Optiontimer's Project

[PWP 10]

Ok then - what am I missing because I've seen many setups. Here are GbpUsd Long and AudChf Short. There was also a EurGbp short as well.

 

Please clarify OT - I'm a little confused now. Thanks - PWP

[russellhq 10]

PWP, looks like you are using the Williams indicator (myself and I think Ingot are using the sRSI indicator). This will lead to slightly different entries and might be the cause of the differences. The key here though is to stick to your indicators and follow them, I wouldn't chop and change.

[TradeRunner 10]

Here is a sierra chart study and for non sierra chart users a standard excel file that identifies entries based on my interpretation of the rules outlined in this thread. It is still very much work in progress. The excel file includes a sheet that describes what each column means.

 

I plan to use this to back test the strategy with various stop management strategies.

 

If you use sierra chart then the study plots the entry bar as shown here on a daily EURUSD chart:

 

 

Ignore the long blue arrows that I added by hand for testing.

 

I haven't coded the rule about going slightly above or below the EMA so you will see entries where price has travelled way passed the EMAs. I'm open to any ideas on what "slightly" should mean.

 

The detection of higher highs and lower lows if very static (a dynamic solution is beyond my limited excel skills) so if there hasn't been a HH/LL after 5 days then it gives up looking.

 

I'm not sure that I have understood what invalidates a signal bar. At the moment the signal bar is cancelled if there is a break of the signal bar in the wrong direction.

 

TradeRunner

optiontimerproject.xlsx

optiontimerprojectsierrachart study.zip

[Ingot54 13]

Ok then - what am I missing because I've seen many setups. Here are GbpUsd Long and AudChf Short. There was also a EurGbp short as well.

 

Please clarify OT - I'm a little confused now. Thanks - PWP

PWP - I am attaching the three charts that you have picked out as trades.

 

The GBPUSD looks great in hindsight- but I can tell you that at the time the dip down right through the 65EMA, the 21 EMA dipped BELOW the 65EMA, invalidating the trend. There was NO WAY I was going to take a trade where the right hand edge of the screen was showing a change of trend at the time. As price rallied, the 21EMA was still at or below the 65EMA on the day, causing much ambiguity, and I think you would have been hard pressed to get the trade qualified.

 

The AUDCHF on my charts did not qualify, because price failed to break lower than the signal bar price. See chart.

 

I simply was not watching the EURGBP so I can not say whether I might have traded it as it unfolded. There was a brief period of profit there, by the looks, before the current rally.

 

I could not say with any confidence that I would have taken any of the three examples you have chosen. But I sincerely believe you might have seen the signals and taken those.

 

I am looking for much better candidates, and my post was a confession that I was not finding the kind of trades that I like to take. I don't think any of the three examples would have inspired me - I can tell you 2 of them did not catch my attention, and I scan right through my watchlist EVERY trading day. I don't watch (or didn't watch) the EURGBP.

 

Anyway I do thank you for taking the time to post those couple of charts - I do appreciate it. I am only responding because of the way I am seeing these. Maybe I missed them and really should have picked up on their setups - I don't know.

 

Cheers mate - and thanks - it takes a bit of effort to get these charts together for posting.

[optiontimer 10]

PWP - I am attaching the three charts that you have picked out as trades.

 

The GBPUSD looks great in hindsight- but I can tell you that at the time the dip down right through the 65EMA, the 21 EMA dipped BELOW the 65EMA, invalidating the trend....

 

You seem to be saying that on 8/11, the valuee of the 21 day ema was less than the value of the 65 ema on 8/11, but that on 8/13, the value of the 21 ema on 8/11 was now greater than the value of the 65 ema on 8/11. That is impossible. A moving average based on daily closes cannot have its value for a particular day change based upon subsequent price action. It is just not the nature of how a moving average is calculated.

 

...The AUDCHF on my charts did not qualify, because price failed to break lower than the signal bar price. See chart...

 

Didn't qualify as what, exactly? It certainly qualified enough to generate an order. The fact that price did not pull us into the market does not "disqualify" a signal. Some signals lead to active positions. Others lead to nothing but unfilled orders.

 

Also, I did not mean to imply that a trade had to be filled the very next day after a signal is generated. If I am not mistaken, my current long notes position was filled on two days after the initial order was placed. The signal is good so long as the conditions are still in effect, i.e. the relation of the ema's to one another and the direction of short term momentum.

 

I am looking for much better candidates...

 

Now that is an interesting statement, Ingot. What do you mean by "much better candidates"?

