The Three Keys

[Lightning McQueen]

Your approach is not dissimilar to the "Writing Naked Option" approach. There is a swan around the corner.



Split

:-0 we'll have none of those nasty black beasties here please!

 

[darktone]

Another idea is to try to get the stop right, in the first place, then extend it by another 10-15 points in anticipation of a bounce. However, the stop has to be there.

Split, Unless i got things wrong this what steve was saying in post 102.

Eg:
mental stop at -20
hard stop at -40

I think the reasoning is sound! If a little uncomfortable!

 

[Lightning McQueen]

Split, Unless i got things wrong this what steve was saying in post 102.

Eg:
mental stop at -20
hard stop at -40

I think the reasoning is sound! If a little uncomfortable!

These stops are massive! the method only needs 15 hard stop tops and 10 as a first alert that all is not well with the trade.

 

[black bear]

Hard Stop Soft Stop

Split, Unless i got things wrong this what steve was saying in post 102.

Eg:
mental stop at -20
hard stop at -40

I think the reasoning is sound! If a little uncomfortable!

Hi Darktone

The method is sound, I have used method for over a year and have no problems with it. I do not no if it is or is not correct, it just works fine IMO.

What I will say is doing something is totally different to writing it, the old saying a good trade goes right from the off is or I have found it to be correct. I take a loss without thinking the moment I no I am wrong and it is always inside my money management plan.

Each to their own, if it works :?:

Not even a little uncomfortable once you get used to it.

I would say I expect a trade to go right from entry and once behind me is enough it never gets a second go, I am very used to 3 timeframes and there relative positions to each other.

I would also say I do not disagree with the other sides opinion at all = One fixed Hard Stop in fact I have decided to adopt one fixed Stop myself, maybe I am more confident in my inicial assesment for Stop location S&R levels etc I do not no, BSD/db posts are very good IMO and one fixed hard stop is certainly the best approach for anybody new to trading IMO.

Just wait for a test of your proposed stop area before considering an entry

ps dont forget the rep pts or I will sulk

 

[darktone]

These stops are massive! the method only needs 15 hard stop tops and 10 as a first alert that all is not well with the trade.

Sloooooow dowwwwn there wild bill!
1) That stop arrangement is what 'steve' quoted for cable, not dow!
2) I havent watched dow for a good while but at a glance to my untrained dow eyes
15 looks a little tight. Does that inc spread? 4 - 5 pips?

Id guess id be looking 15 - 30. Maybe 10 - 30 depending on entry strat. Im a DOW dunno remember! :cheesy:

Anyways. What do you think of the chart?

 

[darktone]

Hi Darktone

The method is sound, I have used method for over a year and have no problems with it. I do not no if it is or is not correct, it just works fine IMO.

What I will say is doing something is totally different to writing it, the old saying a good trade goes right from the off is or I have found it to be correct. I take a loss without thinking the moment I no I am wrong and it is always inside my money management plan.

Each to their own, if it works :?:

Not even a little uncomfortable once you get used to it.

I would say I expect a trade to go right from entry and once behind me is enough it never gets a second go, I am very used to 3 timeframes and there relative positions to each other.

I would also say I do not disagree with the other sides opinion at all = One fixed Hard Stop in fact I have decided to adopt one fixed Stop myself, maybe I am more confident in my inicial assesment for Stop location S&R levels etc I do not no, BSD/db posts are very good IMO and one fixed hard stop is certainly the best approach for anybody new to trading IMO.

Just wait for a test of your proposed stop area before considering an entry

ps dont forget the rep pts or I will sulk

Heya! Have to admit that it is something ive thought about before but for some reason never tried! Funny how when you see something written in black and white it can add weight to an existing notion! my head is hung in shame! lol.

I certainly dont knock a hard stop strat btw! I been using them tooo long !.. But! is there another way!? Perhaps! Im certainly gona dmor!.

 

[Lightning McQueen]

Like the chart and run through

Stops include spread, as I have said because the trade runs in our favour from the off the worst case underwater so far in testing is 6 points 10 to 15 being an absolute luxury in terms of stop.

Sorry hadn't realised we had swapped instruments

 

[darktone]

Like the chart and run through

Stops include spread, as I have said because the trade runs in our favour from the off the worst case underwater so far in testing is 6 points 10 to 15 being an absolute luxury in terms of stop.

Sorry hadn't realised we had swapped instruments

Understood. Still amazed tho, and on a 15min chart too! :clap:

Heres another look at another look at fridays action with trading with contrarian 'sammy salmon swim against the tide wont buy nuthin but the bottom' trader. Dont laugh, closer to me than id like to admit til not that long ago!:whistling.

