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"Ratios & Harmonics: a Different Way to Trade." Summary 37 replies

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Ratios & Harmonics: a Different Way to Trade

  • #40,921
  • May 26, 2018 9:06am May 26, 2018 9:06am
Quoting PeterT
{quote} ...But how is this compatible with the ABCD correction that we target so often? In the example below after an ABCD correction into structure at golden zone, we would initiate a long after confirmation with for example a rotation candle. But as with any ABCD, B was taken out and this confirms a trend shift, so we should look for a short? Can you please clarify? Do you agree that there's a conflict? Is it just a matter of choosing which method you want to follow? Thanks for your insights {image}
When i asked this question before i got something along these lines as explanation:

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  • #40,922
  • May 26, 2018 12:53pm May 26, 2018 12:53pm
Traders Mindset...



http://yourtradingcoach.com/trader/an-entry-mindset-with-a-whole-lot-less-fear/
70% expectancy rate with proper SL placement.
  • #40,923
  • Edited 2:17pm May 26, 2018 2:01pm | Edited 2:17pm
Quoting crixus
{quote} When i asked this question before i got something along these lines as explanation: {image}
Exactly , as long as correction is within the high and low of your trading swing (depending on the OF, or time frame you are trading) , you would not call it expectation failure of that swing. How many ABCD's have we all seen that correct more than 88.6% up to 100% fib and it again has continued in the direction of the trend?
Price braking the point B level, may be an expectation failure, but for whom trading a lower Order Flow.
  • #40,924
  • May 26, 2018 3:57pm May 26, 2018 3:57pm
I've been studying the results of a slightly different trade management strategy shown in the chart.
After my entry, say LONG, price moves from the possible HL towards the previous NSH and achieves 50% of that distance. I then reduce my risk by moving my SL below the possible HL -2 points. I would continue moving to BE like normal after price achieves 100% or tests structure in that area.

Employing this strategy over my last 108 trades....
# Wins drops from 75 to 68 - meaning there were 7 trades out of 75 that initially went in my favor, and then turned against me, and then continued to the target.
WL% drops from 69% to 63%
Average Winner vs Average Loser significantly improves from .86:1 to 1.27:1
240 points were saved on the losers, but 275 points were given up from the previous 7 winners mentioned.

The overall point total was 35 points worse which is basically a scratch/draw, no better no worse.

Mr. Pip I am still reading this thread from start to finish, I have caught up to early 2017, but in early 2017 you were still occasionally employing some strategy of reducing risk as your trade progressed, and before you achieved a BE. Obviously you no longer employ this strategy on the intraday level, for what reasons did you stop that practice? My analysis of my last 108 trades, though not significant enough in terms of iterations, shows this strategy is basically no better nor worse but I'm mostly interested to hear your thoughts on possible times to reduce risk.
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  • #40,925
  • May 26, 2018 4:29pm May 26, 2018 4:29pm
Quoting bmdenton23
I've been studying the results of a slightly different trade management strategy shown in the chart. After my entry, say LONG, price moves from the possible HL towards the previous NSH and achieves 50% of that distance. I then reduce my risk by moving my SL below the possible HL -2 points. I would continue moving to BE like normal after price achieves 100% or tests structure in that area. Employing this strategy over my last 108 trades.... # Wins drops from 75 to 68 - meaning there were 7 trades out of 75 that initially went in my favor, and then...
Thanks , what a nice classical scientific study, quite informative.
  • #40,926
  • May 26, 2018 6:49pm May 26, 2018 6:49pm
Quoting bmdenton23
I've been studying the results of a slightly different trade management strategy shown in the chart. After my entry, say LONG, price moves from the possible HL towards the previous NSH and achieves 50% of that distance. I then reduce my risk by moving my SL below the possible HL -2 points. I would continue moving to BE like normal after price achieves 100% or tests structure in that area. Employing this strategy over my last 108 trades.... # Wins drops from 75 to 68 - meaning there were 7 trades out of 75 that initially went in my favor, and then...
By eliminating partial exits and just trailing I make much more money in the long run. The current method is also easier and more mechanical. Keeping it simple is the name of the game.
If you fail to plan, you plan to fail.
  • #40,927
  • May 27, 2018 3:43am May 27, 2018 3:43am
Quoting crixus
{quote} When i asked this question before i got something along these lines as explanation: {image}
Quoting parviz1953
{quote} Exactly , as long as correction is within the high and low of your trading swing (depending on the OF, or time frame you are trading) , you would not call it expectation failure of that swing. How many ABCD's have we all seen that correct more than 88.6% up to 100% fib and it again has continued in the direction of the trend? Price braking the point B level, may be an expectation failure, but for whom trading a lower Order Flow.
Thanks for your answers. However, they are not satisfying
The point was I was comparing two methods for identifying a shift in trend.
The first one is the "expectation failure", being a break of the high/low of the swing we are trading, as is taught in this thread.
The other one is the break of the B point after a "failure swing" according to Dow theory.

