Improving Chart Analysis

[barney]

Barney you are not lazy which is good.

The nature of the stock you intend to trade: daily ranges, noise, volume etc. They are all different and avoiding the manipulators taking your stops is important.
A small position with a wide stop can achieve a small loss if gone wrong. It doesn't have to be big positions, or small, with tight stops.

This part I liked:



Snake

I understand now thank you Snake ! ................... I suspect you may be/have been a "teacher" of some kind ........... to enable thought processes to develop, questions/puzzles are much more productive "food for thought" ................ Of course you may also be a truck driver from Dapto Thanks Barney.

 

[It's Snake Pliskin]

Barney,

Certainly not Dapto and not taking speed etc to drive long distances. Yes I teach conversational English as a part-time thing to maintain human contact and pay for bills etc.

Take note of Tech's charts he has posted - they say a lot.

 

[barney]

Barney,

Take note of Tech's charts he has has posted.

Yeah You are quite right. I meant to make comment on my last post ............. Tech, that is a lesson in "chart analysis" on its own! ............ Can I ask Tech; After the position was taken, what stop/loss position did you take? And when it first reversed against your initial analysis, how did you react Phsycologically to the position? Thanks, Barney.

 

[Magdoran]

Porper,

You wouldn't beleive how many times I have had to let good trades go because I have been stopped out. This was especially the case when I first started to trade.

I mean you do all the hard work planning your trade, expected entries, exits, and other contingencies etc. What does the market do? It does some fancy footwork first, takes out out all the obvious stops, only to move in your desired direction of speculation shortly after!! Now that can really piss you off!! I am sure that has happened to most of us here at some stage or another.
There has to be careful consideration to where stops are placed. Sometimes I get the impression, dealers love us to place stops and even push and advertise it. It's in their interests, the more trades they can get people to do the better.

Cheers

Well said wavepicker, nicely illustrated to demonstrate the point.


Magdoran

 

[barney]

Barney,

Certainly not Dapto and not taking speed etc to drive long distances. Yes I teach conversational English as a part-time thing to maintain human contact and pay for bills etc.

Take note of Tech's charts he has posted - they say a lot.

I thought so. As I said earlier ........... to make informative/constructive/(not to mention thought provoking!!) comments with minimal use of words is an art form .............. Hopefully others around here appreciate that !! A couple of my best friends are teachers (tafe and school system) ............ I am also curious about Mag's past employment.............. I also suspect a Uni degree in Law/Politics/Economics , but I may be totally off the track?? Cheers Guys. Barney ............ PS No degree for me, but my daughter!! .......... she is another story ...............Very proud of her ............ (make that VERY VERY proud!!

 

[nizar]

Hopefully this will illustrate the entry question well.

This is a trade which is one which is public here on tech trader.

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=74;t=000029;p=3

tech/a,

great charts.

just a couple of questions:
1/ where was ur initial stop upon entry?
2/ where is your stop loss now (i suspect around the $22 mark?)

 

[MichaelD]

I would agree though that entering around a previous high (or low if looking to go short) has some risk because the underlying is nearing previous resistance (or support).

If Michael finds he is effective doing it this way fine. Me, I do trade near new highs sometimes based on the pattern (have done recently), but fully aware that there is quite some risk of a marginal high occurring, and being prepared to exit or even reverse the position.

Mag,

I don't trade with an all time highest close entry. I was merely using it as an example of how simple a robust, profitable system can be and how unimportant the entry is in the overall outcome of a system.

The aim of all my systems is to smooth out the equity curve and minimize drawdown as much as possible to make them pleasant (relatively speaking) to trade. An all time highest close entry is quite a choppy system to trade, so not quite to my tastes.

My major trend following system tends to pick up either trends in progress or stocks about to breakout to a Weinstein Stage 2.

10 losses at 2% = $20,000

Beginners say 2% risk - so little?

Pros say 2% risk - so much?

I used 2% for the example since it's a commonly used risk %. I personally like to trade 0.5% and pyramid winners. It keeps the losses to a size where I can easily shrug them off.

A tight stop is not always the way to have a small loss - please think about it.

Barney,

There's a lot contained within these few words.

