SimCon

[Phoenix]

boots, Dave, et al: Just to let you know about another discussion group that you might find of interest:

http://forum.esignalcentral.com/topic.asp?TOPIC_ID=47

Will have a bit different focus, but since you guys trade the minis, thought you might want to join this group.

Best,

Phoenix

[boots]

Trend

I use "Trend" as a confirm for the direction I should be trading. The use of one cuts down on the number of trades and increases the quality of my trades. The Trend conformation used in my trading does not actually point in the direction of the markets movement. I have found it better to think of Trend as pointing in the direction that will provide the most high quality trades with the least whips. The differnce is a fine line but a very important one.

It is also important to develope a Trend indicator that is decisive and does not change often. The trend indicator used must also fit well with the method used as a trigger for trades. Size, relative time increment and speed must match up with the trigger. The proper match should keep the trigger from giving many false signals, signals confirmed against the true movement of the market.

For my trading I have become comfortable using EMAs on two different time charts. A long chart for the dominant trend and a shorter one for the swing trend. Both charts use the same EMA. When price is on the same side of the EMA in both charts I consider the Trend in that direction. When the short chart is on a different side of the EMA from the long chart then I take no trades or I take only short term scalp trades in the direction of the shorter term chart.

Just some food for thought.

[2Be1000K]

Hi,

You mention "Both charts use same EMA"- does that mean if you are looking at 2 min and 10 min chart, you use, for example, 10-bar EMA on both (which is actually 20 min EMA on 2 min chart and 100 min EMA on 10 min chart).

I appreciate your work on the bootsbox indicators.

Thanks
Ravi

[boots]

Hello Ravi,

>does that mean if you are looking at 2 min and 10 min chart, you use, for example, 10-bar EMA on both?<

Yes that is what I mean. Use the same bar period for both of the charts. I also use a third or shorter chart for the entry signal trigger. Since the trigger is usually going to turn faster than either of the trend indicators, it is usually best to have the trigger on a shorter chart or your trend will always be one step behind the trigger and will keep you out of to many trades.

A set up I have played with uses between a 30 minute and 60 minute chart for triggers. A daily and a weekly for the two trend charts. These combos work pretty well together for timing and proportion. Any trigger charts shorter than 30 minutes may need to go to shorter trend charts than daily / weekly.

boots

[boots]

Methods

Some thoughts about trading methods.

It maybe important to think about trading methods (systems) like you might think about automobiles. Alot of traders try to ask too much of a single set of rules and then are never content. Constantly fiddling with the rules and never settling down.

I often hear a trader complain that he should have taken the two points when he had it (sports car). Then the same trader complain later in the day about taking two points and then watching the market run up another ten (family sedan). The next morning you hear the same traders talking about all the money they would have made if they had just held over night (camper).

Trying to use one method or one rule set to catch all profits and miss all losses is not resonable and leads to messy trading and an unhappy trader (trip across country with wife and 4 kids in the sports car). Pick a method that fits your style. Take the profits it makes, don't sweat the ones it misses and be glad for the losses you skipped over.

You can have more than one plan (larger garage) and use the one that fits the current market. This allows you to take advantage of more opportunities if you have the time and personality (racing and camping). Just make sure you keep the rule sets separate and don't change automobiles mid trip.

Keep in mind that systems are to control you, not the market. If you don't follow the rules you are out of control. Rule sets define which roads you should be driving on and when and a good one tells you if the car should be in the garage.

IMHO

boots


BTW.........it appears alot of people read this thread. I would sure like some of you to jump in here with comments and your own thoughts. It can't hurt and could help and would be much less boring...............thanks

[Phoenix]

Boots: Great post!

But I have no idea who the traders are that you are talking about!

[boots]

Thanks Phoenix,

As for who the traders are ...............hehe. I think we all fit in that group from time to time. I feel it is a problem I have just now overcome..........I think...........I hope.

BTW I should add something to the post. I said :
"You can have more than one plan (larger garage) and use the one that fits the current market."

