Potential swing trades

[bunyip]

Steve, maybe as well as trying to improve your exits you need to look at having a re-entry method?

This is something I'm trying to develop atm, as on review of a lot of my trades I'm getting stopped out by a few cents only for the trade to then move in the right direction. The re-entry won't be under the same set up that triggered the original trade but more of a general entry based on the original pattern holding up.

In their book 'Computer Analysis Of The Futures Markets', LeBeau and Lucas outline a strategy for re-entering after you've been prematurely stopped out of a trend.
It's simply to wait for a day on which 3 period RSI climbs back above the 50 level, then you buy above that day.
Here's a WFMI chart to show some examples.

 

[bunyip]

Yes I mean the trailing stop gets placed under the low of the sixth bar back and so on.

Okay heres a comparison of the exits of 3 winners I've had

CCE - Entry 12.15

6 Bar Exit - 16.99
Bunyip Exit - 17.20

LEAP - Entry 31.89

6 Bar Exit - 36.7
Bunyip Exit - Would still be in trade at 39.84!

SNX - Entry 15.82

6 Bar Exit - 18.8
Bunyip Exit - 19.3

Looks like I could have squeezed a little more from my trades using your exit criteria!

I will have to look at FX at some point, currently spent a lot of time learning about position sizing, risk and the psychology of trading and well aware of the challenges ahead. I am minorly profitable in the stock markets at the moment and will continue to work at this. If I can get this working, will try and explore FX then. Being a Pom, I keep an eye on the GBPAUD pair from time to time which is currently drastically against us (England), looks like its about to pop one way or the other. But even so prices have been fluctuating in the 1.95 - 2.05 area, must have been some great swing trading opportunities there.

Thanks,

Steve

Thanks Steve - an interesting comparison between the two exits.

The GBPAUD is one of the choppier currency pairs and not one I'd recommend for swing or any other kind of trading. There are smoother trending pairs available.

 

[stevo58]

In their book 'Computer Analysis Of The Futures Markets', LeBeau and Lucas outline a strategy for re-entering after you've been prematurely stopped out of a trend.
It's simply to wait for a day on which 3 period RSI climbs back above the 50 level, then you buy above that day.
Here's a WFMI chart to show some examples.

Thanks for that, another interesting concept. Certainly could have got a little more out of that WFMI trade using the 3 period RSI method. I will run that past some of my old trades as well and do some more testing. Would be great to add a re-entry method to the arsenal.

Regarding Forex, any good books you would recommend? Or can I simply adapt current Technical Analysis techniques I've already learnt?

 

[bunyip]

Thanks for that, another interesting concept. Certainly could have got a little more out of that WFMI trade using the 3 period RSI method. I will run that past some of my old trades as well and do some more testing. Would be great to add a re-entry method to the arsenal.

Regarding Forex, any good books you would recommend? Or can I simply adapt current Technical Analysis techniques I've already learnt?

Steve....I haven't read a single Forex book. Any TA techniques applicable to other markets should also be applicable to FX.
On the PPS Trading System thread I've given some examples of applying that system to FX. Also there's a FX thread on here somewhere (can't think of the name of it) where I've posted some FX charts.

Generally speaking, if you can find entry setups in stocks, you'll find them in FX too.

 

[stevo58]

I remember reading that thread a while back, will seek it out again. Really quite like Arnold's book and it does form the basis of a lot my current stock trading along with some volume analysis. When I get some time I'll sift through some currency charts and test out some real time PPS setups along with the TKO on paper.

Thanks again Bunyip, great to gain some insights into your methods.

 

[stevo58]

Hi Bunyip,

I see what you mean about currencies. I decided to have a quick scan for potential TKO setups and found a great little example in the USDCAD. Okay its all great hindsight trading but shows how effective the system can be, its a little like the Traders Trick Entry. I've noticed there might be a pull back forming now so might be another chance to enter.

With the 6 bar trailing stop would still be riding this one with a paper gain of 1092 pips. Is this the kind of entry you would be looking for?

Thanks,

Steve

 

[bunyip]

Hi Bunyip,

I see what you mean about currencies. I decided to have a quick scan for potential TKO setups and found a great little example in the USDCAD. Okay its all great hindsight trading but shows how effective the system can be, its a little like the Traders Trick Entry. I've noticed there might be a pull back forming now so might be another chance to enter.

With the 6 bar trailing stop would still be riding this one with a paper gain of 1092 pips. Is this the kind of entry you would be looking for?

Thanks,

Steve

That's right Steve, that's a good example of a TKO entry. Each one of those pips (I call them points) is worth $10 CAD if you're trading one full contract.
Check out some of the other pairs and you'll find other recent TKO's.

