Revisiting 'Price Action'

This is a discussion on Revisiting 'Price Action' within the First Steps forums, part of the Reception category; Yes, you can think of it all rather differently. Think of it that your bet is your stoploss size and ...

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Old Dec 12, 2010, 2:34pm   #31
 
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Re: Revisiting 'Price Action'

Yes, you can think of it all rather differently.

Think of it that your bet is your stoploss size and not £x per point. So at £1pp and a 20 point stoploss your bet is £20. Let's say you see 60 points in the trade so that's odds of 3 to 1.

If it was a horse race with the bookie quoting FTSE Demon at 3 to 1 you might back it and you'd have to put the £20 up front. You'd then either not get it back or go down and collect your £60 winnings.

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Old Dec 12, 2010, 4:00pm   #32
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Re: Revisiting 'Price Action'

Thanks for your response.

If I could just clarify a few things: I trade the Dow Jones & FTSE. Regarding my money management strategy - I use 3 lots on my trade. The stop loss is set at 20pts away. If the trade moves 12pts in my favour I will take one lot off the trade and move my stop to breakeven, leaving the remaining 2 lots to run. I feel that 12pts is a reasonable amount to let the trade 'breathe'.

I suppose all this boils down to is how risk-averse we all are. For me, I'd say Im fairly risk-averse, if the trade stops me out for b/e and continues to move in the opposite direction then I usually think *phew* at least I managed to get a few points. I think I will try MB325's idea though. This is perhaps the best compromise as it means not moving your stop loss (which is what you're suggesting) and at the same time ensuring a break even trade and minimising losses.

Could you just elaborate on the point you made about not ever taking a full loss (unless momentum pushes the price straight past your trade instantly)? Are you suggesting to use mental stops and hard stops then?

Thanks,

Pi
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Old Dec 12, 2010, 4:53pm   #33
 
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Re: Revisiting 'Price Action'

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Originally Posted by Pi3141 View Post
Thanks for your response.

If I could just clarify a few things: I trade the Dow Jones & FTSE. Regarding my money management strategy - I use 3 lots on my trade. The stop loss is set at 20pts away. If the trade moves 12pts in my favour I will take one lot off the trade and move my stop to breakeven, leaving the remaining 2 lots to run. I feel that 12pts is a reasonable amount to let the trade 'breathe'.

I suppose all this boils down to is how risk-averse we all are. For me, I'd say Im fairly risk-averse, if the trade stops me out for b/e and continues to move in the opposite direction then I usually think *phew* at least I managed to get a few points. I think I will try MB325's idea though. This is perhaps the best compromise as it means not moving your stop loss (which is what you're suggesting) and at the same time ensuring a break even trade and minimising losses.

Could you just elaborate on the point you made about not ever taking a full loss (unless momentum pushes the price straight past your trade instantly)? Are you suggesting to use mental stops and hard stops then?

Thanks,

Pi
If you are taking partial profits why are you also physically moving your stop? You have already effectively moved your stop by taking partial profits so why kill the trade by giving it less 'room to breathe than you had if room to breather is your thing'? Are you being ruled by fear of losing unrealised profit? If you're going the partial liquidation route why don't you take more off the table than you already are and leave your stop where it is? If you move your stop that is where you are expecting to get stopped out.

I don't know how long you expect to hold a trade: 12pts is reasonable based on what fact?

Indices are not going to move quite the same as the Forex but...how often does your 'free trade' get stopped out?

What is a mental stop? A hard stop is nothing more than a level you use to hopefully set your risk.

By not taking a full loss I mean exactly that, unless price blows straight past your entry within 1 bar of the timescale you are trading I'm suggesting you should not allow your stop to get hit. If going long on the 4hour, the entry bar will be red at point of entry, also often pretty close to the average range: someone is going stop hunting, i.e. if it goes much lower we're well wrong. Within that bar we would be expecting stops to trigger and the bar to go back up. If it doesn't and closes against us it's likely we are dead wrong. Hopefully you can you see that by entering where we are, already by definition our stop is MUCH smaller than if we'd have just taken the break out of a previous closed bar.
So price has closed against us but we should also be observing how fast price is moving and in which direction when the bar closes.. Three choices, close immediately, try to get out at a better price or if price now seems to be moving the right way, wait but noting that if price starts down again, get out immediately.
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Old Dec 12, 2010, 5:03pm   #34
Joined Nov 2001
Re: Revisiting 'Price Action'

Yes, risk aversion is what separates us.

Let me put my version. I'm thinking of Footsie now.

If I use 4 hour peaks for identifying entries but use a 3 min bar for the trigger, nunrgguys argument for not waiting for a bar finish would make sense for the 4H bar,but would it not be reasonable to use a bar finish on the 3M, which would involve a smaller SL?

There is something about entering when the price is rising, or the bar finishing, that is a bit hairy. The sky might be the limit, but I guess that is what separates the men from the boys. Changing to a lower TF from which to get some kind of pattern and reversal might be more palatable.

