Technical Trading Exercise (Pavilion103 and tech/a) Discussion

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Either lots of readers agree whole heartedly
OR
Lots of traders have had lightbulb moments.

The silence is deafening.

 

[CanOz]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Either lots of readers agree whole heartedly
OR
Lots of traders have had lightbulb moments.

The silence is deafening.

Everyone is waiting for the pictures Tech...

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Everyone is waiting for the pictures Tech...

Oh I see visual confirmation.

 

[5oclock]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

I am still tuned in TECH, listening and learning, guess others are doing the same,thanks.

 

[burglar]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Oh I see visual confirmation.

Yes, I am a visual person!

 

[waza1960]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

I thought I would add my

Keeping in mind that I am a systems trader first and foremost ..........

In a Systematic approach there are fixed entry/exit and stops. These don't float.

They do in most of my automated systems

Its not about being right its about being profitable.

This really is a gem and I bet most will not even think about it. Of course a lot more books are sold on telling traders what is "right"

In a Discretionary trading method we have the ability to alter all 3
Entry/Exit and Stops. The single most important aspect of this form of trading---in my view.

agree

Unlike a systematic approach we don't have to play trade after trade out to its known end.
We can move our Initial Stop. We can alter our entry and we can determine our exit with discretion.
To sit and wait for a stop to be hit as a stock reverses from well above---with clear signs of an impulse move
during a topping pattern or stage of the life of the chart---would be less than ideal.

This is the detail I hope you show us as this is where the psychology comes to play and experience is needed

 

[Des P]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

I am very interested in this thread hoping i will learn somthing
Keep up the good work
Cheers

 

[Mistagear]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Should a break-even trade even be considered a valid score in a Risk/Reward System ?

If you scratch a trade at break even (Zero R ) what you do next is take another trade, so in effect, within your system you have taken funds out of a Zero R, and placed it in the next trade, a 1R trade.
Thats sort of equivalent to having not taken the first trade.
Some people may consider if the original stop placement was justified as signalling a fail of the trade and that the entry was a suitable entry, why now is the entry point the place to signal a failed trade.

Why therefore, is not a 0.25 R or 0.5 R a better proposition than entering a new trade at 1 R ?
If you are not trying to be right, rather trying to be profitable, surely any risk less than you take for the next trade, remains a valid trade within the Risk/Reward System ?

I struggle with this concept, life was easier when trades were singular, since trading became a series of loops, deploying funds like employees in a business, it's become less simplistic...am glad others here have it sorted

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Tech/Pav

Aaaha - A light bulb moment for me, for sure.

From your previous posts I understood to be proactive and skew the results into my favour by lifting the initial stop loss (1 Risk) towards or to breakeven fairly quickly to reduce our initial risk.

I was skewing the initial risk BUT NOT the exit, doing both does make a big difference on results as you say.

I know the exercise I've done below is very basic but it does illustrates your point of being proactive both ends, start of the trade and end of the trade.

If I tossed a coin 2 times for 1 win and 1 loss (50% Win Rate)
Won $1 for the win and lost $1 for the loss (1:1 Profit Ratio)
That's breakeven trading putting all other costs aside for the time being.

If I could then skew the results by reducing that initial risk down to half, it would mean I only lost .50 cents and still had my $1 win. So Win Rate was still 50% but my Profit Ratio was now 2:1 because I'm now winning twice as much as I was losing. This now has me above the breakeven line.

But now, if I can skew the exit (light bulb for me) and improve this $1 win to say $1.50 the results are very good.
Win Rate still 50%, now winning $1.50 and losing .50 cents which pushes my Profit Ratio out to 3:1.
A very good system indeed.

I know we probably won't get a 50% reduction on our initial risk and a improvement of 50% on our winnings as in the perfect world but I get the idea of skewing both ends and see that it does have a dramatic affect on the end results.

We might or might not get a 3:1 system but it does get us away from that breakeven line.

I get it! I look forward to your charts and ideas on skewing both ends.

Thanks again Tech and Pav, appreciate your work.

PS. Do you trade long and short?

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Some great musings here Mistagear----

Should a break-even trade even be considered a valid score in a Risk/Reward System ?

