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The DIBS Method... No Free Lunch continues

  • #9,321
  • Feb 28, 2010 10:54pm Feb 28, 2010 10:54pm
Quoting Alexone
Your post is interesting, but you start from the premises that everything PC posted is correct and should be taken as is. I also dont understand why you use so many words and be all mysterious about it.

I understand why this is your favorite post. The pair was up quite a lot from the start of the day, also it was above the Daily Open, hot hand (or whatever) and everything, so this is a good trade, Peter Crowns wise. If you trade inside bars, assuming that the pair has moved a lot from the starting of the day and therefore is hot, you are making...
I don't think that PC assumes that the the trend will continue; like the other posters said, it's a point of indecision - not reversal, so whichever way the market goes, it's going to move strongly.

Pair this concept with S/R, trendlines. PC's fave post was up against a trendline and a "hot hand" (I still don't have that figured out). IF it breaks the trendline, the break will be strong. Maybe price will bounce down off that trendline and the entry will be a loser. It could happen. But the reward to risk is good (10:1? more?)

Put a few of those trades together - you'll lose a few, breakeven on others, and then a couple will really take off.
  • #9,322
  • Mar 1, 2010 1:10am Mar 1, 2010 1:10am
Quoting HouseTrader
blunderbuss is right...

Hot Hands...

in the example quoted:

E/U is above daily open AND above last week's close = HOT HAND

U/C is below daily open BUT (maybe still) above last week's close = NOT HOT HAND... you can go short, but definitely it's not the stronger moving pair, ATM... for U/C to be considered also the Hot Hand it should be below daily open AND below last week's close...

that's my simple understanding of it... of course, if E/U is above the daily open and U/C is not below daily open, it's much easier...
It has been a long time since I posted here. I have from time to time come by to see what has been happening but this post has got me clapping my hands. I send HT a PM to thank him for the simplicity of an answer that should have acted to most as an AH HA moment.

Here are some things, and I have done these for a long time now, dropped a few hints here and there but it is time that those who are serious about trading to pull your fingers out and do some serious learning from past action.

WEEKLY and DAILY charts hold a HUGE key to success if you are trading smaller timeframes. If you are looking at the hourly chart and you have your DAILY AND WEEKLY scope then it should be a no brainer as to whether a particular IB has a better than average chance of being a winner (Break even or better). If you havent got as a bear MINIMUM weekly and/or daily SUPPORT AND RESISTANCE lines draw so that you can reference them on your HOURLY chart then you will fail because even though the rules state clearly BUY at HIGHs and SELL at LOWs, you need to understand where the limitations are.

SO i will give you a small hint. You are down on the day heading to an area of STRONG SUPPORT on the weekly, combined with confluence, THE previous bar is a LONG HAMMER (PIN BAR) and the market has moved past its Average Daily Range, WHICH WAY ARE YOU GOING TO TRADE IT???.

These are things that EA backtesting cannot separate and they do happen quite often and they are usually the trades that will net you well over 5x++++ Reward. That is what you need to be looking at and learning. These are setups that I am sure PC has mentioned offered the better returns, ESPECIALLY if the market has had a significant pullback.

It is perfectly good to take trades with the stated rules, PROVIDED you know what is happening on the higher Timeframes. The High timeframes contain a wealth of information. From Price Action to S/R.

Take Care

Razor
  • #9,323
  • Mar 1, 2010 5:55am Mar 1, 2010 5:55am
Quoting icarusfx
just wanted to highlight this trade of catch-22..... i've said i'm not gonna post here anymore about the validity for dibs but i just can't help myself!

anyway good trade...
closer to 10% now...

yeah this style of trading can never work a real break even strat
  • #9,324
  • Mar 1, 2010 1:08pm Mar 1, 2010 1:08pm
Quoting hornet99
Hi, this is my first post so please go easy on me, and apologies in advance if this has been discussed before....

I started reading the Peter Crown threads last night and was really excited at the propect of using such a simple but what appeared to be effective strategy.

However I just did a quick back test for last week (22nd Feb to 26th Feb 2010) on cable and EUR/$ and found that the majority of trades where losers and overall trading this system would have lost me money.

