The DIBS Method... No Free Lunch continues

got into GU too.

How I place my tp and divide my size into 4 parts

-2/4 Risk 1 to 1
-1/4-SMA20, 72 and 90 on 1 hour, 4Hr and Daily!
-1/4 let is run as far as it can

keziahpie

1. Do you use any EA to set SMA as trailing stop or do you close quarter of your position manually?
2. Do you close this quarter of position when price just hit the moving average or you wait to candle close above/below it ?

Thanks in advance

"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."
so if the 6.00 GMT is an inside bar, we don't take the breakout of the 6.00 GMT candle, right?
some day eurusd 6.00 GMT candle was an inside bar but we shouldn't take that signal, right?
please clarify for me, Thanks!

Attached Image (click to enlarge)

Just in case you were wondering...

I just printed some charts of the USD/JPY (because of the BoJ QE injection on Hallowe'en day -- 1 pm Tokyo time) and the USD/CHF.

There are textbook examples of IBs on both charts, and each one led to staggering profit potential with no retracement at all.

I will post them once I get them converted to .pdfs.

Two more DIBS trade setups occurred in the five-day period from 2014-10-28 to 2014-11-01.

(Sorry it took a while to create .pdfs, but here they are.)

I had to use the FF Markets page to print the charts, because the "print screen" function
on these public computers I use has been disabled, so I cannot print directly from
GFT (or GAIN capital, as it were). However, the prices I wrote on the charts
were copied from my GFT feed.

Again, I shall post a girlie pic so this post is easy to spot.

Very quiet here. Is anybody consistently profitable from this? I like the entries. But trying to exit is like a visit to IKEA.

Am very pleased to find this post. I think it explains why this thread has basically died. It also shows how much BS is on the thread in regards to making exceptional returns, including Jarroo,s charts which actually don't show any live entries where you can see he has actually entered, What you see is hypothetical's.

Any method must have an edge, knowing at a positive expectancy.

Thanks Highneb for cutting through the BS.

DIBS gives you an edge. A huge edge. I won't go into details because if you were really keen on learning it you would dig it out. There is a pdf with PC's posts that will enlighten you and may be even take you to the next level. My humble 2 cents worth! Inside Bars are a great pattern. A very objective entry mechanism. The question is "Do I possess the mental skills to be able to hold on to those structures?" As PC states, you build these structures and allow them to grow taller and taller until its time to cash them out. If you can take a DIBS trade , turn into a FREE trade and then allow it to run on Daily time frame and meanwhile keep adding those FREE trades to form the structure, you will know the power of it. I have several times, hit trades with 6 pip risk and managed to grab over 200 pip winners. the Risk Reward is massive here, but holding on to trades, managing your winners is a BIG ISSUE. again all in my most humble and newbie worth less than 2 cents opinion.

The statistical term for edge is Expectancy, which is a mathematical formula that shows the expected value of a system or strategy.

Expectancy is calculated by combining the accuracy and reward-to-risk of any given strategy. The formula is: (% winners x $ per winner) - (% losers x $ per loser)

As an example, if you have a strategy that has 40% winners and makes you $200 per winner while losing you $100 per loser on average, you would get the following expectancy: (0.4 x $200) - (0.6 x $100) = $20. This tells you that over a large number of trades, you can expect to make $20 per $100 risked. And if you happen to risk $100 per trade, this means that youll make $20 per trade over a large number of trades.

A positive expectancy means that you have an edge in the market. A zero expectancy means you have no edge. A negative expectancy means that you have a negative edge. In the first case (positive), you can expect to make money over a large number of trades. In the second case (zero), you can expect to make no money over a large number of trades (loss when you account for commission). In the last case (negative), you can expect to lose money over a large number of trades.

When were looking at the short-term (i.e. a small number of trades), any of these expectancy strategies (positive, zero, or negative) can make or lose money. Its only over a large number of trades (due to the law of large numbers) that the strategy realizes its expectancy.

In statistics, the smallest statistically significant number is 30. However, if you want to calculate the expectancy of your strategy, I recommend you use at least 100 trades. This can more safely be considered a large number in which the law of large numbers will more likely kick in.