I think so and below is why

If you scratch a trade at break even (Zero R ) what you do next is take another trade, so in effect, within your system you have taken funds out of a Zero R, and placed it in the next trade, a 1R trade.
Thats sort of equivalent to having not taken the first trade.

But you cannot deny that the trade was taken. Analysis anticipated a profitable trade and as you will see shortly the anticipation that momentum would continue allowed me or indicated to me that it was sfe to reduce my initial risk by moving the trade to a position of break even.

Some people may consider if the original stop placement was justified as signalling a fail of the trade and that the entry was a suitable entry, why now is the entry point the place to signal a failed trade.

I would suggest that THIS OBSERVATION is widely accepted by most here.

Again you will see that the setup I'm looking for are at best continuation micro patterns and at worst continuation patterns. So there is a group of bars often coupled with other analysis which indicates a continuation of the current move in my direction.
This pattern has a set boundary which we can determine indication of success or failure. It is this boundary which we set our initial stop/initial trigger/and importantly our position sizing (Not with standing your comments below--will get to them).

Why therefore, is not a 0.25 R or 0.5 R a better proposition than entering a new trade at 1 R ?
If you are not trying to be right, rather trying to be profitable, surely any risk less than you take for the next trade, remains a valid trade within the Risk/Reward System ?

Because we are letting each individual trade determine its own out come. We are not limiting the profit potential of the next trade due to the outcome of the last.

I struggle with this concept, life was easier when trades were singular, since trading became a series of loops, deploying funds like employees in a business, it's become less simplistic...am glad others here have it sorted

Why cannot it be exactly as you describe?

So lets have a look at some examples we have traded.

But before I do

Currently Pav and I are not finding the continuation patterns that were prevalent earlier in the year. In fact where a market in general turns you will find many exhaustion and ending patterns. I can and do find that some of the patterns traded at this time as continuation patterns turn out to be ending patterns. In these situations OFTEN our pattern will trigger only to quickly reverse and fail.
Here 1R losses increase (At the end of longer term moves).

This is why there are no NEW setups offered up ---as they appear I will post them.
I will also post Current longer term general market analysis. this I posted this week in the XAO thread (it is actually a chart of the XJO)

Some great musings here Mistagear----

Should a break-even trade even be considered a valid score in a Risk/Reward System ?

I think so and below is why

If you scratch a trade at break even (Zero R ) what you do next is take another trade, so in effect, within your system you have taken funds out of a Zero R, and placed it in the next trade, a 1R trade.
Thats sort of equivalent to having not taken the first trade.

But you cannot deny that the trade was taken. Analysis anticipated a profitable trade and as you will see shortly the anticipation that momentum would continue allowed me or indicated to me that it was sfe to reduce my initial risk by moving the trade to a position of break even.

Some people may consider if the original stop placement was justified as signalling a fail of the trade and that the entry was a suitable entry, why now is the entry point the place to signal a failed trade.

I would suggest that THIS OBSERVATION is widely accepted by most here.

Again you will see that the setup I'm looking for are at best continuation micro patterns and at worst continuation patterns. So there is a group of bars often coupled with other analysis which indicates a continuation of the current move in my direction.
This pattern has a set boundary which we can determine indication of success or failure. It is this boundary which we set our initial stop/initial trigger/and importantly our position sizing (Not with standing your comments below--will get to them).

Why therefore, is not a 0.25 R or 0.5 R a better proposition than entering a new trade at 1 R ?
If you are not trying to be right, rather trying to be profitable, surely any risk less than you take for the next trade, remains a valid trade within the Risk/Reward System ?

Because we are letting each individual trade determine its own out come. We are not limiting the profit potential of the next trade due to the outcome of the last.

I struggle with this concept, life was easier when trades were singular, since trading became a series of loops, deploying funds like employees in a business, it's become less simplistic...am glad others here have it sorted

Why cannot it be exactly as you describe?

So lets have a look at some examples we have traded.

