# Need Guidance - TA/Momentum Based Strategy



## Rypieee (23 January 2017)

Good Afternoon fellow ASF Members,

I wanted to get some help on fine-tuning my trading plan, in particular the following topics:

1) Position Sizing (including how many positions can be taken up within a portfolio)
2) Stop-loss analysis/ how to find the optimum level to set my stop loss targets
3) Filtering out optimum trades to take 
4) Risk Management

If you could elaborate on your methods or provide any advice to me that would be very much appreciated!

1) Position sizing

Based on my current trading plan, I am allowed to have a maximum of 15 open positions at any given moment. I am setting up my position size through the maximum risk allowed (between 0.5% to 1%) based on total portfolio value at the given time (rounded to the nearest hundred). A starting position cannot be more than 10% of the portfolio value.

Example: 
Portfolio value = $50,000
I wanted to buy into stock ABC and my entry price is $1.00, my stop loss is $0.90 and my maximum risk allowed on the trade is 1% of the PV which is $500. I would take $500 divide by the difference in the entry and stop loss price ($0.10) in order to get to the number 5000, which is the number of units I can buy in the stock. I would then end up with $5000 worth of stock ABC at the entry time. $5000 is also 10% or less than the PV so I'm still within bounds. Should the position size be more than 10% due to a wider range in entry and stop loss levels, I would scale the position size to 10% or below.

2) How to find stop loss levels

When I find a trade that I like, I would allocate my stop loss levels between 2 support levels below it's current price. I also use the ATR indicator to allow my chosen stock to weave about between x2 and x4 of the ATR.

Example:
Stock ABC had a recent breakout above $2.00 and the two support levels below that breakout is at $1.80 and $1.60. The ATR on stock ABC is $0.08 which I would then quantify based on my trading plan that I am looking for a stop loss target $0.16(x2 ATR) and $0.32(x4 ATR) from my entry price ($2.00). That means that my stop loss level has to be between $1.84 and $1.68 and in this example. I would set my stop loss to be $1.75.

3) Filtering out optimum trades to take 

I tend to filter my stocks based on the following measures first:
-Market Cap above $50million
-Share price above $0.10
-Average daily trade above $75,000 (x10 of maximum position size or my current portfolio value)

I do my scans to create my watchlist weekly, on the weekends, rather than daily(due to my FT job).
Once I compile a list to scan, I would manually eyeball each chart to find setups that I am looking for. I can use a technical filter, however, I am just starting out and I want to train my eyes on looking for certain set ups manually.

I tend to eyeball on average 500-600 charts on a weekly basis and I look for stocks that are making new highs with recent breakout over resistance OR stocks that look like they are reversing from their downtrend.

My charts display the following criterias:
-3 year time frame on weekly OHLC
        -10 EMA
        -30 EMA
        -150 WMA (Price action needs to be above 150 WMA to be consider - Thanks Stan W.)
-Volume histogram
-ATR
-RSI
-Guppy's long and short term MMA (I dont use this indicator, I just like it there hehe, I used to use the GMMA but decided to not rely on it anymore)

I would then create my watchlist from the stocks found and go through my analysis from there on to find things like recent breakout above resistance with supporting volume and candle stick analysis.

4) Risk Management

I am fairly good with keeping to my trading plan and abiding by my stop losses, however, I recently compiled my open trades into an excel spreadsheet to see my stats and my open trades at the moment is risking 8% of my PV. Do you have a level or % of maximum drawdowns? If so, what is it?

I feel like the 8% risk that I am current expose to feels a tad too high but then again, it could be because I am looking at this for the very first time!

As for Diversification, I adopted Peter2's diversification strategy which is to only have 2 stocks at the very most in a given industry/sub-industry. Only two stocks can be in "metals & mining-steel" at the same time for example.

Conclusion:

I have recently seen some weakness (past 2 months) in my portfolio as the overall market has slumped and I have noticed my profits are starting to be taken away. Out of the 4 topics that I have outlined, is there any issues that you experienced folks could point out for me that could be causing a fall in my PV? 

I believe the culprits for my recent drawdowns are from my stop-loss setting strategy and at times, I feel like I am being overly generous with the stop loss range. I also believe that my position sizing strategy can be brushed up on as I use a range between 0.5% and 1% of maximum risk, depending on how risky the stock looks to me. This is also based on discretion and not a systematic process based on various indicators (E.G I found a real estate stock that I like but the macro factors are not supporting real estate stocks so I allocate 0.5% of max risk to that stock).

Thank you for your time in reading my queries and I look forward to hearing from you!


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## tech/a (23 January 2017)

How do you know you have a long term profitable trading plan?

These ideas seem to be just that----ideas with no 
Basis for positive expectancy.

Any answers to your questions would need to then be tested


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## Rypieee (23 January 2017)

*How do you know you have a long term profitable trading plan?*
I don't know if I have a profitable trading strategy but what I have is drawn from different authors and perspectives + my own. Ultimately, I will be optimising my TP as I go through different experiences to teach me about trading. I'm afraid that I don't have a real person to guide me through every step of the way and the only sources I can get are from books and forums such as ASF.

Specifically on my risk management, I believe that I have sound risk management techniques - or at least the underlying idea of them are in tact, I just need to find out how to fine-tune the techniques in order to optimise my returns.

And on my scanning, I haven't found a particular set up or pattern that I am familiar/comfortable with and it is a very broad filter at the moment but I do intend to narrow it down to find things I am comfortable with or niches I can take advantage of... Obviously that would come with time and experience once again I suppose...

*These ideas seem to be just that----ideas with no basis for positive expectancy.
Any answers to your questions would need to then be tested*
The only positive expectancy that I have are that popular authors have support them and that on forums such as this, part and parcel of my techniques have been echoed across different threads as a good way to "manage risk" for example or "scan charts".

Other than that, I have no other avenue for knowing the positive expectancy of my TP unless I do it and review it accordingly. 

As mentioned as well, there is a level of discretion applied to my TP to the point of gut feeling at times. I don't believe those variables can be quantified into a systematic TP viable for back testing? My main priority is to control the constants such as "having total Open risk below 10% of PV" or "building a position size based on maximum risk" while letting my discretionary side be itself - developing constantly through experience.


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## tech/a (23 January 2017)

Enjoy the journey


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## Wysiwyg (23 January 2017)

My 2 cents. You're position sizing method is a solid base, gut feel is better stated as action based on experience, each stock has its own nuance, stock index context (e.g. direction, run) is influential, consider limit orders rather than at market, identify (experience/testing) higher probability trades although this is easier posted than done.


> I would manually eyeball each chart to find setups that I am looking for. I can use a technical filter, however, I am just starting out and I want to train my eyes on looking for certain set ups manually.



 If success was guaranteed with a buy when this happens and sell when that happens rule then everyone would be doing it Be probably right often.