The Dow theory method will almost always indicate a shift in trend long before there is an "expectation failure".
But on the other hand, as I see it, the Dow theory method will in many cases be wrong, for example when an ABCD corrrection takes place before continuing the trend. That's the case I drew in my previous post.
Dow theory says: Sell this when crossing point B.
Mr. Pip thread says: perfect Buy opportunity after ABCD in structure zone while there was no expactation failure. (depending on the leg of reference you have either a 61.8% correction or a 100% correction).

Now I know no method is 100% accurate and I think one should probably stick to 1 method and use it consistently.
I was just pointing out a conflict between the two, so others could maybe shed their lights on it.

So the statement "If you use the Dow theory method to sell after point B of a failure swing, you are ruling out the possibility of trading ABCD corrections" is still open for discussion and opinions!
  • #40,928
  • May 27, 2018 8:02am May 27, 2018 8:02am
Quoting bmdenton23
I've been studying the results of a slightly different trade management strategy shown in the chart....
My feeling about this aspect goes more along these lines of thought presented by Big Mike from Futures.io:

Quote
I scale in and out. I believe an all-in/all-out approach implies that you have identified an "absolute" in the market, which is impossible. Scaling in whether it be dollar cost averaging or whether it be adding to a winning position implies you don't know what will happen next, but that you are happy taking a position because you believe the odds are with you (positive expectancy) with the position. However, you are open to scaling in because you cannot predict what the market will do next (absolute top or bottom).
Scaling out is the same. I target price levels that I think are probable. I have no way of knowing what will happen, but I prefer to be in a position to capitalize on price action instead of out of a trade/flat because I've already scaled out.
Yes, the argument could be made to all-out at a certain price, and then be ready to jump back in almost immediately. I do something similar which I've discussed at length in the price action thread, but it is not the same. I've discussed in my advice thread, as well, that by having three targets I often can reach my daily goal with just one trade. Psychologically, this is huge and I believe it sets me up for the best outcome each day. I wouldn't be able to do that with an all-in/all-out approach without increasing my risk (contracts).

There is a whole thread there about it:

URL to this post (https://futures.io/psychology-money-management/414-all-all-out-vs-scaling-out-2.html#post53292)
  • #40,929
  • May 27, 2018 10:47am May 27, 2018 10:47am
Quoting PeterT
{quote} {quote} Thanks for your answers. However, they are not satisfying The point was I was comparing two methods for identifying a shift in trend. The first one is the "expectation failure", being a break of the high/low of the swing we are trading, as is taught in this thread. The other one is the break of the B point after a "failure swing" according to Dow theory. The Dow theory method will almost always indicate a shift in trend long before there is an "expectation failure". But on the other hand, as I see it, the...
for the sake of discussion....let's say you are at point C and based on your technical analysis of the 233T chart (stay in a one-time frame) and the knowledge of your trading method you expect the market to trade below point B and creating point D to complete correction of the main swing. After seeing a shooting star (bearish reversal signal provided by candlestick-if you use it) you are ready to go short. Next bar is your 'rotation bar' and you enter short trade....Immediately you put the stop-loss above point C or A depends on your risk tolerance. When you are done with it, you calculate the exit price (point D) [which will contain 1:1 move, 127.2% projection of B to C and 127.2%EXT of A to B swing (min for exhaustion point- on my chart marked with -27.20%)] which you expect to be near 78.6% Ret. of the main swing marked with deep pink color. When a price reaches PRZ is a decision time, to trail or to take profit?...basic goal (1:1 move) of your trade has been met giving you 74 pts. profit.......Always stay focused on the task at hand in the time frame you are trading (233T)......What was I shooting for? Did the price fulfill my expectation? If the answer is yes you are done with this trade.
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Always trade your own plan...I don't provide trading signals.
  • #40,930
  • May 27, 2018 11:15am May 27, 2018 11:15am
[quote=Coreg2004;11103927]{quote} for the sake of discussion....