This was of course just looking at the last 5 days so this does...

hornet99, Does your backtesting recognize S & R? Does your backtesting recognize the so-called "hot hand". Does your backtesting make all the considerations you'll make as a reasonable trader?
If not, then why all the confidence in backtesting. The beauty of DIBS is in trading it, not in backtesting. Backtesting is a programmed command and would never go beyond a program behavior. I'm a programmer myself.
Leave backtesting and trade DIBS.

Kennedy
Mystery Is The Final Product Of Ignorance. Hey! What's ma chart doin'
  • #9,325
  • Mar 1, 2010 1:24pm Mar 1, 2010 1:24pm
Quoting Alexone
Your post is interesting, but you start from the premises that everything PC posted is correct and should be taken as is. I also dont understand why you use so many words and be all mysterious about it.

I understand why this is your favorite post. The pair was up quite a lot from the start of the day, also it was above the Daily Open, hot hand (or whatever) and everything, so this is a good trade, Peter Crowns wise. If you trade inside bars, assuming that the pair has moved a lot from the starting of the day and therefore is hot, you are making...
Now your own premises might have started well, but they sure didn't end well.
I don't know how many books you've read about IBs, but IBs are more of trend continuation than trend reversal. It's a signal that tells you that the minor correction is over, although it also shows that the trend will immediately go into correction.
If you follow IBs well, you'll see that whenever they appear it means that there is going to be some move in the direction of breakout unless break is faces by strong support or resistance.
Trade IB and not argue it

Kennedy
Mystery Is The Final Product Of Ignorance. Hey! What's ma chart doin'
  • #9,326
  • Mar 1, 2010 1:52pm Mar 1, 2010 1:52pm
Hi Kennedy, in answer to your questions, the answer is "no". I wan't trying to trash this strategy, far from it, I think that I was just wondering if there was anywhere (a blog maybe) where anyone who trades this strategy reports how they use it so newbies like me could gain the insight that I reckon i need at the moment that is all
  • #9,327
  • Mar 1, 2010 4:49pm Mar 1, 2010 4:49pm
Quoting Precap2
Now your own premises might have started well, but they sure didn't end well.
I don't know how many books you've read about IBs, but IBs are more of trend continuation than trend reversal. It's a signal that tells you that the minor correction is over, although it also shows that the trend will immediately go into correction.
If you follow IBs well, you'll see that whenever they appear it means that there is going to be some move in the direction of breakout unless break is faces by strong support or resistance.
Trade IB and not argue it ...
Inside Bars are an Indescisive pattern and depending on what has just happened they can be either a continuation or reversal. Trading IBs is a signal not a complete system, the system part is up to the individual to figure out. Provided someone has taken time to backtest this thoroughally they should have formed some bias' to which IBs work as continuations and which work as reversals.

Razor
  • #9,328
  • Mar 1, 2010 4:57pm Mar 1, 2010 4:57pm
Quoting hornet99
Hi Kennedy, in answer to your questions, the answer is "no". I wan't trying to trash this strategy, far from it, I think that I was just wondering if there was anywhere (a blog maybe) where anyone who trades this strategy reports how they use it so newbies like me could gain the insight that I reckon i need at the moment that is all
I am sure his intentions didnt mean to sound like the post. I will be a bit blunt but there is plenty in the first 100 pages to get you going with everything you need at the core level. Backtest it by taking EVERY IB in the direction of the day for at least the past 3-4 years, Circle, Date do what ever you have to to keep a record of every particular trade and at the end go back through every trade and start to look at what has happened around it and LEARN. I recommended well over a couple of hundred hours of backtesting thoroughrally and reading, re-reading and re-re-reading until you understand. Look at IBs on hourly with reference to daily and weekly charts to gain a BIGGER picture of the market.

If you can do this then you will develope habits that will help you in the future. There are no shortcuts for experience. Take the time to learn.

