not yet contributing. Those unasked questions can sometimes be the key that opens big doors.

 

I am fortunate to be using the MT4 platform that has the 7StochRSI available, but as OptionTimer said, the 8.1.1 Stochastic is just as useful, so don't lose heart over that issue. As long as you are consistently following an indicator, the long term results should be similar.

 

I have to say that since using OptionTimer's method, I have reached levels of trading profitability on demo (sim) I have never achieved in the past. Can you imagine how that might feel? I am planning on getting some more experience at the selection process before going live in a small way at first. I have traded both "sim" and "live" in the past, so understand already that there is a huge difference in the psychology.

 

The issues I still have relate only to entry timing, and whether I will persevere with early signals or not. So far this has not made itself clear to me - over the course of many trades I will know.

 

One thing I do want to do, is avoid situations where I experience unnecessary draw-down. But draw-down is a function of risk:reward, so to me it becomes not a question of how much draw-down, but one of managing it.

 

What I call "unnecessary draw-down" is draw-down that is outside system requirements - ie entries that are not system entries (timed incorrectly perhaps), or holding on to trades that have failed.

 

The EURAUD attached explains how I could have suffered "unnecessary draw-down."

 

Hi Ingot. Is price supposed to be at least between 21EMA and 65EMA? Youri.

[russellhq 10]

Hi ingot, I'm with youri on this one. The price in both your charts hadn't broken the 21EMA barrier so I don't think this was a valid trade signal.

 

I think it would help if you re-read post #8 and study the chart in that post. I know it's helped me to re-read this thread from start to finish a few times for everything to fully sink in

 

Finally, from your last couple of posts, it sounds like you are starting to second guess the system and second guess yourself and this might have arisen due to your recent run of success. I think it might help you if you focus on working to the system described by OT and you will no longer have to spend time thinking about "what ifs". I mean no malice, only trying to pass on some helpfull advice

[russellhq 10]

Feeder Cattle looked LONG tradeable today:

 

1\ sRSI turned up from yesterdays 0

2\ 21 EMA > 65 EMA

3\ Price was < 21 EMA

4\ Todays high went higher than yesterdays high

 

See attached chart (2 month)

 

I think I was a day early with my suggestion that Feeder Cattle were tradeable. I think yesterday was the signal day and today we should be looking to trade if the price goes higher than yesterdays high.

 

Would you agree?

 

Also, if the price doesn't make it today do we wait for the sRSI to fall back to 0 and start again waiting for the signal day? Or do we wait and see if the price breaks the signal day's high and take the trade?

[Ingot54 13]

Hm Ingot, I'm not sure that the bar you point out to be the correct entry would indeed be the correct entry... Shouldn't that bar rather be the entry signal? Trade entry then would be made via a stop at the signal day's low (.1ATR10 below the low, really) which hasn't been taken out yet -- so you wouldn't be in this trade at all.

Hi Ingot. Is price supposed to be at least between 21EMA and 65EMA? Youri.

Hi ingot, I'm with youri on this one. The price in both your charts hadn't broken the 21EMA barrier so I don't think this was a valid trade signal.

 

I think it would help if you re-read post #8 and study the chart in that post. I know it's helped me to re-read this thread from start to finish a few times for everything to fully sink in

 

Finally, from your last couple of posts, it sounds like you are starting to second guess the system and second guess yourself and this might have arisen due to your recent run of success. I think it might help you if you focus on working to the system described by OT and you will no longer have to spend time thinking about "what ifs". I mean no malice, only trying to pass on some helpful advice

Hi guys - you are all correct.

 

After re-reading post #8 I have to agree that a signal is not valid unless the price pulls back above the 21EMA. It would be invalid if price closes above the 65EMA.

 

Previously I had believed that the 7StochRSI readings were only relevant when they were overbought / oversold. I was looking for pullbacks to make entries, but had not regarded the fact that price has to pull back to above 21EMA / below 65EMA ... ie between the two EMA's.

 

My application of the strategy has therefore been incorrect. I was keeping my stops tight, and taking every signal. This was leading me to get into some good long trades, but also handing me a couple of stopped out trades.

 

The last 2 weeks I managed some very good pips, but in hind-sight I perhaps should not have taken a couple of them, because the price did not break into the 21 / 65 zone first, before resumption of the trend.

 

I am thinking that we will miss getting into some very long trends if we wait for price to break the 21EMA before looking for an entry. If this is the case, and we are already in a trade, then these pullbacks can be used for pyramiding opportunities as well as entries, but other pull-backs can not be used for either.

 

According to the reading of post #8, entry is quite restrictive. If price needs to break the 21EMA, but misses that mark by 3 pips, then entry is denied.

 

I am unsure if I have interpreted post #8 correctly, but on re-reading it, and from the observations of you all, it seems that I was focused on the activity of the pullback, plus the activity of the 7StochRSI, and not paying attention to the price pulling back as far as the 21EMA.

 

In the attached chart, I explain what I understand by your comments.

 

So far it is working for me, but rules are rules, and I would rather miss these trades than float off into my own set of rules. In the future I will try to take only trades that fulfill all conditions. I do not want to be introducing things that are outside the rules of the strategy.

 

I don't take offence at all - on the contrary - in the future these kinds of observations may save me more pips than I am making through making earlier entries, and entries that are not strictly in compliance as outlined in post #8.

 

When OptionTimer posted in #67 that he didn't see anything wrong with consistently taking the same kind of entry setup (early entry on signal candle, not the next day trigger candle), as long as it was working, he didn't include that it was OK to take entries where price had not broken the 21EMA.

 

Appreciate your pointing that out to me - thanks guys.

 

EDIT: OptionTimer's post #95 clears up the rationale for requiring price to pull back to between the EMA's - 21 / 65.

 

Best wishes

 

Ingot

Edited July 20, 2011 by Ingot54
Clarifying info added as an Edit

[Avarice 10]

Hi guys - you are all correct.

 

After re-reading post #8 I have to agree that a signal is not valid unless the price pulls back above the 21EMA. It would be invalid if price closes above the 65EMA.

 

Appreciate your pointing that out to me - thanks guys.

 

I don't think you have been all that wrong about the pullback. OT waits for a pullback into a previous support/resistance zone, which prices seem to have hit at around the blue-dotted line at 1.330 on your chart (support up until the end of May, resistance since July). I don't have the exact wording in mind but I think the rule states something like "prices print between the EMAs (or slightly above/below)". Seen in this light this aspect of your entry seems perfectly valid.

 

The price at which you propose to enter (black mini-line below the low) looks about right now. An entry stop at this level ensures that it is price action that takes us into the trade, it has to move in the right direction before we jump on board.

 

The only leftover problem I see now is that stockRSI didn't turn down on the signal day (but I think you mentioned it was down at some point and this hardcopy was made later).

 

Cheers,

A