a free gift to total newbies from MajorDutch

[MajorDutch]

Hi

The following information may be useful to complete trading newbies. I am giving this info as I think all vendors should be beheaded. Please save your hard earned money and do not pay vendors to 'train' you to trade. Not only will you be wasting your money but you will also have to eventually unlearn what they have taught you in order to become profitable

Follow these steps:

1. Pull up a daily bar chart of EURUSD

2. Look up the definition of 'pin bars' and 'outside bars' the latter are sometimes called 'engulfing bars'. note for a pin bar open and close should be within previous bar.

3. Mark the 'big round numbers' that price has encountered during 2010 & 2011 with a horizontal line. (hint - these are 1.2, 1.3, 1.4 & 1.5)

4. Now mark on the chart each point during 2010 & 2011 that a pin bar or outside bar met the big round numbers. (hint - by my reckoning this happened 7 times)

5. Make a note of what happened if you would have taken a trade in the direction of the bar (break of pin bar / outside bar) with a target of 1R (distance to target = distance to stop). Your stop being behind the bar.

Check your results

By my reckoning the 7 daily bar results would be:

3.2.2010 pin bar winner
10.5.2010 pin bar winner
30.7.2010 pin bar winner
15.10.2010 outside bar winner
1.12.2010 outside bar winner
7.3.2011 pin bar winner
18.7.2011 pin bar winner

= 100% winners

Now ask yourself the following questions:

Is this coincidence?
Is it possible to trade only with a price chart and horizontal lines marking key levels?
If this is so easy why aren't other people doing it?
How you would feel about taking 7 trades on 1 instrument (EURUSD) in a 2 year period?

Now change the chart to a 1 hour EUR USD and mark out the big round numbers in smaller denominations. (hint 1.31, 1.32, 1.33 etc).

You will see many more opportunities in the 2 year period.

Warning - This not a recommended strategy just an observation exercise to get you thinking and hopefully set you on a good and vendor free path. Don't EVER trade with real money until you have proven to yourself (whatever that means) that you can be profitable on a demo account. Don't EVER listen to vendors or pay them ANY money EVER.

 

[MoonRocket]

.........
Don't EVER trade with real money until you have proven to yourself (whatever that means) that you can be profitable on a demo account. Don't EVER listen to vendors or pay them ANY money EVER.

A good post.
The only slight change I would make is,,,,take the money you would have paid for training ect. put it into an account, say a CFD account. Then trade the very minimum you can.
Trading a demo account especially if you have never traded before can be pretty blasé.
But if you trade with just a $20 position with the chance of winning $5 or losing $5,it's amazing the difference it makes.
Nothing like a bit of skin in the game for reality.

 

[pboyles]

Hi

The following information may be useful to complete trading newbies. I am giving this info as I think all vendors should be beheaded. Please save your hard earned money and do not pay vendors to 'train' you to trade. Not only will you be wasting your money but you will also have to eventually unlearn what they have taught you in order to become profitable

Follow these steps:

1. Pull up a daily bar chart of EURUSD

2. Look up the definition of 'pin bars' and 'outside bars' the latter are sometimes called 'engulfing bars'. note for a pin bar open and close should be within previous bar.

3. Mark the 'big round numbers' that price has encountered during 2010 & 2011 with a horizontal line. (hint - these are 1.2, 1.3, 1.4 & 1.5)

4. Now mark on the chart each point during 2010 & 2011 that a pin bar or outside bar met the big round numbers. (hint - by my reckoning this happened 7 times)

5. Make a note of what happened if you would have taken a trade in the direction of the bar (break of pin bar / outside bar) with a target of 1R (distance to target = distance to stop). Your stop being behind the bar.

Check your results

By my reckoning the 7 daily bar results would be:

3.2.2010 pin bar winner
10.5.2010 pin bar winner
30.7.2010 pin bar winner
15.10.2010 outside bar winner
1.12.2010 outside bar winner
7.3.2011 pin bar winner
18.7.2011 pin bar winner

= 100% winners

Now ask yourself the following questions:

Is this coincidence?
Is it possible to trade only with a price chart and horizontal lines marking key levels?
If this is so easy why aren't other people doing it?
How you would feel about taking 7 trades on 1 instrument (EURUSD) in a 2 year period?

Now change the chart to a 1 hour EUR USD and mark out the big round numbers in smaller denominations. (hint 1.31, 1.32, 1.33 etc).

You will see many more opportunities in the 2 year period.

Warning - This not a recommended strategy just an observation exercise to get you thinking and hopefully set you on a good and vendor free path. Don't EVER trade with real money until you have proven to yourself (whatever that means) that you can be profitable on a demo account. Don't EVER listen to vendors or pay them ANY money EVER.

