The DIBS Method... No Free Lunch continues

hi folks,

I did a manual backtest on the daily IB for GBP/USD for the 1 year period 12/2003-12/2004.
This was quite a choppy year with a trend towards the end of the year.

To take the trade long or short according to the last week being up or down was a bit of a hit and miss affair.
Even in a well defined trend, a week of consolidation could put you on the wrong foot in which direction to take the trade.
But at the end of the year, we still managed a small profit of 1,665 pips, thanks to that trend in October/November.

The choppiness continues after this year until October 2006.

The results are below. Stops are taken at IB or at 20-day SMA if the trade is running. NT=no trade (wrong direction or trigger is after 3 days), BE = break even; trade has to trigger within 3 days.


3/12/03 +767, 11/12 -248, 23/12 +387, 26/12+321, 7/1/04 BE, 4/2 NT, 16/2 BE, 19/2 -250, 4/3 BE, 17/3 NT, 19/3 BE, 29/3 NT, 7/4 -230, 9/4 BE, 3/5 BE, 6/5 -230, 13/5 NT, 18/5 NT, 20/5 NT, 24/5 +348, 31/5 BE, 25/6 BE, 14/7 -192, 22/7 NT, 26/7 +28, 30/7 NT, 9/8 NT, 11/8 -160, 25/8 -252, 6/9 -170, 9/9 NT, 13/9 -186, 16/9 +184, 22/9 NT, 30/9 -356, 7/10 NT, 26/10 NT, 4/11 BE, 15/11 +803, 22/11 +715, 29/11 +386

in choppy conditions you will lose a little, but in a trend you will rake in the pips

not bad at all considering that all trades were taken mechanicly without looking at price action (maybe better for some?!?).

Hi,

do you have historical cable data?
What time frame?

metatrader, 1 minute - 1 month and in between

many thanks for the prompt replay.

Do you have 1 minute time frame back to the 2003 in the metatrader? what is your broker?

Yeah I've had a rubbish week too!! Having said that, I thought I'd been tinkering too much by adding indicators that are totally unnecessary and just over complicate the charts. So today I've gone back to basics !

i trade usdchf, usdjpy, eurusd and gbpusd

Heres hoping some trends develop soon Keep the faith !

Nice IB on the 7amGMT EurUsd long. Anyone else on this? Is a free trade already and really going some

no, only daily TF and up and its a demo from Alpari (US)

ok. many thanks

Is there someone who has any idea where to get (also paying) affordable forex historical data?

Nice one.

I got that one too. The risk was moderate and the uptrend was looking fairly solid on 1HR, 4HR and even the Daily. Let's hope it does some serious damage.

On the higher timeframes it's a bit of a mess, though.

There's a monthly IB on the EUR/USD.

A mere 692 pips.

I wonder what would be used as the open?

Price at 1st January?

:-)

I would say: go with the overall trend

a note of WARNING:

in this strategy you are to hold your trades for BE or SL, unless taken out in a strongly trending market by a 20-day SMA.

after backtesting I found that in a ranging market you will get stopped out on your hourly IB`s all the time for BE or a loss, because price is coming back all the time. You might be up 300 pips with your last trade, but the system tells you to hold and the next day your trade closes at BE.

so when a trend develops, you will have no trades ready to profit from this trend - only the trades that you managed to get in at the last minute.
and even then it is possible that no IB formed just before taking off or you just got stopped out with that last trade or the take off happened after your trading hours.

so what happens if we have 8 months of a ranging market that could happen like in 2003-2006?
suppose we have 2 trades a day; 1 trade @ BE and 1 trade (2 positions) at SL of say 30 pips = a loss of 60 pips a day/300 pips a week/9,600 pips in 8 months.

It might very well be that over the years this strategy is profitable, but at the very least you should be aware that your losses might add up day after day, until you hit the sweet spot.

A solution might be to put this system away until a trend develops.

If you read through this thread you will see many people saying that not all inside bars are the same.

Also Peter Crowns advised trading only the strongest/wekest hand so therefore these would be the one's most likely to be in a trend.

