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Trading strategies for entries

Discussion in 'Trading Strategies/Systems' started by Derek1981, May 20, 2020.

  1. Derek1981

    Derek1981

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    Hi,
    I'm trying to get back into trading, my main experience using swing trading to identify entries (trading CFDs). I am looking for a complimentary or alternate trading signals to use to improve my chance of successful trades.
    Can anyone offer advice on what style of identifying they find most successful? Or recommend any training out there?
    Cheers
     
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  2. peter2

    peter2

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    Welcome to ASF @Derek1981 . Entries hey? They're only the tip of the iceberg in a trading plan. All buy setups have a better chance of working out well when the general market is going up rather than going down. Position sizing, managing our downside exposure and let's not forget the exits are all just as if not more important.

    If you're getting back into trading then you'll know what you've got to do better this time. I don't think you'll need better entries.

    We're here if you need suggestions, but try to be a little more specific with your questions so that we can be of more help to you.
     
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  3. peter2

    peter2

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    You mention swing trading, that's different to trend trading because trend traders have to hold through pull-backs (dips) and that's not a mean reversion contrarian trading style. Swing trading is like momentum trading. We want to get on soon after the swing starts and get off when it pauses.

    What are your beliefs about market structure? Do you like to buy breaks of resistance or rallies off support? Are you an Elliot wave, Gann or Fibonacci aficionado?

    Do you droll over an ascending triangle or a Darvas box? Do you prefer classic chart patterns like flags or wedgies? How do you feel about MA crossovers? Does a MACD cross and kiss give you goosebumps?

    Entries are easy. It's what we do after our entry that really matters.
     
  4. aus_trader

    aus_trader

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    Hi Derek and welcome to ASF.

    peter2 has covered pretty much anything I could think of plus more.

    Entry is just part of being able to survive the markets and there isn't a perfect entry that works in all markets.

    In strong bull markets Break Out type of entries generally work well. But in choppy, range-bound markets, you can get killed and your CFD account can blow up in no time trading Break Outs. That's because in range bound or highly volatile up and down markets most Break Outs tend to be False Break Outs and prices tend to reverse soon after, possibly going to the other extreme of the range.

    There are other aspects that are just as important and over the years I have learnt from ASF members like Peter2, how to position size a portfolio, so that I don't put too much capital into a single position.
     
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  5. Derek1981

    Derek1981

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    Thanks for the welcome and comments peter2 and aus_trader.

    Yes the previous training I have completed was with Safety in the Market, so exactly like you describe trading the swings, getting in when the swing breaks the previous day high (or low if your short) and exiting at a pre-determined percentage of the previous swing while using your stop losses to minimise risk). This is mostly based on Gann. I don't have any experience with Elliot wave and minimal with Fibonacci. These swings ranges obviously need to be at a good entry point within the bigger picture, so not be running into previous levels of resistance of Fibonacci levels, an ideally volumes and temperature of the trade in your favour for a stronger trade.

    I realise there are many different trading styles and techniques out there, so I would like to be able to add some of the more reliable techniques to my trading to improve the chances of picking the successful trades and avoiding taking losing trades. I don't know a lot about selecting trades based on moving averages, is this a technique you would suggest I study more? What choice of crossover days do you feel works better on average?

    Aus_trader that is a good point you make about large ranges in volatile markets such as we have now. It is easy to get stopped out when the market moves the wrong way. I feel like lately in my trading I have been expecting the market to pull back based on Corona so favouring placing short trades when the market has kept running up, when I should be trading with the trend, when daily trend matches the weekly trend indicating a stronger trade.
     
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  6. aus_trader

    aus_trader

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  7. Skate

    Skate

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    Hi @Derek1981 welcome to our community. I've noticed you have been given some excellent suggestions already but I would like to invite you to the "Dump it here" thread & have a read of a few of my posts. I have just started a new trading strategy (the Action Strategy) & it's being "trading live" with full disclosure & weekly updates on its progress so others can follow along. Let me give you the hyperlinks so as not to waste your time.

    The Action Strategy
    The Action Strategy is a "no thinking strategy" as you just follow along with me. It's a small $20k portfolio (trading 20 X $1k positions). After 2 weeks the strategy is showing a nice profit. My weekly updates are after the close of trade on a FRIDAY (tomorrow). Saturday is where I report what I'm buying & selling. Monday updates after the close (if there were purchases on Monday). All the rules are displayed below & easy to follow.

    Don't forget to check-in tomorrow
    After 6pm tomorrow (Friday) I update the Action Strategy performance for the week just closed. Don't forget to check-in & see how the strategy is performing. If you are anxious to start, let's see how this strategy performs first. Don't get overwhelmed it's easy to follow & you read those few links I've supplied you above.

