Strategy development

tune said:
Are you deducting percentages manually or by backtesting with a computer? I presume you are categorising types by looking into things like, whether the retracement low/high fouls the previous low/high or not, and by how much?

tune

All manual, I'm not much of a computer wiz.
"things like, whether the retracement low/high fouls the previous low/high or not, and by how much?"
Yes, and what is more important to me is what came before the trade.
I believe that obtaining a judgement on the energy level being built up on any potential move is critical to determining from entries/ reentries, to profit targets.
 
dbphoenix said:
Incidentally, I'll assume that you're printing these charts and laying them all out on the floor next to each other . . .
The thing that I find most frustrating about looking at charts on my screen, is that it's hard to compare more than 3-4 at a time. Take a BO, -I know what this general pattern looks like 'in theory', and I can recognize one in hindsight (duh!). So now the task is to recognize it in real time and to act accordingly.

So, let's say you are working on defining a single type of set up, on a particular instrument (stocks, commodities, indexes, forex, etc..). If you are attempting to define what a BO, then pullback usually looks like when coming out of a range- the kind sulong used to start off this thread, I guess you'd need to print a minimum of 50-100 charts that have easily identifiable ranges on them, followed by the price leaving the range. Is that enough to begin making useful statements about what a BO/pullback looks like and to take a first stab at saying how wide a stop needs to be avoid noise, how big the average daily range is for this instrument, what is a reasonable target, etc.?

JO
 
sulong said:
All manual, I'm not much of a computer wiz.
"things like, whether the retracement low/high fouls the previous low/high or not, and by how much?"
Yes, and what is more important to me is what came before the trade.
I believe that obtaining a judgement on the energy level being built up on any potential move is critical to determining from entries/ reentries, to profit targets.

I'm no computer wiz either. I would'nt mind trying out one of those backtesting programs one day though. It would be very interesting to ask it questions.

That sort of stuff is a million miles from what I do at present. I found I was suffering from information overload so I paired everything down as hard as I could. I watch the first two hours of the NQ everyday, making notes as it goes along. In the evening I print out two charts (one for scribbling on, one to keep), go over the notes I made and lay out possible horizontal S & R for the next day.
(I print out a twenty day line chart everyday as well).

It might sound boring but the routine is doing me good and I am enjoying the work much more than I used to. (Got more time to read too).

Which all in all means that I am looking at exactly the same things as you are
i.e. where the trade came from and where it went.

tune
 
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tune said:
That sort of stuff is a million miles from what I do at present. I found I was suffering from information overload so I paired everything down as hard as I could

I think this is an absolute must . I believe that first we must "make" it simple, before we can "keep it simple"

tune said:
I watch the first two hours of the NQ everyday, making notes as it goes along. In the evening I print out two charts (one for scribbling on, one to keep), go over the notes I made and lay out possible horizontal S & R for the next day.
(I print out a twenty day line chart everyday as well).

It might sound boring but the routine is doing me good and I am enjoying the work much more than I used to. (Got more time to read too).

Which all in all means that I am looking at exactly the same things as you are
i.e. where the trade came from and where it went.

tune
Wow! are you watching me at work?
:)

Another thing I do, is I have separate folders,to put my charts in, for the type of patterns I see, for instance a folder for BO's from a trading range, one for double tops, one for double bottoms, and so on. 7 in all.
 
Lol. It cost me a small fortune to get a camera put in your office. You would'nt mind moving your monitor about six inches to the left would you? The light keeps catching the glass and it's causing terrible glare. : )

I see what you mean about collecting examples of types of set-up and grouping them together. It sounds useful, I shall start doing that.

I only began collecting intraday charts of the NQ at the beginning of last week so I have not got much to go on so far. I think I am beginning to get the idea of what is being asked for in this thread though. Stop me if I am wrong.

It's all well and good seeing a move that I like the look of but how do I know that it is a winner over time if I don't have any figures to back my thinking up. And what is there about the move that proves, categorically, that it is one of the type I am looking for. And if it does fit my criteria, at which point do I trade it or reject it. Considering that no two moves are ever exactly the same this is quite a head scratcher for me, but if putting figures on all of this is what is needed to get good at trading, I'll do it.

tune
 
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tune said:
I only began collecting intraday charts of the NQ at the beginning of last week so I have not got much to go on so far.

