Day Trading vs. Swing Trading vs. Position Trading 86 replies
Disliked{quote} It's a cunningly, subtly modified version of the standard MT4 simple/smoothed/EMA average. Well, I took a look at the code for #JoGET_MA2b# (mtf + alerts).mq4 and decided likely that a simpler MA will tell the same story. Pictured is the JoGet with period 16, method simple, and Hull MA(20,1), both with Close price as input. You can see the HMA is less "signally", as you prefer. the HMA is yellow/magenta. {image}{image}Ignored
Disliked{quote} Besides being both complicated and inflexible, like most systems based on simple indicator signals, the basic problem is that moving averages love you when the trend is friendly but break it off when the range comes back to town. Avoid this temptress! I didn't take my own good advice and tried to make it work. With variations. I use MULTIPLE INSTANCES of MAs that show me a "smoothed view" of price for 4 TFs at once: Nothing complicated at all about that. And I include a short-and long-term ATR for guidance about ranging periods. The most...Ignored
Now let's count.
This probably breaks even, at best, no matter what you do. The pattern is the least important factor. Right? Right??!?
Dislikedjust for you to know Clemmo17 I willl suppress this message under 24 hours to keep your thread clean {image} {image} {image}Ignored
What all of these combinations have in common is some degree of overlap between bars. It doesn’t matter the trend direction, strength or timeframe, we find this continually owing to the multifractal brownian (or Ornstein-Uhlenbeckian?) motion of price action.
We can (possibly) take advantage of it by considering in any given pair of bars how the overlap might occur. Even if we ignore the current trend there are only a few possible continuations.
Fig. 3 A nondescript price barAttached Image
Suppose a bar has just closed and it looks like this. The following bar will most often start very near the close price (assuming trading isn’t very thin like at the start or end of a week).
Attached Image
Fig. 4 Closed price bar with a new price bar right at open.
Right after open it would look something like this. Now two things can happen.
Fig. 5 The new price bar starts down but then reverses direction.
In either scenario there is a portion of the price bar that overlaps both sides of the opening. In other words, the price would reach that area/level no matter what, as long as it doesn’t simply move directly in one direction from the opening. As a result we can make a theoretical profit no matter what price does on just about every candle, provided it moves enough that we can beat the spread and commission costs.
There are multiple ways to play this. Some ways might not be practical because of the broker tendency to widen spreads at the start of a new bar (?) Not all TF and times of day would be practical either.
In every case we use a TP rather than a trailing stop.
Then there are ways to play the close of each bar, now with added confidence that the bar’s main trend direction has been established.
Just be aware that any mean-reversion system can be torn asunder by a sudden violent trend, if it isn't ready to give up something.
Add bands if desired (I do)
We are looking for fluctuations away from the trend, to either avoid them or trade them lighter. The rest of the time we want to be following the daily trend. We survey charts on the D1 timeframe, mostly.
Combining trend and counter-trend trading in one system is asking for trouble. If you want to do both; do them separately.
The 40 week peak trends are our main guides. Price rarely doesn’t jump to the whims of the 40 week peaks and troughs. These also have the added bonus of being fairly evident and even the novice Hurst trader will be able to identify them. You can even find them phasing manually and so you don’t need Sentient Trader or Hurst Cycles for MT4.
A bold statement; but there is some evidence to back it up, at least in some instruments.
RSX is our secondary guide. If it’s in tune with the 40 week trends we’re simply following it. When its trend gets long in the tooth, but the upcoming 40 week peaks or troughs are still far off, then we want to pay mind to what price is doing with the moving average line of the confidence bands indicator.
When price crosses that line on the D1 or threatens to do so, we want to drop down to H4 and find a finer entry/exit.
On H4 we can also drop down to H1 for even finer entries.
Place 3 trades at the right time. A D1 trade that we intend, as much as possible, to hold between 40 week peaks.
An H4 trade that we’ll hold as long as price stays on the correct side of the RSX or the correct side of the MA line on H4 if the RSX is long in the tooth.
An H1 trade that we’ll hold as long as price stays on the correct side of the RSX or the correct side of the MA line on H1 if the RSX is long in the tooth.
The thing to keep in mind is the RSX will change sides once it’s clear that the trend has changed. You should be aware that it’s due to change well before that. Once it has changed sides, price is bound to retrace, sometimes quite a bit, back to the edge of the confidence band, or the MA line or a bit more. That’s where you actually want to enter. Guided by the higher TF (D1 usually) we expect price to stop retracing and go back the way RSX is telling us its bound to go.
When scanning:
Entries:
Anticipating is better than waiting for confirmations, but then false breaks need to be closed mercilessly. This will result in some up-front costs but the eventual big trades more than make up for it.
