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Tuesday, October 12, 2010

The evolution of my strategies...

As I mentioned in the previous post, my trading has continued to evolve and I am very much focused on making the majority of my money (and spending the majority of my time) in the first hour of trading. I have stated in past posts that based on my research and experience, setups in the first few hours offer the highest probability trades. So everything comes together nicely.

If you are familiar with the years worth of charts on this blog, everything (setups, indicators, timeframes) is still valid. But I have fine-tuned my indicators, how I plot my Fibonacci lines, and the timeframes I follow. So, some of my new strategies and thoughts might appear to contradict things from the past. But in reality, they don't. There are always valid setups no matter how you plot your Fibonacci lines, or what MAs you use, or what timeframes you follow. The key is finding what works for you. The secret to success and longevity is to pick something and stick with it, and not switch at the drop of a hat. Change is fine, especially if it is part of the evolution of your strategy. But switching from 15-minutes to 5-minutes to 30-minutes and back again, or plotting a 34EMA, then a 13EMA, then a 50SMA from day to day and week to week will only ensure that you self-destruct at a rapid pace. Consistency is key.

I made a good post emphasizing this point back in 2006 titled "Chasing Success" - read it here. I also made a follow-up post here.

Having said all of that, I will outline some of my fine-tuning over the next few posts, and I have a good chart from today's trading that will allow me to do so - GMCR. Below is a 2-minute chart of GMCR "naked" - no indicators or Fibonacci lines. Don't get caught up on the 2-minute timeframe, as these patterns will appear on any timeframe. In fact, a word of warning - trading timeframes this fast can be extremely dangerous unless you have perfected your setups and entries/exits. If you think losing money on a 15-minute timeframe is difficult to stomach, moving to a chart this fast may bring on suicidal tendencies. I made a post back in 2005 about trading fast timeframes, and although I have now migrated to a faster timeframe personally, this advice is still worth reading.

Back to the chart. This is the kind of setup you can find multiple times a week, and if you only focused on this your could probably make a living trading. But 99% of us lack the discipline to do that, so there is little danger in it becoming a reality. As you look at this chart the key question is, "how could you have anticipated the setup was going to be a runner (ie, a nice gainer) after the first five bars?" Over the next few days I will post the things I saw in the setup that pointed to a high-probability trade. But for now, try to answer the question on your own.

10/14 edit - so far, great analysis in the comments. I will post what I saw, my thoughts, and a few updated charts over the weekend.



Albert said...

I feel like I am dreaming. Great to see you back blogging and great to see a chart! I am going to study this tonight and look forward to your follow on.

James said...

Hammer-type candle on bar five. Plus a nice run up in the first 10 minutes, past the previous close. Glad you are back X. I look forward to learning more!

Anonymous said...

Per Tom C.'s past posts, price broke through a whole number and pulled back to test it as support.

Dana said...

Nice to have you back!

Javier said...

First bar open below yesterday low and close above it on a strong bar followed by strong upside second and third bar. Pause by Inside bar on fouth bar. Fifth bar is a hammer type of bar testing yesterday close as support and also whole number.

My questios are:
- how do you scan for this type of set up ?
- Do you trail them or have an exit price ?

Great to read you again X !!!!

Times of Your Life said...

@.@ I just done reading the whole blog yesterday and was thinking of reread it again but it's nice to have new post to read hahahaah...

this chart is........really naked.....

"how could you have anticipated the setup was going to be a runner (ie, a nice gainer) after the first five bars?"

@.@ um..................
if I don't look at the price and time frame and just analysis the candles, I would say:

- the first 3 bars are real strong body bars, they closed and opened almost at the same price for each of the previous candles.

- the 4th bar make a NRB closed 75% of the 3rd bar which building up energy for the next few moves, and this is indecision bar

- the 5th bar is a pull back but didn't pull back too much (pulled back above 40% of the 3rd bar body) and closed strong (real hammer, but just red in color but still bullish by looking at the pullback and hammer type)


Dominick said...

Good to see you back x. I read through the entire blog a couple of years ago and just recently started to review it. Your style is straight forward and really speaks to me.
As far as the blog helping or hurting others, I would say it helped way more than hurt (if you can even say hurt). Everyone who has ever tried trading knows it is risky. People are responsible for their own actions. Not you. You were gracious enough to put your technique out there for anyone to try out and adapt. For that you are appreciated.

Anyway here we go:
In the immortal words of trader X,
What did I see?
A gap down but three strong wide range bars blowing through alot of resistance(yesterdays close, ema, etc, etc.) Contraction in bar 4(nr4), a hammer in 5 all in the top of the opening range, and finally a breakout.
What was the entry? Probably a break of the 5th bar high or maybe the opening range set by the 1st three.
What was the exit? Somewhere up top. Maybe 1/2 close after a $1.00 gain and let the other half ride. If your still operating that way.

Let us know X. Thanks.

Anonymous said...

Thanks for returning, X. Your thoughts, comments, and reflections on your trades are always refreshing and educational to read.

Anonymous said...

What a pleasant surprise to find that you're back.
The first 4 candles all closed at the top of the range.

Jamie said...

Welcome back X!

Looking forward to your trading insights and, of course, your brand of humor!