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The System II (Yes with irony)

  • #15,961
  • Oct 31, 2011 2:06am Oct 31, 2011 2:06am
Quoting dim4ik42
well, about expectancy...

i could not grasp it form the very beginning, (and you can see it during the thread), but after some time (when I was not positn here already) I was able to grasp it really - every trading "system" has its own expectancy. When we was asking feb about expectancy I now understand - it was too comlicated for him to do it for us... Look - when you trade - you have your goals. I mean - your goals are either:to catch 1:1 R:R, or to catch 2:1 R:R, or to catch a runner 5:1 more than your risk etc... And whiile your trading...
Thank you again for your great answers! And thank you also for sticking with the heart of this thread from the beginning and passing along knowledge and helping.
Small disciplines repeated with consistency lead to great achievements.
  • #15,962
  • Oct 31, 2011 2:44am Oct 31, 2011 2:44am
I would like to make a few more posts here.... I really want to make more clear for you this simple approach.

I would start with one interesting feb2865's post. Here we go:



____________________________________________________________



Markets are nothing more than a constant battle between supply and demand.



As simple as it sounds to whoever understand this, will have the highest probability of success in all markets.

No matter what time frame you're using, there will be always a pivotal point in which the market turns, either a pullback or a reversal. That by itself is a warning sign that the supply or demand is exhausting.

Indicators are just past representation of price. I am not here to debate if they're good or bad, as to me is the interpretation of the trader where the problem lies. Indicators tends to mislead people into a predictive figure, in reality they're just "warning signs".Unfortunately, traders rely more into what the indicator says rather than price.

As to me, identifying support and resistance or I should say, shifts between demand and supply has a tremendous advantage, system wise over any indicator system. Instead of predictive, Support and Resistance puts you into a "reactive mode" meaning ...what would you do when the market reach x price?? will you buy/sell the breakout or will you buy/sell the bounce??

I prefer to be reactive than predictive. I play the market. Not only at the entry but S/R helps me spot minor/major shifts in the market as my trade develops. Sometimes I just bail out and pass and sometimes my trade takes some heat before reaching my target.


Make it simple - here's an idea

Let the market develop into a direction. There always will be a high/low for the day. Draw two lines, one at the top and one at the bottom (please not to be confused with picking tops and bottoms)

Once the market reach any of these points just ask yourself
- will I buy the breakout??
- or will I sell the bounce??

I assure you something ALWAYS happens at these points!

Develop your own criteria about validating either one, like I'll buy the breakout on the next bar if it breaks the higher/high - lower/low of the next bar...and take the trade as quick as possible.

Whatever happens next it's up to how do you manage your trade/stop-loss etc.

This has been my system since 1980 and I won't change it for nothing.

________________________________________________________________
  • #15,963
  • Oct 31, 2011 2:58am Oct 31, 2011 2:58am
now I would like to go to the basic of reading the chart.

The first pict would show us sideways move. In fact this up and down moves between support (low red line) and resistance (up red line) show us the battle between supply and demand at its finest.

Blue ellipses show where these forces are shifting.
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  • #15,964
  • Oct 31, 2011 3:01am Oct 31, 2011 3:01am
Thank you for putting this up! Thank you for teaching
Small disciplines repeated with consistency lead to great achievements.
  • #15,965
  • Oct 31, 2011 3:07am Oct 31, 2011 3:07am
Now.... I will show you schematically how our "system II" swing looks like.

You will notice at this picture that the power of buyers (or demand) is more powerful than the power of sellers (supply). Again... We enter the trade almost at the changing of these forses (at red line - resistance in this time).
Attached Image
  • #15,966
  • Oct 31, 2011 3:15am Oct 31, 2011 3:15am
Quoting dim4ik42
Now.... I will show you schematically how our "system II" swing looks like.

You will notice at this picture that the power of buyers (or demand) is more powerful than the power of sellers (supply). Again... We enter the trade almost at the changing of these forses (at red line - resistance in this time).
Can you see unbalance between supply and demand at this picture???

well.... this is what the System II is all about.


Do not enter the trade based on System II if you do not have adequatelly initial swing up or down, and the pullback after that swing.

Initial swing is the first force, pullback is the second. Then you enter with the original force after it goes in top of the second (pullback changes to the original direction).
  • #15,967
  • Oct 31, 2011 3:24am Oct 31, 2011 3:24am
And finally.

The shape of swings plays a big role.

Look at the picture. In the first case the swing is powerful, the degree of slope is sharp, pullback is shallow... and you see the result - nice clean break and move after break. In the second case the swing is powerful too, but the pullback is too deep. Well - you see that we had the break, but it is not the best for our trading.

