Hi Graviton,
I hope the holiday for you and your family is nice and enjoyable
I am re reading your thread at this time and I look at the things you have explained and teaches us under the different angle now.
Some of things that I think is important I do add to my trading rules.
My trading rules wouldnāt be completed until I finish re read and re evaluate every your post
Since then I have new questions to ask
What do you use to make such decision on size of retrace? May be PA behaves specific at time of retracement? May be you use some indicators?
Please teach me how to make such decision?
I remember you told somewhere that you have keep the trade for few months or even a year.
During this time have you closed fully all your lots and then came in to the same pair again or it means that during that long period of time you had at list one lot open(running) which means you had rided out all retraces on its way?
another one
what most extreme case is it? What do you see on the tick chart when such extreme case is happening? you said you use eur/usd tick chart as the barometer. Let me guess does it shows to you what pairs became tradable? What do you see on the tick chart if it does? Actually what tick chart for?
I assume there is no time in the market when the buyer or seller have disagreed or we wouldnt see a tick
Jones that does look like a good trade setup especially with the news released Friday evening of Spain being downgraded, the euro is likely to take another beating.
Iād only be stopped out if a retracement begins. If Iāve been in the swing trade for a while, It will have itās own trend line and the retracement will break that trendline. If the swing trade trend line break is a fast sharp spike and the price returns right back to the swing trade trendline, I may return back to the trade. Iād need to look at all the details to be clear I wonāt get whipsawed again. Iāll allow one whipsaw in a trade, but after the second whipsaw Iām finished with it for the duration.
If the retracement lasts for some time, it will create itās own retracement trendline, often best seen on a lower time frame. In that case, I wouldnāt consider re-entering the main trade trend until the retracement trendline is broken. Once again, I would need to look at the specifics of the situation to assure myself that I wonāt get whipsawed again.
I rarely actually get stopped out of these trades. I will usually manually exit before the stop is hit. If I have 4 lots running, spread is only 8 to 12 pips. I can exit to to protect 200 pips of profit, and re-enter on a return to main trend 10 times and still be way ahead of where Iād be if I just waited till a stop hit. Usually, the only time I take a stop out is after some unexpected news and a very large and quick spike. In that case, I want to be out until price settles back down.
A retracement to the main trend is a consolidation. Some traders are taking profit at the retracement and others are playing the counter trend retracement for quick pips. In the vast majority of cases the retracement will run out of steam and price will return to the main trend. Consolidations can be a consolidation before a return to main trend, which happens 4 out of 5 cases, or consolidation before a reversal in main trend, which only happens 1 out of 5 cases. Knowing this, you can always play a retracement as temporary and be right 4 out of 5 times. That 5th time actual reversal to main trend will wipe you out though if you donāt get out of it. So, at some point you will have to exit. Better to exit a little early and re-enter than a little late and lose good pips back. As a general rule, if the retracement is strong enough to establish itās own trendline on a lower TF, exit and re-enter as soon as that retracement trend line is broken.
See my response to Fartist on this subject of re-traces, above. It may answer some of your questions. As far as scaling out of a multiple lot trade as a retracement forms, yes, I do that. I have a certain way I do it. Iāll give you some sample numbers based on a 40 pip increment multi lot system for a swing trade and let you work out your own numbers for different cases. For a longer term position trade, youād just about need to somewhere between double or triple all all these numbers, with an 80 to 120 pip increment to start. The answer to your question is so complex and must account for so many cases, itās not possible to cover everything here, but Iāll give you an example case. Like I said, if you double your increment and initial stop loss, you would have to double all the numbers below.
In the beginning, I have to determine if I have a good entry or not. A good entry goes positive right after entry and I let it run. A bad entry goes negative right after entry and Iāll exit it after it only goes just a few pips against me, plus spread. So a bad entry is exited with a 5 or 6 pip loss total, and a good entry is left to run, but we never at any point let a winner turn into a loser. I will exit before any trade that once went positive before it ever goes negative, no matter what. We do a huge amount of pair analysis and work up front all to get more good entries than bad entries. But even after all that work, if we get 60% or more good entries over bad, we are doing very well. Itās tough to get an edge, but if we are going to get one, this is where we get it, on the entry.
