DislikedHi guys, how are you all doing?
Last week I wasn't trading. I was working with an I.T. friend of mine testing out the methods we use here in this thread. I'm trying to get these methods automated and turned into a complete system.
Some interesting findings have come to light. Heres just a few. Firstly, entering on the initial fade with out some sort of confirmation no matter how good the level based on s&r, fibs, trendlines, or even a combination of all the three (confluence) does not create positive expectancy. This means over the long...Ignored
After reading Market Wizards a couple of weeks ago, I became reinspired in regards to this through the words of Ed Seykota and Paul Tudor Jones. Ed Seykota, for those of you that dont know him, is an MIT guy that is notorious for unreal returns using automated technical systems which primarily are contrarian systems that latch onto the beginning of trends, though he is more likely to refer to them as trend following systems. Paul Tudor Jones is a hedge fund legend who mentioned an automated system he was using that was based on the premise of range expansions (breakouts).
As many of you know, I'm a former heavy reader of Tom DeMark's strategies, and though what I'm about to mention here fits remotely in line with the teachings of this thread, it doesn't entirely. Tom's breakout systems use four primary reference points for entries: highs, lows, opens and closes, all using daily bars. I found some of these (TD Trap, TD Open, TD Clop, Clopwin, Carrie, etc) a bit problematic, however, when I first used them, due to the constant 24 hour activity of the FX market, as they were designed on markets with clear daily opens and closes (eg stock market). But they can still be applied, with great success, in conjunction with these levels.
Again these are all breakout strategies only, and not 'fades' and to be clear use no indicators, just simple price 'qualifiers', or price patterns. In the past, my best success using these types of techniques came from allowing positions to run, sometimes for several days if conditions are ideal.
But in conjunction with this method, simple breakout techniques, like the ones we have mentioned in previous posts, would work extremely well. An example would be the break out of USD/JPY tonight to the downside on a violation of 94.60 support. It was an easy trade with no nonsense that gave up about 100 pips in about 2 hrs. GBP/JPY's breakout tonight of the 145.50 area is another example. That provided apprximately 500 pips in about 3 hours.
I'm working on some more clear methods of my own and coming up with a general rulebook to make this as objective as possible. That's what I was referring to earlier. But simply stated, we're looking for major lows, or s/r levels touched on a 1 hr timeframe multiple times be violated and playing a clear breakout of these. The opportunities are everywhere and its just a matter of selecting the proper ones.
Ive systematically experimented with a couple methods so far and had excellent results. Exit methods are by far the biggest issue but Ive come up with several solutions to that, as well. The best I have found is a quick move to breakeven after a fixed profit amount is realized and exiting upon a realized profit based on x:x risk reward or an upclose against the trade is realized, whichever comes first. In essense, its a short term trading strategy which exploits impulsive market moves intended to break out of a range.
Money management is also key. When breakouts are more 'furious' in nature (more touches, tighter range) positions can be added to the original position as the trend continues. This allows you to exploit your winners and add to them as the trend progresses, allowing greater profits on continuation moves. This simple addition proved to be the missing ingredient to really driving in the nail and doing some exciting work with the method. Same sl to breakeven rules applied with any new positions so you dont hurt the orginal position.
I'm still drafting up specs but I'll let you know what I end up with. Still very much a work in progress, but just to let you know what's been on my head as of recent.
My view is: market doesn't care about my targets and projections: if I am aiming at R2-3, but after R1 I see market reversing, why should I take a loss trying to force-pursue that illusive R2-3? I prefer the "I am right or am out" approach - if market turns against me, I take the money off the table. 
