Well: stayed up last night and opened the relevant positions. So all in (insofar as instruments are concerned i.e. by no means all in insofar as position sizes are concerned). Looking good to be honest. I see this morning that Australia and Brent are both on a bit of tear. Nice. Not sure why: but it’s not something I concern myself with i.e. I make it a HABIT and PRINCIPLE to NOT listen to ANY analysts, watch Bloomberg or CNBC, read blogs, or anything else of the sort. Doing that has caused me more trouble than you can imagine with this trading system (actually and come to think of it it’s caused me more trouble with ANY trading system over the years). As John F. Carter says in one of his books: “Opinions are like ar*eholes: everybody has one”. Mostly: they either don’t know what they’re talking about and are just there to fill up time slots. And over the years I’ve learned that for every one opinion or piece of analysis: you’ll find just as many contrarian opinions or analyses. Without even having watched, or listened to, Bloomberg yesterday: I will bet that the whole bunch were predicting the end of the world and markets as we know them during the selloff. Today and if a trade deal is reached (in whatever form) and if the markets rally: they’ll be singing a totally different and positive tune as if yesterdays selloff only existed in our imaginations. Try and make sense of all of this nonsense at your own peril.
Nice post. I regard watching news as like historical research. Its about as much help in trading as knowing the causative factors of the War of the Spanish Succession.
Nice post to you too i.e. it put a smile on my dial this morning!!!
Regards,
Dale.
P.S.
Unfortunately though it’s taken me a long time and cost me a lot of money to learn this lesson. Matter of fact this was probably 95% of the reason for my bad Gold trade last year. Got into the trade correctly but it then started going bad. So instead of stopping and reversing I allowed myself to be influenced again by outside factors. And it’s funny you know: you actually don’t even have to be making a point of watching or listening to this lot. You can be walking past the TV or the radio and just one sentence can suddenly jump out at you and influence you. This happened to me years ago (also on Gold oddly enough) as well as countless times during the credit crisis. Cost me PILES (and I’m talking upper six figures here) (in USD I might add i.e. not ZAR). Even the trading systems that I was trading at the time which, although nowhere near as effective as this, would have had me shorting stocks (and the rest) at the time. But I was so caught up in the hype of Bear Stearns, Merrill Lynch, Lehman Bros, AIG (and the rest of the thugs) and the politics of the time and not to mention the pretty faces on Bloomberg that I simply ignored what was going on right in front of me. Matter of fact there’s probably quite a few of my old posts around here from those days on this exact topic. Still: it was an exciting time to be in this business i.e. historical time if nothing else. This being said the words of Greenspan keep ringing in my ears (and it’s getting louder and louder as the months go by and when I see how easy it is becoming for people to get credit again): he is on record saying “It’s not a question of IF we end up in this situation again but rather a question of WHEN” (not his exact words but close enough).
I awake to a sea of green (well blue in my case) this morning. Nice. All positions in profit but nothing to write home about yet i.e. 2.31% in total (with Italy lagging as the moves up only started much later in the US trading day and Italy was closed by then). I say no great shake or nothing to write home about but these are not even full positions so not bad at all. Could have stayed up and taken profit on the ASX200 and Brent but couldn’t keep my eyes open by 20h00. Furthermore: no stress i.e. RSI(2) got some way to go on all of the other Indices so all things being equal the ASX200 should follow suit comes Monday or Tuesday thus resulting in a bigger profit on the instrument upon closing. Brent: I will probably just set a TP over the weekend to TP at the open (could also do the same with the ASX200 of course).
So that’s it for the week really.
One thing to be aware of: you will almost always have trades open over the weekend so be prepared to pay interest for the privilege. This being said: it should be mentioned that if you’re long you get paid dividends as and when they’re declared by the various companies that are components of the various indices (this, as always, assuming a reputable and professional broker of course). And although this doesn’t usually happen (dividends received exceeding interest charges) dividends received this week more than covered interest on overnight positions. Most of the time, however, they do serve to reduce overnight interest as you (obviously) offset the amounts. Of course the opposite applies i.e. you pay dividends when short these indices so just something to be aware of is all.