Say itās early in the trade and I have only one lot on and say I have a plan to put additional lots on in 40 pip increments and the first lot has made it to about 30 pips and starts to retrace. I will want to exit with 1/4 of that profit, or about 7 pips profit. Regardless of what happens after that, I have enough pips to re-enter the trade, or another trade, and pay the spread again and still be ahead. I will never let a winner turn into a loser even if price only went up 5 pips and reversed, I will still exit with one or two pips profit, or 1/4 of the profit. The rule of never let a winner turn into a loser will cause lots of exits for small pips profit, but it prevents ever letting a good profit turn into a loss. That will just never happen if trades are managed this way. So first lot is exited with an average of about 5 pips, sometimes a few more and sometimes a few less, but about 5 on average. This happens on about 50% of all trades that arenāt exited early because of bad entry (remember that a little less than 1/2 of all trades are exited early because of bad entry under a separate set of entry rules).
If a second lot is put on, I will have 40 pips profit at that time. Often a retrace will start at that time. Again, I will take profit and close both these lots if price drops so that the combined profit of the two lots drops to 10 pips, or 1/4 of the total profit that was once in the whole trade. Once again, I have plenty pips profit if I want to pay spread again and re-enter, and as a whole, I have not let a winning trade turn into a loser. So once 2nd lot is on, weāll always exit with 10 pips profit minimum. Thatās just twice the profit of the 1st lot. It could be a little more, if the first two lots made 60 pips mac profit, I would exit with 15 pips profit minimum. Thatās not too impressive, but just wait. This happens for about 20% of all the remaining trades, or about 1 in 5.
If a third lot is put on, I have 80 pips profit on the first with a 40 pip SL, 40 pips profit on the second with a SL at break even of 40 pips and the third lot just put on and a retrace starts. As soon as I have identified a retrace has started, say the new third lot had dropped 12 pips, I will exit the first lot, which locks in 68 pips profit. Now, no matter what happens, I cannot have a winner turn into a loser since the worst case is a quick spike takes out the 2nd and 3rd lots at the same time and Iāve made 26 pips total on the trade. +68 on the first lot, BE on the 2nd lot and another -32 on the third lot. If the retrace is slow and steady though, as the vast majority are, I will simply exit when the sum of pips profit of the 2nd and 3rd lots drops to 1/4 of what the profit was at one time. It was 40 pips at one time, after a drop of 10 pips I exited the 1st lot for 68 pips profit, which means the 2nd and 3rd lots have dropped 24 pips total of their once 40 pip profit. With a drop of only 3 more pips in price, Iām down to only 10 pips total profit on lots 2 and 3 and I exit for 10 pips total. All this happens about 10% of the trades that arenāt early exited for bad entry, or about 1 in 10 trades. That means the whole trade is managed for 78 pips profit once a third lot is put on. That is nearly 8 times the profit of just 2 lots being put on. Now it starts to get interesting.
So now comes the more rare case, maybe occurring in only 1 in 20 trades. We get a 4th lot put on. 1st lot has 120 pips profit with 40 in stop loss, 2nd lot has 80 pips profit with 40 in stop loss, 3rd lot has 40 pips profit with SL at BE for 40 pips. We now put a 4th lot on and say a retracement begins immediately. We follow the same plan as with 3 lots on, except with a little difference to account for the extra lot. The extra lot gives us a little extra breathing room for our trade, but not much yet. Now we wait for 15 pips retracement before closing 1st lot for 105 pips profit. 2nd, 3rd, and 4th lots are all exited at the same time after an additional 5 pips retracement for an additional profit of 60 pips, so the whole trade was managed for a profit of 165 pips profit.
Iāll run out the 5th lot case for you and leave you to figure out any others since they are so rare. The 5th lot case will only occur in about 1 in 40 trades that were not exited early for bad entry.
We get a 5th lot on. The 1st lot has 160 pips of profit with a 40 pip Stop Loss. the 2nd lot has 120 pips, the 3rd lot has 80 pips, the 4th lot has 40 pips with SL at break even and retracement starts as soon as the 5th lot is on. We have a little more breathing room now so we can wait until we have 20 pips retracement, then we pull off the first lot with 140 pips profit. After an additional 10 pips retracement, the 2nd and 3rd lots are both pulled off for an additional 140 pips of profit. after an additional 10 pips retracement, the 4th and 5th lots are removed at BE total.
This yields 280 pips profit for a trade that only went up 160 pips total.
