Optiontimer's Project

[zosorock 10]

Hi Neotrader,

 

For simplicity I've attached a chart of the daily EUR/USD as it's quite clear to show my trailing stop system. A short entry is marked along with the initial stop and two possible exits. As price makes each lower high marked with H move your stop down to 1 pip above the high. With this system entry was at 1.3591, stop 1.3816 - profit 712 pips or 2.8 R. Trailing the EMA would have taken you out at pips for 475 pips or 2.1 R.

 

Hi iwshares,

 

Thanks for taking the time to post this. I have tried something very similar to it but I use the swing highs (for shorts) plus 10% of the range of the last 10 bars, in other words 0.1 * ATR(10)

 

That has proved to be effective as it avoids most stop-hunting at these levels.

[SIUYA 11]

I believe you start eroding the effectiveness of the system and begin missing moves that would otherwise keep your expectancy up.

 

actually you dont.....you just end up with a different system.......the key is developing a system for you - that you can live with, based on underlying philosophy and ideas that work/make sense and are generally universal.

Everything becomes a trade off - from which MA, which X days, which number of filters to which filter.....the question is three fold (maybe more) - does this change make sense, and does this change make more money, and WHEN does this change perform best......

 

all tires are round, some are built for driving on snow, some gravel.....some for trucks, bikes, buses......

[optiontimer 10]

How is everyone?

 

I've been exploring a different path for the last few months, and a new project has come to mind. It may be a suitable subject/project for a new thread.

 

I'm not ready to say much right now, but a suitable title for this potential project/discussion thread might be "Leptokurtosis," or perhaps, "Timing Leptokurtosis." Even more accurately "Exploiting Leptokurtosis through Timing and Bet Size" - in other words, something entirely too pretentious and academic to attract much interest.

 

-optiontimer

[SIUYA 11]

I had to look up Leptokurtosis

It sounds like a skin rash.

 

I have been out of the markets lately as I moved, but just starting to edge my way back into it last week with some training drills.

Interestingly enough one of the things I have been looking at/thinking about is varying bet sizes slightly for what I have been building on....so it will be interesting if you start another project. If I could add anything as far as ideas, thoughts then happy to do so as you do have a great way of describing and explaining things.

 

I would say, that ultimately a lot may end up looking the same from the point of view - ultimately we are looking to build the biggest positions possible with the smallest risk possible to capture the largest gains possible.....how to do that is the many and varied road.

 

From an option trading point of view once you start looking at fat tails and/or Leptokurtosis (if my reading of what it is is correct) then it would be interesting.....and yes I prefer the dumbing down of statistical ideas into lay mans terms too

[optiontimer 10]

... ultimately we are looking to build the biggest positions possible with the smallest risk possible to capture the largest gains possible.....how to do that is the many and varied road...

 

You and I are on the exact same page ... it is all a matter of how much does it cost me if I am wrong versus how much I can win if I am right.

 

 

 

OT

[NeoTrader 10]

It's sad to see this thread die. I have greatly benefited from it.

 

I am hoping there are some out there that still check back on it to offer some feedback on a question I had.

 

Specifically related to the methods outlined in this thread, how many of you adopt a "fire and forget" mentality to it?

 

Do you set your target and stop then wait for the position to close itself?

 

Do you review positions daily and consider updates? If so what grabs you enough to close the position if it hasn't reached target/stop?

 

I realize there is no right answer, but I'm interested in the though processes of more seasoned traders than myself (i.e. just about anyone)

[iwshares 10]

Hi Neotrader,

 

I've not posted in a while as I've been evaluating my ideas. One problem I've found with my trailing stop approach is it does need a certain amount of babysitting as I'm using it on range charts on spot EUR/USD which never closes...

 

I have just started testing my approach (described below) using some daily charts of stocks but haven't got enough results to report back.

 

Not using profit targets has led to committing the "sin" of letting a winner into a loser on occasion, even as much as 2:1 RR to stop out but overall it is profitable so I'll carry on using it. What I've found during testing and live trading is that you can never tell which trades will almost stop then go on to 3, 4, 5 or 6 R returns and which will stop at a loss so I just have to trail the stops as I'm told by the system. Hope that is of some use - if it's any use I'm finding exits the most difficult aspect too!

[optiontimer 10]

Here are two very good and relevant posts to the topic at hand from another recent thread here at TL:

 

... In true trend trading, outliers ARE the edge.

 

ie a ‘real’ trend trader is not trying to improve entries, is not trying to prevent or diminish losses… he or she is simply entering positions with the trend and waiting for outlier moves - period…

 

actually given that you think trend following is about outliers, then MM (i.e. money management - edit by optiontimer) can be fairly important here ... Aim is to have the maximum amount on for an outlier ... pyramiding really works when it works ...

