Steve's Basic System for Retail Traders

[BlueHorseshoe 10]

I can agree with you about watching you doing this. Cause I was tempted to go long at 1432.25 after 5 min candle closed above this price, but isn't this counter-trend trading when buying when price has falling down from 1436 to 1431 in a matter of seconds?

 

I don't think it's really 'counter trend'. It's pretty much what DB has been encouraging you to do over in the e-mini thread, and the 'trading in 90 mins' thread - identify the longer term trend - up, wait for price to retrace (a shorter term down-trend/bullflag/pullback/call it what you will), and then fade this shorter term movement back in the direction of the longer term trend.

 

Looking at Steve46's posted chart, the main difference here is that due to the volatility of the news release, the retracement is swift and clean. But the entry criteria remains the same - as soon as the counter-trend movement appears to be over, fade it. Despite the volatility of the movement, the trend prior to this is clearly up. That means there is demand. When price moves rapidly to a better value for buyers, then it's highly likely that lots of buyers will step in and support the market. Waiting for a higher close etc is just a signal that the demand continues to be present.

 

I hope that's helpful to you.

 

BlueHorseshoe

[steve46 12]

I can agree with you about watching you doing this. Cause I was tempted to go long at 1432.25 after 5 min candle closed above this price, but isn't this counter-trend trading when buying when price has falling down from 1436 to 1431 in a matter of seconds?

 

I guess the best answer to your comment is to suggest that my distribution puts a "floor"

under price at 1432.25...and from there what you want to do is see how price reacts as it tests that price.....we saw in the pre-market how it works....price went down to test and then reversed right there....I expected the same at the open....

 

I realize it takes a bit of courage to do this but thats what we are paid to do....I try to make it a bit easier by putting that distribution (and the logic arrows) in place to help me....but there is always going to be risk and I am going to be wrong at times....thats how this profession works...the only thing I can do about it is to try to make good decisions and manage risk so that my losses are less than my wins....

 

From my point of view it is a simple choice, you either learn to operate this way, or find another way that makes you a dollar, or you keep pecking away at it and bleed your account down to nothing....which is what most retail traders end up doing.

 

I hope this helps

 

Good luck

[BlueHorseshoe 10]

I guess the best answer to your comment is to suggest that my distribution puts a "floor"

under price at 1432.25...

 

No offence, Steve, but the only thing that can put a floor under price is demand and/or lack of supply. This is not to say that your distribution lines aren't a very effective way of anticipating this, but let's be clear - the market stops where it does due to supply and demand, and not due to a line on your screen.

 

BlueHorseshoe

[goodoboy 10]

and here is the Employment Report Trade.....the red arrow is the moment the report is made public...and of course the data is negative so we have the initial move down....on this move we see price test 1432.25 on our distribution, take it out....and then reverse ACTIVATING OUR PRE-SET LOGIC...which tells us...if price takes out that price, then reverses, on a close above 1432.25, look for a long entry....

 

The green arrow shows the entry point as price does in fact "take out" that price....then reverses, and you have a few seconds to recognize and act as the next bar opens....that is your entry. The stop loss on this trade is a close back below the line...

 

This by the way is called "event trading" and is something that I try to do as much as possible. The volatility that moves the market makes it fairly straightforward, IF you have a plan....and the ability to recognize the opportunity and execute....

 

Looking at your chart did show the reversal at support (1432.25), price went up and then retraced, now normally at this moment during the retrace phase is where i look for buying op. But the difference is, you was looking at 1min chart and I was looking at 5min chart. I am not trading, just watching, but clearly i missed it. I open 3 min chart and there is a minor retrace as well.

 

I know you use the 10, 3, and 1 min chart. Do you normally use 1 min during the day?

[steve46 12]

Yes thanks for that very important clarification Blue Horseshoe...its called a visual representation....my distribution and the logic arrows are the tools that provide the trader with the info they need to trade it...

 

Goodoboy, I use all three charts....as I have mentioned previously each one provides a different look at the data...the 10 is less noisy, shows less detail and provides a look at trend, the three shows a bit more detail and I use it to determine the initial signal that I use to enter

and the 1 min is use when volume is low OR at the market open when I like to see as much detail as possible..

 

Isn't it interesting that people go from heckling to suddenly being VERY damn interested in how this all works...

 

Steve

Edited September 7, 2012 by steve46

[BlueHorseshoe 10]

Yes thanks for that very important clarification Blue Horseshoe...its called a visual representation....my distribution and the logic arrows are the tools that provide the trader with the info they need to trade it...

 

I know that, and I know that you know that - but sometimes if new traders are reading it's important to be totally clear on these things.

 

 

Isn't it interesting that people go from heckling to suddenly being VERY damn interested in how this all works...

