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Tuesday, March 06, 2012

A chart and question from David...

"My go-to trade is a variation of an X classic. I trade 15-minute charts and plot my Fibonacci lines over the opening range. I look for a pullback to the 50% level, and a valid candlestick pattern and support from a rising 5 or 8EMA. An example from today is VRML, where I entered on a break of the sixth bar's high. I also trade the "beyond the Fibonacci extension" setups a lot on these types of trades, but for the purposes of this comment I just want to discuss the initial setup described above. I have been trading it for 13 months now, and crunching the data my win rate is around 63%. With good money management, it has been a profitable setup but I am curious if any readers have been able to tweak these to get the winning percentage higher. Feedback is appreciated."

Here is David's chart:



Times of Your Life said...

nice trade...
very very nice

Trin Café said...

Any method is only as good as it is consistently used. From what you described in the method, time frame of 15 min, Fib lines, VRML, EMA are all used to identify the a trade and a entry point. It took me a while but I now realize that the best methods are only identifying trades that support good technical analysis.

I say all of that because the example provided is similar to my own method in many ways, but if you think about it, the best trades to take are all based on good technicals.

Back to the original question of tweaking, I would suggest back testing with a larger stop, could get as close to 70% or better. You inspired a new post for me thanks. Sorry to blab on and on. I blame that on some other fellow traders, its contagious.

Charles said...

That is a good percentage over a good timeframe, congrats. I think the road to improvement lies in really understanding buyers and sellers through candlestick patterns. Don't study the conventional stuff in books anymore, start looking at your charts and see what works and what doesn't work. Do hammers work if they close slightly red? Offsetting if it doesn't breach 50% of the previous bar? Tombstone dojis? I think you can get above 70% easy if you put in the time. Good luck.

Brian Lund said...

Great trade. I would have passed on it though due to the long upper tail on the second candle.

ElToro said...


Do you want to win more trades or do you want to make more money? A 63% win rate is outstanding for any trader but what matters is how much money you take home. You may be better served measuring your trades from a risk/reward perspective or even take that further and consider expectancy.

Anonymous said...


What do you usually do, if the next bar is an inside bar that never trigger your order? Would you cancel it and then wait for another bar before making a decision or use the inside bar as a trigger if it is pointing to the direction of your trade?


David said...

Many thanks for all the feedback. I appreciate it.

Trader-X said...

Pat, I usually cancel the order because I am looking for a break of the trigger bar, and rarely will I think that an inside bar after a trigger bar is another trigger bar (does that even make sense?).

Please note, however, I am not saying it isn't a good strategy. I've never researched it. If you have, and it appears to consistently yield positive results, it is valid. I've just never studied it personally.

Times of Your Life said...

can someone explain what inside bar does?

a inside bar with valid support and ema support is always welcome right?

why a inside bar?
is it because:
1. small consolidation so easy to breakout?
2. momentum build up?
3. smaller risk involve because because inside bar sometimes are the smallest out of all bars?


Anonymous said...

Hi David,

It depends on various other factors. As ElToro pointed out above you need to know your ratio of average winner/average loser? If it is more than 3:1, 63% win rate is great. Also, you can calculate expectancy as (Expectancy = (Probability of Win * Average Win) – (Probability of Loss * Average Loss)). If this is positive, you can play with your position size to increase your take home. Also how many trades can you find with this setup in a week. 15 to 20 setups a week gives enough opportunities to work with. Otherwise, you may have to look for additional setups. hope this helps.


Roger said...

Those parabolic moves are sweet. I wish I could find 2-3 a week, and I would be set.

The Dude said...

Nice trade.

Anonymous said...

Roger, I tend to find at least once a week. This is why I'd like to be involved with some type of trading room to find movers like this. It gets crazy when the room trades all different stuff, but if there was a focus on these type of setups and X type trades, I'd be in.