WTF WTF. Now forgive my ignorance. Firstly I did a quick scan of your system. Seems like its one hell of a comprehensive trading plan. Albeit needs some serious formatting for quicker comprehension. Secondly I noticed the date you posted it 19-10-2008. You have been one busy bunny.
How has your system been going? Good? Are you trading with real cash? Is this a project for UNI? You have spent a lot of time at the screen. How many hours are you in front of the monitor per day?
A little advice. Get busy with the flow charts. You will reduce the plans complexity 10 fold and open up more efficient ways of doing things.
Please tell me that after all that effort it is working out for you.
How has your system been going? Good? Are you trading with real cash? Is this a project for UNI? You have spent a lot of time at the screen. How many hours are you in front of the monitor per day?
A little advice. Get busy with the flow charts. You will reduce the plans complexity 10 fold and open up more efficient ways of doing things.
Please tell me that after all that effort it is working out for you.
bbmac
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I will answer your questions in the order in which you raise them, despite the obvious sneering tone of your post resulting from your ignorance.
Yes it is a comprehensive trading system/methodology. It involves a comprehensive understanding of some essential elements of technuical analysis that when combined result in a confluence of hi-probability factors that indicate a trading opportunity. Some formatting for faster comprehension has been done resulting in the Parts I, II, and III documents attached to page 10, post 74.
Some of the price action observations are acutely made but simple enough to understand and add to the high probability nature of the overall system/methodology when employed. Like all things worth having in life, this takes time and effort.
The system/methodology does just fine. High probability trading opportunities result in a High strike rate and attractive low risk intra-day and intra-week gains on account.
Screen time spent actually trading: up to 5hrs/day only. 200 trading days/year. Yes I trade a real a/c. A 20pip gain is anywhere between a +0.5 - +1.0% gain on account at the leverage I am comfortable employing.
Thanks for the advice, but achieving a high strike rate and low risk trading opportunities that results in attractive gains in any market conditions in the equivalent of 5hrs/day trading time or less is what I have now, so I would be only be interested in altering my tactical approach if improvements could be made in those areas.
Those that have reached this far in the thread will know that Price action and Support & Resistance, the constants of technical analysis are what this system/methodology is based upon. Ignorance will hinder your ability to see that.
A little advice of my own...Move on, it's not compulsary.
bbmac
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Why is a High Strike rate trading edge so important?
Why is high probability trading so important?
You will have realised in this thread that I put a lot of emphasis on hi-probability outcome trading. Indeed this whole trading system/methodology is designed to pinpoint the highest probability trading opportunities when a confluence of technical factors come together-that is it's trading edge.
Here is the reason.
You will know that you can theortically make money in trading from an arbitrary entry so long as the correct risk:reward strategy is employed and adhered to. Even without an arbritary entry employing say a 3:1 risk:reward ratio on a 33% strike rate (winning trades as a % of total trades) would over any sample of entries, prove profitable. It is rightly said that it is not the entry, but the exit that makes you the money.
But here's the thing...when in a trade it is common to experience discomfort and the body communicates that to our brains, resulting in the all too common response to ending that discomfort...by exiting the trade early. (Our bodys react to perceived dangers by preparing to 'Fight or Flee.' )
In trading a lower strike rate system/methodology there are naturally more losing trades and crucially more consecutive losing trades. Our brains remember past losses and irrationally place more emhasis on them than the winners, resulting in it fearing more losses to come. It's mechanism to protect us from this discomfort is to secrete adrenaline and noradrenaline (which comes from the adrenal glands above the kidneys.) The release of these hormones results in the body increasing the flow of fatty sugars through the liver which causes the feelings of discomfort resulting in a much decreased ability to make objective judegements. To put it another way;
'..Your Neo-Cortex (the thinking part of your brain) shuts down and the survival mechanism in the middle and lower more primitive parts of the brain take over. As a result you can react to things and stop thinking things through rationally. Basic emotions like fear and anger take over from more complicated sophisticated higher function emotions.'