Heres how a tight hard stop could have hurt him! Not hard to see how soft / hard stop could have changed the outcome!

 

[sqlphone]

Hi LM

This looks like a great strategy for a newbie like me to get started on. I’ve carefully studied the first few pages and charts on this thread but unfortunately I haven’t grasped the basics. Please can you help? Below is my understanding of the rules, much appreciated if you can comment and correct me where I’ve gone wrong.

Rules for entering a long trade:
1. Wait for a completed bar that opens below the MA band, and closes above the MA band. This is the “market shows its hand” bit of the strategy.
2. Wait for the price (in the next uncompleted bar) to trade inside the MA band.
3. Watch the price move towards the upper MA band.
4. As soon as the price trades at the upper MA band, open a buy trade.

Rules for long trade stop loss:
I couldn’t see any exact rules, just “keep it tight”. Maybe stop if the price falls back to the MA?

Rules for taking profit:
Could not see any rules here.

Short trade rules are the mirror image of the long trade rules.

Thanks in advance, and looking forward to getting stuck in.

 

[Lightning McQueen]

Hi LM

This looks like a great strategy for a newbie like me to get started on. I’ve carefully studied the first few pages and charts on this thread but unfortunately I haven’t grasped the basics. Please can you help? Below is my understanding of the rules, much appreciated if you can comment and correct me where I’ve gone wrong.

Rules for entering a long trade:
1. Wait for a completed bar that opens below the MA band, and closes above the MA band. This is the “market shows its hand” bit of the strategy.
2. Wait for the price (in the next uncompleted bar) to trade inside the MA band.
3. Watch the price move towards the upper MA band.
4. As soon as the price trades at the upper MA band, open a buy trade.

Rules for long trade stop loss:
I couldn’t see any exact rules, just “keep it tight”. Maybe stop if the price falls back to the MA?

Rules for taking profit:
Could not see any rules here.

Short trade rules are the mirror image of the long trade rules.

Thanks in advance, and looking forward to getting stuck in.

Hi sqlphone

Your not quite operating the rules as intended.

1. Yes that's correct.

2. Yes that's corect.

3. Here's where it goes wrong, once in the band you enter the price shown by the band as an order on the SB platform in te direction that the market as shown its hand,eg price breaks below the band wait for the price to retrace back into the band then enter your short order.

4. This is a flat market, the dreaded whipsaw.

Yes, short trade rules are the mirror image of the long trade rules.

Stops, If the trade doesn't go your way this is when to cut the trade short.

There isn't any rules at present for managing the trade and taking profit, this is on the way though, I'll just wing it for now.

Good luck.

Lightning

 

[Atilla]

Hi sqlphone

Your not quite operating the rules as intended.

1. Yes that's correct.

2. Yes that's corect.

3. Here's where it goes wrong, once in the band you enter the price shown by the band as an order on the SB platform in te direction that the market as shown its hand,eg price breaks below the band wait for the price to retrace back into the band then enter your short order.

4. This is a flat market, the dreaded whipsaw.

Yes, short trade rules are the mirror image of the long trade rules.

Stops, If the trade doesn't go your way this is when to cut the trade short.

There isn't any rules at present for managing the trade and taking profit, this is on the way though, I'll just wing it for now.

Good luck.

Lightning

The simplicity of this system is the rules for entry with tight SLs.

The exits certainly needs consideration.

However, give it to 10 traders and you'll get 10 modifications.

I'm working on my version and I'll post it here soon.

It is common fact MAs don't work in sideway markets. Switch to another time frame - zoom out or zoom in to get your bearings is what I do. Sometimes ofcourse it's best to lie flat. :cheesy:

 

[laptop1]

Here's an example trade made on the FTSE it shows two examples of trade entry with tis method

The Chart FTSE 2/1/2008

market and participants show their hand

7.00am bar breaks to the upside signalling a long

8.00 am bar opens in the bottom of the band zone, this looks good for a position long you read off the upper dotted line in this instance its 6434 this is participants as an order and we wait for the price to come to us and weare triggered long ...pow we are i a good trade.

the next example was done in realtime on the capital spreads demo!

14.00 pm bar looks bullish we haven't close below the 5 sma since the long from this morning.

15.00 pm price is diving the 5 sma turnes over, price reaches the sma and stalls momentarily at equilibrium giving you plenty of time to read off the short (lower band) and enter the order into the trading platform in this instance you would have entered 6485 as the point to go short, aftera bit more sideways movement ...pow down it goes triggering you into the trade that is from the off a good un.