What results do you get on 1hr charts? I tested this endlessly a year or two ago and the results (on 4hr, 1hr and 15M) were not that spectacular in live trading. Having said that it would be a much better place to start than giving some parasite mentor 3k to 'teach' you.

 

[China Diapers]

What do you do for exits?

 

[pboyles]

Same distance from entry as his stoploss. His stop being just above the high or low of the PIN.

 

[China Diapers]

Oh yeah, didn't read it properly, thanks

 

[MajorDutch]

What results do you get on 1hr charts? I tested this endlessly a year or two ago and the results (on 4hr, 1hr and 15M) were not that spectacular in live trading. Having said that it would be a much better place to start than giving some parasite mentor 3k to 'teach' you.

absolutely no idea mate. not being evasive it's just I don't trade like this I typically only use a pin/outside bar at big round number as an initial starting point for a potential trade. the post was just showing a price observation and is not a trading strategy. I would never EVER blindly take a pin bar or outside bar off a big round number so the results would be fairly meaningless to me. For starters if a pin/outside bar occurred at a big round number I would would be viewing it in the context of the overall price action and I would want to assess where price is likely to go without too much problems and where it is likely to face indecision. There are other factors too such as the form of the bar.

 

[MajorDutch]

A good post.
The only slight change I would make is,,,,take the money you would have paid for training ect. put it into an account, say a CFD account. Then trade the very minimum you can.
Trading a demo account especially if you have never traded before can be pretty blasé.
But if you trade with just a $20 position with the chance of winning $5 or losing $5,it's amazing the difference it makes.
Nothing like a bit of skin in the game for reality.

everyone is individual and you have to do what works for you. whatever you think works for you will have to be 'worked through' in order to progress imo. Hence if you think you need to trade real money in order not to be blase then you probably do. Just be aware though that this could add up to a significant chunk of change and it could take you to a bad place. You then may revert to a demo account and be able to take trades without being blase. do you get me.

 

[MajorDutch]

Same distance from entry as his stoploss. His stop being just above the high or low of the PIN.

for the purpose of this exercise yes but this isn't a complete trading strategy just a price observation exercise. I would never EVER set a fixed trade target in terms of % of account or R. The target of 1R is just for this exercise.

take the example of price being in a tight range, then pops out and gives us a nice pin off a round number. If the next price flip zone or S/R zone is only 0.5R away it would be crazy to shoot for 1R. Some form of action at this zone would need to be taken at this zone 0.5R away, eg. take profit, take partial profit, move stop to b/e however the person is managing their trades.

 

[MoonRocket]

.................
Just be aware though that this could add up to a significant chunk of change and it could take you to a bad place. You then may revert to a demo account and be able to take trades without being blase. do you get me.

Pretty well agree 100%
Most people who have only ever "paper traded" don't truly feel it.
A demo account works for those that have felt the fire or voment.
For a new guy even if he was to lose his first 20 trades but a least got out after he
lost his stake of $20 per trade,(which I think would be an extreme case) that's "only" $400. He would have learnt more about his attitude to money and trading then had he spent a year on a demo account or spent a couple of grand on training.
And as you have said that's the time to revert to the demo account.

 

[BILLV]

Major Dutch
Thanks for sharing this

 

[DionysusToast]

Is this coincidence?
Is it possible to trade only with a price chart and horizontal lines marking key levels?
If this is so easy why aren't other people doing it?
How you would feel about taking 7 trades on 1 instrument (EURUSD) in a 2 year period?

I hate to be the MajorDutch Grinch here..

We have 7 'setups' over 2 years.

The question "is this coincidence" could also be

"is this curve fitting?"
"is this statistically insignificant?"
"is this the result of someone looking for a pattern and finding one?"

The answer to all 3 is YES.

The last of my 3 questions is key. If you study cognitive bias you will understand that we often see what we want to see. We do positive testing and not negative testing.

At the end of the day, this sort of system is every retail traders wet dream. A mechanical 'solution' to trading that boils trading down to a series of steps that any idiot could follow.

There is nothing in the OPs post about WHY this would work. Yet, it is the WHY that is most important.

I would wager that MajorDutch didn't trade this system over the past 2 years. I would wager that this thread is the result of manually looking back 2 years or programmatic analysis. There is nothing wrong with that as long as you have a WHY to begin with. If you can't explain why a trading system would yield results, then the chances are you just curve fitted yourself something that works in hindsight.

Any method of trading must be based on some understanding of market dynamics. A valid trading method cannot be based on a simplistic pattern such as this that is used without context.

It just ain't that easy. Sure, we all want a set of simple rules we can follow to trade off in all market conditions. On the surface, that seems easier than learning to read the market. Fact is, learning to read the market is easier than trying to find a combination (out of trillions) of mechanical factors to trade off.

This is not a gift, it's a fncking curse.