The nice thing is you can work out cases in advance and set pending orders with stop losses and take profit, so all this executes automatically and you never have to make a single decision after entry. That is the way to trade, since any decision after entry is likely to be clouded by emotion. This should take absolutely all emotion out of your trading. You never worry about making a bad decision, you only worry about improving your trading plan. I have cases already worked out in my trading plan for 40, 80, 120, and 180 pip increments. I just turn to the correct page and load everything in and on a good entry and then I just wait to see what happens.
Whew! Sorry about the complex answer, but I donāt know how to explain it simpler :o
Graviton,
I note you discuss a 50% ATR (14 period?) as your SL on a daily entry. Just wondering if you apply this as a uniform rule as you step down the TFās or if you use a different ATR % as you change TF?
See the attached chart for a log/log plot of ATR vs TF for the EUR/JPY pair. It appears that since there is power law relationship between these two variables, it makes sense to maintain a constant % of ATR as your SL even if you change TFās. Whether that constant is 50% or 100% is the challenge I suppose.
Hi graviton, i heard you mentioning that you never let a winner turn into losses. So base on tymen SL at the extreme of the wick of an extreme candle as stop loss.
You do not use that as your SL do you? You would watch the trade literally and as soon as your profits start dropping you would exit your trade am i right to say?
So meaning you do not use the extreme of the wick as your SL? Thanks.
Hereās another little indicator, this time for multiple pairs.
It shows the next higher timeframe trend of each pair, and if a valid tag of the opposite Bollinger Band is detected in the current timeframe, how many candles ago it was. A BB tag is valid if the other band is not subsequently tagged.
It highlights pairs that were tagged within the last 2 candles as red, within the last 4 candles in green, and pairs that have no valid tag in grey.
I suggest you put in on a blank chart. It doesnāt seem to work too well below H1.
i have been reading so many negative reports, but really i must i have been finding it very easy with forex. the most intersting part is that i dont use stop loss. take a look at my account history
hi Norwegian Blue
thanks for little things that is Very helpful
if you would please explain little bit moreā¦ what do you mean by BB tag? valid cbl? I have added your indicator to AU H4 pair. do I understood correctly that the numbers are for daily chart for each pair? the number is representing quantity of candles ā¦ I didnt understand since what event?
thanks in advance
does it count from candle with the lowest low or highest high ā¦ kinda of extreme? right?
Use the āCornerā setting to move into different corners.
Once price ātagsā a Bollinger Band, you can start looking for CBL entries. Thatās all this does. It alerts you to a BB tag, so you can go to the chart for that pair and start looking for CBL entries.
The timeframe is whatever the timeframe is on the chart you attach the indicator to. The ānext higher timeframeā is used to determine the trend, and therefore which BB is being monitored for a ātagā.
sorry, NB my english dont let me understand ātagā term. Can I say when the price touch the band. right?
Actually I look at the indicator and as a tool that shows what pairs are going in the same direction (uptrend or downtrend) and which one in opposite
can you tell me how to change grey color in the column that shows the trend and pair name please?
thanks for helpful advice to date.
I have 2 questions,
Can you clarify your M15 stoch filter set up (is it slow, fast and what are the settings?). What timeframe stoch filter would you use prior to entry on the 4H? (M15 i guessā¦)
Drawing Trend Lines: As you are well aware they can be very subjective. Lets say I was trading the 4H and looking at the daily chart to identify the main trend. How many candles on the daily would you use to draw your trend line (10, 20 ?) I know the line should hit at least 3 points of the price action. Apologies if it sounds like a silly question but as this is a critical part to the strategy, Iād like to know what your opinion is.
Thanks again. Paul
Quiet day on the market, so why not do some programming
Iāve taken the BB Tag indicator, and enhanced it.
In the H4 timeframe for example, it now shows;
H4 bar that tagged the opposite band
H4 bar that is a valid 2xCBL entry.
Number of pips that price is away from the CBL entry.
Direction of the D1 trend.
When price comes within 0.25xATR(14) of the CBL entry, the row turns red. When price exceeds the CBL entry, it turns green. If no CBL entry is found, it turns grey.
Bars are counted 0 most recent and up to less recent. So bar 2 will be 2 periods in the past, or 8 hours on the H4 timeframe for example.
You can start in any timeframe, H4 is just for illustration (although I think the most useful timeframe for this). Various elements are configurable through the indicator inputs.
yes, it is amazing how DEMO accounts are always growing so nicely:rolleyes:. Of course SL is just something for Sissyās, experienced traders NEVER use SL.:eek:
Ohhhhhhhhh Boy:D:rolleyes:
