The DIBS Method... No Free Lunch continues

Here is a super video I just saw. Its proof anyone can be a total sucess if they try hard enough.

Ok here is the number one thing that I look at when deciding if I'm to take a trade or not: where is the next support and resistance level? Knowing this alone will save and make you money. S/R levels are anyone of these:

1. Horisontal levels where price has just touched and moved away quickly
2. Trendlines
3. Candlestick analysis
4. Fibs and Pivots (this one is less important than the first two as fibs and pivots can be used differenlty by different traders: fibs are dependant on the high/low used and daily pivots can vary due to what times that are used)

All these things needs to be checked on mtf's. These things will also keep you with the trend, which we know is powerfull on its own.


The next thing to check: are we trading the hot hand? And this can be different from day to day. I concentrate on GU and EU, so my question will be: is the USD strong or weak and which of GBP and EUR is stronger? Recently the Euro has been far superior to the Pound. For instance for the month of December GU is down around 4% while EU is up more than 9%. Now normally they would move like each other. What does this tell me? If the USD is up on a day then I would buy it against the GBP since it's the weaker currency, and if the USD is weak on the day then I would sell it against the EUR. This is a simple way of how I would determine the hot-hand of the day. The more complex way is to combine this (and look at the weekly % movement as well as the monthly) with candlestick analysis of the daily and weekly candles together with the study of s/r levels mentioned above. I will never trade GU and EU at the same time, overall they are too highly correlated and I only take the one that "looks" better.


The next thing I check is the AverageDailyRange. And this is my understanding of PC's rule to not trade to late in the day and that the best trades are early on in the London session. If I get a trade setup and the the daily movement is close to the ADR then I will most likely not take the trade. Reason is that it has a less probability to give me a runner. I might take it as a scalp if everything is set up, because there will usually be some sort of retracement after the ADR is met which will most likely take out my sl and not give me a runner. Usually the daily movement compared to the ADR in % is low around the time of the London open. For me the daily movement starts in the Asian session (this is not to be confused with the daily open!). So lets say we've already had a move that is 70-80%+ of the ADR, then I will most likely not take a trade. Not trading is also a way of protecting my capital, there will always be tomorrow. Lower % and I will take the trade.


The next thing is money managment. 10 people can take the same trades all year long, with the same entry and stoploss levels and I can guarantee you that they will all have a different result at the end of the year. Two reasons for this: cutting your losses short and letting your profits run. I will from time to time close a trade before it hits my sl if I don't like the action and in that way save me some pips. And I have found a way of letting my winners run that suits my psychology. This is extremely important as you all know. But this is also something so indivicual and this is also why the 10 people mentioned above will have so different results. This is why I wrote "This method is a price action method. Once you understand what that means you will turn profits from this method." You have to study how price reacts to s/r levels, understand chart patterns and basic TA, and have a sound MM system in place. In the end, it is YOU that have to have this understanding, and we all have different understanding of the markets which is why there are so many different systems.


Yes discretion is another set of rules to me too. And it's these rules that are vaguley presented in this post. More precise rules of for example what defines a s/r break or hold and candlestick interpretation is not presented here. I just can't imagine how a "simple" EA would ever replace the eye in a sufficient manner. Remember that I don't look for too many trades, I look for the ones that after my understanding has a somewhat higher probability. This all may seem to be overdoing it, but it really doesn't take me a whole lot of time to go through this on a daily basis. Do you think you could make an EA with this kind of discretion?


One last thing: the IB is not a trigger to buy/sell. It just gives us a place which has a low risk and high reward potential. Just this basic principle alone has led me to look for other situations which present me with a good R:R ratio, not just for IB's, and has given me other trade opportunities. All the things that PC has written is just terrific information. But we are all affected by this in our own ways and must make our own understanding of the information given. I would certainly recommend to read PC's posts more than once, do a little bit of chart studying, then go back and read again before looking at the charts again.


This has been a lengthy post. I will just round off by wishing everyone a merry xmas and a happy new year.

