The DIBS Method... No Free Lunch continues

Hello, Andy!

I will try my best to answer Your question.

I understand why you rather will read posts before doing something, because I myself did so not so long time ago. For me, when I did no understand enough what I have to do for good trading it was easy to read some authors's posts to understand something through their experience. I have read very lot of authors, and did understand almost nothing ...
Then I start to apply what I have read in their posts in my own trading (with cents)... after some months,...
ONLY after some months of forward-and-back-testing I did realized for me what about are they all talking...

For now I have 4 different trading approachs in my pocket... but as I said already - For every one of them I gave for near 2-4 months to understand for every one. By "understanding" I mean rather my confidence for them.

What I want to say you by this is - you will not catch the whole concept only by reading... You will have to apply this concept to understand it fully.

If you want to learn how to go by bycicle... you have to go by bycicle.
(sorry for this metaphor)

There is now other way there.

I understand, that now I speak with you mostly not about DIBS, entries, exits, etc.... But - I try to give you something, that I own not so long time for now... And IT is something that I so needed earlier like trader.
This something is mental. Yes! MENTAL!

I will explain.

Earlier I think that professional traders ALWAYS KNOW WHAT THEY ARE DOING. Yes, I knew that they have losses like others, but I did think that in whole picture they know something more than I or You.

But now - I know for sure, that this is wrong. They do not know MORE than I or You. Of course, they have a lot of experience, and this makes them more clever.... but... Their edge is THEIR TRADING PLAN!!!!!!!
No more no less.

Some little tip to You - pros-trader doesn't know for sure the outcome of any his trade!!

Do you get it? Does it tell you something???

Now, what is the different between you and any pros in terms of knowing trade's outcome???? No different!!!! You do not know what the outcome will be, and he doesn't know for sure what the outcome will be.

But he (pros) knows for sure for what he is looking for in his trading!!!!!!!!
For example by trading DIBS we all are looking for TAILS in our trading.
Catching TAILS is our goal.
Look - it is simple - if we are in a trade, and price immediately reverses against our position - does this scenario fit our plan? No way! We exit this trade with some little loss and wait for the next one. Why? Because our goal is catching TAILS, Runners. This is what we are looking for in our trading.
And if we are in a trade which has profit for us now, do we have to exit it right now just because we want to do this?? No! Because we have our plan, plan tells us to catch tails, and tails are by their definition more than 11-20 pips. So - what we can do with this trade is - trailing stop with it and take profit when our plan tells us to do it.

Do you want to know how the plan of pros looks?
First - all pors have their set up's for entering the trade. These set up's have different forms, different names, different goals. But - they tell to trader when to enter the market. And guess what !!!!!! Pro-Trader "test" every set up which he sees on chart and takes every trade. Why? If you remember - no one trader doesn't know the outcome of any trade.
Only way to know will this particular trade be loss or profit - is to take it!

So - trader has to trade every valid set up which he sees!

Only this way trader can take all trades which will end with profit.
Of course - he has to pay for this "good" trades through those little loss trades. They are like taxes.

Pros do not predict the market. NEVER!
They trade possibilities.

I write all this for you, because I feel you do not know all these stuffs.

Now - DIBS

Like Razor_Trader said yet - you have all you need for entry.
Inside bar, filter (up-day, down-day), 1:1 matrix, timeframe and sessions.

Do you need some discretionary? - You have it yet! It is in RULES. And it is - you have to tend to trade during "active hours" of currency which you are trading. That's it!

I may be wrong - but what IMO about enterys in trade - there is no more needing to be discretionary. Trader just HAVE to trade EVERY set up which fits to RULES.

Where you really need some discretionary - is EXIT.
But - after You will find some good for you exit-method - it will become some sort of rule too.

As for me - now I trade with MA's from some other method - Tunnel of Vegas. They are - 169 and 144. I take every set up for enetery, and tend to hold my positions with this MA's on 1h chart.
What helps me the most in my trading - is my confidence in method which I trade.
Trading doesn't have to be hard. It is simple.... but not easy.
About discretionary here - I look at only 1 timeframe, and Peter Crowns (if I right undertsand him) - looks at 1Day timeframe too. So - my exits may be some different than his.
But this is great - because if we will do the same things - traders from pits will catch very easy us soon enough, because they will know for sure what we all are doing. Get it?

And what I did find in Peters words is -
"Because the bar was so narrow, my protective sell stop was ONLY 6 pips below my entry. Since the risk was so low I was able to multiply my size accordingly, and had 4 times the position I typically have on these trades."
(No Free Lunch but all the Free Coffee you can drink. Post #92)

This gives me hint, that Peter allows himself to lose some nearly same amount of $$ in every trade. Not loss based on numbers of pips, but based on amount of $$. For example - Stop loss - 10 pips then 1pip=4$, Stop loss - 40pips then 1pip=1$..... Something like this.