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## peter2 (23 January 2017)

Ryan, there's too much in your first post to discuss in depth. I first think you need to simplify what you're trying to do. You haven't mentioned what your underlying strategy is. Are you looking to trade a trend or a swing (momentum)? Are you going to buy break-outs or buy pull-backs into an existing trend. Are you trading price charts or a group of pre-selected companies with acceptable FA ? 

Once you understand what you're trying to do I think you'll be able to simplify many details. For example, you've got four prices for your iSL. You only need one or do you even need one? Why is an iSL important to you? 

Using a wide iSL and 10% limit you could end up with 15 - 18 trades. How do you know you can handle so many trades? 
Hint: You won't, because you've already mentioned the loss of open profits as the market falls. 

I'd like to ask why trade individual stocks, why not a few ETF's? 

This is really important. You've got to examine your beliefs about market behaviour and create something that fits your beliefs. 

Once you've established your TP and it doesn't matter what it is. How are you going to have the confidence to trade it exactly as you've written it?


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## Triathlete (23 January 2017)

I think having 15 open position to trade when starting out is way too much.
I would stick to 6 positions.
Since you are not sure if your plan has a positive expectancy ,maybe you should put your current plan through some backtesting to see if it would have worked previously with your rules.

Pick the stocks that you are interested in and go back a minimum 5 years and longer the better and trade them as if you were live and see what you come up with, at least you will have some idea of what would have happened before....still nothing is guaranteed going forward in trading...good luck..!!


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## Rypieee (23 January 2017)

Hi Peter,

To answer your questions in order to give you more insight to my TP (sorry I didn't give those information out as when I was writing up the post, the topics listed were the areas I was seeking advice for, hence, not providing the bigger picture).

_*1)You haven't mentioned what your underlying strategy is. Are you looking to trade a trend or a swing (momentum)? Are you going to buy break-outs or buy pull-backs into an existing trend. Are you trading price charts or a group of pre-selected companies with acceptable FA ? *_

I am trading with the trend and I am buying on break-outs for both existing trends and trend reversal set ups - buying on the pullback makes me feel uneasy as it does not provide that level of confidence in comparison to a breakout. I used to filter out companies via FA before doing my analysis on them but I have changed the tone in December when I was putting my head down to write myself up a trading plan that I follow [I have not deviated from it yet - some good news I suppose]. Now I select a pool of stocks based on simple metrics, wouldn't consider it FA, such as market cap and avg daily trade to ensure that liquidity is readily available in the pool of stocks. After that, I apply chart analysis to that pool and create my watch list.

_*2)Once you understand what you're trying to do I think you'll be able to simplify many details. For example, you've got four prices for your iSL. You only need one or do you even need one? Why is an iSL important to you? *
_
I have one iSL for every opportunity I find, I think you might be getting confused with my initial statement. I use the ATR and the Support levels I see as a range as to where my iSL would sit between.

"Example:
Stock ABC had a recent breakout above $2.00 and the two support levels below that breakout is at $1.80 and $1.60. The ATR on stock ABC is $0.08 which I would then quantify based on my trading plan that I am looking for a stop loss target $0.16(x2 ATR) and $0.32(x4 ATR) from my entry price ($2.00). That means that my stop loss level has to be between $1.84 and $1.68 and in this example. I would set my stop loss to be $1.75." (Snippet from initial post)

I just wanted to get people's opinion on how they determine what iSL they would use such as "placing iSL below recent support levels". Because my trades tend to be weekly based and with a longer time frame in mind, setting a iSL just below recent support level might not be so viable and can at times, kick me out of trades when it is just the stock's natural movements.

An iSL is very important to me because I know that I need a determined price point to execute a decision set prior to entering a trade. I have tried managing my open trades without iSL and that failed miserable so I don't believe that I am suited to that. It also provides me a sense of direction and conviction in an emotional phase (deciding to sell the stock). 

*3)Using a wide iSL and 10% limit you could end up with 15 - 18 trades. How do you know you can handle so many trades? 
Hint: You won't, because you've already mentioned the loss of open profits as the market falls. *

Since inception of my strategy in early December, backed with a trading plan that still needs fine-tuning, I am sitting on a net return of -2%. I am sticking to my trading plan and managing my open risk as best as I can, but I am still definitely learning from the likes of you in how to better manage my portfolio and adding components of your strategy that I find would add a significant advantage to me. For example, your "total capital risk exposure of 5% on the Mom Book" was something that was lacking in my strategy and I will be adopting it going forward as I can see the benefits of that and how it can control my open risk to a manageable level.

I wasn't concern about the loss that I have incurred on my stocks as they are all sitting within their parameters and was comfortable to continue holding them. I was more unsure on how to ensure that I don't over expose myself - thanks to you, I have a solution to the problem now and expect that issue to subside once I ensure that my total open risk is below my maximum threshold This strategy will control the number of trades within my portfolio based on the risk at the time 

*4)I'd like to ask why trade individual stocks, why not a few ETF's? 
This is really important. You've got to examine your beliefs about market behaviour and create something that fits your beliefs. *

Never actually considered trading ETFs before... Should something happen to me further down the road and I pull the plug on trading because of failure, I might decide to start back again in the ETFs, thanks for the suggestion 

*5)Once you've established your TP and it doesn't matter what it is. How are you going to have the confidence to trade it exactly as you've written it?*

I am going to trade based on my TP that is still developing and I am going to do monthly reviews on my actions and selection to see if there is any activity that causes me weakness. I started keeping a record of what I do and why so that future me can reference to it and decide what needs fixing In fact, since December, I have a trade book that I manually write my notes in and its taken up 12 full pages (doesn't sound like much but there is a lot for me to review when the month is up).

In the long run, I hope that I manage to develop my TP according to my personality and tolerance to the point that I am comfortable in running the strategy. The monthly reviews are also in place to ensure that the TP is improving and not destroying my capital and myself.

Thanks Peter!!


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## Rypieee (23 January 2017)

Wysiwyg said:


> My 2 cents. You're position sizing method is a solid base, gut feel is better stated as action based on experience, each stock has its own nuance, stock index context (e.g. direction, run) is influential, consider limit orders rather than at market, identify (experience/testing) higher probability trades although this is easier posted than done.
> If success was guaranteed with a buy when this happens and sell when that happens rule then everyone would be doing it Be probably right often.




Hey Wysiwyg,

Thanks for the reply,

Also thanks for the acknowledgement in my position sizing, it is comforting to know that what I have learnt from authors are widely accepted (by 1 person so far anyways).

Yes, I utilise at limit order and I made the conscientious effort to make sure that I never chase the price, buy orders tend to be left on the market until filled OR after 5 days whereby it is retracted and I will re-analyse the stock to see if the situation is still the same (I would analyse that scenario on a daily chart to see if a pullback could potentially becoming).

I still need to work on my scanning ability to find high probability trades with acceptable risk/return ratios and I hope that comes with experience. At the moment, I seem to be getting about 25% good trades on my scans, with the remaining 75% being a weak or failed setup - risk managed though. Ideally, I would like to start being able to reach a "winning" ratio of 50-60%.