In any case, I am going to try this next week.
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Old Dec 12, 2010, 5:08pm   #35
 
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Re: Revisiting 'Price Action'

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Originally Posted by nunrgguy View Post
If you are taking partial profits why are you also physically moving your stop? You have already effectively moved your stop by taking partial profits so why kill the trade by giving it less 'room to breathe than you had if room to breather is your thing'?
Absolutely

It took me a while to figure out the impact of scaling out on average price.

Until that point I was a huge fan of scaling in.
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Old Dec 12, 2010, 6:51pm   #36
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Re: Revisiting 'Price Action'

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Originally Posted by nunrgguy View Post
If you are taking partial profits why are you also physically moving your stop? You have already effectively moved your stop by taking partial profits so why kill the trade by giving it less 'room to breathe than you had if room to breather is your thing'? Are you being ruled by fear of losing unrealised profit? If you're going the partial liquidation route why don't you take more off the table than you already are and leave your stop where it is? If you move your stop that is where you are expecting to get stopped out.
It never really occurred to me that taking partial/half profits and leaving the stop loss in its original place would result in a breakeven trade if the original stop loss got it - I think I just never worked out the maths for it and so I was pleasantly surprised when I found this out today ^^, . I suppose I dont take more off the table due to the risk/reward ratios because if I take more off at +12pts but my stop is at -20pts then I would be continually risking more to achieve less in the long run. By leaving more on the table, then the reward would be greater if the trade was favourable.

Regarding the point about never letting a full stop loss to be hit. Am I right in suggesting that as soon as you enter a trade you are actively monitoring it, so that if the trade moves against you it is your aim to get out as best as possible to minimises losses. In other words you aren't a 'set it and forget it' kind of person? - This is another reason why I move my stop to breakeven. I know I've banked +12pts so I just leave it and it's rather reasurring feeling. Again this is my personality reflected in my trading style I guess.

On Monday I will try out what been suggested. Thanks for the advice, really appreciate it!! ^^,

Pi
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Old Dec 12, 2010, 7:17pm   #37
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread No problem
Don't get me wrong, I'll reiterate I'm by no means some kind of expert: I used to do exactly the same thing and was doing OK with it BUT mentally it was challenging esp on 4hr trades, watching them through the night (only every 4 hours) only for them to come back and stop out for b/e, or sitting through a drawdown waiting for it come back, sometimes it does and you win big time, others you lose an amount that is hard to handle: Reasonable win, couple of breakevens, loss, right back at where you were at the start of the week is very tough to handle. It wasn't until I thought 'what on earth is happening here' that things started to click a little bit more.

I WAS a set and forget kind of guy but not any more. While I don't advocate watching the market so closely that you are freaked out by every move I do believe that a certain level of focus IS required.If your trade is not in profit watch it like a hawk.

Only on Friday I entered a trade on the hourly with an idea where it would go before pulling back. Thinking it would take longer to get there than it actually did I left the screen, made breakfast etc etc etc - came back to the screen to see that it had indeed hit my point of interest, turned and retraced about 20 pips, as the next point of interest was below my entry I got out with a smaller profit and told myself off for being lax
Price did then go to that level before turning but no pats on the back for a duff trade.
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Old Dec 13, 2010, 8:06am   #38
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Re: Revisiting 'Price Action'

Hello guys,,,,,sneha hare,,,If I could just clarify a few things: I trade the Dow Jones & FTSE. Regarding my money management strategy - I use 3 lots on my trade. The stop loss is set at 20pts away. If the trade moves 12pts in my favour I will take one lot off the trade and move my stop to breakeven, leaving the remaining 2 lots to run. I feel that 12pts is a reasonable amount to let the trade 'breathe'...I suppose all this boils down to is how risk-averse we all are. For me, I'd say Im fairly risk-averse, if the trade stops me out for b/e and continues to move in the opposite direction then I usually think *phew* at least I managed to get a few points. I think I will try MB325's idea though........Thanks lot....
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Old Dec 13, 2010, 11:27am   #39
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread
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Originally Posted by sneha123 View Post
Hello guys,,,,,sneha hare,,,If I could just clarify a few things: I trade the Dow Jones & FTSE. Regarding my money management strategy - I use 3 lots on my trade. The stop loss is set at 20pts away. If the trade moves 12pts in my favour I will take one lot off the trade and move my stop to breakeven, leaving the remaining 2 lots to run. I feel that 12pts is a reasonable amount to let the trade 'breathe'...I suppose all this boils down to is how risk-averse we all are. For me, I'd say Im fairly risk-averse, if the trade stops me out for b/e and continues to move in the opposite direction then I usually think *phew* at least I managed to get a few points. I think I will try MB325's idea though........Thanks lot....
Is there an echo in here?
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Old Dec 13, 2010, 11:28am   #40
 
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Re: Revisiting 'Price Action'

nunrgguy started this thread Click the image to open in full size.

Of course I may have this completely wrong. All ANY of us do is trade our beliefs, right?
What helped to first realise this was looking at standard s/r then seeing when it comes back the next time,and the time after that etc and thinking, "so why doesn't it pull back quite as far as s/r, it never gets there and turns", "sometimes it blows straight through...why?" etc etc

Just to be clear 090 is a longer term area of interest where it may fall. Initially following this mornings PA looking for a pullback to 7785-7600ish
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Last edited by nunrgguy; Dec 13, 2010 at 11:51am.
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