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Awesome EAs, needing just some corrections, but with no mql4 0 replies

Corrections

  • #1
  • First Post: Jan 9, 2008 1:54am Jan 9, 2008 1:54am
Maybe this thread seems kinda noobish to you guys, but the answer to my question in not as simple as you might think!

It is often clear that, when a big move occurs (large drop down or up like a rocket) and when then this move happens in a very short period of time, we can expect a correction of some sort. Or can't we?

That's why we use fibs, don't we?


My question is basicly,how sure are we that after a big move a certain correction will come. And how big wil this correction be (.38-.50). How certain are we that price just wont keep falling and how do we see when the move is over? (Doji-double/triple bottom)

The reason why I ask this, is because I'm developing a sort of method of trading focussing on corrections.

If you guys know any research or historical data that can back the correction theory up, it would be much welcome.

Thanks for helping out!
  • #2
  • Jan 9, 2008 2:35am Jan 9, 2008 2:35am
Hi S,

corrections are not necessarily proportional with regard to time frames.
(i.e. after a 0.5% intraday up/down move to a new high/low you get most likely a different percentage on the correction/retracement than you would get after a weekly advance/decline of let's say 2%)

there are studies in circulation as to countertrend trading which is not so different from trading corrections.

regards
daytrading
Enter Signature
  • #3
  • Jan 9, 2008 2:47am Jan 9, 2008 2:47am
I often scalp USD/JPY and EUR/USD corrections using intraday fib levels after a big move, as well as important S & R levels. These trades are very quick, with higher risk than reward, but an extremely high win ratio, and I can have several market orders just sitting there waiting to be filled without me having to bat an eyelash. It's an easy way to supplement my longer term trades, as I generally hate day trading.

EDIT: I just realized the previous poster was daytrading... I don't mean to diss your name
  • #4
  • Jan 9, 2008 2:51am Jan 9, 2008 2:51am
...hahaha,

no worries man
Enter Signature
  • #5
  • Jan 9, 2008 3:15am Jan 9, 2008 3:15am
Quoting fierceman
I often scalp USD/JPY and EUR/USD corrections using intraday fib levels after a big move, as well as important S & R levels. These trades are very quick, with higher risk than reward, but an extremely high win ratio, and I can have several market orders just sitting there waiting to be filled without me having to bat an eyelash. It's an easy way to supplement my longer term trades, as I generally hate day trading.

EDIT: I just realized the previous poster was daytrading... I don't mean to diss your name

Well, this is what I mean! I do this with gut feeling. But it would like to write it down as a set of rules! I often do this when I'm bored
  • #6
  • Jan 9, 2008 5:10am Jan 9, 2008 5:10am
Quoting Sidus
Well, this is what I mean! I do this with gut feeling. But it would like to write it down as a set of rules! I often do this when I'm bored
You can manually back test this very easily, although it is time consuming. Back testing should yield optimal stop loss and take profit levels for each pair, as well as a win ratio. If the numbers look good, and they do, you can trade it live - but reasonable spread and slippage are broker prerequisites, otherwise don't bother.

In my experience, the more liquid pairs give much more reliable results (for obvious reasons), so stick with the big ones.
  • #7
  • Jan 9, 2008 5:32am Jan 9, 2008 5:32am
True fierceman. The percentage of winning trades is soooo appealing. The key is timing, volatility and low spreads!
  • #8
  • Jan 9, 2008 5:54am Jan 9, 2008 5:54am
Another problem would be:

How can we see the end of a fast and strong move? Candlestick? Declining volatility? If we could only solve that problem.........
  • #9
  • Jan 9, 2008 6:34am Jan 9, 2008 6:34am
You haven't mentioned a timeframe.

Also people always imho use the terms trend and correction and "big" so loosely it's pretty futile trying to guess by the words alone.
Trust price. Know yourself.
  • #10
  • Jan 9, 2008 6:37am Jan 9, 2008 6:37am
True Seeking!

Timeframe would be 15m intraday (In my experience the best for scalping) and Daily for normal trades.


"Big": I don't know how to define it otherwise. Suggestions?