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## tech/a (24 January 2017)

There is quite a bit in the trueisms presented here that I don't agree with.

Let's start with chasing price.
What does that mean to you all
Why is it bad?

Do you think price moving strongly in your direction--long or short could be Easier to trade than attempting to anticipate price direction?

If not why not??


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## Rypieee (24 January 2017)

tech/a said:


> There is quite a bit in the trueisms presented here that I don't agree with.
> 
> Let's start with chasing price.
> What does that mean to you all
> ...




Hey Tech,

Thanks for the reply,

I shall use an example to explain my theory:
I have set a entry price after a breakout that I deem is worthy to be bought into - lets say the price breaks out at $2.00 and I set my entry at $2.10 with a iSL of $1.80. The risk I put onto the trade is $0.30 and the risk-return that I am seeking is x2 of my risk. If the price shot passed $2.10 and landed at $2.30, the risk (based on my stop loss conditions) is now expanded to $0.50 and has increased my open risk. Hence, adding more risk onto the trade that I will need to achieve higher target price to have the same Risk/Return .

I would love to hear your thoughts on price chasing though, there will definitely be something that I can learn from the chart master

Yes to the fact that a leap in price normally represents strong momentum behind the trade and the probability of that continuing is enhanced - I am thinking of stocks that open with a Gap tend to run strongly for the next few trading days and tend to create a resistance below the level that the gap started from. (Correct me if I am wrong).

In a situation where I see a gap forming, I am happy to pay for the price of the stock at the occurrence of the gap. 

If its a standard breakout above horizontal resistance or a ascending triangle breakout (no gaps), I would normally set my entry price just above the breakout range, even if it means that the stock has run pass my entry price and my parcel isn't filled - I am not fuzzed too much by it, if a pull back does occur from the breakout and my parcel gets filled, then I can trade the stock according to my settings.

**I mentioned to P2 that I do not like buying into a pullback - which explicitly means that I won't be looking for stocks with pull back potential. Should I intend to buy a stock after a breakout and it pulls back to fill my order, I still consider that as a breakout trade - albeit a different entry point on the charts (in terms of time wise, $ is the same).


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## Triathlete (24 January 2017)

Rypieee said:


> Hey Tech,
> 
> Thanks for the reply,
> 
> ...




One thing in your example that I do not see is where is your strongest resistance levels above your breakout and entry point????.....

What if their was a very strong level at $2.15 would you still take your trade at $2.10 as per your example ...

I would think not since their would be a high probability that the trade would reverse very quickly......

Not every resistance level is the same and a trader needs to know which ones are the strongest this way you have a vey good idea of how much price is likely to rise before reversing...

I personally like to see at least 15% from my entry price to my strongest levels to give myself some breathing space.


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## tech/a (24 January 2017)

*Chasing price.*
I presume (correct me if wrong) That this means you don't place an order or buy if price trades over a pre determined entry price before you've taken a trade.

When discretionary trading having a hard and fast rule that could leave you at a disadvantage I personally think is not the best policy.

Pixel changed my mind when one day he told me about a friend of his who relished finding stocks that had taken off. They wouldn't be put off by a move above a resistance area.
I had to admit that I had watched many fly past me --- so I investigated.

I came up with the following rules for trading price which had moved away from an ideal entry.
Often this happened and Ill bet you'll be nodding when I say your nightly scan turns up a runner that you seemingly missed.
Firstly I'm not advocating taking every trade where you have to do some chasing.

(1) Never trade a price that has risen 30% or more (From your ideal buy price) before you see it.
(2) Gaps are good.
(3) Be aware of close resistance less than 6 mths.
(4) Beware of Massive volume-- moderate volume is preferable.
(5) Look for past price action which indicates effort to get price moving long term in your direction.

Here is a chart with all of the above*.(Bottom Chart)*

And then there is the question of position sizing and risk management.
The chart below is how I like to do it*.(Top Chart)*


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## Triathlete (24 January 2017)

tech/a said:


> *Chasing price.
> I presume (correct me if wrong) That this means you don't place an order or buy if price trades over a pre determined entry price before you've taken a trade.*
> 
> When discretionary trading having a hard and fast rule that could leave you at a disadvantage I personally think is not the best policy.
> ...




That is sort of what I mean.
I like to know where my strong levels are as this gives me an idea if I will take a trade or not if their is enough in the move or not.

If we are too close to a strong resistance area I will wait until their is a break and hold above this strong resistance level area even though we have had a breakout,it could still be false if we are very close to the strong level so need to wait  before I take the trade.

Lets look at the above example again from Rypieee.

I look at the chart and see there was a move from $1.00 to $2.00 and now price has pulled back and consolidating so now I am waiting for the next breakout at above $2.00

I have also worked out that there is strong price levels at $2.15 and the next strong level at $2.60 which I have marked on the chart, also remember that there are other resistance levels between these prices but they are not significant in my analysis.

So now price has begun moving again after pulling back to $1.60 this is less than 50% of the previous move which indicates to me that the stock is strong and likely to rise 100% this would bring price around $2.50 and we know there is a strong resistance area just above at $2.60 there is a very good chance we will get a move to this level if price breaks and holds above $2.15. At this price I would take my trade.


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## Rypieee (25 January 2017)

Triathlete said:


> One thing in your example that I do not see is where is your strongest resistance levels above your breakout and entry point????.....
> 
> What if their was a very strong level at $2.15 would you still take your trade at $2.10 as per your example ...
> 
> ...




Hey Triathlete,

I would run my charts for over a period of 3 years and majority of my trending stocks have to be trading at it's highest high at the moment - hence the lack of resistance in that instance. My trend reversal stocks are also scanned across 3 years but I like to see support building and trend reversing in the recent 12 months of the chart. When I do analyse stocks like that, I will always consider the potential resistances that I might be facing with a stock and at times, may decide against taking a position because the Risk/Reward diminishes with resistance blocking the trend/momentum.

Do I look at resistance levels in a stock beyond the 3 year time frame? No I do not include that into my scans or analysis - however, I am aware of any major resistances or supports going back 10 years. We may be looking at 2 stocks with the exact same movement over a recent 3 year time frame and if it comes down to choosing between the two to take a position in (if i can only cover one position) then I would have a quick glance at the 10 year history and see if any major resistance/support levels may posed as a threat.


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## Triathlete (25 January 2017)

Rypieee said:


> Hey Triathlete,
> 
> I would run my charts for over a period of 3 years and majority of my trending stocks have to be trading at it's highest high at the moment - *hence the lack of resistance in that instance*. My trend reversal stocks are also scanned across 3 years but I like to see support building and trend reversing in the recent 12 months of the chart. When I do analyse stocks like that, I will always consider the potential resistances that I might be facing with a stock and at times, may decide against taking a position because the Risk/Reward diminishes with resistance blocking the trend/momentum.
> 
> Do I look at resistance levels in a stock beyond the 3 year time frame? No I do not include that into my scans or analysis - however, I am aware of any major resistances or supports going back 10 years. We may be looking at 2 stocks with the exact same movement over a recent 3 year time frame and if it comes down to choosing between the two to take a position in (if i can only cover one position) then I would have a quick glance at the 10 year history and see if any major resistance/support levels may posed as a threat.