Razor
  • #9,329
  • Mar 2, 2010 2:36am Mar 2, 2010 2:36am
Quoting Alexone
Your post is interesting, but you start from the premises that everything PC posted is correct and should be taken as is. I also dont understand why you use so many words and be all mysterious about it.
I'm going to quote myself from that post:
Maybe the answer is there to be found, and maybe there's more than one answer but only one that suits you...

By this it's should be clear (and I've said it before) that you should try and find a way to trade DIBS according to your own way of trading and the way that you see things. That is what my whole post was about, I was trying to get people to understand that they really need to understand what they are doing... If you think that I do everything the way PC does it you need to think twice: none of truly knows how he trades, as he never fully showed us. What he did show us was a path that we needed to explore for ourselves, hence my post...

And if you still think I'm being mysterious, than I'm sorry...
  • #9,330
  • Mar 2, 2010 3:55am Mar 2, 2010 3:55am
Quoting hornet99
Hi Kennedy, in answer to your questions, the answer is "no". I wan't trying to trash this strategy, far from it, I think that I was just wondering if there was anywhere (a blog maybe) where anyone who trades this strategy reports how they use it so newbies like me could gain the insight that I reckon i need at the moment that is all

Razors comments say it all my friend! Backtest, backtest and backtest more! I used to think it was waste of time too until I did it (100's of hours!...yes there are no shortcuts!) , saw the results, read and understood probabilities and money management and got the confidence to trade... trade after trade without concerning myself with the short term ups and downs. I have a chart printed out on the wall above my desk that plots 000's of trades over more than 10 years and trust me you would want to be on this curve! Read market wizards (all 3) Trading in the Zone and Trend following by Covel and decide if you are going to trade mechanically or not?!.......in my experience trying to do a bit of each doesnt work unless your second name is Seykota or you have been around successfully for over 10-15 years!?! Then find someone to work with (you need support!)and get on with the work.......Oh and enjoy it!
  • #9,331
  • Mar 2, 2010 4:06am Mar 2, 2010 4:06am
Quoting JamesBranson
I used to think it was waste of time too until I did it (100's of hours!...yes there are no shortcuts!
But what a way to get years of experience in hours. It helps if you enjoy trading but can get tedious. I agree there is no substitute for live trading but all that homework did me good.
Gone to a better place
  • #9,332
  • Mar 2, 2010 5:23am Mar 2, 2010 5:23am
One of the best purchases I made about a year ago was a product called Forex Tester 2. What it enabled me to do was to go back to early 2000 (the earliest recorded tick data for the program) which is now about 10 years and literally scroll bar by bar taking trades. It is a program that allows you to take trades and manage them like you where doing it live. You can start with whatever amount and you can view your equity curve over the course of trades taken.

What this allows you is a number of things. It allows you to backtest with the mindset of trading live, to the second trades and managing them. You can have any timeframe from tick to monthly, you can trade a whole pile of pairs (once you have purchased the copy) and you can essentially take manual backtesting into the current modern era without the need to write everything down. You can save projects, run EAs (if that what you want to do) and quite honestly it will give you an opportunity, if you allow it, to be completely honest. By this (honesty) you can see the current bar and make your decision to trade or not trade before clicking to reveal the following bars. If you are dead set honest about it then you will see the results for yourself.

By saving the current data (project) you can literally scroll back to any trade you have made and analyse it to learn from. You can start to build a data base in your mind that puts certain situations into pros and cons and what it will allow you is to build a trust in what you are doing. Trust me you can quite literally put years of data and trades through this program in the course of weeks. It is then up to you if you want to learn more by taking the serious part and going back.

Trading is not necessarily the most exciting venture, making money is. If you are passionate about making money and you are serious about doing it in this format then you will take the time to build your trust, find an edge and exploit the hell out of it.

If you are just happy with the backtested results of 6 months, then you will get the results from such endevours. If you take the time to really test the shit out of something and make it your own then time is limitless and hopefully so are the potential gains over the years.

If I could take back 5 years of trading to know what I know now I would be kidding myself. Experience is paramount to success. No one runs a Blue Chip company fresh from Business school, much less straight from the streets. Most are completely fresh to trading and therefore you need to understand the processes to be successful LONGTERM <---- Cannot stress that enough.

