Trading the Ranges

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veluri1967

Well-Known Member
#24
If I donot talk about the mindset, it would be incomplete.

Here is what you feel after acquiring the Trader's Mindset. Each one of the following is a clear cut message to verify whether you possess the most important trait ie "Trader's Mindset".

1. Not caring about the money
2. Acceptance of the risk in trading
3. Winning and losing trades accepted equally from an emotional standpoint
4. Enjoyment of the process
5. No feeling of being victimized by the markets
6. Always looking to improve skills
7. Trading account profits now accumulating and flowing in as skills improve
8. Open minded; keeping opinions to a minimum
9. No anger
10. Learning from every trade or position
11. Using one chosen approach or system and not being influenced by the market or other traders
12. No need to conquer or control the market
13. Feeling confident and feeling in control
14. A sense of not forcing the markets
15. Trading with money you can afford to risk
16. Taking full responsibility for all trading results
17. Sense of calmness when trading
18. Ability to focus on the present reality
19. Not caring which way the market breaks or moves
20. Aligning trades in the direction of the market, flowing with the market



The following could be your obstacles to become a successful trader. Please spend sometime and resolve.

1. Fear of being stopped out or fear of taking a loss. The usual reason for this is that the trader fears failure and feels like he or she cannot take another loss. The trader’s ego is at stake.

2. Getting out of trades too early. Anxiety is relieved by closing a position. This is caused by a fear of position reversing and then feeling let down. The trader has a need for instant gratification.

3. Wishing and hoping. The trader does not want to take control or take responsibility for the trade. The trader has an inability to accept the present reality of the marketplace.

4. Anger after a losing trade. There is a feeling of being a victim of the markets. Unrealistic expectations lead to caring too much about a specific trade. Tying your self-worth to your success in the markets, or needing approval from the markets, will lead to losses.

5. Trading with money you cannot afford to lose or trading with borrowed money. It is desperation to view a trade as the last hope at success. Traders fall into this trap when they are trying to be successful at something or fear losing the chance at opportunity. Other causes are lack of discipline and greed.

6. Adding on to a losing position (doubling down). The trader does not want to admit the trade is wrong and hopes it will come back. The trader’s ego is at stake.

7. Compulsive trading. A trader can be drawn to the excitement of the markets. Addiction and gambling issues are present. Such traders need to feel in the game. They have difficulty when not trading, such as on weekends—they are obsessed with trading.

8. Excessive joy after a winning trade. Tying your self-worth to the markets. The trader feels unrealistically “in control” of the markets.

9. Stagnant or poor trading account profits—limiting profits. In this situation, a trader might feel undeserving of being successful—of making money or profits. Usually, this involves psychological issues such as poor self-esteem.

10. Not following your trading system. The trader doesn’t believe it really works, or did not test it well. Maybe it does not match your personality. Maybe you want more excitement in your trading. Or maybe you don’t trust your own ability to choose a successful system.

11. Overthinking the trade—second guessing the trading. Fear of loss or being wrong can paralyze a trader. A perfectionist personality can create this problem. Causes include wanting a sure thing where sure things don’t exist; not understanding that loss is a part of trading and the outcome of each trade is unknown; not accepting there is risk in trading; and not accepting the unknown.

12. Not trading the correct trade size. Dreaming the trade will be only profitable. The trader might not fully recognize the risk and not understand the importance of money management. The trader might be refusing to take responsibility for managing the risk, or be too lazy to calculate proper trade size.

13. Trading too much. The trader feels a need to conquer the market. Causes include greed and trying to get even with the market for a previous loss. The excitement of trading is similar to compulsive trading, issue number 7.

14. Afraid to trade. No trading system in place. The trader is not comfortable with risk and the unknown. The trader might fear total loss or ridicule. The trader might have a need for control. There is no confidence in your trading system or in yourself.

15. Irritable after the trading day. The trader is on an emotional roller coaster due to anger, fear, or greed. There is too much attention on trading results and not enough on the process and learning the skill of trading. The trader focuses on the money too much. There are unrealistic trading expectations.

Happy Trading friends
 
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veluri1967

Well-Known Member
#26
These ratios tell us current standing on a variety of levels and will give us guidance on how to move forward.

