Is This Just Hindsight?

[Sang Froid]

I know the saying "hindsight and a rear view mirror is a wonderful thing in trading". Well I'm a bit fed up at the minute with the way I was trading. I've got to the stage now where I don't completely blow balls at trading, I'm not consistently making money, I'm consistently breaking even. I'll make money, then slowly give it all back, make it again and round and round we go. I know trading is a journey and this is just another stage, but I'm trying so hard to break out of this cycle.

I was trading breakouts on the H1 charts, my RR was 1:1 and I put this down to the reason I was only breaking even. I've now come up with a new strategy but would like to hear advice from other traders who know their linguine from their spaghetti.

Ok so I'd like to move up a T/F to H4 and up my RR to 1:2. Now I'm planning on trading Pinochio bars and this is where the hindsight comes in. I've been looking back on the charts and yes it looks profitable but is this just because I can see how the trade then played out, if you have to make those calls in real time does trading this way become profitable? See chart.

I'm basically asking if anyone thinks this is a valid strategy and a workable one, it's very nice to look back and say I had x amount of winners. As a note to the chart, I'm waiting for a pinochio bar, that is one that has a significantly higher high than the two bars either side and at the end of a trend. So it it's a pin at the top of a trend it's a signal to short and vice versa. I then enter on the third bar (so pin, second bar, then enter on next bar) at around half the level of the pin bar, if this has already been breached then enter on opening of third bar.

I know what people might say, "only way to tell is to forward test" but I'd like to know beforehand if I might be wasting my time so I can at least try something else.

Any help or advice muchly appreciated

Regards

Frustrated Trader

 

[Splitlink]

I'd like to help but you must make your own mind up on this one, as far as p-bars are concerned. If I may make a suggestion, though, because I use 4H but do not trade Forex. Perhaps you are looking too closely at your chart and should stand away a bit. Here's what I would be looking at if I was using pins because they are very apparent with candles, like this. IMO, you were trading into a pullback and that would have been more obvious with more chart to look at. This last sentence is hindsight, of course. We can't get away from it!

Trader Dante is an expert on p-bars, if he is around.

 

[pboyles]

I know the saying "hindsight and a rear view mirror is a wonderful thing in trading". Well I'm a bit fed up at the minute with the way I was trading. I've got to the stage now where I don't completely blow balls at trading, I'm not consistently making money, I'm consistently breaking even. I'll make money, then slowly give it all back, make it again and round and round we go. I know trading is a journey and this is just another stage, but I'm trying so hard to break out of this cycle.

I was trading breakouts on the H1 charts, my RR was 1:1 and I put this down to the reason I was only breaking even. I've now come up with a new strategy but would like to hear advice from other traders who know their linguine from their spaghetti.

Ok so I'd like to move up a T/F to H4 and up my RR to 1:2. Now I'm planning on trading Pinochio bars and this is where the hindsight comes in. I've been looking back on the charts and yes it looks profitable but is this just because I can see how the trade then played out, if you have to make those calls in real time does trading this way become profitable? See chart.

I'm basically asking if anyone thinks this is a valid strategy and a workable one, it's very nice to look back and say I had x amount of winners. As a note to the chart, I'm waiting for a pinochio bar, that is one that has a significantly higher high than the two bars either side and at the end of a trend. So it it's a pin at the top of a trend it's a signal to short and vice versa. I then enter on the third bar (so pin, second bar, then enter on next bar) at around half the level of the pin bar, if this has already been breached then enter on opening of third bar.

I know what people might say, "only way to tell is to forward test" but I'd like to know beforehand if I might be wasting my time so I can at least try something else.

Any help or advice muchly appreciated

Regards

Frustrated Trader

You're on the right road but I'd make 2 points, firstly why are you trading forex? Forex isnt traded through an exchange so different brokers may show different prices meaning that one person may be seeing a PIN but others are not. Try looking at index futures or even individual equities, these are traded on exchanges so there is only one price.

Secondly I know that the 'experts' will tell you that the bigger the timescale the more accurate the signals will be. However I have never found that to be the case and if you are trying to backtest 4hr charts you'll need to go back years to get a good sample.

