GammaJammer
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Google 'nickels' and 'bulldozers' San Mig....
What, they don't stop hunt or they don't put their stops at round numbers?
Nothing really, I'd need to paper trade for a while but it seems the strategy is based on 2 things. The market testing the level (15 pips) with the trend and if there are stops, blowing through the level (15pips extra).
Yeah, I've just been thinking more about this - I guess this strategy could be used at a PREVIOUS support/resistance area as well? After all, S/R are proven buying/selling areas and stops and/or orders are often placed around these levels because it makes sense to do so (it's where I place stops) - the only difference is that these are dynamic not static levels, so a little trickier to nail in advance. The same rule could possibly be applied to support/resistance BREAKS with a dynamic range on either side, not necessarily 15 pips. I think I'll try it on an S&P spreadbet - it's eerily close to my current strategy though which is also just a tad unsettling... But what's wrong with another weapon in the old arsenal, not so?
.. what this is really about is simply deciding on a level of entry with a pre-determined profit target and entering early by the same amount - and this could be applied to any level of choice really. But I think it's useful because it's similar to a scaling in and out tactic e.g. entering 15 points early with half your stake and adding to it at the 'ideal' level (round number), then moving the first trade stop loss to 0.00. This way the second move is covered. The only problem I see is those damn pesky retracements! And of course, it may not work in all markets at all chosen levels of entry. Just IMO.
Basically what it seems to me to be doing is improving risk/reward or ROI using a variation of a scaled in (averaging up) trade.
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Skill Leverage
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That's not why people try to take out stops, at all. If there is reason for momentum in any one direction, stops are irrelevant. Stop-hunting is something else entirely. Anyway, I have never used a stop, and don't ever plan on using one, so I'm probably not the right person to talk to about this.
GammaJammer
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Pros trading seven, eight, nine, ten figure sums in FX tend not to put their stops at round numbers (and havent done for years). Which totally invalidates the theory n'est ce pas? That's what I've been trying to tell you. Not overly complicated, surely?
trader_dante
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Whatever you do, don't say that to the big guy there.
He threw me out of his office once for saying that.
Skill Leverage
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haha, noted mate. I think they're a load of balls myself, but I just call it like I see it.
trader_dante
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Spoken like a true ledge.
I've only ever lost money in my 9 year career through using a stop.
Sure, but he wrote this strategy in 2006-7 so it can't be that invalid.
But the psychological levels must count for something.
Taking the stops part out of the strategy completely.
Say we have a trend going up to 1.6, would you say as we near the 1.6 level, the market will test that level? That is the 1st part of the strategy. Obviously, there are better ways to trade trends than just grab the last 15 pips but ignore that for the moment.
trader_dante
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That strategy sounds like a sack of sh*t and most probable outcome is you'll do your a*se badly.
Get long ahead of the huge round number like a turd and hope some stops get hit above it? No one is going to be putting stops at a round number. And no one is going to be going long when it hits there either.
Half the time you'll randomly make 15 pips when it guns for the round number then the profit taking comes in and your stop which was amateurishly moved to breakeven on your second half will get sweeped.
Leaving you having 50% of your wins at 1/2 your size and 50% of your losses at full size.
Yep, you've done your a*se.
Get long ahead of the huge round number like a turd and hope some stops get hit above it? No one is going to be putting stops at a round number. And no one is going to be going long when it hits there either.
Half the time you'll randomly make 15 pips when it guns for the round number then the profit taking comes in and your stop which was amateurishly moved to breakeven on your second half will get sweeped.
Leaving you having 50% of your wins at 1/2 your size and 50% of your losses at full size.
Yep, you've done your a*se.
trader_dante
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Were you around when the Euro first hit 1.60? Hope not.
Mate, 15 pips extra? You're taking a full loss if you're wrong and half a win if you're right with the HOPE of making it a full win?
This is how you do your cheeks badly in the FX markets.
Just traded 'your' idea
Just made four points on the S&P Futures trading this tactic (yeah I know, four points not a lot - but just testing). Still, at £15 per point not bad for 1 and half hours work (I kind of knew it would go there because I integrated this method into an existing stratety of my own). But it did work - don't know if it would produce consistent results though. May need tweaking...
Just made four points on the S&P Futures trading this tactic (yeah I know, four points not a lot - but just testing). Still, at £15 per point not bad for 1 and half hours work (I kind of knew it would go there because I integrated this method into an existing stratety of my own). But it did work - don't know if it would produce consistent results though. May need tweaking...
trader_dante
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This needs at least 30 trades all managed with the same set of systematic rules and a positive outcome before it can be said to be even hopeful of working consistently. One or two winners mean absolutely nothing.
Just looked at it on a chart - not sure what happened on the tick basis but on a daily chart (min I can get for that time Apr 2008) it looks to have hit 1.5975 and gone on to a high of 1.6018. I'm guessing it was up/down up down ?
I agree the RR seems flawed but we'd need to know it was a 50:50 strategy for that and even then a 50:50 strategy is losing 30pips when wrong, winning 45 when right, and some of the other time getting 15pips only.
In the months later it did then blast through 1.5, 1.4, 1.3.
Just arguing the point, I guess we need to backtest to be sure. Boris should have some idea what he is talking about shouldn't he?
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GammaJammer
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I couldn't care less what he wrote and when he wrote it. You can choose to trust me on this point or you can choose not to. Entirely up to you SanMig. I've given you a cogent argument (imho) based on real world observations in the interbank market over the past 15 years, as well as a rider about whehn psychological round number levels DO work, and why. I can't do much more really......
Skill Leverage
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Why erroneous? It's based on humans liking round numbers and putting their stops there.
Worked nicely on this one for 15pips + 30pips. On reaching 0.8, it shot up by 5 pips much quicker than the recent 30mins activity. I trailed the 2nd lot but it hit its 30TP anyway. Not bad.
The round number you're speaking of has been traded through twice recently - it isn't new territory, why the hell would anyone have their stop there? If there were stops clustered anywhere (which I can't imagine there are from a glance at that chart), why would people put them below the swing high? If it shot up by 5 pips, it's because someone bought it, no other reason.
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Skill Leverage
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I'm not a technical guy at all, so I could be off on this, but to be honest I think you've completely misunderstood the concept of trying to take out stops. It's very hard to do, very rare, and you need to be fooking massive, willing to buy/sell into major resistance/support, or be a lucky git. Or all of the above.