So our ability to adhere to strict risk:reward ratios necessary to ensure overall net profitability with a lower strike rate system is severely impaired with the greater number of losses and consecutive losses with this type of trading system. The greater the consecutive run of losses the greater the impairment, and again, crucially, the less experience/understanding one has of this, the greater the discomfort one might experience resulting in non-adherence with the critical risk:reward ratio.
Further to this, such a consecutive run of losing trades can also interfere with the ability to actually place the next trade when the trading edge presents itself, fearfull of further losses, thus interfering with the natural flow of probability upon which all trading edges rely.
Physical discomfort and Fear are powerful debilitating factors on the ability to profit from a trading edge.
The only effective answer available to inexperienced traders is to seek a trading edge that has a high strike rate over any sample of set-ups. This trading system/methodology achieves that.
In knowing the strike rate of your trading edge you can calculate the probability and likely size of any consecutive losing run, (and therefore safely optimise risk/leverage to it.) A 50% strike rate for example is liable to suffer consecutive losing runs of 6-7, a 33% strike rate liable to experience losing runs of 11+ at some point. A 90% strike rate is liable to experience a consecutive losing run of max 2, more commonly 1, if it occurs.
Ensure that should such a consecutive losing run is encountered it falls within your tolerance for risk/drawdown by optminising your leverage to your trading edge.
Whatever your trading edge;
a. Try and develop/obtain a high probability trading egde
b. Optimise risk/leverage to the strike rate of your trading edge.
Why is high probability trading so important?
You will have realised in this thread that I put a lot of emphasis on hi-probability outcome trading. Indeed this whole trading system/methodology is designed to pinpoint the highest probability trading opportunities when a confluence of technical factors come together-that is it's trading edge.
Here is the reason.
You will know that you can theortically make money in trading from an arbitrary entry so long as the correct risk:reward strategy is employed and adhered to. Even without an arbritary entry employing say a 3:1 risk:reward ratio on a 33% strike rate (winning trades as a % of total trades) would over any sample of entries, prove profitable. It is rightly said that it is not the entry, but the exit that makes you the money.
But here's the thing...when in a trade it is common to experience discomfort and the body communicates that to our brains, resulting in the all too common response to ending that discomfort...by exiting the trade early. (Our bodys react to perceived dangers by preparing to 'Fight or Flee.' )
In trading a lower strike rate system/methodology there are naturally more losing trades and crucially more consecutive losing trades. Our brains remember past losses and irrationally place more emhasis on them than the winners, resulting in it fearing more losses to come. It's mechanism to protect us from this discomfort is to secrete adrenaline and noradrenaline (which comes from the adrenal glands above the kidneys.) The release of these hormones results in the body increasing the flow of fatty sugars through the liver which causes the feelings of discomfort resulting in a much decreased ability to make objective judegements. To put it another way;
'..Your Neo-Cortex (the thinking part of your brain) shuts down and the survival mechanism in the middle and lower more primitive parts of the brain take over. As a result you can react to things and stop thinking things through rationally. Basic emotions like fear and anger take over from more complicated sophisticated higher function emotions.'
So our ability to adhere to strict risk:reward ratios necessary to ensure overall net profitability with a lower strike rate system is severely impaired with the greater number of losses and consecutive losses with this type of trading system. The greater the consecutive run of losses the greater the impairment, and again, crucially, the less experience/understanding one has of this, the greater the discomfort one might experience resulting in non-adherence with the critical risk:reward ratio.
Further to this, such a consecutive run of losing trades can also interfere with the ability to actually place the next trade when the trading edge presents itself, fearfull of further losses, thus interfering with the natural flow of probability upon which all trading edges rely.
Physical discomfort and Fear are powerful debilitating factors on the ability to profit from a trading edge.
The only effective answer available to inexperienced traders is to seek a trading edge that has a high strike rate over any sample of set-ups. This trading system/methodology achieves that.