Ok....I was just making the point to be aware that before taking a trade understanding where the strong levels are because these are points at which price can stop at and reverse and again it depends on the type of trader you are some are more aggressive than others......


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## tech/a (26 January 2017)

Blue sky will eventually see resistance
How would you spot it?


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## Triathlete (26 January 2017)

We need to be able to spot and be able to read the market in context,When a stock finds resistance and stops rising  we either have:

Equilibrium....where the buyers and sellers are equal in number resulting in the stock trading sideways.

or it is in

Disequilibrium, where we have more sellers than buyers causing the price to stop rising and fall again.

However having the skill to work out where the price is likely to reach prior to your trade is what is needed,this way you are being proactive with your trading and can take the relative steps if it is not working out as you had anticipated.

I use a combination of Price, Pattern and Time analysis with this as it gives me the  points on a chart that I should be watching before the trade and during the trade.


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## tech/a (26 January 2017)

For me there are 3 things to watch for
Attempting to predict where they could fall I have found to be as effective as swimming against a rip.

(1) Volume
(2) Range
(3) Tests

I have found you can pick the rip and see how to get out if it.
There are some key things to look for within the 3 indicators.
Often 1 and 2 will be very clear
At other times 3 may come into play

Perhaps you or someone could work through 1-3
If their findings are similar to my own


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## Triathlete (26 January 2017)

tech/a said:


> For me there are 3 things to watch for
> *Attempting to predict where they could fall I have found to be as effective as swimming against a rip.*
> 
> (1) Volume
> ...




Here is what I think and I keep going back to the strong levels which can be calculated.

Now if your stock has had a good run up and is now consolidating in a sideways movement we can recalculate further strong levels both on the upside and downside and these are marked  on the chart.

From here I  we need to wait to see which way the stock is likely to break.

I will also try and work out what EW we are currently on if I can..... as it is not always obvious , this would give me some confidence as to where I am now and which way it is likely to move and  how far it is likely to fall using EW Theory and in combination with the strong levels which have been calculated. As I have said previously I need to see at least 15% if not I stay out.

If I cannot work out the EW I may use Cycles Theory and in what phase I am in to make a trading decision,it just all depends.


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## tech/a (26 January 2017)

EW can be handy


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## Rypieee (26 January 2017)

tech/a said:


> *Chasing price.*
> I presume (correct me if wrong) That this means you don't place an order or buy if price trades over a pre determined entry price before you've taken a trade.
> 
> When discretionary trading having a hard and fast rule that could leave you at a disadvantage I personally think is not the best policy.
> ...





Hey Tech/A,

Really appreciate your post there! I don't place buy orders in the market the same way that I don't set stop losses in the market. I do have the stop loss levels in mind and I check my portfolio throughout the day to see if the market has stopped me out. 

I remember setting stop loss orders when I first begun but at that time, my stop loss levels were too tight/close to my entry price and I kept getting stopped out for no reason... Now that I have more room with my stop losses, I am not getting stopped out as often and my trades tend to do better - given that they have more room to performance. I might consider putting stop loss orders again the in the future should I feel comfortable with my stop loss settings. (At the same time, I have some sort of conspiracy theory that market makers can force prices down through the day to fill their orders before bring it back up and not having a stop loss helps to avoid such a situation, or lose me a lot of money by not adhering to my stop loss LOL)

With my buy orders, I set this rule for myself that I cannot buy a stock until after 12pm everyday (sounds silly doesn't it) and the reason behind that is because I want to miss out on the emotional part of the trading hours which is the opening of the day. I used to have a list of stocks ready to go every Monday morning that I would want to purchase in and I could not wait to get into the stock - over time, I realised that buying in the morning actually meant that I am buying the stock at the highest point of the day (most of the time). After 12pm, I would set my buy order at my pre-determined entry price and wait for the order to fill.

I am going to take into account your practices regarding position entry seriously too because I have also experienced certain stocks running away from me and in fact, shooting the lights out with its rate of increase (makes me sad).

(1) Never trade a price that has risen 30% or more (From your ideal buy price) before you see it.
(2) Gaps are good.
(3) Be aware of close resistance less than 6 mths.
(4) Beware of Massive volume-- moderate volume is preferable.
(5) Look for past price action which indicates effort to get price moving long term in your direction.

Could you please elaborate on point 1,4 and 5?
1) Never trading a price that has moved 30% beyond my pre-determined entry price? If I found an opportunity and I set my buy price at $1.00, I cannot pay above $1.30 for the stock? OR If i found a stock that recently broke out and it moved up 30% already, to remove that out of my potential buys because it has already "exhausted" it's move?

4) I always had the thoughts the a strong breakout coupled with strong volume was a good sign? I am no expert in volume analysis but from a B/O point of view, strong movement with strong volume = good sign? I got this from Leon Wilson's Business of Share Trading book

5) Could you elaborate on point 5 for me, I don't quite understand that..

Thanks for sharing your pointers with me Tech/a, it will assist me in my development


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## Rypieee (26 January 2017)

Triathlete said:


> Here is what I think and I keep going back to the strong levels which can be calculated.
> 
> Now if your stock has had a good run up and is now consolidating in a sideways movement we can recalculate further strong levels both on the upside and downside and these are marked  on the chart.
> 
> ...




Hey Triathlete,

I have read on the very basics of Elliot wave theory and Dow theory, no idea on how to use fibbs lines or what cycle thoery is. Have you got any good resources and I can read about them? When I have some time, I shall do some google searches about them and maybe watch a few videos on them to understand it better.

From my very basic understanding of EW, I know price moves up in 5 stages and down in 3 stages, do you try and determine which stage you are sitting at and making a subtle prediction over where it could go from here on out?

Also with EW, the one thing that I notice (im not expert) is that you can perform EW over a 1 year chart, 3 year chart, 5 and 10 year chart and each of them could be telling you that you are in a different stage?


----------



## Boggo (26 January 2017)

Hi Rypieee
I don't want to derail where you are with tech/a etc but I thought I would just insert a bit of info on with an EW example that I am currently watching. I won't be entering into an EW discussion.

EW can be a pita, only works probably 25% of the time on 25% of the market and can't be back tested.
From the 480 stocks that I track in the All Ords there are just 7 with a reasonable EW pattern at the moment !
One of those is TLS, I have included a chart of a pattern that has passed but if you look at the TLS thread elsewhere you will also see what I am watching for at the moment.
As Triathlete is saying, EW can give you a big picture of where a stock may be or may go to.