That is true as stated but I want to add the different plans can be traded at the same time. A trader can have a 10 minute chart system, a 45 minute chart system and a daily. Each of these taking advantage of different swings and trends. Trade a third of the money in each.

The same plan may even be used on all three time spans. A two point move can be trapped in the 10 minute plan and never trigger a trade in the 45 and daily plan. A huge longer term profit can be caught in the daily plan that was missed by the 10 minute plan because at that level it was too choppy.

Anyhow...........it has helped me to think in terms of segmenting profit potentials into different groups. Take the cream of the crop in each group and don't get greedy. The more profits I try to pull from an idea the lower the overall quality of the trades become and the whips and chops begin to add up.

Just rambling about a few things that have helped me.

Thanks for dropping by Phoenix.

boots

[boots]

methods

Phoenix,

I was just thinking your 21SMAX60 deal is the type system that would fit with what I was speaking about............ I think.

Couldn't that be run on different time spans. Maybe put a trend confirm with it of some kind and then follow it on a few different charts. The confirm would cut way down on the trades in each time frame but following it on multiple charts would then bring the number of trades back up and those trades maybe higher quality.

Just a thought.

boots

[Phoenix]

boots: I think that is a great idea. The concept behind 21SMAX60 is the importance of the 20 and 200 moving averages as S/R levels (20sma60 =200sma5, basically). But that is not limited to the 60 minute or 5 minute charts, IMO. Just as important on 1 minute, 15 min, daily, etc. The trend confirm is really a good idea as this system is prone to multiple successive whipsaws in sideways markets (such as over the last 2 weeks).

What trend confirmation indicators are you favoring these days? (sorry if you have been discussing this and I have missed it).

I like Kaufmann's Efficiency Ratio. Never got crazy about ADX, but I like DMI D+/D- crossovers as a trend change confirmation.

Thanks,

Phoenix

EDIT - Just read your post a little further down on using the ema in different timeframes as trend confirm

[boots]

Phoenix

Might be interesting to try your 21SMAX60 with the trend confirms I have talked about. Will take a look in the morning. The trick will be to match up the time spans properly.

The 30, 45 and 60 minute charts have worked well with the daily/weekly confirms but I have not worked out shorter term ones yet. Shouldn't be that much trouble but would be nice to have some much shorter ones for scalping during the day.

cya soon.

boots

[TWNN]

Nice charts..good luck!

[boots]

Thanks TWNN,

Glad to see you drop by.

[Phoenix]

Another Idea on Trend Confirm

boots: Here is something I have just started looking at to possibly improve on the hourly moving average crossover system: the Adaptive Moving Average, developed by Perry Kaufmann, that incorporates the Efficiency Ratio that I mentioned last night to determine the length of the MA, depending on how well the market is trending (shorter MA for trending markets, longer for non-trending markets.)

In this chart, you can see how, if trading crossovers of a 20sma, the Adaptive Moving Average produces far fewer whipsaws than the SMA:

http://share.esignal.com/groupcontents.jsp?folder=&picture=KAMA.png&groupid=49

You can read up on and download the KAMA here:

http://www.tssupport.com/knowledgebase/?action=article&id=1769

[boots]

Thanks Phoenix,

It has been a while since I played with adaptive MAs. I did a great deal of testing with them a while back but have not used them recently. I have downloaded the code and added it to my charts. Will keep an eye on them and see what effect it has.

The concept is good of course.........A lot depends on how and what you are using the indicator for. I need to set up a chart for the 21SMA60 method also. Would also be interested in how it would act if it was an adaptive EMA. Maybe I can get Loomis to change the code so we can try that.

I am using the EMA now as a TRIP line. More really for trade signals than Trend signals but the adaptive part could be very useful. As for the 21SMA60 deal I need to get with you and find out the exact rules you have developed so I can follow along better. Maybe if you get a chance you could post them here or point to a place you have them listed.

Thanks again,

boots

[boots]

Original SimCon method. More to follow

http://share.esignal.com/groupcontents.jsp?folder=&picture=snapshot-25.png&groupid=40

boots