Trading Naked - Part 2

[HawkTrader]

Hi everyone, hope you're all having a great weekend so far.

I haven't been following this thread as much as I want to and I'm don't know what the current discussion is about, but I just wanted to make a quick post about something.

Rob, I know you don't trade off S/R reversals but you said you were interested and it's naked trading so I thought I'd give it a go!

I've been watching the 4H charts more recently, mostly GBP/USD since that seems to move in a way which I can read. I have thought about what was said on another thread regarding "The Illusion of Candlesticks" and how Rob and a few others were saying "play the levels, not the candle". The candlestick is a way of confirming what you originally thought, but if you play off a Daily, 4H or 1H candle, you'll miss a large chunk of the move. Some traders identify levels on the higher TFs, and then zoom in a play it from the 15m and lower. This is what I've come up with.

Step 1) Identify pivot S/R zones on the 4H timeframe. Pivots - e.g., where supply and demand has reversed. Price couldn't break a level up, and then in the future can't break that level down etc.

Step 2) as price approaches the level, you zoom down to 5m and watch the momentum. See if you think this level will break or hold. If you think it will hold you watch for candles with long whicks showing price rejection and slowing momentum.

Step 3) once you have entered the trade you treat it as a 4H trade and trail your stop under each new candles high/low.

Step 4) set a target on the 4H timeframe and trail your stop until it is reached. Don’t start trailing the stop on the 5m, at least use the 1H.

Any thoughts?

Regards,
Owain

 

[HawkTrader]

Here is another example, the potential R:R ratios are amazing. It's about 1:6 on these two trades.

 

[peace]

Hey HawkTrader

I'm just starting to utilise a similar method to enter a trade (Futures via DMA) as the one you espouse here, although I also work off hourly S/R zones.

Was at World Money Show last month, one of the guys who teaches at 'Online Trading Academy' uses a similar method for entries, he uses 5min for momentum and 1min for entries.

Anyway, it would be good to hear what others think about this method and also to hear how your getting on.

Peace

 

[gamma]

A great write up hawk,
Details
preparation
entry
and exit

A must read for anyone new entering the trading world

Hi everyone, hope you're all having a great weekend so far.

I haven't been following this thread as much as I want to and I'm don't know what the current discussion is about, but I just wanted to make a quick post about something.

Rob, I know you don't trade off S/R reversals but you said you were interested and it's naked trading so I thought I'd give it a go!

I've been watching the 4H charts more recently, mostly GBP/USD since that seems to move in a way which I can read. I have thought about what was said on another thread regarding "The Illusion of Candlesticks" and how Rob and a few others were saying "play the levels, not the candle". The candlestick is a way of confirming what you originally thought, but if you play off a Daily, 4H or 1H candle, you'll miss a large chunk of the move. Some traders identify levels on the higher TFs, and then zoom in a play it from the 15m and lower. This is what I've come up with.

Step 1) Identify pivot S/R zones on the 4H timeframe. Pivots - e.g., where supply and demand has reversed. Price couldn't break a level up, and then in the future can't break that level down etc.

Step 2) as price approaches the level, you zoom down to 5m and watch the momentum. See if you think this level will break or hold. If you think it will hold you watch for candles with long whicks showing price rejection and slowing momentum.

Step 3) once you have entered the trade you treat it as a 4H trade and trail your stop under each new candles high/low.

Step 4) set a target on the 4H timeframe and trail your stop until it is reached. Don’t start trailing the stop on the 5m, at least use the 1H.

Any thoughts?

Regards,
Owain

 

[HawkTrader]

Hi Peace (brilliant name )

Since you are using DMA, do you also look at the Depth of Market?

I'd be interested to hear more about those 1m intries, I'm assuming he focuses more on the pattern the candles are showing, not invidual candles.

I will start testing this method next week while the smallest bet sizes my broker can allow.

 

[HawkTrader]

A great write up hawk,
Details
preparation
entry
and exit

A must read for anyone new entering the trading world

Hi Gamma, thank you very much.

Edit: Also might want to add the fact that you can also enter on a retracement if you miss the initial move. See chart below.

 

[peace]

Hi Peace (brilliant name )

Since you are using DMA, do you also look at the Depth of Market?

I'd be interested to hear more about those 1m intries, I'm assuming he focuses more on the pattern the candles are showing, not invidual candles.

I will start testing this method next week while the smallest bet sizes my broker can allow.

