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Trading setups around SR Zones

  • #141
  • Mar 18, 2009 9:48am Mar 18, 2009 9:48am
Quoting FXSurfer
I think that a key factor that isn't being talked about is Market Conditions.

Breakout trading works fine when the market is active and on fire.

If you try that same style of trading when things are dull it just doesn't work. During those conditions, when most of the trading is taking place within a range, then you have a good chance to fade - if the swings are big enough to make it worth it and you can keep your bearings. I can't really do it well though. In my mind that's more advanced trading.

IMO for beginners the best way is probably...
I agree, an active market is ideal. You need all those traders present to push the price around.

At the same time, I think it might be pointless to try and choose among your system-defined setups, provided you are in an active market. What I mean is: Eventually, when you have your system worked out, you should just trade every signal you see, don't try to outsmart your system. Grind it out.

If there is some rule, outside of your system, that you are using as a filter, then there are two cases: (1) it's working [then add it to your system], (2) it's not working [then stop using it and stick to your system].

I also agree with you in that there is definitely a learning curve to trading, and even to trading a particular system. You can't expect to trade any system perfectly when you first start.

While you are in the system development stage, that's a very difficult time. You must carefully balance sticking to your system with experimentation to find out what works and what doesn't. Once you find out what works, stick to it with all your discipline and grind it out.

I came dangerously close to abandoning my system altogether in search for something "new and better." But I'm not going to do that anymore. I'm tired of running. I've got a good basis, now I'm going to master it.
  • #142
  • Mar 18, 2009 9:50am Mar 18, 2009 9:50am
I wrote a poem today. It just came to me.

Mistakes are okay.
Mistakes point the way.
The mistakes I've done before, I won't do today.

  • #143
  • Mar 18, 2009 10:40am Mar 18, 2009 10:40am
Help, I can't get off.... somebody help me... aaaaaaaaaaaaaaahhhh!

---

Seriously though, I have been on many tangents and am still pursuing a few, but out of all of them, designing strategies around support and resistance has been the most productive for me.

Setups at support and resistance is my guiding light. I know it works through countless hours of study, so I have narrowed my field of view to only designing methods that take advantage of that concept.

I think whatever concept you choose to research it needs to have the following traits:

Simple and Robust - works on multiple time frames and markets, no more than three moving parts.

produces enough trades for efficient compounding.

You know of other traders that apply the basic concept successfully.

Ideally it is back testable to increase confidence and to have some idea of the methods potential results. Otherwise, you have to spend a month just to get enough data to make an initial appraisal.
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  • #144
  • Mar 18, 2009 10:43am Mar 18, 2009 10:43am
Sorry I've been hogging the board today.

I'm continuing my research and trading with swing points. I took what I was doing before (trading swing point breaks) and combined it with the idea of focusing on the daily high/low. I will also try to be flexible and reverse when a trade fails (at which point I would be trading a swing point reversal, not a break).

It is important to note that I am playing the current daily high/low. Of coure this is a dynamic value and I will change with it. I look for a setup near the current daily high. If price makes a new high, then that's the new daily high, and I will look for my next setup near that. The same goes for lows.

I am also going to try and be more conservative with my stops. If a trade gives me even just a few pips of paper profit, I will move my stop to break-even. Of course I will sometimes get stopped out right before a big move in my favour, but: A lost opportunity is better than lost capital. Also, I think more often than not, it will save me from a loss. A lot of the losses I had before are trades that never really materialized and that loss could have been prevented with a quick break-even stop. All those little losses added up; it was tough for the winners to overcome them.

Anyways, here are my first couple trades.
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  • #145
  • Edited 6:48pm Mar 18, 2009 2:35pm | Edited 6:48pm
Quoting mathematician
Eventually, when you have your system worked out, you should just trade every signal you see, don't try to outsmart your system. Grind it out.
Well, I guess this philosophy to too pure in the way of system trading for me to accept. That's why I'm leaning much more toward a discretionary approach. Sure, I believe in defining both your basic methodology and grinding it out - but not when it's sucking away your account. We just don't have the capitalization for it, do we? Can we grind it out until conditions turn favorable like large cap traders?