Entry signal is usually the MA cross on a lower TF
A band touch might also be a good signal but it’s riskier or slower to win. ‘Edge band’ trade in the parlance of Hurst.
Exits:
MA cross that has follow-through (one more candle after priror candle close) or an RSX change change, but MA cross is usually earlier and better.
Preferred entry signals in order of preference:
Make 3 trades so that you have one long-term trade, one medium-term, and one trade will satisfy your need for action, and pay for the possible harsh retracements that will occur on D1 timeframes.
Process:
Your faith in your indicators will be your downfall.
General notes: I usually only do as much recent history as is needed to make trading decisions in the present. This works out to about one visible screen’s worth of price data.
Colours: Use whatever makes sense. I use the colours I learned from the MT4 version of Hickson’s Hurst Cycles for MT4/Sentient Trader.
18 year: maroon
9 year: purple
54 month: orange
18 month: yellow
40 week: yellow-green
20 week: green
80 day: aqua/turquoise
40 day: blue
20 day: magenta
10 day: deep pink (yes, this is very close to magenta but it’s a habit now - be cautious)
5 day: plum
2 day: orchid
1 day: gold
5 hours: white or red (rarely used)
I don’t generally phase lower than 5 day periods but sometimes I’ll be interested in a 1 or 2 day VTL.
I place dashed lines for peaks; and broken lines for troughs.
Once the chart’s been phased, I find the valid trend lines for each view.
A slightly modified nominal model - all numbers are averages only
18y ~15y
9y ~8yr
54M ~63M
18M ~ 24M (the most variable cycle of all?)
40w ~36w
20w ~18w
80d ~63d
40d ~34d
20d ~22d
10d ~10d
It’s important to remember that phasing is a rough guess, there is no regularity that can be depended upon for consistently long periods, and this is all about attempting to divide the probability space.
Not all cycles are equal
Variance and target dates and amplitudes
Whereas Hurst relied entirely on his nominal model and Hickson uses the average period of past occurrences, I am proposing a slightly different tactic. Make use of the amplitude and timing of past sections that match the type of cycles that bracket the period in which you’re trading.
So for example if you were trying to trade a 10d trough up to a 10d peak you’d consider that the higher degree marker after the 20d peak is an 18M trough, and the preceding peak behind the 10d trough was an 80d peak so you’d
An alternative
Dealing with the unexpected
Trading expected peaks and troughs using the nominal model, mine or Hurst’s or using any other tool of Hurst’s has been disappointing so far.
I believe that Hurst gives us a rough outline, for multifractal price and time, but reality always has something slightly different in store. It only takes a small difference between what we expect and what actually happens to throw a small account into the gutter. Especially without some expectations for variance.
The work we’ve done so far hasn’t been a complete waste of time though, as it gives us our directional bias, a time expectation for trade completion, and a guideline for sizing trades, since trades bolstered by higher cycle degree parents should be more reliable. It gives us a criterion when our main guide gives us unexpected signals.
What should we use for the main guide?
When trading manually I would recommend using Jotunheimr. Whenever price crosses the Jotun you can decide if that’s a likely cycle peak or trough and whether this is a temporary condition (worth ignoring) or not. When in doubt, follow the smoothed MA, even if the Hurst phasing says what you are seeing is impossible. All kinds of reasons could account for it, not least a phasing error. “There’s always a bigger parent cycle.” - Qui Gon Jinn (infinite variance)
Meaning you can (almost) always find a reason why a peak or trough didn’t push price in the direction you were expecting. Maybe the cycle is just running long or short - sometimes it will be very far off, and in cases where it’s running short it can be hard to detect.
For this reason I recommend using double-agent entries just prior to expected cycle changes.
When trading with an EA I would use Around the World to establish when to change from long only/short only or long/short (in ranging periods).
Sample procedure 1.
Be sure to read Jotunheimr if you haven’t already. I would stick with H1 timeframe for this instead of M15.
The only other changes are to increase the channel ATR multiplier to 1.8 and reduce the period to 30.
Basically we’re trading Jotunheimr but with variations that make use of data from the Hurst chart.
Don’t enter these units as a block but add-in to them gradually, especially on the higher degree cycles which may take some time to turn the corner.
First test of this idea seemed to be sub-optimal - more testing required
As Parisboy says, life is hard for the cycles enthusiast! This is the sort of thing David Hickson would pay me to demonstrate on his site, if not for the fact that I recommend against using Sentient Trader.
DislikedBeetlejuice {image} Documentation not found! I can only find this in a reference within a different system. Trading the nominal model cycles at consistent intervals guided by expectations for each level (family member) of a cycle lineage using the Averages Table. Demonstrates the power of the table of averages and the (custom) nominal model. Use of channels (?) But as I said, the nominal model is shaky, the idea of a cycle lineage is therefore built upon quicksand. The averages table can be supplanted with bands.Ignored