Catch 22

[AB]

We've had some calls and questions on Catch 22 by John Jonelis, so I am starting a thread to help answer some of the questions. I read through his report and he has a good explanation of his tests. The report can be found here: http://www.esignalcentral.com/university/get/paper.asp

First of all, this is John's report and it does provide good detail on entry, stop, profit objectives, stop adjustment, minimum return, average return, etc. I suggest you read his report to get the full detail. What I will do here is just clarify for people, as I understand, what strategies were tested.

The first post here is of BBY Daily with the XTL portion of Test 1A. Besides the XTL, Test 1A included False Bar Stochastic, Type 1, and Type 2. These will follow in later posts.

Andy Bushak
eSignal

[wdgigi]

test

Thank you.
Another question too. The 1st blue bar in the 1st entry have the stochastic in OB. Must i entry there or i need waiting for a pull-back in OS of stochastic? So if i wait for the stoch in OS i entry never.

Thanks too.


wdgigi

[AB]

Hi wdgigi,

This strategy tries to capture a breakout. A Stochastic is not shown on my chart because the strategy does not use a Stochastic. It uses one indicator only, and that is the XTL when it first goes blue or red. Initial entry and stop is calculated of the 1st breakout bar.

Andy Bushak
eSignal

[JackR]

Andy:

On the chart you included: Note 4 says " The initial target is 1.6 of the risk. This is where half of the position is taken off and the stop is adjusted to breakeven on the remaining half."

They way I interpret "breakeven on the remaining half" is as follows: Assume you bought 200 shares at $ 32.55 to open the trade (Total $6510).

You sell half at $36.67. This leaves $2843 invested (6510-3667).

You lower the stop on the remaining shares from $30.14 to $28.43 and provide a breakeven on the entire 200 share trade.
(3667+2843=6510).

This lowers the stop quite a bit. I've read the "standard" version of the "Catch 22" paper and Jonelis' says the same thing - "Stop moved to breakeven". Is my example above the correct interpretation? Since Jonelis used GET to trade I assume you have spoken with him and have seen the detailed trading results provided in the "expanded" version of the paper. It seems to me that keeping the original stop would always provide a small profit if the stop were to trigger and that moving the stop from its initial level on the first new pivot (fractal) would be better over the long term.

[AB]

Hi Jack,

After taking profits on half of the position at 1.6, the stop on the remaining position is adjusted to the initial entry. Thus, in my example, the market was entered at Note 2. Half of the position is taken off at Note 3. The stop is adjusted on the remaining position from Note 3 to the level of Note 2, which was the level of the initial entry. This puts you in a situation where you have made money on half of the position and now you are risk free on the remainder.

I have real trading samples here: http://forum.esignalcentral.com/show...&threadid=4135 which is the thread on Managing the Trade, under Trading Strategies/Software. The examples there use a slightly different trade management in exiting the remainder of the position.

Jack, if you have further questions, do not hesitate to ask.

Andy Bushak
eSignal

[mattsb]

Andy,

Great thread! Thanks for posting the link to John's paper.

In the XTL Overview by Tom and Marc, they suggest using a regression trend line for an exit. Have you experimented with any other exit strategies? I wondered if some sort of Average True Range trailing stop might keep us in the trade for long runs like we have seen lately.

Also, once stopped out, I have looked at re-entering on a continuation upon crossing of the new trend channel. Should I enter on the next bar after a close outside the channel or apply another 50% greater than the breakout bar range filter?

I'm dying to hear about the false bar stochastic that John used in his study. Can you tell us about it now?

Lastly, have you developed any scans to search for XTL continuation trades? The first XTL color change search is pretty straight forward, but I'd like to find continuation trades too.

Thanks,

Matt

[AB]

Hi Matt,

Sorry for the late reply. There are multiple exit strategies. One, that I like to use is taking profits at multiple reward/risk levels. I like to take some off at 1 to 1 in reward/risk and then adjust my stop to breakeven. After that, I take profits at 2 to 1 and 3 to 1. You can find more detail here: http://forum.esignalcentral.com/show...&threadid=4135

On a continuation trade, we generally teach entering on the following bar. However, as far as I can tell, John used the 50% method in his testing.

As far as the scanning for XTL continuation, in the the real time Advanced GET Scanner you can use Buying with the Trend or Selling with the Trend. The Buys look for an XTL Blue with a stochastic NFB below 25, and the sells look for an XTL Red with a stochastic NFB above 75. Or, instead of using the Stoch, try to find an XTL Blue that goes below a 13 or 20 period ma. This will alert you when a strong market is is in a corrective phase.

I've posted a Daily chart of GR to show you the False Bar Stochastic. First of all, since I did not do the test, I am not completely sure on how John did the False Bar set-up. I am not sure if he combined it with the XTL color or just combined the False Bar Stochastic in the same testing category as the XTL. In any case the GR chart shows both set ups. I think he did the XTL Breakouts and also did the Buying with the Trend and Selling with the Trend. These combine the False Bar Strategy with the XTL.

On the chart I did not show the stops being moved to the next fractal.

For info, I am scheduled to be on the eSignal Chat at 1630 ET Thursday the 13th. http://www.esignal.com/events/default.asp?events=CHAT

Thanks,

Andy Bushak
eSignal

[tkeough]

Re: Catch 22

Andy,
I am trying to understand how you charted your initial target on the BBY chart (Item 4). The note says the figure is 1.6 of risk and the chart has a Fib line at the 1.618 level but where are the end points used to anchor the calculation?
Thanks in advance,
Tom Keough

Originally posted by AB
We've had some calls and questions on Catch 22 by John Jonelis, so I am starting a thread to help answer some of the questions. I read through his report and he has a good explanation of his tests. The report can be found here: http://www.esignalcentral.com/university/get/paper.asp

First of all, this is John's report and it does provide good detail on entry, stop, profit objectives, stop adjustment, minimum return, average return, etc. I suggest you read his report to get the full detail. What I will do here is just clarify for people, as I understand, what strategies were tested.

The first post here is of BBY Daily with the XTL portion of Test 1A. Besides the XTL, Test 1A included False Bar Stochastic, Type 1, and Type 2. These will follow in later posts.

Andy Bushak
eSignal

[ACM]

Tom
By what I can see the anchor points are items 2 (the Buy Level) and 3 (the Stop Level). The initial target is 1.618 of the difference of those two values ie the risk at the time of entry in the trade.
Alex

[phrozen]

Quick question

Hi, i would like to know wich XTL Settings you are using for different charts. Always default? I want to use the XTL on a 1minute & 5minute chart but i find that the signals (first xtl breakout bar) are coming in late..

Hope to hear from you soon.

[DuaneG]

Hi phrozen,

Thanks for the post. If you could perhaps post an example of what you’re seeing, it will help us replicate it as closely as possible. I haven't seen any other reports of this so we definitely would like to help. I’m not sure if you've changed your settings, but I thought I would include a link to one of the online videos that we have made available regarding the XTL and other Advanced Get tools. Hope this helps.