[Soultrader]

Please Read First:

"The stronger the trend, the greater the distance between successive balance areas. As the auction ages, this distance decreases. In the late stages of a trend, price may continue to rise but the next balance area will often be resting on top of or within the prior, lower balance area."

- James Dalton from Markets In Profile -

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Charts created by tradestation

[WinSum]

I'm also playing around with a new concept on stop loss placement on Trends. Here is another technique.

From Don Jones's book on Value-Based Power Trading (pg 139), he uses a more longer term technique for position traders (minimum of 10 days).

1) There is no target price at the beginning of a trend. The stop-loss price for a trend is 1.5 octants from entry.
2) The initial stop-loss point is maintained until the first node forms.
3) After one or more nodes have formed, the trade is exited when price returns to the mid-point of the prior node.

[walterw]

Originally Posted by WinSum »

I'm also playing around with a new concept on stop loss placement on Trends. Here is another technique.

From Don Jones's book on Value-Based Power Trading (pg 139), he uses a more longer term technique for position traders (minimum of 10 days).

1) There is no target price at the beginning of a trend. The stop-loss price for a trend is 1.5 octants from entry.
2) The initial stop-loss point is maintained until the first node forms.
3) After one or more nodes have formed, the trade is exited when price returns to the mid-point of the prior node.

Winsum : are there any indicators to see does octants on a chart, would be interesting to have a visual aid to follow does octants... wich sounds pretty logic to create a trailing sistem... cheers Walter.

[WinSum]

Don Jones have software/service that you can get it from him , otherwise you will have to build your own.

[dalby]

I have always had "a problem" with the concept of risk/reward as defined by stop size vs. target size. The CW (which I think is wrong) is that a lower risk/reward is "better". In other words, risking 20 pts to make 10 pts is not an intelligent trade.

I think IN GENERAL that has merit. However, I have several setups that set a smaller initial target than the stop, and thus would have a "risk/reward" ratio of 2 or greater. Now, that is somewhat problematic since I scale out, but the point is the same.

What matters in addition to (so called) risk/reward in stop distance is the positive expectancy of the setup.

If you have a setup that has 90% winning trades, with a 3/1 risk/reward ratio (in terms of stops to target distance), is that a "bad" risk/reward.

Clearly not. If you crunch the #'s that trade has high positive expectancy.

I agree that there are a # of concepts about stops and none is necessarily better. I like to consider the average true range of the timeframe I am trading because I find that using a # related to that metric is going to generally keep you from getting stopped out by "noise".

Good video, btw

[dalby]

In regards to the octant thang.

Most charting programs have a Fib tool that will draw lines at ratios of a outlined range. The classic #'s are 38.2% 50% etc.

However, if your charting package allows you to use user modifiable percentages, then you just need to set the retracement at multiples of 12.5%

.125 is 1/8 so, that will draw lines at the octants

it's kind a down and dirty technique, but it works

[walterw]

Winsum : do you have a chart that we can see of does octans in action ?

[WinSum]

No, I have a TPO Overlay Demand Curve that I use to see the market profile structure but I do the Octet calculation by hand because my programming skill is limited.

The ODC allows me to see the previous Balance Area nodes and its POC, so I know where the stop losses are likely to be located for trend traders.

The interpretation is that the break-out Trend has come back into Value and a Stopping Point of the Trend has been created and the market will now transition from Imbalance back into Balance.