Thanks
  • #11
  • Jan 9, 2008 7:25am Jan 9, 2008 7:25am
Quoting SeekingLight
You haven't mentioned a timeframe.

Also people always imho use the terms trend and correction and "big" so loosely it's pretty futile trying to guess by the words alone.
I mentioned the word "intraday" which is specific enough. The actual timeframe is irrelevant as long as you can actually make out exactly where the levels are that you want to trade. I usually use 1H for the S & R and fib studies, zoom into 5M to make sure my screen resolution isn't screwing with the numbers, and then I set my orders.
  • #12
  • Jan 9, 2008 9:13am Jan 9, 2008 9:13am
Quoting Sidus
It is often clear that, when a big move occurs (large drop down or up like a rocket) and when then this move happens in a very short period of time, we can expect a correction of some sort. Or can't we?
well, price doesnt go in a straight line forever, so i guess a "correction" is inevitable. but when it will happen is where the speculation lies.

i believe the timing of a correction depends on the existing trend - how old and how strong is it? for instance, if we are in a strong bull market that has lasted 4 years, and suddenly the market falls 20%, there are going to be a lot of longs who are panicked. when the panicked longs start selling, they will making the fall even more pronounced. in this case i would not expect the correction (of the 20% fall) to come anytime soon, because the market is water-logged with panicked longs who will be trying to exit whenever the price bounces up a bit.

however, if we have a bull market that is maybe 1 year old, there might still be buyers waiting on the sidelines. if the market falls 10%, there is a good chance the correction to this fall will come quickly, because there are sideline bulls who will "catch" the fall.

great topic btw
Relax and be happy.
  • #13
  • Jan 9, 2008 10:00am Jan 9, 2008 10:00am
Thanks, Merlin!


So we should establish:

- The trend (up-down)
- How long does the trend exists? (1h-1mth-1y-10y)
- How strong is the trend? (How do we measure this?)
- Typical correction (Historical data)
- Trust in the current trend (How many traders are LONG - How many traders are SHORT)
  • #14
  • Jan 9, 2008 10:29am Jan 9, 2008 10:29am
yep! i always ask myself, how "old" is this trend? old trends, like old people, tend to get sick and die LOLOL. the older the trend, the more players that are in the market. a 5 year bull market is water-logged with longs... anyone who wants to be long is already long (ie, there are no more buyers left). so if the market falls, you have all these people who are concerned with their positions, and a panic domino effect is likely to happen. whereas a young, strong trend is likely to bounce back from the flu because you have traders who want to be long, but arent long yet. they are waiting for a dip to enter, creating the bounce effect we see so often in strong trends.
Relax and be happy.
  • #15
  • Jan 9, 2008 12:45pm Jan 9, 2008 12:45pm
If I may suggest, I think you will find some answers to your question by using Elliott Wave Principles.

I have not seen any other set of rules which to me (IMHO) is as detailed as the EWP. It has guidelines for probable levels of Price projections and also retracements or corrections.

Couple this with a good foundation on technicals and candlestick formation, your trading profits will most likely soar.

EG
  • #16
  • Last Post: Jan 9, 2008 1:49pm Jan 9, 2008 1:49pm
Quoting merlin
a 5 year bull market is water-logged with longs... anyone who wants to be long is already long (ie, there are no more buyers left).

so if the market falls, you have all these people who are concerned with their positions, and a panic domino effect is likely to happen.

whereas a young, strong trend is likely to bounce back from the flu because you have traders who want to be long, but arent long yet.
they are waiting for a dip to enter, creating the bounce effect we see so often in strong trends.
Putting the topic aside for a second: these are the concepts, ideas and thoughts one should have in mind when seeing the market and trying to understand behavior eventually as the zig-zag / 123 nature of everything is pretty critical to one's own trading behavior ("What! Why isn't this dropping anymore in a straight line, it did so all of last week, what's WRONG! Argh!").

I think understanding the "Two step" (or two cycle or more depending on how you want it) nature of this thing is pretty important..if not crucial..it's basically the make and break of trading...and what's so hard to understand about it initially(no, you do NOT sell when it's going down, you sell when it's going up during a move when it's going down - try having that reflex initially as a "logical" approach...boingggg).
Trust price. Know yourself.
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