 

How does this one look to you, Ingot? This might be a tough one - its been in a vicious looking down trend, price managed to rally, but here we have a long signal with price below the ema's, and while the 21 ema is above the 65 ema today, it is likely that even if the tradeis filled tomorrow by a higher high than today's high, that the 21 ema will be at a value below the 65 ema tomorrow (today's values will not change, of course - for the last bar on this chart, the 21 ema will always and forever be above the 65 ema at the close of that bar, no matter what tomorrow brings.

 

 

I'd like to hear from everyone on the above chart. According to our system, we have a long order to place tomorrow. How does this candidate stack up? Is it ideal? Is this what we should be looking for? Or should I pass on this one?

 

I mean this exercise in all seriousness. I'd really like to hear everyone's opinion on what they see in this chart.

 

Thank you,

 

optiontimer

Edited August 25, 2011 by optiontimer

[mrcsidney 10]

Please understand that I am not very experienced at disciplined trading. So with that in mind I have to say I would not consider this trade. Price action has gone too far past the 65MA, the 65MA is flat and although price action may bounce I "feel" that price is too weak to present a good candidate.

[Avarice 10]

I'd like to hear from everyone on the above chart. According to our system, we have a long order to place tomorrow. How does this candidate stack up? Is it ideal? Is this what we should be looking for? Or should I pass on this one?

 

I mean this exercise in all seriousness. I'd really like to hear everyone's opinion on what they see in this chart.

 

Re. this chart or any other chart posted above - If the system qualifies an entry I take it, no questions asked. I don't second guess.

 

I've taken plenty of trades which didn't feel right at the time of entry which turned out winners. I also took a ton of trades which seemed perfect at the time, only to watch them turn into the mother of all losers. The lesson there: I don't know what's gonna happen. I don't need to, I trust my system.

 

Edith says: If you truly think that your system is missing a crucial element (in this case, the relationship / closeness of the EMAs to each other, their slope, past price action, whatever) then stop trading it, go back to the drawing board and integrate those thoughts into your trading plan. Flesh them out, formulate them in a way that's easily understandable even in the heat of action. Write them down. Test them, then go live again. But never, EVER, change the rules of a live strategy just because you don't like the looks of a chart.

 

Today it's the EMA's slope, tomorrow it's the day's volatility. The day after tomorrow, it's something else. That's not a systematic approach to trading, it's emotional trading. And that is a recipe for disaster.

 

Some of you might disagree, but I find this concept one of the hardest aspects of trading. It's got nothing to do with tech speak and our general understanding of the markets, it's all in our heads. And that's why this thread is in the Psychology subforum of TL (and rightly so).

 

A

Edited August 25, 2011 by Avarice

[TradeRunner 10]

Re. this chart or any other chart posted above - If the system qualifies an entry I take it, no questions asked. I don't second guess.

 

But it doesn't quantify how far passed the EMAs price can go before an entry is invalid:

 

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.

 

So until you fully define what slightly means then you do have to second guess.

[Ingot54 13]

Now that is an interesting statement, Ingot. What do you mean by "much better candidates"?

 

How does this one look to you, Ingot?

 

 

I'd like to hear from everyone on the above chart. According to our system, we have a long order to place tomorrow. How does this candidate stack up? Is it ideal? Is this what we should be looking for? Or should I pass on this one?

 

I'd really like to hear everyone's opinion on what they see in this chart.

 

Thank you,

 

optiontimer

Had you chosen a 20-period EMA there would not even be a question on whether there is a trade setting up.

 

Therefore I would be looking for much better candidates to trade.

 

Now you can kick me for saying that, and say that I am not trading strictly mechanically.

But at a time when it is unclear where trend is going, I would not want to gamble on whether we are seeing an up-trend or a down-trend.

 

Can anyone looking at that chart, say we have an up-trend, therefore we are looking to go long tomorrow?

 

Equally, can anyone say we have a down-trend,?

 

Because price (21EMA) has NOT crossed the 65EMA, technically the up-trend is still intact. We should be looking for opportunities to go LONG.

 

I hope you one day find an example of what I was trying to (unsuccessfully) convey, about the EMA being "pulled" back up from downtrend to up-trend. If you look at a 1 Minute chart, you may see what can happen to an EMA when price is volatile.

 

It doesn't really matter what I think - what matters is what I do with what I perceive as a "good" trade or a "not-so-good" opportunity.

 

The example you gave, Optiontimer, is a little too ambiguous for me, and I would pass at this stage. That inside bar can do anything it wants - as can any bar for that matter.

[Avarice 10]

So until you fully define what slightly means then you do have to second guess.

 

Very true. This ambiguity is precisely why I decided I would only enter trades where price effectively touches one of the EMAs. Under this hypothesis a valid (long) entry would have been triggered some 3 or 4 bars ago. That trade would be in negative territory by now (if I would have gotten the fill which I'm not sure of). But I would have taken it nonetheless. If I don't follow my rules, why have them in the first place?

[NeoTrader 10]

I agree with Avarice that keeping consistent with your entry rules is critical to having a working system and his answer is the "right" one. However, this particular trade wouldn't sit right with me at all. I think if the EMAs have no separation that a new trend hasn't quite defined itself yet. While the system may technically generate a signal I would see the probabilities of the trade skewed badly against me. I personally would wait for another swing high if it ever came and generated a signal after the EMA's separated a bit. I don't want any part of trying to grab the exact moment the trend changes, I think that leaves you open to chop.

 

Case and point is the EUR/USD. That thing has been chopping with mostly flat EMAs for a while now.

 

Maybe this just showcases how inexperienced I am, but unless there was some other screaming reason to take this trade like a multi-month unbroken support level where it bottomed out I wouldn't do it.

[PWP 10]

Hi OT,

 

When the 21 & 65 EMA's are sooo close I've been avoiding the trade. It just seems too ambiguous to me. However, technically speaking the trade is valid for a long order above the prior days high.

 

Good Question though - definitely controversial.

 

Thanks all - PWP

[Ingot54 13]

Hi OT,

 

When the 21 & 65 EMA's are sooo close I've been avoiding the trade. It just seems too ambiguous to me. However, technically speaking the trade is valid for a long order above the prior days high.

 

Good Question though - definitely controversial.

 

Thanks all - PWP

Well put.

 

I don't know what the chart is, but I would be interested to follow it day-by-day to see how it develops.

 

Good learning opportunity there, but certainly not a good trading opportunity as the rules define them.

 

We are trading pull-backs in trends, and I don't see a trend currently as defined by the rules. The 21EMA is neither above nor below - it could more correctly be described as "at" the 65EMA.

 

Thanks to all who commented.

[optiontimer 10]

...I hope you one day find an example of what I was trying to (unsuccessfully) convey, about the EMA being "pulled" back up from downtrend to up-trend. If you look at a 1 Minute chart, you may see what can happen to an EMA when price is volatile.

 

It is mathematically impossible for the historical value value of an ema of closes on a specific date in the past to change based upon price action that occurs after that specific date's close. Impossible. That goes for any time frame whether one minute or one year.

 

Now, if you mean that an ema crossover can create "whipsaws," with an up cross being immediately followed (within one to a few bars) by a down cross, that is a given. But your post was fairly explicit: You are claiming that the 21 ema of daily closes of the GBPUSD was below the 65 ema of daily closes on 8/11 (or thereabouts) and that two or three days later, the 21 ema of closes was now above the 65 ema of daily closes on 8/11. That is not possible.

 

...The GBPUSD looks great in hindsight- but I can tell you that at the time the dip down right through the 65EMA, the 21 EMA dipped BELOW the 65EMA, invalidating the trend.

 

What are you saying? Were you watching an intraday chart with a tick by tick recalculation of the ema's? There is no way that what you say happened could actulally have happened.

 

-optiontimer

[optiontimer 10]

...It doesn't really matter what I think - what matters is what I do with what I perceive as a "good" trade or a "not-so-good" opportunity...

 

So, our system has been revised in the following manner (revisions highlighted in red):

 

Here is our system. I would think it should need very little tweaking. I have tried to make it easy and clear to follow. Please, if you have questions, and if anything seems unclear to you, let me know here. As I said in the previous poll threads, I have two goals with this project - 1) Not to lose too much, and 2) to keep it simple, very, very simple.

 

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 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 if and only if Ingot perceives this to be a good trade.

 

When the 21 EMA is below the 65 EMA, we do not want to be long, and we may be looking for a short entry. Only overbought 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 above. A short entry is signaled when stochRSI has turned down on a closing basis, and entry is made the next day if price makes a lower low than the prior day if and only if Ingot perceives this to be a good trade.

 

 

When this system issues two consecutive losses, then no further trades will be taken until one of the following three criteria are met:

 

1) Price must retest the last signficant resistance level as support or last signficant support level as resistance. These levels should be clearly visible, easily identifiable areas from where price has previously "broken out" in the direction of the major trend. OR,

 

2) Or price trades higher than the high of the second losing long trade, or trades lower than than the low of the second losing short trade, then pulls back, then issues a new signal. OR

 

3) Our EMA's signal that the major trend has changed from the direction of the two previous consecutive losing trades.

 

What I really need is SIUYA to join in and summarize what I am trying to find words for here. Unfortunately, I believe that he is in the middleof a move and may be absent from us for a few weeks.

 

Ingot, you are not good enough to "perceive" anything yet. You need to learn to see. The title of the thread is, after all, usinf trend, momentum, & timing with strategy, discipline, and patience to trade well. At the very least you introuction of your subjective "perception" has undermined the discipline component, and likely the strategy as well.

 

Let me ask you this, Ingot, and be honest with yourself (forget about me, you can tell whatever it is you think I want to hear - but be honest with yourself): Do you feel a sense of relief when you look at your charts at the end of the day and find no acceptable trades? Do you feel relief when you are both out of the market and able to justify remaining out of the market?

 

-OT

[optiontimer 10]

I'm open to any ideas on what "slightly" should mean.

 

"Slightly" has been struck from the wording explaining our system. It was a mistake to include it as it has caused precisely the confusion it was meant to prevent: I did not want anyone thinking that a signal was "invalid" because price was on the "wrong" side of the ema's. I should have simply said as much, and the inclusion of the word slightly has over-complicated the system while opening it to ambiguous interpretation.

 

Here is the complete revised text of the system as of 8/25/2011 at 9:16 PM Eastern Daylight Time, and shall be known as Holy Grail, Current Edition (I just couldn't help myself):

 

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 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 if and only if Ingot perceives this to be a good trade.

 

When the 21 EMA is below the 65 EMA, we do not want to be long, and we may be looking for a short entry. Only overbought 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 above. A short entry is signaled when stochRSI has turned down on a closing basis, and entry is made the next day if price makes a lower low than the prior day if and only if Ingot perceives this to be a good trade.

 

 

When this system issues two consecutive losses, then no further trades will be taken until one of the following three criteria are met:

 

1) Price must retest the last signficant resistance level as support or last signficant support level as resistance. These levels should be clearly visible, easily identifiable areas from where price has previously "broken out" in the direction of the major trend. OR,

 

2) Or price trades higher than the high of the second losing long trade, or trades lower than than the low of the second losing short trade, then pulls back, then issues a new signal. OR

 

3) Our EMA's signal that the major trend has changed from the direction of the two previous consecutive losing trades.

-OT

[Avarice 10]

So, our system has been revised in the following manner (revisions highlighted in red)

 

Man that's harsh :cinema:

 

Trade update,

 

I got stopped out of Sept GBP for a $900 profit the day before yesterday. No open position left.

 

I have standing orders to short Cocoa, Soybean Oil and the CAD. None of these have been filled yet, we'll see how it goes. I've attached the (sept) CAD chart for your perusal.

 

A

[Ingot54 13]

So, our system has been revised in the following manner (revisions highlighted in red):

 

What I really need is SIUYA to join in and summarize what I am trying to find words for here. Unfortunately, I believe that he is in the middleof a move and may be absent from us for a few weeks.

 

Ingot, you are not good enough to "perceive" anything yet.

 

-OT

I don't think you need Siuya's assistance, OT - I think you are doing a pretty good job.

 

I am also in the middle of something.

 

Cheers, thanks, and best wishes

 

Ingot

[TradeRunner 10]

I'd like to hear from everyone on the above chart. According to our system, we have a long order to place tomorrow. How does this candidate stack up? Is it ideal? Is this what we should be looking for? Or should I pass on this one?

 

No trap to spring then optiontimer? Seems like most would ignore the system rules and pass on it. I was expecting you to show that it was the start of massive up trend.

[optiontimer 10]

Man that's harsh

 

I don't feel it was harsh. I feel that it accurately depicts the implications of the stance Ingot is taking towards his trading. I know he is not the only one doing it.

 

Before I go any further, I want everyone to re-read this post from SIUYA (I added some emphasis in bold/italics):

 

as always OT, a nice summary and often this point is overlooked....

 

"In other words, we want, in most cases, to abide strictly and mechanically to our system, but retaining enough discretion to act upon objective and empirical facts the importance of which supercedes whatever the calculation of a moving average is on a particular day, such as price testing a clear and unambiguous support or resistance level."

 

The system is often too binary, and given context applied with experience and common sense - as pointed out with the extra advice given about correlated trades, then often the system can be improved/finessed without actually having to do too much.