But yeh. A nice start again. Without fail this is the norm. and this will now carry on for months. Key here is to not get ahead of yourself after a few months, throw caution to the wind, and start over trading because that little voice in your head says that you cannot do any wrong anymore and the sky is the limit. Next thing you know: you’re holding onto losing positions, doubling up on positions that you should have been out of long ago (and be making profit in the opposite direction to boot), second guessing what got you to this point in the first place (usually because you’ve just heard something on the news or from some other arbitrary source), the list goes on. This paragraph being more of a note to self I guess!!! LOL!!!
Would like to share how I manage losing positions. I have a mental stop to get out of my trades. Risk a portion of profits already banked. Or if I’m in profit for the day, risk that. Or if no profits for the day, risk the profits of the previous day. I always pull out any sizeable amount of profit lately and park it in a sub account so I’m not tempted to trade much larger sizes. Will decide on infusing profits as capital every month or so.
Also have a policy of closing positions which were in red as soon as I can almost breakeven but leaving a few tranches. Won’t make as much especially when price continues to my TPs I miss out a lot but it has saved me from a lot of trouble, since there usually is a pullback or retest during the day.
I do this because I also have found that using SLs was not something I could do well. Would keep getting stopped out, and could never figure what the proper level to set my SLs should be.
^^^ This. Agreed. Pretty much was my problem for a long time (although not with this system of course).
The thing with this trading system though: I’ve found that once you start objectively taking profits (as opposed to following it, the trading system, to the letter) then you start running into problems. On a few trades you may end up taking profits too early (obviously costing you money). Then you decide to let them run to some or the other better level (not dictated by the system) to try and maximize your profits and what happens??? Price retraces and you end up being in a losing trade that you should have been out of at profit. Right now the ASX (Australia) is a prime example. I should have taken profit last night (because RSI(2) closed above 70) but I didn’t (although mainly only because I was real tired and wasn’t feeling too great so went to bed early i.e. were this not the case I’m sure I would have closed in spite of it being a small profit on the position). Now I could simply leave the trade open and let it run maybe to the last swing high (I’ve seen other traders doing this with this system APPARENTLY with great success although I’ve never seen long term results from them) or I could simply place at TP so that at the open the position is closed at a profit (and this I have done this morning). I guess I do try and keep reminding myself that I’m pretty sure that Larry Williams would have tried all manner of permutations and different options before arriving at his conclusions. As I’ve noted somewhere above too: to date there’s not been a single so-called enhancement to this system that I’ve been able to implement that has improved matters. So I guess I’ll just plod along as is really.
Other problem: the moment you start placing stops (or trying to) with this system (be they mental or other) you start writing off far more than necessary. Too many times have I seen a position go into and ugly loss only to recover, get to break even, or at very least realize a loss that was far less than either my fixed stop experiment or mental stop (and if the truth be told: mental stops NEVER work for me i.e. I tend to adjust them on the fly and always to my detriment in the past) (you know the story: "well it’s about to hit my mental stop but I’ll let it go a little further) (and so on and so forth and when you look again you are SERIOUSLY in the hole for a big number and then you’re closing out based on your pain threshold or out of necessity).
But not to negate any of the above though: where there have been PARABOLIC moves in the market (the BREXIT vote on 23 June 2016 comes to mind i.e. I remember it well because it was my birthday!!! LOL!!!) then I’ve taken profits objectively for sure. Point is that is was a material amount of profit. And that type of move doesn’t come along too often. But there is a fine line in my opinion i.e. if you’re not going to trust your trading system’s exit signals then do you also start questioning its entry signals??? See my point??? To be sure: there’s been many times where I COULD have taken greater profits on positions than what I actually ended up taking when finally signaled to do so by the trading system. And I’ve been called a fool on many occasion for doing this. But then there have also been times when I’ve thought about taking profits early only for those same trades to end up being closed at better prices as dictated by this system. Dunno. Seems there’s a fine balance somewhere. And as I posted somewhere else above: “Note to self: if it ain’t broke then don’t try to fix it”!!! LOL!!!
