Steve's Basic System for Retail Traders

[steve46 12]

As usual, the distribution worked excellently today....price "started" outside the median (blue rectangle) and moved toward it....this is one of two scenarios that we have seen...

 

and the logic arrows made it very easy to trade....as you review the intraday charts you can see that price tested the distribution lines and reversed, providing several nice opportunities to get short...assuming you had the confidence to do so, you could have simply held a position all day and ended up with a nice profit at the close....

 

What I like about this system is that you can see where the opportunities are, and stay out during the congestions, where normally a trader gets chopped up....

 

Assuming we have no further questions we are going to finish work on our method to approximate the distribution process so that the average trader with a general background in math can create it in less than a half hour in the evening prior to the next day's open....and then we will close this thread and simply trade it..

 

 

Best of luck to all

Edited September 21, 2012 by steve46

[steve46 12]

JoshDance

 

Noticed your "Thank you" recently...this is a EuroStoxx distribution for Monday....

 

Couple of things might be of interest to you (and perhaps others).....although as "Predictor" has pointed out, I have very little to offer....ROFL

 

First of all, there are two kinds of lines in this distribution....the thin lines represent prices where short time frame participants might take action...while the thicker lines represent prices where longer time frame participants might be motivated to take action...

 

And you might also notice that to the right, where the "logic arrows" are placed, near the lower half of the distribution you can see an area where two arrows are side by side....what this means depends on which way price goes, if it tests that level....the way its set up, if price takes out that level, in my opinion, it means that shorter time frame participants are in control and are probably taking profit....if on the other hand price tests that level and reverses to the north..in my opinion it may indicate the presence of longer time frame participants.

 

Based on experience I would guess that the odds favor price testing down about have way into the median (blue rectangle) then pushing north to continue the uptrend...of course we all know that anything is possible...

 

I had some extra time and thought I would give it a shot.....we will see what happens on Monday......

 

Good Luck

Steve

Edited September 22, 2012 by steve46

[goodoboy 10]

As usual, the distribution worked excellently today....price "started" outside the median (blue rectangle) and moved toward it....this is one of two scenarios that we have seen...

 

and the logic arrows made it very easy to trade....as you review the intraday charts you can see that price tested the distribution lines and reversed, providing several nice opportunities to get short...assuming you had the confidence to do so, you could have simply held a position all day and ended up with a nice profit at the close....

 

What I like about this system is that you can see where the opportunities are, and stay out during the congestions, where normally a trader gets chopped up....

 

Assuming we have no further questions we are going to finish work on our method to approximate the distribution process so that the average trader with a general background in math can create it in less than a half hour in the evening prior to the next day's open....and then we will close this thread and simply trade it..

 

 

Best of luck to all

 

Good job as usual Steve and your system is working fine for you. Thanks for sharing,

 

I only had a few trades this week (had to work extra hours at the job), but I did spend alot of hours during the week just watching price action during the week.

 

The distributions lines work well. And the key is making decisions at the lines and staying out of the middle of the choppy business.

 

I spend the last few weeks just watching, practicing, taking notes, and writing plan. Pretty simple.

 

Keep me updated on the distributions lines as I follow this thread daily. Would hate to see it close.

[steve46 12]

Will Do GOB

 

and we had a nice trade in Globex time today as seen in the attached chart

[steve46 12]

Here's a follow-up to that trade...notice a couple of things...

 

First the entry (if taken promptly) would have filled at 49.....with favorable excursion up to 50.25 where it reversed....our usual advice is to take partial profit at one point (we call it "buying a stop" because now you have a free trade)

 

When price revisits the entry point, if you took that partial profit, you had two choices...A) re-charge the position by adding back to the original size, or B) close out with your partial profit less commission...normally we "re-charge" by adding here...

 

After a re-test of the entry point, price goes back up but fails, short of the local high, leaving a "spike" (selling tail) tail...which tells us that odds now favor a reversal....at this point we would have closed the position...(for better or worse until we had better visibility as to market direction)...

[goodoboy 10]

After a re-test of the entry point, price goes back up but fails, short of the local high, leaving a "spike" (selling tail) tail...which tells us that odds now favor a reversal....at this point we would have closed the position...(for better or worse until we had better visibility as to market direction)...

 

Thanks Steve,

 

Good example and analysis. I like how you state the "odds" (or probability) favor a reversal as sometimes when I see certain setups like this spike, I usually think in terms of "expect", but I gotta remember is a probability/odd business and we have to put odds in our favor.

