Keeping things simple.

[darktone]

Okiemadokie. Been on my mind a bit of late to do a thread on trading using a very simple method. So here i am.. Committed! lol

Its with trend using a single 10ema. It can be used in any timeframe but ill be using two timeframes for most part, the larger one for trend id and smaller one for taking and managing the initial position. Limit orders will be used to take profit / loss for the most part. The main focus of which will be to keep losses (there will be many) as small as poss.

Theres a couple of things that many of you might find appealing or appalling depending on your view. Stops, arnt used for the most part in the traditional manner, the word 'hope' might well appear, as will "I dont know!". Theres no prediction in the normal sense, for me personally this is great because it frees me up emotionally to focus on what I think is most important part, which is to manage losses. Its also takes ego out of the equation!

The above is offered up mostly for the beginners but is open to all to offer views for or against, ask questions etc. Lets try and keep it sensible folks though eh, no need for cryptics or s**t slinging.

Defining the trend: (see attached)
Up trend = closing above ma. Down trend = closing below ma.

Method:
1) Signal to buy/sell is first close above/below the MA.
2) Use a limit to enter.
3) Use a limit to take a profit.
4) Use a limit (not a stop!) to take an initial loss. Ie Youve positioned and the trend changes. Use a break even or + 'x' ticks/points stop when it starts to run to your profit limit.

Something i forgot to mention earlier. Trading with limits is Broker/Spreadbet friendly as its far easier for them to hedge you it you are profitable. Youre far less likely to receive 'special attention' if you trade less, with limits, imho.

Cheers
D

 

[BeginnerJoe]

Using a limit to simulate a stop is still a stop. When you limit buy at 10 and then limit sell at 5, the banks will take you on and thank you. The banks don't care what type of order it is so long as you are guaranteeing to buy high and sell low.

 

[darktone]

Heres two examples of attempted entry in a smaller timeframe (5min). It assumes that the main trend is up so the attempts are long.

If you were filled, the first attempt shows a loss, how much depends on where your limits were. The second attempt (if you were filled) ran more than enough to get a stop in at break even.

The aim is let profits run to a target that would be more in tune with the main trend/daily chart. The sole purpose of the 5min is find an efficient entry and keep loss small.

Let me know if its not clear, cos tbh i found it hard to explain.

 

[darktone]

Using a limit to simulate a stop is still a stop. When you limit buy at 10 and then limit sell at 5, the banks will take you on and thank you. The banks don't care what type of order it is so long as you are guaranteeing to buy high and sell low.

Not sure i get you joe, but the 'banks' can do as they wish.

A traditional stop to exit can be thought of as limit order for loss, in other words its not in your favor,price reaches towards and touches your stop, youre out, its not in your favor! A limit order to exit a loser after 'x' condition is met, is in your favor, as its closer to your entry. Its active management of your position.

Let me explain it like this.
You have your signal and attempt to limit in long at 10 : youre filled
The trend changes and you wish to exit, the signal bar closed at 5 lets say. You could then place a limit to attempt to exit at 7. Ie, in your favour.

 

[darktone]

Thats me for tonight, am pooped. Man flu!

Cheers
D

 

[BeginnerJoe]

Let me explain it like this.
You have your signal and attempt to limit in long at 10 : youre filled
The trend changes and you wish to exit, the signal bar closed at 5 lets say. You could then place a limit to attempt to exit at 7. Ie, in your favour.

Not making sense to me. If you bought at 10 and then sell at 7, you have lost.

Managing winners is easy enough. The hard parts is how to get the winners in the first place. If you can get winners consistently, the simplest strategy is always put a stop at BE and let them do whatever they want. It doesn't get any simpler than that.

 

[darktone]

Not making sense to me. If you bought at 10 and then sell at 7, you have lost.

Im using your numbers to show how to manage a loss. -3 is better than -5 or worse.
Have another look post 3 and see if it makes sense, if it doesnt dont worry, its likely to be a focal point in the thread.

Managing winners is easy enough. The hard parts is how to get the winners in the first place. If you can get winners consistently, the simplest strategy is always put a stop at BE and let them do whatever they want. It doesn't get any simpler than that.

No so sure i agree. I think most folks (myself included in the early days) have a hard time sitting and letting profits run. The temptation to mess and find reason to take a profit can be great! It doesnt take much of a pull back to get most folks sweating.
Getting a stop in at BE is sound but in my experience its better to get a little distance in before you do. Ive found it hard to keep the entry level favorable, ie can be a struggle to re-enter at the same level or better. Another thing is that brokers dont like it as its difficult for them to hedge. If you rely on multiple market orders and/or stops with pin point fills, you'll soon draw attention and likely be given more 'realistic' fills. Ive personal experience with this.

 

[new_trader]

Anyone who thinks it's better to use a limit order instead of a stop can't be a real trader.

 

[Splitlink]

Not making sense to me. If you bought at 10 and then sell at 7, you have lost.

Managing winners is easy enough. The hard parts is how to get the winners in the first place. If you can get winners consistently, the simplest strategy is always put a stop at BE and let them do whatever they want. It doesn't get any simpler than that.

I understand both of you but DT wants to reduce the loss that he is taking at the moment. Whether he will be able to is another matter. From your point of view, you want to sell at the loss you've taken already.

Live calls (and I don't post them because I can never keep up with them) are the only proof that I can see as to which idea is better.