And something else again about discretionary:
every day when you start trading - you have to look at economic calendar, to know if any of the most major events will be today, or next day.... Like for exemple James did tell us about third Friday in March, June, September, December. Or bank holydays.... You get it...

This is all for you, Andy.... read it carefully, manytimes, and absorb it well.

Good luck, best trades to you!!!!

Thanks!

i am trading a combination of DOJIs, IBs or u call them DIBS, and candlestick patterns for more than 15 years. and all strategies are working - in the long run!

BUT with an exception: there are months in a row when for example DIBS doesnt work and i am constantly losing or stepping sideways.

so this is the time when newbies throw in the towel and are looking for a new strategy.

Absolutly and that does for any form of trading. Some cant handle the down periods which are part of everything and anything you trade. There will be some times when the preverbial hits the fan on a number of occasions and you just need to battle through, its the difference between long term trader and eternal quester for pain avoidance

The problem is, why would those of us who put in the hard yards to see how to make this strategy effective (I have come up with so far one great filter and found another mentioned in this thread - am experimenting with a third) want to share our findings with the bunch of whinging morons who seem to hang around here? There is a group of people who is genuinely unwilling to do anything more than read this thread and keep grinding DIBS without doing any more work to figure it all out.

Peter Crown said he had some methods to determine if an IB was 2-5 the expectancy of "every IB" which is what I'm assuming these silly people are backtesting. So far I think I have come pretty close to that determination myself.

Here is a chart showing an A+ setup using the filters I have been testing. No, I won't share them, at least not here because of the poor attitude displayed by many members who expect the system to be spoon fed to them. Dedicated DIBS traders can PM me and I will be happy to explain my thinking to them. These are not random lagging indicators, they are simply visual cues for what is happening on the price action so I don't have to keep calculating certain parameters every hour. Using these filters on every single trade for 100 trades on the visual backtest has been impressive so far.

I can understand your POV and trust me I have been there time and time again, however I believe it is a small minority. I am considering starting a new thread on the issue with a vouch limit. I am unsure of the number though because there are some great people here who have contributed but thusfar dont have any vouchers. Im not an advocate for just handing out vouchers though but I will consider doing this to limit the rubbish that floats by and adds worthless information.

Thank you for sharing your charts, perhaps in time some others will find a useful way to use IBs. Like I mention I taken 4 hourly and daily dibs with my own discretion and have noticed the increase in better trades.

Daily chart........

the checks indicate the positions I have taken. 3 are still open. The others stopped out at BE

up about 650 pips......all risk free right now

I do this all day on smaller time frames on a variety of securities.....

http://i50.tinypic.com/15ml4jq.gif

the more people that throw in the towel the better.....

Daily GU - This is not the exact chart I trade off of as the opening time and MA is different, but you should get the idea

The first 2 ib's were a little tricky, well only as far as one calls handling a few stop outs or losses in a row tricky. I think I took 4 or 5 attempts to get in the positions. Stopped out at BE a few times and think I took a 1.5 complete loses.

Since December 4, I have added a few positions, 1 of which was a loss, 2 were BE. So I am left with 3 total positions - the oldest ones. I took off half on each at 1:1 and the rest are up about 900 pips.......risk free

http://i49.tinypic.com/3450lkp.gif

WELL DONE, This is what i am talking about. So far we have had some good charts posted. As you say you get stopped out at times but whats new, doesnt matter what you trade there will be times when you get stopped out.

It seems like my posts brought some negativity to this thread. It was not my intent. My intent was, maybe someone says something useful. Some did.
I think everyone should find strategy that work best for him or her.
Good luck to everyone!

This is only one traders opinion ...

People get confused about what they are trying to do or perhaps they confuse one type of objective with another. Anyway; I am moving from discretionary to system trading with minor overrides for the few things that really matter that I can't program. This move is forcing some deep reconsiderations on my part.

One way to make money is to have a reasonably high probability of a win with a smallish probable win. In this case, simple PF and Expectancy equations return a result that makes sense. Here one seeks an entry that gives one the 60%-80% win ratio suited to such a system. Now it doesn't matter if, after the win is taken, price retraces and even reverses ... because you've taken your 80% trade and are looking for another one.

Another way to make money is to seek to get into major trends early and then ride them (perhaps with additions) for a large win. But to get into that trend one might take 2 or 3 losses for each win (and perhaps 4 or 5 right at the start). This is a different kind of entry. Volatility breakouts come to mind for these trades. Or range (dibs = narrow range) breakouts. You don't care if you don't get a high win rate ... what you want is a number of managed losses before you get on top of the big winner.