You could buy historical intraday data for NQ and study that. Disk Trading do 1/5/15/30/60-min and tick for $20.
 
blackcab said:
You could buy historical intraday data for NQ and study that. Disk Trading do 1/5/15/30/60-min and tick for $20.

...though it doesn't have volume data, unfortunately.
 
triax said:
...though it doesn't have volume data, unfortunately.

Ah. No good then.

I presume that anyone who is interested in this thread has also looked into the one on Elite.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=33766&highlight=price+and+volume

There is something quite confusing here. There are two big threads both about developing strategy using P + V and both supported by a fine body of introduction.

http://www.trade2win.com/boards/showthread.php?t=11104

http://www.elitetrader.com/vb/showthread.php?s=&threadid=29005&highlight=price+and+volume

I am unable to understand why these threads keep breaking down. Would anyone like to hazzard an educated guess as to why. There is some top stuff here and it keeps going to waste. What's going on?

I don't get it. It all seems to end with, "is this a retracement or a reversal?" and nobody seems to know. What an anti-climax. I don't know if I know what a ret or rev is anymore. I thought I did. Perhaps I don't even understand the question?

If anyone has got bit of light they can shine on all this, please speak up.

tune
 
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tune said:
It all seems to end with, "is this a retracement or a reversal?" and nobody seems to know. What an anti-climax.

The thing is, each trader needs to define them for him/herself.

A stock/future/whatever might make a new high, and start to pull back. This pattern might after a period of time meet your definition of a reversal, and my definition of a retracement; and we might both trade them as such, obviously in different directions. It's also entirely possible that we might both make a profit, or at least both avoid making a loss, especially if we are looking at different time frames, have different exit/stop strategies etc.

As long as you define a particular set-up for yourself, and have looked at enough similar situations (ie. done enough back-testing) to know how to make a profit from it over time, then it doesn't matter what you or anyone else calls it. I call my current favourite set-up a ***** Enhancer.

(I made the last bit up).


edit : Censored! You can probably guess what is under the '*' s
 
Thank you for clearing that up Triax. Those were helpful comments. Perhaps I can move on now.

As it happens, what you are saying is exactly what I thought in the first place. I don't care what anyone else is doing, I never did. I've been looking at charts long enough to know the type of things I want to see. What other people look out for is up to them.

So. It's all about defining my own moves, in an adequately precise way, so that they can be tested and tweaked. It's a bit like a spread sheet I guess. Lay out what you are trying to do and keep twiddling the variables until an acceptable compromise comes out. Then stick to using that compromise. I don't know how to do it but I like it.

It would appear that I have a lot of work to do. I can see how useful a backtesting computer could be for this, assuming you can ask it the right questions that is. By hand will be fine for the time being.

tune
 
In a general sense, Triax is correct that each trader must define them for himself, though not necessarily for the reasons he gave. Other reasons include the fact that many traders just don't want to think about it because thinking about it would mean defining it, and once one has defined a setup, he has more trouble evading responsiblity for the trade, and many traders will go to any lengths to avoid responsibility for the trade. However, it is absolutely essential that one distinguish between retracements and reversals if for no other reason than doing so will enable him to avoid trading counter-trend (given the general quiet on the ET board over the last few days, one can be fairly certain that a great many people bought Tuesday all the way down and sold yesterday all the way up). Perhaps if you review the post I made to you on this subject several days ago, it will make more sense now. I've also addressed this subject in the PV:practicum pdf at my Yahoo site.

I should also point out that while trading via price action may be the simplest course, it is not the easiest. Trading via patterns and indicators seems to be easier since all one has to do is buy when the green line crosses the red line and sell vice-versa, or buy or sell the pattern once one has recognized it. However, this ease doesn't manifest itself in practice, and one can spend at least as much time searching for that elusive indicator or setting that will enable all the pieces to fall into place as he would studying price and understanding why traders do what they do at the points or levels at which they do it. Given the appearance of ease, it is only natural that beginners would turn first to indicators and patterns, and it should come as no surprise that disappointments drive beginners to price later on. Perhaps if I were to re-open those threads and ask the same questions about retracements and reversals, there would be more people willing to puzzle out the answers. But since you and sulong are the only two people I know of who are making a concerted effort in this direction, I doubt it. And the PV:practicum is done now, so I'm not yet motivated to begin again with a thread, particularly since you two are doing just fine.

