[optiontimer]

Originally Posted by optiontimer »

I entered a sell stop to open a 20K short position on stop 1.4091.

The 6E, EUR.USD futures, also issued a sell signal. However, as with all of the recent signals our system has issued, the required risk was too large for a small 25K account. The stop on this trade is nearly 200 pips from the entry, and thus, trading just one 6E contract, the risk would be nearly 10% of the account's equity. I may find myself in a 10% drawdown yet, but let's not all but guarantee it by risking it on one trade!

I did not want to pass up another trade, however. So I decided to take advantage of Interactivebrokers forex products, and, traded a 20K lot size. This will be a $400 +/- risk depending upon slippage and so forth. I'd prefer a 2% tisk to a 10% risk any day of the year.

The entry, again, with commission and slippage, yields an average price of 1.40894. The stop loss is currently 1.4283, risking 193.6 pips plus commission and slippage on the exit, should it come to that. This trade is worth about $2/tick, either way.

I will continue to monitor the futures markets as well, and when a situation presents itself with suitable risk, then I will take that trade.

For now, to assure some activity without assuming unnecessarily high risk, I will broaden our portfolio of tradables to include a basket of cash foriegn exchange pairs and cross rates. I will have more detail to provide as this week progresses.

Have a great week, and good trading to all,

-optiontimer

[Avarice]

Originally Posted by Ingot54 »

[...]the StochRSI should be turned up at the END of the closing candle.[...]

This "computeOnClose" rule is what made me think of trading hours (see my previous post). If you apply this to the daily chart of a security that's traded almost 24/24 you get your close for the day at midnight -- at which time I'll be sleeping the sleep of the just. I have circumvented this difficulty by deciding that "my" trading day will close between 7pm and 8pm, so basically I will take the oscillator's value at that time of the day and decide on a trade from there. I concur with OT in that -- if I manage to follow this rule consistently -- it should not make a difference in the effectiveness of the entry setups.

Originally Posted by SIUYA »

[...]Too often the easy access to computers, programs and instant access to data is more harmful than helpful.

This is one of my biggest problems. Not in the way that I tend to proliferate the use of filters, but I find it very hard to apply "soft" rules to my trading systems. What I mean by this is that, even after reading (and wholeheartedly agreeing with!) Wyckoff, Livermore and now Kroll on the subjects of supply and demand, I find it VERY hard to give priority to support and resistance zones that are (often very clearly) visible on the charts over my computed stops. In a sense my IT-trained mind seems to have a lot more confidence in a computerized formula that spits out hard numbers without any real "knowledge" about the past than in what I am seeing on the chart. I envy traders that learned their craft 20 or 30 years ago: data acquisition might have been a lot harder but they were forced to concentrate on what really mattered instead of being lulled into a false sense of security by ever so capable computers. I for one feel that my next big step on this journey will be to detach myself from the mere mathematics of trading in order to make room in my head for a deeper understanding of what's really happening in a security. As in, what is its price action.

Originally Posted by optiontimer »

This is a difficult market to time long entries with reasonable stops, as after each entry, the market has managed to work itself lower. This situation will have to be addressed. We would not want to make nine consecutive losing trades in one market. With proper position sizing, we could survive it, but it would no doubt take quite a psychological toll

I have a mechanic in place that will stop me from trying to enter a market too many times if my timing is not right. In a nutshell: I have a set amount of money (currently 6% of total account equity) that I am allowed to lose over a moving window of 10 days. I sum up all my losses (exclude the winners!) over the past 10 days and if this running loss is larger than the 6% cutoff, I'm not allowed to trade the security until running losses are below 6% again. I found that these forced "sabbaticals" keep me out of markets that are unclear, and more often than not once the trade ban has been lifted the market has moved past its indecisiveness.

Example, let's say 6% cutoff is $2000, window is 10 days (Wins are only mentioned to show that you do not take them into account) :

Day 1: Loss 1000 Win 200 Running Loss 1000
Day 2: Loss 500 Win 100 Running Loss 1500
Day 3: Loss 0 Win 100 Running Loss 1500
Day 4: Loss 500 Win 0 Running Loss 2000
Day 5: NOT ALLOWED TO TRADE, Running Loss 2000
Day 6: NOT ALLOWED TO TRADE, Running Loss 2000
Day 7: NOT ALLOWED TO TRADE, Running Loss 2000
Day 8: NOT ALLOWED TO TRADE, Running Loss 2000
Day 9: NOT ALLOWED TO TRADE, Running Loss 2000
Day 10: NOT ALLOWED TO TRADE, Running Loss 2000
Day 11: Loss 0, Win 2000, Running Loss 1000
Day 12: Loss 200, Win 0, Running Loss 700

[russellhq]

Hi Optiontimer,


I've been trying to replicate your EUR.USD chart over at Barchart.com - Commodity, stock and forex; quotes, charts & analysis as they have the EMA and sRSI indicators but I can't get it to look like the one you posted from MT4 EUR.USD

I found the site very useful but just can't get it to tie up with what you've posted Can you see where I'm going wrong?