 

I do not recall discussing "targets." Stop loss? Absolutley! Profit target? Not here ... and if I did suggest such a thing ... I shudder at the thought. When I day trade, I do often use profit targets. But this thread was not about day trading. This thread is about trading a system where the edge is as zdo stated - catching the outlier and riding a trend, adding to winning positions as the market moves in favorably.

[iwshares 10]

This thread is about trading a system where the edge is as zdo stated - catching the outlier and riding a trend, adding to winning positions as the market moves in favorably.

 

That's exactly what drew me into this thread: the "simplicity" of a trading where you jump on board a trend and get out when the market's given all it can (be that positive or negative). The expectancy for me has been fantastic. One trend in January allowed entries returning 7 +5+4 = 16R; another 9+8+5 = 22R. Consequently I can take a lot of setups that stop for 1R loss and still make a profit. After some time with contrarian setups, I've really taken to trend trading. I like how the market has to add proof that the pullback is not a retracement - the StochRSI filter seems to indicate this quite well. Thanks again OT!

[SIUYA 11]

Its is an interesting dilemma that I am finding trying to automate some approaches.

The computer is very binary, and getting stopped out by a tick or two only to watch things continue in the original direction is frustrating.....sure sure you could use larger stops, no stops, varying stops etc; but the computer is very precise.....and then it only wants to react when it sees a 21 ma, cross a 33 ma rather than a 20 cross a 34 or whatever.......

Stopping yourself out at 1, or 2 or 3 ticks over a new higher higher, or just letting the pattern develop --- the computer does not care.

Thats why in my opinion (while I am sure it can be done) its very hard to get a set and forget automated system of one size fits all.

(driving me crazy actually maybe I should just throw in the towel on this one )

 

While alternatively looking at the overall picture, not worrying about exact entries, stops, etc, looking to get on board the instruments that are already trending, at what could be seen as retracements in those trends, at levels that offer reasonable levels of success (eg, a 50% retracement of a recent upmove in an existing up trend, or a move back toward a trending MA)......

 

I guess its more a style/strategy/mind set for asset allocation rather than a system....

and as option timer says (if I may change slightly what he says)

....

"But this thread was not about day trading. This thread is about trading a STRATEGY (system) "

[tamag 10]

Here are two very good and relevant posts to the topic at hand from another recent thread here at TL:

 

 

 

 

 

I do not recall discussing "targets." Stop loss? Absolutley! Profit target? Not here ... and if I did suggest such a thing ... I shudder at the thought. When I day trade, I do often use profit targets. But this thread was not about day trading. This thread is about trading a system where the edge is as zdo stated - catching the outlier and riding a trend, adding to winning positions as the market moves in favorably.

 

Hi Optiontimer, I have been following your system from day 1 with great interest,( this by the way is my first post) I just want to thank you for your time and expertise you have helped me make money, and greatly reduced my losses on my losing trades, which by the way are only 2 out of 10 trades. Thank you once again for a great System and the introduction to Stanley Kroll .

 

Regards Nigel

[NeoTrader 10]

.. as zdo stated - catching the outlier and riding a trend, adding to winning positions as the market moves in favorably.

 

I understand up to this point. I guess my question is, how are we deciding that the trend is no longer moving favorably?

 

Obviously this is answered quite quickly if 3 days after you enter your position your stop loss has hit, but what about in cases where it moves to 2 or 3R then starts to slide? Do you move your stop to 2r after it hits that? To break even? I get not using a profit target, but how to you keep from handing it all back?

 

So far I've tried using the EMAs and the 65 seems too sluggish unless the trend really explodes and the 21 seems too sensitive as pullbacks in the trend often will cross it. I am reluctant to use support/resistance, because that seems to more fit profit targets and short term trading.

 

Maybe I'm just floundering around too much and thinking too hard. Maybe just pick a method and suck up the 15 1R losses and be patient for my 20R gain.

 

I guess I was trying to get a feel for what others who are more successful like to use.

 

ATRs? Support/Resistance? Volatility? R multiple? Dartboard? :crap:

 

As always, thank you for the time you all contribute. It is much appreciated.

[NeoTrader 10]

Looking to Enter USD/JPY depending on today's close. Depending on the high and if StochRSI hooks up on closing basis I will use approx 65 pip stop around 10 pips below recent swing low with my objective being retest of recent 84.00 high for around 6R return.

[NeoTrader 10]

Entry Triggered at 81.15

Stop set at 80.47

 

Go dollar go

[tamag 10]

Entry Triggered at 81.15

Stop set at 80.47

 

Go dollar go

 

......Oh! but so slow though!!!