(Chart of TLS ABC pattern below and some basic EW rules - click to expand)


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## Rypieee (26 January 2017)

tech/a said:


> Blue sky will eventually see resistance
> How would you spot it?






tech/a said:


> For me there are 3 things to watch for
> Attempting to predict where they could fall I have found to be as effective as swimming against a rip.
> 
> (1) Volume
> ...




In a blue sky scenario whereby I do not have a clue as to when the next resistance level would hit based on previous price levels/actions, I would watch out for the following details.

1)Should the trend slow down into consolidation, I would watch volume during that period to see possible distribution. That is all I got on volume analysis haha

2) Round numbers help me in every instances, not just in blue sky scenarios. If a $4.10 stock was sitting on it's highest high and was moving towards $5.00, I would trail my stop loss levels as the price rises towards $5.00. I tend to be more careful with my stop losses as price moves towards round numbers like $1, 2, 5, 10, 20, 30 and so on because I have a belief that people tend to like round numbers I sometimes set my profit taking levels before those round numbers at times to avoid possible resistance.

I'm not sure if my volume analysis can be further improved on - I'm sure that there is more than what I know regarding volume analysis.

I'm not sure how range can help in determining possible resistance or forecasting potential downturn but from logical assumption, wider ranges represent less buying compared to a tighter range because there isn't a point of support to close the slip in the SP?

3rd one - Test - I'm not entirely sure what this means haha


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## Triathlete (26 January 2017)

Rypieee said:


> Hey Triathlete,
> 
> I have read on the very basics of Elliot wave theory and Dow theory, no idea on how to use fibbs lines or what cycle thoery is. *Have you got any good resources and I can read about them? *When I have some time, I shall do some google searches about them and maybe watch a few videos on them to understand it better.
> 
> ...




Here is where you can find information regarding EW......www.elliottwave.com

The book:
Merriman on Market Cycles : The Basics by Raymond A. Merriman  

A comprehensive and clearly understandable text about the art of determining cycles lengths and recognizing patterns within those cycles. A book for those who want to improve their timing skills by integrating cycles analysis with technical studies. Includes listing of long-term and short-term cycles in U.S. and Japanese Stock Markets, Gold, Silver, T-Bonds, Interest rates, Currencies, and Grain Markets. 


website below.
www.mmacycles.com


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## tech/a (28 January 2017)

*There is a lot to VSA which you don't/wont find in books*
*It is a fascinating field one which I have spent 20 yrs watching and analysing. Much is personal experience but I'm sure over time you'll see what I have seen. While conventional VSA is a good starting point it really is prep school.*

Could you please elaborate on point 1,4 and 5?

1) Never trading a price that has moved 30% beyond my pre-determined entry price? If I found an opportunity and I set my buy price at $1.00, I cannot pay above $1.30 for the stock? OR* If i found a stock that recently broke out and it moved up 30% already, to remove that out of my potential buys because it has already "exhausted" it's move?
*
*This is a rule of thumb. Moves particularly with very high volume of 30+% in one session are to be looked at with suspicion. Very often a sign for a short play. The greater the % the riskier a buy is.*

4) I always had the thoughts the a strong breakout coupled with strong volume was a good sign? I am no expert in volume analysis but from a B/O point of view, strong movement with strong volume = good sign? I got this from Leon Wilson's Business of Share Trading book

*It can be but if volume is very high 5+ times average and range is 5 X average (see 1)*
*Strong volume with a gap moderate range finishing on a high is ideal. There is a lot then to come from the analysis of the up coming bars which you should in most cases be trading!---not looking!*

5) Could you elaborate on point 5 for me, I don't quite understand that..

*Price wont normally rise without some effort being seen on the buy side and also can be spotted with the lack of effort or desire from the sell side. you should become proficient at spotting effort from buyers and withdrawal from sellers (Who want to hold to make profit)*

Some charts to illustrate and part explanation of 5
Ill do some more up when I get time.(They take a while!) That's why mentors like to be paid!

*Click to expand*


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## Rypieee (29 January 2017)

tech/a said:


> *There is a lot to VSA which you don't/wont find in books*
> *It is a fascinating field one which I have spent 20 yrs watching and analysing. Much is personal experience but I'm sure over time you'll see what I have seen. While conventional VSA is a good starting point it really is prep school.*
> 
> Could you please elaborate on point 1,4 and 5?
> ...




Hey Tech/a,

Thanks for the charts and I appreciate the time you have put into your replies, has opened up my eyes to more possibilities that I have yet to look into. You have made it easy for me to understand what you are trying to put across and can see why you have those rules set into place for yourself.

I am no volume expert and I do intend to try and learn more about volume analysis to couple it up with my T/A knowledge, any sources to recommend for me to start on? In the mean time, I shall suss out whatever I can on the internet.

Your last point of the reply "*Price wont normally rise without some effort being seen on the buy side and also can be spotted with the lack of effort or desire from the sell side. you should become proficient at spotting effort from buyers and withdrawal from sellers (Who want to hold to make profit)"
*
Could you please elaborate on that? I get that in order for prices to rise, buyers will need to overwhelm sellers in order for the price to push up OR sellers have to be withdrawing as you mentioned (increased demand or decrease supply - basic economics). How can you read that from the charts? Do you combine the price action and volume to tell you an underlying story invisible to the untrained eye?

I have actually ordered the book " Japanese Candlestick Charting Technique" to teach myself more about how to read candle sticks, I have very basic skills at the moment, hoping that in time, I will be able to be proficient at candlestick reading


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## CanOz (29 January 2017)

This one graphic says so much....


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## Rypieee (29 January 2017)

CanOz said:


> View attachment 69738
> 
> 
> 
> ...



Hey Canoz,

That does give a very good picture of the underlying asset, Wow!
Liquidity = number of open orders on the market at the time?

What is "High volume + "HFT only" liquidity = flash crash"?
I am guessing that it means the HFTs ate up all the liquidity in one swoop (high volume coupled with an instant nil-liquidity) to crash the price?


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## tech/a (29 January 2017)

Can
It's a nice graphic

Which is very clear once all the action has passed

There were 2 good trades on the chart
One long
One short

If I was to use this in my trading how can I tell when conditions
Have altered
How can I be sure that it's not a blip but something
that will sustain.
Does the software show something at or around the
Areas of change that would alert me to a change that was potentially tradeable

Always looking for things that are easily applied in a practical way


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## CanOz (29 January 2017)

That is likely a custom program from the nanex owner, Eric hunsader. He's a recognized expert on HFT. The information regarding liquidity is available via a dom and depth recorder. They're becoming more popular as part of trading platforms. There are three or four around now....Bookmap, jigsaw, etc.


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## tech/a (29 January 2017)

Can
I've never been any good at reading DOM
I find myself predicting shadows
Particularly liquid markets DOM changes dramatically in 20 seconds
Making any long term prediction (3 min)
I find impossible in fact I find it very distracting from what I'm reading in range 
Volume and pattern
I've even tried to see what these guys on you tube see 
Clearly blind !