This (dibs) type of trade is enhanced by a certain selectivity. Leonardo (TheRealThing) talks about waiting for certain preconditions before the campaign begins. PC said that TRT found him to be even more selective than TRT is ... which is interesting because it tells us that PC doesn't come close to taking each DIBs trade (at least with strength).

PC gives some hints but he doesn't give away the whole package. Then there are some more ideas here. But they are just one way of adding to the "type of edge" that dibs is giving you. And different people will have different solutions and preferences.

So its really hard to quantitatively test something like DIBs and come up with a PF or an Expectancy that makes sense. It is a tool to get you to a place where you can make money if you have the psychological makeup required to take a lot of losses before loading up on a few big winners.

My 2c

impressive pippin' there, razorboy.
you mentioned adding positions, does it mean that you use martingale-like mm?

All the newbies should read this:

https://www.bsp-capital.com/documents/turtlerules.pdf

How can you become a successful trader millionbillionjillionare if you trade 20 day breakouts that work less than 50% of the time?...hmmm...

@ sinner-
thanks for the advise and pdfl. that is one great reading!

from a glance of the idea of ib it looks pretty clear to me that ib works best on the extremes. so when the price is on the top/bottom side it can turn into a bear/bull ib or it can continue even further north/south as a continuation ib. correct me if I'm wrong here, please.

martingale and multiple positions have nothing to do with each other. Right now my MM for this is very unsophisticated. I put on 2 units for each trade - just like how I back tested with. Using a constant dollar MM - my position size would get bigger when the ib is smaller, this method would be more profitable

I use IB's @ work as well.

Yesterday, I had a lapse of concentration and I missed going long off of an IB that was sitting on my Buy/Sell line (I had just gone short off of it and lost a few cents/share). The end result was that long position was only about 2/5's as profitable as it should have been.

I trade equities off a short term chart. The first trade of the position should have been long at xx.42 and the second at xx.48. I only got the 48 on and rode it up to xx.73 and then closed it out at xx.60 when it closed below my buy/sell line, for a 12 cents/share profit, leaving another 18 cents/share sitting on the table by not taking that first position.

@ work right now, I am just in "training" - I have to progress thru a number of milestones, so im not playing with huge size, but if I had been playing with 10,000 share lots, this was an $1800 mistake

all you need is a lot of capital to start with...........to still have something left after going thru the required losses

1% is 1%, on $100 or $100,000,000.

That is absolutly true but the mindset is completely different. You would take more care of a large some of money whereas the smaller does entice greater risk. In the end, after read the PDF on the turtles, IBs have alot in common, which to me is no surprise. Breakout methodology regardless of how you take has a strong trend upside and a very discipline demanding range side.

I couldnt help but place these lines from the PDF that stand out to anyone who has taken enough time to read this thread.

"Consistancy - The Turtles were told to be very consistant in taking entry signals, because most of the profits in a given year might come from only 2 or 3 large winning trades. If a signal was skipped or missed, this could great affect the returns for the year"

"If you know your system makes money over the long run, it is easier to take the signals and trade according to the system during the periods of losses. If you are relying on your own judgement during trading, you may find that your are fearful just when you should be bold, and courageous when you should be cautious. If you have a mechanical trading system that works, and you follow it consistently, your trading will be consistent despite the inner emotional struggles that might come from a series of losses, or a large profit. The confidence, consistency and discipline afforded by a thoroughly tested mechanical system are the key to many of the most profitable traders' success."

and last but not least

"There is an old saying "you can never go broke taking a profit." The Turtles would not agree with this statement. Getting out of winning positions too early, ie "taking a profit" to early, is one of the most common mistakes when trading trend following systems. Prices never go straight up; therefore it is necessary to le tthe prices go against you if you are going to ride a trend. Early in a trend this can often mean watching decent profits of 10% to 30% fade to a small loss. In the middle of a trend, it might mean watching a profit of 80% to 100% drop by 30% to 40%. The temptation to lighten the position to "lock in profits" can be very great.

The turtles lead by Richard Dennis and William Eckhardt made some serious profits, smashing market averages year after year.

So much of this can relate to IBs. For those who have done comprehensive testing, with what ever fruit added will have found that there is light at the end of the tunnel. How bright that light is will depend on how long a trade stays in play and how well you adhere to the rules, whether they be PCs or your own. I dont think I need to say it again but take a chart, any chart with and scroll back some time into the past. Look for some IBs that would still be in play today and do the maths. Im sure on your journey you will find a good number that have run well past 100:1. Sure there will be some loosers, there will also be a good number of small winners that help balance the books.

Razor

Oh and to add, the emotional satisfaction (provided its kept under control) will always be greater depending on the capital. Small gains on 1 Mil with give you more to write home about then small gains of 1k. Although we should percieve that gain in the same manner (as 1%) reality is that the monetary aspect will always give more.