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The DIBS Method... No Free Lunch continues

  • #4,001
  • Jul 18, 2008 4:30am Jul 18, 2008 4:30am
Quoting hanover
I will end with a question. To produce a free trade, it makes no difference whether half profit is taken off at 1:1 RR, or the SL is moved to breakeven. Peter apparently recommends the former. The trade-off (as I see it) being that this gives price more subsequent room to move initially, but the halved pos size is going to cut profits from all winning trades by 50%. If the DIBS philosophy is to let profits run (note Peter’s comment: "the best trades for us are the ones that don't give you ANY retracement after the breakout"), then I would have thought that the object would be to let as much of the position run as possible. Comments, anybody?

David
Hi David,

I think there is no right or wrong here. It´s about feeling comfortable. People who take out half the position after 1R gain the good feeling of a free trade at the costs of cutting the full potential of the trade.

I remember TRT writing, that taking out half of the position and let the other half run is not one system, but two. Both are separate systems. The first with the chance to either win 1 R or lose 1 R, so you need at least 51% profitable trades to have an edge. The second one with the chance of either losing 1R or winning "infinite" R.

The decision one has to make is to trade both systems or just one (#1 or #2).

Peter once noted that TRT called him the "most reluctant trader" he´s ever seen. If you put that in perspective, it could mean, that Peter just tries to trade high potential trades in his preferred direction, instead of taking every setup forming in the market. He admitted this by saying, that he was just looking for long entries on one day. TRT probably would have taken short trades too. That would otherwise mean, that the system has an edge no matter if you try to trade with the main trend only or if you´re willing to also open positions against the trend to participate in a potential retracement.

The hardest part of all this and of trading in general is, to accept, that losses are part of the business. Once you´ve realized that, you can start trading system #2. I´d love to do that and tried it already with 1R being 0.5% of my equity, but after a few losses I tend to trade system #1 and #2 to be at least break even if the one half reaches the 1R level - just to feel more comfortable.

On the long term it´s probably more profitable to trade system #2 only. I just don´t have the guts to do so right now

Just 2 cents from another David
  • #4,002
  • Jul 18, 2008 4:38am Jul 18, 2008 4:38am
Quoting manto
Hello, NaL,

i know, you are experienced in gld. I have a signal there, but indifferent signals from the indicators. Any opinion?

Regards, Michael
My chart looks like this. Look at the pretty support at around 950: 50% fib level, weekly pivot, upward trendline meets the channel and a supportline from the highs of each of last two weeks. That's my point of interest in gold at the moment.
At the moment we are sitting at the 38% fib and just above the the montly R1 and above a minor support area (blue area) and we are in the middle of the channel.
I would avoid selling into this area. If you buy you are against the shortterm trend, and I suggest following to see what the strength of the USD is then. A buy could meet resistance at the aqua arrow at around 967-968 where the channel meets a resistance line, so if you could get a resonable r:r ratio on a buy you could get a small profit. But I'll rather wait in this spot.
Attached Image (click to enlarge)
Click to Enlarge Name: gold.JPG Size: 156 KB
  • #4,003
  • Jul 18, 2008 4:57am Jul 18, 2008 4:57am
Quoting birdt
The inevitable eating of long strings of losses might be difficult to stomach but if this trading method represents anything it should be that success% does not matter; a trading system is designed to make money in the long run yet I believe most traders would opt for a system that has a lower yield with higher success%. It is human nature to avoid pain.
I agree that a trader must opt for a system that makes them more money in the long run. Now that could be with a method that has a very high success rate, low yield or vice versa as you stated. A method that has a success rate of 30% can be very profitable if the risk to reward ratio is let's say 1:4. On the other hand the same method can be even more profitable if the success rate is 60% with a ratio of 1:2. So DIBS should be extensively back and forward tested by those who are using it to find the optimum results. By keeping the s/l under support or above resistance, will the success rate increase two fold? That's for the trader to find out.
  • #4,004
  • Jul 18, 2008 5:15am Jul 18, 2008 5:15am
Quoting NowAndLater
My chart looks like this. Look at the pretty support at around 950: 50% fib level, weekly pivot, upward trendline meets the channel and a supportline from the highs of each of last two weeks. That's my point of interest in gold at the moment.
At the moment we are sitting at the 38% fib and just above the the montly R1 and above a minor support area (blue area) and we are in the middle of the channel.
I would avoid selling into this area. If you buy you are against the shortterm trend, and I suggest following to see what the strength of the USD is then. A buy could meet resistance at the aqua arrow at around 967-968 where the channel meets a resistance line, so if you could get a resonable r:r ratio on a buy you could get a small profit. But I'll rather wait in this spot.
....thanks a lot. Better to wait with a buy for a close above the aqua line or even above the 971...
Regards, Michael
  • #4,005
  • Jul 18, 2008 5:18am Jul 18, 2008 5:18am
The way I read it Peter seems to say buy the market thats up most on the day and sell the market thats down most on the day. I was just wondering if anyone knew of a MT4 indicator where you could see at a glance which of the 4 majors had the % change on a time frame, day/week/month.
I would be great not to have to figure it out all the time when multiple set ups arise.
Thanks.
Sincere and humble thanks, If.
  • #4,006
  • Jul 18, 2008 5:41am Jul 18, 2008 5:41am
Quoting Oedipus100
The way I read it Peter seems to say buy the market thats up most on the day and sell the market thats down most on the day. I was just wondering if anyone knew of a MT4 indicator where you could see at a glance which of the 4 majors had the % change on a time frame, day/week/month.
I would be great not to have to figure it out all the time when multiple set ups arise.
Thanks.
I posted an indicator a while back called Range. That will (among other things) show the %-age pricechange from the monthly, weekly and daily open. Check under the paperclip.
  • #4,007
  • Jul 18, 2008 6:11am Jul 18, 2008 6:11am
Hello,