Ouch..When the price got into your PRZ you recognized the market is weak (broken PRZ) and you decided to stay in the trade to grab a bigger chunk of the profit (a sound decision if you ask me)...You move your trailing stop-loss just above point B, locking at +40 pts in profit...... You were prepared for this eventuality with your PRZ2 which contains 88.6%Ret of the main swing, Alt 127.2AB=CD 161.8% projection of BC swing and -41.4% exhaustion point of swing A to B: 4 ratios which define our PRZ2. When the price gets into PRZ2 again it's decision time..What have you decided Peter?
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Always trade your own plan...I don't provide trading signals.
  • #40,931
  • May 27, 2018 11:48am May 27, 2018 11:48am
for the sake of discussion....

Let say you watched the movie Wall Street a long time ago and you remember Gordon Gekko said: 'Greed is good' and you decided to hold on your short trade, why? PRZ2 broken and the low of main swing taken out...now you are watching your PRZ3 you established when the market was going down and wait for the price to gets there....your PRZ3 contains: Alt161.8AB=CD, 223.6%(a secondary fib. #)projection of swing A to B, 127.2% projection of the main swing X to A (Scott Carney in his Harmonic Trader book advised you to examine 127.2%ratio as the first support after swing low or high is broken) and ouch...200% exhaustion point marked on my chart as -100%...again 4 Fib. ratios defining PRZ3...hello it's decision time....you move your trailing stop to just above SH before the price got into PRZ3, locking at +110 pts in profit..or you are taking profit at this point and you are done with this trade....What is it, Peter?
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Always trade your own plan...I don't provide trading signals.
  • #40,932
  • May 27, 2018 12:07pm May 27, 2018 12:07pm
for the sake of discussion....

let say you saw small reversal pattern (ABC) formed in PRZ3, you look at the bottom of the chart and you noticed the time 9:15-9:20 EST, NY is going to open any moment, you move your trailing stop just above B point and the market is taking you out for the profit of +125 pts.....And this is what I do day by day....I trade the right side of the chart looking to find PRZ's...it's just one of many approaches to trade the markets, not better or worse from another...just my own method..
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Always trade your own plan...I don't provide trading signals.
  • #40,933
  • May 27, 2018 12:46pm May 27, 2018 12:46pm
Quoting parviz1953
Update on USDJPY weekly: {quote} {image} Daily chart of same area: {image} EDITED :Coreg 2004 :if you agree we may here try to trade short on the basis of the daily main swing down, an abcd corrected to its golden zone and now at its c point, (Yellow CD leg becoming Blue ab leg and a main swing on a shorter term OF/TF ), but the best is to trade long, at AOI when both weekly and daily trend are in line and suggesting long. (weekly main swing is Red AB).
Personally looking for longs on the daily.
"Luck is when opportunity meets preparation"
  • #40,934
  • May 27, 2018 12:59pm May 27, 2018 12:59pm
Quoting Coreg2004
for the sake of discussion.... let say you saw small reversal pattern (ABC) formed in PRZ3, you look at the bottom of the chart and you noticed the time 9:15-9:20 EST, NY is going to open any moment, you move your trailing stop just above B point and the market is taking you out for the profit of +125 pts.....And this is what I do day by day....I trade the right side of the chart looking to find PRZ's...it's just one of many approaches to trade the markets, not better or worse from another...just my own method.. {image}
Great explanation. I believe every trader has to develop their 'own' way of trading. I trade different than most of you, based on 1000's of trades backtested and hours of experience. And I believe every trader 'makes this trading strategy their own', by altering it to their personal wants and needs. I would of personally taken that short you described in the first post, as well. I do believe that not one trading strategy is traded the same, over a longer period of time.. We are trading with a hundreds of people on this thread, and we all get different results. The point being is that find your own method, just like you described. That method works pretty awesome for you but it could of not (example wise) suite me or anyone else as a trader, and therefore the results differ!