1. A tight stop can easily be whipsawed out by random market action.

2. A tight stop may be suitable for trading a wild ride down like PMN. Whether you can consistently take this sort of wild countertrend ride is another matter. Who knows - maybe it's your niche. Not for me at the moment, thanks - too much excitement. After a spike up you see several possible different behaviours;

a. Another spike up - everyone's seen the spike and greed is dominant. Gimme gimme gimme at any price.
b. A day which opens and closes at about the same spot with a fairly wide range between the high and the low. Here many of the holders of the stock from way back have noticed the spike and have headed for the exit, locking in profits, but buyers are equally keen to get hold of the stock.
c. A modest pullback on low volume. Very common for this to occur and a few days later the stock breaks out again.
d. A big bearish day where old holders swamp the buyers to get out after the price spike.

Working out how to consistently profit from these behaviours is the hard part. For me, this is my current work-in-progress. Tech/A has started a thread on trading this sort of behaviour which promises to be extremely interesting.

3. You can also lose a little by trading a small parcel size with a wide stop. If a trade size is so small that you're thinking "why am I wasting my time even putting on this trade" then it's about right.

4. Based on my backtesting, an intraday stop leads to more drawdown than an end of day stop - the ride is wilder. There's a pattern of potential interest which I believe is called a Kangaroo Tail which seems to reflect all the intraday stops which have been placed at the same or similar price being hit and causing a deluge of sellers getting out at market - the price drops down quickly and then when the sellers are all out, the price rebounds, so you get this long tail on your chart.

I prefer to keep my stops on my charts and not in the market for my style of trading for this reason.


Having said all of this, all of this discussion should not lose sight of the fact that;

Barney is now trading with a stop.

Barney has now given himself a shot at surviving. All the rest is finesse.

 

[nizar]

Well said wavepicker, nicely illustrated to demonstrate the point.


Magdoran

Mag,

when does an initial stop loss become a trailing one for you? as in, when do u start moving up your stop to protect increasing levels of profit?
are most of your exits from the stock hitting your stop or from some other exit criteria?

i used to think that the only reason traders would sell is if a stock hit their stop. ie. they wanna keep hold of a winning position as long as the trend allows, and consequently the stop should be placed in a position which would indicate that

 

[tech/a]

After the position was taken, what stop/loss position did you take? And when it first reversed against your initial analysis, how did you react Phsycologically to the position?

The system has a 10% of purchase price stop which when you hold 10 positions and you have equal $$ value of stock held equates to 1% of total equity.In this case it was 79c off the purchase price.

How did I feel.---I had no attachment to it,it would do one of 3 things like ALL my trades. Be a winner,be a loser or bugger about in no mans land.
A 1% loss doesnt concern me.

However during discretionary trading a 10-20% drawdown does concern me.
This has happened more than once and when it does I STOP trading completely and re visit WHY.

WITHOUT exception its been letting my losses run longer than I should AND in doing so causing my profit on exit to be less than the loss would bear--IE the Reward Risk ratio was out of skew.

Last time that happened was 4 yrs ago.
Ive become an expert in selling stops.

My R/R aim is 7:1 or more in realisty that gives me 3+---as I cant test how I trade in a discretionary manner I guard this R/R like Fort Knox.
Its the outlier wins that make the $$s thats for sure.Ive had more than a few that return 200:1 R/R.
As Ive said before my stop is 2-3 ticks on momentum discretionary trades.
A vast difference to the 10% longterm stop placement.

Ive been waiting for someone to pull me up on TIMEFRAME---there you go did it myself!!

Moggie.
You open up topics that will have us involved for hrs!!---Bugger I have other things to do!!

Nizar the stop is still in its original spot---quite useless now!! the exit is the 180 day EMA of the low ---the red line! as you can see its chased it all the way up.What seemed like a crazy wide stop aint that crazy now!!

 

[barney]

Mag,

I don't trade with an all time highest close entry. I was merely using it as an example of how simple a robust, profitable system can be and how unimportant the entry is in the overall outcome of a system.

The aim of all my systems is to smooth out the equity curve and minimize drawdown as much as possible to make them pleasant (relatively speaking) to trade. An all time highest close entry is quite a choppy system to trade, so not quite to my tastes.

My major trend following system tends to pick up either trends in progress or stocks about to breakout to a Weinstein Stage 2.
Beginners say 2% risk - so little?

Pros say 2% risk - so much?

I used 2% for the example since it's a commonly used risk %. I personally like to trade 0.5% and pyramid winners. It keeps the losses to a size where I can easily shrug them off.
Barney,

There's a lot contained within these few words.