Thanks (I'll take that as a compliment).

Yes I do also refer to the DOM but not as a rule of thumb, I tend to refer to it every now and then.

I didn't get to quiz the guy (Steve Beaumont {spelling}) from OTA about his 1m entries and he didn't go into it, he just sort of mentioned it in passing during his presentation.

Good luck with things next week, defo keen to hear how it goes.

As for me, this past week I used a similar system for entries in conjunction with volume, it has led to me pulling a few orders due to an increase in volume/ momentum as price approaches my entry point (I use limit orders to enter trades), ah well lose some, win some I guess.

Peace

 

[HawkTrader]

Hi again Peace (I was serious about the name, it's nice and a great symbol for exactly that!)

What do you see in the DoM? Anything you've noticed that strikes out at you? Hmm, you use volume, so you are mostly trading stocks I assume. Could you perhaps post up a chart to show examples?

Thanks,
Peace to you too.

 

[peace]

Hi again Peace (I was serious about the name, it's nice and a great symbol for exactly that!)

What do you see in the DoM? Anything you've noticed that strikes out at you? Hmm, you use volume, so you are mostly trading stocks I assume. Could you perhaps post up a chart to show examples?

Thanks,
Peace to you too.

Hi HawkTrader

I'm no expert where the DOM is concerned, I look for the obvious, i.e. the number of orders at each price level, albeit the number of orders at any level is in constant flux.

As one would expect on the DOM, you sometimes find large numbers of orders spread across a tight range of price levels that correspond to an S/R zone.

In some instances as price is approaching the S/R zone, the large orders on the DOM begin to move away, i.e. they are pulled and placed again slightly higher or lower depending whether price is approaching S or R, it's interesting to see this process repeated again and again until a resolution occurs.

I trade index futures e.g. mini dow, footsie, mini S&P and occasionally corn and gold. I do keep an eye on oil but have never traded it, even though it's $10 a tick, the fact that it is $1000 a point just doesn't sit well with me; I guess that's weired but hey.

I'll have a think about posting a chart as my situation is not so straight forward, I use 2 brokers at the same time, one has better charts the other has a better platform and DOM.

Peace

 

[Bloodhound]

Hi Owain,

Great stuff IMO and I'm really looking forward to seeing how this develops for you. It's strange but I really struggle to buy support and sell resistance. Having done a certain amount of research into this there does seem to be 2 types of traders - those doing as you suggest (i.e. expecting the level to hold) and those doing as I tend to do which is trading the breaks of these levels. I guess a psychologist would infer that these 2 styles of trading unlock the types of personalities we have!!

All the best

Rob

 

[Bloodhound]

I'll have a think about posting a chart as my situation is not so straight forward, I use 2 brokers at the same time, one has better charts the other has a better platform and DOM.

Peace

Hello Peace,

Very much looking forward to seeing what you are doing.

All the best

Rob

 

[Bloodhound]

In the spirit of looking at levels holding, rather than breaking, here's an interesting one I think. It's a slight variation on just buying the support level but may offer up some nice returns if it works out?

Daily chart looks pretty uninspiring IMO:


H1 looks more interesting and I've added on some H4 levels in dark blue and some H1 ones in light blue:


M5 for the entry:


I guess a lot will depend on the open tonight. Depending on where price opens a plan B might be to sell below the current support level?

 

[Bloodhound]

Hi Owain,

A quick question for you. Am I right in thinking that what you are saying is that, if you were trading off an H4 level, then your first target would be the next H4 level away from that? In other words if you were trading off a daily level then you would shoot for the next daily level up or down?

All the best
Rob

 

[tenbobtrader]

Hi Owain,

Great stuff IMO and I'm really looking forward to seeing how this develops for you. It's strange but I really struggle to buy support and sell resistance. Having done a certain amount of research into this there does seem to be 2 types of traders - those doing as you suggest (i.e. expecting the level to hold) and those doing as I tend to do which is trading the breaks of these levels. I guess a psychologist would infer that these 2 styles of trading unlock the types of personalities we have!!

All the best

Rob

Hi Rob

your buying S or selling R in H4
your buying the high or selling the low in M5
your trailing Stop H4
target H4

whip at entry is only issue I can see - exit as per before if your entry M5 is bad your gone and sat on hands

Owain thinks you can have your cake and eat it Rob

later

Andy

 

[vcir]

Hi Owain,

Great stuff IMO and I'm really looking forward to seeing how this develops for you. It's strange but I really struggle to buy support and sell resistance. Having done a certain amount of research into this there does seem to be 2 types of traders - those doing as you suggest (i.e. expecting the level to hold) and those doing as I tend to do which is trading the breaks of these levels. I guess a psychologist would infer that these 2 styles of trading unlock the types of personalities we have!!

