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The DIBS Method... No Free Lunch continues

  • #11,261
  • May 15, 2018 11:13am May 15, 2018 11:13am
Quoting harvest3r
{quote} Respect acknowledged. Sure you are right :-) but I'm still not that convinced about the "hot hand" interpretations. The chart I posted is a Daily one. There are similar charts which were very profitable. So that's why I wanted to bring it to discussion. When PeterCrowns mentioned the "hot hand", it's related to the previous week's close; he didn't mention any longer term trend/chart at that moment. He did say later: "If you are also in tune with the weekly and monthly trends is when it gets exciting!" So my understanding is that the tuning...
There are lots of little clues from PC's posts which only go to underline the difficulty of transmitting knowledge and experience. One point he makes fairly early on is the value of news releases. If the price stalls in the week before NFP, and the numbers are relatively extreme, the following days provide opportunities to get into longer term trends or even reversals.

From my experience of profitable traders, there is a lot left unsaid which they themselves are not aware they know! So a trader might say, for example, only follow the 20 dma, but might omit to say, oh, by the way, only follow it if it isn't running into last year's low. Another thing experienced traders omit to say is that when trading conditions (for them) are bad, they also lose money. Forex is very unforgiving and many hedge funds employing the brightest and best go under.

I'm so pleased you did not take offence at my critical statement. Yes, it was a daily chart, but it was trading within the previous year's range. It was a seriously poor period for trend trading. Take a look at 2014 - 5 in comparison. This method provides a cheap way to get into a trend but you have to be prepared to ride it. Try a search for "infinite yield trading". Have you already done that?
Gone to a better place
  • #11,262
  • May 15, 2018 2:42pm May 15, 2018 2:42pm
Hey guys, the thread is 10 years old today! Happy anniversary!
"The reason I was born and came into the world is to testify to the truth."
  • #11,263
  • May 18, 2018 8:41am May 18, 2018 8:41am
After all the feedbacks, I think the 1st backtesting phase is over. Conclusion: the IB breakout concept has a long-term edge by itself, if traded mechanically, but the drawdowns can be unbearable.

So now it's time to add the first filter: the "hot hand" concept. I started to apply it to my real trading since Tuesday and already feel the difference: less orders, less emotions!


Quoting smikester
{quote} There are lots of little clues from PC's posts which only go to underline the difficulty of transmitting knowledge and experience. (...) From my experience of profitable traders, there is a lot left unsaid which they themselves are not aware they know!
And here lies one of the greatest dangers: misleading interpretations. In the quest to reveal "hidden secrets" from PC's posts we can be misled by wrong assumptions and end up with lots of indicators on our charts. That's what I want to avoid by all means.


Quoting smikester
{quote} I'm so pleased you did not take offence at my critical statement. Yes, it was a daily chart, but it was trading within the previous year's range. It was a seriously poor period for trend trading. Take a look at 2014 - 5 in comparison. This method provides a cheap way to get into a trend but you have to be prepared to ride it. Try a search for "infinite yield trading". Have you already done that?
I could have taken offence, but it was also clear that I was intentionally not applying one of the most basic DIBS rules, so you were more than right in pointing that. And yes, I know the "infinite yield" article and even read it again yesterday, just to refresh. By the way, I feel the urge to read this entire thread from page 1...

Now a question: what did you do during that long periods when no clear trend existed? Did you give up DIBS? Did you move to stocks or commodities? Did you trade Forex only on specific weeks? Did you take a vacation/sabbatical LOL? My visual backtesting shows that virtually ALL CURRENCIES moved sideways for the entire first half of 2014, among other periods. I wonder what to do during those times.
"The reason I was born and came into the world is to testify to the truth."
  • #11,264
  • May 20, 2018 6:53am May 20, 2018 6:53am
Quoting harvest3r
. Now a question: what did you do during that long periods when no clear trend existed? Did you give up DIBS? Did you move to stocks or commodities? Did you trade Forex only on specific weeks? Did you take a vacation/sabbatical LOL? My visual backtesting shows that virtually ALL CURRENCIES moved sideways for the entire first half of 2014, among other periods. I wonder what to do during those times.
I struggled, to put it simply. I remember. After the years of the carry trade, leading up to the credit crunch, I think it was relatively easy to be a trend trader. After that, markets were a bit trickier.
Gone to a better place
  • #11,265
  • May 20, 2018 9:07pm May 20, 2018 9:07pm
Quoting smikester
{quote} Hot hand is key. I use the 20 dma. If it has slope and the price has left it, then I will look for trades. I like smaller inside bars and it is possible to define these using ATR. Pile in hard when you see a good one. Leave the ranging ones alone. Look at yesterday's range. If you are trading inside that, you are usually wasting your time with this method.
Can you please elaborate on how you use the ATR for the purpose of defining smaller inside bars?
  • #11,266
  • Edited 10:10pm May 20, 2018 9:11pm | Edited 10:10pm
Quoting harvest3r
And here lies one of the greatest dangers: misleading interpretations. In the quest to reveal "hidden secrets" from PC's posts we can be misled by wrong assumptions and end up with lots of indicators on our charts. That's what I want to avoid by all means.
Keeping things simple and not reading too much into PC's posts is good advice however Peter himself stated point blank with no ambiguity that there were certain inside bars that had an edge over others. But he didn't reveal which inside bars he was referring to. This therefore is a legit mystery. One which I feel should be explored as unlocking this "hidden secret" would give us an advantage as well.

