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Line in the Sand

  • #1
  • First Post: Mar 28, 2007 6:01pm Mar 28, 2007 6:01pm
1) pick a S/R level, trade the smallest lot size possible in your acct.

2) stay long above S/R, stay short below S/R.

3) always reverse logging how much its costing you.

4) take profit at twice the cost or till 1% loss in account equity.


What you will find is that volatile markets are the best, and price will make headway in one direction or the other. The goal is to pick a price point that is retraced the least. And a price vector is either positively sloped or negatively sloped to greater degree then flat on a intraday timeframe.
Price is the only indicator.
  • #2
  • Mar 28, 2007 10:12pm Mar 28, 2007 10:12pm
On 100,000 account, 1% is 1000

USDJPY spread is usually 3 pips.

3 pip spread x 33 reversals x 9.17 dollars/pip = 907 dollars or close to 1%

now take a look at price action and how many times certain points get retraced and when they rarely get retraced. The number of reversals before you hit 1% loss is actually less, since slippage and just the price moving in one direction vs another implies a loss greater then the spread. Lets say your API exits at 1 pip loss so total of 4 pips per reversal implies only 27 attempts before 1% loss limit is hit.

take a look at your chart and when price traverses through the same point 27 times. on a typical day how many times does price traverse a typical point. Thats why it inherently important to only trade this method on volatile days, where price just runs and doesnt look back. And even if it does look back, it looks back less then 5 times. The cost ends up being 183 dollars or 5 x 4 x 9.17. The price needs to slip 40 pips to cover the cost of reversal and make an extra 20 pips on the trade. If you further reduce you cost to ECNS that have minimal spread, your margins are even greater to work with.
Price is the only indicator.
  • #3
  • May 22, 2007 10:42am May 22, 2007 10:42am
This is, as described, a technique more than a system.

Probably that's why no one has chosen to add to this thread.

Too bad. This technique has some of the greatest value to an "edge" trader that is available.

I use it all the time, and you will see why.

This setup is extremely good because it is useful for those who are diligently trading a system and wish to either have early entry to it or early exits and save or make additional money in the process.

This technique can be made into a system quite easily if you come up with a precise definition of the Support or Resistance points that you would be trading from. This could be as simple as using the "highest high or lowest low of X days."

And then pick out some form of trailing exit for the winners.

Imagine trading this way with a definite concept of trend. Only trade in that direction, making frequent additions to your position by buying breakouts above a serious resistance point. And only staying with the new position in the direction of the trend. And then exiting all of your positions acquired at the point when your major trend indication changes to flat.

Also, by trading through a futures firm with low commissions or a firm like Currenex with miniscule spreads/commissions you can cut the trading costs down to a bare minimum.

The only possible negative trade-offs that I am aware of is the need to be watching the market personally when the opportunities come and the equal need to actually take the trades and the frustrations that result when you get many little losses before the market decides to rumble along in the direction of your trend and reduce the need to be constantly attentive.

What most readers of this forum don't realize is that this is a primary system used by floor traders and institutional traders. They have staffs that can and will watch the market constantly, and their costs are the lowest due to volumes and money under management.

TheRealThing
  • #4
  • May 23, 2007 10:23am May 23, 2007 10:23am
Quoting TheRealThing
This is, as described, a technique more than a system.

Probably that's why no one has chosen to add to this thread.

Too bad. This technique has some of the greatest value to an "edge" trader that is available.

I use it all the time, and you will see why.

This setup is extremely good because it is useful for those who are diligently trading a system and wish to either have early entry to it or early exits and save or make additional money in the process.

This technique can be made into a system quite easily if you come up with a precise definition of the Support or Resistance points that you would be trading from. This could be as simple as using the "highest high or lowest low of X days."

And then pick out some form of trailing exit for the winners.

Imagine trading this way with a definite concept of trend. Only trade in that direction, making frequent additions to your position by buying breakouts above a serious resistance point. And only staying with the new position in the direction of the trend. And then exiting all of your positions acquired at the point when your major trend indication changes to flat.

Also, by trading through a futures firm with low commissions or a firm like Currenex with miniscule spreads/commissions you can cut the trading costs down to a bare minimum.

The only possible negative trade-offs that I am aware of is the need to be watching the market personally when the opportunities come and the equal need to actually take the trades and the frustrations that result when you get many little losses before the market decides to rumble along in the direction of your trend and reduce the need to be constantly attentive.

What most readers of this forum don't realize is that this is a primary system used by floor traders and institutional traders. They have staffs that can and will watch the market constantly, and their costs are the lowest due to volumes and money under management.

TheRealThing
A word to the wise....

Thanks for your comments.....I have found your few posts a very good source of trading wisdom. You have been added to my "must read" list of posters at FF!

Thanks!