:

Here is the chart in question
http://www.trade2win.com/boards/att...628-three-keys-ftse-100-1-hour-02-jan-08-.png

Only just come across this thread, so forgive me if I am not 100% on the rules I only read as far as post #3 where I found something that has been over looked.

The method requires you to take a directional trend trade based off the direction of the sma. . Lets us look at your entry at 15.00 pm you would have entered 6485 the point to go short. This is where I feel you method FAILS, what if it turned around at this price at 6485 and closed above 6500 based on the 15,00pm bar, your 5sms would have been still trending up. The correct way to trade this method would be to wait for the bar to finish to draw, then your entry price would have been much lower but more reliable at 6440. Otherwise, you will get a lot of false signal over time. Something to think about.

 

[Lightning McQueen]

Here is the chart in question
http://www.trade2win.com/boards/att...628-three-keys-ftse-100-1-hour-02-jan-08-.png

Only just come across this thread, so forgive me if I am not 100% on the rules I only read as far as post #3 where I found something that has been over looked.

The method requires you to take a directional trend trade based off the direction of the sma. . Lets us look at your entry at 15.00 pm you would have entered 6485 the point to go short. This is where I feel you method FAILS, what if it turned around at this price at 6485 and closed above 6500 based on the 15,00pm bar, your 5sms would have been still trending up. The correct way to trade this method would be to wait for the bar to finish to draw, then your entry price would have been much lower but more reliable at 6440. Otherwise, you will get a lot of false signal over time. Something to think about.

Not necessary to trade in the direction of the sma no, the 15:00 bar did indeed wobble for a second but was ok, if it had indeed retraced on the trade this would be an ideal time to employ those tight stops, at no time was this trade in any danger of doing other than what it says on the tin and being a good 'un, there is no time to wait for the bar to draw, a lower timeframe would infact do this, I haven't got that far in my studies yet and thanks for the tips, cheers laptop

 

[Lightning McQueen]

The simplicity of this system is the rules for entry with tight SLs.

The exits certainly needs consideration.

However, give it to 10 traders and you'll get 10 modifications.

I'm working on my version and I'll post it here soon.

It is common fact MAs don't work in sideway markets. Switch to another time frame - zoom out or zoom in to get your bearings is what I do. Sometimes ofcourse it's best to lie flat. :cheesy:

Nice comments Atilla thanks, I'm looking forward to your creation, although I've had a sneak preview and its looking good, yes, exits work in progress

 

[Splitlink]

Split, Unless i got things wrong this what steve was saying in post 102.

Eg:
mental stop at -20
hard stop at -40

I think the reasoning is sound! If a little uncomfortable!

Thanks, that post brings me towards his reasoning, again. But why the mental stop of -20? Does the trader intend to use it? I should say that the -20 level is his assessment of where the other traders' stops are that, hopefully, will be taken out, making the price react to a point when he can close at a better price. However, based on his hindsight analysis and just in case, he is placing a hard stop at -40 points.

Split

 

[Splitlink]

These stops are massive! the method only needs 15 hard stop tops and 10 as a first alert that all is not well with the trade.

Yes, Don, you are right. In fact, I would say that Steve's system is greatly different from yours and could be more suited to a contrarianist trade i.e. opening where the main stop level is thought to be.

Split

 

[black bear]

The first and second rule

Thanks, that post brings me towards his reasoning, again. But why the mental stop of -20? Does the trader intend to use it? I should say that the -20 level is his assessment of where the other traders' stops are that, hopefully, will be taken out, making the price react to a point when he can close at a better price. However, based on his hindsight analysis and just in case, he is placing a hard stop at -40 points.

Split

Yes, Don, you are right. In fact, I would say that Steve's system is greatly different from yours and could be more suited to a contrarianist trade i.e. opening where the main stop level is thought to be.

Split

Hi Split and any one really interested in Soft Stop and Hard Stop use

Intra day use


You enter with trend (4 Hrs) judged by sma or HH LL, whatever

lets say trend down

Index approachingTop of established range (past few days price action)

ie: perhaps open hour range breached and hour bars breached their last hour

Index approaching Resistance judged by Previous days price action week high or previous days high = however a trader wants to judge it.

you enter a trade at 1st weakness 15 mins targeting the low of the range (its low gone say) could just as easy be macd Histo drop off in that time frame

Hard Stop 25 pts 15 over the last hour high and in fact well into the resistance area

Soft over the entry bar (15 mins bar that was breached)

Entry goes ok for 3-4 pts say then whips back to test entry and in fact goes behind you and takes out the entry bars 15 min high

