We've discussed WRB's in a couple threads, but since this is something that has grabbed my interest, I was hoping we could discuss it here.
I've been watching WRB's or what I 'see' is simply a 'big' candle and from a perspective of exiting a trade, they appear to be good. Now, I may be oversimplifying how they are supposed to be used, but here's what I've noticed and have actually used this past week...
- My entry and initial stop is the same as it's always been - using VBC's on 'shorter' timeframes. WRB's have NO impact on my trade setup.
- After in a trade, go to a 'longer' VBC chart and use WRB for exit.
My version of WRB/Big candle exits is rather simple - when I see a big candle on my bigger VBC chart, I exit at the close of that candle. And I exit the entire position here using a market order.
Here's what I have seen - since I use smaller initial stops, by exiting everything on the first big candle I see, I am able to exit trades quicker w/o a threat to my initial stop. In a bigger move I simply look for another trade setup and repeat the process.
The other thing I have seen is that I am taking smaller gains more, but that is all the market was willing to 'give' me.... I believe we discussed this in another thread and I may be coming around... :p While getting 15 or 20 pts on the YM is nice, if I am able to get 12 with no problem, it may be best to take it while there. It's frustrating to want 20 and if it goes 18 and then reverses on you, was that 2 ticks worth it? Up until analyzing WRB's though, I did not have a good method for exiting trades.
I attached a chart to this purely for illustration purposes. These were NOT actual trades, I just grabbed a YM chart off of quote.com since my TS is shut down for the night. You'll see that exits are not perfect, but I think they are pretty darn good.
I'm curious to hear what is working for others who are using WRB's in their trading or at least watching them. Maybe we can even get the WRB guru (NihabaAshi) to share some ideas with us.
Here's my biggest question right now - what is the theory behing WRB's and their practical use in trading? I am proving to myself by looking at actual chart setups as to whether I like what I see, but I don't quite have my arms around why these work and why they make for good exits... My idea right now is that a 'bigger' move may be followed by some 'correction' due to the supply/demand imbalance that happened during the WRB - while the WRB is being formed, that would show us that either the bulls or bears took control during that timeframe and sooner or later, they will have to take a breather. That's not to say that the current move will not continue, but some sort of breather and/or correction could happen; which could take a stop that is snug (like mine) out easily.
SHORT HAND KEY:
VBC = VOLUME BASED CANDLES (more info here: http://www.traderslaboratory.com/for...ofit-1414.html)
WRB = WIDE RANGE BODIES (info scattered throughout some threads)
TS = TradeStation