Diary of a position trader

[medisoft]

Cyco, can you confirm that the USDCAD pair is a buy with channel breakout technique?Thanks

[medisoft]

Thanks!

I’m going to re-read the rejection rule part, because I think it should be placed once only for the breakout that triggered my entry, not for other breakouts that could be triggering new trades…

Also, the rejection rule says to exit on the day of the breakout or the next day, isn’t it?

@Cyco

Here is a AUD/CAD chart with the breakouts numbered from left to right. Could have picked a better one - just grabbed the 1st, no Bishop signal here, nor much in the way of profit!

When the rejection rule is in play, and you are using a last bar stop Smith say you can take a 3% position. I calculate to ensure if I do take the larger trade that I have the last bar stop tighter than 1%

1. 55 day channel flat or heading towards the market price in the 5 preceding days. ADX rising. Enter trade. 3rd day closes below breakout price, Rejection rule. Re-enter on 5th day after initial breakout. No rejection rule in play. ADX doesn’t get high enough to give a Bishop, so take a slight loss when trade hits 20 day channel.

2. Enter trade. Rejection rule out.

3. Enter trade, rejection rule in play but not activated.

4. Continue trade from 3, but rejection rule has come back into play, and we exit for a profit

5. ADX dropping, so we do not enter. I entered a few days later when it came up using Conqueror.

6. ADX flat or rising so we enter. Rejection rule takes us out.

7. Enter and rejection rule out for minuscule loss

8. Rejection rule

9. Enter. Rejection rule not triggered so we are long.

10. ADX dropping when we hit the 55 channel again, so we won’t enter here, however the rejection rule (as I understand it) is still used to exit us from the trade.

11. We enter the trade short. Rejection rule in play, but not activated

12. We are still short. Rejection rule comes back into play, again not activated. We exit for a loss in late October

13. We enter long, and rejection rule exit

14. Enter long again, rejection rule active, but does not get used, so we take a loss

15. Enter short, rejection rule out

16. Enter long. Rejection rule.

Hopefully you understood some of that Seems as clear as mud here…

[medisoft]

Cyco, can you confirm that my entry and my rules are OK?

Thanks

[Cyco]

Why do you exit on the third day? I thought C Smith’s Rejection Rule was the first two days of the trade.

Because I stuffed up!

I just checked the book. It should be the second day.

[Cyco]

medisoft; Your entry and rules all appear to be correct.

[Cyco]

Mr Smith will be in Australia in August.

I will either be travelling to see him, or even better, I’m trying to arrange for him to come to Perth.

If I can get him here I am planning for an education and a Q&A session in the time we have with him so either let me know if you’d like to join us, or any questions you’d liked asked - and I’ll try and remember them…

[o990l6mh]

Mr Smith will be in Australia in August.

I will either be travelling to see him, or even better, I’m trying to arrange for him to come to Perth.

If I can get him here I am planning for an education and a Q&A session in the time we have with him so either let me know if you’d like to join us, or any questions you’d liked asked - and I’ll try and remember them…

Now you’ve made me all jealous

[medisoft]

I would like to know if he has a objective way, with no trader discretion, to define that the market is flat or declining. (forget this question! I re-read the chapter and found that it is very well described!)

Also, if he has any improvement to his techniques would be great to know!

---

And I’m jealous also

Mr Smith will be in Australia in August.

I will either be travelling to see him, or even better, I’m trying to arrange for him to come to Perth.

If I can get him here I am planning for an education and a Q&A session in the time we have with him so either let me know if you’d like to join us, or any questions you’d liked asked - and I’ll try and remember them…

[medisoft]

Cyco,

I re-re-re-read the rejection rule section. I think is the only part of the channel breakout chapter that I don’t understand fully.

What I want to know is if I “enable” the rejection rule everytime I see a channel breakout with the five day condition, or only on the first time, when I bought the pair.

For example, let suppose I bought EURUSD at 1.3 and the five day rule is active, so I apply the rejection rule. The price never retraced to close below the 1.3 level, so the rejection rule doesn’t gets activated.

3 days later, a new high is made and it breaks the previous high, that was established by the current trade entry bar. The five day condition is enabled, should I need to check for rejection rule here, and if it gets activated, should I close the trade made various days before?

Thanks!

[RogoPip]

Cyco,
3 days later, a new high is made and it breaks the previous high, that was established by the current trade entry bar. The five day condition is enabled, should I need to check for rejection rule here, and if it gets activated, should I close the trade made various days before?

Thanks!

From my understanding of the book the 5 day condition is enabled in the opposite way between breakups and breakdowns. In the case of the breakup, the 5 condition is enabled if the 55 day channel is flat or [U]decreases[/U] in the last 5 days. So in your example, if a new higher high takes place, then the 5 day condition would not enable the rejection rule anyway (the 55 day high channel would increase).