As far as infusing profits: I don’t know if you’ve read any of my other posts above but for the sake of interest just take a look at that excerpt from Larry Williams’ book (the one where he demonstrates that an 80% profitable system can still lose money when following this hard and fast rule of only risking a fixed percentage of capital on any given trade). I found it fascinating to be honest. And I’m busy trying to compile data based on that to use with this trading system i.e. given that there are no stops it’s a problem determining the correct position sizes (and I know for a fact right now that I am UNDER TRADING if you’ve ever heard of that) (but I’m in a situation where I need to err on the side of caution for a while).
But thanks for the post. Nice to hear from you. Keep in touch.
Was also playing with indices and oil this week thanks to good old Donald Trump. Nothing like a geopolitical threats to introduce good volatility into the markets.
Agree with you about news and analysts, a lot of them are pushing their views because of positions they hold. I read and listen to them but never believe in any single one. If I read a bullish article I’ll look for a bearish one to balance it out. Try to make up my own mind though. And fintwit is great for breaking news, someone posts about it so much faster than you’ll hear about it from mainstream news.
Frank Ochoa aka Pivot Boss teaches a tranche exit system, do 1 1, 1 1 1, 2 1 1, 2 1 or some variation. I do a tranche entry and exit system that applies the same concept. For example of the 2 1 1 which I like, I’ll take maybe 4 0.10 lot longs. Once price moves to my first and nearest TP, which has a really high chance of being hit quickly, I’ll take off 0.20 for profit. If it breaks that then great, I’ll take off another 0.10 at the next (and usually real) TP2. If it breaks that then I can let it ride. Having difficulty though letting it reach TP3. It took a loooonnnggg time to get used to this and not feel bad about missing out on profits. Conversely it means I am trading double the size of what I actually want to trade, but since the initial TP is almost always hit I’m able to de-risk quite soon after entering the trade. Makes me look (and feel) like a dumb genius though as it’s resulted in a 90% win rate.
Yip. He sure is good for making markets move (one way or the other).
Must admit it is really difficult to try and ignore everything that goes on around us or to isolate yourself. Just this morning I (innocently) had the TV on the news and there was some report about these trade talks going down the pan at some point yesterday. Without even THINKING i.e. it was just an involuntary action: I found myself wondering about my open trades. And that’s without even actively trying to find information about yesterday’s events. And it can influence your bias without you even knowing it or realizing it. I even have to stop myself from reading opinion and analyst threads right here on the forums (something that I used to spend day in and day out doing). It’s like a constant internal struggle to be honest. But I think I’m alright. Getting better at ignoring this nonsense anyway. And keep having to remind myself that most times all of this stuff is priced in anyway (unless there’s some real shocker or the other which can happen of course).
It is difficult to ignore all the talking heads and analysts and gurus. It’s natural to imagine hey they must know something otherwise they wouldn’t be on TV, have followers, etc. But I try to listen to them still, but not necessarily believe them. When almost all of them agree on the same bias, it’s either going to be a spectacularly profitable trade for me or spectacularly bad loss. So I at least know to be on my toes.
Case in point I wasn’t trading forex yet during the Brexit vote. But when everyone was expecting Brexit to lose and Bremain to win, you could see all the talking heads trying to show confidence when the vote count showed Brexit had a real chance to win. Same for Hillary Clinton losing to Donald Trump. Spectacular moves after.
You were replying while I was posting above (TWICE now!!! LOL!!!).
Interesting (the “Pivot Boss” post of yours).