 

Are you talking about me, Steve? If so, then I only heckled you whilst you were being rude to everyone. As soon as you started a quality thread of your own and began being civil towards me, then I'm certainly very interested in anything you have to say.

 

BlueHorseshoe

[goodoboy 10]

Isn't it interesting that people go from heckling to suddenly being VERY damn interested in how this all works...

 

Steve

 

HAHA, Well, anyone is welcome to laugh at me. I want to be consistent and learn and know what I am doing, that's the only thing on my mind. I am learning that unless a trader have some systems or plan in which they trade, it will be tuff and frustrating.

[goodoboy 10]

Interestingly most of the folks who contact me and say they have benefitted do not post...

 

They lurk and read the posts and occaisionally send me PMs to ask questions...

 

Based on that experience I have an idea of who it is that I want to help....and what I want to publish....

 

It may not be what you (traderunner) want to see...and if that is the case I invite you and anyone else who thinks as you do...to point & click somewhere else...

 

 

Good luck to you

 

Well, I certainty appreciate the help and just the comments on how to be more of an observer than anything. I am not trading for a living right now, so my goal is more learning based and just having an idea on how this market really works. I spend most of my time either reading, paper trading, taking notes, and writing my plan in three phases: 1. Entry 2. Trade Management and 3. Exit.

 

I have taken Db advice and thrown away everything that wasnt helping me: Indicators, this head and shoulders stuff, yahoo.com/finance, cnbc, why obama shouldn't be reelected discussions, etc . Its all just watching and observing and planning.

Edited September 7, 2012 by goodoboy

[goodoboy 10]

..they couldn't find buyers so down they went.....

 

Thanks Steve,

 

I have seen times like this for example in your chart when price just drops down, without even a retrace to test minor range it broke down from. And this is where newbies like myself begin chasing. Or some like I have read on TL will simple fade the drop. I don't like that too much. This is good example for newbies that once the price falls like this, just sit back and wait for the next support area to take place and make decision after price makes decision which way to go.

[steve46 12]

Look my friend...on an intraday basis, a significant move after an economic report or some news event should be viewed as though price were a rubber band.....the report or news event is released and then the rubber band is stretched....if it stretches too much, it breaks and price will keep on going, but more often what happens is that price "stretches" and then at some point, reverses...

 

There's also an element of common sense that you can employ....if the primary trend on a daily basis is up and the event "stretches" the market down....its pretty likely that you are going to see a reversal....especially in a market dominated by professionals....why? Because we have all "seen" this movie many times before.....in fact on the professional (institutional) side, we look at adverse events as buying opportunities......

 

The first thing you need to do is to observe this kind of behavior...there isn't any shortcut for this...it just takes time (or research) sometimes both...

 

The next thing you can do is to watch someone who HAS this experience, and observe how they deal with it...

 

and finally, if you do this for a while, one of the lessons you learn is that in order to make money trading these types of events, a person has to prepare ahead of time....you have to have a plan, you have to be able to recognize whether the event is unfolding in a way that fits your trading plan.....then if it does (match with what you expected) you have to be able to execute your trade in a disciplined manner...and if it doesn't (if something doesn't "look right") you have to be able to stand aside...(this is part of good risk management)....

 

You can't just improvise...you see?

Edited September 8, 2012 by steve46

[TradeRunner 10]

I can agree with you about watching you doing this. Cause I was tempted to go long at 1432.25 after 5 min candle closed above this price, but isn't this counter-trend trading when buying when price has falling down from 1436 to 1431 in a matter of seconds?

 

 

Hi Goodoboy

 

If you think that it would help watching someone trade (in this way) then check this out:

 

http://www.traderslaboratory.com/forums/e-mini-futures-trading-laboratory/9207-don-miller-trading-after-dark.html

 

and there is plenty of information on what and how he trades in his blogs...(fading fast moves is one of his things)

Don Miller Trading Journal

Don Miller's S&P Trading Tank

 

in a few years time, after you have finished trying to find out how other people trade, you will be back here and ready to figure out how you are going to trade:

 

http://www.traderslaboratory.com/forums/wyckoff-forum/13708-trading-journal-trading-log.html

 

Enjoy the journey!

 

TradeRunner

[steve46 12]

Excellent idea...Don is a decent guy

[TradeRunner 10]

Excellent idea...Don is a decent guy

 

Agreed. I don't think he would agree with you that applying statistics is necessary to successfully trade or providing an edge. KISS is his mantra.

 

 

Here is a trading secret:

 

Guys even if you had Steve's lines you still wouldn't be able to trade successfully...

 

TradeRunner

[steve46 12]

Agreed. I don't think he would agree with you that applying statistics is necessary to successfully trade or providing an edge. KISS is his mantra.

 

 

Here is a trading secret:

 

Guys even if you had Steve's lines you still wouldn't be able to trade successfully...

