The DIBS Method... No Free Lunch continues

Quoting nutmg12

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Hey guys,

Great thread. I just finished reading the entire thing. I don't think this has been discussed.

How do you guys approach setting stops on IB's when the range is really small? Like 10 or 15? When the range is this low I'm not comfortable risking 1 or 2%.

My thoughts are only consider it a strong or valid signal if you can confirm with other TA as always.

Possibly use the outside bar as the entry/stop?

Do any of you have a rule on a minimum stop?

I apologize if this has already been addressed.

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Quoting nutmg12

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PC
http://www.forexfactory.com/showthre...18#post1980318

NowandLater;

Thanks I knew I was stepping in it. I'm not trying to change the system. You are correct I have not read the entire "No Free Lunch" thread. I have however read this one. If I missed something then please forgive me. It is a gigantic thread with tons of chatter.

If you don't mind what are your thoughts on PC's above post? The way I read it he actually increased his position size since his stop was only 6 pips. How is his risk lower because his stop in pips is lower? I don't understand this line of thinking. It seems the market could easily drift and take out his stop.

It has already been stated in this thread that PC doesn't discuss Money Management. Everything I've learned to this point about Money Management says multiplying your risk by 4 because your stop is only 6 pips is a good way to loose a chunk of your account. I'm not questioning him in any way. I'm just trying to figure out his line of thinking. As volatile as Forex markets are putting even 1% risk on a trade with a 6 pip stop loss seems very dangerous.

I will back test and try figure out a formula that makes sense. I would like to contribute to this thread.

My next read is the entire "No Free Lunch" thread.


Extractor;
Thanks for your support.


Joe

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Quoting NowAndLater

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Here's my take on this:

PC's posts suggets to me that he doesn't take every IB, and it can be seen in many of his posts. So you are imo wrong in this statement:
"Going through the rules of the system the only element of discretion in the rules is when to close the free trade."
The entry is not a like a mechanical system, where you would enter just because you have an IB showing on your screen, much like a system of indicators where a bunch of indicators lines up and give you the "signal".

"If I may ask, how do you trade this system?"
I believe that this was never revealed by PC himself. The reason for this was that there is "no free lunch". The meaning of those three words is what everyone must work on to understand which IB's to take. From one of PC's posts:
"And, contrary to some common beliefs, not all breakouts are the same. I know which breakouts have 2 - 5 times the edge of similar-looking breakouts others take, get frustrated with, and likely lose money trading if they don't have perfect skills."

People keep posting trade suggestions on this thread, IB here and IB there, when they really should be backed up with some technical analysis (TA). Or people will be posting that they've seen an IB on a pair, and asks who are going to take it. You don't need a confirmation from someone else to take a trade, because in the end you're the one clicking the mousebutton so make sure you understand why you are taking the trade. An show a picture of your chart and tell us why you would like to the the IB, that is the way forward imo.

I've suggested before that everyone should keep a journal on their computer with picture of the chart for the trade you are taking and some TA and only trade on a demo to start with. Keep track of the overall picture and update the journal with the result of each trade and a picture of the chart after the trade was closed or stopped out. Give a reason to why you would enter the trade and why you think you got stopped out or why you closed the trade. Also state what the break looked like, fast, slow or never really broke out and just ranged. You can review the journal from time to time and see if you can start seeing any patterns. Then you might have a solid background of which IB's to take, at least you have something to compare to when looking at a new IB that you are thinking about trading.

It takes time to become a successful trader, and everyone must put in the time needed. If you can't be in front of the computer then you can still post a chart in your journal at the end of the day with some quick analysis. And stick to just a few pairs in the beginning. PC himself trades only EU, GU, UJ, UCHF and takes trades on GJ only when he thinks that he can get into the carry trade.

Two things that I have to emphasize:
1) Read PC's posts over and over and over again. I still go back and read them, or some of them at least. They are invaluable.
2) There's no free lunch.

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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.

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multiplying your risk by 4 because your stop is only 6 pips is a good way to loose a chunk of your account.

Quoting nutmg12

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So what your saying is PC's 4 times his normal position is probably still risking only a tiny fraction of his account. Someone in this thread posted that they only risk .25 of each trade on their account.

I understand this concept completely.

I see what I was missing. You would close half at 6 PIPS leaving you in a free trade. This still seems like more of a risk than trading a IB with a bigger range.

Wow sometimes it has to be beaten into me. Thanks for the help.

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Quoting attictrader

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PC

nutmg

Hi nutmg,

I may be wrong here but I'm not sure PC was advocating increasing RISK but rather taking advantage of the low IB range to increase his position size..........my MM excel sheet does this automatically when I enter the IB range......my RISK always stays the same, i.e. 0.5% of my account, but if the IB range is small, say 6 pips, my POSITION SIZE will be much larger., and v.v. if the IB range is larger, eg. 25 pips, then my POSITION SIZE will be correspondingly smaller. The RISK will ALWAYS be the same.

Hope I've explained this clearly....hope this helps.

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Quoting eagle_eye

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I asked billflet what discretion he uses to trade, just wanted to know what he looks at to decide whether an inside bar should be traded or not. Isnt that what forums r about, asking each other their opinions? I wasnt asking for a 'free lunch'. I found that part of your post quite offensive. who are you to say that to me?

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Quoting highneb

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DIBS is a trend following system and, like all trend following systems, will be cut to ribbons in a ranging market.

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Quoting attictrader

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PC

nutmg

Hi nutmg,

I may be wrong here but I'm not sure PC was advocating increasing RISK but rather taking advantage of the low IB range to increase his position size..........my MM excel sheet does this automatically when I enter the IB range......my RISK always stays the same, i.e. 0.5% of my account, but if the IB range is small, say 6 pips, my POSITION SIZE will be much larger., and v.v. if the IB range is larger, eg. 25 pips, then my POSITION SIZE will be correspondingly smaller. The RISK will ALWAYS be the same.

Hope I've explained this clearly....hope this helps.

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