My open book trading plan - Two month test

[nizar]

Tech.

Also -- how about SEK.
When would you consider SEK out of its range? Let me guess, a blue sky close!

Would it be a trade then?
Is it even on your watchlist?

many Thanks.

 

[tech/a]

How about for somebody who takes a longer term view and trades end of day?
Would such a person, in your opinion, discard CUO?
Or is it still a goer?

Regardless of timeframe better (or patient) closer stop entry means better R/R.That better R/R and as a consequent larger positionsize with the SAME risk attached---remains with the trade througout its life.

I once mentioned waiting for a trade to come to you.
Sometimes a trade is already ready to hop on next open (I thought that with MAH). Using COE as an example I personally see the stop as a little to far away. I also know that the structure of moves (from experience ) is rarely vertical---if it is I miss out. If it isnt it will correct pretty soon giving me a better entry setup criteria. IE Ill be able to tighten the stop.

I'll either reap reward OR fail.It doesnt matter either way as the risk is the SAME but the potential REWARD if I wait is FAR greater.
Subtle but important.
I didnt see the course of trades.

With your projections, such as those on MAH. Has this methodology of working out price targets been used in the past with a reasonable rate of accuracy?

If you mean spot on to the cent---no.
But thats NOT how I use Elliott and projections.
I want to know where I am in the scheme of a charts trend or where a move out of a correction fits.
Ideally I dont want to take a trade thats at the top of a 5 wave move.
I dont want to take the first breakout from a prolonged corrective move.
I want to see certain criteria satisfied during a move which tells me where it is.
Then I can have confidence in possible projections and can quickly asertain if a move has 3 X R/R possibility in the NEAR future.
If not the PASS.
Waves have a habit of extending beyond projections and is the MAIN reason accuracy is challenged.Some Hit spot on and end that phase of its move.
There will be criteria which confirm that this is so.
Not necessarily on the day but soon after.

If so -- then id be keen to know how you work these out. Id appreciate if you could point out any software and/or books.

Ive chosen
(1) Metastock mainly for search and formula testing capability.
(2) Tradesim for systems testing.
(3) AGET EOD for Elliott (Even with its Algorithm wave count inconsistencies)It is a powerful piece of software with capabilities I still havent familiarised myself with).
(4) Tradeguider Realtime. Simply for short term trading dont leave home without it!

All in all my setup is not considered cheap.Around $10k Plus computers and screens. Live feed by esignal. EOD by Just data.
Bloody expensive buisiness!---Well compared to my day job its damned cheap!! To set up in a professional manner realy is pretty cheap.
most would pay over $250,000 for a business that could return a decient wage!!

SEK
Watchlist--no
Bluesky---yes
Would I trade it---possibly but Id want to see more than just a breakout
IE a retest,Then a breaking of the new breakout high.
In other words a wave 1/2 confirmation of the begining of a wave 3 of a longer move.

Back to work!!

 

[CFD]

Another good post tech/a.
I do not mean to be rude, being new here and all, but I do hope that those responding to it do not need to re quote the whole post in full.

 

[nizar]

Thanks tech.
Great post.

 

[CanOz]

MCR, i have this as 2.3:1 R/R...to me it looks unacceptable and i'll look for other opps...

Tech, if you have time to comment on this one.

Cheers,

 

[tech/a]

Tech, if you have time to comment on this one.

Canaussi
I'm not going to comment on specific stocks unless I use it as an example.
If I and others do an analysis of it you dont learn anything!!

I'm happy to comment if I think there is something that you have perhaps overlooked,or could include in your analysis.

Radge does it to me all the time.

So why not post up your view and as we have all done on others post up our own hints or take on the chart after you have put forward YOUR view.

 

[R0n1n]

Good point Tech. Hope Can wont mind others posting their view about other stocks.. I do plan to put in my .2C and the experienced guys can then point out the overlooked stuff..

 

[CanOz]

MCR, i have this as 2.3:1 R/R...to me it looks unacceptable and i'll look for other opps...

Tech, if you have time to comment on this one.

Cheers,

Ok, well to be honest, since i've started using Fibb on triangles to calculate R/R, i can't really to get too excited over anything less than 3:1.

On triangles, i'm putting my stop usually just below the apex, i can't get any closer than that realistically.

The chart i posted, MCR, has a decent R/R to the secondary target (6.8:1)...i guess i'm looking for some advice....a bit unsure, but at the moment i think i'm needing 3:1 to enter a trade...provided i've used the proper stop level etc.

Thoughts?

Cheers,

 

[tech/a]

but at the moment i think i'm needing 3:1 to enter a trade

Why??
I know why I came to this conclusion---why is it that you have??

You need to know why.

 

[CanOz]

Why??
I know why I came to this conclusion---why is it that you have??

You need to know why.

Because my money is better used somewhere else, if i can get 3:1, then why not take a bit more time to find it.

Other than that Tech, i don't know why...it just dawned on me that anything less than 3 looked pretty average to me after looking at enough of them...I just don't feel comfortable now with anything less than 3 x my risk.

Cheers,

 

[Porper]

Why??
I know why I came to this conclusion---why is it that you have??

You need to know why.

This surely comes down to the maths.Risk/Reward is part of the win / loss ratio in essence ?

If we can get the R/R out to say 4:1, we can afford to have more losing trades without having a major impact on profits.

R/R is different in that if we can get a higher reward for a smaller risk (wait for the right trade), while also having that risk below substantial support we have less chance of a losing trade........, higher win rate, more profit.

Or am I on totally the wrong track here ?

 

[nomore4s]

Because my money is better used somewhere else, if i can get 3:1, then why not take a bit more time to find it.