[eqsys 10]

To: Steve46

 

Steve,

 

I have been following this thread for its entire length. Your system is very interesting and potentially very profitable. Congrats on all the hard work.

 

Now, to the REALLY hard questions.

1) Have you backtested this system for more than a year?

 

2) If you have the backtest results, how much has the system made trading 1 contract and what was the highest drawdown that has occurred (intraday, not closed trade) over the past year?

 

3) Once you have these numbers you have a ratio of reward/risk that can be quantified and compared with other systems, including buy and hold.

 

If you don't have or can't backtest this, do you at least compute the theoretical gain/loss every day trading 1 contract?

 

If you have confidence in this system, are you actually trading it in real time with your own money NOW?

 

If you are actually trading it, are you making money? Can you prove that you are making money?

 

I don't mean to be difficult, but I have been at this for a very, very long time trading the real markets with real money - so, these are the questions I ask myself every day...

 

My best,

 

eqsys

[steve46 12]

Sir or Madam

 

The system is still in development.

 

Your comments about proving anything or providing data are A)premature, and B)unecessary since I don't intend to sell it....(if it turned out to be very profitable, why would I?)

 

Thanks for your interest.....

Edited September 24, 2012 by steve46

[meow 10]

Hey Steve, good job with your system, will you post levels for today? It should be an interesting day if we break the resistance round 1445-1444.

[steve46 12]

Nothing particularly earthshaking about this chart

 

What works (in current conditions) is to enter at the extremes....and hold until you test the opposite extreme....The distribution lines help make this easier to visualize, and the rest is up to the trader...

 

Unfortunately while posting this I missed the third and potentially best entry of the day so far...too bad...

[goodoboy 10]

Nothing particularly earthshaking about this chart

 

What works (in current conditions) is to enter at the extremes....and hold until you test the opposite extreme....The distribution lines help make this easier to visualize, and the rest is up to the trader...

 

Unfortunately while posting this I missed the third and potentially best entry of the day so far...too bad...

 

Nice work. Price action just came to the 1448.50 line failed to hold and retested.

[goodoboy 10]

Nice work. Price action just came to the 1448.50 line failed to hold and retested.

 

Thanks Steve,

 

I used your line 1448.50, and made 5pts. Good patience on that.

[steve46 12]

Nice to hear

 

The real important questions are "how much drawdown did you experience"?

 

and "How did you decide WHEN to enter (price was going sideways for quite a while)

 

and finally you probably should add your last trade to Negotiator''s thread to provide some balance...

 

Best Regards

Steve

Edited September 24, 2012 by steve46

[eqsys 10]

Sir or Madam

 

The system is still in development.

 

Your comments about proving anything or providing data are A)premature, and B)unecessary since I don't intend to sell it....(if it turned out to be very profitable, why would I?)

 

Thanks for your interest.....

 

Steve,

 

"unnessary"? They are necessary FOR YOU!!! Isn't the idea of all of this effort for YOU to make money? The whole point of backtesting and finding out the potential profit/loss is to tell you if you should actually place the trades.

 

I wasn't suggesting that you are intending to sell the system, but if you haven't or can't backtest the system, or don't track the theoretical P/L on a daily basis, how do you know if all this work is worth the effort? How might the system compare with other, basic, simple systems you have worked on.

 

When I come up with a new system idea (and I have been doing this since the days before computers using hand drawn charts) the first thing I do is go back at least a year and look at the buys and sells to see if I have something that is potentially profitable. Then, I calculate a profit/loss ratio(s). Then, I compare this with other systems I have come up with to see if the new one is worth the effort. This is, essentially, a "survival of the fittest" approach - a genetic model of discarding the poorer system ideas and keeping the best ideas.

 

I am not trying to give you a hard time, but we are now on 27 pages of this thread and I am just asking if you have any statistical idea of how good this system is compared with other similar systems you may have come up with.

 

Based on my own system testing, the ES does not produce results comparable to the NQ. So, what I am suggesting is that you test your system on other things that might produce better results for you than the ES.

 

I notice that many traders get locked into one type of contract - the ES for example, and then attempt to come up with a system to trade it, rather than to come up with a logical, basic system then test it on everything to see what works best with that system.

 

Just some ideas for you..

 

My best..