USDCHF May 7 & 18

USDJPY May 19

NZDUSD May 18

GBPUSD May 14 (up 670 points so far in 7 trading days)

EURUSD May 18 (up 450 points in 5 trading days so far - $10 USD per point). This one is interesting in that the TKO showed up at an old resistance level that acted as a new support level. See attached chart.

I can see you switching over to the FX camp before long!

 

[bunyip]

EURUSD May 18 (up 450 points in 5 trading days so far - $10 USD per point). This one is interesting in that the TKO showed up at an old resistance level that acted as a new support level. See attached chart.

Forgot to attach the chart - here it is. Click on the chart to expand it.

 

[stevo58]

That's right Steve, that's a good example of a TKO entry. Each one of those pips (I call them points) is worth $10 CAD if you're trading one full contract.
Check out some of the other pairs and you'll find other recent TKO's.

USDCHF May 7 & 18

USDJPY May 19

NZDUSD May 18

GBPUSD May 14 (up 670 points so far in 7 trading days)

EURUSD May 18 (up 450 points in 5 trading days so far - $10 USD per point). This one is interesting in that the TKO showed up at an old resistance level that acted as a new support level. See attached chart.

I can see you switching over to the FX camp before long!

Yeah, I spent a lot of my weekend going over FX charts with the TKO and PPS setups in mind and was certainly an eye-opening experience. I've always viewed FX with a little trepidation, not sure really why that was the case but I can see now that FX offers up several trends.

I currently trade the US markets and while there are no absolutes, have found that many individual stocks closely mirror the overall market averages. Of course there are exceptions but there is a feel one is trading one instrument. I spend hours over the weekend and every night scanning through charts to find PPS setups which is fine but there is a suspicion that the success of a breakout is dependent on the averages. I certainly feel there is immense opportunity to be had there but as you say there are some great trends to ride in FX in not such correlated markets plus its easy to monitor and manage 10-12 ccy pairs. 7 such setups in May providing opportunities as you've highlighted.

I will open a demo account with Oanda and paper trade these strategies for a few months and if successful could well be making the switch to the FX camp!

 

[bunyip]

Yeah, I spent a lot of my weekend going over FX charts with the TKO and PPS setups in mind and was certainly an eye-opening experience. I've always viewed FX with a little trepidation, not sure really why that was the case but I can see now that FX offers up several trends.

I certainly feel there is immense opportunity to be had there but as you say there are some great trends to ride in FX in not such correlated markets plus its easy to monitor and manage 10-12 ccy pairs. 7 such setups in May providing opportunities as you've highlighted.

Steve

Yeh, between PPS and TKO setups you should find plenty of profitable opportunities in FX.
As you say, there are definite advantages in the light workload of following only a dozen or less pairs.
Fifteen minutes a day is about all it takes, half an hour at most.

This AUDUSD chart might interest you.

Cheers
Bunyip

 

[stevo58]

Steve

Yeh, between PPS and TKO setups you should find plenty of profitable opportunities in FX.
As you say, there are definite advantages in the light workload of following only a dozen or less pairs.
Fifteen minutes a day is about all it takes, half an hour at most.

This AUDUSD chart might interest you.

Cheers
Bunyip

Thats another beauty, its good point you make about adding to the position. TKO seems to be tailormade for pyramiding opportunities. You can really turbo charge your trades by using it. I'm certainly looking forward to playing around with these concepts in FX. Going back to stocks for a quick second, could also use the TKO to pyramid the winners there as well.

I have just read about another trailing stop which is calculated by taking the 10 EMA then subtracting the value of 50% of the 14 bar ATR for long setups. Will try and code this and check it out along with the PSAR trailing stop you mentioned. Of course nothings ever perfect but if we can extract as much as we can from the trade then all the better.

 

[Chorlton]

Here's a swing trading system that's just about as simple as it gets.
Some software can find for this setup by scanning for two or three lower lows or lower closes.

If you wish to use an indicator to pick these trades, you'll find that a 3 period CCI falling below zero tends to correspond with the TKO signals. CCI scans are easy to set up in some software.
Click on the chart to enlarge it.

Hello Bunyip,

Can I ask what is the max number of bars that can occur after the TKO bar (without them exceeding the high of the TKO bar) before you decide that the set-up has failed?

 

[bunyip]

Hello Bunyip,

Can I ask what is the max number of bars that can occur after the TKO bar (without them exceeding the high of the TKO bar) before you decide that the set-up has failed?

No specific number of bars. Dave Landry suggests in his swing trading book that the retracements to the TKO should not go beyond the 20 day EMA, otherwise you have to suspect that the trend may be in question.
All the same, there are many good TKO trades from retracements that briefly breached the 20 EMA.

During strong trends, the TKO's tend to be found in shallow retracements that stop well short of the 20 EMA.

 

[bunyip]

I have just read about another trailing stop which is calculated by taking the 10 EMA then subtracting the value of 50% of the 14 bar ATR for long setups.

