Shotoku
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Posts: 16
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« Reply #3 on: April 17, 2009, 09:24:44 AM » |
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I am mainly scalping bonds and using 45 - 90 - 270 tick charts (because I like multiples of 3).
Although I am not sufficiently 'bankrolled' to do this for real, many times after actual day-trading I go into simulation mode testing out various ideas etc. Because it is 'play money' I find that sometimes when it goes against me, rather than take the loss at a stop I let it ride because I noticed so often in actual trading that after getting stopped out it comes back down and the trade works. I am sure many people have experienced this!
Since using Ichis I have more confidence in my read on Support and Resistance, Equilibrium and so forth. So the following strategy - which is really just money management - is highly reliable but ONLY for those with large bank accounts. In over 2 years playing around with this (albeit I only lately discovered Ichis), I have yet to have a losing series, albeit too often the amount of risk was really far too high.
It is simple, and I put it now in an Ichi context:
Let us say you have a LT timeframe and a ST timeframe. Both are bearish.
You take an Ichi sell at whatever point for whatever reason. You have nice bearish cloud cover above you in both timeframes and both timeframes are bearish with the Tenkans beneath the Kijuns and ideally the ST Tenkan is the lowest of the three, i.e. they are all nicely 'lined up' in solid bearish configuration.
Especially if it is after lunchtime in the bonds or indexes (with which I am familiar, not having any experience with Forex like most people on this forum), and especially if it has been a fairly consistent down day (in this example), there is a strong tendency for a significant correction. You don't know when it will happen (though in the indexes it is often around 1.30 EST but bonds are different since they end earlier so around 12.30 ish is more like it for bonds), but you jump in on the short side when you have a signal. (Personally, I prefer retracements so once and Ichi sell setup is in place I look for a pullback and then use pattern entries to get in from higher up on the short side).
In this latter context I use Pivots or Support/Resistance from previous Swings as the picture below (somewhat) shows.
So okay: I am short and it keeps going up. The clouds are up there, SR resistance is up there, so rather than letting myself get stopped out, I add to the position. The way I like to do it is:
1. Initial trade = initial trade amount, let us say 1 contract.
2. 2nd entry is also 1 contract. At this point if things are looking bad, try to exit at just below BE = a small profit = the price between the two entries - 1 tick. If it still looks very good - and it should otherwise you won't be adding in, raise the profit target on the first position to less and put the second in the same place.
3. It STILL goes against you so 3rd entry is now 2 contracts = double what you have on = 4 contracts.
4. 4th entry is double again so now you have 4 + 4 = 8.
5. And so on.
In two years I have yet to lose doing this, albeit admittedly this is in SIMulator mode only since I do not (yet) have large enough account.
But I know that some people daytrade with $100,000 plus accounts. This is an approach, using Ichi overview, that can turn losing trades into winners. Yes, it is aggressive and highly fearless, but 9/10 times it will work and the one time it fails (because risk is simply too high for the account, you can get out with a reasonable loss since by doubling the commitment you are never more than 4-5 ticks down (x nr. of contracts) assuming you add in every 6-8 ticks or whatever.
Think about it: if a market keeps going up and up and you add in (on short side) but it never corrects 6-8 ticks to let you out at Breakeven plus a tick or two (your profit), at some point it is simply BOUND to correct back a little to get you out. If it had corrected earlier you wouldn't have so many contracts on in the first place. I have rarely had to add more than 4 times (16 contracts) doing it this way but sometimes it happens. Again, with a large account at $500 margin per contract, 32 contracts = $16,000. Alot, yes, but not in perspective.
1 contract risk = 8 initial which changess if you add in and is added in below (using $18.00 per contract including commissions which is about 50 c low but makes round numbers)
1 at 6 higher = 6 ticks initial + 12 on Nr 1 = 18 = $324
2 at 6 higher = 12 initial + 18 Nr 1 + 12 Nr 2 = 42 = $756
4 at 6 higher = 24 initial + 24 Nr 1 + 18 Nr 2 + 24 Nr 3 = 90 = $1620
8 at 6 higher = 48 initial + 30 Nr 1 + 24 nr 2 + 36 Nr 3 = 138 = $2484
So at 16 contracts you have $2484 risk. And if you end up with 4 ticks profit on the average price = 4 * $12.00 profit * 16 contracts = $768.00 versus risk of $2484.00.
Picture attached with results from today (in SIM!) which went to 8 contracts. I put in PT just above Tenkans etc. ignoring the pivot lower down, but of course it went straight down (like a falling rock!) to the pivot which would have doubled the $$$ made which was only 4 ticks below the average price (not shown on chart)
So this is aggressive - but not for those with large accounts who are not over-risking on each position - but also defensive - reduces probability of loss with each additional position.
Every once in a while one is going to get blown away assuming you can't go from 16 to 32 to 64 to 128. Of course. But using the Ichis the probability of this happening is greatly lessened, that's the point. One doesn't add in unless the configuration is solidly bullish or bearish.
Also this is really more appropriate for short term traders. Hard to do this trading monthly charts unless one has a million or so and is going for 1-2% per trade, i.e. $10-20,000 and every once in a while willing to risk more than $50,000 to prevent a loss.
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