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## CanOz (29 January 2017)

tech/a said:


> Can
> I've never been any good at reading DOM
> I find myself predicting shadows
> Particularly liquid markets DOM changes dramatically in 20 seconds
> ...




It's not just a DOM, it's a depth recorder...displays liquidity as a heat map.


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## tech/a (29 January 2017)

That's all well and good but from a practical point of view I can't see how it would be tradeable.
Would look pretty and interesting to look back on but if your sitting there with a buy in mind I can't see how it would be timely 
We are looking for change which is easier to see after that change has occurred and confirmed.


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## CanOz (29 January 2017)

tech/a said:


> That's all well and good but from a practical point of view I can't see how it would be tradeable.
> Would look pretty and interesting to look back on but if your sitting there with a buy in mind I can't see how it would be timely
> We are looking for change which is easier to see after that change has occurred and confirmed.



I think you’re still misunderstanding what the depth recorder is showing you. It shows you where buyers/sellers have had their resting orders in the past and when the depth gets to that level you can see in real time if the orders are still there. As price gets to that level, you watch the for the reaction of the buyers/sellers or lack or reaction, you want that liquidity to be real and effective to stop and turn price. There are many different scenarios to trade off of, even times where a larger player will hit the resting orders and then cause a stop run that may result in a new trend.  Because of the change to the laws on spoofing, the possibility that the resting orders in the book are real liquidity now is greater. The liquidity is real and you can see it. Search on Youtube for VeloxPro Bookmap and watch the video to see what I mean. It is literally looking inside your bars / candles. I can’t see an experienced technician like you finding this useless information.


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## Trembling Hand (29 January 2017)

Rypieee said:


> I have actually ordered the book




We all have - trading books. They rarely offer much practical help with trading. And sometimes they actually make reading a market and trading harder if you believe the nonsense. If someone with unknown trading ability writes a book and 1000s of other unknown punters purchase it and give the thumbs up you can fall into the trap of actually going looking for the rubbish you see printed without having a clue if the patterns offered an edge *ever *let alone in your time frame and market.

What are you doing each day to test and learn stuff about the market? Are you trading now? Live or Sim? Have you a reliable system for collecting what you actually are doing stats, thoughts, successes and failures?

Its better to spend 1 month testing real application than 1 month planning and talking about basics. Cuz if you are going to trade in a discretionary fashion getting your head around the basic stuff is years off from profitability. 

IMO of course.


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## peter2 (29 January 2017)

Ryan, you've received a lot of interesting info in this thread but don't let it distract you from your goal. I agree with TH in that you should continue trading your plan and see if you've are able to apply it in real time. You'll probably need six months before you'll have enough completed trades to start making some informed decisions. 

As you're starting you must restrict your losses to small amounts and keep your portfolio heat at comfortable levels. A lot of small losses add up. That's why I use a market filter and don't start as many trades when the market is going down. 

Your first task is to see if you can keep your losses small. If you can't do this, abandon trading. 

Once you can keep your losses at comfortable levels then you can review the effectiveness of your chart selections, entries, position sizing and of course your exits. You may find that a basic understanding of EW or VSA may help in some of these secondary but important aspects. They may help you discover "your" trading style. 

As tech/a as mentioned, "enjoy the journey".


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## tech/a (29 January 2017)

Thanks Can I'll have a look.

As I said not my area.
To be honest I'm happy where I am.
For me it's simple / clear / repeatable.

I realise as I make up those charts that I could explain for chart after chart
What my brain sees in 60 seconds and when trading in seconds.
Not only that but what to do/ when to do it/ plan A,B,C

 The often seen adage of find something that works for you
Prove it,then trade it. Is very true.

So while I can show "a" direction I'm certain that over time it won't be 
YOUR way of trading.
Think wysiwyg once said that a chunk of a number of traders here would be the ideal approach.

Well for many that's what it will be.


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## Trembling Hand (29 January 2017)

tech/a said:


> Thanks Can I'll have a look.
> 
> As I said not my area.
> To be honest I'm happy where I am.
> ...




Yep. Funnily I use a DOM but don't like the new price action tools. Partly cuz i trade thinner order books and can see what I want to see without any extra bells and flashing lights. 

You only need to know what you need to know. But as you have said that is the journey.


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## tech/a (29 January 2017)

Tools?


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## CanOz (29 January 2017)

Trembling Hand said:


> Yep. Funnily I use a DOM but don't like the new price action tools. Partly cuz i trade thinner order books and can see what I want to see without any extra bells and flashing lights.
> 
> You only need to know what you need to know. But as you have said that is the journey.




Yeah I agree that a bookmap has less advantage on thinner markets as participants will accumulate a position over a wider range of prices than in a thicker market. The dom shows the liquidity over the ten or twenty levels adequately enough.


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## CanOz (29 January 2017)

tech/a said:


> Tools?




The newer tools are the bookmap style heat maps I referred to....I believe. 

On an interesting note, I have a mate that was trading prop in Europe, mostly spreads...I asked him if any of the outright directional traders in Europe were using bookmap, his reply was that almost all of them had started using it immediately as it became available on TT.


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## tech/a (30 January 2017)

Ok I see.

I find your comment that lots of people in Europe jump on the latest tools interesting.

My view from buying lots of "tools" 
Is that as an edge in trading Buying/Managing/Exiting most are pretty well average.
I have however found that they have added to my learning of market movement but as they cannot be tweeked for personal observations are poor for direct implementation.

They have helped in mapping structure and pointing to areas which should be observed but fall short in proctical application.

We as traders are far better at it.


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## tech/a (30 January 2017)

tech/a said:


> proctical application




Proctology --- No ordinary duck!


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## Trembling Hand (30 January 2017)

CanOz said:


> The newer tools are the bookmap style heat maps I referred to....I believe.



Yep



CanOz said:


> On an interesting note, I have a mate that was trading prop in Europe, mostly spreads...I asked him if any of the outright directional traders in Europe were using bookmap, his reply was that almost all of them had started using it immediately as it became available on TT.




Probably thick markets and a short time frame?


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## Rypieee (30 January 2017)

Trembling Hand said:


> We all have - trading books. They rarely offer much practical help with trading. And sometimes they actually make reading a market and trading harder if you believe the nonsense. If someone with unknown trading ability writes a book and 1000s of other unknown punters purchase it and give the thumbs up you can fall into the trap of actually going looking for the rubbish you see printed without having a clue if the patterns offered an edge *ever *let alone in your time frame and market.
> 
> What are you doing each day to test and learn stuff about the market? Are you trading now? Live or Sim? Have you a reliable system for collecting what you actually are doing stats, thoughts, successes and failures?
> 
> ...




