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jarroo May 15, 2008 9:44pm | Post# 1

The DIBS Method... No Free Lunch continues
 
7 Attachment(s)
This is a continuation of the DIBS Method which was started at the
No Free Lunch but all the coffee you can drink thread.

http://www.forexfactory.com/showthread.php?t=56907

The bottom of the page is all of Peter's posts, thanks to doubletop.

It is a must to read and study the above thread to be current with this thread.

I would like to thank NowAndLater for putting this together.

Opening time
I think MPP sums it up nicely:
0600GMT is always 0600GMT. GMT and UTC never move all other times are +/- of GMT/UTC. ie london is currently GMT+1, your broker times are set to a GMT time and never change. BST, DST and EST change at differrent times so can be confusing.

I believe PC uses 0600GMT at all times, this way he can set his charts up get used to where the 0600gmt open is and forget about the confusion of BST EST and so on.
Peter:
"I use 00:00 CST or 06:00 GMT as my open. Believe me, if you are off 1 hour due to Daylight Savings time it is not going to be a problem."
NowAndLater's great post:
http://www.forexfactory.com/showpost...&postcount=679


Thanks ozziedave:
The one constant in this equation is that 6:00 GMT never changes. The variables in the equation are your time zone, if you have daylight savings time and what your brokers time feed is. As I see it there are 3 possibilities for setting your start of day time.

The one constant in this equation is that 6:00 GMT never changes. The variables in the equation are your time zone, if you have daylight savings time and what your brokers time feed is. As I see it there are 3 possibilities for setting your start of day time.

1. Just find out what time on your trading platform corresponds to 6:00 GMT and adjust your start of day time on your trading platfoorm to reflect 6:00GMT.
2. Change the start of day time based on the London open, which is currently GMT +1. The big money doesn't start trading until the open of the Euro session (currently GMT +2) and really kicks in when London (GMT +1) comes on line. Keep in mind you may always have to adjust your trading platfrom due to it's time feed. For example, some platforms are always set at GMT +2.
3. Find a broker with a time feed that is GMT = 00:00 such as Interbank. So 6:00 GMT will always be 6:00GMT on your trading platform. Then you only have to adjust the time you sit in front of your computer based on daylight savings time.

Peter Crowns charts have a time feed of 00:00 CST/USA. When he wrote his posts 6:00GMT corresponded to 1:00CST/USA. So on his charts he would have had to adjust his start of day once per year to account for daylight savings time in the USA. The actual start of the 24 hour period on his charts (the time feed from his broker) never changes). The thing that changes is when he decides to start his trading day based on using 6:00GMT as the start of his day. I believe all of the options I have described will provide you with many chances to take quality DIBs trades. As PC himself said, if your an hour off due to daylight savings time it really won't matter that much. Let's face the fact that not everyone on this forum will choose the start of day time as 6:00GMT.



What’s an Inside Bar (candle)?
A bar with a High that is lower than the previous bar’s High and a Low that is higher than the previous bar’s Low. A stricter definition for trading the DIBS Method is that an IB cannot exceed the bounds of the previous bar. Meaning that a top and/or bottom (High and/or Low) can be equal to the previous bar. (see bottom charts)

IB on which hour?
You can play an IB, be it at 5.00 GMT, 4.00 GMT, 3.00 GMT or even 2.00 GMT as long as it is off the Open of the Day, 6.00 GMT. Peter's charts show this.

Where to put the buy and where to put the sell:
First rule: We buy on a break of an IB if price is above the daily open and sell if it’s below.
Where to put the buy and sell has no where been discussed in great detail. Put the buy/sell 1 pip outside the IB range and remember to add the spread.
Example: IB range is high @ 1.5500 and low @ 1.5400. Buystop: 1.5501 + spread, SL 1.5399, BE 1.5603 + spread. Sellstop: 1.5399, SL 1.5501 + spread, BE 1.5297. (chart to follow)
Should we not take the high/low of bar prior to IB for our breakout range?
This is not by PC’s rules, if you feel that this is what suits you, then go ahead.