As an alternative to trying to ride out drawdown we can stop trading when we start bleeding out. Either that or change methodologies, which even then means discontinuing the one that wasn't producing good results in the given conditions.

For my part I'll stick with this approach:

*Know from the outset that there are many different Market Conditions that will present themselves.

*Not attempt to trade in all Market Conditions.

*Work on developing a trading method that takes advantage of the temporary inefficiencies present during a certain Market Condition.

*Trade the method when the condition exists.

*Not trade during any other condition.
  • #146
  • Mar 18, 2009 4:42pm Mar 18, 2009 4:42pm
Quoting FXSurfer
Well, I guess this philosophy to too pure in the way of system trading for me to accept. That's why I'm leaning much more toward a discretionary approach. Sure, I believe in defining both your basic methodology and grinding it out - but not when it's sucking away your account. We just don't have the capitalization for it, do we? Can we grind it out until conditions turn favorable like large cap traders?

As an alternative to trying to ride out drawdown we can stop trading when we start bleeding out. Either that or change methodologies, which...
Yep, actually I don't think we disagree. Those last two bullets that you've outlined could be part of your system, so by following those rules, you are still following your system.

For example, if a trader has one method that he uses for trending conditions and one method that he uses for ranging conditions, he would certainly only use those methods when it's appropriate. So that would be the first part of his system: Determine the market conditions.

When I say, "trade every signal your system gives you", I assume that part of the rules of the system dictate when to trade. If fact if a trader trades the trending method during ranging conditions, he would be breaking his rules.

I too am wary of purely mechanical systems. I think that a successfull mechanical system is extremely rare. I still prefer to be a discretional trader because I am looking for patterns in my setups. Now it is probably possible to program a computer to be able to recognize these patterns, but it would not be easy. There are so many minute variations in the patterns that a computer program might not notice. In contrast, humans are very good at recognizing patterns, even if there are slight changes to them (which is certainly true of market patterns). In order to use a set of strict mechanical rules (such as in a computer program) that could capture all the variations of even a basic pattern as well as a human can, those rules would have to be very complex. I don't think it's worth the time and effort.
  • #147
  • Mar 19, 2009 12:38am Mar 19, 2009 12:38am
I've never seen such a big move in such a short time for EUR/USD! Wish I had been there...
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  • #148
  • Mar 19, 2009 1:44am Mar 19, 2009 1:44am
Quoting mathematician
I've never seen such a big move in such a short time for EUR/USD! Wish I had been there...
What could you do if you had been there???? It shot up over 200 pips in 60 seconds, Oanda had raised their spread back to 10 pips again in the beginning of the move. If you were there, you'd not even had time to blink after seeing such a move like this..... The best you could do was to place a limit buy order above the consolidation zone @ 1.3355 with 5 pips spread. From there, there were 180 pips left (in hindsight) for you to capture. How many pip you could grab had you been there and got the balls to trade given that you bought? Hopefully, a quarter of them was the best you could do in your style........ but you sound like other people that posted their chart with a pin bar or whatsoever pattern back to few months old implying that they'd capture the most out of the down or up move if they had fortunately been there....

So, what could you do if you were there, mate?
Trading is the game of fear and greed.
  • #149
  • Mar 19, 2009 2:00am Mar 19, 2009 2:00am
Couple of pivot reversals from current session
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  • #150
  • Mar 19, 2009 2:24am Mar 19, 2009 2:24am
Quoting Fx chartist
What could you do if you had been there???? It shot up over 200 pips in 60 seconds, Oanda had raised their spread back to 10 pips again in the beginning of the move. If you were there, you'd not even had time to blink after seeing such a move like this..... The best you could do was to place a limit buy order above the consolidation zone @ 1.3355 with 5 pips spread. From there, there were 180 pips left (in hindsight) for you to capture. How many pip you could grab had you been there and got the balls to trade given that you bought?...
Hey, I was just saying it would have been nice to have caught that move. Just a could've, would've, should've.