My personal opinion (which could be completely off-base) was that these special inside bars were narrow range bars, not just relative to the mother bar, but to the preceding bars as well. So if a narrow range inside bar materialized which was the narrowest of the preceding four bars (NR4 bar concept by Toby Crabel) and also met the other conditions of DIBS (appeared early in the session, was above the 24 HR line for longs, below for shorts, etc), then you would want to pounce on that bar and strike first, strike hard, attacking with no mercy.

Like our friend, Peter Crowns.

Quote
The second chart below is the Eur/Usd "free trade" I took in that market today. The trade happened a little later in the day than I would normally operate, but the range was so narrow, the other pairs were gaining on the dollar.

Attached Image (click to enlarge)
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Quote
While the Eur/Usd and Gbp/Usd both had good DIBS trades this morning, and I took them too-- my most effortless and hugely profitable trade was buying the Usd/Chf at 1.0354. Just 30 minutes into the day, the market took out the high of the previous hour's inside bar, putting me long. Because the bar was so narrow, my protective sell stop was ONLY 6 pips below my entry. Since the risk was so low I was able to multiply my size accordingly, and had 4 times the position I typically have on these trades.
Attached Image (click to enlarge)
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  • #11,267
  • May 21, 2018 12:21am May 21, 2018 12:21am
Quoting Jason W
{quote} Can you please elaborate on how you use the ATR for the purpose of defining smaller inside bars?
Well, this is up to you. Personally, I would make a rule such as: if the bar </=ATR(24)/n then use x% risk. It pays to juggle with these figures and look at how inside bars perform. You have to be there.
Gone to a better place
  • #11,268
  • May 23, 2018 7:46am May 23, 2018 7:46am
Hi guys, I've been researching the "hot hand" issue. It will take a lot of time.

In order to have that info in a quick glance, I developed a small panel (see image below) which tells me the % variation for each currency since daily open (6:00 GMT) and since last week's close. Someone posted an MT4 indicator on this thread but it seems to be very heavy, so I preferred to build my own web version.

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 41 KB


The picture has a snapshot from yesterday at 14:00 GMT.

The "Daily Trend" section tells me that GBP and EUR are good for longs (up on the day), while CHF and JPY are good for shorts (down on the day).

The "Weekly Trend" sections tells me that the strongest trends are: long CHF / short GBP (and eventually JPY).

Is it correct to say that the "Weekly Trend" alone defines the "hot hand"? And the "Daily Trend" only determines if I have to go long/short?

Please consider that I am trying to apply only the original DIBS rules, so there are no MAs or indicators involved (yet).
"The reason I was born and came into the world is to testify to the truth."
  • #11,269
  • May 23, 2018 10:24am May 23, 2018 10:24am
Jason brought an interesting post by PC. Coincidently it brings the 20dma issue, which was there all the time but I didn't notice before. It is mentioned on page 30.

I decided to break down his post in order to get some of the DIBS "spirit". If you think it will clutter the thread, please just drop a note asking me to stop. I will understand, really. There are 530 pages to be read and maybe all those points are already mentioned somewhere.


Quoting PeterCrowns
Regardless of what it may appear, this post is not to gloat, but to show the virtually perfect DIBS trade and why you have to trade the earliest breakouts possible for the greatest possible gains. Thank goodness I was awake and trading this morning!
It became clear that an IB can be formed before 6:00 GMT and still be valid. What matters is the breakout time. In his example (May 1st, 2008) PC got a breakout between 6:00 and 6:30 for an IB formed one hour before.