------------------------------------------
Also.....thanks to the originator of this thread for bringing this up!
  • #5
  • May 23, 2007 11:09am May 23, 2007 11:09am
Pretty much what Im reading in a book at the moment. The main difference being a specific movement of X pips defines your entry/exit spot. When a currency pair moves X number of pips (usually based on its ATR 20) price will try to move its ATR again away from the price where it completed initial movement. Obviously you dont know 100% which way, but when it completes the movement it gives you an exact entry spot and you know how far the movement you are trying to trade will be (the x pip ATR range). If you were using 62pips on the e/u then when the movement had finished, you would then go short or long depending on whatever trigger you are using and your stop would be set above/below where u entered. Since you expect some kind of 62 pip movement, you can use a stop of 20pips and target 62 pips. You may not get exactly +62 pips as the range bar will be 62 pips from its high to low.
  • #6
  • Jun 1, 2008 9:59am Jun 1, 2008 9:59am
Quoting Spectre2006
1) pick a S/R level, trade the smallest lot size possible in your acct.

2) stay long above S/R, stay short below S/R.

3) always reverse logging how much its costing you.

4) take profit at twice the cost or till 1% loss in account equity.


What you will find is that volatile markets are the best, and price will make headway in one direction or the other. The goal is to pick a price point that is retraced the least. And a price vector is either positively sloped or negatively sloped to greater degree then flat on a intraday timeframe.
I am curious about this but not sure that I understand it. What does 'always reverse' mean.

For anyone who is interested, do a dig through TRT's old posts, lots of titbits there.

Thanks

Max
Gravity goes both ways in forex...
  • #7
  • Jun 2, 2008 4:53am Jun 2, 2008 4:53am
but which S/R weekly daily post one chart
  • #8
  • Jul 6, 2008 8:29pm Jul 6, 2008 8:29pm
Spectre2006, I really like the 'technique' you've outlined in your OP. Also, the fact the TRT vouches for it speaks volumes. If anyone would care to post results and anecdotes using this technique, I'm certain it would be appreciated by many more than just myself.

Either way, thank you for posting your concept in this thread.
-Tim
  • #9
  • Jul 6, 2008 9:39pm Jul 6, 2008 9:39pm
Spectre2006 hasn't visited this forum in the past 9 months
"To Be A Successful Forex Trader, You Need A Successful Forex Mentor."
  • #10
  • May 8, 2010 5:26pm May 8, 2010 5:26pm
I guess this "wheel" was invented long before I thought it out.

The really funny part is that I even gave it the same name, believe it or not.
  • #11
  • May 8, 2010 6:38pm May 8, 2010 6:38pm
Can you please expand on this?
  • #12
  • May 9, 2010 12:08pm May 9, 2010 12:08pm
Quoting guess121
Can you please expand on this?
I have developed almost exactly the same approach on my own and I thought it was funny when I found this thread and saw that it had already been done.

Not only that, but I also called my approach Line in the sand... small world.

I developed my approach to be used at high probability locations, such as a very good J16 setup and then I'd enter a large position with a very tight SL expecting to get stopped put many times, but sooner or later price would finally shoot through the entry level and not look back and then I'd be in the trade with a very large position.

That's the idea of this entry technique. sadly my working hours do not allow me to really utilize it. But some day...
  • #13
  • May 9, 2010 1:52pm May 9, 2010 1:52pm
But how would you enter your trade?

I see price whipsawing around the price... how would you base your entry?

Is it possible for you to expand on this or provide an example?

Quoting o990l6mh
I have developed almost exactly the same approach on my own and I thought it was funny when I found this thread and saw that it had already been done.

Not only that, but I also called my approach Line in the sand... small world.

I developed my approach to be used at high probability locations, such as a very good J16 setup and then I'd enter a large position with a very tight SL expecting to get stopped put many times, but sooner or later price would finally shoot through the entry level and not look back and then I'd be in the trade with a very...
  • #14
  • May 11, 2010 2:31pm May 11, 2010 2:31pm
Quoting guess121
But how would you enter your trade?

I see price whipsawing around the price... how would you base your entry?

Is it possible for you to expand on this or provide an example?
Here's an example of how one could potentially use the LITS method of entry in order to get a maximum sized position with tightly controlled risk.

I have marked the two very short term swing high/low levels on this cable chart. If/when price crosses one of these level and closes above or below, we have a 1-2-3 formation.

As we can see (marked with arrows) we first had a false break up and later price broke through the swing low and then continued down, 37 pips as I write this.

Now, imagine that you use a 2.2 pip SL, which on Oanda normally with their 1.8 pips spread on cable gives a total SL of 4 pips

If we're using 0.4% risk per entry, that makes every pip worth 0.1%.
As we start off with a false break, that causes a 0.4% loss, but after that we enter short and if we were to close out right now, we'd get a (37-4) x 0.1 = 3.3% profit. Total risk has been 0.8%.

Need I mention what happens if you're able to ride such a trade for a few hundred pips?