Hey TH,

Yeah I can see that some of the books that I have already come across offers little to me in terms of being able to scan for an opportunity or differentiating between a good opportunity and a bad one. Example - most trading books will talk about breakout trading and how to apply it to a chart (you want volume to be high, B/O has to be above 3% of the resistance, RSI to be this and your MMAs to be crossed etc) which makes sense when you are reading it and the chart they provide helps to support their thesis but rarely does the perfect scenario happen in the real world and every trade will come with differing background information. I am and will have to work hard on improving my "scanning" ability and being able to read a chart better and understand more if I want to become better and that would be done through experience and reviewing my trade book every month 

The one thing that trading books have given me so far though, is how to manage my risk, how to position size, how to manage losses and how to capture profits - Trade management! Even so, the concepts covered in the books in at most - basic. I took whatever knowledge I have learnt from the book and coupled it up with information provided on this forum (ASF has been a great tool for me to build on my basic understanding so thank you all) to grow and develop my trading plan further to my own characteristics. Since following Peter2's thread, I feel more advanced in my trading methodology and abilities and there is many nuggets to be found across the entire forum!

To sum it all up, trading books may not provide the advanced knowledge for me to be incredibly successful at trading but it gives me a good foundation to start.

*What are you doing each day to test and learn stuff about the market? Are you trading now? Live or Sim? Have you a reliable system for collecting what you actually are doing stats, thoughts, successes and failures?*

I am trading Live and have been for about 9 months, I have set up my trading plan in December 2016 and am trading off the rules of that TP. I also have a Trade Diary, Portfolio management Tool (created by myself on excel) and Trade notes (handwritten into a book) to record my actions and thoughts in that moment. As the TP was only properly developed in December 16 and has been live for about 2 months alone, it is still early days to tell whether my TP is profitable or not - I have allocated a monthly review on the Portfolio and associated notes to see if there is any area of weakness in my TP and try to improve on that. [Wish I started developing my TP earlier when I started rather than just trade without proper guidance , lesson learnt ]

I am comfortable now to take the basic knowledge that I have acquired from books and start to really develop on advanced strategies going forward to optimize my Trading Plan. I still read trading book however, because there is always something that I have not come across before or thought about - lifelong journey

Still a long way off from saying my TP is profitable or my strategies work but in time, I shall find out.


----------



## Rypieee (30 January 2017)

peter2 said:


> Ryan, you've received a lot of interesting info in this thread but don't let it distract you from your goal. I agree with TH in that you should continue trading your plan and see if you've are able to apply it in real time. You'll probably need six months before you'll have enough completed trades to start making some informed decisions.
> 
> As you're starting you must restrict your losses to small amounts and keep your portfolio heat at comfortable levels. A lot of small losses add up. That's why I use a market filter and don't start as many trades when the market is going down.
> 
> ...




Hey Peter,

I have indeed received an abundance of information from this thread and forum, huge appreciation to everyone who has contributed to this for me.

Yeah I will have to stick to my TP and test it out before deciding whether it is profitable or not and to have enough information (historical info on my actions) to determine what I am doing wrong to jeopardize my profits or what I am doing right to make my profits bigger. I might run the TP for 6 months and then come back to the thread with my results 

Surprising, risk management/cutting losers have been the easier part of my trading journey - unlike what the books says, maybe the statement that I read over and over again "Cut your losers and let your profits run" is etched into my brain after all that reading!

Then again, I do have the occasional slip in not adhering to my stop loss BUT the slippage is minimal (maybe 5% at most below my target stop loss was the worst case scenario).

There are many techniques out there that would be handy for my portfolio, such as adopting your method to managing risk exposure or Tech/a's 5 golden rules of entering a stock [mentioned above] that I will seek out while managing my current TP in order to improve the results. Well... how would I know if adopting your technique works? Because I didn't have any of those techniques in the portfolio in the first place and luckily, I managed to catch on and apply it before it is too late (thank god).

Looking forward to this journey of mine eagerly!


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## CanOz (30 January 2017)

Trembling Hand said:


> Yep
> 
> 
> 
> Probably thick markets and a short time frame?




Yeah intraday stuff on the bund, eurostoxx, oil etc....


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## peter2 (1 February 2017)

> I am trading with the trend and I am buying on break-outs for both existing trends and trend reversal set ups - buying on the pullback makes me feel uneasy as it does not provide that level of confidence in comparison to a breakout.






> Found GXY on the weekend (and last weekend too) when it peaked at $0.68. Last weekend I told myself to let the pullback happen to see if it test the previous resistance and jump in on the bounce off previous resistance if it does occur. Sure enough
> Put a buy order in today @ .62 with a stop loss of .52




You've asked for guidance. Here's my first bit of advice. Stick to your trading plan.

Opportunity for an important review: Ask yourself why didn't you follow your TP?


----------



## Rypieee (1 February 2017)

peter2 said:


> You've asked for guidance. Here's my first bit of advice. Stick to your trading plan.
> 
> Opportunity for an important review: Ask yourself why didn't you follow your TP?




I had a gut feeling when typing that message on Tech/a's thread that someone will point that out against my statements on this thread  Thanks for looking out for me on that one Peter!

Should have clarified that up with the correct wording of the statement, on my thread when I said "buying on pullback makes me uncomfortable", it was directed at stocks that have pulled back to below previous resistance levels. I wouldn't buy a trending stock at the point of it's highest low.

GXY is different to me because the pullback (when I saw it) was still occurring above the previous high point $0.54. If GXY was to go below $0.54 but rebounded before it touched $0.30 - I consider that buying on the pull back of a trend because our entry is at the higher low of the trend.


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## peter2 (1 February 2017)

It's not personal Ryan. You know that. A TP is not like a pair of skinny jeans that you feel you must squeeze yourself into them to show off your assets.  

I think you should clarify your TP so that you can follow it. 

ps: Every trader reading this has tried to fit/justify a "gut feel" impulse trade to their TP. We all did it when we started out. I have separate stats on my "gut feel" trades and they're not pretty.


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## ThingyMajiggy (1 February 2017)

peter2 said:


> ps: Every trader reading this has tried to fit/justify a "gut feel" impulse trade to their TP. We all did it when we started out.




What if that's the only thing that works?


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## peter2 (1 February 2017)

If your gut feel trades are overall profitable, then I'd suggest two equally probable options. Either you don't keep records and only remember your winners or your intuition has spotted a pattern that you have not consciously identified yet.


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## tech/a (1 February 2017)

Reversion to me is NOT trading a corrective move.

Shallow tight range lower volume pullbacks are my fav.

There are many trades every day.
You don't have to trade every trade.

There is more to a trade than
Stop
Enter
Exit.


----------



## ThingyMajiggy (1 February 2017)

peter2 said:


> If your gut feel trades are overall profitable, then I'd suggest two equally probable options. Either you don't keep records and only remember your winners or your intuition has spotted a pattern that you have not consciously identified yet.