Thank you for sharing this....it was truly incredible. Merry Christmas everyone and good trading in the new year.

Mike G

Thanks NowAndLater for sharing your approach.
Now I can use something more to improve the results I got while first testing the DIBS "philosophy"

I'm thinking I should perform an analysis of which common elements I can find on those IB which generate good trades, then define a set of rules to filter the DIBS. I'll follow your hint.

Candlestick patterns analysis can be easily implemented in EA, I used that already a bunch of times. S/R levels requires a bit more work as one must chose them carefully... but if it's worth it can be done.
I think one should also check what's behind the IB formation... I trust pretty much triangles and pennants for breakout but if the IB is result of a range formation then I think it's not worth to open a trade... I should check this on the chart on the number of good openings I get.

In the end, I agree that the IB doesnt give you a sure entry... but you should always check how did you get the IB... in other words the Price Action which took you to the formation of the IB can tell you whether the trade can be promising or not.
This is not different from technical analysis and that's why managing risk with IBs makes sense a lot... another reason why I like this approach.
Be sure I'll investigate further.

Xmas greetings to everyone!!!

To me candlestick patterns is more than just IB, OB, doji and so on. I also look at the close of the bars, where the close is in comparison to the open, what was the body like, length and so on. And also where the candlestick is in relation to the surrounding s/r levels. Is this also easy to code?
Yes I always check lower timeframes as well. But to me pennants and ranges are the same as it's always an s/r level that needs to be broken. The difference is just what this s/r looks like, and what characterizes a break of it.

Ciao, Zypkin? What a "hot" Italian guy is doing in freezing Estonia?

As NAL and GW explained, there are far too many variables to most strategies, incl DIBS (as GW mentioned, some of the "big boys" are playing with algo trading, quant analysis and high-frequency automated trading, but they are in a different league when it comes to a/c size - would you be happy with a 12% annual return?..)

By the time you perfected an EA which can cover just 50% of those variables well, you'll be able to trade "manually" better than your EA.

However, entries are only half (if not 1/3) of the problem. If two traders took the same trades, the one who handles exits better will make more money than the other. Number of variables for exits is even greater than for entries. How does your EA recognise that the price is ranging? How do you teach it to let your profits run - e.g. exiting your short position at BUOB which sits below a major SR level is not wise. Etc etc

But by programming such an EA you could learn the skills which will make you a better trader...

Buon Natale!

That is just sensational !

Hi Forex007... sitting in the freezer clearly shows that I didnt make a fortune with Forex
Surroundings are not bad anyway... it's a place where U can live a nice life... except for the weather.

This is out of any doubt true. I have the impression that people here tend to imagine someone who codes an EA like a dumb individual which believes in magic
I never said I dont trade manually. As a matter of fact I do and I'm with you in everything you say about "discretion", "feeling of the Market" and so on... but with a degree in Robotics and Automation I cant help thinking that most of this can be transferred into a program, as complex as you want, that can help you in managing your trades when you are not in front of the screen.
Yes, being in front of the screen is for me a major problem because I cannot be there all the time. Having an EA that takes care of my interests when I'm away is for me of great help.
Finally, as you say I'll surely become a better trader in the process of teaching to trade to an EA... whether the EA will work or not it will not be a failure cause I still will have learnt something

I do not agree on this. Ok that if two guys take the same trade and one exits better he is going to make more money.
But at the question "would you prefer to improve your entries or your exits?" I'd answer entries.
The reason is that better entries means a higher percentage of winning trades. Now, as profit is by definition [ %win*AVGwin-%loss*AVGloss ], by improving my % of wins I not only increase my gains (like your hypotetic fellow) but I'm also reducing my losses.
So hell, I want to make better entries
I understand that your critique was just an example of another thing an EA is not supposed to be able to do... well, it's the last thing one should work on but sure it is really important to handle exits with some smart criteria.