In knowing the strike rate of your trading edge you can calculate the probability and likely size of any consecutive losing run, (and therefore safely optimise risk/leverage to it.) A 50% strike rate for example is liable to suffer consecutive losing runs of 6-7, a 33% strike rate liable to experience losing runs of 11+ at some point. A 90% strike rate is liable to experience a consecutive losing run of max 2, more commonly 1, if it occurs.
Ensure that should such a consecutive losing run is encountered it falls within your tolerance for risk/drawdown by optminising your leverage to your trading edge.
Whatever your trading edge;
a. Try and develop/obtain a high probability trading egde
b. Optimise risk/leverage to the strike rate of your trading edge.
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bbmac
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Think about it!
When you think about it Price action informs almost all of the factors that make up the trading edge obtained from this trading system/methodology, ie;
a. Overall price action-Classic peak/valley analysis informs us what the market conditions (trend or range) are present on the main time frames of interest.
b. Previous price action pivots (swing hi/lo's) inform us where the highest probability potential supp/res/sbr/rbs at which to seek further potential supp/res factors confluence are.
c. Individual price action provides the actual key to market entry.
Don't get hung up on the indicators, they are there only to provide repeating easily recognisable set-ups/patterns, particularly useful on the smaller time frames where price action alone can be less reliable...in order that risk can be minimised.
When you think about it Price action informs almost all of the factors that make up the trading edge obtained from this trading system/methodology, ie;
a. Overall price action-Classic peak/valley analysis informs us what the market conditions (trend or range) are present on the main time frames of interest.
b. Previous price action pivots (swing hi/lo's) inform us where the highest probability potential supp/res/sbr/rbs at which to seek further potential supp/res factors confluence are.
c. Individual price action provides the actual key to market entry.
Don't get hung up on the indicators, they are there only to provide repeating easily recognisable set-ups/patterns, particularly useful on the smaller time frames where price action alone can be less reliable...in order that risk can be minimised.
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bbmac
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Then you are welcome, and feel free to ask any questions you may need answering. Always happy to help if I can.
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Great example of Reversal type C and double reg seq div in osma
Strong move off asian lows in Gbpusd so far today, the perfect 1min Rev C set-up below with 5min Rev C main chart supporting set-up devloping @ pot res = a 3 fib cluster...23.6% 0671-3505, 38.2% 5372-3505, and 50% 4980-3505 swings....Not visible on the screenshot is the double regular seq bearish divergence in the osma.
The set-up has seen some +50pips gain available at time of writing.
Notice how the 20bol intersects the 10bol from above it, the resulting 2 bol flip occuring inside the 40/60 flip still intact from the original 4 bolflip.
Good set-up, Good supporting set-up on 5min with small chart supporting conditions top 15min @ pre-identified potential res = hi probability trading, even against the prevailing trend!!
I've just screenshotted the osma in above set-up and you can see the double reg seq bearish divergence;
Edit: 0954am gmt, set-up has seen +80pips gain available
Strong move off asian lows in Gbpusd so far today, the perfect 1min Rev C set-up below with 5min Rev C main chart supporting set-up devloping @ pot res = a 3 fib cluster...23.6% 0671-3505, 38.2% 5372-3505, and 50% 4980-3505 swings....Not visible on the screenshot is the double regular seq bearish divergence in the osma.
The set-up has seen some +50pips gain available at time of writing.
Notice how the 20bol intersects the 10bol from above it, the resulting 2 bol flip occuring inside the 40/60 flip still intact from the original 4 bolflip.
Good set-up, Good supporting set-up on 5min with small chart supporting conditions top 15min @ pre-identified potential res = hi probability trading, even against the prevailing trend!!
I've just screenshotted the osma in above set-up and you can see the double reg seq bearish divergence;
Edit: 0954am gmt, set-up has seen +80pips gain available
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bbmac
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If you are looking for the indication of the strong move down from current intraday highs, (140pips at time of writing) look at the trend t/f (30min) a Rev Aii seq set-up with reversal set-up too on 1hr chart, A Rev C, 4hr being a Re-entry type 1.) Ie supporting set-up extending to the trend t/f and beyond - on the next 2 t/f's above the designated trend t/f, which is the highest t/f in the 3 t/f methodology
bbmac
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15min Re-entry type 4 supporting set-up
You can see that cable found support at the potential rbs zone shown below, following it's steep sell-off from current intraday hi, (set-ups higghlighted in last 2 posts.)