Ah I wouldn't know how to write down a record when it's based on gut feeling as no two days are the same. I don't understand how you guys have set defined setups. But then again you guys are the profitable ones and I'm the utterly hopeless non-responder with an IQ of 7 so I'll just shut up


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## Triathlete (1 February 2017)

*Trading Plans....*

While you cannot guarantee if you use a trading plan you will be successful, as you need to fine tune each one to suit your personal style, you can be sure that by using a trading plan you will be far more successful in the market than most.

If you change your trading plan you will change the effectiveness,which may not always be for the better.Therefore,each time you change a trading plan,*you need to back test it to ensure it works for you.*

This is probably the greatest downfall of most traders. They get hold of a trading plan and attempt to implement it, *and before long they change it and wonder why it does not work*. *If you are not willing to back test the effectiveness of the changes you make to your trading plan, you are gambling with your money which means there is a much higher probability you will lose.
*
By not proving that your rules or your trading plan actually work is, why so many traders are ineffective and over the long term actually fail.
*
Successful traders back test everything.*

Would you not think that the first person who sky dived from a plane with a parachute tested that what they were about to do actually worked..!!

No difference for a trader or anyone else who wants to be successful.


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## Trembling Hand (1 February 2017)

Triathlete said:


> *Trading Plans....*
> 
> 
> If you change your trading plan you will change the effectiveness,which may not always be for the better.Therefore,each time you change a trading plan,*you need to back test it to ensure it works for you.*



You cannot back test a discretionary trading plan??


----------



## tech/a (1 February 2017)

You can back test certain aspects.

You can back test a lot


----------



## Trembling Hand (1 February 2017)

tech/a said:


> You can back test certain aspects.
> 
> You can back test a lot



Yeah sure you can test ideas but you are kidding yourself if you think a trading plan thats discretionary can be anything but forward tested in real time.


----------



## barney (1 February 2017)

ThingyMajiggy said:


> Ah I wouldn't know how to write down a record when it's based on gut feeling as no two days are the same. I don't understand how you guys have set defined setups. But then again you guys are the profitable ones and I'm the utterly hopeless non-responder with an IQ of 7 so I'll just shut up




LOL ... I hear you Sam.

Re "Trading Plans" ........... The best trading plans are those derived from "experience".

Having to write down and test a  myriad of mathematical possibilities to prove what may or may not work in the future has not been a method I have personally found productive 

However ... Screwing up, then realizing why you screwed up (it took a while!) .... then trying "not to do the same thing next time" has proven to be the greatest trading plan I have found

On that note ..... To be successful ...... If you like Stocks,  Paper trade ..... or if you like Futs/ Forex, Sim trade with dedication and honesty until you learn what does and doesn't work ... 

In my own "very humble" opinion ..... Its best not to complicate things too much no matter what you are trading  Cheers.


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## Rypieee (2 February 2017)

It seems that while my TP is based on discretionary variables, there are some constant factors to it. Lets take my risk management aspect for a second, there are component within that which could be back tested to see if the strategy used is more beneficial to having differing factors. 

Because I am reviewing my TP in real time against my personality, its hard to know what you are really like until you start trading real money - for me anyways, a dummy account, as honest as I can be on it, wouldn't yield the same emotions as a real-live account. I am still making certain decisions to adjust my risk tolerance which is up to an individual. I thought I was able to handle a 1% drawdown of my total PV per stock but I am starting to understand that 1% is a little too high for my liking. I have fine-tuned it down to 0.7% to see how I go with that. 

I use Stock Doctor as my research tool and my maximum risk allocated to a stock is based on the fundamental soundness of a company - Triathlete will know this one. My max risk per stock *used* to be 1% for strong or satisfactory financial health, 0.7% for early warning and 0.5% for marginal or distressed financial rating. But after 2 months of using the financial health model as my backing, I am changing it to 0.7% for strong, satisfactory and early warning ratings and 0.5% for distress and marginal ratings.

My main goal right now is to stick to my trading plan, clarify any loose statements on my TP so that I know exactly what action is required in the moment, fine tune my portfolio & risk management techniques and experience the market.

The goal would result (logically speaking) a more developed trading plan attuned to my personality, some experience for myself in the market on what I see (what works and what doesn't) & exceptional portfolio & risk management techniques.

Portfolio & risk management is the number 1 step for me because if I don't have a sound plan for P&R management, I won't last in the market.

My winning ratios at the moment is 40% win 60% lose - not good at all but the idea is that if I can control my risk well from the start, I can focus on how to increase my winning ratio as the next important step. Truth to be told, my "Scanning" abilities are sub-par at most and there is still a long way to go in that department - hopefully, through my experiences and self-education through books, I might be able to improve it.

Long run - Controlled P&R management + Improved stock picking abilities means better profitability, even if it's from -$1000 to -$100 hehe 

Do I need to back test my TP? Well it may be good to do it but having experienced a pretty crap P&R management  with sub-par stock picking abilities between *March 16 to Dec 16* I still managed to pull a tiny profit from the market. I am somewhat confident that an improved system will yield better results! Only time will prove me wrong haha


----------



## Trembling Hand (2 February 2017)

Rypieee said:


> It seems that while my TP is based on discretionary variables, there are some constant factors to it.
> 
> Do I need to back test my TP? Well it may be good to do it but having experienced a pretty crap P&R management  with sub-par stock picking abilities between *March 16 to Dec 16* I still managed to pull a tiny profit from the market.




I think you will find in any sort of cobbled together disc. back testing or real time forward testing the biggest influence on your outcome will be market phase. Nothing in your trading plan can influence that only manage it.

Be wary of bull market results.....


> grant me the serenity to accept the things I cannot change,
> Courage to change the things I can,
> And wisdom to know the difference.


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## Rypieee (2 February 2017)

Trembling Hand said:


> I think you will find in any sort of cobbled together disc. back testing or real time forward testing the biggest influence on your outcome will be market phase. Nothing in your trading plan can influence that only manage it.
> 
> Be wary of bull market results.....



Noted about the Bull market comment, Tech/a and Canoz put me in my place back in Mid 2016 for not acknowledging the bull market period in 2016 haha, I shall be careful with market phases.


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## tech/a (2 February 2017)

Trembling Hand said:


> Yeah sure you can test ideas but you are kidding yourself if you think a trading plan thats discretionary can be anything but forward tested in real time.




This could be said for all types of testing.



Rypieee said:


> My winning ratios at the moment is 40% win 60% lose - not good at all but the idea is that if I can control my risk well from the start, I can focus on how to increase my winning ratio as the next important step.




Your results are common for a long ---longer term system. For better win rates shorten your time frame or lengthen your stops. Both have balancing consequences.



Trembling Hand said:


> I think you will find in any sort of cobbled together disc. back testing or real time forward testing the biggest influence on your outcome will be market phase. Nothing in your trading plan can influence that only manage it.
> 
> Be wary of bull market results.....




A high tide floats all boats except those with holes in them.


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