[steve46 12]

You know I taught stats for 7 years...I think I know what is required (clearly)

 

Thanks

[eqsys 10]

You know I taught stats for 7 years...I think I know what is required (clearly)

 

Thanks

 

Just trying to help.

 

My background: UCLA, CAL, statistics, forecasting, computer programming, trading (32 years). Just, perhaps, in some of my unsolicited advice to you, there might be something useful from someone who actually makes money trading in real time.

[steve46 12]

You know its interesting folks

 

Suddenly there's a lot of interest in what I am doing here

 

I've had people offer "help" of all kinds from programming, to assistance in recording and evaluating data....I think thats wonderful...

 

however I am going to be doing things (or not) in my own good time, using my own judgement as to what is (and isn't) important...and what is (and isn't) necessary for my own success....

 

Thanks to everyone for their gracious offers of assistance...

 

Steve

[steve46 12]

admittedly in hindsight, although I have posted many similar examples as much as 12 hours prior to the open of RTH

 

This is interesting to ME because it outlines the price action from the Globex open to the end of RTH and of interest is the way the pre-programmed "logic" arrows worked...

[goodoboy 10]

Nice to hear

 

The real important questions are "how much drawdown did you experience"?

 

and "How did you decide WHEN to enter (price was going sideways for quite a while)

 

and finally you probably should add your last trade to Negotiator''s thread to provide some balance...

 

Best Regards

Steve

 

Thanks Steve

 

The entry occurred from support of 1448. Price open and closed below this line. I waited for a retest of 1448 and it did and eventually price got above this line and I waited for retest to enter long. Entry was taken at 1448.50 after retest and held. Exit at 53.50. 2pts stop loss

 

Repeated the same thing after market close at 1452.50, exit at 1450.50

[steve46 12]

Once the market closes...taking entries based on that same distribution might not work (except due to random chance).....thats why I create a new one each evening...

 

and of course when you trade the new market (globex) you need to use a 1 min chart to begin with...from my point of view there was no trade in the Globex market until about 1700 hours....and that trade that setup resulted in another 4 pts.....

[steve46 12]

Tuesday's ES & DAX Distribution Lines

[steve46 12]

and tomorrrow's NQ Distribution lines...for a change I will be trading the NQ tomorrow.

[SIUYA 11]

Sir or Madam

 

The system is still in development.

 

Your comments about proving anything or providing data are A)premature, and B)unecessary since I don't intend to sell it....(if it turned out to be very profitable, why would I?)

 

Thanks for your interest.....

 

So in other words Steve ---

 

as it is still under development - you have no idea if it works consistently over the long term

(and it might not be able to be properly backtested and automated in order to do so - except maybe by hand - as it is only apparently being forward tested now)

 

If it turns out to be profitable - you wont sell it, and so anyone following this thread will be left having to develop their own system of which little of the distribution calculations are revealed, and there seems a fair bit of discretion in terms of waiting for confirmation above or below a support or resistance line.

 

If it turns out to be not so profitable - you might sell it? (joke )

 

I hope it turns out to be profitable for you Steve, but the logic seems a little strange - maybe that is what eqsys was alluding to - and that those following along who dont have stats training and expertise might be alert to?

[steve46 12]

I suggest you (and Eqys) point & click yourself to some other thread where the other children play nice....as to whether the "logic" is strange, I think the experience of making money is strange and unusual to many here at TL....and as with the first few posts, there have been many profound pronouncements about how this "cannot" work.....and yet here we are...

 

Personally I find myself with little time or interest, to debate the subject.....

 

Good evening

Edited September 25, 2012 by steve46

[steve46 12]

and now a sampe of the NQ overnight price action....clearly the distribution lines are providing a nice framework for entering (and exiting) trades.

 

As before and with other markets we show two kinds of lines, thicker blue rectangles delineate areas where longer time frame participants are likely to act, and thinner lines where (in our opinion) the short time frame participants are likely to act....We infer that these two separate "types" of participants are at work depending on the type of price action that occurs

 

For example, based on recent experience we believe that the longer time frame participants are more likely to buy at the upper end of the distribution extreme, while it is the shorter time frame participants who (again in our opinion) will be motivated to take profits at these same exteme price points.

 

Also because of the presence of automated programmed execution, we know that liquidity is periodicaly absent the market, and during these times, it seems both parties essentially stand aside waiting for the market to determine a direction (based on some news driven event)....when this happens it is likely that price action will be primarily horizontal development (relatively small range)...

Edited September 25, 2012 by steve46