The previous swing hi=potential rbs zone also coincided with the steep 1hr ascending support t/line and the 50% fib of the intraday move up.
A good 1min trigger Rev Extr set-up, no 5min main chart supporting set-up but a decent 15min Re-entry type 4 (1min small chrt supporting conditions too) supporting set-up at the potential rbs....set-up has seen +100pips gain available at time of writing
Confluence, Confluence, Confluence = Hi-prrobability trading
The supporting 15min Re-entry type 4 is shown here;
You can see that cable found support at the potential rbs zone shown below, following it's steep sell-off from current intraday hi, (set-ups higghlighted in last 2 posts.)
The previous swing hi=potential rbs zone also coincided with the steep 1hr ascending support t/line and the 50% fib of the intraday move up.
A good 1min trigger Rev Extr set-up, no 5min main chart supporting set-up but a decent 15min Re-entry type 4 (1min small chrt supporting conditions too) supporting set-up at the potential rbs....set-up has seen +100pips gain available at time of writing
Confluence, Confluence, Confluence = Hi-prrobability trading
The supporting 15min Re-entry type 4 is shown here;
Given that you trade in and out looking for high prob trades how often do you come across trades of 100+ or 200+ pips?
For example. What is your average win in terms of pips and into what price bracket do your wins fit. ie. 50 - 100 100 -150 etc etc. Have you for example hit any 500+ trades given the amount of trades per day. Would be interesting to find out what you do in situations when a trade is going significantly in your favour. Trailing stops or do you keep a wider stop but move it manually for maximum profit potential. Or do you just feel the trade and move the line as you see fit?
For example. What is your average win in terms of pips and into what price bracket do your wins fit. ie. 50 - 100 100 -150 etc etc. Have you for example hit any 500+ trades given the amount of trades per day. Would be interesting to find out what you do in situations when a trade is going significantly in your favour. Trailing stops or do you keep a wider stop but move it manually for maximum profit potential. Or do you just feel the trade and move the line as you see fit?
"The aim of identifying areas of potential support and resistance is to find the areas at which there
are likely to be sufficient market participants/volume of orders to move the market so as to
produce a gain should a set-up present itself on the trigger chart and upwards (confirmed by
individual price action.) On an intraday basis the aim is to identify the areas where the
big/institutional/smart money waits to act. "
You have obviously done a significant amount of research which to your credit is clearly paying off and myself as a person who like to be methodical would love to know more about support and resistance in terms of the long term model. Could you point me in the right direction for identifying support and resistance on say the monthlys or is TA not really applicable to this time frame. Would you say its more a case of macroeconomics at work.
My plan will hopefully fuse FA and TA together but im not sure just yet where to start. I will endevour to continue reading your system because i will undoubtedly from what i have seen so far learn a great deal. Thanks.
are likely to be sufficient market participants/volume of orders to move the market so as to
produce a gain should a set-up present itself on the trigger chart and upwards (confirmed by
individual price action.) On an intraday basis the aim is to identify the areas where the
big/institutional/smart money waits to act. "
You have obviously done a significant amount of research which to your credit is clearly paying off and myself as a person who like to be methodical would love to know more about support and resistance in terms of the long term model. Could you point me in the right direction for identifying support and resistance on say the monthlys or is TA not really applicable to this time frame. Would you say its more a case of macroeconomics at work.
My plan will hopefully fuse FA and TA together but im not sure just yet where to start. I will endevour to continue reading your system because i will undoubtedly from what i have seen so far learn a great deal. Thanks.
bbmac
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Good Questions. I've never had a +500pip trade. Most of my pip gains fall in the +5 - +20pips range. I tend to try and hold the ones that go quickly in my favour/are with trend/and also when I have already secured my soft daily target (aggregated from a weekly target which is a more important target to me.) I will also leave a trade to run overnight if stop already at b/e, but these occassions are not the norm.