But to answer your question: Yes, I would have had a limit buy order at 1.3359 because that's 2 pips above the previous high. Actually I would have placed it at 1.3358 + spread, whatever the spread was at the time. This is all according to my "Swing Points at Daily High/Low" setup which is a couple posts ago. You're right though, I might not have had time to catch the move considering the spread and all.
  • #151
  • Mar 19, 2009 2:34am Mar 19, 2009 2:34am
A few weeks ago I was very much interested in Jesse Livermore style "pivotal points," then I realized that these were nothing more than swing points. Just recently I started trading only those swing points that occur at the day's current high/low. I just now realized that this is, depending on the time of the day, basically an Asian session range breakout strategy.

I remember a few years ago, when I first started learning about the forex, I found some great videos on fxstreet.com about the Asian session breakout by Phil Newton. You can see some of them on Youtube. Phil Newton
  • #152
  • Mar 19, 2009 2:46am Mar 19, 2009 2:46am
Quoting ProbaBill
Couple of pivot reversals from current session
When you say "no entry" at that one entry, does that mean that you entered at those other circles? If so, well done!
  • #153
  • Mar 19, 2009 3:51am Mar 19, 2009 3:51am
Quoting mathematician
When you say "no entry" at that one entry, does that mean that you entered at those other circles?
indeed, there was no trigger.

We just had another entry a little while ago.
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  • #154
  • Mar 19, 2009 4:27am Mar 19, 2009 4:27am
Here are the EURUSD trades and the usual scenario for a failed trade. I am keeping a tight stop on these trades, so once the pivot is taken out against me I am out. I am willing to take two attempts at the one level and am happy to take the loss and re-enter rather than holding large stops which kills my RR.
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  • #155
  • Edited 9:25am Mar 19, 2009 5:04am | Edited 9:25am
Quoting ProbaBill
Here are the EURUSD trades and the usual scenario for a failed trade. I am keeping a tight stop on these trades, so once the pivot is taken out against me I am out. I am willing to take two attempts at the one level and am happy to take the loss and re-enter rather than holding large stops which kills my RR.
Yes, exactly! It is better to have one small loss and one win (both with low risk), rather than one win with a much larger risk. If you scale your position size so that the risk is always the same percentage, you will have a much larger gain.

For example, consider risking 10 pips vs. risking 30 pips. Maybe you risk 30 pips, you don't get stopped out, and you make a profit of 90 pips. That's 90/30, a 3/1 reward/risk ratio. If you scale your position so that you risk 1% on each trade, you've just made 3% profit on that trade. One the other hand, if you risk only 10 pips and get stopped out the first time, but catch it on the second, you have... -1% on the first trade, but then 90/10 = 9/1 reward/risk, so the second trade gives you 9%. In the end you've made 9% - 1% = 8% even though you lost once.
  • #156
  • Mar 19, 2009 11:52am Mar 19, 2009 11:52am
Hey ProbaBill!

Today was day 2 of my strategy to trade swing points near the CDH/CDL (current daily high/low). I learned a few things and I made a few pips.

Many times it will be a false breakout, at which point I am looking to reverse. In that case I will be trading the swing point reversal, like you. I have a feeling that on most days, I will probably be making my pips from the reversal trades rather than the breakouts. However, when I do catch a breakout, I'm sure it will be worth it, as that guy said in the "rocket" file you posted. Of course not every day is going to be profitable.

One thing that I learned was that I probably shouldn't update the new CDH/CDL every time price makes a slightly new high/low. Instead, I should keep trying to enter at the original high that I've marked and only update it when price moves significantly away from what used to be the daily high/low. That should increase my probability of my entries making a few pips right away, enough so I can move my stop to break-even and have a risk-free position.
  • #157
  • Edited 4:00pm Mar 19, 2009 3:33pm | Edited 4:00pm
Quoting mathematician
I am also going to try and be more conservative with my stops. If a trade gives me even just a few pips of paper profit, I will move my stop to break-even. Of course I will sometimes get stopped out right before a big move in my favour, but: A lost opportunity is better than lost capital. Also, I think more often than not, it will save me from a loss. A lot of the losses I had before are trades that never really materialized and that loss could have been prevented with a quick break-even stop. All those little losses added up; it was tough... amen to this ....
looks clear enuf. quick question. could you explain what you meant by "bear/bull" trap as it happened during your trade (or trade set-up)?