    Look for the Action Strategy logo & read the post
    1 FRIDAY New Information Action Strategy Logo with Disclaimer Arrow minor version.jpg


    Live trading strategy links
    https://www.aussiestockforums.com/posts/1070763/
    https://www.aussiestockforums.com/posts/1072660/
    https://www.aussiestockforums.com/posts/1070768/
    https://www.aussiestockforums.com/posts/1071158/
    https://www.aussiestockforums.com/posts/1071248/
    https://www.aussiestockforums.com/posts/1071258/
    https://www.aussiestockforums.com/posts/1071294/
    https://www.aussiestockforums.com/posts/1072095/

    This is informative
    https://www.aussiestockforums.com/posts/1072112/

    Skate.
     
  8. peter2

    peter2

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    OK @Derek1981 I know the SITM structure and it's a robust trade framing technique. You can use it to create a profitable trading plan. However the market doesn't provide perfect textbook setups very often. We have to improvise a little but still adhere to the basic techniques.

    I started my trading career using the SITM swing structure and it didn't take long for me to become frustrated with it. The market doesn't play nice. We see price pulling back ending the swing up (A - B) and we're waiting for point C to form. Point C forms, our buy stop order is placed and we're waiting for price to trigger us into the trade. Bang, we're in and our hopes are high that we'll get to the 100% level.

    All of a sudden price reverses and hits our SL giving us a full loss. Damn. Now worries next setup BUT a few weeks later we notice that old chart we traded for a loss made a lower swing low and then took off and charged past the old swing high. Bugga! Did you notice this also? That simple pull-back morphed into a complex pull-back that I now know is a basic abc EW pullback. We missed out on a great trade because our trade plan was too specific.
    abc2205.png
    I added EW abc corrections, double bottoms and Darvas box break-outs to my play-book and I've never looked back. The SITM setup ensures that we frame every trade with an acceptable RR payoff. This is priceless.
     
  9. peter2

    peter2

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    @Derek1981 Something else to get your trade juices flowing.

    This post is about employing two moving averages to outline the current medium term trend. The EMAs are 13,21. There's nothing special about the numbers. They suit my medium term outlook. The EMA trend is shown in the chart by filling in the difference between the EMA lines with green for an up trend.

    We see that price has fallen from the high at 9.55 to create a swing low at 6.55. Can we use this as another point C to frame our SITM setup? According to the SITM TP this swing down is now a down trend because the low is lower than the prior swing low. Damn.

    BUT if we consider that the medium term trend remains UP according to the EMAs then this swing low can be traded as a SITM double bottom setup. You remember the target for DBs? (hint +200%). Boom.

    fmg2205.PNG

    The SITM trade framing setup is valuable and you know it. The only question is can you create a profitable trading plan using it? Can you apply it in real time? Can you stick to it?
     
  10. peter2

    peter2

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    Are you still watching Derek? Same chart after the coronavirus selloff.
    Did this chart just form another point C (at 8.20) for us to use?
    Can we apply our SITM double bottom setup here as well?
    The EMAs indicate that the medium term weekly trend remains UP.
    Lets go for it.

    fmg2205b.PNG

    I hope by now, you understand that what you already know about trading learned in that SITM education is gold.
     
  11. peter2

    peter2

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    Sorry I'm getting carried away by all the possibilities with what you've learned from the SITM course. I hope you are as well. Let me look at trading from another angle.

    You've got your trade plan (TP) and it's based on the SITM setup and includes the DB setup. You've got a daily or weekly market preparation process (that you totally enjoy doing btw).

    Now, you're sitting there looking at the FMG weekly chart and you notice the DB opportunity at 8.20. Point C forms and you know what to do next (place your orders in the market).

    On this same week-end the news about the coronavirus is bad. The market has just tanked big time. Investors are selling out of everything. There's a massive rush to cash. Headlines indicate panic.

    Will you be able to follow your TP and place those buy orders in the market? Your partner, friends and everyone else will think you're mad for even thinking about buying now. Will you be able to pull the trigger? Do you have the discipline and personal integrity to do the correct thing when it's difficult to do it?
     
  12. Derek1981

    Derek1981

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    Thank you Skate for the information. I did start to read the "Dump it Here" thread the other day however i ended up down a rabbit hole follow links and information i wanted to read more about that was mentioned. I will definitely check out the links and follow your journey.
     
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  13. Derek1981

    Derek1981

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    I really appreciate you talking through some of the movements in those chart set ups peter2.
    It's starting to pull all that information back out. Yes absolutely trading off a potential double bottom is in a much stronger position. SITM says to qualify for a double bottom you can allow 1-3% difference in price, however the more symmetrical the stronger the signal. And yes 200% of the range is the target. The real money is made in the big moves, not the simple ABC repeats of previous range.

    I'm finding i'm running scans each night to identify ABCs and realise this is fine to pick up new markets but its probably more important to pick a few markets to study in more depth that have a higher success rate in ABC trading if i use this method. As you say with your method, the goal is to use several indicators that all add to determining the strength (or weakness) of a trade, then deciding whether or not to pull the trigger with your limit and stops placed in line with your trading plan. One of those stocks that may be worth looking into further from your charts above is FMG.