Yours,

The Grinch

 

[MajorDutch]

I hate to be the MajorDutch Grinch here..

We have 7 'setups' over 2 years.

The question "is this coincidence" could also be

"is this curve fitting?"
"is this statistically insignificant?"
"is this the result of someone looking for a pattern and finding one?"

The answer to all 3 is YES.

The last of my 3 questions is key. If you study cognitive bias you will understand that we often see what we want to see. We do positive testing and not negative testing.

At the end of the day, this sort of system is every retail traders wet dream. A mechanical 'solution' to trading that boils trading down to a series of steps that any idiot could follow.

There is nothing in the OPs post about WHY this would work. Yet, it is the WHY that is most important.

I would wager that MajorDutch didn't trade this system over the past 2 years. I would wager that this thread is the result of manually looking back 2 years or programmatic analysis. There is nothing wrong with that as long as you have a WHY to begin with. If you can't explain why a trading system would yield results, then the chances are you just curve fitted yourself something that works in hindsight.

Any method of trading must be based on some understanding of market dynamics. A valid trading method cannot be based on a simplistic pattern such as this that is used without context.

It just ain't that easy. Sure, we all want a set of simple rules we can follow to trade off in all market conditions. On the surface, that seems easier than learning to read the market. Fact is, learning to read the market is easier than trying to find a combination (out of trillions) of mechanical factors to trade off.

This is not a gift, it's a fncking curse.

Yours,

The Grinch

Hi Grinch/DT

I think you have been staring at your DOM ladders too long.

Let me address some of your points:

We have 7 'setups' over 2 years. - No we don't. These are not set ups, this is just a price observation exercise.

"is this curve fitting?" - No it's not, show me where I have 'curve fitted' and don't give me some tripe about pin bars not working as I know pin bars do not move price it is what has happened to price during a pin bar that is important. yes that's price in the past and it is significant imo.

"is this statistically insignificant?" - No it isn't. Nobody said it was. This isn't a trading method so I am not sure why anyone would want to measure a statistic anyway.

"is this the result of someone looking for a pattern and finding one?" - No it's not. All I did was pull up a daily chart, draw on big round numbers and then looked at how pin bars and outside bars interacted with these levels.

If you study cognitive bias you will understand that we often see what we want to see. We do positive testing and not negative testing.

well aware of cognitive bias mate. This isn't a test of a system so bias doesnt come into play really. If you would like to point out any pin bars / outside bars I have missed or made errors on then fine, wouldn't be surprised if I made an error, didnt spend much time on it.

At the end of the day, this sort of system is every retail traders wet dream. A mechanical 'solution' to trading that boils trading down to a series of steps that any idiot could follow.

this is where you really lost it with your own confirmation bias lol. THIS IS NOT A SYSTEM and NOT A MECHANICAL SOLUTION. Yes retail traders as a rule love mechanical rules and want to be 'told' what to do. I understand this thinking is futile.

There is nothing in the OPs post about WHY this would work. Yet, it is the WHY that is most important.

100% agree with you. I had no intention of saying why this would work as nothing 'works' anyway. I intentionally left it open so newbies can think about what happens at big round numbers. I did not say WHY pin bars and outside bars 'work' because they in themselves dont work (I know you know that). All they show is what happened to price and this can be compared to what happened on the previous bar(s)/day. I am a discretionary trader but I think systematically.

I would wager that MajorDutch didn't trade this system over the past 2 years. It's not a system, I explained that so it would foolhardy for someone to think I traded it.

I would wager that this thread is the result of manually looking back 2 years or programmatic analysis

you probably wont believe me but it isn't. I have been studying price action for many years I just pulled up the EURUSD daily chart and checked a few bars and they showed me what I already knew.

Any method of trading must be based on some understanding of market dynamics. A valid trading method cannot be based on a simplistic pattern such as this that is used without context.

100% agree with you. Your bias has gone into overdrive, I agree without context any 'set up' is meaningless. We can have a separate argument about what constitutes a patten. Personally I don't class a pin bar as a pattern and I have my reasons.

It just ain't that easy. Sure, we all want a set of simple rules we can follow to trade off in all market conditions. On the surface, that seems easier than learning to read the market. Fact is, learning to read the market is easier than trying to find a combination (out of trillions) of mechanical factors to trade off.

100% agree it's not easy, these are not trading rules, this is not a system. bored of repeating myself now.

anyways I don't want a flame war I just wanted to give some newbs some starting things to think about. Happy to have an adult discussion on the finer points as I am sure I can learn something from you, I think you have got the wrong end of the stick though assuming this was a trading system, maybe I should have made it clearer it isn't a system.

 

[DionysusToast]

I can't argue against the fact I've spent too long looking @ ladders...

