Trading the Storm - Methods for the Struggling Trader

[marty221 10]

I like the support resistance as it gives you where the change in direction is and much less complicated and more reliable. This method might be good but it seems complicated. Read the book reading price charts bar by bar by Al Brooks and it would refine your system alot.

[Maelstrom 10]

I like the support resistance as it gives you where the change in direction is and much less complicated and more reliable. This method might be good but it seems complicated. Read the book reading price charts bar by bar by Al Brooks and it would refine your system alot.

 

Thanks for the heads up on the book - I believe I have flipped through this one a few times, but I think a lot of the concepts apply to time-based/multi-size bars that would not work with range bars. If I recall, there was some good stuff in there about trend lines however.

 

Will definitely check it out the next time I am at the bookstore.

 

M

[Maelstrom 10]

I have been struggling with how to clearly explain my trade targets on here. It really isn't difficult or terribly complicated, I am just trying to word it all in a way that will make sense.

 

Here are a couple of charts though to show the results of my profit target method over a few days. 3 consecutive moves from this month - the 22nd through the 26th. Are they always this close? Of course not, but pretty darn often, and eerie when it happens just right.

 

More to come guys.....

 

M

 

 

 

[horace 10]

 

Yes, a bigger chart means bigger stops,

 

M

Hi there M,

 

Why do you feel that your choice of bar size and type leads you into wider stops.

[Maelstrom 10]

Came up with an idea - a dangerous thing for me.....

 

The idea is to post charts not bar by bar exactly (that would take forever!) but event to event - pattern formation, trigger and entry, stop placement, target adjustments, reversal, etc etc.

 

Each chart/post I could explain what and why I am doing what I am doing at that point, allowing a better flow to my trade management.

 

May be a significant undertaking, but, if anyone out there is interested in something like that, I'm game.

 

Let me know, or I will just listen to the chirping crickets..... :rofl:

 

M

[steveh2009 10]

This is 20 tick range chart of a great move on the Crude futures August contract last week. Did I get the long signals right according to the rules? Because a max possible of $300 on a $3000 move can't be right.

 

The CL contract is probably the premiere day traders futures contract because it trends so well. A $200 stop loss (20 ticks) is plenty on this contract as well so I'm okay with the range bar setting here.

[Maelstrom 10]

This is 20 tick range chart of a great move on the Crude futures August contract last week. Did I get the long signals right according to the rules? Because a max possible of $300 on a $3000 move can't be right.

 

The CL contract is probably the premiere day traders futures contract because it trends so well. A $200 stop loss (20 ticks) is plenty on this contract as well so I'm okay with the range bar setting here.

 

Steve,

 

Thanks for the chart! I had been meaning to look at crude for some time, and actually was happy to see the opportunity. Looks like you have my entries down correctly.

 

I am attaching a chart of the same day ( I believe) at a 10R - $200 stop loss is too rich for my blood This is a real quick pass at the day, but I see three trades, 2 wins, 1 loss, for about 192 ticks. That is using a really basic trailing stop, with more optimized exits, there may be another 50+ ticks in there somewhere. But, I think I would be ok with getting about 2/3 of that type of move.

 

Let me know if I missed something on it.....again, not my market, and just took a real quick look.

 

And I do appreciate the post - feedback is awesome!

 

M

 

*** Update **** Miscalculated that profit on the second trade big time.....see next post

 

Edited July 3, 2011 by Maelstrom

[Maelstrom 10]

This is what happens when you are tired and looking at charts....after a closer look, and better exits, trades would have been approx +66, -11, +80, for 135 ticks for the day. Disregard that 100+ trade.... losing my mind. Not optimal overall for that big of a range, but again, not that familiar with the market. Sure like the $$ potential though of CL.....

 

M

[DEStocks 10]

Maelstrom,

 

Just wanted to compliment you on your thread. I trade the YM in a similar style and can identify with a lot of your experiences. I'm in the process of teaching my 16 year old son how to trade and its really forcing me to simplify my methodology to its most basic terms. No indicators, just pure price action. My ah-ha moment came when I finally truly understood what price action is. Simply stated - Price action is price testing prior supply and demand areas. Trading "works" because price action has a point of memory just like gambling "works" if it has a point of memory, like counting cards or playing poker. With that in mind, I do have a question for you though. Have you ever thought looking INTO price would improve your skills even more? I think using range bars are ideal for a new trader but I also know that not all prices are equal.

 

DEStocks

[horace 10]

Originally Posted by Maelstrom View Post

 

Yes, a bigger chart means bigger stops,

 

M

Hi there M,

 

Why do you feel that your choice of bar size and type leads you into wider stops.

