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The DIBS Method... No Free Lunch continues

Quoting mr_p
Well chaps...after thinking i had DIBS sorted a year ago, the markets and my misunderstanding of the nuances came back to bite me in the arse. 2.5 years of trading it, and 5 long months of backtesting it later (unfortunately i did the backtesting and the live trading the wrong way around, however it's unlikely i'd have known what to look for without this prior 'live' experience), i made a huge breakthrough this last week. This is for anyone reading this wanting to extract it's edge....you will get no where with this strategy if you wish to trade...
Is this post to brag or to help readers? Good Luck to you for your breakthrough.
  •  goodling
  • | Joined Oct 2011 | Status: Be Extra Patient to Collect Money. | 7 Posts
DIBS is a great concept to follow the trend, just go with the rythm of market without emotion, more objective!

but to throw half at 1:1 just can improve your mental situation to insist on holding this position continuously, yes it can reduce the bad effect of your emotion; but actually it may not be the best result we can get.


the existing half isn't in line with the principal of 'LET THE PROFIT RUN'.


just don't throw the half when your position is @ 1:1, hold these two halves continuously , if retrace after reaching 1:1, exit all your positions 1 tick from your entry(how many ticks depends on your commissions), or hold until final exist.


I have backtested this concept and apply it in real commodity trade , and the result is better.


of course, if you can;t accept this 'all hold, all exist' concept, just take what PC said, his is also great.


best regard to PC & Joel.








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  •  goodling
  • | Joined Oct 2011 | Status: Be Extra Patient to Collect Money. | 7 Posts
Happy new year, everyone.
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Quoting goodling
Happy new year, everyone.
Thanks for wishes!

Happy new year you too!
Quoting goodling
DIBS is a great concept to follow the trend, just go with the rythm of market without emotion, more objective!

but to throw half at 1:1 just can improve your mental situation to insist on holding this position continuously, yes it can reduce the bad effect of your emotion; but actually it may not be the best result we can get.
...
It wasn't optimal in my backtesting (in fact I think if you look on this thread I may have posted that several years back).

Because DIBs is really a trend-following method, the profits come from a small number of outlier trades, trades which make 5R or more. Taking half off at 1R just means having a half position on your biggest pip wins.

The other thing I remember from my tests was that break-outs from IBs don't really have any edge. The main thing it does is provide an obvious entry trigger and stop point.
It is a great way to add on to existing positions in the strongest or weakest markets.
  • Post #10,167
  • Quote
  • Edited Jan 13, 2012 6:09am Jan 12, 2012 12:40pm | Edited Jan 13, 2012 6:09am
No, but the concept nearly GOD Damn should be.

The simplicity lies in the following line:

"find a low risk entry into the markets and learn to wait".

Yours,
KR
Just trade wisely and correctly.

KR
I took that e/j trade but 3 days later and it failed. But agree the long term direction is down. Will re enter at next pivot on price.


Quoting Knight Rider
4 Jan 2012 - eur/jpy 0400 4 hr dibs trade. This 4hr bar straddled the opening time of 6GMT.

Was eur/jpy making new multiple weekly lows? You want to stack as many of the odds in your favour.

The risk here was as small as it gets (tiny risk), yet the potential for this trade was/is massive.

Once the trade was eventually entered, you will notice that there was very little retracement after pulling the trigger (check 5mins). These are the dibs trades which are the best. Simple is best in these dangerous markets.

There were other related...
Patience is magic
Quoting muntu ntu
I took that e/j trade but it failed. But agree the long term direction is down. Will re enter at next pivot on price.
....it should not have failed.


KR
The main difficulty in trading DIBs is how to take profits. I remember backing testing DIBs on EUR and there was a 6 month period where every trade was a loser if you had no tp or trailing stop. There were 2 instances where EUR went up over 500 pips before being stopped.

Wide trailing stops mean you give back too much open profit before being stopped out and tight stops mean you get knocked out early.

I've never traded DIBs because I never found a trailing strategy that I was happy with.
Quoting jzw
The main difficulty in trading DIBs is how to take profits. I remember backing testing DIBs on EUR and there was a 6 month period where every trade was a loser if you had no tp or trailing stop. There were 2 instances where EUR went up over 500 pips before being stopped.

Wide trailing stops mean you give back too much open profit before being stopped out and tight stops mean you get knocked out early.

I've never traded DIBs because I never found a trailing strategy that I was happy with.
Not happy with this response. I don't agree with it. You definitely have the right to post your thoughts, but it would seem with this analogy any medium to long term strategy you employ would be frought with difficulties.

Find a trailing stop you are comfortable with and learn to wait, whilst accumulating along the way....and after some specified period of time....never let a winning trade turn into a loser. This does not necessarily mean you take half a position off along the way. This method is a discretionary technique, therefore backtesting (I would have thought) would be seemingly useless.

I was frustrated by this comment earlier. Not your fault, it was mine for originally posting. Trading is boring for those of us who want to build our accounts/business. Otherwise, it is just gambling.....a mug's game!

KR
Quoting Knight Rider
Not happy with this response. I don't agree with it. You definitely have the right to post your thoughts, but it would seem with this analogy any medium to long term strategy you employ would be frought with difficulties.
Fair enough. I did say a few posts back that DIBs is basically a trend following strategy and my comment would apply to any trend following strategies.

I should also say that I think DIBs is a sensible strategy (one of the few on FF) and potentially a profittable one if you have a sensible trailing stop strategy.