He also mentions that the earliest breakouts are the best. Today (May 23rd, 2018) there was a similar setup on EUR/CHF: a 5.6-pips wide IB happened at 5:00 GMT and the breakout happened at 6:00 GMT. It peaked at +93 pips before retracing.



Quoting PeterCrowns
While the Eur/Usd and Gbp/Usd both had good DIBS trades this morning, and I took them too-- my most effortless and hugely profitable trade was buying the Usd/Chf at 1.0354.
Hmm... so what about the "hot hand"? He traded 3 currencies in the same morning! C'mon!



Quoting PeterCrowns
It took off so quickly I didn't even drop off half of my position until 1.0499. Yes, 145 pips later and at the round number: 1.0500.
So did he enter orders without TP and close half manually? I thought it was safer to create two separated orders and set an automatic TP at 1:1 for one of them! But it seems that PC prefers to keep some room for both halves and only close the first half when he thinks it's ok.



Quoting PeterCrowns
If you look on a daily chart (also inserted below) you can see that there is a clear breakout to the upside on the Usd/Chf. Having gotten in before the breakout gives us a comfort zone, something that is rare and usually significant this early in a month. What if this market goes up to 1.0750 or 1.1100 (66:1/125:1 return on risk) or even higher? What if this is the beginning of a serious turn in the dollar for a while?
If you check the daily chart posted by PC, you can see that he is clearly COUNTERTRADING! The chart was going down and he even drawed a bearish trendline, but he saw the possibility of a breakout if the trendline would break.

At the first pages I see some folks telling: "there is a resistance coming, so I will fade this IB". PC doesn't seem to do that. He will "waste" his money trying to catch a market turn.

By the way: even though the chart was showing a downtrend, the price was above the 20dma. So smikester would be happy to go long... or not?

Can we say that a DIBS trade is good enough if the currency is a hot hand, regardless of the long term trend?



Quoting PeterCrowns
If the market doesn't reverse and take out the initial trade stop, I will use the 20 period moving average (displayed) as a trailing stop.
OK, got it. Maybe there should be no more doubts about the trailing mechanism. So let the position be stopped at the original SL until the 20dma picks up (if the dma is too low), then keep trailing.



Quoting PeterCrowns
Obviously, finding the low risk “place to stand” is crucial. For me, DIBS has proven to be one.
I don't know if I can describe it clearly... It seems that DIBS is not a trading system in itself, it's simply a tool to create "free rides". PC's agenda is to guess big market movements. Guesses can be very expensive. DIBS shows the cheaper (low risk) places to stand.



Quoting PeterCrowns
This trade is an actual working example of how you can, with a simple but durable methodology, expect to make profits from long tails. There are consequences for trading correctly. Exponential profits!
Long tails! Nassim Taleb! That seems to be the real strategy behind PC's intentions. DIBS is just an entry methodology to catch a market turn as early as possible and keep adding positions all the way while the trend lasts.



So again:
Quoting PeterCrowns
Having gotten in before the breakout gives us a comfort zone, something that is rare and usually significant this early in a month. (...) What if this is the beginning of a serious turn in the dollar for a while?
Not sure if PC did it intentionally/beforehand or if he just realized it later on: his DIBS trade managed to catch a trendline break at the right time. He got a "comfortable" position because a +150-pip barrier was built and then he could daydream of a long term continuation. The questions: did he choose that special moment or was pure luck? Did he try to go long all the way from the previous low?
"The reason I was born and came into the world is to testify to the truth."
  • #11,270
  • May 23, 2018 1:17pm May 23, 2018 1:17pm
Interesting post. You should be a detective. Maybe you are? :-)

Just picking out a few phrases here and there underlines the skill of an experienced trader. I think there is an underlying experience from being a pit trader for a long time. I'm still learning about fundamentals and stuff like bond yields and VIX.
Gone to a better place
  • #11,271
  • May 23, 2018 7:40pm May 23, 2018 7:40pm
Quoting smikester
Interesting post. You should be a detective. Maybe you are? :-)
Not really. Just call it "Hermeneutics"

I really would like to know your take on that issues, especially about the hot hand. Up to page 50 I don't find anybody discussing that - most guys seemed to be trading mechanically, as I did until 2 weeks ago.


