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smilingsynic trading observations etc.

By Lawrence   on 2011 Dec 6 Tue 16:35

smilingsynic’s trading observations, techniques, etc.

*** this is part of our archive, complete thread now moved to forum under same name ***

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  • smilingsynic  February 22, 2012 at 21:26:08

    Notes on BOB VOLMAN’S book on scalping.
    Very similar to Al Brooks. I don’t trade with 70 tick charts and don’t even deal directly with Forex, but I still found some value here. I strongly recommend it for anyone who trades intraday and takes it seriously enough to realize that this is a business that requires hard work and commitment.

    Forex Price action scalping:
    Only scalp when the spread plus commission is one PIP or less.
    Use a 70 tick chart with a 20ema and no other indicators.
    Target of 10pips and a stop around 6 to 7.
    Using indicators is a losing proposition that will only add confusion and doubt.
    The market cannot be beaten. A trader can only strive to be those in it less proficient than himself. We have no guarantees; we just trade probability.
    Those who strive for glory in trading are simply deluding themselves.

    Double Doji break:
    1. Look for a pullback to around the 20ema.
    2. Look for two dojis or small candles in a row.
    3. The key: temporary, compressed in decision.
    4. Entry bar: takes out high ( for longs) or low ( for shorts)
    5. For there is no point speculating over other traders’ motives. All he has to go by is what takes place in the chart on a recurring basis. And this task should be to exploit repetition.
    6. Do not front run a break.

    First Break:
    1. First bar in a substantial pullback that gets taken out in the direction of the trend.
    2. Enter with trend to capitalize on a quick resumption of the market’s original intent.
    3. There are three conditions: (1) a strong trend with bigger frame participants; (2) full-fledged pullback; (3) the first pullback to go against the trend.

    Second Break:
    1. A superior setup than the First Break.
    2. It is a pattern that could be seen as to first breaks following each other in relatively quick succession.
    3. If the first break fails, this is the second with-trend attempt to end the pullback.
    4. Enter at the moment the second signal bar gets broken in the direction of the trend.
    5. As long as the market is trending and not running into obvious resistance, we should consider every orderly pullback a temporary event and use it to our advantage by trading our setups at every possible turning point.
    6. And there is arguably no higher probability of a winning trade in the market than to take that trade with-trend after a pullback peters out.
    Double Doji break, first break, and second break are with-trend entries.

    Block Break:
    1. A most simplistic description would be to characterize the pattern as a cluster of price bars tightly grouped together in a narrow vertical span. Preferably, the barriers of this block of bars are made up of several touches each, meaning that the top and bottom side of the pattern clearly represent resistance and support.
    2. Think of a coil being suppressed by a now-weakening force that is bound to give in. If prices eventually break free in the direction of the path of least resistance, we immediately enter the market on a break of the box. That makes the broken horizontal barrier the signal line to our entry point.
    3. There are three likely places where this can show up: (1) as a block of bars in the end of a pullback; (2) as a horizontal pullback in a strong trend; (3) as a block of bars in a non-trending market.
    4. Although not nearly as detrimental to a trader’s overall results as the other case, giving in to a sudden burst of boredom after a prolonged spell of inactivity is like walking away from investment that is just about to sprout.

    Range Break:
    1. The range will ultimately crack. The longer it lasts and the more defined the barriers can be drawn, the more players will spot the same break, which will enhance the likelihood of necessary follow-through. But not all breaks are created equal. As is the same with the BB setup, pre-breakout tension is one of the better leads to a dependable breakout.
    2. What is a false break? When the market comes down from a high of pattern straight to the lower and it breaks the low almost instantaneously. Back is a terrible way to celebrate and often leads to a very classic trap, because there is no pre-breakout buildup. Prices that break through this barrier are already exhausted. There needs to be buildup.
    3. Look for a proper squeeze: prices are literally being sandwiched between the 20ema and the barrier line.
    4. The 20-bar ema can be an excellent aid not only in pushing prices through a barrier defense, but also in keeping them from slipping back into the box after a break.

    Inside Range Break:
    1. A range-break trade in the middle of the range.
    2. It is not uncommon for prices, once broken free, to accelerate towards the nearest barrier.
    3. At the end of the day, a scalper’s task is all about tuning in to the beat of the market with as little information as possible. In a scalper’s world, less is definitely more.
    4. We should always bear in mind, though, that regardless of our wonderful setups, trades go sour all the time. New strategy could ever be devised to prevent that from happening. But once we understand that giving profits back to the market is part of the exact same process as taking profits from it, the whole idea of losing will become a non-issue. Losses are the costs of doing business as a trader, nothing more and nothing less.
    5. This is a profession, not a constant game of win or lose.

    Advanced Range Break:
    1. To set up can be classified in two ways.
    2. The first is as a clustering number of bars stagnating around the broken barrier level, but resilient enough to not prove the initial break false. The cluster basically hangs around the barrier, either on top of it ( for possible longs)or below it ( for possible shorts); sometimes the barrier level is running right through the center of it.
    3. The second is more of a pullback variety. This is like a breakout pullback.