Obviously it's not as easy as I made it seem here, not at all. This was just to demonstrate why LITS can be a powerful tool. The risk lies in getting frequent stopouts that slowly bleed you even though every loss is small. Find a way to handle that is the key to making LITS work for you.
Attached Image (click to enlarge)
Click to Enlarge Name: lits example with 1-2-3 entry.jpg Size: 78 KB
  • #15
  • May 11, 2010 5:23pm May 11, 2010 5:23pm
Ok great, I see what you are getting at.

Yes, the difficult part is tight SL and good position sizing, and the tight SL thing, as you say, become difficult.

For it is about position sizing and multiple entires based on your first position and your first positions SL and TP... as I don't think we can get in the trade at the 'perfect' price and it's a matter about managing the trade and controlling the risk.

Quoting o990l6mh
Here's an example of how one could potentially use the LITS method of entry in order to get a maximum sized position with tightly controlled risk.

I have marked the two very short term swing high/low levels on this cable chart. If/when price crosses one of these level and closes above or below, we have a 1-2-3 formation.

As we can see (marked with arrows) we first had a false break up and later price broke through the swing low and then continued down, 37 pips as I write this.

Now, imagine that you use a 2.2 pip SL, which on Oanda normally with...
  • #16
  • Sep 17, 2011 8:56am Sep 17, 2011 8:56am
This technique is really interesting. Too bad the author is not in this forum anymore. Not too sure if I understand it correctly, but the idea is to pick a S/R and keep on long once above it and short below it. If one is in long position and price reverse and goes down, then one need to take a double position and short it, double also include the spread cost. This mean that so long as it goes one way be it up or down, and hit twice of what you put on the table, you take profit and close your position.... Only way to lose is that it keep on hovering the S/R without hitting your takeprofit which is twice of what you put on the table until then, and it hits the 1% limit of your account via the multiple entries and losses. The 1% is to break/stop the possibility of risk of ruin.

I guess only people who's able to get minimal spread can do these. Can anyone who use similar concept give some hint if I'm correct thinking in these direction?
  • #17
  • Sep 17, 2011 11:22am Sep 17, 2011 11:22am
Quoting danieltang
This technique is really interesting. Too bad the author is not in this forum anymore. Not too sure if I understand it correctly, but the idea is to pick a S/R and keep on long once above it and short below it. If one is in long position and price reverse and goes down, then one need to take a double position and short it, double also include the spread cost. This mean that so long as it goes one way be it up or down, and hit twice of what you put on the table, you take profit and close your position.... Only way to lose is that it keep on hovering...
s/r is 50% between a high and a low, with volatility high and microtrends close together --
certainly, just have to watch the box-like area for subtle changes that may lead to momentum, which could pad the # of pips or violently subtract from them.
  • #18
  • Sep 18, 2011 12:29am Sep 18, 2011 12:29am
Quoting ha-pattern
s/r is 50% between a high and a low, with volatility high and microtrends close together --
certainly, just have to watch the box-like area for subtle changes that may lead to momentum, which could pad the # of pips or violently subtract from them.
Thanks for reply. After reading the whole thread a few more times, and been thinking about how best to use this, I think I finally understand what the author trying to do. And it makes sense for instituational trader to use this due to the advantages they have. Think the best way to find out how to use this is to try it out myself now.

BTW the idea of setting your TP at how much it's costing you till then is kind of new to me.
  • #19
  • Jul 20, 2012 5:59pm Jul 20, 2012 5:59pm
Well going back and fourth and looking at systems, price action, etc, etc... I have come back to this 'technique' of trading.

This is the most simplistic yet powerful approach to trading.

1. Look for points where price may retrace and shoot off from
2. Close out our losses
3. Let our winners run

Then you think wow... seems simple.

So let me explain further.

Point 1
I think this is easy to do, zoom out charts and look at distinct SWING highs and low (key word SWING, as you might get HH and LL within this 'SWING' but we are looking for clear areas where price might test and shoot off)

Point 2
This can be done with help of an EA and hopefully goes hand in hand with Point 1 above, BUT, we do not know how many times this area may get tested in the future - if we all knew, we would be millionaires!

Point 3
This is the difficult bit... I have read little bit of Graeme's thread in building the millipede and stacking positions... but I do find this difficult to do and see some sizeable trades, +100 pips die out for BE (as I move SL to BE once I hit say 50 pips)

The key to this is KISS, read The Real Things post and not to over complicate it... I am not trying to reinvent the wheel here.
  • #20
  • Jul 20, 2012 6:12pm Jul 20, 2012 6:12pm
I guess for this trading style you might add a strength meter to the chart and only trade the S/R break if strength has built up to something exceptable to trade. This will depend on your meter.It won't be perfect but if it helps only a little, it could make all the difference.

Also, some brokers offer low spreads these days which will help a lot for the small stop. I don't want to talk about Brokers really but Axis gives me an average of 0.6 on majors which is great for tight trading. (which i do)

jt
"Even if you fall down face first, you still went forward."
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