Hope it helps!

Good luck!
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  • #15,968
  • Oct 31, 2011 3:35am Oct 31, 2011 3:35am
Quoting dim4ik42
And finally.

The shape of swings plays a big role.

Look at the picture. In the first case the swing is powerful, the degree of slope is sharp, pullback is shallow... and you see the result - nice clean break and move after break. In the second case the swing is powerful too, but the pullback is too deep. Well - you see that we had the break, but it is not the best for our trading.

Hope it helps!

Good luck!
Real live example of this. Look at the pict. The break was too little to get our profit.
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  • #15,969
  • Oct 31, 2011 3:38am Oct 31, 2011 3:38am
Quoting dim4ik42
Real live example of this. Look at the pict. The break was too little to get our profit.

But if you look at previous down swing - it has worked very well.... Again - the shape plays a big role!
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  • #15,970
  • Oct 31, 2011 3:56am Oct 31, 2011 3:56am
Dim, this is great stuff... this is what I look at as well, supply vs demand. Thank you for all this, very good to have it reinforced and ingrained again in my mind by a senior trader here
Small disciplines repeated with consistency lead to great achievements.
  • #15,971
  • Nov 4, 2011 6:59am Nov 4, 2011 6:59am
Thanks for you input on this great thread, a really simple yet effective way to trade and look at the markets, I will be incorporating this into my daily trading system as soon as I have completed some testing (manual backtesting that is) I wondered if you have found the original 20 pip Trailing stopp method to offer a positive expectancy of reasonable levels....say over 1.3?.....or if you have found another method? I tend to take half my position off at 1:1 and then trail the remainder using either the 20 or 30 MA's.....'Feb' mentioned 'expectancy' but I didn't notice any actual numbers based on either his or others actual testing/trading?

James

Keep calm and carry on..........

Quoting dim4ik42
well, about expectancy...

i could not grasp it form the very beginning, (and you can see it during the thread), but after some time (when I was not positn here already) I was able to grasp it really - every trading "system" has its own expectancy. When we was asking feb about expectancy I now understand - it was too comlicated for him to do it for us... Look - when you trade - you have your goals. I mean - your goals are either:to catch 1:1 R:R, or to catch 2:1 R:R, or to catch a runner 5:1 more than your risk etc... And whiile your trading...
  • #15,972
  • Edited 12:14pm Nov 4, 2011 8:12am | Edited 12:14pm
Quoting JamesBranson
Thanks for you input on this great thread, a really simple yet effective way to trade and look at the markets, I will be incorporating this into my daily trading system as soon as I have completed some testing (manual backtesting that is) I wondered if you have found the original 20 pip Trailing stopp method to offer a positive expectancy of reasonable levels....say over 1.3?.....or if you have found another method? I tend to take half my position off at 1:1 and then trail the remainder using either the 20 or 30 MA's.....'Feb' mentioned 'expectancy'...

Hello!

What I could say is - Feb stated somewhere that this "system" is just a blueprint how to trade. He said that one have to make his own trade management, rules, all that etc.

so - I think you are allowed to trade this "system" in your manner just only remember to not make it too complicated. Keep it as symple as it is...

In the middle of this thread is one post - great summary about this from member Systray. I have PDF so I attach it right here for you....
Attached File(s)
File Type: pdf DetailedStatement_systray.pdf   191 KB | 866 downloads
  • #15,973
  • Nov 4, 2011 1:00pm Nov 4, 2011 1:00pm
Out of my cave for a minute.

Just a reminder guys - once you are in a trade it is pretty much it. You could not imprive market's move, or move the market your way... All you can do is - trade your system with stacking all the odds in your favor. Of corse you could improve a little by moving stop-loss etc. but in the whole picture - once you are in a trade it is pretty much up to the market. Let the market do its thing.
Here is the really play. You know your setup, you know what time frame/time of the day/time of the month/ before-after news... etc. this setup needs to work better, then you place your trade, the trade is fill... and - let the market do its thing.


For example - The System II (yes with irony) works better during active trading hours, because it needs some momentum. And the best time is during the market sessions open. London-open and N.Y.-open are better than Sydney and Tokyo open.


Good luck!
  • #15,974
  • Nov 4, 2011 5:38pm Nov 4, 2011 5:38pm
Hey Dim, do you have any suggestions for how to notice when the market is moving enough to follow through on a trade? That question isn't quite coming out like I'd like it to... basically, what I mean is that sometimes these swings form beautifully, with a great pullback, and then excellent follow through. Other times, great pullback, and then nothing. And even other times, the market is an absolute chop-monster-mess, but from it forms a swing, pullback, and a beautiful follow through you'd never expect.