i found in the attachment lists here the jarroo indicator but cannot figure out were the explanations were posted / discussed. Does anyone know where in the thread this was discussed and tell me the post number?
Thanks, Michael
  • #4,008
  • Jul 18, 2008 6:14am Jul 18, 2008 6:14am
Could you post a link to it please.
Sincere and humble thanks, If.
  • #4,009
  • Jul 18, 2008 6:16am Jul 18, 2008 6:16am
It's post 379, thanks again
Sincere and humble thanks, If.
  • #4,010
  • Jul 18, 2008 6:19am Jul 18, 2008 6:19am
Quoting Oedipus100
Could you post a link to it please.
I wrote "it's under the paperclip", but since you didnt wanna look there here it is again
Attached File(s)
File Type: mq4 Range.mq4   3 KB | 831 downloads
  • #4,011
  • Jul 18, 2008 6:30am Jul 18, 2008 6:30am
Got it. That is exactly what I was looking for, really helpful thanks NAL
Sincere and humble thanks, If.
  • #4,012
  • Jul 18, 2008 9:12am Jul 18, 2008 9:12am
I initially coded this EA to only work in 1hr charts but when I mod it to allow trading on any timeframe, I forgot to change the part where it finds the Open price of the day. it was still using Time[i] and Open[i] when it should really use iTime and iOpen. I've made the rectification in the attachment.

regards,
Zen

p.s., I've deleted the previous post to prevent confusion. here's the description again.
http://www.forexfactory.com/showpost...postcount=3943
Attached File(s)
File Type: ex4 DIBS_EA_ver6_2.ex4   27 KB | 802 downloads
File Type: mq4 DIBS_EA_ver6_2.mq4   26 KB | 1,225 downloads
Programming for a better future.
  • #4,013
  • Jul 18, 2008 9:14am Jul 18, 2008 9:14am
If we look for pin bars, patterns like double tops, flags, pennants, we can form a bias for the day and look for IBs that go in d direction of our bias. IBs that occur after pin bars, around important S/ R levels may also b special. Look for this kind of IBs and follow the rules from the progenitor, u will b on the positive side. I am.

We've got over #4000 posts, and some are still questioning the viability of the system, trying to probe what they feel is xtraodinary that wasn't revealed by P. Crown. Some, on their first post, are discountenancing the system, without trials. Making criticism isn't wrong but it should be after u hav tested. Many of us are already successful with the system. U don't need to ride up to 5:1, u can exit first at 1:1 and then 2:1, and when u are stronger, u can go as far as 10:1. I havn't exceeded 4:1, though. If d risk is small, there is much confidence for a long free ride.

I want to advise that we post charts, discuss trade entries, give reasons why a potential setup isn't that prospective. These are what we need. We can form community of DIBS traders, like some hav done, and help each other.
Attached Image (click to enlarge)
Click to Enlarge Name: gbpusd1.GIF Size: 25 KB
  • #4,014
  • Jul 18, 2008 9:39am Jul 18, 2008 9:39am
I've received a few PMs about my EA and there's something i need to be clear for those who are new to Autotrading..

one thing I can't stress enough, this strategy to me isn't a set and forget system. The EA is coded to follow the original rules pretty much to the letter and it's meant to help a trader not to miss a trade as long as the rules are met. with an EA, you won't need to do the counting of stoploss and position size as its all gonna be done for you according to the settings that you place in "Inputs". The EA doesn't guarantee that trade you're in will turn out well. especially when market is ranging, you'll be whip sawed left right center. not a pretty sight... Therefore trade with discretion.

read through this thread to know how the experts here are trading this system to filter off bad trades. if you went home and saw a pending order opened in a direction that you somehow feel negative of, you can just close it off. the EA won't open that trade again cos it knows you've made a decision.