[NeoTrader 10]

Well I must admit to anyone still following this thread that I moved my stop loss based on price action late last night. I decided to watch price as the market opened in Asia to see how support held up. I didn't like what I saw and bumped my stop down 2 pips then 3 more pips. Price came within 4/10ths of a pip of stopping me at one point.

 

This isn't much of an adjustment considering my previous stop and target but I still feel like I cheated and it seems like the market will take notice and swing violently to take me out at my new stop level in the next few days anyway. Seems it would serve me right.

 

On the one hand I felt good about seeing what price was doing, and realizing my stop was a bit too tight. For now it seems that buying has stepped in and I might be ok.

 

On the other hand I'm not happy with what in my opinion was a mentally weak move to meddle with the trade mid flight.

 

Obviously need to work on the "fear of loss" aspect of my trading. :crap:

[NeoTrader 10]

Stopped out. Bad news galore for USD.

 

flipping annoying

[iwshares 10]

My

 

Did you test your version of the system and refine the rules accordingly? If so did you move your stop according to your plan?

 

If so then don't be annoyed about a) moving your stop or b) the market moving against your position. Even if it's only 10% accurate but has a profit factor of 9.1:1 then you're laughing all the way to the bank.

 

What I found was it took quite a bit of back and forward testing (with small amounts of real capital) to discover a set of exit rules I was happy to trade. I also find it useful to keep a log of perfect trades e.g. if I take a trade when the setup wasn't complete or I typoed the order it doesn't go in the perfect ledger. This allows me to gauge how my execution is performing compared to testing, or discover if there is an unexpected problem with the system when used in live trading.

 

I found with my first version of the rules that while in testing it was profitable, poor execution or more accurately a system that allowed for too much indecision, reduced the profitability to negative. I also couldn't take the barrage of loss after loss of real money (which wasn't a problem for me with paper $$) so looked for a system beter suited to my loss tolerance.

 

Despite a strong start to the year so far this month (due to lack of strong trends as I'd interpret them) I've had 6 losses, 3 break-evens and one profitable trade, but I'm still carrying on with my small grubstake, taking each trade as it comes.

[NeoTrader 10]

Thank you sir.

 

Unfortunately I did not move the stop according to the system, so it was a bad trade all around really.

 

I'm sure its not uncommon but what particularly frustrates me about this trade is that the entry was barely triggered and it did nothing but go against me since it was triggered.

 

I think I need to analyze my entry technique and refine it some, or rather my money management. I need to resist the urge to set the initial stop too tightly or at least get a better feel for the timing.

 

On a minor technical level I'm having a hard time reproducing the StochRSI as accurately as I'd like. I know that it's more of a training wheel and ultimately I will learn to get a feel for when price will mostly likely respect a level of support or resistance.

 

Need to get back on the horse and stick to my rules. Strive for better execution.

[NeoTrader 10]

Will look to reenter USD/JPY if I get a signal.

 

Feeling a lot less secure about this support level however.

[tamag 10]

Will look to reenter USD/JPY if I get a signal.

 

Feeling a lot less secure about this support level however.

 

I entered the same trade at the same time as you but noted the hourly before execution and that all the rules were in place, I closed out the next day with a small profit.

I am also using RSI 2 along with stochastic RSI to confirm entry, and along with 21ema and 65ema I am also using 5ma to exit. Agree with you if an uptick appears at the close today or tomorrow and all my rules in place will be looking to get back aboard.

[russellhq 10]

I've been following this thread since April last year with keen interest and am curious as to how the system has worked for eveyone over the last year.

 

Has anybody kept a profit/loss log of their trades to show how the system has performed for them and would care to share?

[kuokam 10]

Maybe you should try and see for yourself, on a demo account ? I just got directed to this thread, finishing reading the book by S Kroll and then try the system.

 

I've been following this thread since April last year with keen interest and am curious as to how the system has worked for eveyone over the last year.

 

Has anybody kept a profit/loss log of their trades to show how the system has performed for them and would care to share?

[tamag 10]

Maybe you should try and see for yourself, on a demo account ? I just got directed to this thread, finishing reading the book by S Kroll and then try the system.

 

I tried Optiontimers strategy without success, however I combined the ema's with fibonnaci and RSI stochastic and have been quietly pleased with my results.

[optiontimer 10]

I tried Optiontimers strategy without success, however I combined the ema's with fibonnaci and RSI stochastic and have been quietly pleased with my results.

 

Awesome!

 

Why don't you post a chart or two showing what you are doing with the fib's? You might end up helping someone else to achive better results!