In reply to NowAndLater about candlesticks I can tell that recognizing candlesticks is easy to do and of course any formation must be considered in its surroundings... so, yes, I've done this already in a couple of EAs.
I believe everything can be done... it just takes time and skills.
Perhaps traders tend to see it as impossible because as Forex007 just said ther are "too many" variables... but people like NowAndLater seems to have it clear... seems they have a clear picture of what is important and what is not... they have a plan, they follow a reasoning.
So who better than them can guide the process to develop an EA which is able to make an effective selection of entry points?
Maybe they have no interest in this... that's why we are questioning if it's possible or convenient.



I have to say that the most you find examples of things hard to teach to an EA, the most I get nice ideas to get it done... so please continue to make such examples... I think I can get some good out of it

Buon Natale a tutti!!!

Yes... but what I meant is that ranges and flags are often not well represented as IB. In many cases ranges seen from higher timeframes ends up in bars with progressive higer highs or lower lows... so when I see an IB and I spot a range or flag in the lower timeframes I'm extremely cautious before jumping in the trade... most of the times the breakout is far from the IB formation.

Have you read "Trading your way to financial freedom"? The author explains well how effectiveness of a method can be judged. E.g. you can have better expectancy (more wins than losses), yet still lose money due to poor RR. Vice versa too. (There is also frequency aspect, i.e. how often your setups occur).

Anyway, back to entries vs exits. True, entries are important; but traders trading the same strategy (e.g. DIBS) would all enter - more or less - at the same point. Yet not all would made money. Why? Exits.

I'm glad someone liked the video. I was absolutely floored when I saw it. It convinced me to get off my arse and do something more productive with my life.

Jimmy Jones,

I have read a post of yours in another thread. You seem like a genuine student of the markets not one of those forum types that want something for nothing. I thought I would converse with you in this thread since it does relate to all practitioners of the dibs method.

"Your wasting your time with comments like this. I think it's great advice, but the sad truth is it will not make an impression on those who need it the most.

Success in this game has less to do with what time frame you trade, what system you use, ect, and much more to do with your thinking, your beliefs. Until folks realize this they will be mediocre at best.

This system posted is a great gift.

I will add another gift. Read The Magic of Thinking Big. Keep re-reading it until you can look yourself in the mirror, tell yourself that you are going to be a successful forex trader, and you believe it to the very core of who you are, no matter what anyone else tells you. Then you will be ready to take advantage of this system that was gifted here, or any other of the better systems posted on these boards.

Most of you will tell me I'm full of crap. Perhaps someday when your tired of losing all the time you'll come back across this post and give the book a try. It works for all of life, not just trading"

In the past I would have totally agreed with your philosophy about how important the mental aspect is to trading. Years ago I read Mark Douglas and made the hasty conclusion that my problems were the result of faulty trading beliefs and other trading psychology issues.

After being around for a while, I believe less and less in that theory. Its my opinion that one has trading psychology issues if they can't stick to the plan or they get in the way of the plan. If one is sticking to a well thought out plan and still experiencing problems. Trading psychology is not the problem the problem is the plan.

Here is a great blog post from Dr. Brett that illustrates the point I'm trying to make in a much more illuminating manner. By the way Dr. Brett offers psychological solutions for professional traders (prop,hedge funds, banks, mutual funds) all over the world. This makes this theory of his even more meaningful because he is basically in the business to offer psychology solutions and he is saying psychology is not the main thing.

"Am I deluding myself by following his assertion that successful trading is predominantly based on mindset--and that this is the key--this is all that has been missing from my previous trading ventures? I have spent years and thousands of $'s trying to educate myself as to trading systems, books, and methods. I thought that all I really needed to do was find a trading method that suited me - (my psychological makeup), something I could follow with a degree of self-confidence...Is there any hope that this might become a possibility?"

My heart goes out to those who struggle with trading, and I cannot express the depth of my contempt for "coaches" who pander to those hopes with psychological snake oil.

Let's try an experiment: Read the first two paragraphs of this post again, but this time substitute the words "play chess" for trade and "chess playing" for trading. Now read the paragraphs again and substitute the words "play golf" for trade and "golf playing" for trading. Do it yet again, imagining that our writer is an aspiring Broadway star, and substitute the words "act" and "acting".