-12 -14 pts at this stage say

I just check how the wee time frames are trading at this time ( just use them as a guide ( I do have quite a bit of screen time )

RSi14 centre line and dislocation from ema / ma = you do get pretty good at it

What I am looking for in circumstances I have just described and what is in fact in the moment ~

1. The trade is high prob a bad un
2. Close out at scratch or close to scratch
3. Target is now my entry, I do not try to re-run the trade I start over again = I do not care if it carries on and turns out a good un because

ITS NOT THE BEST UN and those are the only ones I am interested in. You can keep the rest, I just want as much of my money back as possible so I can follow Warren Buffets command "dont lose your money"

Cost of re-entry is covered if you mis-judge it any way, I never let a missed trade bother me much, if I do get the hump I p..ss off and get myself a cup of T and a Kit Kat.

The wee time frames to turn in my favour = judged by taking out their lows in my case

The second the 3 mins have a close above their highs = I am gone
The second I have recovered = hit target I am gone (exception would be a fast 3 min bar taking out 15 min lows (looks like Td ish pinbar in miniture if you like)

All this I agree is very hard to get across in writing and BSD / db / Split / Dax are probably correct that the method offers no real advantage over 1 fixed hard Stop

But I have to post because it does to me, my past results have proved it.

I use 4hr 1hr 15min & 3 min (when I was SBing/ undergoing changes ) the 3 mins were just for = range = approx price = I never trusted the bast....ds

I always now what the Month Week and Days are up to, even if I dont directly trade them that often.

I held trades in the 15 min or the hours depending on my targets and size (more than one unit/indian on etc)

Any hows enough of that, just thought I would post because I have used the bad method, and have never come to any harm, in fact I have found the reverse is in fact true in the actual world, an added advantage is you will learn a lot if you make sure the hard stop is 1% of your bank, so it does not really matter a jot if its hit as per plan anyway. What you will learn is IMOworth it, but I concede you could get by fine without

 

[darktone]

Thanks, that post brings me towards his reasoning, again. But why the mental stop of -20? Does the trader intend to use it? I should say that the -20 level is his assessment of where the other traders' stops are that, hopefully, will be taken out, making the price react to a point when he can close at a better price. However, based on his hindsight analysis and just in case, he is placing a hard stop at -40 points.

Split

Hi split. If im honest Im not sure im getting what your asking completely ? May be better to let steve answer that one and give his thoughts on where others stops may be etc.

My take on things is basic! Just like me! . Shall use 20/40 for example and in this case ive gone long and the market will take my soft stop.

Ok -20 just hit!

1) My soft stop has been hit and i accept that my position is ill!
2) Identify last swing high (in this case because im long) and set limit to close according to my reading of the price action.

By doing this you are attempting to exit your position near a price extreme in your favor! Exiting at your soft stop will get you out but at an extreme not in your favor!

Have a quick look at my tongue in cheek sammy the salmon trader above. I find it really tough to put into words what i mean sometimes. especially on a sunday morning!

 

[Splitlink]

Hi split. If im honest Im not sure im getting what your asking completely ? May be better to let steve answer that one and give his thoughts on where others stops may be etc.

My take on things is basic! Just like me! . Shall use 20/40 for example and in this case ive gone long and the market will take my soft stop.

Ok -20 just hit!

1) My soft stop has been hit and i accept that my position is ill!
2) Identify last swing high (in this case because im long) and set limit to close according to my reading of the price action.

By doing this you are attempting to exit your position near a price extreme in your favor! Exiting at your soft stop will get you out but at an extreme not in your favor!

Have a quick look at my tongue in cheek sammy the salmon trader above. I find it really tough to put into words what i mean sometimes. especially on a sunday morning!

I think that we are using much the same system but that you think that the trade is bad and are getting out at best, whereas I am looking for an entry with a safe stop level behind me.

I am thinking much as Pinkpig but he is ahead of me, I think.

Don, I'm sorry that you are getting your thread de-railed. I hope we get it back on track
right now

Split

 

[Lightning McQueen]

Don't worry Split, threads ok, stops are a real important aspect and should be discussed in depth.

This method relies on strong entry tactics with a focus on the stop, if we prove to have entered the market at the wrong place in time, it is so easy to spot we can stop out the trade and re-time the entry order for as little damage as is possible.

Managing the trade should really be the next focus of the thread, this is where profits will be maximised and not do as I, get scared and close out the trade for a small profit rather than let it run to the max.

But hey, feel free to discuss what you like about any aspect of it all

cheers