No Indicators

[stoploss please]

I have become heavily reliant on indicators over the past few years. With discipline and used in the right way, they are good tools. I have however decided to go back over my notes and many of the good threads on the subject to see if I can trade purely off price action.

Attached are a few charts of the Dow from the last couple of weeks. I am looking for simple Swing Set ups on the daily with trade entry and management off the 60 minute.

 

[stevespray]

I would suggest that trading off the 60 min is pretty hard. The first 60 mins of trading on any given day always tends to be a large bar.

Perhaps the better bet with swing trading is the daily chart?

The first problem with trading trend, in my own personal experience, tends to be that trades take on what might be termed as a 'break out' strategy. By that I mean that you end up having to buy a high or sell a low which tends to prove pretty expensive over time as many of the triggers a false moves. Because of where you entered (ie the recent high or low) the market can move a fair distance against you before you realise that you are wrong.

Therefore I would put forward two ideas;

1) Trade the reverse of the system idea. Sell the break higher and buy the break lower looking to make money on the many false triggers whilst 'defining' a strategy to get you out of the market if a genuine break out does occur.

2) Play the trend idea but, using a formula or just plain old 'eye balling', only enter on pullbacks of a certain size (ie x number of points) thus helping, on average, to reduce the loss making trades whilst making the winning ones larger.

As a postscript I would ask if you have fallen into the trap of deciding that "I want to trade the Dow"? It's just that I have noticed that many people are drawn to a particular market and fail to consider that that market may not fit their 'trading personality'. The Dow seems a big pull because it can move several hundred points in a day. This doesnt make it automatically the best market to trade even though it gets tons of coverage. Some FX pairs trend far better than the Dow for example.

Steve.

 

[stoploss please]

Lets start with the Postscript. I trade mainly the emini using 610 and 2584 continuos Tick charts. Although I do trade out of hours, I would only trade once I see the time it takes to close candles begins to quicken.

My style I would call momentum ish.

I have been looking at FX for about a year as I have an interest in monitoring Carry Trades. However, I must admit the intra day volatility to be rather hectic. I also find intra that the intra day emini chart looks to my eye smoother. GBP/FX is actually one of the main reasons why non indicator swing set ups based off simple Dow/Gann have taken my recent focus.

Trading off the 60 minute bar is I agree rather difficult. I for one would not suggest taking an entry off the 60. On my own set up, I would take trend trades in the direction of the 2584 and counter trend trades off a divergence on the 610. It seems to work for me.

Going back to my examples on the Dow. What I am trying to do is identify Swings in the direction of the trend, and enter off lower time frames. Lets say a Daily/60/15 set up.

I would then counter trend off the 15 minute.

I will post more examples during the week

 

[stoploss please]

Taken a look at GBPJPY on a 5 minute chart. Rather hectic and must admit, makes a lot more sense with all my indicators and EMAs.

Looking at 3 period Gann retracements but using some Marc Rivallands take on it.

Trying to enter on a close beneath the high of the low bar or low of the high bar. Keeping it simple.

 

[stoploss please]

Looking at a five minute chart of GBPUSD. Identified two change of trends.

At 07.25 EST, we made a two bar rally off a swing low which happened during a larger rally.

The two bar rally turned out to be a double top and we subsequently crash through the Swing Low.

This collapse was short lived and we turned back up into bull mode.

Would you discount a Swing Low that was followed by a two bar rally as being a real Swing Low.

 

[stoploss please]

One more open question. Would you class this as a 3 or a six bar retracement. I see it as 3 bars.

 

[Windowsill]

One more open question. Would you class this as a 3 or a six bar retracement. I see it as 3 bars.

I'm not sure you will get many replies on this.

If anyone is interested they will probably examine in great detail and come up with an answer, ....its a 5 bar retracement!! Or some other labelling system.

What I wonder is why are you so keen to give this bit of price action a label???

Perhaps the questions that you should be asking are:-

Is the price going up or down.....

If thats established, where can I enter with very low risk to capital....??

Where your big arrow points…..that green bar is the highest of the series of subsequent lower bars…that’s all you need to know:smart:

The probability is that a retracement will occur(a lot of newbies will know this after the event) . Put an order to open short after the formation of Bar 5 the stop can be a tick above bar 1 ,,,,and in my opinion the open within 5 points….therefore if the price heads north you have a tight stop. If it goes as predicted then a good win ratio.

You will notice that the whole scenario repeats its self in the bottom right hand corner..there is your exit and a new entry, long.

As far as the other chart goes……More labels….what is the point…..it certainly causes procrastination!

Up to 18570, you have a series of SLs (as labelled)🙂
Clearly the price is going up.
So long it is.
At 18570……to the left of “Is this a swing low” (I would not know by the way)….You will see a double bottom…..You would need to be a bit brave but not that much, to enter a long the same way as mentioned above. Again the most you could lose is say 5 pips and some spread.

I hope that helps.

 

[barjon]

hi stoploss,

You may know that my main trading is based on 3+ bar retracements.

1. I have no experience of forex which may have different characteristics to stocks and indices, but I would be wary of hanging too much on it in a 5 min timeframe.

2. Yes, I would regard it as a potential swing low needing to be confirmed by price moving on to reach a new high (which it didn't). I'd have still traded it, but shifted my stop to break even as it fell back from the earlier high.

3. I'd have started my count at your red 2 since I like a lower high so I 'spose I'd be in the 6 bar camp (or 5 in my case 🙂) and I'd have been more than happy to trade as the high of the red 5 went although, as I said, I'd have been quick to move to b/e as it fell back from the earlier high with a shooting star type candle to boot.

good trading

jon

 

[stoploss please]

Windowsill
I'm not sure you will get many replies on this.
If anyone is interested they will probably examine in great detail and come up with an answer, ....its a 5 bar retracement!! Or some other labelling system.
Looks like the consensus is that it a five bar retracement but I do like how it looks as three. Just looks cleaner to me. It does make sense that it is a five.
What I wonder is why are you so keen to give this bit of price action a label???
Perhaps the questions that you should be asking are:-
Is the price going up or down.....
If thats established, where can I enter with very low risk to capital....??
Where your big arrow points…..that green bar is the highest of the series of subsequent lower bars…that’s all you need to know
I do like my labels. Trying to approach this with zero indicators, MAs or crutches to lean upon. Therefore trying to establish where the Swings are found helps me organise my very cluttered mind.
In terms of Price, yes it was going down but my game plan was to buy the Swing Low and only change my bias if we traded beneath the prior Swing Low.
The probability is that a retracement will occur(a lot of newbies will know this after the event) . Put an order to open short after the formation of Bar 5 the stop can be a tick above bar 1 ,,,,and in my opinion the open within 5 points….therefore if the price heads north you have a tight stop. If it goes as predicted then a good win ratio.
Maybe I am getting this wrong but I usually short on the close of 2 as this bar closed under the Low of the High Bar. The trade being a counter trend trade.
You will notice that the whole scenario repeats its self in the bottom right hand corner..there is your exit and a new entry, long.
As far as the other chart goes……More labels….what is the point…..it certainly causes procrastination!
Up to 18570, you have a series of SLs (as labelled)
Clearly the price is going up.
So long it is.
At 18570……to the left of “Is this a swing low” (I would not know by the way)….You will see a double bottom…..You would need to be a bit brave but not that much, to enter a long the same way as mentioned above. Again the most you could lose is say 5 pips and some spread.
I see that. Much easier to read. For some reason, Engulfing Bars like the one at the top do confuse me.
Barjon
You may know that my main trading is based on 3+ bar retracements.
1. I have no experience of forex which may have different characteristics to stocks and indices, but I would be wary of hanging too much on it in a 5 min timeframe.
I was using 5 minute bar on Forex as an example. Forex at the moment is keeping me busy because I am working on a project that involves Carry Trades. Trade entry management at lower time frames is a bit of a logistic problem at the moment.
2. Yes, I would regard it as a potential swing low needing to be confirmed by price moving on to reach a new high (which it didn't). I'd have still traded it, but shifted my stop to break even as it fell back from the earlier high.
The above comment is of great interest. So we are saying that this retracement is not a Swing Low. However, can we say that its penetration could be viewed as a potential change of trend.

 

[barjon]

.................The above comment is of great interest. So we are saying that this retracement is not a Swing Low. However, can we say that its penetration could be viewed as a potential change of trend................

stoploss

The problem when price comes back from a high is whether we're dealing with a retracement or a reversal (ignoring the additional complications of small pullbacks or the start of a flat periods).

At the time you never know and all you can do is make assumptions which are confirmed, or otherwise, by the subsequent action.

For example, in an established uptrend I assume that a 3+ bar fall back from a high is a retracement, unless it breaks an earlier swing low (when I'd assume a reversal and change of trend)or is too deep (each to their own definiton here). Thus, I assume that the "final" bar is a swing low if its high goes and I trade that break long. In reality it is only a potential swing low and if the price doesn't move on from there to new highs then I assume that we might be dealing with a reversal and I protect my position.

When thinking about a change of swing trend (which is crucial because it determines whether I will be favouring longs or shorts) I see it as a series of lights that come on as the price develops.

Each can establish their own key features, but here's an example:

failure to make new high - first light
penetration of potential swing low - second light
penetration of substantive swing low - third light
close below substantive swing low - fourth light
ample time (and/or %age) below substantive swing low - fifth light
successfull first retracement - sixth light

Even with the same list, different traders will have different ideas on the number of lights to be lit before they will call a change in trend and how much illumination they need to make an assumption and trade it.

just my opinion 🙂

good trading

jon

 

[stoploss please]

Barjon

Have you adopted many of Marc Rivallands tactics.

 

[Bladerunner]

Good post

stoploss

The problem when price comes back from a high is whether we're dealing with a retracement or a reversal (ignoring the additional complications of small pullbacks or the start of a flat periods).

At the time you never know and all you can do is make assumptions which are confirmed, or otherwise, by the subsequent action.

For example, in an established uptrend I assume that a 3+ bar fall back from a high is a retracement, unless it breaks an earlier swing low (when I'd assume a reversal and change of trend)or is too deep (each to their own definiton here). Thus, I assume that the "final" bar is a swing low if its high goes and I trade that break long. In reality it is only a potential swing low and if the price doesn't move on from there to new highs then I assume that we might be dealing with a reversal and I protect my position.

When thinking about a change of swing trend (which is crucial because it determines whether I will be favouring longs or shorts) I see it as a series of lights that come on as the price develops.

Each can establish their own key features, but here's an example:

failure to make new high - first light
penetration of potential swing low - second light
penetration of substantive swing low - third light
close below substantive swing low - fourth light
ample time (and/or %age) below substantive swing low - fifth light
successfull first retracement - sixth light

Even with the same list, different traders will have different ideas on the number of lights to be lit before they will call a change in trend and how much illumination they need to make an assumption and trade it.

just my opinion 🙂

good trading

jon

Hi Jon

good few posts

like your traffic lights, a nice visual map Jon



Day Swing Rivailand method

Day = short term trend

Week = medium term trend

Month = Long term trend

Just thought its worth posting up trend days = short term trend only

I have found the hours are best played from S and R zones as per Steves post but each to their own I guess. Good post Steve 👍





Good luck with it :clover:

Andy

 

[barjon]

stoploss

I've been trading pretty much the same way for over 30 years, but Rivalland filled in a few gaps and had me re-draw my rules much more along his lines.

good trading

jon

 

[stoploss please]

BBmac and I use to hold monthly trading meetings in London. They became really popular. I managed to get Marc to give a chat. Really interesting and down to earth chap.

Ok, today I have got rid off all my indicators and MAs. Actually was a bit scary. Felt naked.

Used a 610 Tick chart of the emini.

Set up was simple Pivots Points and a Mid Point. A trade was action off a close

above the High of the Low Bar
below the Low of the High Bar

To keep it simple, if we are trending from R1 to R2, I do not look for reversals at the midpoint unless the reversal coincided with a larger trend formation,

Was tempted and did look at the ADX a few times. Of all the Indicators, the ADX is the one I think I will never give up.

Also looked for 3 bar retracements.

What I am displaying is not my trades, but where I would place my entries off a Price and Pivot method.

There are two failed Trades. The ADX would have kept me out of the last one but the ADX would have also given me worse entries.

I have shown one short above R2, would have waited for a close beneath R2 for an entry.

 

[SFL Trader]

Forget about the charts and the bars and the indicators altogether. You are on the right path. The biggest day traders trade purely off the price action. You should probably look into the E-minis or treasuries though. There's a lot more volume.

 

[stoploss please]

SFL

Small steps.

So, is that how you trade. Would be interesting to see how you manage your trade entry. What is your trigger.

 

[SFL Trader]

Small steps make the journey twice as long. Who has time?

My trigger is...when I think a guy is about to drop the hammer, I go whatever direction I think he's going. He could be several "hes". It's all about the most money and which way it's going next.

Of course, sometimes the hammer hits me right between the eyes. That's never pleasant.

 

[stoploss please]

I walk very quickly.

You are looking at order flow. I trade off a consistent trade analysis, entry and management strategy. You must be a very skilled and confident trader. Unfortunately, I would be hard pressed to include "I think" into my Trading Plan.

"I think" leads to opinion and confusion. All I am looking to do, wait for my signal, pull the trigger and manage my stop. If the trade goes pear shaped, well that is the cost of doing business.

What would be interesting to me is how you would have managed yesterdays action on the emini. Especially around the Pivot areas.

Andy

 

[Trader333]

The biggest day traders trade purely off the price action.

In what context and how do you know ?


Paul

 

[SFL Trader]

stoploss

If you're waiting for a signal, you have an opinion. You are thinking. There's a reason you pick that signal for a signal. You have to constantly re-evaluate because the market can turn on the drop of a hat. There is no reason to give back 4 ticks of an 8 tick winner. There is certainly no reason to give it all back.

I don't know what I would have done around the pivots because I'm not interested in the pivots. I'm interested in the bids and offers.

Trader333
In the context of they read the order book. I know because I've traded as big as 150 and seen guys trade 2,000. The Flipper is one the biggest traders in the world when asked in an interview, "How does one become a good trader?", his response was, "Spend a lot time looking at the order book."

He didn't say, "spend a lot of time looking at charts".