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The DIBS Method - No Free Lunch Returns 13 replies

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Attachments: The DIBS Method... No Free Lunch continues
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The DIBS Method... No Free Lunch continues

I have the "you can't go broke taking profits" argument every day at work....mostly with scalpers who think that just because price has moved X%, that it can't move any more.............these are also the people who usually have a high % of winners, but end up negative due to one or two losers. These are also usually the same people who cannot walk away with a small loss at the end of a trading period, which for me is from 9:55 to about 11:30 est

if you do not have a systematic way of taking profit and loses.......how do you decide to take them?

The best thing about switching from playing IB's on daily charts to one minute charts is the increased number of opportunities on a daily basis.

Having said all that, i have heard people say that the Turtle method "no longer works"...I've never tested it myself, but isnt this like saying that price no longer breaks out?

Quoting Razor_trader
That is absolutly true but the mindset is completely different. You would take more care of a large some of money whereas the smaller does entice greater risk. In the end, after read the PDF on the turtles, IBs have alot in common, which to me is no surprise. Breakout methodology regardless of how you take has a strong trend upside and a very discipline demanding range side.

I couldnt help but place these lines from the PDF that stand out to anyone who has taken enough time to read this thread.

"Consistancy - The Turtles were told to be very...
ok, it's not forex....but the idea remains the same.

HPQ - 1 minute chart

Long at the white line off of the IB @ 9.59 - 52.36 - closed @ 52.59

Had a small loss around 9:55

http://i46.tinypic.com/3355km1.jpg
Quoting razorboy
Having said all that, i have heard people say that the Turtle method "no longer works"...I've never tested it myself, but isnt this like saying that price no longer breaks out?
Yeah, Donchinian channels are a bit dated in terms of breakouts but there are newer methods which everyone is familiar with, like fractal breakouts, open range breakouts, volatility breakouts, etc.

I actually ran down that PDF because a well known TA trader here in Aus was offering "turtle trading technique modified to the ASX" as a signal service and someone asked me about the original technique. So the fundamental ideas are still in use, but probably more contemporary. I even found an indicator last night while trawling a Japanese forex website which has buy/sell lines for a break of the last N bars!

Quote
I have the "you can't go broke taking profits" argument every day at work....mostly with scalpers who think that just because price has moved X%, that it can't move any more.............

If you have a high win rate strategy I have no issues "taking profits" as you say, but if you're relying on the outliers to pay you then you have to wait for the outliers. Personally I prefer a mix of the two. I risk about 5% intraday to make a daily target, and exit about 75% of the position there to leave a few small contracts on the table with some to take home and some to ride.
yes, but thank god 90% of traders have no clue of the difference between these two different forms of strategy and their implications for trade management

Quoting sinner-
If you have a high win rate strategy I have no issues "taking profits" as you say, but if you're relying on the outliers to pay you then you have to wait for the outliers. Personally I prefer a mix of the two. I risk about 5% intraday to make a daily target, and exit about 75% of the position there to leave a few small contracts on the table with some to take home and some to ride.
Quoting razorboy
yes, but thank god 90% of traders have no clue of the difference between these two different forms of strategy and their implications for trade management
DIBS as presented by Peter Crown can be a relatively high win rate strategy just by following the original rules and taking everything off the table at 1:1.

That is why when I run backtests I always divide the results up to see interesting patterns: losers, scratch (break even) trades and winners. Especially in the case of DIBS, the scratch trades have their own positive expectancy pattern which you can test out again. Losers have their own pattern and so do winners.

To give an idea of what I mean, here are SOME of the parameters I record for every DIBS trade (for both back and forward test) to generate useful information:

Risk:
- Initial risk
Volatility:
- Volume of IB <> vol avg
- IB vol <> vol of prev. bar
- IB ATR or Bollinger Bwidth or HVR (any will do as long as you keep it consistent).
Trend:
- MA slope
- IB close price distance from 72SMA
- IB close price distance from FO/LO open price

Now who would be crazy enough to plug 5 years worth of backtested IBs with all those parameters (and a few more) into a Bayesian modeller to be able to have some predictive expectancy of any new IB? Hmmm, probably any trader worth their salt...