I will say this:
There is only ONE other trading system that I would really like to master and that is trading pivot points. For some reason or the other I’ve never been able to get it right. And I don’t know why. And the only reason I’d like to get it right is because pivots is something that you can trade intraday (as opposed to my half hour daily bit of work at night). The absolute irony is that I can sit and look at my charts all day every day and I know with a 1 000% certainty that when price stalls (in whatever direction) it’s hit a pivot. Then I put the pivots up and lo and behold I’m always right. But do you think I’ve been able to make any money off of this??? Nope. Not a brass bean!!! LOL!!! For some reason or the other my stops with pivots ALWAYS get nailed. Or (true to Dale form): I’ll start moving stops (which has always ended up in disaster).
Just this last week: I watched Dow tank and hold. I just knew it had stalled at S2. And of course it retraced almost immediately. But I didn’t have the guts to jump into that trade. Only time I’ve made any money with pivots has been if price has hit R3 or S3 i.e. it’s a pretty much foregone conclusion that at THOSE levels it’s going to retrace. But this doesn’t happen very often let’s face it.
So yeh. Maybe with all of this spare and free time I have on my hands nowadays I should dust off some of my books that I’ve collected over the years and revisit pivot points (as I say: if for no other reason than to occupy my mind during the day).
I was just scrolling through Connors’ book to find something for someone and I paused to take a look at his 3-day High/Low strategy that you mentioned. And it dawned on me that something I’ve not mentioned on this thread is this: the TPS system is mostly profitable because of the scaling into the positions i.e. not necessarily because RSI(2) is fantastically accurate. Now on all of the other trading systems he advocates to add a second position (in all of the aggressive versions that is) if at any time price closes lower or higher (depending on which direction you’re trading in obviously) than your entry point at any time while you’re still in the trade. Point I’m trying to make is that there is no conceivable reason (not in my mind anyway but I’ve not tested this of course) to use the scaling in portion of the TPS system with the other systems. It may very well increase profits on those systems or reduce losses i.e. very seldom, I would imagine, does price always change direction after the three day highs or lows occur and the very next day close where you want it close (as per the usual cherry picked examples in the book). Those trades may run for longer and go deeper into the red before recovering. The scaling in used on the TPS system effectively gives you five days (or rather five signals) really before you’re fully committed to a position i.e. gives the trade more time to mature type of thing. Just an observation is all.
Of course: whenever I get these ideas I do (as noted somewhere above) make the assumption that they would have already tried whatever permutation I’ve just conjured up at the yime. But who knows: maybe not.
The above being said though: scaling into positions is not some new concept that was invented by Mr. Connors & Co. at the time i.e. I’ve seen many trading systems use this type of entry method (seem to recall that IBM Big Blue trading system also scaling into positions at least from what I could gather from the documentation anyway). The big difference though (and as I think I noted above somewhere): a trader needs to be 100% sure of their game plan and motive as there is a big difference between scaling into a position and simply adding to a loser hoping to come out at break even at some point on the trade (and the latter we have all tried at some point and usually, at least in my case, it’s ended in disaster).
Hi Dale, I’m happy to see you posting again. You might remember I visited you at your home many years ago (I recall it was in Linksfield, or nearby?) and you introduced me to some books on your forum - New Concepts by Welles Wilder, Mastering the Trade by John Carter, High Probability Trading Strategies by Lien and Schlossberg and, of course, High Probability Trading by Connors and Alvarez. I’d love to see you again and chat to you about TPS. How can I contact you, if you’re open to that? Alistair
Of course I remember. How’re you doing??? What a nice surprise!!!
Yip. I’m back again (not out of choice if the truth be told but it is what it is for now).
Isn’t it too funny: you mention High Probability Trading. That’s exactly what I’m doing now (and have been doing for the past four or five years or so) (part time though I must add) and nothing else i.e. that’s what this thread is all about really. Sad part is that I had that info. many years ago but never gave it a second thought (was too caught up with Wilder’s stuff and trying to prove a point) (which ended up in disaster but I think I met you after that had happened actually).
There’s nothing that I could impart in person re: this trading system that I’ve not already attempted to impart here on this thread though I have to say. I would say that if you have questions then post them i.e. others may be able to benefit from the discussion (although because there is no FOREX involved it’s not going to win any popularity contest). But send me a PM anyway.