Expectancy doesnt have to be calculated in overall dollar terms. If you specify the risk-to reward part of the equation as a ratio (e.g. If we have $200 per winner and $100 per loser, the ratio would be a 2:1), then we arrive at an expectancy per dollar risked. So an expectancy of 0.4 would be telling us that we can expect to make 40 cents per dollar risked. If, in turn, our average trade risks $100, then we can expect to make $40 ($100 x 0.4) per trade. Calculating expectancy in this way allows you to compare different strategies that may be using different account sizes and risk per trade. It allows you to compare them on an apples-to-apples basis by looking at the amount each makes per dollar risked.

Our case study showed that while most traders want accuracy because it feels good to be right and ring the cash register, you really need to look at overall expectancy. Indeed, many of the systems you see being advertised online truly do have a great 90%+ accuracy, but what they dont tell you is the expectancy of the system. Most often, such systems have very large losers and very small winners. This makes the reward-to-risk profile very weak, and often makes the system a negative expectancy system despite the high accuracy.

Our case study also showed that a very low accuracy system or strategy can still have a positive expectancy and make money if the reward-to-risk profile is large enough. Many great traders (especially the trend followers), have accuracies in the 30% range and yet make huge amounts of money year over year.

The other variable that determines the value of a strategy or system other than expectancy is Frequency. This variable tells you how many trades you have in a given period of time. Frequency combines with expectancy to give you the true value of your trading system or strategy.

All things being equal, if you have two strategies with the same expectancies, the one with the higher frequency of trades will make you more money. If, on the other hand, you have two strategies with the same frequencies, the one with the higher expectancy will make you more money. If both frequencies and expectancies are different, multiply the expectancy by the average $ per winner, and then multiply that result by the frequency to find out how much money the strategy or system will make you. For example, if we have a 1.2 expectancy strategy (very good number) and we make $500 on average per winner, while taking 750 trades a year, we would make: 1.2 x $500 x 750 = $450,000. (If the expectancy is negative, multiply by the average $ per loser to know how much the strategy will lose you. The higher the frequency of trades, the more youll lose).

Your first goal as a developing trader is to build your market reading abilities and trading skills to the point where you have a positive expectancy strategy. Once you have one, you can look at how to increase the frequency of those trades (i.e. find more good trade setups to take). But first you need the positive edge before you do anything else

Well thanks for the lesson in expectancy and statistical analysis. In a perfect market, what you are trying to teach us would be useful. In fact it comes across as a bit hollow, because seasoned traders know that calculations for expectancy for any given market will vary according to market conditions. Take 2012 and 2013 when most forex instruments were consolidating. How would you include those in your statistical sampling? During this period, several major hedge funds collapsed.

The fact is, if you can trade, statistical analysis is meaningless. It provides a trophy number from your performance in the way Trade Explorer does. If you can trade the dibs strategy well, what dustbin says is correct and what you say is didactic nonsense. Sorry to be blunt, but game theory should probably be added to your skill set.

Firstly, I am not trying or teaching anything. Just pointing out something crucial that's been missed in this method.

"Take 2012 and 2013 when most forex instruments were consolidating. How would you include those in your statistical sampling?"

Answer, Obviously you didn't understand my post. On the off chance you did, why don't you do an expectancy analysis on your trading. Perhaps you have over 100 plus Dibs live trades you can use. And post your results here? Considering you have 6000 + posts you must have 1000,s of trades. Or are you just a trolling?

If anyone actually has say 50 plus Dibs trades be great to see the expectancy analysis relating to Dibs only trades.

Understanding basic probabilities is key to understanding trading edge. And having a trading edge is key to becoming a consistently profitable trader. Whether youre flipping a coin ten times or one million times, you never know on any given flip which side itll land on. But the difference in the million flip scenario is that it is a large enough number of flips to allow the laws of probability to play out. In that scenario, you're very likely to get close to 500,000 of each side. Whereas in the 10 flip scenario, the result could easily be titled to one side just based on short-term randomness. This shows that in any probability distribution, luck dominates in the short-term (making things seem random and chaotic), but the probabilities play out in the long-term and luck gets largely cancelled out.