Bit of complexity involved in that one Steve. Maybe too complex perhaps?

 

[stevo58]

Bit of complexity involved in that one Steve. Maybe too complex perhaps?

Yes you're probably right there, no point complicating a simple system with a complicated exit strategy.

One other quick thought when going through the FX and US stock charts last night. There are a number of PPS setups each day in the US markets yet these are to some degree as I mentioned earlier, governed by the overall market trend. I guess similar setups in FX as well as the TKO aren't subject to such restrictions so one can sit tight and wait for the setups to present themselves. I'm a little guilty of overtrading atm in the US markets, which I do need to work on.

On a sidenote, I've noticed USDJPY and one another might be setting up for a TKO tonight. Will check when I get back home.

 

[Chorlton]

No specific number of bars. Dave Landry suggests in his swing trading book that the retracements to the TKO should not go beyond the 20 day EMA, otherwise you have to suspect that the trend may be in question.
All the same, there are many good TKO trades from retracements that briefly breached the 20 EMA.

During strong trends, the TKO's tend to be found in shallow retracements that stop well short of the 20 EMA.

Hi Bunyip,

So if I understand correctly once the TKO Bar appears Buy and Stop Loss orders are placed and these then remain active until either (i) price falls below short-term EMA (in this case 20), or (ii) the Buy Order is activated?

Thanks....

 

[bunyip]

Hi Bunyip,

So if I understand correctly once the TKO Bar appears Buy and Stop Loss orders are placed and these then remain active until either (i) price falls below short-term EMA (in this case 20), or (ii) the Buy Order is activated?

Thanks....

When you find a TKO bar during a pullback within an established uptrend, you place a buy order slightly above the TKO bar and an 'if done' stop loss order slightly below the same bar.
If your buy order is not filled and tomorrow price goes below the TKO bar, then you have a new TKO bar and you lower your buy order to just above the top of this new TKO.
Same story if price makes another lower low next day - you have another bar that's taken out the low of the previous two days, in other words a TKO bar, and you lower your buy order to just above this latest TKO.
If the retracement continues below the 20 EMA without filling your buy order, you might want to think seriously about whether you persist in chasing this trade, or look elsewhere for another opportunity.
If the retracement seriously breaches the 20 EMA, then I'd definitely abandon the trade and I'd look for the next opportunity elsewhere.
You can use a bit of judgement when the pullback gets to or near the 20 EMA. If the daily ranges are shrinking then it's a sign that the retracement might be fizzling out, in which case you might want to allow some leeway with the 20 EMA rule. It's not set in concrete, just meant as a general guideline to alert you that maybe the trend is getting weary when the retracements start getting deeper.
It's pretty common for retracements to end at or near the 20 EMA. In fact some traders make a stand alone trading system by trading bounces from the 20 EMA. Larry Connors and Linda Bradford-Raschke outline such a system in their book 'Street Smarts'.

Of course the same rules apply in reverse when you're using TKO setups to go short from rallies during downtrends.

 

[beamstas]

What does the 20 day EMA signify?

 

[Chorlton]

When you find a TKO bar during a pullback within an established uptrend, you place a buy order slightly above the TKO bar and an 'if done' stop loss order slightly below the same bar.
If your buy order is not filled and tomorrow price goes below the TKO bar, then you have a new TKO bar and you lower your buy order to just above the top of this new TKO.
Same story if price makes another lower low next day - you have another bar that's taken out the low of the previous two days, in other words a TKO bar, and you lower your buy order to just above this latest TKO.
If the retracement continues below the 20 EMA without filling your buy order, you might want to think seriously about whether you persist in chasing this trade, or look elsewhere for another opportunity.
If the retracement seriously breaches the 20 EMA, then I'd definitely abandon the trade and I'd look for the next opportunity elsewhere.
You can use a bit of judgement when the pullback gets to or near the 20 EMA. If the daily ranges are shrinking then it's a sign that the retracement might be fizzling out, in which case you might want to allow some leeway with the 20 EMA rule. It's not set in concrete, just meant as a general guideline to alert you that maybe the trend is getting weary when the retracements start getting deeper.
It's pretty common for retracements to end at or near the 20 EMA. In fact some traders make a stand alone trading system by trading bounces from the 20 EMA. Larry Connors and Linda Bradford-Raschke outline such a system in their book 'Street Smarts'.

Of course the same rules apply in reverse when you're using TKO setups to go short from rallies during downtrends.

Hi Bunyip,

Thanks for the clarification. The fact that you lower your entry point for each subsequent TKO bar makes more sense as it obviously allows for a tighter entry.

I actually do something similar for exactly the same reasons.

Thanks Again for the reply & Good Trading......

 

[bunyip]

Sometimes there are several TKO's offering on the same day.
Candlestick analysis can be helpful in choosing the best prospect.