What is the TP? Or the FTT (Free Trade Target)
We are looking to exit half of our position at 1:1, which means that once you’re up the amount of pips which equals the amount of pips you’re risking (IB-range + 2 (1 up and 1 down for the breakout) + spread) then you close half you position. This is your FTT (Free Trade Target) If after this price comes back and takes you out, you haven’t lost anything. Do not move the SL on the remaining 1/2.


Variations: close 2/3 after 1:1 this will bank some profits. Or you could close 2/3 after gaining half the risked pips, this will give a free ride sooner, but if you price runs away in positive direction then this will win you less but when you have a doubt about a DIBS or see that there are technical levels that are too close then this may be the approach. PC closes half after 1:1 and I suggest you do it too.
There are different ways to trail the stop on the winning remainder. I would move my stop to new support/resistance areas but there are other ways to do it.


What if an IB has it’s high above the daily open and it’s low below the daily open?
Then you take the break that occurs, if it breaks to the downside then sell and vice versa.

2, 3 or more IB’s in a row – which one to take?
I would take the first one which is the largest just to be on the safe side.

How to avoid losses?
If you look to ask this question then you’ll have to start all over again! Read PC’s posts.


Peter Crowns:
"buying breakouts of inside hourly bars if the prices are "up" on the day, and selling downside breakouts of inside hourly bars if the prices are "down" on the day.
These types of trades are simple, low-risk and potentially high reward. The only problem is you do have to be conscious when they happen so you can take the trade!"

"What I like about these simple trades is the tendency to be able to cover your risk quickly by exiting half of your position at 1:1, allowing you to hold the remaining position with the initial stop (the other side of the inside bar) as a virtual "free trade".

"I've found 'elegantly simple' in trading is best."

"Simple works in the markets, because they are very simple.
Most traders complicate things incredibly. Because their minds probably can't handle the truth yet that the markets basically feed where the orders are."

"Win rate is not the most important factor in finding a good trading method. Profit potential/risk is."

"the best trades for us are the ones that don't give you ANY retracement after the breakout"

"The trade is simple and perverse at the same time. It also gives some of the best risk/reward trades possible and always ensures that you are with the daily trend. If you are also in tune with the weekly and monthly trends is when it gets exciting!"

The DIBS method is one of the surest "unknown" methods available for making money in Forex. I wish I had invented it.
Having traded the concept personally for more than 15 years, I know how good and also how irritating it can be. As you mentioned, trading during the active hours is key to the best trades. It is hard to beat the combination of low risk and high probability. Yet it stays in obscurity, which is the way of all good methods."
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shodd May 15, 2008 10:21pm | Post# 2

Taking the liberty of posting some of the relevant posts from Peter here at the start of this thread -

Trading the "hot hand": Trading the strongest/weakest market is actually really simple. For example, yesterday the Eur/Usd was up more proportionately than the Usd/Chf was down. This was because the Usd/Chf wasn't even a down day. Definitely off its highs but not down relative to last week's close. The Eur/Usd was up, up and away! So that is the market you buy.

And I did! I'm sure I had company from this group.

In the pit the first thing you learn--- when you are ready to actually make money..., and stop the bleeding, is:

  1. Only be willing to buy a market if it is up on the day.
  2. Only be willing to sell a market if it is down on the day.

Obviously, it would logically follow that the currencies which are up more are better buys and the ones down more are the better shorts. So basically, if you get a buy setup forming on two strong currencies, take the trade on the one up most on the day.

This actually means that you never go short a currency unless it is "down" relative to yesterday's close; or go long for any reason unless the market is "up" on the day.

Review for yourself how many large losses you could've eliminated from your past trades if you followed these rules. At the same time, I am certain you would have eliminated very few of your biggest winners by doing this.

Think about this for a while. I have for decades. The power of this simple concept still amazes me.