    Do you feel in the current conditions with a more volatile market, it is better to have a smaller position with a larger stop loss to allow more market movement than the traditional below point C that would be used with this system? And yes thats a very good question placing trades when big news comes out. I probably am too influenced by news at the moment instead of looking at what the chart is saying.
     
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  14. Derek1981

    Derek1981

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    I feel like where you were at before is very much how i feel about using the system at the moment. I need to modify the rules to suit me. I like the structure and rules that make it easy to follow however and finding am not achieving anywhere near as many as successful trades as I would like. When i had a break last time, I wasn't losing money but was essentially treading water, spending time but with no gain.
    With your example of looking at EW pullbacks, how would you determine whether or not you take the 1st ABC trade, or leave it to a potential 2nd pullback?
    What target would you be aiming for/ what reference range would you use?
     
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  15. peter2

    peter2

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    Now we're getting somewhere Derek. Your questions are better as you're thinking through your concerns regarding your TP.

    If you use a larger iSL size then yes your position sizes are smaller, but you'll need price to go further to get to an acceptable RR level. Is the current market condition giving us this follow through? I don't see it (in the ASX). Increasing our iSL size may make us feel better but it hurts our performance significantly. This is the sort of compromise that reduces our edge (assuming you have one). Selling 1/2 at initial targets is another compromise that significantly reduces profit but it makes us feel better.

    Instead of increasing the size of the SL, how about just risking less per trade?

    This is a question for you isn't it. I don't trade the simple pull-backs. I'll only trade the pull-backs that go back to the 50-62% level and have an abc appearance. I watch the simple pull-backs for a break-out entry. What does a shallow pull-back indicate about the trend? (check your SITM notes). A shallow PB indicates a strong trend so I trade the BO-NH after a shallow PB.

    I've worked around the problem I was having. You can also.

    The ref range is always based on the AB swing from the Pt C. When market conditions get tough I will enter at 33% instead of 25%. My 1st target for a deeper PB is always pt B. If I get more I'm happy. On a BO-NH trade the 1st target is 75% range.

    If the range from 33% (entry) to pt B is not giving me more than +1.5R I'll pass on the opportunity.
     
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  16. Derek1981

    Derek1981

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    You can risk less per trade yes but that doesn't help with the problem of having a higher success rate with my trades. Agree that increasing the SL is probably not the right way to go either.
    Very much appreciate your thoughts and they do make sense to me. I need to find some more indicators to add to my trading to pick trades with a higher probability of success. I'll look more into EW & moving averages as a starting point, and keep trawling through the wealth of info on this forum.
     
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  17. peter2

    peter2

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    Derek this may help. Cut & pasted from @Skate . It fits perfectly here.

    Your first process is to find strong impulsive A-B swings. MA crossovers may help find them but even simple things like looking for stocks that are +10% in a week or +20% /month will also find them. I screen the A-B swings using a checklist (Increasing volume, pt B is a new high, A-B swing breaks through a horizontal or sloping resistance line, etc.)

    Second, we wait for a confirmed pt B.
    Third, we anticipate pt C. This is right out of the SITM education.

    This is where my process differs from SITM as I look for these setups in this order. It's a planned process.
    (i) BO-NH setup: Once pt B is confirmed, Place buy stop at new high while the pull-back does not close below 38% PB level (shallow PB). If price goes lower the setup is invalidated, delete buy order. Go to next setup.
    (ii) PB setup: Wait for nice abc correction down to 50-62% PB level. Anticipate pt C , place buy stop order. If price continues to fall this setup is invalidated, delete buy order, ditch chart or wait for next setup.
    (iii) DB setup: Confirm medium term trend (dual EMAs) remains up. Buy the bounce off the double bottom.

    Currently the market is/has been forming a stack of BO-NH setups. In this environment I don't need to look for PB or DB setups. Go with the flow and only risk what you're comfortable risking. For example I'm not comfortable with the current state of the market, but it is going up slowly so I must trade what I see. I'm not going to invest 100% no way. I am willing to risk 3%. This could be 3 x 1% or 6 x 0.5%. I'd prefer to start with six right now and see what happens.

    We return to "Sometimes, good enough is good enough".
     
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  18. Skate

    Skate

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    @Derek1981, Peter has just given you a GEM - "Go with the flow" it's an exceptional piece of advice, the mantra of a "trend trader". If you only followed that one piece of advice it would serve you well as a trader. Bill Williams PhD once said the same thing, "You will never go broke trading - if you want what the market wants”

    GEM
    "Go with the flow & want what the market wants"

    Skate.
     
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  19. Derek1981

    Derek1981

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    Appreciate your insights and specifics in your response peter2. Take Home Message trade what we see in front of us. I like your thoughts on looking for balances trades, around the 50% PB level.
     
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  20. Derek1981

    Derek1981

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    Noted. A great piece of advice to have stuck on the wall behind the computer! Can I ask what program is best to use for your ebook? It's not allowing me to download.
     
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