The Simplest Trading Method In The World

This is a discussion on The Simplest Trading Method In The World within the First Steps forums, part of the Reception category; Good thread, Paz....

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Old Feb 8, 2011, 10:53pm   #49
 
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Re: The Simplest Trading Method In The World

Good thread, Paz.
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Old Feb 8, 2011, 10:59pm   #50
Joined Jan 2011
Re: The Simplest Trading Method In The World

Pazienza started this thread Hey T,

Quote:
Originally Posted by trendie View Post
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
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Old Feb 8, 2011, 11:05pm   #51
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Re: The Simplest Trading Method In The World

Pazienza started this thread
Quote:
Originally Posted by MitchT View Post
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!
If it jumps at you, that's a good sign. Just be careful with eyeball back-tests - the winner jump out, but the losers hide.
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Old Feb 8, 2011, 11:11pm   #52
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Re: The Simplest Trading Method In The World

Pazienza started this thread
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Originally Posted by DionysusToast View Post
Get in quick then Mitch - 1300 S&P is just around the corner...
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Old Feb 8, 2011, 11:22pm   #53
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Re: The Simplest Trading Method In The World

Pazienza started this thread
Quote:
Originally Posted by paulevans85 View Post
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.
Please don't take this the wrong way, I mean it completely straight, just the way it's written.

What makes price change (stocks, futures, forex, whatever)? That is the most important question you need to ask.

Then ask what are you trying to do here. Bernanke's written a pretty good economics text book, so you're probably wasting your time getting ready to write another one.

Hopefully, you're here because you want to make more money than you lose when you trade.

So the answer to the question "What moves price?" is order flow. Now stop f***ing wondering. Does that sound trite? Is that an annoying answer? It is the literal truth - nothing else can move price. NOTHING. It is not possible.

Working out why that order flow is there might help with writing your economics text book, but it's f*** all use for trading intra day.

This is all I do:

Look for potential areas of significant order flow. Wait to see if I get a good trigger. Trade.

No area, no trade. No trigger, no trade.

That is it.

You are a retail trader. You trade when you want. Only when you want.

Making sense?
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Old Feb 8, 2011, 11:27pm   #54
Joined Jan 2011
Re: The Simplest Trading Method In The World

Pazienza started this thread
Quote:
Originally Posted by Rooster34 View Post
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.
Bars / candles are just a picture of price, drawn according to the parameters you set. They are NOT important in themselves.

That said, if I were you I would focus on two specifically - engulfing / outside bars and pins/ hammers / whatever the fashionable name is this week.

I like these because they contain the most information in my opinion.

Another thing - might sound stupid, but just try it. See what happens if you only take big bars.

Yep, just that. Laugh and ridicule me, then go and see how often a big bar at a good area fails to give you a chance to get to break even at least.
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Old Feb 8, 2011, 11:33pm   #55
Joined Jan 2011
Re: The Simplest Trading Method In The World

Pazienza started this thread
Quote:
Originally Posted by jimmc View Post
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.
I check in every 5 minutes on a few charts, every 15 on a few more. Not too onerous for the rewards.

Patience is hard. It is a skill I developed using a novel method like this:

I wasn't patient. Eventually I got very, very, very f***ed off with losing. I became patient. I started breaking even. I became more patient. I started winning.

Eventually, one of two things will happen. You get tired and change, or you get tired and quit.
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Old Feb 8, 2011, 11:43pm   #56
Joined Jan 2011
Re: The Simplest Trading Method In The World

Pazienza started this thread
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Originally Posted by Mr. Charts View Post
Good thread, Paz.
BEHEAD MR CHARTS!

Right, I'm caught up. Some charts, finally.

This was the last-but-one trade I took.

It's an example of a crap trade. I deserved to lose, and lose I did. That's what I like about trading - you get treated exactly as you deserve. You trade like a f***ing jerk off, you get treated like a f***ing jerk off.

No area hardly, no number, not much of a prior range, 5 minute (so my rules tell me to be extra choosy, which this was most certainly not), trading a continuation on a reversal, continued ad nauseam. Just a sh1t trade. I killed it for about a three quarters loss.

As an aside, I just got nicked in before it turned down. Look where it turned. 2330.
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