AND if you're new to autotrading, something that I think is a must to have is to install UltraVNC on your computer. that way, you can remotely access your trading platform from anywhere in the world with an internet connection. This allows you to check on your EA when you're not at home. best of all, that software's free! PM me if you need more info on how to setup UltraVNC on your PC.

Happy trading.

Regards,
Zen
Programming for a better future.
  • #4,015
  • Jul 18, 2008 8:29pm Jul 18, 2008 8:29pm
In post #23 on the "No Free Lunch" thread, PeterCrowns writes:

Trading the "hot hand": Trading the strongest/weakest market is actually really simple. For example, yesterday the Eur/Usd was up more proportionately than the Usd/Chf was down. This was because the Usd/Chf wasn't even a down day. Definitely off its highs but not down relative to last week's close. The Eur/Usd was up, up and away! So that is the market you buy.

And I did! I'm sure I had company from this group.

In the pit the first thing you learn--- when you are ready to actually make money..., and stop the bleeding, is:

  1. Only be willing to buy a market if it is up on the day.
  2. Only be willing to sell a market if it is down on the day.

Obviously, it would logically follow that the currencies which are up more are better buys and the ones down more are the better shorts. So basically, if you get a buy setup forming on two strong currencies, take the trade on the one up most on the day.

This actually means that you never go short a currency unless it is "down" relative to yesterday's close; or go long for any reason unless the market is "up" on the day.

I recently found a currency heat map indicator here:
http://www.forex-tsd.com/indicators-...-heat-map.html
Post #12 in this link explains how the color system operates.
Note that it may take 1-2 minutes before the indicator appears on your chart (obviously it has to check every cross that's offered by your broker).

The way I currently have it set up is with the W1, D1, H4, H1 indicators in separate windows. Then, if I look down a column, the currency with the most (bright) green boxes is weakest, and the currency with the most (bright) red boxes is strongest.

I realize that Peter rarely trades DIBS beyond the 4 major pairs, and that a quick, common sense scan of the relevant charts (in the way that he describes) can easily determine which is the strongest/weakest of the four. However, knowing that a currency is also stronger/weaker against other currencies could potentially add to the probability of a profitable trade. (TRT increases his pos sizes in situations when the probability of profit is significantly greater). One could also possibly adjust one's exit strategy to reflect the current strengths of the currencies being traded (e.g. hold on longer to a long trade in XXX/YYY, as long as XXX remains strong overall, and YYY remains weak).

Anyway, I include this in case anybody finds it useful, for whatever reason.

David

  • #4,016
  • Edited Jul 19, 2008 1:41am Jul 18, 2008 10:52pm | Edited Jul 19, 2008 1:41am
Thanks, everybody, for your responses to my question (final paragraph in post #3991).

I guess one operates either:
-- statistically: by back-testing over a vast sample, to try to find a "sweet spot area", in terms of an R-based exit; OR
-- technically: by looking for suitable reasons (e.g. S/R, exhaustion candle, deceleration/weakening in the move); OR
-- by using a trailing stop (possibly back-tested to find the optimum width, e.g. n ATRs); OR
-- by simply leaving the initial SL in place in the hope of attaining a "long tail" (e.g. 50:1 or better) trade; OR
-- by sacrificing the possibility of any statistical edge for whatever feels most comfortable.

David
  • #4,017
  • Jul 19, 2008 1:11am Jul 19, 2008 1:11am
Quoting hanover
In post #23 on the "No Free Lunch" thread, PeterCrowns writes:

Trading the "hot hand": Trading the strongest/weakest market is actually really simple. For example, yesterday the Eur/Usd was up more proportionately than the Usd/Chf was down. This was because the Usd/Chf wasn't even a down day. Definitely off its highs but not down relative to last week's close. The Eur/Usd was up, up and away! So that is the market you buy.

And I did! I'm sure I had company from this group.

In the pit the first thing you learn--- when you are ready to actually make money..., and stop the bleeding, is:

  1. Only be willing to buy a market if it is up on the day.
  2. Only be willing to sell a market if it is down on the day.

Obviously, it would logically follow that the currencies which are up more are better buys and the ones down more are the better shorts. So basically, if you get a buy setup forming on two strong currencies, take the trade on the one up most on the day.