    Tipping Point Technique:
    1. The essentials are pretty easy. For example, the maximum loss on any trade will be determined before the actual trade is put on them will stand for as long as the position is active.
    2. This last point to get out – the ultimate tipping point – usually lies a pip above or below a signal bar or at a level above or below the top or bottom in a particular pattern. In this scalping method, the average stop will be about 6 to 7 pip. The target objective at all times is 10. Whereas the target level should never be tampered with, the stop level, on the other hand, is free to be adjusted as the trade progresses, but only in the direction of the target and never the other way. The idea behind this, obviously, is to minimize the damage in case the market turns sour on the trade.
    3. Not exiting an invalid trade is the cardinal sin of trading. It has been a recurring theme in many trading anecdotes, and this one folly will no doubt continue to entertain the public for as long as there are traders. Respecting a stop can never be a shameful act; disrespecting one, on the other hand is the true disgraceful feat.
    4. To protect a trade from ever becoming a loser by pulling a stop to breakeven is simply asking for an early exit.
    5. Bailing out of very healthy trades at the slightest sign of counter activity, grabbing whatever tiny profit, is a surefire way to remain forever stuck in the non-profitable phase of trading. A trader has to rise above his fears of losing and giving back profits.
    6. It is not uncommon for a trade to come dangerously close to being stopped out. Such is the nature of trading. It cannot be stressed enough how important it is to not hit the X. button when confronted with these very typical counterattacks. When prices take your time, the power of demoralization can be excruciatingly strong. Fight it. Fight as hard as you can.
    7. The urge to get out of the trade when it is still technically valid can be extremely powerful. And so can be the reluctance to pull the plug on a position when it is time to bail out. These two little quirks reside in each one of us. They can never be defeated. But, fortunately, there is a wicked clever enough to stop these little demons right in their tracks, and that his commitment. To simply do what needs to be done, even when it hurts.
    8. A well-chosen tipping point is not just a spot on the chart. It must bear technical significance.

    • Lawrence Chan  February 23, 2012 at 08:13:29

      It is organized the way you summarize it here or you have done the organization?

      If it is the former, his writing is definitely more organized then Al. Maybe because the topic is more focused?

      • smilingsynic  February 23, 2012 at 11:26:39

        Organized acc to the chapter by chapter progression of the book.
        Volman is a much better writer and provides more illustrations of his concepts.
        By comparison, Brooks just likes to hear himself talk and has no clue on how to teach.

    • geosing  February 23, 2012 at 08:17:46

      Thanks for the excellent synopsis and for taking the time to post it. Looks to me like this is worth the study.

      • smilingsynic  February 23, 2012 at 11:27:37

        you’re welcome

    • geosing  February 23, 2012 at 19:54:56

      Does Mr Volman provide some rationale for using tick charts as the trading basis?

  • vertigo3  February 27, 2012 at 08:14:27

    geo,
    I have no idea whether Volman offers rationale for tick vs time bars, but here is url for someone who expresses an opinion.

    http://www.prorealtime.com/en/x-tick-charts

  • vertigo3  March 11, 2012 at 08:16:45

    SS,
    remember, you owe me a beer for comments I made (like 2 years ago?) about AH price levels that got you started looking at AH.

    A friend of mine wanted to know how often RTH PA printed at the 50% of the AH range.

    I only looked at one contract so far, ESH12.
    trade dates ran from 11-9-11 to 3-9-12.
    I didn’t want to use continuous contract because I wanted it to be the real numbers we see LIVE.

    STATS on 82 trade days of ESH12

    AH50 hit 62/82 during RTH, 75.6% of the time AH50 Hit

    40/82 opened BELOW 50% of the AH

    of the 40 days that opened BELOW AH50, 32/40 printed AH50 in RTH, 80%

    42/82 opened ABOVE 50% of the AH

    of the 42 days that opened ABOVE AH50, 30/42 printed AH50 in RTH, 71%

  • vertigo3  March 12, 2012 at 08:32:03

    I did find a bug in the code, now debugged, will run again and post results later today (Monday 3-12)

  • vertigo3  March 12, 2012 at 15:35:58

    bug in code only affected 1 trade day, data virtually the same, here’s H12 and Z11
    answering the question, How often is 50% of the AH rnge tagged in the RTH.

    MMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
    STATS on 81 trade days of ESH12 these stats start on 11-10-2011 run thru to 3-9-2012

    AH50 hit 62/81 during RTH, 76.5%

    39/81 opened BELOW 50% of the AH
    of the 39 days that opened BELOW AH50, 32/39 printed AH50 in RTH, 82%

    42/81 opened ABOVE 50% of the AH
    of the 42 days that opened ABOVE AH50, 30/42 printed AH50 in RTH, 71%

    MMMMMMMMMMMMMMMMMMMMMMMMM

    ESZ11
    8-17-11 to 12-15-11 total 84 Trade days

    total…58/84 trade days, AH50 was hit = 69%

    RTH opened below AH50 37 times…23/37 tagged AH50 = 62%

    RTH opened ABOVE AH50 46 times…35/46 tagged AH50 = 76%

  • RoloRolo  April 8, 2012 at 12:13:43

    Thanks again for the incredible insight and hard work SS, also thanks vertigo3 for your studies. It does not fall on deaf ears or blind eyes.

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