All the best

Rob

Well, i think we can (try to) have the best of both worlds...

Last friday i took two morning trades on a break out and an evening trade on a suport test...

The point is during choppy market hours, you can try to score a few points almost risk free on a suport/resistance test... During the morning that would be way to risky...

But please dont ask me if after selling at the resistance i ever regreted the sell when i saw prices going up....lol

Best regards,

Victor

 

[HawkTrader]

Hi Owain,

A quick question for you. Am I right in thinking that what you are saying is that, if you were trading off an H4 level, then your first target would be the next H4 level away from that? In other words if you were trading off a daily level then you would shoot for the next daily level up or down?

All the best
Rob

Hi Rob,

Andy has hit the nail on the head. If the S/R was identified on the 4H chart, we'd also aim the target at the next significant S/R on the 4H. The target was actually the same on the 4H and Daily but I am trying to point out that when price is going in your direction you could even target a higher TF even with a 5m entry but make sure you trail your stop loosely under the 4H.

Although I don't understand what Andy means by whip at entry? As soon as we've entered on the 5m/15m we instantly treat it as a 4H (assuming that was where the S/R was found) and assume all 5m movements to be 'noise'. I pretty much guarantee that price will come back to your entry point on the 5m before hitting your TP. However that's because if you were happy with a 1:2 and a quick profit, that's fine. But I'm trying to find bigger R:R ratios. I think the average using this method is around 1:4 after some big wins, some losses, etc.

Hope I've explained myself well, I currently too have man flu!

-Owain

 

[Bloodhound]

Hi Owain,

Cool - that's what I thought you meant. I like what you are saying about R:R. Something that interests me is how one can let a position develop and load up as (one hopes) each level is picked off in a decent trend.

When I have read about this type of trading, very often it seems that the trader will go in with a very small position to start with and hope to increase the position as the trend develops.

All the best

Rob

 

[tenbobtrader]

Hi Rob,

Although I don't understand what Andy means by whip at entry? As soon as we've entered on the 5m/15m we instantly treat it as a 4H (assuming that was where the S/R was found) and assume all 5m movements to be 'noise'. I pretty much guarantee that price will come back to your entry point on the 5m before hitting your TP. However that's because if you were happy with a 1:2 and a quick profit, that's fine. But I'm trying to find bigger R:R ratios. I think the average using this method is around 1:4 after some big wins, some losses, etc.



-Owain

Hi Owain

entry trigger M5

Stop at initial M5 location

trade goes bad from off = I assume you take loss at M5 location

ie: -20 :?:

possible no H4 stop location to use if H4 bar still hot

re entry if M5 sets up again

ie: for short sell a new low as per usual (123 low or the range consolidation pattern thats formed at judged H4 R

Andy

 

[HawkTrader]

That's right Andy, I'd take the M5 loss. I have thought about the fact that the stop is likely to be hit even while H4 entry is valid, but re entry again on M5 never occured to me!

Great idea, it's funny that even simpl things can be overlooked. I'm actually in a position now, anyone want to have a guess where?

Edit: Quick question Andy, where would the new stop be? Above/below new pattern or above/below the S/R?

 

[tenbobtrader]

That's right Andy, I'd take the M5 loss. I have thought about the fact that the stop is likely to be hit even while H4 entry is valid, but re entry again on M5 never occured to me!

Great idea, it's funny that even simpl things can be overlooked. I'm actually in a position now, anyone want to have a guess where?

Edit: Quick question Andy, where would the new stop be? Above/below new pattern or above/below the S/R?

Hi Owain

lol ..... not my idea - yours

not given it that much thought really Owain - just assumed thats what you meant if no H4 closed bar at location (ie: 2 hrs of period left)

hence me thinking you could end up with a few entry attempts to get one going in right H4 direction = multi attempts would eat into that 6:1 RR I think over a good sample period of trades - test it and see

you could just wait for H4 to close at your judged R or S location and sell buy the next open with stop over H4 if % risk ok for trade and take it from there

no M5 timeframe at all - Kiss - Stop -Target (with a trail stop to lock in)

good luck with it Owain

Andy