But nice to hear from you. Nice surprise as I say.
Thanks, Dale. As you hinted, I trade only forex and I’m still convinced that Connors’ TPS strategy must have something to offer me. So while you have been posting here, independently last week I went back to Connors’ book to revise the TPS system! As you might say LOL!!!
So I am marking up some charts to show everyone whether TPS works on forex charts or not. There’s just one question that I am not sure of - my reading of TPS tells me to exit all trades (whether 1, 2, 3 or even 4 of them have been placed), exit all of them when price crosses 30 (if selling). I might be wrong, but this is what I have applied in the chart I have posted below. The thick purple line is the 200 SMA and price is mostly below, or bearish, except right at the end of the EURCHF chart. The vertical red lines mark the first bar where RSI(2) goes above 70,so trades start being placed when the next bar closes (let’s speak of candles closing, not bars - I might be misunderstood LOL!!!). The blue lines mark the close of the candle where RSI(2) crossed below 30. That is where I have assumed all trades will be closed. I then calculated pips made or lost and multiplied those per candle, respectively pips x 1 + pips x 2 + pips x 3 + pips x 4. The total of those is the number I have placed near each blue “Exit” line. So it is the total pips made or lost per 10% of full lot size.
You will see for AUDUSD I have had 9 winning trades, zero losing trades. Total of 2005 of my numbers. As each number represents 10% of full lot size, then the real value of pips made in this exercise would be 2005 divided by 10 = 200 pips altogether. I think.
I have been working on EURCHF too and it goes OK mostly, but then there is a wipeout, so let me complete that one and I’ll post it later, before everyone gets too excited.
Before I go any further with this I must make it clear to you that I have NEVER tested this trading system with FOREX pairs and I have no intention of doing so. Not now and not ever. The closest I came was about three years ago when I took positions on the Dollar Index and same thing happened to me as on your EUR/CHF chart i.e. the thing started trending against me without so much as a pause for at least two or three weeks. It cost me dearly. That was the first time and the last time I ever traded anything but stocks, indices, and commodities with this trading system. These instruments move in a totally different fashion to FOREX pairs (and I’m sure you remember that this is not by any means a new mantra of mine). And oddly enough: last night (when I couldn’t flipping sleep due to toothache mind you i.e. was ready to put my head through a wall the entire night and have only just returned from getting meds. i.e. first thing this morning) I ended up watching some YouTube videos made by some chap who ACTUALLY, and after all of this time of me wondering, explains the FOREX market, who moves prices and why prices move, and why FOREX is totally different to stocks, indices, and commodities (and actually goes to great lengths to explain why none of the traditional indicators work with FOREX pairs but they do work with stocks, indices and commodities). More on this later though (probably in another post).
As a matter of fact (and quite proud of myself for doing this if the truth be told): I posted somewhere here that I was prepared to take a chance and try EUR/USD with this (placed my entry order over the weekend). But late yesterday I decided to cancel the order. I guess I just thought to myself well what’s the point i.e. I’m not here to prove anything to anybody and I’m certainly not prepared to simply lose money just to prove something to myself that I know already. So anybody that’s been following this and that other thread where I mentioned EUR/USD: sorry. No trade. In just looking at the daily chart it would appear that this system would work. But there’s always the possibility that it breaks out and starts trending just like in your EUR/CHF example and then??? May just cost me money. And to what end??? So that’s that.
ALL of the above being said though:
I have many reasons for having started to post here again and many reasons for starting this thread (most of which are selfish I’ll admit i.e. more notes to self and I figure if I’m posting publicly about my trades then I will not mess up by over trading and whatever else i.e. save myself from myself and the inevitable embarrassment type of thing). But one other reason was to see if with some collective heads we could find a solution to address the EXACT type of bad trade that you have demonstrated on your EUR/CHF chart. That type of thing may not have happened to me as yet. But that sure does not mean that it cannot and will not. In other words: one of the reasons for starting this thread was to see if there was a way to actually incorporate the use of some type of “emergency stop” if/when things actually DO get out of hand as per your EUR/CHF chart. I’ve spent months thinking about this though and to date I’ve not come up with anything that will not interfere with the operation of this trading system. But that does not mean that there isn’t a way.