 

TradeRunner

 

I've had that conversation with Don....he makes money with his method and sees no reason to change...nothing wrong with that...

 

As to your second comment, I think what matters is the psychological makeup of the trader. Unfortunately, many folks show up here hoping/believing that they are going to find something that allows them to trade without having to think, to work at it, to learn a skill (or a profession)...and that once they find that special something (or special somebody) they will be able to make unlimited money into the future ("and they lived happily ever after")....as you can tell from my comments, I think this is a "fairy tale"...and as such it is indicative of an infantile personality....and in fact if you read many of my previous posts, what you see is the reaction of "infantile" personalities to my comments....(I will leave that for another thread)...

 

Look here is what matters....if you see a method that works for you....ask yourself if you are willing invest yourself in the hard work and effort that it takes to A) really learn a system and B.) to "extend yourself" to make it work....I use this language purposely....unless you invented a system yourself, what you will find is that any method you choose to pursue will require an adjustment, an accomodation on your part...sometimes that adjustment will be more than you are willing to make...and in that case...the sooner you find out, the better, so that you can point & click to the next option.....If on the other hand, as you move forward to investigate how a method "trades" and you see that it might "fit" your personality reasonably well, then you would do well to put forth the effort (to extend yourself)...

 

I would love to teach struggling students, provided they were "adults" willing to work, possessed of the basic skills, motivated and focused on the goal of learning to become independent, profitable traders....the problem is that it is incredibly rare to find those people, in fact in my experience, those who I taught were almost always already successful in other pursuits, intelligent, patient and disciplined....My intuition is that those folks would have been successful using any number of methods (not just mine)...

 

Based on my previous classes, I believe a motivated skilled adult could learn this system in about 3, to maybe 6 months max...and then be on their own...unfortunately the culture of cynicism here prevents it....so I stopped offering to do it...

[steve46 12]

Here are my ES & DAX distributions to start the week

[steve46 12]

The importance of Pre-Trade Preparation

 

If you look at the threads on this (or any trading website for that matter) one thing you may notice is that you never see comments about the importance of proper preparation

 

The opportunity to make money in markets is time based...that is why we use time based pivots and why we prepare the same way each week...our pre-trade process begins with a review of the schedule of economic reports....Resources for this include

 

Briefing.com

ForexPros.com

Forexfactory.com

 

Every Sunday evening, we begin the process by reviewing the listing of scheduled economic report releases...we screen this list making note of those reports or events that are likely to have "significant" or "high impact"...(each of the websites listed have their own way of marking high impact reports for the user).

 

Once we have a list of high impact reports (including the timing), we go back to our chart software and and look at the way that the markets responded to the previous report....this is easy to do by simply

 

1. Using the same economic calendar, simply go back to the previous month and verify the date of the report you are looking for.

2. Using your charting software, scroll back to the proper date and time and look at how the market responded to the report release.

3. We make note of the report, whether it was "in line with expectations" or a "surprise to the upside or downside"

4. We note the range of response in terms of the "initial move" and the "counter move"

5. We observe the resulting price action for the balance of the morning, and afternoon.

 

Using this data, we decide (prior to the report) whether to "pre-position" in front of the report or to wait and trade the "counter move" looking for a continuation or trending move that might last throughout the session.

[goodoboy 10]

The importance of Pre-Trade Preparation

 

If you look at the threads on this (or any trading website for that matter) one thing you may notice is that you never see comments about the importance of proper preparation

 

The opportunity to make money in markets is time based...that is why we use time based pivots and why we prepare the same way each week...our pre-trade process begins with a review of the schedule of economic reports....Resources for this include

 

Briefing.com

ForexPros.com

Forexfactory.com

 

Every Sunday evening, we begin the process by reviewing the listing of scheduled economic report releases...we screen this list making note of those reports or events that are likely to have "significant" or "high impact"...(each of the websites listed have their own way of marking high impact reports for the user).

 

Once we have a list of high impact reports (including the timing), we go back to our chart software and and look at the way that the markets responded to the previous report....this is easy to do by simply

 

1. Using the same economic calendar, simply go back to the previous month and verify the date of the report you are looking for.

2. Using your charting software, scroll back to the proper date and time and look at how the market responded to the report release.

3. We make note of the report, whether it was "in line with expectations" or a "surprise to the upside or downside"

4. We note the range of response in terms of the "initial move" and the "counter move"

5. We observe the resulting price action for the balance of the morning, and afternoon.

 

Using this data, we decide (prior to the report) whether to "pre-position" in front of the report or to wait and trade the "counter move" looking for a continuation or trending move that might last throughout the session.

 

Nicely written and thanks for the time and effort for displaying how to prepare.

[steve46 12]

Thanks for the kind words GOB

 

Now a chart showing how the distribution can be use to trade the Globex open....