But before I do

Currently Pav and I are not finding the continuation patterns that were prevalent earlier in the year. In fact where a market in general turns you will find many exhaustion and ending patterns. I can and do find that some of the patterns traded at this time as continuation patterns turn out to be ending patterns. In these situations OFTEN our pattern will trigger only to quickly reverse and fail.
Here 1R losses increase (At the end of longer term moves).

This is why there are no NEW setups offered up ---as they appear I will post them.
I will also post Current longer term general market analysis. this I posted this week in the XAO thread (it is actually a chart of the XJO)

Click on all charts to enlarge

View attachment 52542

This is why we are seeing zero continuation trades and got hit recently with a number of completion patterns.
like this one with TLS
You can see the initial setup and as momentum had already triggered the trade I placed the initial stop in the body of the pattern. I would had we taken the trade at the point of breakout moved the stop up in line with momentum going our way,as it was I found it the day of breakout.
Filled the next day you can then see how quickly and aggressively the trade collapsed.
Note how the patterns has been tested and has acted as resistance!!
1R loss.

View attachment 52543

The other chart in the Shot is TPM I miss labelled it.
This pattern failed to trigger.

Here are today's shots of both charts.

View attachment 52544

Here is one of our FIRST completed successful trades.
This chart was labelled as the chart unfolded and sent as an educational exercise to Pav each time a management of the trade took place.

View attachment 52545

This is how Ill label all charts as they are traded in future.

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Tech - In regards to your SWM chart

Your buy in date was Jan 16th
Buy in price was $1.86, why that price? Why not the top of the run up of Jan 10 or was it 1 cent above the first top bar of the first rush of momentum on the Jan 3?

What day did you move your stop loss to breakeven and the reason or if you have time the dates you moved all stops up and the reasons so I can see what makes you react and when.

On the Jan 21 we see a high finish with lower volume so does that mean no sellers? Same on Feb 1.

Very interested in seeing what your seeing and what makes you react on these days as the trade moves along.

 

[pavilion103]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Tech can correct me if I'm wrong on any of this but below is a details analysis of the chart that I marked up for SWM. It shows where the stop was trailed each time and has a few explanations on the chart.

In answer to the previous questions notice:
21st Jan - this was preceeded by a couple of very tight range high volume bars which could indicate potential supply. 21st Jan tests this on low volume which could suggest little supply. It needed a couple of bars to sort itself out and then away it went.

1st Feb - Notice that this is preceeded by the pivot point reversal. We like to see price moving up on lower volume, with no resistance in the near background.

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Thanks Pav
I will digest all that this afternoon, understood what you are saying and will go over this to make sure it sticks. I can see where you are going, very good.
Thanks once again.

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Pav/Tech
Thanks once again for your charts and comments.

Pav - Your use of different colours for the circles and comments really are helpful and makes it easy to follow where and what you are talking about. Just that 1 chart and all the info in it has helped me understand previous charts posted a little better, so thanks. The student now becoming a teacher.

Forgive me asking questions as I don't presume I know things when maybe I don't, so I'd rather ask a silly question and know the right answer than going forward on a false belief. I'll ask them as they come into my head and if they need to be answered at a later date that's ok too.

What is the ideal amount of open trades to have going at any one time, any thoughts?

So we're not really interested in getting in at the first breakout of a larger consolidation pattern (Base) but we are using that breakout to attract us to that share for our Watchlist, is this correct?
And this does make sense when I think about it because it has not shown the upward momentum that you talk about at this stage beside the 1 day breakout.

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Just to add to Pav's comments.
I also encourage Pav and others to type out your comments here---it helps to crystallize thought processes.

Tech - In regards to your SWM chart

Your buy in date was Jan 16th
Buy in price was $1.86, why that price? Why not the top of the run up of Jan 10 or was it 1 cent above the first top bar of the first rush of momentum on the Jan 3?

All setups are found from a scan.These scans are looking for consolidation or continuation patterns. As such the prospects thrown up need to be eyeballed for suitability which is an experience thing. You can read up on patterns in many many books and on the net. What I look for in particular is a likely change of sentiment from consolidation or short term pull back to the resumption of trend.

What day did you move your stop loss to break even and the reason or if you have time the dates you moved all stops up and the reasons so I can see what makes you react and when.