I think that DT has given up on that trade, which is sensible if he thinks it is going wrong, and hopes to get out near flat.

 

[darktone]

Below are a couple of examples using the same price action as above. Of course things could have turned out different. The intention is to show the difference and imo benefit of using limits to enter and manage loss.

The first is a typical style of entry. Note the distance between orders and how they arent (imo) in favor of the trader.

The second uses limits and hopefully shows the possible benefit of using them.

The third is a bare chart for anyone to offer up their own view, please try and keep it within the boundaries of the trend id method and bars already used in the previous examples.

Cheers
D

 

[darktone]

Anyone who thinks it's better to use a limit order instead of a stop can't be a real trader.

Have to hand it to you, you always turns up with the goods! What a corker!
3771

Mods, please feel free to chop at will!

 

[darktone]

I understand both of you but DT wants to reduce the loss that he is taking at the moment.

Yep, its as simple as that Split, its certainly doable. If i can, anyone can imo.
Just that it goes against the the grain for most. Not surprising given that most folks use hard stops.

Live calls (and I don't post them because I can never keep up with them) are the only proof that I can see as to which idea is better.

Live calls. Hmm, not possible in the 5min imo, to intense to be posting up live limits. Ive been eyeing weekly gold though, a 4hr for entry there could work perhaps. Well see.
In sense its irrelevant though as its totally dependent on the traders view of risk. A panicker will no doubt do worse than someone whos a bit more relaxed.
The only proof imo, if the idea resonates with you is try it for yourself. Tie your own shoelaces as they say.

I think that DT has given up on that trade, which is sensible if he thinks it is going wrong, and hopes to get out near flat.

Yep, spot on! The aim is to get in and get out at a price that is better than being currently offered. That goes for the winners and losers. Ie In favor of the trader.

Cheers
D

 

[darktone]

Just so were clear that these concepts are nothing new.
Market Wizards, Tom Baldwin
Bottom of page 181.

 

[wackypete2]

I get the limit to stop and the reason for it. I'd guess you'd get filled on it often enough on a 5m time frame. Forgive me if I missed this but what happens if your limit to stop is not hit? That means you'll be sustaining larger losses as the price continues to move against you. Are you still using a traditional stop loss to then exit?

Peter

 

[wackypete2]

OK, I just read the clip you posted. In the scenario I gave above Mr. Baldwin would be using a discretionary exit and not a mechanical one.

Peter

 

[new_trader]

I get the limit to stop and the reason for it. I'd guess you'd get filled on it often enough on a 5m time frame. Forgive me if I missed this but what happens if your limit to stop is not hit? That means you'll be sustaining larger losses as the price continues to move against you. Are you still using a traditional stop loss to then exit?

Peter

I'm keen to see how this sensible question is answered...:cheesy:

 

[new_trader]

OK, I just read the clip you posted. In the scenario I gave above Mr. Baldwin would be using a discretionary exit and not a mechanical one.

Peter

The above is offered up mostly for the beginners but is open to all to offer views for or against, ask questions etc. Lets try and keep it sensible folks though eh, no need for cryptics or s**t slinging.

There is NO WAY a beginner should even be contemplating using discretionary exits or "Limit stops". I trade with mental stops but it took me more than 5 years before I had the confidence and experience to do it. The idea of a limit stop for a beginner is insane. This whole thread belongs in "Joke of the day".

 

[wackypete2]

There is NO WAY a beginner should even be contemplating using discretionary exits or "Limit stops"

I agree with that.

This whole thread belongs in "Joke of the day".

I disagree with that. There are some merits to the exit style, but as you said, not for beginners.

Peter

 

[darktone]

I get the limit to stop and the reason for it. I'd guess you'd get filled on it often enough on a 5m time frame. Forgive me if I missed this but what happens if your limit to stop is not hit? That means you'll be sustaining larger losses as the price continues to move against you. Are you still using a traditional stop loss to then exit?

OK, I just read the clip you posted. In the scenario I gave above Mr. Baldwin would be using a discretionary exit and not a mechanical one.

Hi Pete. I dont, but that doesnt mean you couldnt have a 'GET ME THE F**K OUT!' hard stop placed somewhere, if you like the idea. Personally i dont, the idea of a stop getting gaped doesnt appeal, and in the past, at least when ive tried it, when under pressure i had a tendency to sort of sit there and wait for it to get hit.
Lets say your used to taking an average loser of 3. Bang! SHF and the first print is -100. Your hard stop at say -50 wouldnt have done you much good cos you getting filled -100! In that situation id rather have no stop and aim for say -70, then go from there.

No question, there will be days when you take a belter! But they should be more than offset by the winners, which while infrequent, for the most part should be belters too.

Cheers
D

 

[BeginnerJoe]

you want to sell at the loss you've taken already.

In that case it comes back to the first post I made. As long as you guarantee to buy high and sell low, the banks will take on the deal and accede to your every wish. My research tells me the banks get very excited on a £0.000001 profit. So this kind of guarantee cannot survive for any length of time.

I can't do live calls because it would give away my banks defeating strat. Also I don't use stops, don't use targets. My BE suggestion is just to point to a strategy that is simpler and safer than what DT is trying to do. I don't use this BE strategy myself. If you offer the banks a BE, they will often take it since they have already made some on the spread. I can't let them do that, if I put in the effort, I want a profit.