EDIT: PS: The Bayesian inference returned by a modeller on any new IB can be plugged back in as a parameter for all new recorded trades, which in effect trains your modeller even better.
Quoting sinner-
DIBS as presented by Peter Crown can be a relatively high win rate strategy just by following the original rules and taking everything off the table at 1:1.

That is why when I run backtests I always divide the results up to see interesting patterns: losers, scratch (break even) trades and winners. Especially in the case of DIBS, the scratch trades have their own positive expectancy pattern which you can test out again. Losers have their own pattern and so do winners.

To give an idea of what I mean, here are SOME of the parameters I record for...
I like your style.

What have you found with the bollingers? Any interesting results? This is something that I have not yet tested with the method so I thank you for the thought.
I dream, therefore I become.
Quoting mike w
I like your style.

What have you found with the bollingers? Any interesting results? This is something that I have not yet tested with the method so I thank you for the thought.
There are some questions as to the validity of using bollinger bandwidth as a volatility measure due to their use of Std Deviation when price is nonlinear (stddev works on linear stuff correct me if I'm wrong) but whatever, to me they seem the same when I look bwidth will be low when ATR and HVR are low.

But think about it like this: in every other market in the world if we want to determine volatility we have to use ATR or HVR or whatever. In forex, we have tick volume. Tick volume is "alright" for use in VSA, but what it is perfect for (especially on the hourly chart) is use as a volatility indicator. Let me repeat that again in case you didn't catch it. Tick volume is the perfect volatility indicator in forex. Look back to the chart I posted of the A+ IB, what do you notice about the tick volume of that bar? Yes, that's right, less than 1 std dev of volume.
Quoting sinner-
Tick volume is the perfect volatility indicator in forex. Look back to the chart I posted of the A+ IB, what do you notice about the tick volume of that bar? Yes, that's right, less than 1 std dev of volume.
Point taken perfectly well, my good man. Thanks for provoking me into a new endeavor. I've tested quite a bit with this method, but I've never tested with tick volumes. Damn, I can't believe I haven't either.
I dream, therefore I become.
Quoting razorboy
yes, but thank god 90% of traders have no clue of the difference between these two different forms of strategy and their implications for trade management
The best conceptual method to understand or "get a clue" on this, I read in a book called "Trading in the Zone" which is posted on this site multiple times.

"The Market" (all markets) are described like a completely objective casino. When you go to a normal casino, they don't care who wins or loses. They simply bring a probabilistic edge to bear on a scenario (people gambling) and the more gamblers there are the more profitable the edge is. For example, imagine if a casino trades $100 million per night in Las Vegas. That doesn't mean the casino brings in $100 million per night, in fact almost all the money that walks in the door walks out the door within the same hour. But the casino has an edge. Enough people do leave their money at the door before leaving. Usually about 4.5%. What does that work out as? 4 million USD per night for the casino. Simply by providing $100 million dollars with a random place to go.

That is the same way professional gamblers operate. They grind the probabilities.

The market is one giant objective casino. The stream of opportunity is literally endless. It isn't exactly on the level of nonlinear dynamics in a quantum sense, but it might as well be: the number of possible parameters which would be required to pre-known before you can pre-dict the move is almost endless.

So what do you do if you walk into a casino and nobody is running the joint? Well hell. You become the casino. There is an endless stream of nonlinear opportunities directly in front of you. All you have to do to make your 4.5% of $100,000,000,000 is to bring your edge to bear. Any edge. The simpler the better in fact. That's why DIBS is so great. The edge is soooo easy to quantify, the rules are so simple to define, etc.