1. A tight stop can easily be whipsawed out by random market action.

2. A tight stop may be suitable for trading a wild ride down like PMN. Whether you can consistently take this sort of wild countertrend ride is another matter. Who knows - maybe it's your niche. Not for me at the moment, thanks - too much excitement. After a spike up you see several possible different behaviours;

a. Another spike up - everyone's seen the spike and greed is dominant. Gimme gimme gimme at any price.
b. A day which opens and closes at about the same spot with a fairly wide range between the high and the low. Here many of the holders of the stock from way back have noticed the spike and have headed for the exit, locking in profits, but buyers are equally keen to get hold of the stock.
c. A modest pullback on low volume. Very common for this to occur and a few days later the stock breaks out again.
d. A big bearish day where old holders swamp the buyers to get out after the price spike.

Working out how to consistently profit from these behaviours is the hard part. For me, this is my current work-in-progress. Tech/A has started a thread on trading this sort of behaviour which promises to be extremely interesting.

3. You can also lose a little by trading a small parcel size with a wide stop. If a trade size is so small that you're thinking "why am I wasting my time even putting on this trade" then it's about right.

4. Based on my backtesting, an intraday stop leads to more drawdown than an end of day stop - the ride is wilder. There's a pattern of potential interest which I believe is called a Kangaroo Tail which seems to reflect all the intraday stops which have been placed at the same or similar price being hit and causing a deluge of sellers getting out at market - the price drops down quickly and then when the sellers are all out, the price rebounds, so you get this long tail on your chart.

I prefer to keep my stops on my charts and not in the market for my style of trading for this reason.


Having said all of this, all of this discussion should not lose sight of the fact that;

Barney is now trading with a stop.

Barney has now given himself a shot at surviving. All the rest is finesse.

Thank you Michael, So much good advice around here its almost scarey!! Can I say, that on this Forum, most of the "Good Advice" is found "Between the Lines" ................ In the words of Billy Connelly .... (Brilliant!) Cheers, Barney.

 

[It's Snake Pliskin]

i used to think that the only reason traders would sell is if a stock hit their stop. ie. they wanna keep hold of a winning position as long as the trend allows, and consequently the stop should be placed in a position which would indicate that

Setting stops is guesswork at best.

 

[tech/a]

Tech/A has started a thread on trading this sort of behaviour which promises to be extremely interesting.

These can be traded very well and you guys just get me involved in other threads which take so long to answer I havent devoted the time to such a great topic.
Actually I'm looking forward to the flack from the "Experts" from the Fundamental lounge,who have been trading outliers like they are a longterm trend.MOX and PHM threads make a good read.


I will get to it I'll have to do it in small chunks.
My apologies.

 

[barney]

The system has a 10% of purchase price stop which when you hold 10 positions and you have equal $$ value of stock held equates to 1% of total equity.In this case it was 79c off the purchase price.

How did I feel.---I had no attachment to it,it would do one of 3 things like ALL my trades. Be a winner,be a loser or bugger about in no mans land.
A 1% loss doesnt concern me.

However during discretionary trading a 10-20% drawdown does concern me.
This has happened more than once and when it does I STOP trading completely and re visit WHY.

WITHOUT exception its been letting my losses run longer than I should AND in doing so causing my profit on exit to be less than the loss would bear--IE the Reward Risk ratio was out of skew.

Last time that happened was 4 yrs ago.
Ive become an expert in selling stops.

My R/R aim is 7:1 or more in realisty that gives me 3+---as I cant test how I trade in a discretionary manner I guard this R/R like Fort Knox.
Its the outlier wins that make the $$s thats for sure.Ive had more than a few that return 200:1 R/R.
As Ive said before my stop is 2-3 ticks on momentum discretionary trades.
A vast difference to the 10% longterm stop placement.

Ive been waiting for someone to pull me up on TIMEFRAME---there you go did it myself!!

Moggie.
You open up topics that will have us involved for hrs!!---Bugger I have other things to do!!

Nizar the stop is still in its original spot---quite useless now!! the exit is the 180 day EMA of the low ---the red line! as you can see its chased it all the way up.What seemed like a crazy wide stop aint that crazy now!!

Thanks Tech, I'll let others more experienced take these points up, and thank you for your input ........... I feel like the "kid at the side show" .......... just enjoying the atmosphere .............. Barney

And PS ...I agree .... Its Mag's fault ............. Thats what you guys get for being clever ...........serve you all right Been a great discussion on this thread ............ hopefully others have gotten a lot of "insight" out of it as I have , Barney.

