Diversified Trend Trading Approach

The Recap continued.......

Here is the sequential progression of trading activity undertaken for the USDJPY to ferment the ideas we already have discussed.

Buys on M30 and H1




Buy on H4




Damn...exits on M30, H1 and H4.




....more rolling forward to come.

C

The Recap continued.......

Entries on D1, W1, M30, H1 and H4






Ok so now we are getting some good trend extension on the lower timeframes and profits are building as we experience the building momentum of the underlying trend.

Now when we get to a profit of 2.5R on any timeframe, we need to reduce the SDC to a width of 0.5 as shown below. Note the narrowing of the SDC which means you need to now adjust the trailing stop (hashed line) over the top of the new outer band. The result means that you give less chance for the trend to breath ensuring that significant profit is derived when the trend hiccups. Now remember given that you will also have trends running on higher timeframes, this will not affect their progress so you are not sacrificing profit potential by doing this. You are simply maximising your profit potential on each timeframe.



.....so moving on again.



Some good profits are building on those lower timeframes and M30, H1 and H4 have all been reduced to 0.5 SDC width. D1 and W1 have not achieved 2.5R as yet hence are still on the 1.0 width setting.

C

The Recap continued.......

...so moving on again.

Stopped out on the D1, H4, H1 and M30 timeframes but MN and W1 survives.




Some good profit is starting to build but it aint over as MN and W1 are still going up.

Another great profit haul from the M30, H1, H4 timeframes with D1, W1 and MN still in the game.


....and the trade profit keep building but once again, we are still in the game with MN, W1 and D1.


Now I wont bother keeping going, as the story on the longer timeframes continues to the present day but here is where we will leave it with for the purposes of the recap.

The exercise we have followed through the recap demonstrates the power of this EDTTI technique but importantly you will need to have a user friendly platform and a system that can quickly determine appropriate position sizes as speed in execution is essential. Just practice, practice and practice to make this process intuitive and seamless and then benefit from the fruits of this approach across a diversified portfolio.

Given that now we have a comprehensive account of the process I thought I would now revert back to simply a Q&A approach with this thread and just:

1. maintain on an ongoing basis for the next few weeks at least, the Weekly Outlook to assist those that might be utilising this approach on similar instruments; and
2. provide monthly performance results that compare the DTT, EDTT and EDTTI (the subject of the recap).

I would encourage you all after familiarising yourself with the recap to now venture back to Post 1 and read to this point again to pick up any small details that have been missed and closely examine the performance results posted in this thread to-date.

It has been a fairly exhausting process for me...and now its time to sit back a bit and work on my own technique.

If there are any substantive changes to the technique, I will let you all know as I will continue to forward test not just for statistical purposes, but also to continuously hone my own personal technique, but in the interests of keeping this thread brief as opposed to a vast wall of posts that in the future may be difficult to trawl through....this thread in the next few weeks should probably be put to bed aside from occasional updates to performance results.

I wish you all well.

C

END OF RECAP

Thanks for the detailed recap. It is obvious you have spent a lot of time into this and I have no doubt you are a better trader because of it. I will take some time to digest and internalize everything so far. Will be also following along with your future posts.

Thanks genie. Writing this all down certainly helps me clarify things in my own mind so it is a worthwhile exercise for me. Hopefully people here will also get some benefit from it. A win, win all round. :-)

C

PS Something I didn't mention which is worthwhile considering is the following. The recap looked at a sequential time ordering of trades taken across multiple timeframes associated with the USDJPY. Now some may argue that it is the lower timeframes that drive the price direction of the longer timeframes, but quite clearly using this sequential method of analysing trades, the reverse appears to hold. Namely that it is the long term secular trend on the monthly timeframe that is running the show. The results of this recap show the profit taking in sequential trending surges that is being driven by economic fundamentals associated with the relative strength between USD and JPY and is largely the progressive announcement driven nature of the longer timeframe which is causing the rally.

This fact alone is giving me a great deal of confidence in why it is very beneficial to trade the longer timeframes even though many feel it is not very exciting or rewarding. With this technique the major profits are being driven by trend surges on the M30 and H1 timeframes with the longer timeframes being icing on the cake. If you are a trend follower, no matter what technique you use, you are missing out on opportunities if you don't consider also trading on the higher timeframes which enjoy far greater breathing space and lower risk albeit also lower returns. The combination of trading multiple timeframes appears *so far* to compound performance significantly.