Of course, the re-readings sound ludicrous: we know that there is far more to success in chess, golf, and acting than "mindset" and prefab "systems, books, and methods". The missing element? Skill development. Training. A systematic program of learning that emphasizes pattern recognition, an understanding of market movement across time frames, intermarket relationships, sound execution of trade ideas, and risk management.

Mindset is critical in sustaining motivation, interest, and focus during the learning curve, and mindset is crucial in the consistent application of one's skills. The wrong frame of mind and emotional/cognitive/physical state can disrupt the best of skills, but the best of mental outlooks cannot substitute for developed skills. No positive mindframe and "method that suited me" can provide competencies--in any performance field.

So is there hope for our reader? As long as he is searching for a perfectly harmonious method that he can "follow with a degree of self-confidence", he won't be immersed in a learning curve and won't succeed as a discretionary trader. His best bet is to shop for an actual trading system that has been adequately developed and backtested and have it executed mechanically by a participating broker.

Alternatively, he could start from the ground up with observing markets and patterns, testing out trading ideas and skills in simulation mode, and making note of the markets, time frames, and patterns that come most easily and provide the greatest interest, as outlined in my trader performance book. Observing experienced traders apply their skills in online trading rooms or joining a proprietary trading firm that features sound training can also be worthwhile toward this end.

Most of all, our reader should find coaches and mentors that are more interested in guiding a career than making a sale. There are good ones out there that will shoot straight; note, for example, John Forman's recent series of questions that he answers for developing traders and the sophisticated observations of Ray Barros re: emotions and trading.

The bottom line is that the answer to successful trading cannot be found in any coach, book, or system. Success is something that is cultivated over time, with directed effort. There is hope for our reader if he can identify his strengths and systematically learn to apply them to markets that capture his interest and motivation.

Season's greetings, luxinterior. I tried setting up the indicator, but here is what I ended up with:Compiling 'DIBS_TriggerLinesmq4.mq4'...'DIBS_Trigger_B + iUNiqueID,OBJ TREND, 0, Time[i], iHigh(NULL, 0, 1), Time[i-iExtension],iHigh(NULL, 0, 1));' - double quotes neededCrogram FilesMetaTrader - Forex-MetalexpertsindicatorsDIBS_TriggerLinesmq4.mq4 (124, 45)'DIBS_trigger_S = iUniqueID,OBJPROP_WIDTH,3,);' - double quotes neededCrogram FilesMetaTrader - Forex-MetalexpertsindicatorsDIBS_TriggerLinesmq4.mq4 (150, 52)2 error(s), 0 warning(s)Any help? Thanks.

I by no means meant to imply that skill development was not necessary to success. What I meant was that no matter how much time was spent on skill development, no matter how proficient one became at technical analysis, money management, risk management, ect, no matter how many people try to help someone with tips, tricks, pointers, systems, ect, that alone will not guarantee any kind of real success.

It's something I believe is absolutely vital to success at anything one wants to accomplish, and I have read many bios of successful people who elude to the same thing, as well as heard it mentioned by people I know personally whom have achieved much more than I have.

I have been reviewing my past year this week and have come to the conclusion that the time I spend on this forum (or any other for that matter) is more of a detriment than a help now. The thing that makes thinking so powerful is also the thing that makes it the most dangerous. Most of the posts on this forum are not in line with the thinking that someone can become extremely successful at this game. The more someone reads that type of negative tone material (not necessarily ill intended), the deeper it takes hold in his thinking. I won't be discussing it anymore in the forums, too many people here either think I'm nuts or they are to busy looking for the magic bullet to take a real look at what being successful requires.

You are right, JJ. Mechanical acquisition (and even adequate comprehention followed by complete digestion) does not g'tee success. Look at F1 - they are all pros, yet there is only 1 (2-3) winner. Now consider how many highly-skilled and trullly professional contenders were competing for a place at F1.

