The "Flip" Trade (support and resistance changing roles)

[walterw]

Here is a very simple setup for new traders who want something easy, simple and efective... even a chimp can trade ¡¡

Support becomes Resistance and viceversa....

Once you have grasped the concept then you just have to make money...

One way you can time your entries is with a simple cci 0 line cross....

For exits maybe you want to take a cross of the lsma...

Trading can be as hard or as dificult you make it... make it simple, enjoy it, make money.


cheers Walter.


(example chart is a 55 Tick emini russell with : ema 100, ema34, lsma 25, cci 14, cci 6 ) charts from trademaven.

[brownsfan019]

Walter - how's this look on a trending day?

I appreciate the post and how 'easy' it looks, but you should carefully explain the pitfalls before a newbie jumps in. One trending day could literally take your entire account if simply playing the S/R flips. Throw in when the market can't make up it's mind around these areas, and you can be rapidly buying and selling over, and over, and over again. Your broker will love those trades though!

[walterw]

Brown : I noticed that in great momentum conditions a flip will show you a continuation trade.... the other alternative is that it will show you the reversal itself at the end of a big move... what I like from this trade is the good RRR that you can manage.... this trade is intended for small scalps... so you can walk out of the market every day with 100 bucks on the pocket per contract.... not bad... cheers Walter.

[brownsfan019]

Good charts Walter. Thanks for sharing.

It would be interesting to know what is the best exit method. As we know, the exits are so important and that can dictate whether a trader can make money with this.

A nice simple method coupled with a good exit strategy is something for consideration here.

[walterw]

yeap, I had been all evening today figuring out a nice exit method for this... the one I use on my M trades its not compatible for this flip trade, now looks like cci could give some hints on the +-100 extremes turn arround.... because the lsma gets to much noise some times... thanks for interacting Brown... I am open to some good Ideas... cheers Walter.

[brownsfan019]

Walter - I suppose, I would look at like this:

On counter-trend trades, consider getting some/all off after an acceptable move in your direction knowing that you are going against the flow. There's money to be made here, no doubt, but my personal opinion is that you cannot get greedy in counter-trend trades.

On trend trades, I would consider allowing the trade some more room to work for larger profit potential. I personally have found some great success with WRB's, so perhaps that's a consideration.

Of course, if you can scale out as well, that's another component for consideration. I am a big fan of scaling out if your account size and risk tolerance allows.

[walterw]

Originally Posted by brownsfan019 Walter - I suppose, I would look at like this: On counter-trend trades, consider getting some/all off after an acceptable move in your direction knowing that you are going against the flow. There's money to be made here, no doubt, but my personal opinion is that you cannot get greedy in counter-trend trades. On trend trades, I would consider allowing the trade some more room to work for larger profit potential. I personally have found some great success with WRB's, so perhaps that's a consideration. Of course, if you can scale out as well, that's another component for consideration. I am a big fan of scaling out if your account size and risk tolerance allows.

yes Brown, I never take counter trend trades against momentum conditions..

when market is in cyclical mode (mostly) the extreme of the cycle or coil gives you a good place to trade, obviously thats counter but you are not going against a great strength in course, because there is no momentum...

I must say that most of the times you are in the right side of the market, the poor trend trader is just exhausted trying to beat the cycle conditions, he always gets late, he makes party when there is momentum, but that happens very few times per month....

so on cycle conditions you want to be counter... it takes ba...lls to trade in congestion, but when you get used, and have a method, cant stop trading it...

Now on this Flip trade we have diferent context situations, they may be trendwise wich would suggest the continuation of trend and maybe the buildup of momentum....

or counter, wich would cycle back to equilibrium on the average zone...

depending where you are in relation to the "average"...

For a momentum flip I would suggest to stay as much possible, for a cycle flip I would close the entire position on the area of the average...

cheers Walter.

[brownsfan019]

I see what you are saying. When I look at counter-trend vs. with trend, I am just looking at the current trend movement of that day.

Let us know how this goes, whether real $ or not. Always good to learn new things I suppose.