Dear Copernicus

Thanks for the recap. Very usefull.
There is a point though which is not clear in my mind.
Can you please repeat how and why did you draw the predictive entry line of the M30 UJ example at 102.45?

Hi TK (morning here)

You have highlighted something that I have not discussed in the recap. Namely, a discussion regarding sideways price action (congestion). It is morning here but in the next few days I will revisit the "Predictive Entries" as there appears to be a bit of confusion regarding their placement from a few posters, which is suggesting that I have not explained it sufficiently. I will focus specifically on the decisions that were made in setting that predictive entry on M30 at 102.45 and then look at other examples as well.

In the meantime, what is driving my considerations in their placement is the following:

1. I am ensuring it is placed in the direction of the primary trend;
2. I am ensuring that a higher high or higher low is achieved on entry which necessitates that I look at price action on the timeframe concerned and place a few testing SDC channels at various points (lows or highs) to check whether price action is currently in the primary trend direction or not. If it is then I am looking for entry point above the most recent high/low to confirm a trend is valid. If it isn't, then I clearly need more room for price action to turn in the primary trend direction and have room for an infant trend to develop;
3. I am creating sufficient vertical space for a trend or sufficient breakout pattern to emerge between where price is now (including an assessment of its recent history) using the timeframe price history and higher timeframe price history assessments;
4. I am checking to see if the entry lies outside zones of clear price congestion by using multi-timeframe analysis to jump onto a breakout from congestion;
5. I am ensuring it is a sufficient distance from prior highs/lows to avoid the majority of fake-outs; and
6. I am ensuring that if trading higher timeframes that the predictive entry on the higher timeframe is not placed in exactly the same position as a lower timeframe as this really helps trade management purposes as you don't want to be doing two things at once.

I will discuss with more examples in the next few days that hopefully brings a bit more clarity. As you can see, there is a hell of a lot of subjective assessment going on, but as mentioned, this is not an accurate science and provided that generally the conditions above are met, that in my mind is a 'good' entry. It's the same kind of decision making that a surfer makes in deciding whether to catch a wave or whether to wait a bit until the swell get's bigger or better formed. He is simply looking to avoid the chop and ride a good wave by being picked up and carried by it, as opposed to being concerned about being in the right exact place at the right exact time.

One of the issues associated with this approach that many of those traders used to following exact rules will be concerned with, is that there is no exactness to the entry technique. Different people will get different results based on their different interpretations but it is quite clear that 'exactness' of entry is not a pre-requisite of this approach. Provided the general rules above are followed, it should be Ok.

Will speak later on this.

C

Back in 2013 we were using the DDT approach and the trade transactions for that year are detailed in that big spreadsheet found in this post. It's safe to download so just unzip .......

Hi Copernicus
Thanks for your explanation and clearing that up.

Also thanks for posting the rest of the re-cap approach. Very detailed and thorough, and very good. There is some very good stuff in your thread and I for one am benefitting from it and really appreciate the effort your are devoting to it.

Much appreciated K :-)

Preparing for Setups

Guys (and in particular TK)

I thought I would provide an example or two of a few current trade templates to help things a bit more in determining where to put those 'Predictive Entries' (PE) and SDC's while waiting for trade entry opportunities.

Below is the current ASX template.



Current info that can be drawn from the chart template is as follows:

