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The benefits of working on a higher timeframe with a well defined strategy

 
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vesskrastev

The benefits of working on a higher timeframe with a well defined strategy

Not too long ago (one week to be precise) I was struggling to get 10 PIPS a day consistently. Two days ago, trying to achieve multiple 25 PIPS winning, 24+ hours trades, I had the astronomical loss of 180 PIPS, all of them in one day. My objective was to win the 24+ hours trades, not to win PIPS. I was wrong. No objective is worth losing 50-60 PIPS on a trade. So yesterday I decided to change the way I trade. Before I was purposefully chosing only the currency pairs with the biggest volatility. I still do that, burt only during the London Open and the New York Open. After that, when the dust settles, I pick up the pairs with the lowest volatility and the longest time cycles. The key is to synchronise the trade, to start from the beginning of the longer cycle (whether the bull or the bear) of the pair, and to pick up the right direction. This way the trade starts almost immediately with profit and stays like that. When the countertrend comes (which inevitably happens), there is enough accumulated profit so that the trader would not be thinking constantly: "Should I pull the plug?"

Since the duration of the trade is at least 24 hours, that means no constant monitoring. Initially I was mad at this requirement. Everybody who has stayed on the trade 24 hours knows what a rollercoaster that is. The stop losses should be huge and may still not prevent you from getting kicked out from the trade. And the losses are Really Big. Now I realize that this requirement forces us to try and win at least a few swing trades. And when the taste for swing trades comes, I don't think that it will ever go. On the attachment below it is seen how just overnight, with the help of a couple of London Open trades, the unrealized PIPS were +240 on top of +28 realized PIPS (for some unknown reason the realized PIPS were not displayed on the screenshot). Since I have to hold the top three trades at least 24 hours, some of the gains may be gone. Still, it is a very nice result, especially compared to what was I scoring just a few days ago. On the other hand, once the requirement 25-5-24 is fulfilled, I can close the swing trades at the best moment, without being forced to wait for a certain amount of time. It feels really nice to know that with a small movement of the mouse I could have 240 PIPS. And that is accomplished without having to stare at the computer screen for hours. I am a professional self employed limo driver and my trading time almost coincides with my working time. Having to put the computer aside because a customer is in the car was (and is) a reason for many losses. Now, carefully planning the trade ahead of time, and only now and then checking its progress, feels so much better. And the results also are better, substantially better.

The key to the succes of a swing trade though, in my opinion, is primarily based on finding precisely the right entry point. Couple of days ago I posted on the forum an article named "Finding entry points for trades." ( https://apiaryfund.com/forum/finding-entry-points-trades ) It is based on the teachings of Brian Lloyd. I was using that strategy on 15M timeframe. Now I decided to apply it to the H4 frame, while consulting also D1 and H2 and H1. The main point was to start a trade exactly at the beginning of the time cycle of a pair, whose time cycle is longer than the proposed lenght of my trade - this way I would avoid multiple ups and downs of the price and more or less would  know what to expect (understanding that the market could still throw a curve ball at me). Since then I found out that the relationship between price and EMA(7), also the relationship between price and the middle line of the Bollinger Band, and generally how all three of them relate to each other, can carry so much information about what to expect for the future move of price. Anyone could see these relationships after some study of trades already completed. I wish I did have such a good system for finding out the best EXIT points of an existing trade. In my opinion, it would depend on ATR, time cycle, price cycle, and support and resistance, but I still haven't managed to finalize that.

HOORAH!!! I just completed the 25-5-24 requirement and now I am finally Silver II. Below are the two screenshots - one from the morning, and one from the afternoon. I will continue practicing swing trades.    

  

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Fri, 10/20/2017 - 5:06pm
 
ddyjak77

Congratulations, vesskrastev, and welcome to the swing traders' camp! I've had trades open for a couple of weeks gain around 400 pips profit. I tell you, there's no other feeling like that! The key for me to having the patience to stay in was to have a compelling reason to believe the market had room still to move without pulling all the way back, and that comes mainly from looking at the weekly chart and understanding the larger wave structures. When you start following the market's larger moves, the really big trends start to open up to you. I'm also a pretty recent convert to swing trading, so hopefully we'll both start seeing those big gains more consistently.

 
vesskrastev

Thank you, ddyjak77. Yesterday, while setting up the 3 winning 24 hrs trades, I realized that the system of different timeframes is actually a web of waves with different frequencies. All of them move with their amplitudes and frequencies, and the result of all of their movements is the movement of price. When trying to figure out long term the direction of the movement of price, the high time frames should be considered. When it is necessary to figure out the movement of price on short term, then the fast time frames (15M and 5M) need to be considered, since they change the fastest and their input is the one, that is the most impacting (on short term). I think that 1M is important only for hard core scalpers.