[tlc 10]

Hi Maelstrom,

 

Have you ever tried this method for trading forex? How succesfull this method with it?

 

As a newbie I am still struggling for trading forex, want to know if this method is wothed to learn and implement for forex trading.

 

Thanks in advance for your kind reply.

[Maelstrom 10]

Hi there M,

 

Why do you feel that your choice of bar size and type leads you into wider stops.

 

Sorry Horace, missed your post earlier. But a full nights sleep has done wonders

 

Very good question and point there. Larger bar sizes do not necessarily mean bigger stops. With the method I am highlighting here and my initial stops, of course, it would mean bigger stops for me if I was trading on say a 50R chart. But, initial stops can be set wherever one wants, and trail as their risk appetite allow. It is all up to the trader.

 

M

Edited July 3, 2011 by Maelstrom

[horace 10]

Sorry Horace, missed your post earlier. But a full nights sleep has done wonders

 

Very good question and point there. Larger bar sizes do not necessarily mean bigger stops. With the method I am highlighting here and my initial stops, of course, it would mean bigger stops for me if I was trading on say a 50R chart. But, initial stops can be set wherever one wants, and trail as their risk appetite allow. It is all up to the trader.

 

M

 

Bar size and type is perhaps the least understood part to trading, as well as being the most important, since it forms the foundation of all visual interpretation of price action.

[Maelstrom 10]

All,

 

Just occurred to me to bring up what I think is most important in trading - is the market going up or down at this time in a meaningful way.

 

I like using intention moves to tell me what the market seems to be wanting to do - going up, down, or sideways. For my trading, that is vital, and the underlying priority. Entries, exits, etc.... those can be anything - swing breaks, 1-2-3 patterns, pullbacks, alignment of the planets, you name it. But the important thing is what is the market saying.

 

I am bringing this up because I remember at one time wanting to outsmart the market. I wanted to get in right at the beginning of a move and exit right at the top, or picking exact tops or bottoms and thinking I knew that the market was stopping right there. Of course, 99% of the time, it didn't, and I spent many days looking back on the trading day at a string of short trade losses on a 200+ upswing day and asking "wtf was I thinking??".

 

Sometimes, it is hard to see what is going on at that hard right edge when you are right in the middle of it. Some simple rules or guidelines to verify what you "think" you are seeing can be invaluable.

 

Chart attached....what is the market doing this day? Do you want to be long or short? Get the direction and intention of the market right, and it is really hard to get hurt or to not make some money.

 

M

 

[Phil-n-Texas 10]

This is 20 tick range chart of a great move on the Crude futures August contract last week. Did I get the long signals right according to the rules? Because a max possible of $300 on a $3000 move can't be right.

 

The CL contract is probably the premiere day traders futures contract because it trends so well. A $200 stop loss (20 ticks) is plenty on this contract as well so I'm okay with the range bar setting here.

 

Pardon me if I chime in here with a question for Steve and/or Maelstrom... wouldn't there be a long entry at about the 10:50 green bar??? I see a larger swing from either 93.70ish to 94.60ish or from 93.10... or does this one not qualify per the rules.

 

great thread btw, thanks for sharing...:applaud:

 

i've been using a similar market flow analysis of simple HH/HL - LL/LH and buy the pullbacks to fib levels or retrace to a pattern breakout point. Also just read an article from Stocks and Commodities by Ron Black er: Clear signal method... another interesting trend change / swing technique... a 2 part article from Sept. & Oct. 2010.

 

Edited July 3, 2011 by Phil-n-Texas
to add image...

[Maelstrom 10]

Pardon me if I chime in here with a question for Steve and/or Maelstrom... wouldn't there be a long entry at about the 10:50 green bar??? I see a larger swing from either 93.70ish to 94.60ish or from 93.10... or does this one not qualify per the rules.

 

great thread btw, thanks for sharing...:applaud:

 

i've been using a similar market flow analysis of simple HH/HL - LL/LH and buy the pullbacks to fib levels or retrace to a pattern breakout point. Also just read an article from Stocks and Commodities by Ron Black er: Clear signal method... another interesting trend change / swing technique... a 2 part article from Sept. & Oct. 2010.

 

 

Phil,

 

Thanks for the post. Indeed, looks like that would be a valid setup - however, as you know from my previous posts, I don't like re-entering on a trend. But, the setup is there. Even taking the previous two loss trades Steve had pointed out, that last trade would have more than made up for them. Again, not ideal with that bog of a move, but would have worked.