 

First go back and review the distribution I published for Monday's open (it is used for the Globex as well)

 

Direct your attention to the "logic arrows"...in some ways they are the most important element of the display...for this distribution, you can see the green logic arrow pointing up and it is located ABOVE 1438.75.....the "logic arrow" is there to suggest that the trader prefer a long or a short entry depending on whether price opens and closes above or below that line....

 

In this instance price opened (and closed) below that line...immediately we are looking for an opportunity to get short....the logic does NOT mean simply "get short"....it means look for an opportunity (your preferred short setup) THEN get short...in this instance our preferred method is to wait for price to confirm support or resistance...

 

Looking at our attached chart you can see the open and then price establishing (tentatively) a smal range...characterized by a "local" high and then a "local" low...once we see that, we want to wait for price to confirm either side (by retesting and failing)...and as you can see on our chart.....the local high (resistance) is "confirmed" ....and at that point we can enter

 

On the chart you can see the next two red arrows showing a couple of possible short entries

 

This is very typical of the Globex session, especially after a nice RTH move up...

[mediaad 10]

Thanks!!!!!!!!!!!!!!!!!!!!!!!!!

[steve46 12]

Globex consists of several markets opening one after another....

 

For my purposes the primary opportunity is London...at Midnight

 

The attached 10 min chart shows the pre-position setup...(according to my "logic" system)

 

On the chart you see price has moved in a tight range...too small to trade....

so we wait for the pre-position time, which for this market is 11:40pm (2340 hours) local time

 

The "logic" is dictated by the arrows and the position of price in relation to the distribution lines....looking at the 11:40 candle (2340 hours) we see that it closes below the line....if we had an open below the line it would indicate a short entry....instead price moves back above the distribution line and the next open is also above (higher green arrow)...that open indicates a valid long...if you didn't like that one, the next retest (right most green arrow) also indicates a valid long entry...

 

As of this point in time, that long entry was only good for a couple of points however it was nice to see the distribution lines and our logic system confirmed once again...this is the kind of process that gives the trader confidence to pull the trigger.

[Insearch 10]

Here are my ES & DAX distributions to start the week

 

Steve . . . . very good thread . . .

 

Question for you:

 

You say that the rectangle is the 5 & 10 day mid point . . . you have ~1422-1428 as mid point for beginning of the week. My 5 & 10 day high/low is the same (1438.75/1394.50) and I'd have a 5/10 day mid point of 1416.50 . . . would you please clarify . . .

[goodoboy 10]

arrow pointing up and it is located ABOVE 1438.75.....the "logic arrow" is there to suggest that the trader prefer a long or a short entry depending on whether price opens and closes above or below that line....

 

.

 

Hello Steve,

 

In this example the green arrow is shown below 1438.75. Is 1438.75 your resistance for this example or is 1437?

 

Thanks,

[steve46 12]

Hello Steve,

 

In this example the green arrow is shown below 1438.75. Is 1438.75 your resistance for this example or is 1437?

 

Thanks,

 

You have to read from the beginning...it says go back to the distribution published for Monday's session (post 143)....that distribution shows a green arrow ABOVE 1438

 

When the Globex session opened BELOW, it means we want to look for short entries..

 

I hope that makes it clear..

[steve46 12]

Steve . . . . very good thread . . .

 

Question for you:

 

You say that the rectangle is the 5 & 10 day mid point . . . you have ~1422-1428 as mid point for beginning of the week. My 5 & 10 day high/low is the same (1438.75/1394.50) and I'd have a 5/10 day mid point of 1416.50 . . . would you please clarify . . .

 

Sorry can't "clarify"...as mentioned in the first post of this thread I am not going into detail on the math used to create the distribution...I expect that it will be somewhat different than anyone else's..I also expect that it will "work" better...it should, because it took a lot of time to develop....

[steve46 12]

This relates to the previous post

 

My distribution is built to frame price action in a specific way....

 

The midpoint is the target for price action moving from either extreme OR failing to take out a long "logic arrow"...

 

The old saying is that the "proof is in the pudding"... and today is no exception...as we near the end of the day, we have a nice short as price moves through a distribution line, closing below it...(our signal to look for a short entry)

 

To repeat... our system is composed of distribution lines and "logic arrows"...as price tests those lines, we wait for a close above or below, then we act according to our pre-programmed logic...taking a long or short on the next open...with a 1 point stoploss and a profit target at or near the next line...or in this case at the midpoint...

 

As can be seen the system is working very well indeed...summer is difficult to trade because volume dries up....you only have a couple of opportunities to get paid....one is at the open, and in our opinion, the other is near the close...the system shows you the opportunities, and the rest is up to the trader...this last short entry is worth about $250 per contract....

 

And once again thanks to Predictor and Onesmith for their "profound" comments.

 

Best of luck folks

Edited September 10, 2012 by steve46