[SIUYA]

Originally Posted by Avarice »

This is one of my biggest problems. Not in the way that I tend to proliferate the use of filters, but I find it very hard to apply "soft" rules to my trading systems. What I mean by this is that, even after reading (and wholeheartedly agreeing with!) Wyckoff, Livermore and now Kroll on the subjects of supply and demand, I find it VERY hard to give priority to support and resistance zones that are (often very clearly) visible on the charts over my computed stops. In a sense my IT-trained mind seems to have a lot more confidence in a computerized formula that spits out hard numbers without any real "knowledge" about the past than in what I am seeing on the chart. I envy traders that learned their craft 20 or 30 years ago: data acquisition might have been a lot harder but they were forced to concentrate on what really mattered instead of being lulled into a false sense of security by ever so capable computers. I for one feel that my next big step on this journey will be to detach myself from the mere mathematics of trading in order to make room in my head for a deeper understanding of what's really happening in a security. As in, what is its price action.

Not to get too far away from OptionTimers thread, but it is topical that you mention this especially in a trend following thread.
Personally I am old school and learnt the old way, and to a certain extent I envy you who can just rely on the computer. I have recently spent a lot of time effort and energy into trying to do so and have a few similar trading friends doing the same....trying to get the best out of both worlds......so dont feel like you are missing something

Point being and linking back to this thread as Optiontimer has mentioned and even showed in the recent trade where the stop was too far away that applying things in a mechanized way but with the addition of a few heuristic/rules of thumb does not need to be too difficult. It is the strategy thats important. In one of the original market wizards books (or an interview) I think I recall someone say the best way to see the trend is to just throw the charts on the floor get on a table and look at those that are trending.....now that is old school.....and then decide how much heat to have in the trade.
(pure day trading is different so as to not mix the two up and keep the focus here)

Think about it this way (and not to say this is right) - as a trend follower your DEFAULT position should be to take the trade and ride the position, but you can then override the finese of the entry or the exit somewhat using simple (dont make them complicated) levels of support and resistance to keep you out of trouble. Even the original turtle trend following rules had a few simple rules in them like this and they even had a fail safe get in the trade rule so that if they missed the 20 day breakouts they still took the 55 day breaks.

[optiontimer]

Originally Posted by russellhq »

Hi Optiontimer,


I've been trying to replicate your EUR.USD chart ...but I can't get it to look like the one you posted from MT4 ... just can't get it to tie up with what you've posted Can you see where I'm going wrong?

Well, I would say you are not doing anything wrong at all. I just this evening received my new computer and I have begun the slow process of re-creating my price history database, charts, templates, etc. and so on. I have found that the set up I posted last night on the eur.usd is not showing on my CSIData charts, and what I had thought was a valid set up on the 6E was due to missing data causing an error in the calculation of the stochRSI on my old computer as it lay dying. Unfortunately, interactivebrokers does not make the stochRSI one of their avalable studies. I was therefore left with hastily downloading oanda's MT4.

I cannot explain why oanda's data yields the set up while it is not a signal elsewhere. It could have to do with weekend data and the manner in which oanda collates it. It diesn't really matter. I am back with my CSIData, and I will be using that and only that going forward, save for when it moght be useful to post a chart from Interactivebrokers.

As the EUR.USD trade was not a valid signal, the trade was an error. I did the only thing you should ever do if you find you have intitiated a position by mistake - double down and hope for the best!

Actually, no, that is not what I did - I closed the position for a loss of $77.80 - whether it moves in an otherwise favorable direction or not, it does not matter. A trade entered in error, whatever the source of that error, must be cut short unless the trade, originally in error, has been subsequently signalled by your system. Today issued no such signal. Therefore, the right thing to do, having discovered the error, was to exit the trade at market.

I am not yet set up to take screen captures of my charts, but a cursory flip through a few charts has the GBP.AUD issuing a sell signal using both the stochRSI and the stochastic.
If anyone out ther is able to help, I'd appreciate a few examples of this chart using either/or/both of our oscillators to see if we are all coming up relatively close on being able to see the same thing at the same time.

Thank You,

optiontimer

[digibranco]

"And I am sure there are at least a few others "out there," silently following along here, who have already tried to apply additional "filters" to this system."

Assuming that this trading strategy is applicable to any market, I can use it to trade stocks.

But then I cannot help, but use a Market direction filter - trade with the major trend of not only the specific stock, but the market as well.

Would you criticize this complexity?
or
Suggest a method of gauging the Market?

I apologize as this may be slightly off topic as it was decided to implement the strategy on futures.

[optiontimer]

Originally Posted by digibranco »

Assuming that this trading strategy is applicable to any market, I can use it to trade stocks.

But then I cannot help, but use a Market direction filter - trade with the major trend of not only the specific stock, but the market as well.

Would you criticize this complexity?
or
Suggest a method of gauging the Market?

I apologize as this may be slightly off topic as it was decided to implement the strategy on futures.

I was referring specificaly to adding additional indicators to the current set in order to further filter whether a set up is valid or not.

Certainly a stock trader would want to be predominantly long during bull markets and predominantly short in bear markets. That is not the same as adding an extra moving average or oscilator to the chart of IBM to decide whether or not to take a particular trade.

-optiontimer

[phantom]

Originally Posted by SIUYA »

I think I recall someone say the best way to see the trend is to just throw the charts on the floor get on a table and look at those that are trending.....now that is old school.....

I believe Ed Seykota is the man you're referring to. He'd pin his charts to the wall and then stand across the room. If he could see the trend from there, he knew he was on to something...

For those of you who are getting knocked out all too regularly due to bad entry levels, you may want to try waiting for a volatility breakout (extended range bar) of a 3-5 bar sideways channel in a trending market.

Just a hint.


Luv,
Phantom