 

Something to note here - every market has it's characteristics.....ES, NQ, TF, YM, CL....they all have their quirks if you will. Finding a good chart size for a particular instrument is not curve fitting in my opinion, because you have to weather trends, chop, ranges, etc, without flipping from chart to chart. It is simply getting familiar with a market to capture it's "flow".

 

HH/HL and vice versa, in my opinion, is the way to go. I'm sure if you look at my charts, that is what you see, because that is exactly what it is!

 

Will have to look for that article - sounds like good stuff.

 

Chart attached with food for thought.....

 

M

Edited July 3, 2011 by Maelstrom

[Phil-n-Texas 10]

Maelstrom,

 

thanks for the reply and annotated chart...

 

yes, i understand and agree with the 1st setup practice... i guess my post and observation was that Steve had other longs that triggered on the way up, so if one was so inclined to trade that way, then maybe there was another possible setup there.

 

re: chart sizing... it's been my experience that the larger size charts tend to eliminate a lot of the noise but i will still go to the smaller chart to time entry.

 

i use to trade the 3, 5, and 15 min. charts on equities and after going through all that i found that i did better trading daily EOD close and still do for my retirement accounts.

 

anyway, great stuff...

 

cheers

[Maelstrom 10]

Maelstrom,

 

thanks for the reply and annotated chart...

 

yes, i understand and agree with the 1st setup practice... i guess my post and observation was that Steve had other longs that triggered on the way up, so if one was so inclined to trade that way, then maybe there was another possible setup there.

 

re: chart sizing... it's been my experience that the larger size charts tend to eliminate a lot of the noise but i will still go to the smaller chart to time entry.

 

i use to trade the 3, 5, and 15 min. charts on equities and after going through all that i found that i did better trading daily EOD close and still do for my retirement accounts.

 

anyway, great stuff...

 

cheers

 

Thanks Phil - feel free to post some charts or thoughts on your trading. Always like to see how others are trading.

 

Good trading...

M

[Maelstrom 10]

Ok, back to business.... I will try to clearly explain how I set stops, targets and exit trades.

 

Initial Stop

 

1 tick above/below entry bar - this is a touch exit. If price touches that number, it's an exit.

 

 

Reversals

 

These are just that - stop and reverses. Rare occurrence.

 

 

Trailing stop

 

1 tick above/below every new intention formation - these are closing bar exits. If price retraces to one of these, a bar needs to close above/below this level for an exit.

 

See chart below for trailing stop examples. Next will be formation extension targets that allow (usually) much better and profitable exits.

 

[Maelstrom 10]

Not exactly targets really..... more of tighter, profit trailing stop. I use them in conjunction with the trailing stops below the formation.

 

Basically, here it is:

 

1. Entry into a trade - we will assume a long for the purpose of this example.

 

2. I take the range of the upward intention formation just prior to the entry, and extend that 100% from the top of that formation.

 

3. When/if a bar closes above that extension line, the stop is moved below that crossing bar. This is a close-bar stop, just like the trailing stops.

 

4. Each new upward intention pattern will result in a new extension line.

 

There are a couple of situations where you exit immediately on a touch of the extension line, but I will focus on the basics here first. Some charts to show the stop progression on a trade, though I have a feeling this will be confusing to a lot of people. If anyone would like something clarified, please ask.

 

M

 

 

[Maelstrom 10]

Chart attached of the move from my last post with all exit points.

 

White stop lines are trailing stops.

Orange stop lines are extension exit points.

 

Entry to the trade was at 12180.

The last trail exit point is a bar close below 12455.

 

Of course, this ended on a friday before a holiday weekend, and the true exit would be at the end of the day - even I am never crazy enough to hold a position over the weekend. But hopefully, you can see that the combination of these methods would have kept you in the move all the way up, locking in profit as you go.

 

As an exercise, this week I will try to post updates either to this position or new ones as they come up, hopefully "live or before they happen. That may make things a little clearer to anyone interested.

 

M

 

[makhan 10]

Nice stuff M,

Looking forward to how you use S&R.

makhan

[tlc 10]

Hi M,

 

Is this strategy or system can be applied to forex?

 

Eager to know as I am the one among other traders who are still struggling.

 

Thank you

[Maelstrom 10]

..... have a great 4th of July!

 

Well, for US traders that is. Enjoy your families, be safe and enjoy!

 

M

[brave1 10]

Maelstrom,

 

Great thread, thanks for sharing! I really like the simplicity of your methodology. Happy 4th and hope your dog gets better!

 

brave1