I understand, testing testing testing was Feb's point from the get go, but I believe there must be some refinement from someone such as yourself who has continued to trade this religiously for the past year or however long you've been at this.

If not, just tell me to keep testing and I'll do so
Small disciplines repeated with consistency lead to great achievements.
  • #15,975
  • Nov 4, 2011 5:59pm Nov 4, 2011 5:59pm
Quoting jmflukeiii
Hey Dim, do you have any suggestions for how to notice when the market is moving enough to follow through on a trade? That question isn't quite coming out like I'd like it to... basically, what I mean is that sometimes these swings form beautifully, with a great pullback, and then excellent follow through. Other times, great pullback, and then nothing. And even other times, the market is an absolute chop-monster-mess, but from it forms a swing, pullback, and a beautiful follow through you'd never expect.

I understand, testing testing testing...

Let me think some time about the answer for you... But what I could tell you right now is - once you see your setup (swing-pullback) - make your risk assesment, and go trade, take this trade. The rest is up to the market. Let the market do its thing. But, remember? - THE TRADE MUST GO YOUR WAY IN RESONABLE TIMEFRAME, AT RESONABLE SPEED, etc - remember that? - Well, this is an answer at your question to the some point... It comes with experience. You will have good days, you will have bad days, but you would know if the day was good or bad only after the day is already gone. But you would have to make your trades no matter what until you have money to keep trading for this day. It is obvious that you are here for the money, so you just need to bail out off your trade if it goes not your way, but you have to wait for your trade to reach your target if is keeps going in your favor.......

Hope it helps.
  • #15,976
  • Nov 4, 2011 6:07pm Nov 4, 2011 6:07pm
Quoting dim4ik42
Let me think some time about the answer for you... But what I could tell you right now is - once you see your setup (swing-pullback) - make your risk assesment, and go trade, take this trade. The rest is up to the market. Let the market do its thing. But, remember? - THE TRADE MUST GO YOUR WAY IN RESONABLE TIMEFRAME, AT RESONABLE SPEED, etc - remember that? - Well, this is an answer at your question to the some point... It comes with experience. You will have good days, you will have bad days, but you would know if the day was good or bad only after...
Yes sir, it helps. It is a matter of my expectations. I think the most meaningful thing someone said somewhere in this was that the market rarely moves in a straight line in any direction. So I'm trying to find the balance between getting out of a trade too soon or letting it pullback slightly after a breakout/breakdown before continuing in my favor.

I know Feb talks about just getting back in if the market pulls against you right after entry (causing you to exit your trade) but then moves back in your favor. My quesiton about that, and I'm not sure if you take that move or not, is do you enter at the original price or have you moved your entry to the latest breakout/breakdown point? Basically, the market moves past the swing point say 8 pips and then pullsback 20 hard. I get out because I don't like that hard movement, but then the market moves back in my favor back through the original swing point. Is my entry based on the original swing point or is it based on that swing point of the breakthrough, 8 pips above the original swing point? Hope that makes sense.....

Lastly, one thing I have toyed with is putting my stop at the low of the pullback and letting the market move. Normally it seems that the market will never immediately take out that stop if it pulls against you, but will come back to somewhere near the entry point at which time you can either exit the trade (if market stalls) or hold trade if it breaks through. I think that has been talked about, but I wanted to know if you practice that yourself? As Feb said, keep the stop away from the action.

Thank you again, it's nice to actually talk out some of my thoughts instead of just reading.
Small disciplines repeated with consistency lead to great achievements.
  • #15,977
  • Nov 7, 2011 1:13am Nov 7, 2011 1:13am
Good morning!

I want to post my possible trade setup. Simple and straigtforfard.

If the market goes up - Then I would be in long trade,
If the market keeps going my way - Then I would be trailing my stop-loss.
If the market goes other way - Then I will bail out as soon as I could recognize its intentions to go other way.
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  • #15,978
  • Nov 7, 2011 1:44am Nov 7, 2011 1:44am
Quoting dim4ik42
Good morning!

I want to post my possible trade setup. Simple and straigtforfard.

If the market goes up - Then I would be in long trade,
If the market keeps going my way - Then I would be trailing my stop-loss.
If the market goes other way - Then I will bail out as soon as I could recognize its intentions to go other way.

well, market went down, my long order was not hit... Waiting for another possible setup.
  • #15,979
  • Nov 7, 2011 2:03am Nov 7, 2011 2:03am
Possible setup down is forming...
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  • #15,980
  • Nov 7, 2011 2:15am Nov 7, 2011 2:15am
I am ready for short.. lol
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