Take Care

Razor

BTW I will try to post some charts with potential IBs either here or my journal but please note that I am more Price Action orientated now (more potential arrows to fire at the markets) however I still have a passion for quality IBs due to the risk they allow.
  • #9,333
  • Mar 2, 2010 5:40am Mar 2, 2010 5:40am
Thanks for that, Razor. I'll look at that program. I was just using the f12 key in mt4 and paper and pencil. High tech/low tech...

I would assure any budding DIBS traders that if they do their homework they will make it pay. When I collated my figures for the first year of DIBS trading it was break even. I was taking most DIBS trades - even marginal ones. Now I am much more choosy.
Gone to a better place
  • #9,334
  • Mar 2, 2010 7:37am Mar 2, 2010 7:37am
Quoting hornet99
Hi Kennedy, in answer to your questions, the answer is "no". I wan't trying to trash this strategy, far from it, I think that I was just wondering if there was anywhere (a blog maybe) where anyone who trades this strategy reports how they use it so newbies like me could gain the insight that I reckon i need at the moment that is all
Didn't mean no harm bro. If I sounded HR, it wasn't intended.
I like IBs and they're very good tool to trade if you use filters. Actually, where I worked before going solo, we were allowed to trade mostly IBs that form in the direction of the dominant trend, and to apply tight SL for IBs that are otherwise. We traded it profitably, but I kept on breaking their rules and traded other triggers of my own. I got sacked eventually
IB is good, please ignore all those unnecessary argument in this thread and give it your best shot.

Kennedy
Mystery Is The Final Product Of Ignorance. Hey! What's ma chart doin'
  • #9,335
  • Mar 2, 2010 9:23am Mar 2, 2010 9:23am
Thanks to Daniel (HT) I have decided to go back to the early tests (from 2000) and add in the weekly scope to see how and if it improves on trades by seeing if a bias is present in both weekly and daily candles.

What I will be looking for early in the piece is the final formations of both weekly and daily candle (Price Action Bias) and later as I have some relevant data weekly Support and Resistance (Strong Area Bias). Depending on the location of current price in retrospect to the previous weeks close (higher or lower) plus the location in regard to the day I am aiming to build a picture of whether this helps improve. Add into the mix the Price Action and strong areas of S/R I am looking to see how this pans out also.

As most here know I much prefer higher timeframes and that is not just for trading but also to give me as much of the puzzle as possible to formulate a trade that has a better than average probable chance of succeeding. Whether a large timeframe Bias can be used in conjuction with an hourly chart is what I aim to find.

So far the results are tough to swallow. For the first 30 weeks (please note that the testing so far is based on limited rules) there was a 25-30% drawdown with a good number of losses and BEs. Note however that there where a number of trades that did pan out well before retreating (which can be seen in the equity curve) however instead of playing with multiple lots I waited until there was a 30 pip gain before moving the SL to BE. I will run test based on both half off and just moving to BE. As most are aware taking the half off has the benefit of more room and perhaps in some of the testing I have completed this would help. However I do have 2 trades running that are both up around 300 pips (off of around 16-20 pip SL) that are full lots. The results are a turnaround from drawdown to a current profit of around 35-40% growth which highlights that holding runners is a key, which I am sure most are already aware of.

Once I have some results I will post them for your leisure.

Take care

Razor
  • #9,336
  • Mar 2, 2010 1:46pm Mar 2, 2010 1:46pm
Hi all.

This is my first posting - I've just jumped aboard the DIBS train and plan on riding it as simply as possible (PC's original rules...but with a little common sense added).

I've read Razors recent posts about S&R levels on D1/W1 and agree - but my question for the forum would be whether or not to fade the key S&R levels i.e. flip the primary trade direction when it is (perhaps) likely that bank action would buy the support?

(I've read BRV's postings...hence the idea)

If anyone has any views on this I'd love to hear them.

ColGen
  • #9,337
  • Mar 2, 2010 5:37pm Mar 2, 2010 5:37pm
Quoting Colgen
Hi all.