Most traders dont really understand how short-term luck and long-term probabilities work. And you are probably one of them. They attempt to be right on any given trade that they take, not realizing that this is like trying to flip heads on a coin. That is, they try to control short-term luck (which cant be controlled), while they really should be focusing on the long-term probabilities of their trading. Having a great strategy with appropriate risk and money management can ensure good long-term probabilities that will make you money, but you can never know how your wins and losses will be distributed (i.e. their order). That part is random (or luck), whereas the total results of that random distribution of wins and losses is not luck.

"Sorry to be blunt, but game theory should probably be added to your skill set."

The casino industry is a good example of an industry that makes use of the concepts of luck and long-term probability distributions. On any given roll of the dice or draw of the cards, luck reigns supreme and people can beat the casino. But over the long run, the edge is in the casinos favor. That is, the probabilities are in its favor, and in the long-term the random distribution of wins and losses will be tilted by a slight percentage towards the casino. This is how they continually make money in an arena that seems to be governed by luck. Its just simple math and the law of large numbers at work.

The main reason I am asking and investigating this system is that i know inside candles/bars work. And its of some concern that a thread can go for 500 plus posts with numerous posters making great, if not exceptional returns, then just STOP. What happened? Did the method just stop working? Did everyone blow up their accounts?

Hi Sifufx,
thank you for your posts very informative !
I was one of many old dibs follower here, I truly believed that this trading approach using low risk per trade for very big reward could be a very sound approach, so since i'm a coder i tested it deeply as best as I could do by programming an expert advisor that should replicate as much as possible dibs method presented here using different exit criteria (based on sma, donchian channel, and so on).
Well in my backtest I was never able to find any barely profitable sign or edge since all my backtest ran on different pairs ended miserably with big losses, so I've never traded it.
How could you state that this dibs method is profitable ? Did you made some backtest ? Are you live trading it with good result overall ?

Thank you
Regards

Hi Skyline,

Thanks for your reply, its appreciated to hear the work you have performed. Perhaps trying the same backtests on just the EU, GU UC and UY could have produced a better result.

How could you state that this dibs method is profitable ? Think you refer to my statement that i know inside candles work. For this method as a whole system I don't know and have my doubts about it. Thats why i am asking for people with over 100 live trades if they could to do an expectancy analysis. I am live trading it but with very small positions that are all calculated similar so when i get enough trades i will have an expectancy number.

Have almost read the whole thread and am seeing a pattern why this method may have under performed for so many. And that is basically traders adding to many indicators, not following the rules and a general lack of experience , not thinking in a contextual manner on how to tie together multiple time-frame analysis with key reference areas to come to a contextual view of the markets being traded. I don't think the markets are as simple as Peter Crowns suggests. They are made of people and people are complex beings which is what the market is. Disregarding Algo trading obviously, but they too are programmed by humans.


My interest in DIBS comes from another method I use on daily charts in regards to inside days which is profitable with acceptable expectancy. The problem is on a daily, inside days are not altogether common.

Going over these indicators/alerts most of them are not displaying the inside candle correctly. Maybe its to do with MT4 updates.

Clearly I have offended you. Expected but not intentional. Do you think statistical analysis has not been done on this method? I could, if I wanted, produce statistical analysis based on a clockwork method of trading dibs. In a good market, there would be good results. In a poor market it would be mediocre at best. Dibs gives us an edge, if we know how to trade. It is fairly obvious how it works and a good trader knows 1. It is a low risk entry 2. There is a possibility of a long tail 3. The problem of sitting on one's hands when a long tail retraces and knocks itself out is completely counter intuitive. 4. The method of making dibs work is only outlined and has more to do with trading experience than simply trading inside bars.

Therefore, meaningful statistical analysis is difficult to do and very hard work. Believe me when I say it would be best to concentrate on Peter Crown's posts only. Hot hand is the best way to sum up this method. Identifying the hot hand is the trick and statistical analysis would help immensely but there are a thousand different different profiles to explore and, as you rightly say, you need a good enough sample in each.