I know I said 2 points but I should also mention that you need to use support and resistance along with PIN bars, trading PINs on their own doesnt give you much of an edge. Again the point about timescales is relevant, trading 4hr charts you might not get near a support or resistance level for weeks on end. Trading 15 or 30 minute charts will give you more opportunities.

 

[pboyles]

I know the saying "hindsight and a rear view mirror is a wonderful thing in trading". Well I'm a bit fed up at the minute with the way I was trading. I've got to the stage now where I don't completely blow balls at trading, I'm not consistently making money, I'm consistently breaking even. I'll make money, then slowly give it all back, make it again and round and round we go. I know trading is a journey and this is just another stage, but I'm trying so hard to break out of this cycle.

I was trading breakouts on the H1 charts, my RR was 1:1 and I put this down to the reason I was only breaking even. I've now come up with a new strategy but would like to hear advice from other traders who know their linguine from their spaghetti.

Ok so I'd like to move up a T/F to H4 and up my RR to 1:2. Now I'm planning on trading Pinochio bars and this is where the hindsight comes in. I've been looking back on the charts and yes it looks profitable but is this just because I can see how the trade then played out, if you have to make those calls in real time does trading this way become profitable? See chart.

I'm basically asking if anyone thinks this is a valid strategy and a workable one, it's very nice to look back and say I had x amount of winners. As a note to the chart, I'm waiting for a pinochio bar, that is one that has a significantly higher high than the two bars either side and at the end of a trend. So it it's a pin at the top of a trend it's a signal to short and vice versa. I then enter on the third bar (so pin, second bar, then enter on next bar) at around half the level of the pin bar, if this has already been breached then enter on opening of third bar.

I know what people might say, "only way to tell is to forward test" but I'd like to know beforehand if I might be wasting my time so I can at least try something else.

Any help or advice muchly appreciated

Regards

Frustrated Trader

Only 1 of those is a PIN by the way. Is that chart supposed to show your PIN strategy or the other one?

 

[Splitlink]

You're on the right road but I'd make 2 points, firstly why are you trading forex? Forex isnt traded through an exchange so different brokers may show different prices meaning that one person may be seeing a PIN but others are not. Try looking at index futures or even individual equities, these are traded on exchanges so there is only one price.

Secondly I know that the 'experts' will tell you that the bigger the timescale the more accurate the signals will be. However I have never found that to be the case and if you are trying to backtest 4hr charts you'll need to go back years to get a good sample.

I know I said 2 points but I should also mention that you need to use support and resistance along with PIN bars, trading PINs on their own doesnt give you much of an edge. Again the point about timescales is relevant, trading 4hr charts you might not get near a support or resistance level for weeks on end. Trading 15 or 30 minute charts will give you more opportunities.

Hi, indicatorman!

You are right about backtesting on 4H. I just use mine for trend direction and get along fine!

 

[findcount]

I know the saying "hindsight and a rear view mirror is a wonderful thing in trading". Well I'm a bit fed up at the minute with the way I was trading. I've got to the stage now where I don't completely blow balls at trading, I'm not consistently making money, I'm consistently breaking even. I'll make money, then slowly give it all back, make it again and round and round we go. I know trading is a journey and this is just another stage, but I'm trying so hard to break out of this cycle.

I was trading breakouts on the H1 charts, my RR was 1:1 and I put this down to the reason I was only breaking even. I've now come up with a new strategy but would like to hear advice from other traders who know their linguine from their spaghetti.

Ok so I'd like to move up a T/F to H4 and up my RR to 1:2. Now I'm planning on trading Pinochio bars and this is where the hindsight comes in. I've been looking back on the charts and yes it looks profitable but is this just because I can see how the trade then played out, if you have to make those calls in real time does trading this way become profitable? See chart.

I'm basically asking if anyone thinks this is a valid strategy and a workable one, it's very nice to look back and say I had x amount of winners. As a note to the chart, I'm waiting for a pinochio bar, that is one that has a significantly higher high than the two bars either side and at the end of a trend. So it it's a pin at the top of a trend it's a signal to short and vice versa. I then enter on the third bar (so pin, second bar, then enter on next bar) at around half the level of the pin bar, if this has already been breached then enter on opening of third bar.

I know what people might say, "only way to tell is to forward test" but I'd like to know beforehand if I might be wasting my time so I can at least try something else.

Any help or advice muchly appreciated

Regards

Frustrated Trader

why not go forexfactory and ask the experts at James16 thread ?

they're trading pinbars and also 2-bar pinbars and other candle formations.

these bars are more effective if they're off major support and resistance or so-called price pivot zones (major support turned resistance and vice versa)

also avoid pinbars that occur too closely together.........the more space between them, the better..........

 

[Sang Froid]

You're on the right road but I'd make 2 points, firstly why are you trading forex? Forex isnt traded through an exchange so different brokers may show different prices meaning that one person may be seeing a PIN but others are not. Try looking at index futures or even individual equities, these are traded on exchanges so there is only one price.

Secondly I know that the 'experts' will tell you that the bigger the timescale the more accurate the signals will be. However I have never found that to be the case and if you are trying to backtest 4hr charts you'll need to go back years to get a good sample.

I know I said 2 points but I should also mention that you need to use support and resistance along with PIN bars, trading PINs on their own doesnt give you much of an edge. Again the point about timescales is relevant, trading 4hr charts you might not get near a support or resistance level for weeks on end. Trading 15 or 30 minute charts will give you more opportunities.

Hi pboyles,

I've had mixed results with trading shorter T/F. The reason I want to move up to higher T/F's is one of a psychological reason. I have a tendency to overtrade and even revenge trade. I firmly believe that each and everyone of us has to find a strategy that suits their personality. Over the years I've come to realise that I need to slow the pace down, this short term trading just makes me trigger happy.

The second reason for not trading pins on a shorter T/F is that I was under the impression that a pin on say a 5min chart is largely irrelevant. The shorter the T/F all you're trading is noise. So a pin on a 5min is only showing indecision on such a minute scale.

I hear what you're saying about trading through an exchange and not trading Forex, this is my longer term plan, but capital is restricting this at the minute.

 

[Sang Froid]

I'd like to help but you must make your own mind up on this one, as far as p-bars are concerned. If I may make a suggestion, though, because I use 4H but do not trade Forex. Perhaps you are looking too closely at your chart and should stand away a bit. Here's what I would be looking at if I was using pins because they are very apparent with candles, like this. IMO, you were trading into a pullback and that would have been more obvious with more chart to look at. This last sentence is hindsight, of course. We can't get away from it!

Trader Dante is an expert on p-bars, if he is around.

So..... I've now realised that as pboyles noted only one of those on my chart is a real pin bar by the definition.

I've tried to trade pullbacks in the past but by using MAs. The only bit that put me off was the whole "the trend is your friend". Trying to pick tops and bottoms is bloody hard.

 

[Sang Froid]

why not go forexfactory and ask the experts at James16 thread ?

they're trading pinbars and also 2-bar pinbars and other candle formations.

these bars are more effective if they're off major support and resistance or so-called price pivot zones (major support turned resistance and vice versa)

also avoid pinbars that occur too closely together.........the more space between them, the better..........

Thanks for the link I'll certainly check that thread out.

I might have a look at S/R too, but surely a pin bar is a pin bar regardless???

 

[pboyles]

Hi pboyles,

I've had mixed results with trading shorter T/F. The reason I want to move up to higher T/F's is one of a psychological reason. I have a tendency to overtrade and even revenge trade. I firmly believe that each and everyone of us has to find a strategy that suits their personality. Over the years I've come to realise that I need to slow the pace down, this short term trading just makes me trigger happy.

The second reason for not trading pins on a shorter T/F is that I was under the impression that a pin on say a 5min chart is largely irrelevant. The shorter the T/F all you're trading is noise. So a pin on a 5min is only showing indecision on such a minute scale.

I hear what you're saying about trading through an exchange and not trading Forex, this is my longer term plan, but capital is restricting this at the minute.

I trade PINs on 5 and 15 minute charts on futures only. Using S&R they are very reliable. I always put my stop 1 tick above the high or low of the PIN to keep losses to a minimum. Of course with the spread on FX this will be much more than 1 tick.

Another point on 4hr charts is that different brokers will have different 4hr periods, some will start at midnight, others at 11pm and so on. At least with 1 hour and below they will all be opening and closing at the same time.

You can trade futures for about $500 per contract, I dont recommend you do that but that is the minimum margin, my point being that you do not need a massive amount of money to start. You do of course still need to know what you're doing but that's no different to any other instrument.

 

[pboyles]

Thanks for the link I'll certainly check that thread out.

I might have a look at S/R too, but surely a pin bar is a pin bar regardless???

Yes but PINs are more reliable at support or resistance levels.

 

[Splitlink]

So..... I've now realised that as pboyles noted only one of those on my chart is a real pin bar by the definition.

I've tried to trade pullbacks in the past but by using MAs. The only bit that put me off was the whole "the trend is your friend". Trying to pick tops and bottoms is bloody hard.

You said it! More traders lose more money trying to spot tops and bottoms than can be imagined.

My personal opinion on that is to be a trend follower. They are safer (although nothing is 100%)

Good trend following threads are by BSD. Trend following with averages can be dangerous because of the trend change at the bottom, but the same can be said for your method. The last trade was a loser because the trend changed. Sort that problem out and you will make more. To be honest, I play it by looking to see if it is overbought/sold according to a TL or average, or whatever you like, and close out. Often I could have done better but that's trading for you.

 

[Sang Froid]

I trade PINs on 5 and 15 minute charts on futures only. Using S&R they are very reliable. I always put my stop 1 tick above the high or low of the PIN to keep losses to a minimum. Of course with the spread on FX this will be much

Another point on 4hr charts is that different brokers will have different 4hr periods, some will start at midnight, others at 11pm and so on. At least with 1 hour and below they will all be opening and closing at the same time.

Ok, let me just get this right in my head.

A pin bar is showing indecision between the buyers and the sellers. If it occurs at the top or bottom of a trend then this is a signal that that trend might be about to reverse. I use the term top and bottom loosely as one can never be sure what is a top and what is a bottom. Now my point is thus: regardless of whether my broker is using a 4hr candle that starts at 00.00gmt or 01.00 it will still show this indecision, more so than using a 5 or even 15min chart. Using such a small T/F if there is a pin bar at the top of that trend and you move up the T/F to say a 1hr chart all of a sudden that trend vanishes.

 

[pboyles]

Ok, let me just get this right in my head.

A pin bar is showing indecision between the buyers and the sellers. If it occurs at the top or bottom of a trend then this is a signal that that trend might be about to reverse. I use the term top and bottom loosely as one can never be sure what is a top and what is a bottom. Now my point is thus: regardless of whether my broker is using a 4hr candle that starts at 00.00gmt or 01.00 it will still show this indecision, more so than using a 5 or even 15min chart. Using such a small T/F if there is a pin bar at the top of that trend and you move up the T/F to say a 1hr chart all of a sudden that trend vanishes.

Yes it's a reversal signal. Here two tips for you.

1. Put a slow stochastic on your chart, this will help you visualise swing highs and lows

2. Plot weekly pivot points on your charts, that's WEEKLY pivot points. Only trade PINs that occur at these pivot points. That will cure your overtrading.

 

[Dubai]

Hi Sang,

My advice would be to get back to basics. It sounds like you have a fair understanding of forex and know the basic principles which is a lot better than most traders.

Like you say, picking tops/bottoms is incredibly tough and definitely isn't an easy way to trade.

My one piece of advice would be to learn bare naked price action and learn why price reverses at certain points. Also I am a big, big advocate of camarilla pivots. They are very accurate and can save a lot of headaches.

 

[tomorton]

Hi sangfroid - Your strategy looks good, assuming entries are on a 'good' pin bar pattern. As has been said, Forexfactory is a good place to understand the pattern better - see James 16 and Lincoln (a.k.a. lwoo034).

As also said above, pins work best when they align with other significant levels, such as -
1) Fibonacci levels (retracements of the previous move)
2) Important pivot levels
3) Moving averages
4) Confluence (several MA or Fib levels in the same general region)
5) Swing high / swing low
6) Retracement of the current move (must retrace a minimum of 23% fib
retracement of the current move), which is a lower probability play.

The pin also gives a rational and not-too-distant stop but what about where you take profit? Do you find trades go into the money and then retrace to hit the stop?

As for r:r, the TA decides what reward a pattern gives, you can't simply adjust these figures according to desired equity curve. What I mean is that I can't use a stop of 40pts on the FTSE from pattern XYZ and decide I will be happy with a r:r of 1:10 - it might be that XYZ patterns only tend to run for 3-4 days in recent times and the odds of getting to a 400pt gain in that time are non-existent. If you are going to ignore trade set-ups with less than r:r 1:2, that's fine, as long as 2 is a rational and readily achievable reward for your pattern in your market at this time in the first place, and not a statistical outlier.

 

[trader_dante]

I know the saying "hindsight and a rear view mirror is a wonderful thing in trading". Well I'm a bit fed up at the minute with the way I was trading. I've got to the stage now where I don't completely blow balls at trading, I'm not consistently making money, I'm consistently breaking even. I'll make money, then slowly give it all back, make it again and round and round we go. I know trading is a journey and this is just another stage, but I'm trying so hard to break out of this cycle.

I was trading breakouts on the H1 charts, my RR was 1:1 and I put this down to the reason I was only breaking even. I've now come up with a new strategy but would like to hear advice from other traders who know their linguine from their spaghetti.

Ok so I'd like to move up a T/F to H4 and up my RR to 1:2. Now I'm planning on trading Pinochio bars and this is where the hindsight comes in. I've been looking back on the charts and yes it looks profitable but is this just because I can see how the trade then played out, if you have to make those calls in real time does trading this way become profitable? See chart.

I'm basically asking if anyone thinks this is a valid strategy and a workable one, it's very nice to look back and say I had x amount of winners. As a note to the chart, I'm waiting for a pinochio bar, that is one that has a significantly higher high than the two bars either side and at the end of a trend. So it it's a pin at the top of a trend it's a signal to short and vice versa. I then enter on the third bar (so pin, second bar, then enter on next bar) at around half the level of the pin bar, if this has already been breached then enter on opening of third bar.

I know what people might say, "only way to tell is to forward test" but I'd like to know beforehand if I might be wasting my time so I can at least try something else.

Any help or advice muchly appreciated

Regards

Frustrated Trader

Funnily enough, the losing trade is about the only one that would have fit my criteria for trading a pin.

Number 2 is not a pin by any account whatsoever.

You are going to have to work on your definition of a pin. A bar that has a higher high than the bar before and after is not good enough. You'll get a whole host of bars that are not pins.

You also don't need to wait for the third bar after. No one that I know who trades pins does this. You can enter right after the pin has formed. e.g. on the second bar.

Secondly, forget about taking profits at arbitrary R values. Read the market to define your exit.

I can tell you right now, that if you can get good at mapping the market (drawing s/r) and you can actually define a decent pin, you should be able to make money no problems.

I think there are better ways of doing things but it will definetly make you money no doubt about it.

 

[Dubai]

You might like bar charts, sang, but for ease of reference to pinbars, candlesticks win hands down for me. Just a thought..

 

[Sang Froid]

Right,

got it.

Thanks for the replies guys.

Trader Dante hit the nail on the head... I wasn't trading pin bars for a start. What I'm looking at now is pin bars but not around usual S/R but at round numbers instead.. .00 .50 .00 etc...

I like the very visual element of this if you physically draw the lines on, wait for a pin to form and bingo you got S/L and T/P levels right before your eyes.

Had a little play with this on a micro account during the week. Seemed to go fairly well if you open two positions and then close half once the first round number or target has been taken out leaving the second one open for a free ride once you move the stop to b/e.

Liking the pure price action which is something I've been trying to get to for a while.

 

[Chartsy]

backtest the probabilty of 1:2 R:R being hit by a pin bar on some majors, on several timeframes.

DO NOT add discretion or lines, just backtest the fundamental setup, i did inside bars on cable hourlies and o about 500 and got 62%, though only 1:1, i also did pin bars off weeklies.

i used to get stressed over whether it's hindsight or reality...then i realised;just get some numbers, and then you'll get confidence, or a reality check