1. Primary trend (MN) is long so all timeframe entries will be long;
2. A trade is active on the MN timeframe (note the hashed line on the outer SDC which is a trailing stop).;
3. A trade is active on W1 timeframe. Note the current SDC that has been extended to the highest high. You can also see the original setup SDC for entry;
4. We are approaching the D1 Predictive Entry (blue dashed horizontal line at 6059.4 which is positioned at a location that requires a new high to be formed a distance above the highest high to avoid possible fake-outs;
5. We are approaching the H4 PE (purple dashed horizontal line at 6026.7) which is positioned at a location that requires a new high to be formed a distance above the highest high to avoid possible fake-outs. Also note that this is positioned lower than the D1 PE to ensure that there is a bit of distance difference between entry on D1 and H4 for simply ease of trade entry management ;
6. We are also approaching H1 PE....(refer to H4 reasons above). Also note that in this case, the H1 PE is above and not below the H4 PE. This is because I have already had a crack at an H1 entry and it failed, so when re-setting and re-establishing the new predictive entry, the space I wanted to put the new H1 entry was already filled by the H4 PE. I therefore looked at the nearest available space to place the H1 predictive that ensured that H1 and H4 trade entries were not right on top of each other.
7. We are also approaching M30 PE....(refer to H1 reasons above).

Note that in all instances we are trading into clear blue sky.

Also note the commencement bars of each SDC and see how where possible, each time frame has it's own unique starting point. Now H1 and M30 are the same as it was not possible for me to conclude that the prior price movement to H1 and M30 was part of the same directional thrust. With reduced magnification of price movement on the higher H4 timeframe, I was able to extend the commencement of the SDC further back in time to now include that prior price movement that was not included in the M30 and H1 assessment. I am always trying to stretch the SDC if possible as it gives more room for the trend to breathe if it continues but it also does reduce position sizing. So where possible I ensure that each timeframe has it's own unique settings which assists in risk management diversification and also trade management purposes.

I hope this helps. I will put further examples up as I see them.

C

Preparing for Setups continued.....

Ok here is another template for interpretation for AUDCAD.



Information made available from this template is as follows:

1. MN timeframe is currently sideways tracking in consolidation. I cannot determine primary trend direction here so I go to the next lower timeframe to see if we can define it there. Note that given the lack of clarity for primary trend direction I have two PE's placed on the chart if price commences a trend direction from consolidation. The PE for a long trade is located in blue sky above the highest highs of most recent history. The lower PE is placed with sufficient distance away from consolidation for a trend to emerge and........below the lowest low of 2010. I could set it at the lowest low of 2009 but that would be too far away and well beyond the distance from which a trend could emerge so I would miss a significant part of the trend if placed such a long distance away....but there is nothing wrong with doing this.
2. The W1 timeframe is also not convincing in trend direction. It is in consolidation but on the most recent bar, appears to be moving up...however to soon to say with confidence. PE placement based on previous posts should be easy to determine here.
3. The D1 timeframe is in consolidation but the hashed SDC is concluding an upward bias. This is where I conclude (not very confidently) that the primary trend direction is up. Obviously this assessment and it's subjective nature is not standing out hence I am saying this with less conviction. Given that I conclude that on this timeframe the primary trend direction is up, I do not have two PE's here. I am only going long. Note hat the hashed SDC is commencing at A. I am streching it out as far as possible given consolidation uncertainty currently.
4. The H4 timeframe has been in consolidation and now appears to be making it's move up slowly. The PE is still a distance away for more price data to conclude that a trend is underway. It is not shouting at me yet. The SDC commencement point at B is as far as I can stretch the current SDC.
5. The H1 timeframe like H4 is like H4 timeframe but I am gearing this trade more to a breakout trade from prior consoidation than a straight forward trend entry. The PE is located above a consolidation at a position where I will catch a sharp move. The SDC commencement at B is as far as I can strech things to be represenative of a trend movement long.
6. The M30 imeframe is currently active and I have a trade running. No big deal, and if it works it works. This is a fairly low probability trade that is 'testing the waters' given the interpretation above.

Let me know if you guys need more examples to get your head around.

C

PS.... Tom (TK) if you specifically want me to deal with the M30 PE on USDJPY from the recap I will, but I need to go back in time and set up the charts etc. which is a pain in the neck. Do the examples above help?

How the SDC Deals with Price Movement Anomalies

Below is a M30 chart of the EURCAD



If you were using a traditional trend following technique of exactness plotting the trend line to touch 2 or more highs, you would not be interested in this price movement. Note however how the SDC deals with the price movement in confirming that directional price movement is sloping up in accordance with the entire price data contained in the channel. It is not being significantly influenced by the anomaly (highlighted with the ellipse).

This is one of the benefits of the SDC in it's ability to 'cut through' price anomalies and define what is going on generally with underlying price action.