 

[tech/a]

Setting stops is guesswork at best.

No its part of risk management if you trade that way.
IE you trade the numbers.
I gave you the test results for various width stops.
All they do is preserve capital so that when you do get a runner YOU HAVE THE CAPITAL ON IT!

Barny its NO PROBLEM
Thats my humour

 

[lesm]

These can be traded very well and you guys just get me involved in other threads which take so long to answer I havent devoted the time to such a great topic.
Actually I'm looking forward to the flack from the "Experts" from the Fundamental lounge,who have been trading outliers like they are a longterm trend.MOX and PHM threads make a good read.

I will get to it I'll have to do it in small chunks.
My apologies.

No need to apologise. When you get the time.

Those guys are good for a bit of light humour and when a light distraction from more important matters is required. Unless you are going to use a baseball bat with spikes, why waste the time on them. They don't want to hear or try to understand the message, even if it may actually be in their interests.

Some good comments on this thread so far and looks like Barney is moving in a positive direction.

Cheers.

 

[nizar]

The system has a 10% of purchase price stop which when you hold 10 positions and you have equal $$ value of stock held equates to 1% of total equity.In this case it was 79c off the purchase price.

How did I feel.---I had no attachment to it,it would do one of 3 things like ALL my trades. Be a winner,be a loser or bugger about in no mans land.
A 1% loss doesnt concern me.

However during discretionary trading a 10-20% drawdown does concern me.
This has happened more than once and when it does I STOP trading completely and re visit WHY.

WITHOUT exception its been letting my losses run longer than I should AND in doing so causing my profit on exit to be less than the loss would bear--IE the Reward Risk ratio was out of skew.

Last time that happened was 4 yrs ago.
Ive become an expert in selling stops.

My R/R aim is 7:1 or more in realisty that gives me 3+---as I cant test how I trade in a discretionary manner I guard this R/R like Fort Knox.
Its the outlier wins that make the $$s thats for sure.Ive had more than a few that return 200:1 R/R.
As Ive said before my stop is 2-3 ticks on momentum discretionary trades.
A vast difference to the 10% longterm stop placement.

Ive been waiting for someone to pull me up on TIMEFRAME---there you go did it myself!!

Moggie.
You open up topics that will have us involved for hrs!!---Bugger I have other things to do!!

Nizar the stop is still in its original spot---quite useless now!! the exit is the 180 day EMA of the low ---the red line! as you can see its chased it all the way up.What seemed like a crazy wide stop aint that crazy now!!

tech/a,

how long do u keep a stock thats in "no mans land" before u chop it?

 

[wayneL]

Actually I'm looking forward to the flack from the "Experts" from the Fundamental lounge,who have been trading outliers like they are a longterm trend.MOX and PHM threads make a good read.


I will get to it I'll have to do it in small chunks.
My apologies.

Tech,

It's a bit like the Catholics and the Protestants in Nth Ireland, innit.

In reality we know they're the apostates. We should just treat them with ignore and get on with our own ideas.... instead of fighting.

Hmmmmmmmmmm. Maybe I should follow my own advise

Cheers

 

[lesm]

Tech,
It's a bit like the Catholics and the Protestants in Nth Ireland, innit.

In reality we know they're the apostates. We should just treat them with ignore and get on with our own ideas.... instead of fighting.

Hmmmmmmmmmm. Maybe I should follow my own advise
Cheers

Agree with ignoring them.

You wouldn't happen to be referring to the SPI thread with your last sentence?

Have they been making too much noise and awakening you from the crypt?

 

[It's Snake Pliskin]

Its the outlier wins that make the $$s thats for sure.Ive had more than a few that return 200:1 R/R.

Tech,

An outlier is something far from normal. Taking that meaning and relying on outliers for CONSISTENT profits seems a little challenging. Do you rely only on outliers, and are they included in your stats for expectancy etc?

What timeframe allows the consistent outliers to eventuate in your case? Much like the charts posted before I would imagine.

You may see the paradox: consistent outliers are not outliers, merely consistent returns.

 

[It's Snake Pliskin]

No its part of risk management if you trade that way.
IE you trade the numbers.
I gave you the test results for various width stops.
All they do is preserve capital so that when you do get a runner YOU HAVE THE CAPITAL ON IT!

Barny its NO PROBLEM
Thats my humour

Yes tech you may see that I used the word "SETTING" and not "USING". I fully agree with using stops.