rainman2's journal

[rainman2]

Here's how tomorrow looks :
Obviously a bit extended but you never short a new high right?
17.42 million shares traded in the last hour seems climactic though for now.

 

[rainman2]

Stops

Stops will be placed .01 cent below the low of the candle preceeding entry. Most of the time that will mean that I will be risking .15 cents or less. However there are occasions where risk is significantly larger due to "bozo's". I haven't figured out what to do when that happens. Should I set a fixed stop at .15 cents or just reduce position size. Any suggestions will be appreciated.

 

[TIKITRADER]

Tikitrader,

I will be using monthly, weekly, and daily charts for channels and longer term darvas box prices.
I will be using the 60 minute chart for boxes and momentum(33sma)
I will be using the 15 minute chart for intraday boxes that I will use for long/short signals
Finally, I will be using the 5 minute chart for entries and exits.

I plan to experiment with defining trend(momentum) on the 15 and 5 minute charts. At this point, I'm thinking of using the 33sma on both timeframes and also adding the 4sma and 12sma on the 5 minute but don't want things to get to complicated. I'm hoping to figure out trend and its strength through price action.

Rainman2, thanks for the info. i am not familiar with Darvas box rules. I trade breakouts from ranges using the market as my lead along with price , volume, and stochastics. The great thing about the market is all the different styles of trading that can be profitable for each individual approach. I myself am always looking to learn more,it never ends. keep up all your hard work !

 

[CYOF]

CYOF,

Thanks for taking the time, I appreciate your input and your setup. At this time in my journey, I'm trying to develop a plan that will keep me out of reversing. I'm trying to concentrate on understanding why breakouts succeed and why they fail. A major reason, I suppose, is what the major markets are doing. I haven't posted attachments of them so far in the journal with my trades but have the $COMP, $DJI, and SPY on my screen at all times. I'm constantly monitoring what's breaking out/ breaking down and how that will affect IWM. Here's an example on the 15 minute chart of each. As you can see IWM broke out a full half hour before the $COMP and $DJI and 45 minutes before SPY. How you would use this info is up to you, but if I were a nasdaq futures trader, having an IWM chart up on one of your screens couldn't hurt.
By the way, good luck on your journal as I will continue to read it and hopefully contribute constructively if I can.

Very well put - for it is YOU that can only make it happen for YOU - not me or anyone else.

Will look into IWM - as I was wondering why you were concentrating on one Stock.

Another stock "Indicator" that I used to look at was NEM - Newmont Mining - to get an indication of money flow into Gold. Must check it out again :idea:

Regards,

 

[firewalker99]

Stops will be placed .01 cent below the low of the candle preceeding entry. Most of the time that will mean that I will be risking .15 cents or less. However there are occasions where risk is significantly larger due to "bozo's". I haven't figured out what to do when that happens. Should I set a fixed stop at .15 cents or just reduce position size. Any suggestions will be appreciated.

If you use a fixed stop at a certain fixed distance, than it's a sensible thing to use a fixed maximum amount of risk you're willing to take on each trade (some say 1% others risk 3%...). Than you can calculate what your position should be in relation to the stop. This is obviously much preciser if you're trading forex.

If you do it the other way around, that is changing your stop closer or further depending on the position you are taking, the amount of money you're risking may be the same, but the real risk of getting stopped out might not. In my opinion you should place your stop at that point where you think the market is not going to pass, unless you are mistaken (and your probabilities will tell you how many times this will happen). Placing your stop discretionary is more likely to get you losing trades.

 

[rainman2]

As a follow up to yesterday's post on watching $comp and iwm together, here's something to think about.

 

[rainman2]

If you use a fixed stop at a certain fixed distance, than it's a sensible thing to use a fixed maximum amount of risk you're willing to take on each trade (some say 1% others risk 3%...). Than you can calculate what your position should be in relation to the stop. This is obviously much preciser if you're trading forex.

If you do it the other way around, that is changing your stop closer or further depending on the position you are taking, the amount of money you're risking may be the same, but the real risk of getting stopped out might not. In my opinion you should place your stop at that point where you think the market is not going to pass, unless you are mistaken (and your probabilities will tell you how many times this will happen). Placing your stop discretionary is more likely to get you losing trades.

fw,
Here's my problem with using a fixed stop. First of all I believe that there has to be a price action reason where you put a stop. As you can see on the chart, if I put my stop at .15 cents(78.51, I entered at 78.66) there was no good price action reason to put my stop there. I can see putting it below the breakout candle at 78.55 or even the 11:10 candle at 78.46 but not at a fixed .15cents. According to plan, I should have put my stop .01 cents below the low of the candle preceeding entry (the 11:25 candle at 78.60), but I put it a .01 below my entry candle at 78.59. Why, because my risk was still only .07 cents. Unfortunately, I got stopped out at the 12:00 candle ( which burns me because I knew it was going higher). So there's my dilemma.