The way I use the rejection rule is this: Rejection rule for the first 2 days of the trade only if 5 day condition is in place and after this I follow the last bar technique. When the SL given by the 20 day low is higher than that of the last bar, I change the SL to the new higher SL (in case of a long trade). I will not lower the SL after this, ie once a higher SL is registered it stays there. If the price keeps on going up, a new even higher SL will be registered. If the price starts decreasing, the SL may be hit. That s why it s there anyway.

Please correct me if my understanding is wrong. I have read the book many times as well and I am glad I discovered this thread afterwards

[Cyco]

The way I read it is as such:

Initial stop on Last Bar.

Rejection rule is in play for entry so long as Channel is flat or moving ‘against’ your entry direction when you get the breakout.

Stop moves to 20 day channel when it comes past the Last Bar position.

Rejection rule is activated any time the trend stops - so you get the 5+ days flat and a new breakout occurs.

In medisoft’s post it has no 5 day condition on the 3rd day after the initial breakout, so no rejection rule will be in place. Stop will be at Last bar

[RogoPip]

Cyco I agree with you, I corrected my post so I don t confuse anyone.

One problem I have is the Bishop close. I use MT4 for my analysis and I still haven t found a reliable ADX indicator. The MT4 stock ADX indicator is too fast (decreases almost at the first day the price closes against the trade, is this how it s supposed to be?) and some add-on ADX indicators I have found are too slow (never raise above 40). I read that the Wilders ADX indicators you find online are not smoothed but still, they rarely go above 40. Can someone please upload the ADX MT4 indicator they use? Cyco which one are you using so that I can compare it to mine please? I know you had stated it in one of your posts but I can t find it now.

[Cyco]

Rogo, I use the ADX that is in the platform I use (DealBook 360). I don’t use MT4, so I’m not sure what the best one is there.

Hopefully someone who knows, like Cmac or one of there others who has experimented in this area can help you.

[o990l6mh]

@RogoPip

Cyco I agree with you, I corrected my post so I don t confuse anyone.

One problem I have is the Bishop close. I use MT4 for my analysis and I still haven t found a reliable ADX indicator. The MT4 stock ADX indicator is too fast (decreases almost at the first day the price closes against the trade, is this how it s supposed to be?) and some add-on ADX indicators I have found are too slow (never raise above 40). I read that the Wilders ADX indicators you find online are not smoothed but still, they rarely go above 40. Can someone please upload the ADX MT4 indicator they use? Cyco which one are you using so that I can compare it to mine please? I know you had stated it in one of your posts but I can t find it now.

This is the correct indicator. Make everything except the adx line invisible and set the level to 40 and you’ve got it set up properly.

Wilder’s DMI book.zip (1.2 KB)

[medisoft]

I think the same

And checking the history, this technique can get out a trade pretty near the top or bottom of the trend!

The way I read it is as such:

Initial stop on Last Bar.

Rejection rule is in play for entry so long as Channel is flat or moving ‘against’ your entry direction when you get the breakout.

Stop moves to 20 day channel when it comes past the Last Bar position.

Rejection rule is activated any time the trend stops - so you get the 5+ days flat and a new breakout occurs.

In medisoft’s post it has no 5 day condition on the 3rd day after the initial breakout, so no rejection rule will be in place. Stop will be at Last bar

[medisoft]

Cyco, do you have any stats about which pair gives better results and which one worst results?

In the recent history I see that yen pairs make pretty nice trends, and some others not.

[RogoPip]

Thank you for your answers

This is the correct indicator. Make everything except the adx line invisible and set the level to 40 and you’ve got it set up properly.

This indicator gives one exit signal in early June 2012 and the one before it is on August 2011 for EUR/USD. All other times the ADX line (grey) is below 40. Is this how it s supposed to work, is a bishop signal so rare?

In the meantime I am trying to use DealBook360 with a demo account but I keep getting a warning about the “integrity of my connection” and I can t see any live charts. Doooh

[medisoft]

Cyco

Can you please review this chart, to see if I applied well the five day rule and the rejection rule?

Thanks!

[medisoft]

From page 30 of the book:

We don’t get many Bishop signals but they tend to be great when we
do. I find that about half of the signals are astounding and get me out at or
near the end of a trend. The others get me out at a good time but I end up
getting back in later.

Thank you for your answers

This indicator gives one exit signal in early June 2012 and the one before it is on August 2011 for EUR/USD. All other times the ADX line (grey) is below 40. Is this how it s supposed to work, is a bishop signal so rare?

In the meantime I am trying to use DealBook360 with a demo account but I keep getting a warning about the “integrity of my connection” and I can t see any live charts. Doooh

[medisoft]

Cyco, another question. For the ADX filter and the Bishop, you use the current candle’s ADX? or the previous day’s ADX?

I mean, if today is Day0 and yesterday was Day1, for ADX filter you check that ADX of Day0 is greater than ADX of Day1?

And for bishop, you check that ADX of day0 is below 40 and ADX of day1 is above 40?

Or you use Day1 and Day2 and their ADX?

Thanks