A little discretion can probably save you $$££ when using this method

sorry foredog, but from your comments I get the impression you havent really looked into this strategy seriously.

yes, some people say that not all IB`s are the same, but Peter never mentioned that.
he did say that some breakouts have 2-5 times the success rate of others, but he might have been talking about other strategies that dont use IB`s for breakouts.

weakest/strongest hand: he only talks about trading the pair that is up or down the most for THAT day and that has nothing to do with the overall trend.

undoubtedly when the trend is there and it keeps going, this strategy will be very good, but so will be a lot of other trendfollowing systems.

but foredog, if you have some numbers to share, I will be more than happy to have a look.

take care

Trend develope all the time and at any given time the trend on 1 time frame will conflict with the trend on another timeframe.

You could easily argue that you could trade this method on a 1 minute chart that trends the most, however has the greatest amount of noise too. There would be prime benefits that your risk would be exceptionally small therefore hitting 1:1 would happen quicker, however the wipsaw effect could see you out of the trade in a matter of seconds.

If you were a daily trader and you waited for a trend to occur you could be waiting a very long time. The Eur/Usd well known for its trend accuracy has been up and down like a yoyo with no long term trend (unless you call the move from 1.6000 to current still the definable trend).

Now for the second point, which will touch upon the first slightly and that is that this and most methods work best in a trend. If you trade a variety of TFs there is always going to be a trend, it is just the longevity of the trend will differ. So saying this, it is discretionary and I cant emphasise that enough to trade to a profit zone you feel comfortable with. So your saying that over an 8 month period you could accumulate 9000 pips of loses (dont know too many accounts that would withstand that number), you could just as easily accumulate 9000+ pips of profit by taking profit at earlier stages. If you had accumulated 9000 pips loss then you would be in effect on the wrong side of the tracks, considering that in that case the trend would more likely be in the opposite direction to your trading.

Now if you were to go around trading systems depending on the markets the you would have to be a very astute trader to be able to implement to a T a system in a market that is completely random and unpredictable. This is one of the reasons traders will ultimately fail. They believe that when something doesnt work a couple of times they need to change direction, look for an answer. Drawdown and losses are inevitable, regardless of the edge you may have. They are a part of trading. As soon as you believe that you understand something that is random in nature then you begin to expect things to happen. Expecting is a road to failing. You cannot expect the market to continue in its direction. As soon as you expect something, then it is hard to adapt to and accept signals of change.

How many people went bust on the landslide of the past 2 years because they read to much into the news and expect this to be a minor correction of the last big bull run. Some of the best minds in this industry expected the american economy to be strong enough to withstand the implosion of it market. Dont believe me, look up Peter Schiff and the debates he had with almost every reputable analyst and trader from 1996 (had you listen and acted upon Schiffs advice you would have weathered the storm nicely and probably gained greatly from it).

I guess what Im saying is that no system is perfect, everyone needs to understand that, and all systems will have there bad times, just as they will have there great times. The trouble with humans is that we are impatient and believe everything should come easily. Trade with that mentallity and you may just loose 9000 pips in a row.

Take care all

Isn't saying "some breakouts have 2-5 times the success rate of others" the same as saying not all IB's are the same?

Basically in a ranging market theres not much point in taking a IB of 100 pips but in a market in a downward trends then an IB of 25 pips is more likely to return a good %.

I've not got any firm numbers on this because:

A: I've been trading UK equities for years not FX and have recently changed due to the very low volumes there.

B: I've only been watching the Fx markets and seeing the IB's not making a details list of +/-, my eyes tell me what ones look to have been good.

C: As i said it's discretionary what trades you'd take so what i might take is diiferent to what you might take.

D: Backtesting and past gazing is only a guide as future event will not copy the past exactly.

BUT

I'm sure Peter has posted on here that someone has backtested this and it showed that if you entered and trailed the whole position then there was a return of 1.27 and if you took off half at BE then it was still 1.21 but seem to have less drawdowns.

I'm confident it works and am trading this (only for a few weeks though as said above) and basically the same on 15m charts, no problems ...yet.

just my 2cents though.

ok folks,

I dont care about TF or discretionary stuff.
We`re talking about Peter`s 1H dibs strategy arent we?