If I am holding a trade I tend to try and trail stop manually with developing price action, 1 retrace but one behind current price action.
On that 0923am gmt Rev C from todays current 4242 intraday hi for example I took +77pips, so because I had already secured my soft intraday target I was able to hold the 1047am gmt Rev Extr discussed above, but came out just ahead of the Uk CBI survey data at 1100am gmt for +52pips. these pip scores are though at the top end across any typical sample of trades.
bbmac
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Monthly potential support/resistance can be guauged exactly the same way as any other t/f. Technical Potential supp/res built around previous price pivots (obvious previous swing hi/lo zones) along with the confluence of the other main potential technical supp/res factors of fibs and t/lines.
Re: the triple time frame analysis, Mthly would be your trend and highest t/f, the Weekly your intermediate and Daily the trigger t/f's.
Arguably, the Daily t/f+ reflects more the prevailing fundamental factors. I'm sure that even fundie traders must glance at the technicals to optimise a market entry point.
G/L
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bbmac
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Re-entry into developing 5min downtrend?
Gbpusd...you can see the potential sbr zone shown in screenshot below
The 1208pm gmt 1min Re-entry type 1 set-up @ this 5min pot sbr zone is shown below, and although has seen +30pips gain available has yet to see a with trend follow thru to a new low, achieving an equal LL @ the 1hr previous swing hi zone now acting as rbs, which may curtail this developing 5min downtrend. Per the other conditions advisable for a re-entry (to next t/f trend after a pullback) set-up -At time of set-up The macd histogram on 5min was crossed down thru axis, but 30min was not, but it and the 1hr were pointing steeply down.
Gbpusd...you can see the potential sbr zone shown in screenshot below
The 1208pm gmt 1min Re-entry type 1 set-up @ this 5min pot sbr zone is shown below, and although has seen +30pips gain available has yet to see a with trend follow thru to a new low, achieving an equal LL @ the 1hr previous swing hi zone now acting as rbs, which may curtail this developing 5min downtrend. Per the other conditions advisable for a re-entry (to next t/f trend after a pullback) set-up -At time of set-up The macd histogram on 5min was crossed down thru axis, but 30min was not, but it and the 1hr were pointing steeply down.
bbmac
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Another good example of a high probability set-up;
I had finished my trading session so wasn't at desk when it set-up but still a good example of the confluence of the factors required by this system/methodology to indicate a hi-probability trading opportunity...Gbpusd price finds support at the 1hr potential rbs zone shown below;
A 1min trigger Rev Extr set-up is supported by the 5min Rev C set-up, both shown below with an imperfect (re 20bol) supporting Re-ent 2 on the 15min, and even a supporting Re-entry type 3 on the 30min trend t/f. Set-up has seen a max of +75pips from trigger entry, at time of writing, but no with trend follow thru to new highs.
The trigger set-up is here
The supporting intermediate t/f set-up is here;
and the further supporting trend t/f re-entry type 3 is here;
I had finished my trading session so wasn't at desk when it set-up but still a good example of the confluence of the factors required by this system/methodology to indicate a hi-probability trading opportunity...Gbpusd price finds support at the 1hr potential rbs zone shown below;
A 1min trigger Rev Extr set-up is supported by the 5min Rev C set-up, both shown below with an imperfect (re 20bol) supporting Re-ent 2 on the 15min, and even a supporting Re-entry type 3 on the 30min trend t/f. Set-up has seen a max of +75pips from trigger entry, at time of writing, but no with trend follow thru to new highs.
The trigger set-up is here
The supporting intermediate t/f set-up is here;
and the further supporting trend t/f re-entry type 3 is here;
I have absolutely no doubt that you are a fantastic trader and that this system is working brilliantly for you but it seems you are spreading your resources a little too thinly.
Dont flame me here just trying to help. You post a lot of information on the thread each day and I think your time would be served more productively if you compiled your data daily and then formatted your results and placed them into a daily summary or a comprehensive summary. Your choice.
If you knew or can do it yourself then it would be far easier for yourself to write a program that will annotate all your trade set ups with basic data and then you could manually add to that where you feel appropriate. I used to be a programmer and the job is not that difficult to do. Automating part of your journal would help you immensly to focus more time on less tedious tasks.
I know manually doing things helps things sink in loads and this is great but as retail traders we only have a limited set of resources to work with otherwize we burn out. Try automating some of your system. I dont mean writng a mechanical trading system just a bit of code to help reduce your load thats all.
Msg me if you would like to know more.
Dont flame me here just trying to help. You post a lot of information on the thread each day and I think your time would be served more productively if you compiled your data daily and then formatted your results and placed them into a daily summary or a comprehensive summary. Your choice.
If you knew or can do it yourself then it would be far easier for yourself to write a program that will annotate all your trade set ups with basic data and then you could manually add to that where you feel appropriate. I used to be a programmer and the job is not that difficult to do. Automating part of your journal would help you immensly to focus more time on less tedious tasks.
I know manually doing things helps things sink in loads and this is great but as retail traders we only have a limited set of resources to work with otherwize we burn out. Try automating some of your system. I dont mean writng a mechanical trading system just a bit of code to help reduce your load thats all.
Msg me if you would like to know more.
bbmac
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BBC2 programme 'Million Dollar Traders'
Further to my post #424 on page 53 of this thread that in part discusses the physiological and neurological responses of the body that can occur in the the trading environment, the (U.k) BBC2 television programme Million Dollar Traders BBC - BBC Two Programmes - Million Dollar Traders, Profit and Loss Part 3 (final part) of which was broadcast last night,...who doesn't recognise the emotions that were visible amongst the traders during the 3 parts?
Everything from sickness to anger. Some froze consumed by fear, one employed the 'may as well get hung for a sheep as a lamb' philosophy, another was impatient and angry, another let his ethical beliefs hold him back....and that was just some of the responses they experienced in a trading environment.
Interesting, and further to my point in post #424, those that were feeling the most 'discomfort' quit at the first available opportunity that they could justify in their own minds as being a valid reason, thus admonishing themselves of any blame or failure.
Further to my post #424 on page 53 of this thread that in part discusses the physiological and neurological responses of the body that can occur in the the trading environment, the (U.k) BBC2 television programme Million Dollar Traders BBC - BBC Two Programmes - Million Dollar Traders, Profit and Loss Part 3 (final part) of which was broadcast last night,...who doesn't recognise the emotions that were visible amongst the traders during the 3 parts?
Everything from sickness to anger. Some froze consumed by fear, one employed the 'may as well get hung for a sheep as a lamb' philosophy, another was impatient and angry, another let his ethical beliefs hold him back....and that was just some of the responses they experienced in a trading environment.
Interesting, and further to my point in post #424, those that were feeling the most 'discomfort' quit at the first available opportunity that they could justify in their own minds as being a valid reason, thus admonishing themselves of any blame or failure.
bbmac
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5min Re-entry (into next t/f trend after a pullback) type 3
Good example of that this London/European session morning. An upside break to current intraday highs in gbpusd [4332] and a subsequent pullback off those highs finds support @ the 1hr potential rbs zone, [which also coincided with a 5min previous swing lo zone]...
The 1min trigger set-up was a Rev C and the supporting 5min Re-entry set-up is shown below. The set-up has seen +30+ pips gain but no with trend follow thru to new highs at time of writing. London/European session so far remains rangy with upside bias in this pairing, correct at time of writing.
Good example of that this London/European session morning. An upside break to current intraday highs in gbpusd [4332] and a subsequent pullback off those highs finds support @ the 1hr potential rbs zone, [which also coincided with a 5min previous swing lo zone]...
The 1min trigger set-up was a Rev C and the supporting 5min Re-entry set-up is shown below. The set-up has seen +30+ pips gain but no with trend follow thru to new highs at time of writing. London/European session so far remains rangy with upside bias in this pairing, correct at time of writing.