 

[rainman2]

Exits

I plan to exit in thirds. My first 1/3 profit will be taken when risk+ slippage is achieved. when that happens, my stop for the rest of my position will be moved up to .01 cents above entry price. My second 1/3 profit will be taken into resistance as drawn before the market opens. The last 1/3 profit has not been defined yet but will based on a breach of support on the 5minute candle.

I realize that as my exit strategy is now, my plan will have to have a high percentage win rate to be profitable, but thats one of my goals anyway.

 

[rainman2]

Here's tomorrow

Daily - Price retraced when it hit the upper edge of its channel. Does lower volume mean less buyers at these levels or no sellers.

60 minute - Finally a lower box forms. Hey db & erie, how do you define price exhaustion?

15 minute - the levels are easy enough to see but I don't have a good read on volume. (short term distribution???)

 

[erierambler]

60 minute - Finally a lower box forms. Hey db & erie, how do you define price exhaustion?

)

For me, when price crosses the 25sma.............mainly another box will form here.(or be forming )

erie

 

[rainman2]

For me, when price crosses the 25sma.............mainly another box will form here.(or be forming )

erie

Does that become a reversal for you or a probable consolidation area? I'm asking because because I'm trying to define counter trend trades and when does countertrend become reversals.
tia

 

[erierambler]

Does that become a reversal for you or a probable consolidation area? I'm asking because because I'm trying to define counter trend trades and when does countertrend become reversals.
tia

It becomes a consolidation area, for me . As for a reversal , you'll have to define that for yourself. (By the way, it took me quite a while to define one, even though I should have had that accomplished a long time ago.)
As for yourself, you can define a consolidation area any way you like............
erie

 

[rainman2]

Stop loss dilemma

I've been thinking a lot about where to put a stop loss and think I came up with a decent solution even though I got stopped out twice today.



TRADE 1 - A lower box formed at 78.61 and price broke out of the box on the 10:50 candle at 78.60 ( not a valid signal for me, but important as for where I'm going to put my stop).

The 10:55 candle becomes an entry signal for me and I entered at 78.49 on the 11:00 candle. This being a countertrend trade I was looking to get a 1:1 risk/reward with no partials.Looking at the 15 minute chart, the next box support was at 78.22 so as long as I have less risk than .27 cents, I felt good about it. The fact that price broke a second support at 78.52 from yesterday also helped.As for trend, price was below the 33sma on the 15 and 5 min chart.

According to plan, I would place my stop .01 above the candle preceeding my entry for a short, but after thinking about it, that stop doesn't take into account that the real breakout took place at the 10:50 candle (78.60) so I should place my stop .01 cent above the 10:45 candle (78.86). That risk (.37 cents, when at best I was hoping for .27 cents gain) should have negated any trade. But I was determined (ie. an idiot) to take the trade. So where do I put the stop that will be within risk parameters and still give the trade the room to work? I decided that a .01 above the swing low of the 10:15 candle (78.67) seemed logical. That cut risk to .18 cents slippage included and well within risk parameters. I would really appreciate any feedback on my thought process and remember I already called myself an idiot.



TRADE 2 - Same thought process as trade 1 except I used .01 cent below the swing high for my stop.In retrospect the 10:40 candle (78.91), 10:00 candle (78.97),

and the 9:40 candle (78.99) showed a lot of overhead resistance, but I thought the trend would pull through.

 

[rainman2]

Here's tomorrow

Daily - start of a bull flag or is this the beginning of the head in a head n' shoulders formation?
60 minute - consolidating the gains.
15 minute - how the heck am I going to make this box stuff work when price is ranging. How fast am I going to figure out that price is in a range?

 

[erierambler]

I've been thinking a lot about where to put a stop loss and think I came up with a decent solution even though I got stopped out twice today.



TRADE 1 - A lower box formed at 78.61 and price broke out of the box on the 10:50 candle at 78.60 ( not a valid signal for me, but important as for where I'm going to put my stop).

The 10:55 candle becomes an entry signal for me and I entered at 78.49 on the 11:00 candle. This being a countertrend trade I was looking to get a 1:1 risk/reward with no partials.Looking at the 15 minute chart, the next box support was at 78.22 so as long as I have less risk than .27 cents, I felt good about it. The fact that price broke a second support at 78.52 from yesterday also helped.As for trend, price was below the 33sma on the 15 and 5 min chart.

According to plan, I would place my stop .01 above the candle preceeding my entry for a short, but after thinking about it, that stop doesn't take into account that the real breakout took place at the 10:50 candle (78.60) so I should place my stop .01 cent above the 10:45 candle (78.86). That risk (.37 cents, when at best I was hoping for .27 cents gain) should have negated any trade. But I was determined (ie. an idiot) to take the trade. So where do I put the stop that will be within risk parameters and still give the trade the room to work? I decided that a .01 above the swing low of the 10:15 candle (78.67) seemed logical. That cut risk to .18 cents slippage included and well within risk parameters. I would really appreciate any feedback on my thought process and remember I already called myself an idiot.



TRADE 2 - Same thought process as trade 1 except I used .01 cent below the swing high for my stop.In retrospect the 10:40 candle (78.91), 10:00 candle (78.97),

and the 9:40 candle (78.99) showed a lot of overhead resistance, but I thought the trend would pull through.

Rainman2
I see lots of problems with your post and unfortunately can't help you as you have more than one issue here. I shall refrain from posting more, but have to say that trend is one of your problems. To clarify, your 33 sma is for momentum, and that is only to the upside, not pertaining to shorts......(the trend is up until a reversal, and then needs to be confirmed down). I'll leave this here........maybe Db will post with me staying out of this.

erie

 

[firewalker99]

fw,
Here's my problem with using a fixed stop. First of all I believe that there has to be a price action reason where you put a stop. As you can see on the chart, if I put my stop at .15 cents(78.51, I entered at 78.66) there was no good price action reason to put my stop there. I can see putting it below the breakout candle at 78.55 or even the 11:10 candle at 78.46 but not at a fixed .15cents. According to plan, I should have put my stop .01 cents below the low of the candle preceeding entry (the 11:25 candle at 78.60), but I put it a .01 below my entry candle at 78.59. Why, because my risk was still only .07 cents. Unfortunately, I got stopped out at the 12:00 candle ( which burns me because I knew it was going higher). So there's my dilemma.

If I may suggest, your stop is very close. Consider taking a wider stop, you have to incorporate for those bars that might spike you out (shake-outs). The bar around 1500pm where the wick is just below the line for instance, it that would stop you out than I suggest you're not giving the trades enough room to go ahead and develop...

 

[firewalker99]

I've been thinking a lot about where to put a stop loss and think I came up with a decent solution even though I got stopped out twice today.



TRADE 1 - A lower box formed at 78.61 and price broke out of the box on the 10:50 candle at 78.60 ( not a valid signal for me, but important as for where I'm going to put my stop).

If what I'm saying isn't helping you and confusing you, just ignore it.
As I don't have a good breakout strategy, I don't trade them and can't give you any good advice but if I were to give any, I'd say you're getting in too late. You have a valid short signal, but you short moments later while the price already went down significantly. On the other hand you've drawn a good line at 78.6, and you could have waited for the retracement to enter. That way your entry would be at 78.6 (with a stop of 0.05) and a assuming a risk:reward of 1:3 a target of 78.45 was easily hit.

Your second trade does not seem like a valid BO. It might be easy to say in hindsight, but I would be looking at the bar around 10:30am that hits 78.90. You can see price is being tested again with a high volume doji-bar going again no further than 78.90.

This is just my 2 cents but I think you're risking too much for gaining too little. Giving away 0.15 to gain 0.15 isn't worth it in my opinion. Unless you have an extremely high probability rate of success, and even in that case...

 

[rainman2]

Rainman2
I see lots of problems with your post and unfortunately can't help you as you have more than one issue here. I shall refrain from posting more, but have to say that trend is one of your problems. To clarify, your 33 sma is for momentum, and that is only to the upside, not pertaining to shorts......(the trend is up until a reversal, and then needs to be confirmed down). I'll leave this here........maybe Db will post with me staying out of this.

erie

erie,
Thanks for all your input, its been very helpful. I received sperandeo's methods of a wall street master in the mail yesterday, so hopefully will be able to pick up some insight into trends,reversals,momentum, etc...

 

[rainman2]

If what I'm saying isn't helping you and confusing you, just ignore it.
As I don't have a good breakout strategy, I don't trade them and can't give you any good advice but if I were to give any, I'd say you're getting in too late. You have a valid short signal, but you short moments later while the price already went down significantly. On the other hand you've drawn a good line at 78.6, and you could have waited for the retracement to enter. That way your entry would be at 78.6 (with a stop of 0.05) and a assuming a risk:reward of 1:3 a target of 78.45 was easily hit.

That's one of the drawbacks of the darvas box. I'm buying high and selling higher and selling low and buying back lower. I think that's why erie and db are emphasizing the importance of trend and momentum in this strategy.After studying the 15 min chart last night, I noticed that I completely missed drawing in a top of box line at 78.81 which would have resulted in a profitable trade.

This is just my 2 cents but I think you're risking too much for gaining too little. Giving away 0.15 to gain 0.15 isn't worth it in my opinion. Unless you have an extremely high probability rate of success, and even in that case...

A one to one risk reward is all that I plan to look for on a counter trend trade.

 

[CYOF]

Very well put - for it is YOU that can only make it happen for YOU - not me or anyone else.

Will look into IWM - as I was wondering why you were concentrating on one Stock.

Another stock "Indicator" that I used to look at was NEM - Newmont Mining - to get an indication of money flow into Gold. Must check it out again :idea:

Regards,

Hi rainman2,

Just a note to say thanks for highlighting the IWM - iShares Russell 2000 Index - even though I monitored the Index % change I never thought of using it as a leading indicator on a chart.

I have set up a chart for the main Russell 2000 based on your comments that this price may precede the other markets - will monitor and see how it goes.

Regards,