The break even stop on 25/1
The reason was that momentum proved that it had returned to the up trend.
The trailing stop then was placed on 1/2 with that being an up day.
Moved on 6/2 after a strong wide range up bar.
Finally 19/2 as price moved out of consolidation.

On the Jan 21 we see a high finish with lower volume so does that mean no sellers? Same on Feb 1.

In both cases nothing remarkable about volume---either way so we need to wait for following bars to confirm price movement probabilities. lower volume rising bars certainly indicate lack of supply.

Very interested in seeing what your seeing and what makes you react on these days as the trade moves along.

I get it wrong just like everyone.
Mr Market is definitely a woman!

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

SWM - I have spent a few hours reviewing your comments and this chart alone and the info you have passed on has been very beneficial so many thanks Tech and Pav.

Tech - In relation to your earlier post No:13,043 MTU Chart:
It broke out on the 10th April 2013
You waited for price to return to 5.14, why that price?
Were you looking for a lower risk entry?
If so, were you looking at trying to get in very near to the half way mark of this bar?
Or was the volume of this bar not that remarkable that made you think it might pull back a little before running up again.
I do understand you are waiting for a micro pattern of about 5 / 10 days to exist to achieve a low risk entry and is that the reason you waited for this to little pullback?

Thanks for any feedback ... Debtfree

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

SWM - I have spent a few hours reviewing your comments and this chart alone and the info you have passed on has been very beneficial so many thanks Tech and Pav.

Tech - In relation to your earlier post No:13,043 MTU Chart:
It broke out on the 10th April 2013
You waited for price to return to 5.14, why that price?
Were you looking for a lower risk entry?
If so, were you looking at trying to get in very near to the half way mark of this bar?
Or was the volume of this bar not that remarkable that made you think it might pull back a little before running up again.
I do understand you are waiting for a micro pattern of about 5 / 10 days to exist to achieve a low risk entry and is that the reason you waited for this to little pullback?

Thanks for any feedback ... Debtfree

Yes right on all accounts.
Hard to see on the metastock chart but when volume is above normal
and range is wide it is very common to see price retrace 50% of the bar.
This gives a much better entry and far better R/R than buying the high of the bar.
Sure you will miss some that dont retrace.

But its about profit NOT BEING RIGHT!

This is a Tradeguider Chart

Note a very common signal in the pullback
The GREEN triangle this is a

No supply bar
With volume lower than the previous 3 bars.

Click to enlarge.

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Tech, understood your points in the last post thanks.

Spent quite some time going through each day of the MTU trade from page 1. Naturally your lines and comments have help me understand the management of this trade to a certain extent and I was hoping you have time to run over my thoughts of what you were thinking as it unfolded.

By the looks of things there was 5 Stops used:
1 - Initial stop at 4.89
2 - Breakeven stop at 5.14 .... was this moved here on 17th April after close? Strong day, supply coming in and buyers accumulating resulting in moving your initial stop to breakeven very quickly.
3 - Looks like 5.38 ... was this moved here on 29th April after close? Good effort today, looks like supply is a little short of average but buyers are willing to pay more.
4 - 5.69 ... was this moved here on 8th May after close? Strong day, supply coming in and buyers accumulating and the next day as well which has a big spike. Did this mean maybe nearing the end of it's run?
5 - 6.09 ... which you explained in that post.

You also have 2 thin blue lines above and below days 18th to 24th, was this a potential area to add another position but passed for some reason or are the lines for something else?
Seen the added position at 5.69.

Thanks for your time and chart.

Cheers ... Debtfree

 

[tech/a]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

You also have 2 thin blue lines above and below days 18th to 24th, was this a potential area to add another position but passed for some reason or are the lines for something else?
Seen the added position at 5.69.

 

[debtfree]

Re: Technical Trading Exercise---Discretionary, (Pavilion103 & tech/a)

Don't know if this will work as I have not added charts before.
No not those line I'm aware of those. I'm talking about the second graph which I hope will be inserted into this post when I reply.

The 2 short thin horizontal blue lines above and below those days mentioned and there is also a red thicker line in that area with a blue and white stop sign just below. Hope this clarifies.