"All I did was pull up a daily chart, draw on big round numbers and then looked at how pin bars and outside bars interacted with these levels."

To me, this is the definition of curve fitting. You went back in time, looking for a pattern and found one.

"You will see many more opportunities in the 2 year period."

This is what made me think you were presenting a method. There is only opportunity if there is a chance to trade and profit.

What you will see over any 2 year period you look at is - repeated patterns. This doesn't represent opportunity in any real sense.

 

[MajorDutch]

I can't argue against the fact I've spent too long looking @ ladders...

"All I did was pull up a daily chart, draw on big round numbers and then looked at how pin bars and outside bars interacted with these levels."

To me, this is the definition of curve fitting. You went back in time, looking for a pattern and found one.

"You will see many more opportunities in the 2 year period."

This is what made me think you were presenting a method. There is only opportunity if there is a chance to trade and profit.

What you will see over any 2 year period you look at is - repeated patterns. This doesn't represent opportunity in any real sense.

To me, this is the definition of curve fitting. You went back in time, looking for a pattern and found one.

pah. depends on your definition of pattern. What makes you think I am looking for patterns? pure price chart, marked off round numbers, pin bars and outside bars. no patterns here. You might class pin bars/outside bars as patterns - I don't. To me a bearish outside bar just shows where price exceeded the highest price and closed lower than the lowest price of the previous period/bar (in this case daily period/bar). Pin bar is just price opening and closing within previous bar/period range and during the period price moving to test a level away from previous bar.


"You will see many more opportunities in the 2 year period."

This is what made me think you were presenting a method. There is only opportunity if there is a chance to trade and profit.

so where I wrote 'WARNING - this is not a recommended strategy' in the original post you ignore this and read into the word 'opportunities'.

not patterns here mate you have got the wrong guy. maybe you should be picking on guys using dodgy Head & Shoulders, Wedges, Trend lines, Flags and indicators.

I dont trade patterns. I can only guess you are classing pin bars / outside bars as patterns. These are not patterns any more than watching a DOM ladder and looking for repeating 'patterns' of filled/pending orders are not patterns.

 

[DionysusToast]

The joy of semantics...

By pattern, I refer to something you can see on the charts visually looking back. That does not have to have a shape like a wedge, pennant, H&S etc.

It's just looking for something visual to repeat itself. A pin bar near a round number is a pattern.

 

[DionysusToast]

pat·tern   [pat-ern; Brit. pat-n] Show IPA
noun
1.a decorative design, as for wallpaper, china, or textile fabrics, etc.
2.decoration or ornament having such a design.
3.a natural or chance marking, configuration, or design: patterns of frost on the window.
4.a distinctive style, model, or form: a new pattern of army helmet.
5.a combination of qualities, acts, tendencies, etc., forming a consistent or characteristic arrangement: the behavior patterns of teenagers.

 

[MajorDutch]

pat·tern   [pat-ern; Brit. pat-n] Show IPA
noun
1.a decorative design, as for wallpaper, china, or textile fabrics, etc.
2.decoration or ornament having such a design.
3.a natural or chance marking, configuration, or design: patterns of frost on the window.
4.a distinctive style, model, or form: a new pattern of army helmet.
5.a combination of qualities, acts, tendencies, etc., forming a consistent or characteristic arrangement: the behavior patterns of teenagers.

you are stretching out the definition. I am sure when you are watching your DOM ladder you are looking for certain 'qualities' or 'tendencies' which give certain characteristic patterns. Therefore you are probably trading 'patterns' too. correct me if I am wrong.

What I am talking about are not patterns in a traditional sense but a set of circumstance.

Anyway what we are really talking about here imo is whether someone believes that certain market characteristics can and do repeat. I am in the camp which believes that every moment in the market is unique however certain characteristics repeat over and over again and an edge can be derived from this.

This is just the same as watching a DOM ladder and looking for repeating things that happen then watching the market live for these things to happen again.

Whether you class big round numbers with pinbars/outside bars as patterns is really irrelevant. Personally I don't consider them patterns in the traditional sense i.e. trendlines, flags, wedges, indicators etc.

So DT, do you believe that certain market characteristics or patterns do repeat and that it is possible to derive an edge from this? I am guessing you would say no however I am sure you look for patterns in your DOM ladder all day long and this amounts to the same thing.

 

[neil]

Outside bar trade -not a pattern therefore I agree with Dutch above

 

[MajorDutch]

Outside bar trade -not a pattern therefore I agree with Dutch above

thanks for the thumbs up Neil but I think the crux of DT's problem with my post is that he doesn't believes market characteristics repeat themselves and that it is possible to create an edge from them. hopefully he can confirm this when he wakes up in Thailand! (if he is still there). arguing over labels doesn't really move anyone forward.

it's a good discussion anyway as this is important stuff.:innocent: