THE BUY ZONE - TheRumpledOne

[JTrader]

you are right, and i've had exactly the same concerns and everyone i ask just avoids this or does not know or says don't backtest, i don't backtest and would not know how, i prefer to test in a simulator.......... i just want to know if i can be profitable in the long run, that's all i want to know with proof of course............im trading it right now and making money, alot the times my winning trades took off on a trend and i got points instead of ticks but your right what you are saying, it's not as straight forward as tro is saying........i love it though and really hope i can continue as it just suits my style, it's simple like me i guess.......... but i know deep down im gonna have to confront the issues you have just raised if im to continue being profitable overall, or do i??



jason

Hi Jason
Well said.

If you look at BZ see on a historical chart with skylines BZ_skyline indicator (see kreslik.com - skylines BZ indicator displays history for previous zones) that some zone periods whip you up & down.
Some candles in such zone periods gave 2 signals on the same candle, one long + one short trade. They both look like a profit will have been made.
However, information can be hidden in the bar - therefore while both trades look like winners, due to hidden tick-by-tick data within say a 15-minute candle, in reality both trades could have been losers, IF the SL was hit after the entry, B4 the profit target was hit. Do you understand this concept?

See attachment.

This makes BZ difficult to backtest anyway, except on the smallest of timeframes.


PS. Although it may be said that BZ is intended for M5 charts, & my example uses M15. If i'd looked hard enough i could have found a candle on M5 charts that displays the same double trade - long + short. I just had this M15 example at hand. Both the long & short appear to be winners, but both could quite easily have hit their SL's before going into profit.

 

[jayjay121]

Hi Jason
Well said.

If you look at BZ see on a historical chart with skylines BZ_skyline indicator (see kreslik.com - skylines BZ indicator displays history for previous zones) that some zone periods whip you up & down.
Some candles in such zone periods gave 2 signals on the same candle, one long + one short trade. They both look like a profit will have been made.
However, information can be hidden in the bar - therefore while both trades look like winners, due to hidden tick-by-tick data within say a 15-minute candle, in reality both trades could have been losers, IF the SL was hit after the entry, B4 the profit target was hit. Do you understand this concept?

See attachment.

This makes BZ difficult to backtest anyway, except on the smallest of timeframes.


PS. Although it may be said that BZ is intended for M5 charts, & my example uses M15. If i'd looked hard enough i could have found a candle on M5 charts that displays the same double trade - long + short. I just had this M15 example at hand. Both the long & short appear to be winners, but both could quite easily have hit their SL's before going into profit.

omg, this actually happened to me on my losing day this week that i had, yes it was on monday i think, i actually lost the first two trades beacuse of the exact same thing within the candle you explain above...........but looking back after the event it looked as if i should have made money and it confussed me, but thanks to your explanation it now makes sense to me why the buyzone appears to look so good on a chart when looking back in hindsight..............so really this is gonna happen again to me, i guess the question now is will it run more often then it does this?.............i guess i'll just have to find out myself..........but i do have a rule like craig audio that if the first two trades are loses, then i stop trading for the day............so maybe we need rules like these to protect us from what you describe, what do you think???

cheers

jason

 

[JTrader]

omg, this actually happened to me on my losing day this week that i had, yes it was on monday i think, i actually lost the first two trades beacuse of the exact same thing within the candle you explain above...........but looking back after the event it looked as if i should have made money and it confussed me, but thanks to your explanation it now makes sense to me why the buyzone appears to look so good on a chart when looking back in hindsight..............so really this is gonna happen again to me, i guess the question now is will it run more often then it does this?.............i guess i'll just have to find out myself..........but i do have a rule like craig audio that if the first two trades are loses, then i stop trading for the day............so maybe we need rules like these to protect us from what you describe, what do you think???

cheers

jason

Well today buzone M5 on EURUSD produced 15 trade signals between 0800-1600, with a maximum of 1 long + 1 short trade per candle.
Having a rule that if first two trades are losers, i go home for the day seems pretty pointless IMO - as who knows, the following 10 or so may all be winners.

Regarding the historical double trade candle with both looking like winners, but in real-time both could have been losers,. This is likely to happen from time to time. You would think that the chances of it happening are less than 50:50. As perhaps you'd expect one of the trades to offer a profit b4 the SL was hit. But yes, this is an issue/anomoly that will crop up from time to time, as has happened to you. Meaning that on double trade historical candles you cannot be certain of what happened - without looking within that bar (i.e. at the five 1-minute bars within a M5 bar).

This has a knock-on effect for single trade historical candles also. Say EURUSD M5 candle open at 1.4635 and goes down to short line at 1.4623. It may then reverse to 1.4630 before heading down to the low of 1.4614. This means that our SL took us out of the trade before any profit was made available to us. See the attached chart which demonstrates this candle at 17:40 today.

For these reasons, a historical chart HIDES intra-candle price action. Therefore live trading will reveal this glitch occasionally, as happened to you.

 

[Trader333]

This has got me thinking but then it means altering the way in which it could work. One possible is to only take a trade in the direction of the prevailing trend. The other is to factor in the likely volatility of the market in the timeframe being traded and set the buy zone to cater for this.


Paul

 

[JTrader]

This has got me thinking but then it means altering the way in which it could work. One possible is to only take a trade in the direction of the prevailing trend. The other is to factor in the likely volatility of the market in the timeframe being traded and set the buy zone to cater for this.


Paul

Yes.
There are many ways in which one could look to enhance the buyzone.
But then the buyzone becomes a more complex set of rules, which is not the original idea of TRO's KISS buyzone :|.

From my experience, when i start adding bits onto systems to try & filter out the bad signals etc. the additions have seldom made much of a difference overall :|.

 

[jayjay121]

This has got me thinking but then it means altering the way in which it could work. One possible is to only take a trade in the direction of the prevailing trend. The other is to factor in the likely volatility of the market in the timeframe being traded and set the buy zone to cater for this.


Paul

i suppose we gotta ask ourselves, do we want to catch trends or scalp and range trade?

cos the way i see this system is similar to tkimbles (forexfactory) systems where he tries to catch trends, so do we wanna be trend traders and break-out traders or range scalpers?.....can we be both?

I personally at the mo anyway like to catch trends.........but i think we need a way for both, but then the obvious problem is we can't detect when it's gonna trend or consolidate before it actually happens, can we?.....maybe we just play the percentages as alan hansan on match of the day would say and just go for all.

I did some training with viperspeedtrader.com (speedscalper on t2w forum), and although it was costly and hardly holy grial stuff, only now im actually beginning to make sense of some of the stuff he taught me, like the trendline break, , 1,2 step, walking the trendlines, drawing a range box and waiting for the second candle only out of the range before trading, watching the dom etc.............anyway combining some of that stuff of vipers with this buyzone is actually working ok i gotta say (even if it has not been that long), for example by trading the second bar out of the range you normally don't get sucked into the fake out trade.


just some thoughts,

jason

 

[jayjay121]

This has got me thinking but then it means altering the way in which it could work. One possible is to only take a trade in the direction of the prevailing trend. The other is to factor in the likely volatility of the market in the timeframe being traded and set the buy zone to cater for this.


Paul

by the way paul a guy called ed over at kreslik actually is using the atr to check volatility on the er2 and trades according to it.......it's quite complecated the way he does it but im gonna pm him and ask him how he does it.


jason

 

[TheRumpledOne]

Thanks again for having a civilized conversation about the BUY ZONE.

#1 NO SYSTEM WINS EVERY TIME.. OTHERWISE THE MARKET WOULD CEASE TO EXIST.

#2 OVER THE LONG HAUL THE BUY ZONE WINS... PRICE MUST RANGE OUT OF THE ZONE.

#3 IF YOU START FILTERING THEN YOU ALTER THE STATISTICS AND FILTER OUT MORE WINNERS

#4 IT DOESN'T MATTER IF YOU USE M1 OR H1 OR ANYTHING IN BETWEEN.. PRICE IS PRICE AND THE TRIGGER LINES ARE IN THE EXACT SAME PLACE.

I have a Chat | Chat Rooms | Paltalk chatroom called the two percent club.

If you have trouble finding it, just pm me, therumpledone, and I will invite you in.

Come and hear us trade live!!

 

[Trader333]

#3 IF YOU START FILTERING THEN YOU ALTER THE STATISTICS AND FILTER OUT MORE WINNERS

I actually agree and this is why I posted the way I did. It is always tempting to try and improve on an existing approach but I take your points.


Paul

 

[jayjay121]

I actually agree and this is why I posted the way I did. It is always tempting to try and improve on an existing approach but I take your points.


Paul

paul, just been in tro's room over at paltalk...............it's actually really good and i'll be in there again monday.........anyway why don't you come and take a look.

cheers,

jason

 

[JTrader]

Well today buzone M5 on EURUSD produced 15 trade signals between 0800-1600, with a maximum of 1 long + 1 short trade per candle.
Having a rule that if first two trades are losers, i go home for the day seems pretty pointless IMO - as who knows, the following 10 or so may all be winners.

Regarding the historical double trade candle with both looking like winners, but in real-time both could have been losers,. This is likely to happen from time to time. You would think that the chances of it happening are less than 50:50. As perhaps you'd expect one of the trades to offer a profit b4 the SL was hit. But yes, this is an issue/anomoly that will crop up from time to time, as has happened to you. Meaning that on double trade historical candles you cannot be certain of what happened - without looking within that bar (i.e. at the five 1-minute bars within a M5 bar).

This has a knock-on effect for single trade historical candles also. Say EURUSD M5 candle open at 1.4635 and goes down to short line at 1.4623. It may then reverse to 1.4630 before heading down to the low of 1.4614. This means that our SL took us out of the trade before any profit was made available to us. See the attached chart which demonstrates this candle at 17:40 today.

For these reasons, a historical chart HIDES intra-candle price action. Therefore live trading will reveal this glitch occasionally, as happened to you.

So basically to summarise my concerns/doubsts/queries-
on a historical M5 CHART, if the open of the zone is eg. 1.4635, and the open of the M5 candle that produces a long signal at 1.4638 is eg. 1.4332, and the low of this candle is 1.4628 and the high is 1.4642........we know that the +7p PT was hit, and the -7p SL was also hit in this candle. We DO NOT know for sure whether the PT or SL was hit first by looking at the M5 candle only. It may have made the PT before hitting the SL or it may have hit the SL before hitting the PT.
Therefore on all candles where the candle measures an amout equal to or greater than our SL above or below the short/long entry line, we cannot be sure whether the SL or PT was hit first.

This means that the buyzone cnanot be accurately manually backtested using only the one timeframe that we are trading from, as we would need to look inside the (M5) CANDLE to see what came first.

Perhaps on these candles/trades there is a 50%/50% chance that either the SL or PT was hit first after the entry. In either case, it still leaves the chart suggesting that a profitable trade conclusion was available, when in fact you may well have been stopped out before the trade went into profit.

Cheers.

 

[JTrader]

Thanks again for having a civilized conversation about the BUY ZONE.

#1 NO SYSTEM WINS EVERY TIME.. OTHERWISE THE MARKET WOULD CEASE TO EXIST.

#2 OVER THE LONG HAUL THE BUY ZONE WINS... PRICE MUST RANGE OUT OF THE ZONE.

#3 IF YOU START FILTERING THEN YOU ALTER THE STATISTICS AND FILTER OUT MORE WINNERS

#4 IT DOESN'T MATTER IF YOU USE M1 OR H1 OR ANYTHING IN BETWEEN.. PRICE IS PRICE AND THE TRIGGER LINES ARE IN THE EXACT SAME PLACE.

I have a Chat | Chat Rooms | Paltalk chatroom called the two percent club.

If you have trouble finding it, just pm me, therumpledone, and I will invite you in.

Come and hear us trade live!!

Hi TRO

what statistics are these?

Perhaps you could post them here?

Cheers.

 

[ianp]

So basically to summarise my concerns/doubsts/queries-
on a historical M5 CHART, if the open of the zone is eg. 1.4635, and the open of the M5 candle that produces a long signal at 1.4638 is eg. 1.4332, and the low of this candle is 1.4628 and the high is 1.4642........we know that the +7p PT was hit, and the -7p SL was also hit in this candle. We DO NOT know for sure whether the PT or SL was hit first by looking at the M5 candle only. It may have made the PT before hitting the SL or it may have hit the SL before hitting the PT.
Therefore on all candles where the candle measures an amout equal to or greater than our SL above or below the short/long entry line, we cannot be sure whether the SL or PT was hit first.

This means that the buyzone cnanot be accurately manually backtested using only the one timeframe that we are trading from, as we would need to look inside the (M5) CANDLE to see what came first.

Perhaps on these candles/trades there is a 50%/50% chance that either the SL or PT was hit first after the entry. In either case, it still leaves the chart suggesting that a profitable trade conclusion was available, when in fact you may well have been stopped out before the trade went into profit.

Cheers.

Hi Jt,

I am sure I have missed the point here,

but why dont you back test on 1 min timeframe as TRO says the BZ line is always at the same level ?

Ian

 

[JTrader]

Hi Jt,

I am sure I have missed the point here,

but why dont you back test on 1 min timeframe as TRO says the BZ line is always at the same level ?

Ian

Hi ian

that may make sense because as you say, the long/short trade lines are always 3-4 pips from the m60 open. But then M1 is likely to produce more trade entries than M5, which may not be beneficial. Therefore watcing the m60 buyzone on M1 charts may enable the individual to see more info.
However, for todays EURUSD, with 1 long & short trade per 1 candle maximum. Between 0800-1600, M5 produced 15 trade signals. M15 & M30 produced 13 trades each. Therefore timeframe used may not have such a big effect on the number of trades signals generated.

 

[TheRumpledOne]

Hi TRO

what statistics are these?

Perhaps you could post them here?

Cheers.

I have real time statistics for Min, Max and Avg range.

The other statistics have to do with what happens if the price moves 1 pip away from the open, 2 pips away, etc... TOP SECRET...LOL!

But I have given you all you need to know to trade the BUY ZONE.

 

[JTrader]

I have real time statistics for Min, Max and Avg range.

The other statistics have to do with what happens if the price moves 1 pip away from the open, 2 pips away, etc... TOP SECRET...LOL!

But I have given you all you need to know to trade the BUY ZONE.

Thanks TRO.

one IMPORTANT question that i asked that you haven't answered related specifically to this is -

the long and short range is 3-4 pips from the open price. Is the buyzone trader expected to enter the trade when price hits the furthest line (4 pips) or the nearest line (3 pips) away from the open? Which line is entry on - 3 pip line OR the 4 pip line from the open?

If this parameter is based on statistics, as you say, then knowing whether entry should be 3 OR 4 pips from the open is VERY important to the buyzone trader.
Cheers.

 

[Trader333]

But then M1 is likely to produce more trade entries than M5

I don't see how that can be the case unless you constantly get stopped out and then re-enter.


Paul

 

[JTrader]

I don't see how that can be the case unless you constantly get stopped out and then re-enter.


Paul

Using M1 you would also likely limit trades to one trade per bar. Whereas on M5+ there's a realistic option/need perhaps to trade 1 long and 1 short trade per bar. Therefore this would limit M1 to a few less trades.

As i posted earlier, yesterday on M5 = 15 TRade signals, M15 & M30 = 13 BETWEEN 0800-1600 - not much difference.

I'm going to look at M1 triggers later.

 

[JTrader]

Using M1 you would also likely limit trades to one trade per bar. Whereas on M5+ there's a realistic option/need perhaps to trade 1 long and 1 short trade per bar. Therefore this would limit M1 to a few less trades.

As i posted earlier, yesterday on M5 = 15 TRade signals, M15 & M30 = 13 BETWEEN 0800-1600 - not much difference.

I'm going to look at M1 triggers later.

Yes looking at yesterday EURUSD on M1 between 0800-1600 UK time, reveals....

15 trade signals (with 1 trade max per M1 bar).
11/15 hit the 7 pip green profit take line, before a 6 pip SL was hit. See attached.

Therefore M1, M5, M15 and M30 all produced 13-15 trade signals between 0800-1600 on EURUSD 18/1/8.

 

[JTrader]

GBPUSD yesterday

GBPUSD 0800-1600 UK time 18/1/8

35 trade signals, with a maximum of 1 trade per 1-minute candle.

The screenshot shows a choppy 2 hour segment of yesterday.
I do not know about you, but i certianly would NOT want to be trading each of these signals, with a 5-7p PT and a 5-7p SL .

On the whole of yesterday - 0800-1600 i calculate that 11/35 trades hit the displayed green 7 pip profit line.