When I was fresh out of the university, in 1983, with a friend of mine we developed a program for a digital Furie analyses. If you gave the program the frequencies and the amplitudes of the different oscilating components, the program would give you the resulting spectrum - the "sound wave," or, in our case, the price movement. You also could give the program the combined result of all the oscilations, the "recorded sound," or the "price movement," and the program would have given you all of the harmonic or (oscilating) components - their amplitudes and their frequencies. My task, as a newly minted physicist with fresm math abilities, was to "chew the math," and my friend's task, was to write down the code. It worked out marvalously. We were trying to apply that program in the metalurgy, but in communist Bulgaria that was hopeless. Now, with a big delay, I see that every good deed bears fruit. A good trader just has to distinguish what is the time horizon he considers, and therefore what are the most important timeframes for the moment - and also how that picture changes with time.

 
WestCoast

So, I'm on the 25-5-24 task as well, and I've found the following to probably be the 'best' way to accomplish this task. Please understand the following caveats:
1) I'm not inclined to be the type of trader to hold trades for 24 hours. It's just not in my nature. I would have to see a proven strategy to attempt this.
2) I'm not trying to 'win' pips in this task. I simply want to complete it.
3) I heard this approach in a class a few weeks ago.

Find a few pairs which move quite a bit during a day (probably 50 pips). Put on both a buy and a sell for a pair, at the same price, at the same time. Set stop losses way outside of the expected range for a day. Come the following day (post 24 hours), evaluate each pair of trades and, if one of them is +25 pips, close them both out for a net loss of zero pips (give or take slippage). Right now, I'm sitting on 4 'winners' (for the task), waiting for Sunday night. I would have had a 5th, but the USD/CAD really moved higher yesterday and stopped me out of that pair of trades. At least I completed the 25 pips in one trade task. :)

 
ddyjak77

Vesskrastev, you absolutely nailed it. Great description of the relationships between different time frames! That's really interesting about your physics work too. I wonder if there's a predictive application to fractal oscillations in the market?

Scdavies, I'm with you 100% on needing to have a proven strategy to let a trade run. That's exactly the thing that kept me from holding trades - I just didn't understand or trust the analysis of the longer term charts enough to have confidence that a trade could go to the long term target. Admittedly, there can be corrective periods within the larger moves. The strategy vesskrastev gave above got me started with this confidence, but it didn't provide technically derived targets, just the entries. My own study into Elliott wave theory has begun to provide me with the targets and an improving understanding of the behavior of corrective patterns. I now prefer holding trades for at least a day or two, particularly if I enter early in the week and the market doesn't start to really move until Wednesday or Thursday.

 
Ronconomics

What an extremely insightful thread. Thank you to the original poster and contributors.

After kicking around in Gold 1 forankly for far too long I've come to the realisation that I can't fight the advice and just do my thing any longer. A reset (again ) is due. This time its a step towards professionalism and away from blitzing through beeline.

Several weeks tryiing to get my stats right (the 30 day rolling expectancy) has found me out. A combination of strategies with chaisng short term movements like a shiny object has led me to conclude that I can;'t continue and follow the advice of all the tutors which since the summer event seems more focused, absolutely cohesive and reinforcing now. Well done guys!!.

The Eureka moment is to recognise the stark choice between spending all day trading but not progressing or being more humble, stripped back and taking an engineering approach - measurement and response. Ortherwise whats the point of viewing all the discussions and advice which is now clear as day. I'm talking about a reset based on discipline. I thought I had it but I haven't.

So today I've begun afresh - same strategies - but more controlled entries and sizing, timeframes, explicit criteria, and labelling trades with emoticons to help with analysis subsequently.

