A-B Matchups:- Does Anyone Trade Using Them ?

[Trader333]

It is a while ago since I came across these and I have never seen them discussed on any forum. So has anyone any experience of using them and if so how useful to your trading were they ?



Paul

 

[Rognvald]

Tell us more Paul

 

[Trader333]

It is a method of determining entry and setting a stop by taking the most recent high and low and a number of other measures backwards from the current bar. I may post more if there is more interest and even an example.


Paul

 

[mmillar]

I'm interested Paul. Just never even heard of it before.

Cheers

 

[BBB]

I all ears/eyes 2!!

 

[al-motor]

Paul-

Must say, i have never heard of it either !! Is it specific to stocks !???


cheers

Al

 

[Simon]

Come on Paulie, the suspense is killing me.

 

[Trader333]

It is not specific to stocks and if anything is used more on futures. I am not saying that it is better than any other method of trading, I was just trying to get some idea if others had heard of or used it.

It is based entirely on price action and if I get enough time over the next few days I will post an example.


Paul

 

[Rognvald]

Paul
thanks for that - I for one would be pleased to see an example of the technique. I don't think anyone is under the impression that you have discovered the "grail" but I think we are all interested in having another arrow in our quivers. I can find no information on it and am intrigued to know its source

 

[Trader333]

OK here we go with an example on the Emini S&P for Friday.

Note that the market has made a new low at point E so we are looking for an opportunity to go short. We re-trace backwards to the last high at point D and further retrace to points marked C then B and finally A.

Point A is the price point where we enter the market with a Sell Stop order at 1087.75 our risk is price point B at 1089 (which is 1.25 points) and where we have a buy stop order but I would trail this if the market moved 1 point into profit from entry.

Our target reward is 3 times the risk which is 3.75 points which equates to an exit at 1084 where we also have a buy stop order

About 10 mins after we have identified the opportunity we get filled at out stop price of 1087.75 and the market moves against us going up by 0.75 points before coming down and filling us at our target profit of 3.75 points at 1084.

Many times you dont get a complete setup as shown so no opportunity is taken. I thought it may be of interest to others although I have to say that I dont use it myself to trade.


Paul

 

[Simon]

Interesting, but why a target reward of 3? Is there any great theory behind this, or is it simply the reward we would like to gain?

 

[Trader333]

No specific reason on the 3 to 1 reward to risk, it just appears to work well and I am sure there are others who may have better money management strategies than this.


Paul

 

[Rognvald]

Paul
Have you tested what happens if the target is linked to the instrument's volatility

 

[Trader333]

No I havent really done any testing and I wont be I was just seeing if others had heard of or used it. One of the reasons for 5 minutes bars was to address some of the volatility that can occur with a smaller timeframe. I did know of one guy who trades exclusively using this and does extremely well.

The setup is quite specific and if for example point B or point A had been above or equal to points C and D then the setup is not complete and no trade is taken.


Paul

 

[Rognvald]

Paul
As the setup is precise I imagine you would recommend using scans to identify?

 

[Trader333]

Ron,

I am not in a position to recommend scanners or otherwise. As it is used primaily on futures then there are only a few markets to monitor. I would guess that it must be able to be programmed to be scanned for though.


Paul

 

[Rognvald]

Paul
I wasn't asking for a scanner recommendation but a confirmation of my feeling that the setup would be best scanned for by program - sorry if I gave that impression
Ron