I don't know what the key to success in trading is, but I liked this post (I am a big fan of the thread too) - http://www.forexfactory.com/showpost...ostcount=17482

Good luck!

Another great post from Dr. Brett over at traderfeed. I thought I would post it here since it is extremely relevant to Dibs traders.


My recent post emphasized the role of planning in successful trading. While trade planning is as important for the trader as game planning is for the quarterback, the reality is that a trader's performance, like that of the quarterback, is a joint function of gut feel and careful forethought. The quarterback may call for a pass play, with the flanker slanting up the middle of the field as a primary receiver, but under pressure from linebackers may opt to dump the ball to a running back or scramble out of the pocket and look for secondary receivers. Similarly, the trader may plan a trade to break below the previous day's low, but noticing very weak holiday volume, might take profits before the target is hit when the NYSE TICK cannot make decisive lows on a down move.

One of the formative experiences of my career as a psychologist was observing high frequency traders in Chicago (those making 50-100 or more trades per day on a discretionary basis) make money consistently, day after day, week after week, and year after year. When I looked at how much they were giving up in commissions each day and yet still could make money, I realized that their skills were greater than any market efficiencies.

Perhaps most interesting to me was that these traders typically could not verbalize to me how they were making their decisions. Yes, they could point to shifts in order flow, volume, etc.,--and, yes, their trading size and ideas about limiting losses and taking profits had a strong element of preplanning--but most of their decisions were like the audibles of the quarterback. It was clear to me that they knew a great deal about markets, but did not seem to know what they knew.

This realization led me to research the field of implicit learning when writing my book on trading performance. It also led to this key post on the objective basis for subjective knowledge. It appears that, particularly in the realm of pattern recognition, we process the world far better in an implicit, subconscious mode than explicitly. As a driver, I respond to the sudden shift of the car in the next lane almost immediately, before I consciously identify what that car is doing. This makes evolutionary sense: if we needed to rationally, consciously evaluate each threat before responding, we would not survive long as hunters, fighter pilots, or race car drivers.

An excellent recent research article passed along by an alert reader (many thanks!) points out that the human brain is hard-wired to make sound decisions in an implicit mode. For example, research subjects watching a computer screen in which most dots move randomly, but some move with a programmed path, can eventually make accurate predictions about the direction of the programmed dots far beyond chance levels. The mathematical calculations needed to make these predictions are beyond the skill level of many participants. Rather, their brains capture the probability distributions in the data and these present themselves to subjects as a "feel" for what will happen next to the dots.

The reason psychology is crucial to developing and experienced traders is that access to this felt, implicit knowledge is easily disrupted by such factors as fatigue, worry, frustration, and performance pressure. Indeed, one of the most common mistakes traders make is that they address performance problems by thinking harder. Like the insomniac who stays awake longer and longer thinking about trying to get to sleep, the trader who analyzes and worries about performance loses that "zone" in which probability distributions present themselves implicitly.

Experienced, successful traders know more than they know they know. Their performance crucially hinges on their ability to sustain a mindset in which they can access their implicit knowledge. Maintaining that "zone" will be the topic of the second post in this series.

Excellent article, thank you for posting it.
On a side note ..... Nasim Nicholas Taleb's book Fooled by Randomness is an excellent read.

Here is a Dibs trade I have just squared up with a handsome profit. I squared this trade based on a fixed target. I chose this option due to the time of day and my opinion that the method is now pressing its luck. I believe this because this is third successful dibs type trade that his worked out quite well. Time shall tell if this was a mistake or not. Time has spoken and I cut my winner short by about 50 pips. Is there a lesson? If there is one its don't be so aggressive to cut your winners short.

I've gone through the thread and not found any results from anyone doing live trading. I could have missed a post while scanning through. I like the system and briefly papertraded it with limited success. I'm curious what others have achieved.

Tks

Just to be sure, this system requires no other indicators right? I eyeballed the daily with an inside bar indicator, looks pretty promising..