Quoting smikester
I'm still learning about fundamentals and stuff like bond yields and VIX.
Even though I can't believe such things are important/necessary to be profitable as a trader, I do think it's nice to know them and it can even be useful sometimes. Hopefully I will also find the time to learn them. Do you have any free learning sources?
"The reason I was born and came into the world is to testify to the truth."
  • #11,272
  • May 24, 2018 12:37am May 24, 2018 12:37am
Quoting harvest3r
{quote} Not really. Just call it "Hermeneutics" I really would like to know your take on that issues, especially about the hot hand. Up to page 50 I don't find anybody discussing that - most guys seemed to be trading mechanically, as I did until 2 weeks ago. {quote} Even though I can't believe such things are important/necessary to be profitable as a trader, I do think it's nice to know them and it can even be useful sometimes. Hopefully I will also find the time to learn them. Do you have any free learning sources?
From what I can remember about my paper back testing, there was a definite, big, improvement in results from only taking hourly inside bars in the direction of the 20dma. So I can say with some certainty and logicality that it is worth discarding those that didn't fit that criterion. I don't know how many valuable opportunities are also lost by doing this.

I studied Donchian Channels for a long time. As you may know, Donchian Channels were a part of the trend trading method the famous "Turtles" used. But what intrigued me most was not so much buying at a high, and selling at a low (which works in good trends), but when price consolidated at a level and even compressed. This is the cause of inside bars but sometimes the compression does not form an inside bar on the arbitrary H1, H4 and D1 time scales. The result is the same, however. If you think about herd mentality, you start to get an insight into why this could be an opportunity.

You ask for free resources? There is nothing better than a search engine and an enquiring mind in my opinion.
Gone to a better place
  • #11,273
  • May 24, 2018 12:57am May 24, 2018 12:57am
This is pretty annoying:

Attached Image (click to enlarge)
Click to Enlarge Name: Usdjpy180524m1.PNG Size: 47 KB


This one minute chart shows a 1 : 1 profit take on an hourly inside bar which reverses the market. I don't know how many times I've seen this when there is low liquidity, but someone is getting it and the spread of 1.4 pips left me in the trade. Pretty, pretty annoying, as Larry David might say.
Gone to a better place
  • #11,274
  • Jun 12, 2018 2:46am Jun 12, 2018 2:46am
Most trends seem to have stalled. Usd/Jpy and Gbp/Jpy may be of interest. My favourite pair, Eur/Gbp, is hopeless, still trading inside the January range and we are half way through the year. Thanks brexiters.
Gone to a better place
  • #11,275
  • Jun 12, 2018 5:30am Jun 12, 2018 5:30am
Only market I'm willing to trade at the moment is the Swiss and maybe the Euro.

After seeing how much spread costs affect trades the only pairs I am willing to trade are still the 4 majors.

We had some good moves recently so it might take a little while to get going again. This week might provide the necessary stimulus.

Good trading.
  • #11,276
  • Jun 12, 2018 12:55pm Jun 12, 2018 12:55pm
Some people (e.g. Zero Hedge) are calling the current week "The Week from Hell". Many market moving events to happen in the next days. Hopefully we will have a kick-off for some trends (not only a kick-off for the FIFA World Cup).

It itches when I see gold. It's sooo squeezed! It would be a perfect place to trade a DIBS entry but the coming volatility can kill the position very easily.

After starting to read the thread from page 1, I reached page 100. Looks like those guys had a lot of fun trading DIBS mechanically for the first month, since the market conditions where perfect - meaning few losses and many winning positions. Few people discussed any rules besides the timezone issue. Until page 100 there was almost nothing related to the 'hot hand'. Only one matter was interesting enough: timing. I will make a new post to discuss it.

Fast forwarding to June 2018, I became quite skeptic about DIBS and would contradict what PC said: we have to "fade" DIBS if we want to survive a non-trending market. Or we have to search for other markets.
"The reason I was born and came into the world is to testify to the truth."
  • #11,277
  • Jun 12, 2018 1:46pm Jun 12, 2018 1:46pm
The "trading session" or the "active trading time" can be a very important aspect for DIBS - more important than I thought at first.

Here follow some quotes:

Quoting jarroo
{quote} Mondays have been great for the DIBS trades.
It makes sense. Even though it can be too early to call a trend or even the 'hot hand', on Mondays we have the chance to catch the very beginning of a larger move. Jarroo found that truth empirically.