People think they can beat the casino, or try to win by doing the opposite of what the casino does. But day in day out those giant casinos in Las Vegas are still bringing in the dollars. Even in the midst of Americas greatest recession in almost a century. The market is a casino and you are the pit boss. I am the pit boss. Everyone is the pit boss, the only way to get fired is to not follow the rules. When someone at a normal casino wins big on a roulette spin they say "thank you please win again, and bring your friends too!". When you lose a trade on the market say "thank you please can I have another IB" (or WHATEVER setup it is that you've decided has an edge).
Quoting sinner-
The best conceptual method to understand or "get a clue" on this, I read in a book called "Trading in the Zone" which is posted on this site multiple times.

"The Market" (all markets) are described like a completely objective casino. When you go to a normal casino, they don't care who wins or loses. They simply bring a probabilistic edge to bear on a scenario (people gambling) and the more gamblers there are the more profitable the edge is. For example, imagine if a casino trades $100 million per night in Las Vegas. That doesn't mean the...
GREAT POST!
Quoting sinner-
The best conceptual method to understand or "get a clue" on this, I read in a book called "Trading in the Zone" which is posted on this site multiple times.

"The Market" (all markets) are described like a completely objective casino. When you go to a normal casino, they don't care who wins or loses. They simply bring a probabilistic edge to bear on a scenario (people gambling) and the more gamblers there are the more profitable the edge is. For example, imagine if a casino trades $100 million per night in Las Vegas. That doesn't mean the...
I concur......an excellent post. While I am first time poster (have traded FX for over 5 yrs), I have been following the thread for a few months and must say have been impressed with the quality of the information and knowledge available and accessible thanks to the generosity and sharing of many many people.
I note many of you guys are Ozzies....so it's g'day from a South Aussie. Where are you (Sinner, Razor Trader, Icarus et al) based?
cheers Mitch
Quoting MitchOZ
I concur......an excellent post. While I am first time poster (have traded FX for over 5 yrs), I have been following the thread for a few months and must say have been impressed with the quality of the information and knowledge available and accessible thanks to the generosity and sharing of many many people.
I note many of you guys are Ozzies....so it's g'day from a South Aussie. Where are you (Sinner, Razor Trader, Icarus et al) based?
cheers Mitch

i'm uk based mitch, lived in sydney some time back now..... hope to again
Quoting MitchOZ
I concur......an excellent post. While I am first time poster (have traded FX for over 5 yrs), I have been following the thread for a few months and must say have been impressed with the quality of the information and knowledge available and accessible thanks to the generosity and sharing of many many people.
I note many of you guys are Ozzies....so it's g'day from a South Aussie. Where are you (Sinner, Razor Trader, Icarus et al) based?
cheers Mitch
Born and Bred in WA, currently reside just south of Perth but would love to live further north like Broome or Coral Bay. Both great fishing and diving spots.

Razor
Max
Sydney boy here, currently living in Melbourne though.

Alright, you want chart here's chart and it fits all the good criteria. Below TO/FO/LO (red lines), below monthly open, etc.

Attached Image (click to enlarge)
Click to Enlarge Name: gu.gif Size: 27 KB


Can it give 1:1? 1:10000? Who knows.

O look here is another one, fits the rules too...above TO/FO/LO, above monthly open, etc. I have highlighted the FO/LO in red lines.

Attached Image (click to enlarge)
Click to Enlarge Name: uj.gif Size: 28 KB

^^ Straddle the London open baby!

Already given 1:1. Can it give 1:10000? Who knows.

This sort of shit must happen all the time
Quoting Razor_trader
Born and Bred in WA, currently reside just south of Perth but would love to live further north like Broome or Coral Bay. Both great fishing and diving spots.

Razor
Max
Perth is a great spot...similar weather to Adelaide where I am based. Went to Fremantle for the first time earlier this year for a conference and loved it. Historic and beautiful coastal spot...found a great micro brewery which served a multitide of great beers!!
I caught the E/U run down today for 100 pips (Sell 1.4411 but closed out 1.4311 aware daily support line @1.4290. Watching closely to see if price bounces (again...third time?) or goes through. If it breaks, I suspect it will go quickly. Just my 2c.
Oh Razor...I'm also long Ozzie also @ .917 (bounce off 45sma). Sorry haven't figured out how to post charts yet.
Good trading chaps !
To show that tonights IB on USDJPY is no different than any other, I have prepared a small illustration.