 

This is usually only achieved after tracking a system for a while and then you know when to "break" the rules to achieve the same overall strategy objective without adding too much extra risk. The same can be said for those times the system says to take a trade, but experience tells you to be a little extra wary.

 

Ask yourself this - whats the difference between a 21day ma or a 20 d ma - a few pips maybe ??? Why use one and not the other??? To a computer this may mean everything, but to us when trying to capture 100s of pips the overall strategy is important.

 

"Objective and empirical facts," not subjective "perceptions" should dictate when to "break the rules." This is what I mean by "learning to see." The impression I get from Ingot is that he is allowing his opinions and feelings about things external to the technical action of the market to influence his decision making. However, the only thing we mere retail mortals can rely upon to make good decisions is the technical action of the market. If I fail to make this point and if I fail to persuade Ingot and others similarly disposed to eliminate reliance on opinions, feelings, and personal sentiment and instead rely only on the technical action of the market, then for that trader, his own failure will be the inevitable result. Harsh? You tell me.

 

Now, let's get back to the example I posted the other night, and see if that may help make my point with an objective and empirical example.

 

That chart from the other night was of the USDCHF from 2009 - June of 2010, and that trade ran for a max of 1600+ pips, which would translate to 800-1300 profit depending upon stop management and how well one reads long term S/R. I shorted the 6S Swiss Franc Futures at that time (the futures move inversely to the spot). The futures ran 1200 ticks, and I was stopped out with 1000 of them.

 

Here is the chart I posted the other night:

 

 

Here is how it played out over the ensuing five and a hald months:

 

 

And here is the weekly futures chart showing that the rally had reach a significant prior high resistance level (note the elipse drawn on the entry area):

 

 

Here is the daily chart of the corresponding futures, withan ellipse drawn at the entry area:

 

 

I know I have said in this thread that weekly and monthly charts should be monitored periodically for long term support and resistance implications. Support and resistance take precedence over any moving average, any oscillator, and central banker, any politician, and wealthy Billionaire, and certainly over the opinion of any of us mere retail mortals.

 

If you are going to "break the rules" of the system, it has to be based upon what SIUYA calls contextual considerations, and I assume by this he means technical context. The ability to read these contextual clues comes with experience. But it does not come with all experience. It comes from an earnest, disciplined, and patient application of a sound strategy. That strategy, for us, is to enter positions against minor rallies in major down trends for shorts and entering against minor declines in major up trends for longs. The only clues we should be using to over ride our system should be based upon our monitoring of long term support and resistance.

 

There is nothing objective about "looking for better candidates," unless that phrase is followed by an explanation of the objective bases of what would constitute a "better candidate."

 

This would be a good time for setting aside a weekend to go back to the very beginning of this thread and thoughfully read and take hand written notes. We have reached a point where there is a danger of straying from the strategy without realizing one is doing so.

 

Have a good weekend,

 

-optiontimer

[optiontimer 10]

No trap to spring then optiontimer? Seems like most would ignore the system rules and pass on it. I was expecting you to show that it was the start of massive up trend.

 

You're mixing timeframes - Optiontimer is a daily chart, but you were expecting an intraday response;)

 

See my post directly below yours.

 

-optiontimer

[PWP 10]

Thanks OT for your further explanation and reaffirmation of the objective/direction of this thread.

 

Here's a position update:

 

Eur/Chf Short Stopped out at +8.8 pips

Aud/Chf Short Stopped out at -270 pips

 

Current Positions:

 

Eur/Gbp Short from 0.8750 - Stop at 0.8890

Gbp/Jpy Short from 125.50 - Stop at 127.40

 

Have a good weekend!

[russellhq 10]

My close for this week:

 

[optiontimer 10]

My close for this week:

 

Very typical results in that there is a mix of many small wins and small losses, and the majority of profits come from just a few of the trades, hence the saying, "cut your losses short and let profits run."

 

This is why failure to take all the trades signalled that fall within your risk parameters and a habit of repeatedly cutting your profits short out of fear that the market will "claw them back" will have disastrous effects on one's long-term profitability.

 

There are only two reasons not to take a siganl:

 

1) The initial risk is too great as a % of equity, or

 

2) An objective analysis of support & resistance indicates that further price action is required to prior to making a commitment, e.g. it is desirable to get a short entry at resistance, but it is not desirable to take a long entry with price at resistance.

 

-optiontimer

[Avarice 10]

Just got slapped in the face by Canadian $, 1.5k loss. Both entry and exit at the worst possible moment. How's that for timing the market :applaud: