Making Money Trading

[Glenborrell]

Hi VS.
What timeframe are you using?
By EOD, I am assuming you mean the daily timeframe.
I do not believe there is a pinbar from the price action we saw today.
Also, your trade price of 912, you sure this is spot? Gold has been below 910 since 8am.
Can you post your chart please.
Also, where are you s/r lines?
Do you have a fib lines to support this retracement?
Awaiting your chart.
Omni.

Hi Omni,

I've had a look and i think VS's entry at 912 includes his spread?? (correct me if i'm wrong). If i were to take it that's about where my entry would be too. The nose comes down to the 50 fib off recent swing low to high. On my charts though the body is really big. Can't see any S/R lines here but that's cos gold is around it's all time highs. I do remember earlier in the thread TD mentioning that in some situations you need to trade just based on the pin (and your knowledge of the market i guess), like when you would trade against the trend at all time highs. Maybe VS is doing that??

Glen

 

[trader_dante]

Based on what I believe to be an EOD pin-bar on the Gold Spot Daily chart, I've gone long at 912.56, with a TP of 936.76 & a sl of 891.89 (Volume of 1.00)

This is my first trade using T_D 's approach.

I executed the this trade with a complete lack of emotion - this should bode well for future trades using this method.

Thoughts anyone? Good, bad or indifferent??

Constructive feedback required!!

Hi Vince,

First off lets look at the pin bar itself (see chart)

If you are unsure whether a pin is a good one remember to ask yourself THREE questions. You want to be able to answer YES to all of them.

1. Does it have a long nose in proportion to its body?

The range of the whole bar (high to low) is $10.65 and the range of the body is $2.53. Therefore the size of the body is just under 25% of the range of the bar. That is just about acceptable.

2. Does it have its close within the range of the previous bar and near to the previous bars high or low?
Yes

3. Does it have its body in the top or bottom third of the range?

The range is $10.65.

$10.65 / 3 = $3.55

The high of the daily range is $912.55.

So $912.55 - $3.55 = $909

So we want to see the close (which is the low of the candle body) above $909.

Unfortunately the close was $903.40 so the pin bar has FAILED To meet this criteria.

Now of course after time you get to know whether these pin bars are good enough to take without doing the calculations I have done above but this is simply for illustration.

Of course the pin bar itself is only HALF the story. What is important is WHERE the pin bar occurs.

Lets have a look at that next:

Support/Resistance Pivots

There is no significant s/r pivot.

Fib Levels

The "pin" hits the 50 fib from the last swing low. This is good.

Would the order have even been triggered?

You should be entering on a BREAK of the previous days high NOT in anticipation of it. As you can see from my chart, the high has not been broken so even if the setup was perfect, a position would still not be taken.

Summary

I hate to say it but this looks like a very weak setup and not one I would have taken.

That doesn't necessarily matter. Gold is in an uptrend and you are buying a retracement. You may find yourself bailed out by the trend on this one. But to clarify, the pin is not a good one, there is no real pivot and the previous days high has not been taken out. All you have is a fib level and the trend. It may be enough but "may" is not a situation I would like to put my money behind.

Good luck.

 

[Cavalry Trader]

HI T_D

Would you be more inclined to take weak pin bar setups if they with the long term trend, or would you use the same set up for trading both with the trend and retracements

Rgds

CT

 

[trader_dante]

HI T_D

Would you be more inclined to take weak pin bar setups if they with the long term trend, or would you use the same set up for trading both with the trend and retracements

Rgds

CT

Hi CT,

I'd NEVER be inclined to take, what I consider to be, a weak pin bar setup

 

[VinceStanzione]

Hi Guys,

Thanks for all the feedback - in particulat to T_D for his in-depth analysis.

I'll post a lengthy explanation of my reasons for taking this trade later today (ie after work!) & I'll try to tie it in to Dante's comments.

If nothing else, it'll be a good exercise for people new to this method.

I was a demo account trade in any event & the goal is to learn; this trade has more than served it's purpose!!

Until Later (& thanks again T_D),

VS

 

[superspurs]

Bp

here is a pin spotted today,reasons i will take this short tomorrow (if it triggers)
1 refusal of the 38 fib
2 refusal of the s/r pivot
3 market sentiment
4 continuation of trend
5 long nose
6 body in range of previous day

 

[trader_dante]

here is a pin spotted today,reasons i will take this short tomorrow (if it triggers)
1 refusal of the 38 fib
2 refusal of the s/r pivot
3 market sentiment
4 continuation of trend
5 long nose
6 body in range of previous day

Fantastic setup!

 

[superspurs]

hi td,i hope you are keeping that youngster in the next seat in his place.just a quick question what do you reckon about the outside bar on premier oil,its at all time highs.i am gonna watch this keenly

 

[Cavalry Trader]

Hi SS

Had my eye on the BP one as well, What will be your target price for the move??:?:

CT

 

[superspurs]

half pos at 500,rest at measured move of prev downswing,400

 

[trader_dante]

Our first classroom session today confirmed to me that I have been following the right track in trading in the way I have outlined in this thread.

We were advised to concentrate on price action and to look for it to return to previous swing highs - for previous resistance to become support - when looking to take long positions. (see diagram 1) This is reversed for short positions.

When price hits these areas a trader is presented with a potentially profitable opportunity.

A trader can "probe" these pivot levels by taking positions as they are reached - cutting his losses quickly if he is wrong and they are broken and running his profits if they hold and price moves off them.

In doing this, the professional traders have an advantage over many of you.

The pros use the ORDER BOOK to see the size that is stacking up on the bid and offer and therefore get an indication of whether a level is likely to hold. The trader at home can get this for some markets too (I know Lurker was watching the YM order book in a similar way) but not for all markets.

Having said that I don't think that level 2 is, by any means, necessary.

The same profit potential can be achieved by waiting for a price action setup such as a pin bar on the TF of your choice.

A pin bar shows that the pivot has, at least temporarily held and gives you an opportunity to get in on a potential reversal. On the hourly or daily bars, the stop on pin bars is large but remember that the reward is relative.

Consider these two bund trades below. When I was trading the Bund with E*Trade (spreadbetting) I had a spread of 3. Now as a pro I have a spread of 1.

As a result, today, I was able to take a position on the 5m TF as soon as the market showed signs of holding at the pivot (chart 2) and enter with a stop of just 5 ticks. I set a target of the recent swing high and when it was hit that gave me a reward of 10 ticks or 2:1 ( 2 X the amount risked).

Now consider the trader who sits at home and who has a large spread to contend with and no order book to look at. This trader could take an hourly pin bar (such as the one in chart 3) Taking into account the range of the bar AND the spread the trader STILL achieves a R:R of 2:1 by holding until the target of the previous swing high is hit.

Same strategy. Same profit potential. Different TF.

Those of you that are familiar with pin bars and confident in using them may want to look at the lower TFs. This is something that I am now progressing towards at work.

I have heard people on here say that pin bars don't work on the lower TFs. Rubbish! I see profitable pins on every TF. The only reason I played the hourly and daily bars is because I found them easier to manage whilst at work.

As a pro I will look to use the lower TFs because setups are more frequent and the risk is lower.

However, it is worth mentioning that it is my INTENTION to use any profit I generate from trading in this way, in trading the higher TFs once again.

 

[VinceStanzione]

Evening All,

OK, I'm home from the day job & can now give T_D's post the time it deserves.


"First off lets look at the pin bar itself (see chart)

If you are unsure whether a pin is a good one remember to ask yourself THREE questions. You want to be able to answer YES to all of them."

In a nutshell, yes. I use the pinbar identification spreadsheet that was posted by another user on this forum. I was happy with how the questions on this file matched the pin-bar's formation.



"1. Does it have a long nose in proportion to its body?

The range of the whole bar (high to low) is $10.65 and the range of the body is $2.53. Therefore the size of the body is just under 25% of the range of the bar. That is just about acceptable."

This statement confused me when I saw it in work - hence the need to check my chart on my PC (which is at home - I'm not willing to risk the trouble I'd get into by downloading MT4 in my workplace). Here's why:-

The high of the pin-bar is 912.55; the low is 891.90 - a difference of $20.65. This figure was still clearly in my mind when I placed the demo trade, because my capital at risk in my demo account worked off this figure.

Sorry to be pedantic about the numbers! For my considerable sins, I work alot with figures each day, so for better or worse, I've good attention-to-detail with maths.

I do agree that the body's range is $2.53 (Phew!!!)

So:-

=> 2.53/ 20.65 = 10% (approx) < 25% => 1st condition satisfied.

"2. Does it have its close within the range of the previous bar and near to the previous bars high or low?
Yes"

I actually think the close of my pinbar is one pip below the low of the previous bar!
More importantly, I was still happy with my pin-bar cf. the ID rules on the pinbar.xls file.

So: 2nd condition satisfied.

"3. Does it have its body in the top or bottom third of the range?

The range is $10.65. "

Gotta disagree here. Unless I'm missing something (& I'm glad to be corrected on this, if true!!), I believe the range is $20.65, as above

"$10.65 / 3 = $3.55"

Have this as: ($10.65 / 3 + $10 / 3) = ($3.55 + $3.33) = $6.88

"The high of the daily range is $912.55.

So $912.55 - $3.55 = $909

So we want to see the close (which is the low of the candle body) above $909.

Unfortunately the close was $903.40 so the pin bar has FAILED To meet this criteria."

I have this as:-

H = $912.55
L = $891.90
O = $905.93
C = $ 903.40

$891.90 + $6.88 x 2 = $891.90 + $13.76 = $905.66 (it's been a long day, might have got this wrong).

The open is marginally above this level; so I took this to be ok.

Now I realise that it's the close for a long trade (and open for a short) that must exceed the 66.67 percentile (ie 2/3rds of the way up matey!) of the pin-bar.

So there-in lies my mistake on the pin-bar set-up.

I still think it was pretty close -as the pin-bar set-up rules go - to our ideal pin.


"Now of course after time you get to know whether these pin bars are good enough to take without doing the calculations I have done above but this is simply for illustration.

Of course the pin bar itself is only HALF the story. What is important is WHERE the pin bar occurs.

Lets have a look at that next:

Support/Resistance Pivots

There is no significant s/r pivot."

In a number of posts throughout the thread, a running theme seems to be that perfect pin-bar set-ups on the Daily timeframe are sufficient enough on their own to trigger a trade.

It was only when you cut down the TF did you require extra info. (However, I may have got this wrong! Again, please, please put me straight if I've mis-construed.)


"Fib Levels

The "pin" hits the 50 fib from the last swing low. This is good."

I did actually see this - so I've just contradicted my above point!

But in all seriousness, I place more emphasis on S/R than on Fibs, so T_D's pivot point note above is valid.

S/R is vital.

"Would the order have even been triggered?

You should be entering on a BREAK of the previous days high NOT in anticipation of it. As you can see from my chart, the high has not been broken so even if the setup was perfect, a position would still not be taken."

Agreed - finally, we agree on something!! No seriously, this is a part of your trade management startegy that I mis-understood. Or "let the market come to you", as a wise trader once said

Summary

"I hate to say it but this looks like a very weak setup and not one I would have taken.

That doesn't necessarily matter. Gold is in an uptrend and you are buying a retracement. You may find yourself bailed out by the trend on this one. But to clarify, the pin is not a good one, there is no real pivot and the previous days high has not been taken out. All you have is a fib level and the trend. It may be enough but "may" is not a situation I would like to put my money behind."

Again, I want to thank you for taking the time to review & constructively comment on my trade.

Having reviewed your post, I believe the pin-bar was actually bit better than your analysis concludes - however, this is based on my successful calculation of the range of $20.65.

Certainly, I didn't let the close of the pin lie in the upper third of this "proposed" pin-bar.

Gold is of course on the up, but then all commodities act as an inflation-proof capital preservation asset during times of financial turmoil. However, we wish to trade price & price action only, not fundamentals.

Or should read:-"I'm trying to trade price, you already can"

Ultimately, I believe my trade was incorrect because my entry was flawed. I didn't realise I should wait until the pin after the "pin-bar" broke the high of it's predecessor.

Something for me to consider in future.

Thanks a mill for your time & patience again.

As we all know at this stage, the trade was stopped out (!), but there are times when what you learn from losers far outweigh the profits from winners.

Thanks for reading.

Good luck.[/QUOTE]

 

[trader_dante]

hi td,i hope you are keeping that youngster in the next seat in his place.just a quick question what do you reckon about the outside bar on premier oil,its at all time highs.i am gonna watch this keenly

First impressions are it's good. It looks like a double top to me.

However, you've got Crude heading down into strong support at around $84.50. I'd keep a close eye on that.

 

[trader_dante]

half pos at 500,rest at measured move of prev downswing,400

Superspurs, let me ask you a question in turn. Are you able to use measured moves for profit taking with a good degree of success?

 

[grimweasel]

T-D
Thanks again for the informative posts. I tried a copule of pins today on DJI and Gold. I now realise that I was trying to 'make' a pin and justify it to myself. Having re-read the pins rules I now realise the pins failed due to them not being ideal (body not in top third and too large (more than 25% of candle))
I find the hardest thing is spotting them. Like you I am at work all day; I stick to the daily and 1hr TFs but I do find myself being drawn into the 15m TF where there seem to be quite a few pins forming. I guess If I'm at home on leave during trading time, then these can be succesfully traded but you do need to watch them closely due to the extra volatility.
I think the key is to have well defined SR points too. I have been drawing Rest' lines and using them as a set-up instead of the much stronger SR points, where reversals have occured before.
I have added an arrow to the bar I took. There would have been a few ticks profit, but I was away. As you can see it was stopped out later on the low of the pin bar. Loss of £30. If I'm honest it was not on a key Fib or SR level. What doth ye think?
Grim

 

[trader_dante]

Hi Vince,

Well, what can I say? My maths is truly awful. Pelzar tells me this on a daily basis.

The high of the pin-bar is 912.55; the low is 891.90 - a difference of $20.65.

Out by a full $10 too. LOL. That is shameful.

Sorry to be pedantic about the numbers!

Not at all - I appreciate it.

I actually think the close of my pinbar is one pip below the low of the previous bar!

Again - well spotted. It is marginally lower. I examined it visually rather than checking the numbers and it looked fine.

Now I realise that it's the close for a long trade (and open for a short) that must exceed the 66.67 percentile (ie 2/3rds of the way up matey!) of the pin-bar.

So there-in lies my mistake on the pin-bar set-up.

Funny how I got the maths so wrong but our conclusions are basically the same.

I still think it was pretty close -as the pin-bar set-up rules go - to our ideal pin.

I didn't like the look of it immediately because I thought the body was too low down the bar. This is the concept that I tried to explain with the maths. In an ideal world you want to see the body close to the top of the range with hardly any wick above it. Go back through this thread and look at the J16 thread too and familiarise yourself with the pin bars that are posted. Over time you can identify good ones by sight instantly.

In a number of posts throughout the thread, a running theme seems to be that perfect pin-bar set-ups on the Daily timeframe are sufficient enough on their own to trigger a trade.

THIS IS VERY IMPORTANT: You should ALWAYS look for the pin bars to hit s/r pivots, fib levels, moving averages and any OTHER supporting factors you are familiar with. This is true even on the DAILY timeframe.

The key point is that it is not the pin bar that makes the money it is where it occurs.

If you play these bars when they are well supported then you will find they have a very high probability of working.

The confusion probably arises because from time to time I enter a pin bar at a swing low or a swing high where there is NO additional support for taking it. I would like to make it clear that I only like to do this in trending markets that show an EXTREME move in one direction that culminates in the bar. In this scenario the pin bar represents an exhaustion spike upwards and indicates distribution and possibly the final throes of a trend. Your daily pin bar on gold does not fulfill this criteria.

I hope this helps.

Tom

 

[grimweasel]

Guys,
Would I also be correct in saying that it would be better to go long/short on a pin in cahoots with the 50EMA trending in the same direction as the entry?
ie Long entry on SR etc one would like to see an upward trend intact on the 50EMA?
Thanks and soz for being a pain! Has Pelzar revealed his secrets yet?
Grim

 

[trader_dante]

Guys,
Would I also be correct in saying that it would be better to go long/short on a pin in cahoots with the 50EMA trending in the same direction as the entry?
ie Long entry on SR etc one would like to see an upward trend intact on the 50EMA?
Thanks and soz for being a pain! Has Pelzar revealed his secrets yet?
Grim

Going with the trend of the 50 is another supporting factor that you can use in your trading. Have a look at the 10, 21 and 50 EMA strategy I have used alongside my setups.

 

[trader_dante]

Has Pelzar revealed his secrets yet?

Yeah, it's called "enter and pray"

 

[trader_dante]

T-D
Thanks again for the informative posts. I tried a copule of pins today on DJI and Gold. I now realise that I was trying to 'make' a pin and justify it to myself. Having re-read the pins rules I now realise the pins failed due to them not being ideal (body not in top third and too large (more than 25% of candle))
I find the hardest thing is spotting them. Like you I am at work all day; I stick to the daily and 1hr TFs but I do find myself being drawn into the 15m TF where there seem to be quite a few pins forming. I guess If I'm at home on leave during trading time, then these can be succesfully traded but you do need to watch them closely due to the extra volatility.
I think the key is to have well defined SR points too. I have been drawing Rest' lines and using them as a set-up instead of the much stronger SR points, where reversals have occured before.
I have added an arrow to the bar I took. There would have been a few ticks profit, but I was away. As you can see it was stopped out later on the low of the pin bar. Loss of £30. If I'm honest it was not on a key Fib or SR level. What doth ye think?
Grim

I wouldn't take a setup on the 15m that had no SR level or fib support.

Interestingly enough, the pin bar at the swing high on your chart caught my attention.

Its directly off the 61 fib from the swing low and has an s/r pivot (exclusive to the lower TFs) coming in as resistance not far above it.

That would have made a good trade.