Chart 1:
A night like any other for a DIBS trader at some unnamed point in the recent past. The MAs look good, above the FO and straddling the LO.
Attached Image


Chart 2:
Hardcore probability grinders that we are, we were presented with a long, and took it. 3 days later we are presented with a choice. Trend change could be imminent and there is 3% on the table for the taking.
Attached Image (click to enlarge)
Click to Enlarge Name: snapshot76.png Size: 12 KB


Chart 3:
Somehow we overcome the urge to have an awesome 1:3 trade (maybe the fact that it is a free trade has something to do with it) and are presented with the same choice again, a bit higher up. Taking it off the table now would be a great trade to brag about for weeks!
Attached Image (click to enlarge)
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Chart 4:
Uh oh. Profits evaporating...last call aboard on the 1:3 train, all awesome traders embarking now.
Attached Image (click to enlarge)
Click to Enlarge Name: snapshot78.png Size: 22 KB


Chart 5:
Now this is a perfect example of infinite yield at play. "Awesome" traders got on the 1:3 train. You are still here. But you only get here by sticking to your guns. You wanna get paid by the outlier, you want 300 pips profit for a 20 pip risk, this is how it goes.
Attached Image (click to enlarge)
Click to Enlarge Name: snapshot79.png Size: 29 KB
Quoting sinner-
Sydney boy here, currently living in Melbourne though.

Alright, you want chart here's chart and it fits all the good criteria. Below TO/FO/LO (red lines), below monthly open, etc.

Attachment

Can it give 1:1? 1:10000? Who knows.

O look here is another one, fits the rules too...above TO/FO/LO, above monthly open, etc. I have highlighted the FO/LO in red lines.

Attachment
^^ Straddle the London open baby!

Already given 1:1. Can it give 1:10000? Who knows.

This sort of shit must happen all the time
Hi Sinner. Love Syd and Melb too. AFL or NRL???
Re your charts, pardon my ignorance (or I may have missed one of your earlier posts), but what do all the various lines on your chart represent. Also bit confused by TO/FO/LO (are you referring to Tokyo,Franfurt, London open?) Sorry for all the questions?

Mitch
Quoting MitchOZ
Perth is a great spot...similar weather to Adelaide where I am based. Went to Fremantle for the first time earlier this year for a conference and loved it. Historic and beautiful coastal spot...found a great micro brewery which served a multitide of great beers!!
I caught the E/U run down today for 100 pips (Sell 1.4411 but closed out 1.4311 aware daily support line @1.4290. Watching closely to see if price bounces (again...third time?) or goes through. If it breaks, I suspect it will go quickly. Just my 2c.
Oh Razor...I'm also long Ozzie also...
Was it Little Creature that you went to (brewery in Freo). Great beer and great food as well. When I was working at the Swan Brewery we handled the packing for Little Creatures. Expensive beer but well worth it IMO.
Quoting sinner-
To show that tonights IB on USDJPY is no different than any other, I have prepared a small illustration.

Chart 1:
A night like any other for a DIBS trader at some unnamed point in the recent past. The MAs look good, above the FO and straddling the LO.
Attachment

Chart 2:
Hardcore probability grinders that we are, we were presented with a long, and took it. 3 days later we are presented with a choice. Trend change could be imminent and there is 3% on the table for the taking.
Attachment

Chart 3:
Somehow we overcome...
Ah the shot by shot action replay. Love it mate, absolutly love it
Pull up a daily and zoom right out. Draw a trendline connecting the swing highs and you will notice that the pullback for the U/J is almost at the decending Trendline. Over the next week, depending also on US numbers tomorrow, we could see the U/J start to move short again. Just a small heads up if you looking for long U/J IBs at the moment or if you are holding them, you might want to protect some of those pips.

Razor
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