I'm sure this sounds simplistic to everyone, and maybe this stuff is obvious to you all, but I doubt it. How many times do you find yourself buying a weaker currency instead of the stronger one, thinking that the weaker one "has" to catch up, or the stronger one has already moved as much as it is likely to already.

Always buy setups in the strongest daily markets, always take sell orders in the weakest daily markets.

And yes, I have come up with very simple methods to exploit this. Breakouts of inside bars on hourly charts is one very useable technique I use a lot. Pennants of various constructions work very well too. Once you know which markets to trade, and in which directions--- it is a pretty simple job.

After all, trading is just risk control. Unfortunately it can take a while for us to learn to use the simple tools we have available.


shodd May 15, 2008 10:24pm | Post# 3

More info -
1. You mentioned earlier that you only buy on up days and sell on down days. You also said that you look for entries in the first 9 hours of a trading day. How soon into the trading day can you determine whether the day is an up or down day and not an outside bar?

I see where the difficulty is. As traders we have no idea if a day will be an "up" day or a "down" day. (Actually, that isn't absolutely correct, but for the purposes of this method it is.)

If you know what the opening price of the day (and the closing price of yesterday) is, you know at any moment if the price is "up" or "down" vs. yesterday's close .

RULE:
For the "Daily IBar Setup" or DIBS Method--- only take an upside breakout of an hourly inside bar if the breakout price is higher than the day's open and downside breakouts of an hourly inside bar only if the breakout price is lower than the day's open.

And as mentioned a number of times before, the resulting trades have a higher potential if they take place in the first 6 - 9 hours of the day.

2. ..., is it just a simple case of waiting for an inside bar to form, then placing an order to the topside (on an up day) or downside (on a down day) and wait for it to be filled?

With deference to my first answer, yes.

3. Are stops on longs placed just below the low of the inside bar and vice versa for shorts, or are you more discretionary with your stops?

Yes. There is no need to be discretionary with the stops.

Where every trader tends to get discretionary is with how they handle the profits. That is one of the beauties of the DIBS method. The trades happen often enough that the opportunities exist for you take similar trades over and over again. If a trader gets comfortable with a take-profit concept and a decent trailing mechanism, incredible things can happen because of the operation of time improving the value of the surviving trades.

It works on various timeframes. I personally would never use it for less than 1 hour bars, but some do use it on 30 or 15 minute timeframes. It would require your having a firm where trading spreads are very small.

About the short trade displayed yesterday entering the EUR/USD which I turned into a "free" trade. I waited and it stopped me out. That is the result of many of these trades, but definitely not all.

If you enter these trades in the direction of a longer term trend, and trail a number of them, the position you can accumulate over a few weeks and months can be tremendous. So are the profits!

shodd May 15, 2008 10:28pm | Post# 4

1 Attachment(s)
A chart picture is the best thing I can do.

The chart I am attaching is a snap of the hourly GBP/USD for this week.

The white dotted lines, which are 24 hours long, start at the close of the previous day, at Midnight. I am only looking to go long on a breakout (blue line) of an inside bar if that breakout is above the previous close.

Likewise, I am only interested in selling a downside breakout (red line) if the breakout is below the previous close.

You will notice that almost all of the breakouts were significant enough for you to make a very good shorter term trade, some you could have trailed most of them with a form of trailing stop (moving average) and still be in hundreds of pips after entry with a small stop at the other side of the inside bar.

(I did get an email from a reader of this thread (Matt) who also used to be on the floor. He wasn't exactly happy that I was telling these details of floor trading. Well, my answer was: "These are very big markets and anything I might reveal is unlikely to matter much since very few will believe that profitable trading can be simple. Most are looking for some special complex answer. It isn't there!")

One last tip: You want to be particularly interested in the inside bar breakouts which meet the conditions early in the session, namely the first 9 - 10 hours.

Knock-em dead.

Trading doesn't have to be tough to work.