Quoting PeterCrowns
Regardless of what it may appear, this post is not to gloat, but to show the virtually perfect DIBS trade and why you have to trade the earliest breakouts possible for the greatest possible gains.
The "earliest breakouts" could mean: go for DIBS setups very early in the day, with all your strength; as the day goes by, risk less and eventually avoid entering at all. It makes sense. Usually the market will be sleeping at 6:00 GMT and a breakout at that time will have the highest potential to move very strongly away from the entry point. After some hours the market can start moving aimlessly, bringing a higher losing rate.

The "earliest breakouts" could also mean: Monday breakouts might have bigger potential because they give us the chance to pick a trend at its start, even though there is a higher risk for false breakouts. Tuesdays can have the potential for "cleaner" breakouts when we already see a trend developing. Later on the week it might be too late to enter a trade.

PayTheLimit does something similar to what I just described:

Quoting PayTheLimit
The twists on the original method are as follows.
1. Use the weekly open instead of the daily open.
2. No trading on MON. Entries only on TUE/WED. Exits only THU/FRI
3. Only one entry per pair, per session.
One might say that's not pure DIBS but maybe it's one of the best interpretations. PayTheLimit is trying to filter false breakouts (MON), catch the "clean" ones (TUE/WED) and avoid losses on potential corrections (THU/FRI).


Quoting Galeforce 10
Ok, I think I see what you are saying... that the price retraced and took out your stop before you even got to the 1:1 target. In that case it's just bad luck. You will get these occasionally, because you are aggressively trying to enter the market before the majority of people do.
I remember PC (or TheRealThing) saying that the only way to beat the "big guys" is to enter the market before them. That's why I think that timing is extremely important - much more than I thought at first.

So my mistake #1: one cannot trade DIBS seriously if he/she does not start trading right on London open (or eventually Asian open for JPY pairs). The earliest breakouts are the most important ones and might lower the risks. When I sleep until 9:00 GMT the best breakouts might go away and the later ones might be a bunch of losers!

My backtesting showed that the net results can get better when the trading session is reduced to only 6 hours (instead of 9-10 hours)! So in fact there is a deeper truth hidden on the call to ride the "earliest possible breakouts".
"The reason I was born and came into the world is to testify to the truth."
  • #11,278
  • Jul 24, 2018 9:57am Jul 24, 2018 9:57am
My small contribution to DIBS thread.

Very best IB always have same general structure - Impulse wave(4-9 bars in one direction) Corrective wave(2-4 bars in oposite direction) and then new impulse wave started with IB.
Attached Image (click to enlarge)
Click to Enlarge Name: EURUSDH1.png Size: 85 KB
  • #11,279
  • Aug 10, 2018 6:32am Aug 10, 2018 6:32am
Quoting harvest3r
Hey guys, the thread is 10 years old today! Happy anniversary!
Oh wow ... thanks for pointing it out...


I might as well take this opportunity to reply to those sending me pm's and asking one question. "Do you still trade DIBS".

the answer is YES. Adn why wouldn't I. The method gives you proven 1.25PF (and you can improve that if you know what to do)

Wish you all the best.

simple method - simple application - lots of patience and discipline
"...Look for 5:1 RR. I can be wrong 8/10 time yet I'm not gonna lose" PTJ
  • #11,280
  • Aug 14, 2018 3:55am Aug 14, 2018 3:55am
I've extensively tested a similar system to this one. I have encountered the same problem. There are periods of time when all my profits get slowly wiped out. I've tried to use various filters to protect my capital: trading with moving averages, not trading when ADR or ATR are below certain levels, excluding days or months, moving my start and end times of trading, not trading when the price hasn't moved out of the previous daily/weekly/x-hourly range etc.
I've backtested more than a decade of data. When I thought I found the sweet spot and applied it to my trading... I managed to hit a devastating loosing streak within a year or two. Again and again and again. So I gave up.
I trade purely price action now. It's not easy.
Your recent posts made me think about resurrecting my old system again. I'm a bit short of free time so I thought I'd ask for your feedback before I launch into it.
I believe that trading purely on autopilot is not the way to a long term success. I think that some trader's intelligence should be applied.
So here is my question: Have you tried to select your trades so that they are clear from pivot levels, support/resistance lines or fibs? If yes, has it made any difference to your long term trading results?
I'd appreciate your feedback

Happy trading to all
Austros
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