Peter is a quant trader and that means he knows that he`ll be alright over the years according to the statistics. But it also means that for long ranging periods he will stack on the losses.
He just has to take every trade, because price might take off from there and we dont know when that will be.

On short TF`s you might make a quid, but thats not what Peter is about. He goes for the big trends, not the small stuff.

Just read an article about MorganStanley I think where their quant traders made big losses over a certain period of 2007, but managed to end flat for the year.

So thats what I`m warning people about: if you follow Peter`s system be prepared for mounting losses in a extended ranging market.

To ride out these periods, watch you MM like a hawk.

If you think Peter takes every Inside Bar he sees on the hourly then my friend you would be sorely mistaken. When learning a system it would be fair to take all trades to work out what may work best. There are times when candle combinations give better information and he may take setups like that.

If you trade everything you see because you dont want to miss the ride then you are just a random enterer (just because it is based on 1 candle doesnt change that fact) and more times than not you will suffer the emotional rollercoaster that is attributed to that kind of trading.

When you understand that there are some Inside Bars that offer greater chances to move then you will find yourself not overtrading. There are chances in all markets to make money. Dont overtrade, trade will SLs and trade with a balanced MM approach and you will find you will move more comfortably then a random approacher. Missing trades, like taking losses is part of the build. If you get down, because you missed a trade that ran then you are just going to get yourself into the situation that you will trade everything you see.

Sit back, read the signs and trade however you wish but please dont tell me a trader of Peters experience doesnt use his edge to filter trades that have less likelyhood of playing out.

BTW, please dont take my post as attacks, they are purely neutral in nature (the written language is impossible to decipher from an emotional standpoint).

Why do I say trading is discretionary?

Quite simply it is. Whenever you trade a system that someone else has made available you will seldom trade it to the exact perameters of the original intent. The answer lies in the simple fact that all of us are different. We all have different expectations and boundaries and our interpretations of something, no matter the clarity will always be skewed from trader to trader.

This is a great thing as it gives the volilility of the market. Different people with different strategies speculating on different prices. No matter what your system there are times you are wrong and there are times you are right. Some will say that you have to be right more than wrong to be successful. Those some traders trade for limited profits.

Once we understand what we are doing and can execute the method of our interpretations without fail then we are starting to move in the right direction. In ranging markets there will always be trends, just much smaller and shorter lived. In these time it is difficult to make your bread but you can still sharpen your game to include taking profit in such periods. Lets be honest, who has the stomach to watch there trade accumulate serveral hundreds of pips only to watch them go backwards into the abyss of BE territory. You may be fine with it trading 2 micro or mini lots, how do you think you will fair when it is 10 standard lots.

Some will manage the above few lines easier than others, which I guess means that some will take profits, some will watch them over a longer period of time and perhaps take profits then, some will forget about them for years (provided they are still in) until they have made there goal.

Razor

[quote=Razor_trader;2695952]If you think Peter takes every Inside Bar he sees on the hourly then my friend you would be sorely mistaken. When learning a system it would be fair to take all trades to work out what may work best. There are times when candle combinations give better information and he may take setups like that.[/quotes]

where does it say that Peter takes his trades discretionary?

IF you trade the H1 dibs like Peter does, you only exit for a profit if price goes up long enough to get the 20-day SMA working and in a long-term range, this will hardly happen. Anyway not enough to erase the mounting daily losses.

But I notice you are trading the daily dibs and might not hold until stopped out by the 20-day SMA.
If so, you cant compare it to Peter`s system.

And people like Peter will let a runaway go back to BE if the 20-day SMA is not yet working, but he knows that the numbers (statistics) over the years are on his side.

Its just what TheRealThing says, who taught Peter this strategy: Out of 10,000 trades you might lose on 6,000 of them for small losses, win on 3,800 for moderate profits and win fairly big on 200 of them.
I suppose that to mean on average over the years through trending and ranging markets.

Think about that for a moment: on average you lose on 6 out of 10 trades!!!
Can you imagine what would happen in a ranging market that might last 8 months???
You might still have 6 losses out of 10 trades, but the moderate profit trades will be almost non-existant and no big wins at all.

If you are discretionary in your entries and exits you are NOT adhering to this system.