I won't wish you luck. You won't need it now.

-PeterCrowns-
Chart which Peter is referring to is attached.
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luxinterior May 15, 2008 10:48pm | Post# 5

DIBS Indicator
 
1 Attachment(s)
Here's a simple indicator I put together for this system.

Has a few options that should be self explanatory.

Enjoy and good luck!

Lux

PS: If you only want triggers for the current day set 'bBackTest' to 'false'.

UPDATED
V1.1 - Fixed problems with last trigger not being drawn correctly.

NB: Could still have minor bugs so let me know if you find any and I'll try to fix it if I have time.
DIBS_TriggerLines1.1.mq4

Aad May 15, 2008 10:55pm | Post# 6

That was quick, thanks LuxInterior...

mbqb11 May 15, 2008 11:05pm | Post# 7

hey thanks lux, you guys are saviors with codes

jarroo May 16, 2008 12:13am | Post# 8

Hi Jarroo, I was wondering if we should post some compiled info about:

1) The Strategy.

Absolutely.

2) Some info on who Peter is.

We don't have to do that. People can click on his name and find out about him on his profile.

3) Questions and answers that Peter has responded to already.
Yes. That could be directed to the Strategy section.

Perhaps that would be helpful to get any newbies up to date here...
Thanks Aad.

jarroo May 16, 2008 12:22am | Post# 9

Here's a simple indicator I put together for this system.

Has a few options that should be self explanatory.

Enjoy and good luck!

Lux

PS: If you only want triggers for the current day set 'bBackTest' to 'false'.
WOW. How cool is that.

Simple is good.

Thanks lux.

Aad May 16, 2008 12:24am | Post# 10

Thanks Aad.
Looks like Shodd is taking care of things, but maybe we should move that info into the first post. I'll delete my first post to keep it looking cleaner as the thread is still in construction mode...

shodd May 16, 2008 12:51am | Post# 11

There's many more golden nuggets of information that Peter has left us which I'm willing expend the effort to post in this thread. It's just that they don't specifically relate to the DIBs method, so I'm trying to be a bit concious of not overly cluttering the start of the thread. Thoughts?

jarroo May 16, 2008 12:56am | Post# 12

There's many more golden nuggets of information that Peter has left us which I'm willing expend the effort to post in this thread. It's just that they don't specifically relate to the DIBs method, so I'm trying to be a bit concious of not overly cluttering the start of the thread. Thoughts?
Yeah. Good point.

I like to spell out the basic method in a "check list" format. Then we can go into the golden nuggets.

Thanks shodd.

Islander May 16, 2008 2:09am | Post# 13

Good Morning Jarroo and all.

Thanks for starting this new thread, I'll be posting when I can - after I've got my head round the overnight -for me! - action....not a lot it seems http://www.forexfactory.com/images/icons/icon12.gif

piphitman May 16, 2008 2:17am | Post# 14

jarroo,

thanks for carrying on the DIBS torch

billflet May 16, 2008 4:13am | Post# 15

Anybody else play off that little spinning top (USD JPY) that closed at 1:00 am EST? Got in at 104.60 and on a free ride now.

mbqb11 May 16, 2008 4:17am | Post# 16

Anybody else play off that little spinning top (USD JPY) that closed at 1:00 am EST? Got in at 104.60 and on a free ride now.
Wasn't an Inside bar on my chart(mt4 demo). I saw you were on TS was it an inside bar on there? That is a nice looking trade so far

jarroo May 16, 2008 4:18am | Post# 17

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I took the 1st IB at 0200GMT.
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billflet May 16, 2008 4:24am | Post# 18

yeah,it was barely an inside bar on TS.

jarroo May 16, 2008 4:35am | Post# 19

I took the 1st IB at 0200GMT.
It seems that for the Usd/Jpy the new day start at 0000 GMT.

billflet May 16, 2008 4:43am | Post# 20

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What a difference a few pips makes.
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