The Simplest Trading Method In The World

Originally Posted by trendie

hi Pazienza,

having established your method, are you going to expand upon:
1: the risk you apply to each trade, ie, is the stop loss (should you use them), beyond the tip of the pin?

Put it where the market says you were wrong. If you surmise that the tip of the pin was the turning point (the basis of your reversal play) then why would you want to be in the trade if the basis is shown to be incorrect?

That said, on some I put it some way away from the bottom / top of the entry bar, on other it would be at a point actually on the entry bar itself, as I don't feel the need to give it the whole bar as room. It depends on the situation. I always look to use my S/R flips / areas for everything, stop placement included.

There is the argument that 1 tick / pip below the pin is the obvious place for stop hunting. Fair enough, but with my trades it rarely happens. In fact, if it comes say 60% of the way down the entry bar, it's almost always over in a big way.

I very rarely take a full loss - ie, my original stop is a tight one, not a disaster one, but even so it's normally moving up quite quick. Cutting losses was a major breakthrough for me.

Risk is always the same - a fixed % of my account.

2: how you quantify the amount of return from the trade? (do you have fixed, or dynamic methods of knowing the move is exhausted)

On index futures specifically, it's very common to see a big move intraday with only minor pull-backs, which will peter out late afternoon / early evening GMT. Those days are so easy, it hurts.

Again though, I go back to s/r, RNs, flips etc. I watch to see what price does, and cash out, move stops etc. Other times, you take a quick profit at the first obvious area, maybe if you enter late in the day etc. It's entirely discretionary.

A good idea (even though it's a pain in the f***ing a$$) is to track the results of alternative exit / management methods, alongside your actual results. I can almost guarantee after a year or so the answer will be very clear (but obviously I don't know what it is as it will be different for everyone).

3: do you trade bigger if the RN pin is also coincident with a weekly or monthly strength RN?

Nope, I'm in for my % or I'm not. I aim to take fewer, better trades. If I trade bigger on certain set ups because I've shown them to be better, why trade the others? Why not wait patiently for the best and enjoy lower stress, smaller dd, lower variance.

In or out.

4:One comment you made was to "forget the move went 5R"; do then take all your profits in one go? ie, no scaling out in case of big runs?

Again, yes, in or out. My testing showed taking partial profits was costing me - really costing me. But that doesn't mean that this would apply to everyone.


thanks

Originally Posted by MitchT

Fascinating thread – a system so simple that you’d be too busy trying to think of something more complicated to notice that it’s right there staring you in the face!

I’ve done some quick, visual back-testing of this on various charts and it seems to be spot-on! It’s so easy to spot once you’re ‘thinking simple’. I’m now seeing loads of support and resistance at, or very close to, big round-numbered prices, and some pretty clear price action where the big reversals take place – You don’t even need to start drawing on the chart – it’s all just there staring straight back at you.

As Trader Dante points out, S/R levels aren’t always exactly at the big rounded-numbers, but what I have observed is that, mostly, S/R occurs sufficiently close to those ‘rounded’ prices that you could easily consider those prices as the centre-points for a slightly wider S/R ‘zone’ in which to look for definitive price action.

I’m not one for buying into the concept of there being a ‘holy grail’, but this is as close as anything has come to confirming that such a thing could exist!

Thanks to Pazienza for sharing!

Originally Posted by DionysusToast

Get in quick then Mitch - 1300 S&P is just around the corner...

Originally Posted by paulevans85

I may be new here, but this is an epic post! Keep em comin'

I am very much a numbers guy, so I look at these charts and just see so many patterns. I guess one of my biggest questions, and one that I imagine has many answers, is what makes a stock price change? I see the trades rolling through above/below/at the market/bid/ask price, but who says "this is the price of that stock"? Is there some dude (market maker or specialist) or a computer or a mix of the latest prices based on volume at each price point? I don't mean to hijack your thread, I'm just trying to understand the basis for it.

Originally Posted by Rooster34

Honestly this is exactly what my trading is starting to evolve into. Horizontal S/R, trendlines, channels. I need to find a way to filter the trades so I can seperate the A trades from the B and C trades. So I'm reading up on candlestick patterns trying to recognize reversal and continuation bars.
I still overtrade and take bad setups, so I've got a lot of work to do on the "mind" part of my trading. I'll be watching this thread with interest.

Originally Posted by jimmc

wow - you're not called pazienza for nothing (assuming thata means patience). How do you keep up concentration, or do you have alerts running to bring you back to the screen?

Excellent thread, as I'm leaning towards fewer and hopefully better trades.

YES!


Please keep posting - I'm subscribed.

Originally Posted by Mr. Charts

Good thread, Paz.