Other than the above: looks like you have a perfect grasp of the trading system anyway. Only thing that’s not clear to me: I assume when you close out a position as indicated by the system it is done at the close or just a few minutes before the close of the bar with the RSI(2) signal??? In other words: you don’t exit as soon as RSI(2) crosses above 70 or below 30 i.e. you close when RSI(2) CLOSES above 70 or below 30???
One other thing to bear in mind: at any given point in time I’m trading ten or so different instruments (usually just all of the indices that are available for me to trade and where I have signals obviously). In other words: I’m not reliant on a profit on any single instrument. It’s the sum total of all of the trades is where the money comes in. In some cases I’ll take a loss on whatever e.g. say three indices but make a profit on the other and the net amount is (usually) a profit. In other words: I’m not looking to get 100% (or even 80%) profitable trades on each and every single instrument i.e. it’s the overall net figure that counts (and probably the main reason why I don’t lose money IF I behave myself of course but that’s another whole story). And overall (is my point) based on your trades: even although it would appear that you wasted a few months work on EUR/CHF you did indeed close out at a net profit because of the other pair.
To answer your question about the close, here are some extracts from the book that indicate that we close all trades (whether 10%, 20%, 30% or a full position) when the candle CLOSES after price crosses the opposing 30/70 level.
This extract speaks of closing ALL positions.
A technical question - how can I quote what someone else has said and include that in my post?
Since this system is totally mechanical it should be possible to create an EA to trade it. That would be a neat way of testing it across lots of currency pairs AND various indices etc. Any ideas where we could find such a robot (in my case for MT4), or any keen coders out there?
Yeh listen: this ain’t funny (toothache). I’m still climbing the walls in spite of the meds. which have not taken effect yet obviously. And got to go back to either have root canal or extraction. Between the meds. and that it will cost me more than I make on my currently open trades (no healthcare obviously). Reason I’m going on about this: it is things like this that these dudes don’t take into account when they’re all fired up to start trading for a living and trying to calculate their minimum capital required and doing their straight line compounding worksheets!!! Sh*t happens. Life happens.
Anyway and moving on. Great. So you are doing everything as per the book. No problem.
Let’s see what we can do. There are two things really. The first being whether or not there is a way to incorporate the use of some type of “real emergency stop” but that does not interfere with the normal operation and hit rate and profitability. The other is to see if there is a way to lock in profits and let the trades run. I was able to take profit on Brent Crude but price is still going up (and this happens often I must admit).
Now as to he first problem: I have indeed seen discussions on this. But the only concrete offering was somebody saying that they trade the system and their mental stop is 5% of capital on any given trade. Apparently this did not affect anything and his narrative was that such a stop rarely gets hit but when it does then one will be glad there was a stop in place. Unfortunately though: this doesn’t seem like a very robust or scientific method i.e. more like thumb suck to me.
As to the second problem: have seen discussions on this too. Only idea that made sense to me was that somebody said that they hold the trades open and take profit at the level of the previous swing high or swing low. This I have indeed tried but with very mixed results. Mostly: if you have not taken profit as dictated by the original system and hold on to the trades then they go against you and usually get to a point where price is just too far away for it to ever be able to recover and close at a profit.
So give it all some thought as will I. Solve the above and one could very well be able to use this in any market and maybe even increase profitability overall.
I cannot help re: creating an EA. Those days are long gone I’m afraid (have not gotten any younger). And I don’t use Metatrader either so there’s that. But: an EA sure would help in testing any solutions that we may come up with re: the above.
Thanks. Using the TPS strategy is a bit laborious so having an EA take the grunt work out would be very helpful. I’m hoping someone might pop up who knows where one might be hiding, or might be inspired to code one. Then we could leave it running full time across many charts. We live in hope!