Other than that Tech, i don't know why...it just dawned on me that anything less than 3 looked pretty average to me after looking at enough of them...I just don't feel comfortable now with anything less than 3 x my risk.

Cheers,

Cana,
Why I look for 3.5-4x R/R on my trades is that it means I've got to be right less and I can still be profitable.
Just say with a R/R of 4x I can have a win/loss ratio of 30% and still be profitable (in theory).
Example - 3/10 Win/loss with a 4X R/R, with a risk of $100.00.
7 Losses x $100 = $700
3 Wins x $400 = $1200
Profit = $500
Obviously the higher your W/L ratio the higher your profits as well.
Someone may be able to post up a equity curve that would better explain what I mean.

The reason Tech(I'm guessing here Tech) would look for a 3x R/R is he has probably done alot of testing on his system and knows he needs this R/R ratio to be profitable.

edit: lol, Porper beat me to it

 

[nizar]

The reason Tech(I'm guessing here Tech) would look for a 3x R/R is he has probably done alot of testing on his system and knows he needs this R/R ratio to be profitable.

How (and why) would you do systems testing on a discretionary system?
It doesnt seem his stops are set in a mechanical/systematic way.

 

[CanOz]

Cana,
Why I look for 3.5-4x R/R on my trades is that it means I've got to be right less and I can still be profitable.
Just say with a R/R of 4x I can have a win/loss ratio of 30% and still be profitable (in theory).
Example - 3/10 Win/loss with a 4X R/R, with a risk of $100.00.
7 Losses x $100 = $700
3 Wins x $400 = $1200
Profit = $500
Obviously the higher your W/L ratio the higher your profits as well.
Someone may be able to post up a equity curve that would better explain what I mean.

The reason Tech(I'm guessing here Tech) would look for a 3x R/R is he has probably done alot of testing on his system and knows he needs this R/R ratio to be profitable.

edit: lol, Porper beat me to it

Ahhh, of course.......so basically the winners that you do have return at least the specific R/R your looking for (or in theory anyway), squewing the numbers more again in your favour...

You know, i have had more 'ahh haa' moments in the last week than i can ever remember! Great stuff.

 

[nizar]

You know, i have more 'ahh haa' moments in the last week than i can ever remember! Great stuff.

You and me both, my friend

 

[R0n1n]

ok guys here is MRE. I had posted about it in the potential breakout thread where Can suggested me to discuss it here along with my R/R and profit target. I liked his idea so here it is.

Now provided I buy it (on paper) at tomorrow's open at $7.69 my first target and expected resistance is $8.61 and stop loss trigger is at $7.02. Now this is 9%, but I generally use 3% as stop loss. The 7.02 is based on the support line.
Based on the support line stop loss, the R/R would be 1.33:1 , not good enough. but if using a 3% stop loss the R/R is 4:1 . Is my calculations correct ?

Also the volume is speaking another story...

 

[Nick Radge]

My system testing clearly shows that taking a trade during low volatility periods greatly increase the risk/reward benefits of a trade. As an example, if you measure the distance between an entry and initial protective stop level, then only take trades below X$, then you will find that the results will be a lot better. As an example, calculate the dollar difference between a channel breakout and its stop; assume 50-day entry and 13-day exit. If that amount is less than X$, then take the trade. If it's more then forego the trade. The same principal can be applied to any technique.

We commonly hear about a Bollinger squeeze. Essentially that is right, but one Bollinger squeeze needs to measured against another which is my point here. A wide Bollinger squeeze may need to be left alone for another.

Research will show the differences are quite astounding.

Tech/a may remember that I discussed this is Adelaide at an ATAA talk back in 2001 or so.

 

[wayneL]

My system testing clearly shows that taking a trade during low volatility periods greatly increase the risk/reward benefits of a trade. As an example, if you measure the distance between an entry and initial protective stop level, then only take trades below X$, then you will find that the results will be a lot better. As an example, calculate the dollar difference between a channel breakout and its stop; assume 50-day entry and 13-day exit. If that amount is less than X$, then take the trade. If it's more then forego the trade. The same principal can be applied to any technique.

We commonly hear about a Bollinger squeeze. Essentially that is right, but one Bollinger squeeze needs to measured against another which is my point here. A wide Bollinger squeeze may need to be left alone for another.

Research will show the differences are quite astounding.

Tech/a may remember that I discussed this is Adelaide at an ATAA talk back in 2001 or so.

I've not tested this myself, so my comments are entirely anecdotal. But I fully agree, it's something I've noticed over a number of years. fwiw

 

[nomore4s]

How (and why) would you do systems testing on a discretionary system?
It doesnt seem his stops are set in a mechanical/systematic way.

lol, Nizar I did say I was guessing, Tech would better be able to give his reasons.

Ahhh, of course.......so basically the winners that you do have return at least the specific R/R your looking for (or in theory anyway), squewing the numbers more again in your favour...

You know, i have had more 'ahh haa' moments in the last week than i can ever remember! Great stuff.

Me too! Very glad you started this thread learning heaps off of it. Thanks to all the more experienced posters for taking the time to explain things to us, especially Tech & Motorway.

 

[tech/a]

Yes.
Its all about Win rates.

Here are a few doc's that you may find helpful.
THE MATRIX.
This will show you your risk to ruin.
Simply fill in the fields and see how often you need to have a winner (Win %) to profit.Anything under and your Risk of Ruin.
The Second ACTUAL TRADES
Fill in the YELLOW cells with your parameters and record your trades.
Your NUMBERS will be displayed for you to evaluate your trading.

ENJOY