As for backtesting via computer, I can't see that it would help much. In fact, I can't see that it would help at all. None of this work is going to do you any good whatsoever unless it enables you to detect a shift in buying/selling pressure in real time, and the only way you're going to be able to do that is by poring over old charts and finding those "inflection points" by hand, studying what happens before and what happens after, bar by bar. A computer won't do that for you.

The principles are few, but in order to apply them, you must forget a lot of what you think you know, which is why it's easier for a beginner to do this than a "pro" whose head is full of false facts about the way things work. As I said, while this is simple, it is in no way easy. But as long as you can put faces to the movements you see, you shouldn't have any insurmountable difficulties.
 
DT's daily data has got volume but the intraday hasn't. Intraday has got U and D instead - the no. of up ticks and the no. of down ticks.
 
As far as old data goes, whatever program you're using ought to have some sort of support board where you could ask somebody to send you his data file.
 
Thank you Db. That has cleared a little fog. Poring over old charts by hand is exactly what I had in mind for this weekend, and plenty of future weekends. I particularly like it when I realise that I have missed a potential R or S.

I realise that the naked price and volume approach requires plenty of hard work, but what's wrong with that? As far as I am concerned, being a home based trader is exactly the same as running a small business. It can be tough going, but it beats working for someone else.

The rest of the Practicum is on my Christmas present list.

tune
 
Hey Tune,
I spent many hours this week, just looking at charts I'd printed out. First I stacked them randomly and viewed the whole chart, looking for patterns of BO's and reversals. Then I stacked them by time sequence, one day after the next and covered the future action with another piece of thick paper while my eyes were closed, -then slowly moving it to the right one tick at a time to see if I could recognize those patterns as they were developing.

Well I was feeling pretty smug about it until I'd gone through about 5 pages and I realized I was getting a lot of help from the charting program. It automatically sizes the screen (and hence the printed chart) to acccomodate the range for that day. Well - duh - no wonder it was so easy to predict the major support and resistance for that day... I mean if you are within the bottom 1/2 inch of the paper it can't go too much lower can it?!

Well the exercise wasn't wasted, there was plenty of support, resistance, bo's and reversals in the middle of the page too - and those were the ones that I felt really good about. And I have a whole series of marked up charts that have been 'seared into my brain'. But the next time I do it, I'm going to find a way to do it on screen so that it is more realistic..

JO
 
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JumpOff said:
Well - duh - no wonder it was so easy to predict the major support and resistance for that day... I mean if you are within the bottom 1/2 inch of the paper it can't go too much lower can it?!
Which is precisely why it's also useful to consider your chosen instruments in multiple timeframes.

A different perspective?
 
I see what you mean JO. Perhaps you could get some big 20 day 5 minute charts printed out at a printing shop. Something like A2. I don't know how much they would cost but it can't be that much.

tune
 
JumpOff said:
Hey Tune,
I spent many hours this week, just looking at charts I'd printed out. First I stacked them randomly and viewed the whole chart, looking for patterns of BO's and reversals. Then I stacked them by time sequence, one day after the next and covered the future action with another piece of thick paper while my eyes were closed, -then slowly moving it to the right one tick at a time to see if I could recognize those patterns as they were developing.

Well I was feeling pretty smug about it until I'd gone through about 5 pages and I realized I was getting a lot of help from the charting program. It automatically sizes the screen (and hence the printed chart) to acccomodate the range for that day. Well - duh - no wonder it was so easy to predict the major support and resistance for that day... I mean if you are within the bottom 1/2 inch of the paper it can't go too much lower can it?!

Well the exercise wasn't wasted, there was plenty of support, resistance, bo's and reversals in the middle of the page too - and those were the ones that I felt really good about. And I have a whole series of marked up charts that have been 'seared into my brain'. But the next time I do it, I'm going to find a way to do it on screen so that it is more realistic..

JO


What are you trying to accomplish? What are your objectives? 1, 2, 3 . . .
 
Another exercise

Sulong,

There has been a narrow range day again(Fri) on the NQ. Do you want to discuss price/strategy at this particular time?

erie
 
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