This is my first posting - I've just jumped aboard the DIBS train and plan on riding it as simply as possible (PC's original rules...but with a little common sense added).

I've read Razors recent posts about S&R levels on D1/W1 and agree - but my question for the forum would be whether or not to fade the key S&R levels i.e. flip the primary trade direction when it is (perhaps) likely that bank action would buy the support?

(I've read BRV's postings...hence the idea)

If anyone has any views on this I'd love to hear them....
That is what I am testing. At the moment my common sense mechanism suggests that provided we get relatively strong confirmation at these areas that a bounce is likely (Pins, BEOB etc) then there will be a bias swing. I am not a fan of buying into weekly resistance or selling into weekly support unless there is something compelling to say I should. For me it is a matter of looking at the most recent action and deciding for myself the appropriate action to take that is going to put the chance of a longer runner in my favour (5x reward or better).

It is true with the last part that alot of my most recent trading has focused less on the running and more on the bookings of profit however this is due more to my recognising better setups and limiting my trading. I do still leave a small piece of the pie to run in the event that something big happens. The results have been pleasing.

Razor
  • #9,338
  • Mar 3, 2010 3:29pm Mar 3, 2010 3:29pm
I think the market dynamics may be slightly different at the moment as I'm seeing a lot of sideways action on many of the weeklies as the currencies slowly shift direction this year. Because of that, booking profit is possibly a better approach in the mean time. Certainly my experiences with DIBs to date has been a decrease in equity due to the large number of stop-outs without a 1R move first.

Picking up the thread of using some 'other' knowledge to filter trades, such as observation of price movement or placing S+R zones, I think it is highly likely to increase profitability. Religiously taking signals, even with a broadly defined method like this, is always going to be less profitable than choosing your trades based on a higher knowledge of the market.
  • #9,339
  • Mar 4, 2010 1:13pm Mar 4, 2010 1:13pm
Quoting MattW
I think the market dynamics may be slightly different at the moment as I'm seeing a lot of sideways action on many of the weeklies as the currencies slowly shift direction this year. Because of that, booking profit is possibly a better approach in the mean time. Certainly my experiences with DIBs to date has been a decrease in equity due to the large number of stop-outs without a 1R move first.

Picking up the thread of using some 'other' knowledge to filter trades, such as observation of price movement or placing S+R zones, I think it is highly...
MattW,

I admit that I've only seriously tested DIBS for the about two weeks. Although I'd heard of the strategy before then, it wasn't part of my arsenal.

I'm currently using it on a broader range of pairs than PeterCrowns listed, and my hit rates have been very good. I need to review all of my entries to give an accurate response, but I'd say that 65%-75% of my entries have hit the 1:1 mark.

At first I used two entries of equal size, one that use the 1:1 to TP, and the other I've let run. I now TP on 3/4 of my trade and let the other 1/4 run free, that way if the SL is hit on the second portion I still get a 1% return.

I've missed a number of trades from either choosing not to take the trade, or because they occur before I trade (7am EST). Eyeballing these missed trades suggests that they have a hit ratio similar to what I've achieved with the trades I took.

Exit is the difficult point for me. I'm moving my SL down in steps, trying to place it just beyond areas of strong S/R. Picking a good exit point to maximize profit is a good problem to have.

Can you elaborate on how you use weekly charts to inform your trading?
  • #9,340
  • Mar 4, 2010 1:27pm Mar 4, 2010 1:27pm
I play IB's on a daily chart - 10 years of back testing on one major pair was profitable enough just on the basis of going thru the chart that worrying about things like weekly support and resistance was of little value.

although there were strings of small losses, the large positions you can accumulate are absolutely amazing.....

Quoting Razor_trader
That is what I am testing. At the moment my common sense mechanism suggests that provided we get relatively strong confirmation at these areas that a bounce is likely (Pins, BEOB etc) then there will be a bias swing. I am not a fan of buying into weekly resistance or selling into weekly support unless there is something compelling to say I should. For me it is a matter of looking at the most recent action and deciding for myself the appropriate action to take that is going to put the chance of a longer runner in my favour (5x reward or better)....
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