I don't know how many accounts have been destroyed in the last couple of months but let's just say, in the month of February, there were very few hot hands in the Euro. Why? And in January - well the Swissy did it for lots of traders and even brokers and it didn't matter whether you were trading dibs or any other method. Guess what? I closed my Swissy longs a few days before the floor dropped out. I think I heard a rumour the SNB were considering letting the floor go?

I used to have a live account Trade Explorer attached to my profile which included some Dibs trades, because if I see one, I will sometimes take it - and it was making a good profit. It seemed a bit like bragging and had little point other than that. I am also well aware of how it would look if it were consistently losing and that seemed entirely possible too and so I closed it. But maybe I'll open a small account for Dibs only. What immediately springs to mind is, it would be a bit boring. There aren't many Dibs trades I would take. Looking at 18th December and 2nd January on the Euro is useful. The 18th December trade would have been knocked out on the 19th if we were too quick to move to break even.

I'm not sure I agree with you on the coin flip theory. It is not at all like trying to flip heads on a coin. If only it were as binary as that. It is worse because although we can say the likelihood of heads is greater then tails, we can often see two tails or more of risk before the heads eventually gain ascendancy. Also, I don't agree with the term "luck", because it is completely unscientific and has superstitious connotations. Hopefully we all will end up making a profit in Forex but if we experience "luck", it could be damaging in the longer term.

Totally agree in regards to just reading PC's docs. Having watched traders destroy many good methods by over complicating them etc. This has certainly happened on the DIBS thread. I think around posts 280- 300 is when it got really bad and continues apart from the odd post.

" in the month of February, there were very few hot hands in the Euro". After a muilti month 2600 pip fall I wouldn't expect many hot hands. As for the CHF peg this is well from being over. There are several other pegs happening also.


Because forex (which I don't do often as I trade futures) traders don't have decent volume data to analyse like futures or stocks it puts the forex trader at a disadvantage. The only way to really combat that is to use extreme discipline. (i know you can use currency futures for volume also.)

As a trader, you have to learn to think like a casino. My partner writes the algorithms for the gambling/poky machines casinos use. You have to focus on the long-term, and not on the results of any specific trade. Just focus on the correct process, and if youve built a good strategy with solid money management the odds will play out in your favor in the long run and you will make money. This is one of the secrets to trading. Its a game of probabilities. [Note: the long-run is not a specified period of time, but rather depends on how frequently you trade. If youre an ultra active scalper who takes 1000 trades a month and has a good edge, its possible that youll never have a losing month because that is a large enough number for the long-term probabilities to play out]. The second coin flip experiment demonstrates that statistical edge can be arrived at in two different ways. On one end of the continuum we have Accuracy and on the other side we have Reward-to-Risk. The experiment showed that even if you have low accuracy, you can still come out ahead if your reward is high enough relative to your risk. Thats why a trading strategy of only 30% winners can still be very profitable if the winners are much larger than the losers. Accuracy and the reward-to-risk profile combine to give you edge in trading. The combinations that can produce a positive edge are literally infinite. Edge, in turn, is the expectation of how much money youll make over a large enough number of trades. The most fundamental thing you need to make money as a trader is an edge. Without a real edge, the best psychology and analysis is useless.

Anyone still trading this method?

I adore inside bars, use them in my intraday and swing trading, and believe they are a vastly-overlooked setup amid the rush to find the grail.

With that said, usually when a strategy is producing profitable results for the readers of its thread there is a certain amount of excitement as readers post screen shots of this winning trade or that one. I do not recall this strategy ever producing that type of interaction.

Not all the time. The market has to be moving for this to work. Personally, I look at the weekly and the daily before I choose a direction on the hourly. That's my edge. LOL.

As one example of the value of inside bars, the below chart highlights the 10 inside bars that appeared today during the first hour and 40 mins of the crude oil futures session on a 1 minute chart. This is what I trade, so this is why I chose this example. Of the 10 setups, 9 wins and 1 loss.