I know its a tueasday and theres more volatility around but Its working and so far Im feeling good. I'm up 1.5% compared with losing up to 2% per day. I've about 15 trades on with half of them triggered.and green. Settings are at 1 and 2 atrs. No pairs have 5 positions turning bad on me at once!! Ive let bad positions turn around by setting appropriately wide stops and being patient and confident about the set up and seen the power of bigger green numbers in my unrealised. Ive taken profits and let secondary positions run to good effect. .

Three strategy Strategies:

Higher probability set ups and deliberate approaches so I can follow the training to consistent profitability.

1. D1 - Look for fast track set ups confirmed by D7 (see 2 below). There aren't many so use pending stops around consolidation for potential break outs instead where there are already 10 small range bars - all 0.05 [Green]. Danger of having too many orders pending with no chance of being triggered so limit to one buy and one sell at 1 atr initially. Strong trends may get a second entry with the trend for the continuation. I'm happy to leave these overnight.

2. My Core approach - called 5 energies. It's a variant on Fast Track.[Blue]

EMA 89, 34,8) relative to price action for direction;
STO (8,3,3) for cycle timing;
ATR (12) for trade and risk management
Positions sizes 0.05

Fractal energy - Momentum aligned on higher TF (trend and MACD for extra alignment confirmation if needed).

I'm using D1 and H4 (and in time H1 but not for now) as my trading picture and alignment one TF up.
No counter trend entries at this stage.

My workspace shows D1, H4, (opportunity spotting) and H1 M5 charts (BBands and pivots for fine tuning) on a single screen with one click and Orders open.

11 pairs are under review scanned at H4 intervals (paired back from 26 by eliminating those which seem to be so highly correlated that having multiple positions became unmanageable.and upping position size a bit.

Entries (at a good place, designed to find new trends relatively early ) are above or below the close of the confirming second candle after the trigger candle that turns the stochastic up or down. Late entries are allowed within a bar or so.
Entry P1 and P2 at 1atr and 2 atr targets mostly set as pending stops, 1 atr S/L always. P3 is allowed on success and derisking with no TP.

Exits - I'm working on but currently running with more discipline around the TP targets.(no more scalping out of fear) and review of entry conditions holding.

3. A few short term opportunities spotted by momentum moves or continuation patterns - again with trend, these may be range trades or even consolidation break out opportunities perhaps on H1 and M5 when patterns shout from the screen. Size reduced to 0.01 so plenty of scope to enter trades without concern. Price cycle and chart will determine S/L and TP. [Yellow]

I've flirted with currency strength tools for focus but get drawn into volatility plays and get stressed by the speed of unexpected moves. I tried and liked ADX but have dropped it for now. My pc doesn't cope well with too many indicators and I prefer to see a few charts alongside. I attend lots of classes for reinforcement of discipline. I cant really do crossover strategies as I find it difficult to see on Alveo without a whole chart to the page and then get confused on my triggers. I like the confidence the fast track gives for walking away from the computer until a new bar has formed, ro the chance to look for other set ups in the meantime without 200 trades a day;earning 80 pips and ending the day down 250!.

I don't get the positive feedback from beeline tasks now as its just me and the stats in Gold 1 left to do - so I'm going to look at treats fro when I avoid a trade temptation outside of my structures - my mantra being "higher probability is everything. on teh path to consistency". Catchy ain't it. Good luck all, and thanks for your kindness as ever. Thunderbirds are go!.

WIll I be able to keep to a regime? I don't know.. I really need this to work so here goes.

 
tlakes97

I have found that Scalping like Nate, Shawn and Todd demonstrate was taking too much time and causing me too much stress. After attending Fall Summit in Salt Lake, my work changed so I could not Scalp every morning before going to work. I followed Doug Eatough advice and started using D1 for determining trades. I started having 200 - 300 unrealized pips and it only took 15 minutes to set up. Now as I am finishing Gold 1, I am less stressed, and still making good pips. Next I wlll be working on Swing trades, to try become a better trader and have separate income streams, long term and swing trades.

 
beaches1k1

Hello Vesskrastev,
Very awesome insights, by you and the other Apiary Traders. Yes, rollercoaster and hair pin turns, and a few weeks of markets trading in ranges, for the most part. It's been tough, but as the saying goes we stand on the shoulders of those giants who have taken incredible steps ahead of us. For sure, we plan our trades and then work toward our goal.
As I speak, USD/CAD just ran from 1.2650, down to 1.2633, then in response perhaps to Housing numbers, back up to current 1.2733. Thanks for sharing!