Do you know something: I logged in to read your reply SDC and something just ‘jumped out’ at me as I read that part of my original message that you quoted!!!
Let me quote MYSELF again and then I’ll explain:
A S&R trader (as I understand it) would have been buying at various support levels not so and back then none of them held.
Read that ‘observation’ of mine carefully (YOU TOO DALE PATERSON)!!!
Does it not just go toward demonstrating what my ‘bias’ at the time was??? At no point did it even occur to me to short those instruments because I just could not get my mind around the fact that those large financial institutions could fail or that their prices could plummet to the extent that they did??? In other words: in spite of what my trading systems were telling me I had a ‘long bias’ and a ‘personal belief’ that they would rebound after every consolidation (support???) on the way down (and of course bought MORE every time)!!! Do you see what I’m saying??? At no point on the way down did I even consider shorting them because of this ‘long bias’ and ‘personal belief’ in spite of what my trading systems were telling me at the time!!! As Matt pointed out: a S/R trader would have been selling when support broke. This did not even OCCUR to me when I made that ‘observation’ and the scary part is that I made that observation only two or three DAYS ago so my ‘long bias’ still ‘holds’ (no pun intended) it would seem!!! LOL!!! Talk about ‘not seeing the wood for the trees’!!! LOL!!! Interesting!!!
Come to think of it: only yesterday I read an article somewhere (for the life of me I cannot find the link this morning) that noted that most new traders will try to trade AGAINST the trend (basically most new traders will always try to catch the top or the bottom) and the ‘professionals’ know how to capitalise on this. In another book (sometime ago) I also remember reading that even although the phrase ‘the trend is your friend’ is such ‘common knowledge’ it’s surprising how many traders try to trade AGAINST the trend without even realising that they’re doing it!!!
On a sidenote Larry Levin always signs his e-mails with this:
‘Trade well and follow the trend, not the so-called “experts.”’.
Most of the retail traders being inexperienced or new like to trade the breakouts! When the new traders learn technical analysis, they tend to most eagerly follow trade recommendations based on certain chart patterns recommended in the books. However, the seasoned traders prefer to fade breakouts. They do exactly the opposite of what the crowd is expected to do. Most of the successful traders have contrarian trading approach. Trading is a zero sum game. For every loser, there is a winner. Most of the breakouts fail. Breakouts fail because the institutional or the seasoned traders take advantage of the crowd psychology of the retail or inexperienced traders and win at their expense…
Now I’m not sure if these breakouts are with or against the trend as it doesn’t really say, but it did say that “The breakout fading strategy usually does not work well when the market is in a strong trending phase”.
This just made me think of that saying ‘damned if you do and damned if you don’t’!!! LOL!!!
The ‘Turtle Trading System’ would have you buy or sell the 20-day (or 55-day) breakout immediately on a breach. Then there is the ‘Turtle Soup Plus One Trading System’ that would have you fade the breakout(s)!!! LOL!!!
WHO KNOWS I ask you!!! WHO KNOWS!!! LOL!!!
For what it’s worth Matt: I’ve all but abandoned both of the above trading systems by the way BECAUSE of what’s noted above!!! LOL!!! I’m back to my Wilder ‘stuff’ (mainly his Swing Index System) and I’m happy with that i.e. I don’t have to worry about S/R or whether a breakout is ‘for real’ or not!!! The Turtle Trading System REALLY is only good (nowadays anyway I believe) for trading (soft) commodities (in my opinion anyway). Then again (and with everything else I guess): this could ‘change on a dime’!!! LOL!!!
I’m also quite ‘into’ the ‘RSI Rollercoaster’ (I think I sent you that e-book???) the basic idea being that what the ‘RSI Rollercoaster’ ‘missed’ the Swing Index System will ‘catch’ (and visa versa).
I’ve always understood fading to mean trading a bounce off support or resistance…the opposite of breakout. What your describing of adding in positions sounds like “scaling”…a structured strategy of adding more positions, whether losing or winning.
The difference between adding to a loser and scaling in is your initial intent before you place the trade.
If your intention is to ultimately buy a total of one regular 100,000 lot and you choose to establish a position in clips of 10,000 lots to get a better average price (instead of the full amount at the same time) this is called scaling in. This is a popular strategy for traders who are buying into a retracement of a broader trend and are not sure how deep the retracement will be; therefore, the trader will scale down into the position in order to get a better average price. The key is that the reasoning for this approach is established before the trade is placed and so is the “ultimate stop” on the entire position. In this case, intent is the main difference between adding to a loser and scaling in.
Yes, if in trend…lol…but it seems in a ranging market, it’s just buying low and selling high at support & resistance. If markets range more often than trend, then it’s not as risky. I guess the age-old problem is whether price will continue ranging or start trending…;).
And you even QUESTIONED what I was saying!!! LOL!!! You’re talking to ‘the king’ of 20-day breakout systems (false or otherwise)!!! LOL!!! (Well: I’ve spent a year or two studying them anyway i.e. that’s not to say that ‘the king’ has been profitable with them)!!! LOL!!!
In my ‘book’ (by the way): ‘scaling’ (into or out of) a position is called ‘pyramiding’.
