back start next
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [ 80 ] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107] [108] [109] [110] [111] [112] [113] [114] [115] [116] [117] [118] [119] [120] [121] [122] [123]
80 Trading By The Book - Part V CHAPTERS Trading Within a Trading Range So, what about the no-mans land of 11 to 21 bars on the chart? For that answer, read on. In this section I will show a way to trade in a congestion, It is not my favorite way to trade because it takes much patience, but I have done it successfully. The method I use places the odds about 55%-65% in my favor. To trade in congestion takes a lot of judgment. For those who trade single markets such as S&P daytraders, and for those finding themselves trading in periods where the markets they watch simply do not trend, I will be writing a book entitled Tradirig in Congestion. This book will go into great detail about how to trade inside congestion areas. The methods I show there will expand upon the concepts shown in this part of the manual. There have been years in which markets overaii simply went sideways. Trend traders suffered greatly in those years. Anyone wishing to become a complete trader, one able to trade in all markets, will need to read that book. What I will present here is the essence of how I traded the sideways markets of the 1970s. Those were tough years, and many traders lost heavily - especially those using trend following systems. It seems as though now, with the advent of fund trading, the markets are trending less and less and we are seeing more and more that markets are in large trading ranges. A look at the weekly charts will bear me out. Markets used to trend for months to years. Now they trend for weeks to months. This is going to be very hard on long term traders. The only markets that trend long these days are the minor markets, those with insufficient open interest to attract the fund traders. Fund trading affects the markets with large open interest because when the trading models used by the funds perceive a market to be overvalued, they issue a sell signal. When markets are perceived to be undervalued, these same models issue buy signals. The result is that the major markets chop up and down sideways in response to the enormous positions put on by these funds. Fund trading and managed pools are becoming more and more common and are thus affecting the markets to a greater and greater extent.
2280 2224 2168 2056 1944 1 PrafitabJe trade Bought here, could have been nade. hODJt 1720 <-Out , uith profit, ff for loss. Figure 12 The Bean Oi! chart shows that Bean Oil went into an extended trading range that lasted several months. Ive aiso shown the envelope that I would normally place around a congestion that has lasted 25 or more days. But what about days 10 through 24, could any profitable trading have been done there? Just before the beginning of the range there was a (Ross) hook, but it never came to fruition as prices gapped up. Subsequently, prices made a ledge which was traded as such, and which produced a profit. Still, there was another way that this congestion could have been traded. After the tenth day, if prices were to enter into the inner envelope (dashed line) and then come out again, a profitable trade couid have been made.
The problem here would have been that right after the tenth day it was not clear at all that prices were in a trading range, and certainly not in the trading range that is shown in Figure 12. It wasnt until the day 23 bounce that I figured out the true extent of the range, and on that day Bean Oil entered the lower part of the inner envelope but closed back up between the two inner envelopes. Now this is a high risk trade, one I dont highly recommend, but i placed an order prior to the opening of the next day to buy the Bean Oil, on a buy stop, at one tick above the lower part of the inner envelope. I ended up being filled at the open. Prices moved back down, t placed a protective stop just below the low of the range which is the solid line just above the mid-out low of the envelope. The inner envelope is determined as .146 above the range low and as .146 below the range high. To compute the envelope, I subtract the iow of the range from the high of the range, and multiply the difference by .146. The result is added to the low of the range and subtracted from the high of the range.
[start] [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58] [59] [60] [61] [62] [63] [64] [65] [66] [67] [68] [69] [70] [71] [72] [73] [74] [75] [76] [77] [78] [79] [ 80 ] [81] [82] [83] [84] [85] [86] [87] [88] [89] [90] [91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107] [108] [109] [110] [111] [112] [113] [114] [115] [116] [117] [118] [119] [120] [121] [122] [123]
|
Menu