I just don't think it is that easy to find a trailing strategy that works as you always end up in some trade-off between a looser trail that gives back a lot of open profits at the end of a trend and a tighter trail that gets knocked out during a pullback.
Quoting jzw
Fair enough. I did say a few posts back that DIBs is basically a trend following strategy and my comment would apply to any trend following strategies.

I should also say that I think DIBs is a sensible strategy (one of the few on FF) and potentially a profittable one if you have a sensible trailing stop strategy.

I just don't think it is that easy to find a trailing strategy that works as you always end up in some trade-off between a looser trail that gives back a lot of open profits at the end of a trend and a tighter trail that gets knocked...
Yes, you can use many different trailing stops which the "sure" money always uses, or you can figure out something that suits your own "utility".

Dibs is a discretionary technique and your own trading experience should be your best guide. Don't let anybody tell you otherwise.

That said, you could do a lot worse than just following a 30 day ema at the close....although I use different trails for different markets and there are no guarantees, unless you're the wife of a central bank chief!

Unfortunately, some people are uncomfortable with large gains when they should be uncomfortable with large losses. It is the mindset that needs to change, not just the execution of the trade.

KR
Quoting jzw
The main difficulty in trading DIBs is how to take profits. I remember backing testing DIBs on EUR and there was a 6 month period where every trade was a loser if you had no tp or trailing stop. There were 2 instances where EUR went up over 500 pips before being stopped.

Wide trailing stops mean you give back too much open profit before being stopped out and tight stops mean you get knocked out early.

I've never traded DIBs because I never found a trailing strategy that I was happy with.
Not sure what you mean here, if you follow PC`S rules then you close out position 1 after 20 pips, move position 2 to break even and enjoy a "free trade".

Also, lets not forget the "hot hand" principle here, DIBS is not about taking every set up on every pair but playing the strongest and weakest pairs respectively.

Gez.
Seek not to change the world; seek only to change your mind about the world
Quoting gez40
Not sure what you mean here, if you follow PC`S rules then you close out position 1 after 20 pips, move position 2 to break even and enjoy a "free trade".

Also, lets not forget the "hot hand" principle here, DIBS is not about taking every set up on every pair but playing the strongest and weakest pairs respectively.

Gez.
The point here is that if you trade 2 lots you have 3 outcomes
Full stop out -40 (2*20)
First target hit then stopped +20
Target hit & trail = +20 + "free trade"

Now the "free trade" bit needs to pay for all the -40 stop-outs and then leave you a profit. And that depends on the trailing strategy. For example just using a 20 pip trail won't work.

I didn't test with the 'hot hand' principle. Trading the strongest trends and ignoring the rest sounds like it should help but I didn't try to test that.

I would like to have tested DIBs more thoroughly but you need several years worth of 5 min data which I don't have.
I would suggest stacking the odds as much in your favour as possible...a fast moving market helps, as well as other factors.

This is why I believe it is no more than a discretionary technique - a low risk method to enter the markets. It is a way to stop the bleeding and trade correctly.

I don't even know why one may be inclined to use multiple lots, or to take half off when it reaches breakeven. If a bar is so small it would be stupid not to take the trade, why limit taking half off when it reaches breakeven? Use all of your trading experience to improve your odds of success....and trust yourself. Once you have the self belief you will be further along the journey than others who get fed up, trade for excitement and blow their accounts.

No need to be a robot. Be creative. It is boring enough having to be patient all of the time!

KR
Quoting jzw
The point here is that if you trade 2 lots you have 3 outcomes
Full stop out -40 (2*20)
First target hit then stopped +20
Target hit & trail = +20 + "free trade"

Now the "free trade" bit needs to pay for all the -40 stop-outs and then leave you a profit. And that depends on the trailing strategy. For example just using a 20 pip trail won't work.

I didn't test with the 'hot hand' principle. Trading the strongest trends and ignoring the rest sounds like it should help but I didn't try to test that.

I would like to have tested DIBs...

I see what you`re saying but don`t forget your stop should be on the high/low of the IB, so you may only be risking 10 pips or so if the IB is small, I think PC mentioned he once had an 8 pip stop on a trade that went up over 700 pips.

I understand your comments though.

Gez.
Seek not to change the world; seek only to change your mind about the world
Quoting gez40
I see what you`re saying but don`t forget your stop should be on the high/low of the IB, so you may only be risking 10 pips or so if the IB is small, I think PC mentioned he once had an 8 pip stop on a trade that went up over 700 pips.

I understand your comments though.

Gez.
This brings up another thing about DIBs. Because your stop distance is the size of the IB, your position size is inversely related the size of the IB. So a 10 pip IB has you trading twice the size of a 20 pip IB. Your position size can vary dramatically for no obvious reason because small IBs are not higher probability than larger ones.

So this position sizing method introduces a lot more randomness into the results. A big pip win starting at a small IB gives you a huge $$ win but the same move starting from a bigger IB a much more modest win because of the smaller position size.

The argument for having the stop on the other side of the IB is that the low of the bar is support and so should 'protect' your stop. But my feeling is that most of the time the low of an IB is just a random point and provides no support, so there is no advantage being just beyond the low.
Quoting Knight Rider
Dibs is a discretionary technique and your own trading experience should be your best guide. Don't let anybody tell you otherwise.
I don't know why people discourage others to use software to back test some form of DIBS. I guess it is true that PC uses it as a discretionary technique. But it is also true that people like Joel himself have back tested what he calls DIBS on different time frames and different instruments (Forex, Futures).

My own personal back tests so far indicate that one could do far worse then trade a diversified futures portfolio on the basis of DIBS mechanically.
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