While the predictive entry is still a way to go, I am getting interested in this price movement as a potential trend appears to be forming in general price direction.

PS Don't be confused with the 2 PE's for the M30 timeframe as this graph is relevent to ther EDTT approach where we are both intrend trading and countertrend trading. Not the EDTTI approach. I just thought this chart may interest you as it highlights a benefit of the SDC in determining trends.

C

Morning C,

Just a quick note to let you know that I am lurking with great interest. While I am not able to set my charts up exactly like yours, I do have the the 6 windows and TFs with SDCs. For me this is a great way to keep track of the directional bias on the TFs and cleanly watch my pairs in a Top - Down fashion all at once.

All the best, AG

Ta AG. Great to have you on board and that the info is of use to you. :-)

C

PS As mentioned before but is debated heavily on this forum I reckon it is Top-Down as well, as opposed to Bottom-Up though many would like to differ given that higher timeframes are a composite of price action from lower timeframes....however the fundamental factors driving the directionality appear to me at least to *generally* be logically tied to a swag of consecutive economic factors as opposed to singular announcements.


....anyway, Christ it's late in the Antipodeans.......time to hit the hay :-)

I can't thank you enough!
Everything is very clear and very well presented!

That's great TK.

What is hitting me over the head as I have been working on this approach over the last few years is that it is really challenging some of the 'golden rules' that we have taken for granted in Technical Analysis (TA) such as the 2% rule, the need for precise entries, the need to focus on a single instrument.....etc.etc.etc. and the list goes on. Some of the golden rules are still valid such as 'the trend is your friend until it bends', diversification manages risk etc. but it has taught me not to accept anything without first putting it through the statistical crucible.

That's why I refer to it as a 'brutal approach' in that it really challenges the profession of TA, but in a good way, as the approach itself is pure TA but guided by probability rules and not 'exact' rules. It has changed my philosophy to trading and the way I view trading generally and has given me a few good challenging insights along the way that seriously make me question 'how good the professionals really are?', 'why the need for secrecy in the profession such as the hedge funds?', 'why are so many so retiscent to share their supposed excellent results and trade details?'....etc..and it is a personal shame that it is the cynic in me that is actually answering these questions for me.

There are so many ego's to please in the trading world that perpetuate so many myths and half-truths when alone, it is difficult enough trying to eke a living from this market. No wonder there are so many tragic trading stories. Traders in their'secrets' really offer nothing to this world. How do you trust them all. Well the answer is that you don't and it is critical that you test every assumption yourself personally (which includes me and this approach). In the process you are going to find that you truly 'own the approach you use to trading'.

This paradigm shift for me has all come about by putting in the effort to challenge the 'golden rules' and the purported myths in the profession. This arose because of the need to survive and the fact that I had wasted almost a lifetime thinking that success is achieved by preciseness in this market and relying on the guidance of others without ever challenging it. Only by rigurous testing will you be able to see through the forest of trees and this really has been an eye opener for me. It is great to share the results here but just ensure that you follow a similar process if you embark on trading this approach as the testing achieves two outcomes:

1. It opens your eyes to what is valid; and
2. It ensures that you can manage all contingencies that are very prevalent when dealing with the 'mother of all puzzles', namely market uncertainty.

C

It is essential that critical thinking is applied to trading as opposed to relying on the advice of others. For example, below is a demonstrable fact. There is 'at least' one person 'Anonymous' that you should never listen to in dealing with risk..../tic :-)

You mean ..... it's not a math problem?

Well you could use maths to determine if the lion actually has a probability edge over you in surviving the outcome or use a forensic probability splatter pattern analysis to assess which parts of you would be found in which area of the room after the outcome.....or you could use a brute force technique without the maths and shove the PC so far down said Lion's throat to make digesting you are future problem. Critical reasoning will allow you to make the necessary rapid choice.:-)

Hi C and others,

I am enjoying this thought provoking thread and trying to come to grips with the methodology and process.
I find it easier to work through the ideas off-line and so tend to create a pdf of anything interesting.
You might find the attached of interest - its a summary of C's recap from post 360 - for your viewing pleasure.

cheers Fred