Day Trading - page 2
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Mr.Marketz, also please explain what you mean by 1 minute pivot and 15 minute pivot or pivot break? Are you refering to the hourly pivot line?
Or could you please attach the 1m and 15m pivot line indicators? Thanks.
Post 3 updated
I updated the 3rd and final post. From this point on it's all open discussion.
Mikkom and Sivach,
By pivots, I mean turning points in price. Not daily pivots or S/R lines. Pure price action breaks, fellas. Take a look at those chart examples again...
By pivots, I mean turning points in price. Not daily pivots or S/R lines. Pure price action breaks, fellas. Take a look at those chart examples again...
I went through the charts and what I could assume from there is that you mean the absolute tops/bottoms of the price waves? Am I on the right track here?
I went through the charts and what I could assume from there is that you mean the absolute tops/bottoms of the price waves? Am I on the right track here?
That's correct, Mikkom.
Last, But Not Least
I am going to imagine that some of you are thinking certain things, and have questions. So before I have to field random inquiries, I will address some of the concerns / issues you may have… an FAQ, if you will.
Q. What’s with the 5 to 1 risk/reward ratio?
A. If you don’t rush into the trades, and take the time to spot a nice strong move (money flow) with a decent pullback (profit taking), you will come to realize that the hit rate for this technique is astronomical. I believe that if you spend some time nailing down these concepts, and watch for (and become familiar with) setup failure patterns… you should be all good. Not to mention, we are averaging… we need a bit of a buffer. Keep in mind that if your first order is down 20, and you add your second (and final) order… you will only be able to sustain an additional15 pip move against both of your positions before the SL is activated. You should be booking most of your trades… if you’re not, practice, practice, and practice.
Q. How is the money management configured?
A. The scripts are designed to allocate position sizing based on a 10pip move equaling 1% of the total account balance. In turn, if the EA closes you out for the 50 pips…you will be down 5% on the account. Some of you may think this is a bit aggressive; and it is. However, we are exposed to the market for an extremely limited amount of time and under the highest factors of probability. If you like, you can alter the scripts to your own liking. Also, you don’t have to sit around waiting for the 5% loss… you can close the trade/s if you don’t feel right about the way the trade is developing.
Q. How often should I trade in a session?
A. I’m sure no one is thinking about this question… but I believe it needs to be addressed. Most of you are thinking that you’re going to trade your way into superstardom within the next 6 to 8 weeks. Here’s the deal. I recommend no more than 2 trades a day… one preferably. Here’s why… 1% a day (compounded over the year) will create gains over 10 times your initial investment. Or just look at it this way, a great CD account at a bank will generate 5% for 6 months (or a year depending on the terms), and they’ll lock up a healthy minimum amount while doing it. You can make that 5% in a WEEK!!! There’s no rush. When you day trade, the greatest threat is overtrading. If you plan on doing 2 trades a session, I suggest you put a 2 hour distance between the trades… go drink some coffee. If you don’t take my advice on this… you will fail – guaranteed.
Q. Why just the 10 pips, price always seems to go much further after the setups?
A. I know you’re thinking about this one. Well, actually YOU’RE not the one that’s thinking about it. Your inner monster is. You know – the inner monster, the one who’s the “not so distant cousin of fear and greed”. You better learn to recognize the sound of that voice… or he’ll screw you every single time. Here’s a little secret for you… he’s responsible not only for all of your trading failures, but also, all of your failures in life. If you don’t control it… it will control you. Do me the favor, and stick to the script. Or… you will fail – guaranteed.
Q. Why cost average?
A. Precise market entries don’t exist. I’m sure you’ve seen it before, a trend line breaks, you come in with a good sized order, and the price overextends one more time (taking out your stop) before doing what you thought it was going to do all along. Cost averaging (in this strategy) is intended to solve the problem of these overextensions.
Q. Can I add indicators to this method in order to enhance this technique?
A. My guess is that once you focus in on the “market’s rhythm”, and it becomes second nature to you, you’ll never use indicators again. Not because they’re bad, or because the “cool traders” don’t use them – simply, because they will no longer serve the beneficial purpose you once thought they did.
That’s about it for me, gang. I know it’s a bit all over the place, but we’ll work out the kinks as we go along. As always, if you’ve got a question… post it, and I’ll do my best.
Peace,
MM
another question popped to my mind, not sure if you want to answer this so feel free to ignore it - is this the same system that you have automated?
Sorry Mikkom,
I missed this question from a previous post. The answer is, no. I spent a fair amount of time and resources developing an automated strategy for pull backs, and such. At best, the results were break-even, or slight gains (usually over an extended period of time). In either case, I never felt satisfied. With the strategy we're discussing in this thread... you need a human touch. There's a lot of things that I have not covered here, simply because it would be like writing a novel. Here's an example. You'll eventually start to notice the type of effect price momentum has on your setups. By this, I mean the actual speed of money flow and profit taking. Then the time of day becomes important once that's figured in, as well. There are an infinite amount of variables that will affect ones decision to get into a setup. A lot of them might have nothing to do with the market at all. I can't expect a computer to have a moment of divine intervention, or a gut feeling. Both of those elements will be your greatest tools once you've spent enough time studying the setups.
The EA I'm using now utilizes a different methodology, but its development would not have been possible without the market theory I've outlined in this thread.