Have a great trading week all!

PS: I love the quote from Gekko. I was laughing pretty hard.

- Sheep
"Luck is when opportunity meets preparation"
  • #40,935
  • May 27, 2018 1:04pm May 27, 2018 1:04pm
sheep, do have any new blog post coming up?
  • #40,936
  • May 27, 2018 1:12pm May 27, 2018 1:12pm
Quoting Coreg2004
for the sake of discussion.... let say you saw small reversal pattern (ABC) formed in PRZ3, you look at the bottom of the chart and you noticed the time 9:15-9:20 EST, NY is going to open any moment, you move your trailing stop just above B point and the market is taking you out for the profit of +125 pts.....And this is what I do day by day....I trade the right side of the chart looking to find PRZ's...it's just one of many approaches to trade the markets, not better or worse from another...just my own method.. {image}
Wow this is really great stuff, I could read this all day
Thanks for taking the time to write this and even draw matching charts

I would probably never hold the short trade past the low of the swing (X), as it would require an expectation failure in the timeframe I'm trading.
And also, when I calculate a PRZ, I would expect it to hold, especially with confluence of multiple fib levels, extension, harmonic completion, and in this case I think it was a Gartley.

In this case, I was in a long, starting from PRZ1, then hoping PRZ2 would hold, and eventually moved my stop below the swing XA, below structure, below a zone with confluence of 161.8 of AB and 138.2AB=CD. But price kept going down breaking PRZs. Until the 261ext of BC was reached + 138.2 projection of X to A + almost 200AB=CD.
There was no way to predict that all these PRZs would fail right?
Or do you explicitly wait for an ABC formation to indicate that the PRZ will probably hold and lead to a larger correction?
  • #40,937
  • May 27, 2018 1:24pm May 27, 2018 1:24pm
Quoting dogdays713
sheep, do have any new blog post coming up?
In the next few days, currently working on one, not quite done yet. Thanks for the interest buddy!
"Luck is when opportunity meets preparation"
  • #40,938
  • May 27, 2018 1:33pm May 27, 2018 1:33pm
Quoting Sheeep44
{quote} In the next few days, currently working on one, not quite done yet. Thanks for the interest buddy!
great ! can't wait to read it!
  • #40,939
  • May 27, 2018 1:34pm May 27, 2018 1:34pm
[quote=Sheeep44;11104104]{quote} Great explanation. I believe every trader has to develop their 'own' way of trading.


Thank you Sheeep and I agree with you 100%. You will never get into someone's head only your own. Trust your analysis and follow your trading plan.....Based on the charts you post, you are doing good Sheeep. Good luck with your trading.
Always trade your own plan...I don't provide trading signals.
  • #40,940
  • May 27, 2018 1:53pm May 27, 2018 1:53pm
Quoting Sheeep44
{quote} Great explanation. I believe every trader has to develop their 'own' way of trading. I trade different than most of you, based on 1000's of trades backtested and hours of experience. And I believe every trader 'makes this trading strategy their own', by altering it to their personal wants and needs. I would of personally taken that short you described in the first post, as well. I do believe that not one trading strategy is traded the same, over a longer period of time.. We are trading with a hundreds of people on this thread, and we all...
Sheep, I don't want you or others to have an impression I have discovered any of elements I use in my trading. I use the knowledge and lifetime work of others. I just composed my trading method with segments of their approach. The credit goes to world-class traders/investors/educators: Robert Fischer, Robert Miner, Scott Carney, Victor Sperandeo and Linda Raschke. .....I love this movie (Wall Street)....here is another quote (I am paraphrasing) of our great Gordon Gekko..' If you want a friend (in this business) get yourself a dog'...Enjoy your weekend too...
Always trade your own plan...I don't provide trading signals.
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