I promise to you the very first COMPLIMENTARY copy!!! LOL!!!
I’ve just had a look at EUR/USD. Yes: it is true that TS+1 would have made some nice pips BUT MY problem with that system is ‘when to get out’ (if I’m not mistaken I asked one of the authors some time back and was told to trail a stop at the high or low of the previous bar). Also: I spent a LOT of time trying to see whether or not it would be at all possible to trade both the Turtles as well as TS+1 but it nearly ‘killed my brain’!!!
Well: maybe there’s a possible discussion here!!! LOL!!!
MY idea was not to trade each system independantly but then I never really thought about doing that. What I was TRYING to do was (for example) take a Turtle trade and if it FAILED then switch to TS+1. The big problem that I found though was that the TS+1 signal (the ‘fade’) would always come before the (initial) Turtle stop so essentially it was the equivalent of ‘bailing’ on a Turtle trade early (and of course more often than not the Turtle trade was the valid trade UNTIL you started TRADING it then the TS+1 became the valid trade)!!! LOL!!!
But trading both independantly of each other??? Maybe??? One may THINK that this is the same as the above but actually not if you think about it for the simple reason that if the Turtle trade is valid then you’ll simply get stopped out of the TS+1 trade and if the TS+1 trade is valid then you’d simply get stopped out at the Turtle stop. Interesting. And as you say: the one should ‘mop up’ the others shortcomings and while it may reduce overall profitability it would, on the other, reduce the massive potential drawdowns inherent with the Turtle’s i.e. sort of ‘smooth out’ the quity curve as it were???
Stop trying to develop a ‘system’ and concentrate on developing a method. There’s a difference.
I use the RSI and the RSI only. It’s all there. But I’ve gone a little further than what Wilder wrote in his ‘New Concepts’ (By the way that book wasn’t about giving the reader a bunch of self-contained recipes for making money. C’mon!)
Spend as much time as you can with the RSI (or any other indicator for that matter). Go to bed with it. Learn about the Ranges. Range shift. Positive and Negative reversals. Watch it as it moves between 80 and 40, and then down between 60 and 20. See what it does between 60 and 40. Can you spot the trend? Look harder. Put a couple of MAs on it and watch as they move. See a pattern? Look harder. It’s all there. Takes time but it’s well worth it.
(By the way that book wasn’t about giving the reader a bunch of self-contained recipes for making money. C’mon!)
I’m afraid I have to differ with you on this one though. While Wilder does indeed mention that some of his ideas can be used to enhance or develop other trading systems or methodologies (my own wording being used here): each chapter of the book details a viable (and profitable) trading system in its own right (the only exception being the chapter on RSI which explains the CORRECT use of RSI and is not detailing a trading system in and of itself).
Don’t get me wrong here i.e. I’m not saying that an attempt should not be made to enhance the trading systems detailed in the book. I favour the Swing Index System above all else but I do as a rule tend to take ONLY long trades (as you may or may not know I don’t trade forex as a rule) and therefore I don’t stop and reverse as the system would have you do. Maybe this is the type of thing that you’re talking about i.e. a ‘personal tweak’??? This is NOT to say that trading the system ‘as is’ is not profitable (I just have a ‘long bias’ and I’ve never been able to ‘shake it’). Another example is the Volatility System which, if I may add, Wilder HIMSELF trades (or should I say traded before going off at a tangent with ‘The Delta Phenomenon’) and has in more than one article or interview noted that this is one of his ‘favourites’ (I forget the exact words that he used). Although the system has merit: it’s impossible to control risk simply because there is no way to place stops without interfering with the functionality of the system itself. As for the rest: those systems can be ‘traded by number’ (‘paint by number’???) ‘as is’ and they will be profitable over time. The ONLY proviso being that you are ‘discretionary’ as to what type of instruments you trade with them (and by that I mean that one must never forget that Wilder was a COMMODITIES trader and forex DOES NOT ‘behave’ the same way as commodities but that’s the subject of various other threads that I’ve contributed to on this site so I’m not going to ‘reinvent the wheel’ here).
But hey: if you feel like sharing some of your RSI enhancements feel free (and I’d be interested to see them myself). For what it’s worth: I too have a system that relies SOLELY on RSI (the RSI Rollercoater by Kathy Lien and Boris Schlossberg) and that works very nicely (the only ‘tweak’ is that I use RSI(10) and not the default RSI(14) for a very specific reason).
But I’m pleased that you’ve contributed here and please don’t be a stranger around these parts (especially seeing as you obviously know quite a bit about Wilder’s work).
I’m propably the dummest trader in the world.The stunts i tried to pull in creating my own system will make you laugh for a week.Trust me I am not very bright yet i am making money…the reason is that i use mecanical systems.At least i can do that.
People always knock my systems down…they would rather think for themselves and all mecanical systems are scams and dumb and none of them work.While this might be true for most systems of this nature it is most definitly not true for all of them.
I like the idea that a algorithim make my trades for me and that in the long run losing money becomes very hard.Trading like me there is so little discretion involved.I just excecute my system every day take a couple of winners take a couple of losers make a little money.
My piont…maybe you should think about at least demo trading a good mecanical system.It can simplify your trading take a little stress of your back.