[tradingkevin]

I have a suggestion for exiting.

enter with 2 units ( 1 unit could be 1 contract or 10 contracts or 100 contracts..thats up to your capital and risk i.e. max 1 to 2% of total capital)

exit unit 1 at 4x your initial risk whatever happens ( so even if wrong on second unit, the unit 1 will cover the loss on unit 2. example. risk 5pts initial risk. 5 pts x 2 units ( 1 cts per unit in this example) = 10 pt initial risk. If you exit unit 1 at 5 pts x 4 ( 4x initial risk) = + 20 pts profits. if you are wrong on second unit then + 20 pts - 5pts = + 15 profit. now if you are wrong on your entry you would get - 10 pts. but since you make a minimum of + 20 pts per entry you are still working at a 2 to 1 reward to risk which is not too bad ( i.e. you can be 2 times wrong and still be break even )

Exit unit 2. exit at minimum 8x your initial risk. that s a target but once it reached that level, you can do 2 things. exit right there or trail it since market is showing lots of strenght ( i.e. each new bar is big and full ...not much shadow on the candles ) . it's a judgement call.

Now if you exit unit 2 at minimum of 8x risk that would be 5 pts x 8 = + 40 on unit 2 and + 20 on unit 1 = +60 total profit for a risk of 10 origianaly . 60 / 10 risk = 6 reward to risk factor. so that means that for every trade you take, you can be 6 times wrong and still be at break even ( not lossing anymoney ) . This is a very favorable R/R factor.

You cannot control anything in the market but using this simple technique gives you confidence and a frame work to work with for you targets by putting the math in your favor. YOu can play areound with the Risk multiplier to... If for example your risk is +10 per contract and the the average swings are about 20 to 30 pts, you might lower your 1 st target to maybe a 3x risk or 2 x risk. and on the 2nd target a 5 or 6 x risk. that 's all up to you.


This idea is so simple that many people will overlook it but the simplicity of it makes it very stress free and builds your confidence over time since you know that you can be 6 times wrong and still not loss money for every trade that works out.

[walterw]

Originally Posted by tradingkevin I have a suggestion for exiting. enter with 2 units ( 1 unit could be 1 contract or 10 contracts or 100 contracts..thats up to your capital and risk i.e. max 1 to 2% of total capital) exit unit 1 at 4x your initial risk whatever happens ( so even if wrong on second unit, the unit 1 will cover the loss on unit 2. example. risk 5pts initial risk. 5 pts x 2 units ( 1 cts per unit in this example) = 10 pt initial risk. If you exit unit 1 at 5 pts x 4 ( 4x initial risk) = + 20 pts profits. if you are wrong on second unit then + 20 pts - 5pts = + 15 profit. now if you are wrong on your entry you would get - 10 pts. but since you make a minimum of + 20 pts per entry you are still working at a 2 to 1 reward to risk which is not too bad ( i.e. you can be 2 times wrong and still be break even ) Exit unit 2. exit at minimum 8x your initial risk. that s a target but once it reached that level, you can do 2 things. exit right there or trail it since market is showing lots of strenght ( i.e. each new bar is big and full ...not much shadow on the candles ) . it's a judgement call. Now if you exit unit 2 at minimum of 8x risk that would be 5 pts x 8 = + 40 on unit 2 and + 20 on unit 1 = +60 total profit for a risk of 10 origianaly . 60 / 10 risk = 6 reward to risk factor. so that means that for every trade you take, you can be 6 times wrong and still be at break even ( not lossing anymoney ) . This is a very favorable R/R factor. You cannot control anything in the market but using this simple technique gives you confidence and a frame work to work with for you targets by putting the math in your favor. YOu can play areound with the Risk multiplier to... If for example your risk is +10 per contract and the the average swings are about 20 to 30 pts, you might lower your 1 st target to maybe a 3x risk or 2 x risk. and on the 2nd target a 5 or 6 x risk. that 's all up to you. This idea is so simple that many people will overlook it but the simplicity of it makes it very stress free and builds your confidence over time since you know that you can be 6 times wrong and still not loss money for every trade that works out.

Thanks Kevin for the input, that would be truly a mathematical money management of the position, makes great sense from a RRR stand point of view...

I think it will work better on trending conditions, you need a trend to make this swings so you can get this x4 an x8 etc... so if momentum conditions are present I would suggest paying attention to this posible money management aproach...

If the market is in cycle mode, it will be dificult to have so hi 4x or even 8x RRR... so maybe you could lower it to a x1.5 and all in one 1 unit ( no runners ), because there is no running conditions to hold a runner...

thanks for inputs, please keep interacting, I will post soon some new technical exit techniques.... cheers Walter.