here's my observation (my 2 cents worth & that's probably the fair value ... ) ... 1. market ran up from below, testing your swing high; 2. is the overflow effect (talking about patterns, then i would have expected a pullback here ... if not, so what, let it run up till it does). also, it formed a double top of support on those last 2 bars; 3. after price pulled back, it pulled back beneath & closed below your swing high ... twice. still not convinced, then enter off the "range" of the price action that formed around the swing high after it pulled back & your off to the races (maybe ...) ... except the bulls never recovered & et voila, you have your reversal entry ...

anyhow, that's it for the monday morning quarterback report ... it's so easy to see after-the-fact isn't it? hope i didn't rain on your good trade ... (i was thinking more about saving you the cost of the first entry).
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"Believe nothing you hear and half of what you see." Proverb
  • #158
  • Mar 19, 2009 4:47pm Mar 19, 2009 4:47pm
Quoting fxgrinder
[color=Black]looks clear enuf. quick question. could you explain what you meant by "bear/bull" trap as it happened during your trade (or trade set-up)?
The breakout above the high of a rage is usually a bullish signal. Since a bull wants to go long, if price breaks out above the high, but then quickly turns back down, it will hurt the bulls, probably stop them out. Hence the bull trade. Similar for the bear trap. Luckily i had my stop to break-even before the bull trap on this trade...and that's what I intend to do often. So I will have a lot of break-even trades.

Quoting fxgrinder
here's my observation (my 2 cents worth & that's probably the fair value ... ) ... 1. market ran up from below, testing your swing high; 2. is the overflow effect (talking about patterns, then i would have expected a pullback here ... if not, so what, let it run up till it does). also, it formed a double top of support on those last 2 bars; 3. after price pulled back, it pulled back beneath & closed below your swing high ... twice. still not convinced, then enter off the "range" of the price action that formed around the swing high after it...
Yes, the main reason I put my reversal order there is because it's back below the previous daily high that gave the breakout signal. At that point the bullish breakout clearly failed.
  • #159
  • Mar 19, 2009 5:45pm Mar 19, 2009 5:45pm
Quoting mathematician
So I will have a lot of break-even trades.

im starting to like these myself... there's always another entry.

Yes, the main reason I put my reversal order there is because it's back below the previous daily high that gave the breakout signal. At that point the bullish breakout clearly failed.
hope i didn't offend or just state the obvious. good trading tho. had another thought about this ... if i remember what it was, i'll PM you when i return.
"Believe nothing you hear and half of what you see." Proverb
  • #160
  • Mar 19, 2009 11:08pm Mar 19, 2009 11:08pm
Quoting fxgrinder
[color=Black]looks clear enuf. quick question. could you explain what you meant by "bear/bull" trap as it happened during your trade (or trade set-up)?

here's my observation (my 2 cents worth & that's probably the fair value ... ) ... 1. market ran up from below, testing your swing high; 2. is the overflow effect (talking about patterns, then i would have expected a pullback here ... if not, so what, let it run up till it does). also, it formed a double top of support on those last 2 bars; 3. after price pulled back, it pulled back beneath...
I agree with your analysis, the pullback to the origin of the BO is to be expected, there are usually traders looking to capitalize on this phenomena, so you get a fresh burst of momentum from these bulls. The trap springs shut on all of those bulls when price takes out the cluster of lows at the bottom of the range (your 3).

This same scenario often takes place just below the HOD which makes for better BO trades IMO. Traders (including me) are looking to go short at the HOD and you get these micro ranges developing, the shorts will look at the break of the highs of this range as confirmation their position is in trouble, and many will start offloading to minimize their losses, this snowballs and before you know it all of the shorts stops are getting taken out as price passes through the HOD. Now bulls like 'Mathematician' are jumping on board... etc...etc.

If you are prepared to miss a few BO's, waiting for these patterns to develop may give you an additional edge. Also, by trading off some of these patterns you may get a position ahead of the actual HOD BO, this gives you an advantageous postion when the pullback comes.. I will find an example for you.

Cam
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