This actually means that you never go short a currency unless it is "down" relative to yesterday's close; or go long for any reason unless the market is "up" on the day.

I recently found a currency heat map indicator here:
http://www.forex-tsd.com/indicators-...-heat-map.html
Post #12 in this link explains how the color system operates.
Note that it may take 1-2 minutes before the indicator appears on your chart (obviously it has to check every cross that's offered by your broker).

The way I currently have it set up is with the W1, D1, H4, H1 indicators in separate windows. Then, if I look down a column, the currency with the most (bright) green boxes is weakest, and the currency with the most (bright) red boxes is strongest.

I realize that Peter rarely trades DIBS beyond the 4 major pairs, and that a quick, common sense scan of the relevant charts (in the way that he describes) can easily determine which is the strongest/weakest of the four. However, knowing that a currency is also stronger/weaker against other currencies could potentially add to the probability of a profitable trade. (TRT increases his pos sizes in situations when the probability of profit is significantly greater). One could also possibly adjust one's exit strategy to reflect the current strengths of the currencies being traded (e.g. hold on longer to a long trade in XXX/YYY, as long as XXX remains strong overall, and YYY remains weak).

Anyway, I include this in case anybody finds it useful, for whatever reason.

David

Thanks for the link, can you grab it and paste or attach it here by any chance? I seem to be having trouble with that site.

I have Tom Yeomans Forex meter which basically does what I think you are saying the heat meter does. I must admit I often think about putting it on my screen but keep forgetting to. I would really like to test dropping to a lower time frame and use a combo of the IB and meter.

I think you have a good plan there David....
"Even if you fall down face first, you still went forward."
  • #4,018
  • Jul 19, 2008 2:07am Jul 19, 2008 2:07am
Quoting juicyt
Thanks for the link, can you grab it and paste or attach it here by any chance? I seem to be having trouble with that site.

I have Tom Yeomans Forex meter which basically does what I think you are saying the heat meter does. I must admit I often think about putting it on my screen but keep forgetting to. I would really like to test dropping to a lower time frame and use a combo of the IB and meter.

I think you have a good plan there David....
Juicyt, I've attached the indicator to this post.

If the trouble you describe is an error message saying that you need to register (it's free), then I would suggest that it's worth it, as you can then view all attachments, and download indicators and other goodies from the site.

In the case of the Currency heat map, if the indicator doesn't display properly, you apparently need to download MS Line Draw (also available from the link). There's other instructional material in the thread, another incentive to register, so that you can read it all.

I've also included a screenshot here, illustrating the way I have it set up. The JPY column is the "greenest", making it currently the weakest currency, and the GBP column the "reddest", making it the strongest currency. Hence, everything else being equal, a long position in GBPJPY would (arguably) be the "hot hand".

The second screenshot is a grab showing how the colors are derived. Note that this assumes that you're reading the map on a row by row basis. I find it easier looking down the columns, hence for me the rationale is reversed (green = weak; red = strong). You can, however, change all of the color parameters when you attach the indicator to your chart.

David
Attached Image(s) (click to enlarge)
Click to Enlarge Name: juicyt.gif Size: 25 KB
Click to Enlarge Name: Heat map legend.GIF Size: 36 KB
Attached File(s)
File Type: mq4 Currency heat map.mq4   10 KB | 1,157 downloads
  • #4,019
  • Jul 19, 2008 2:18am Jul 19, 2008 2:18am
Quoting hanover
Juicyt, I've attached the indicator to this post.
David
Good job David!
  • #4,020
  • Jul 19, 2008 2:35am Jul 19, 2008 2:35am
My first post here, I hope someone able to see what I see.

DIBS, is an entry method, that exploit on price consolidation when market has high volume (first few hour of europe session). Our edge is relatively low risk in pip terms before market goes in one direction, and our big chance to turn one trade into a free ride by taking half of our position on 1 : 1 RR

Anyone should be able to spot which area where the market may reverse. Some people here has show us how to spot those area (Skunny, BillyRayValentine, Bemac and some other). They all talk about horizontal S/R lines, that derived from previous S/R that have been formed previously.

When not to trade DIBS, or when not to trade at all whatever our entry method is when the closest potential turning point (previous consolidation price) is too near with entry price and RRR is not good. This is often happen if price is in a process of consolidation/congest/ranging/building value (same thing but people make different names for it)

Chart sample of good and bad entries. Black arrow is dibs setup entry.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: refined entries.gif Size: 28 KB
Click to Enlarge Name: bad entries.gif Size: 23 KB
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