WIN RATIO FORMULA

This is the percent of winning trades to losing trades. The more winning trades you have, the better, although in trading you will never have 100 percent winning trades. This ratio may fluctuate day to day, and it is important for you to constantly observe the ratio to determine if there has been a market cycle change or to determine if you are experiencing a normal drawdown.

When your win ratio is low, there is the possibility of pilot error, or basically, human error. Determine what might be causing the human error issue so that you can address the situation and make the necessary adjustments.

Formula:
Win ratio = Number of winning trades Total number of trades
To get a percentage, multiply the ratio by 100.
Example:
60% = 60 100

PAYOFF RATIO FORMULA

This is the ratio that tells you how many rupees you earn for every rupee you lose. The higher your payoff ratio, the better. If you are consistently earning Rs.3 for every Re.1 you lose (3 to 1), you can be proud of yourself. If you are earning $\Re 1 for every Re 1 you lose, you are breaking even and you will need to determine how to improve this ratio. Very often, a sound money management system will enable you to improve this ratio.

Formula:
Payoff ratio = Average winning trade Average losing trade

Example:
3 = Rs. 300 Rs.100

COMMISSION RATIO FORMULA

This is the percent of your profits that go toward paying commission to your broker. When you are overtrading, the percentage of your profits that goes toward paying commission will go up. This figure can be a barometer to tell you when you are overtrading. For example if you have a commission ratio of 90% you are giving 90 percent of your profits to the broker. This means you want to make fewer trades while still making the same profitthat way you get to keep more of your winnings. Another cause for high commission ratios is poor payoff ratios. For example if 60 percent of your trades are winners you will have a more favorable commission ratio than if 25 percent of your trades are winners.

Formula:
Commission ratio = Total commission paid Total Gross profit
To get a percentage, multiply the ratio by 100.

Example:
20% = Rs.200 Rs.1000

Note: This formula is not applicable if your payoff ratio is less than 1 to 1. If you are not generating a profit you can not calculate your commission ratio.
 

veluri1967

Well-Known Member
#27
We have tried to calculate the anticipated Range of the day, basing upon yesterday's High/Low/close and today's first Half Hour/One Hour High/Low/Close. But isnot it a narrowed bet? If we can broaden the data for about 5 days, I think we will have a better calculated range for today to play atleast taking into consideration whatz happening in the market. Hence, the following.

A simple calculation, the five-day range has a variety of uses. You can superimpose the five day average range over an early high or low and extrapolate market bottom or top. When compared with the range of the day just completed, the five-day range provides a yardstick against which to measure the likelihood of tomarrow's range falling within its parameters. Should you wish to take a trade late in the day, the average range can often tell you whatz
left in the market.


Taking the prices shown below, let us calculate the five-day average range:

Code:
Day High Low
1 37.20 23.50
2 40.30 24.00
3 66.70 41.80
4 89.80 66.60
5 215.00 193.90
The formula for calculating the five-day range is to take each daily range (high -low), sum the five ranges, and divide by five.

Accordingly, the calculations are as follows:
Code:
Day Range
1 3.70
2 16.30
3 24.90
4 23.20
5 21.10
When you add these range numbers together, the sum is 99.20. Divided by five, the five-day average range is 19.80 points.

Now, take High/Low of todays first half an hour/one hour, ADD the fiveday average range to Low to get RESISTANCE and DEDUCT the five day average range from High to get SUPPORT.
 

veluri1967

Well-Known Member
#28
Experience matters the most in trading journey. Many best traders have compiled books with rich experience. Presently I keep referring the following books to learn something. If anybody is in need of these books, first google and download. If not successful, just PM with email id.
I would be glad if one can share some interesting ebooks.:D


Trading Reference Books

1. Reading Price Charts Bar by Bar - Al Brooks
2. 30 days to Market Mastery - Jacob Bernstein
3. The Master Swing Trader - Alan S Farley
4. Getting Started in Swing Trading - Michael C. Thomsett
5. A practical guide to Swing Trading - Larry Swing
6. Trade your way to Financial Freedom - Van K Tharp
7. Advanced Trading Strategies - Laurence A Conners
8. Day Trading with Short Term Price Patterns and ORB - Toby Crabel
9. Trading for Tigers - Walter T Downs
10. Enhancing Trader Performance - Brett N Steenbarger
11. A Trader's Money Management System - Bennet A Mcdowell
12. A complete guide to Technical Trading Tactics - John L Person
 
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veluri1967

Well-Known Member
#29
I have already figured out my reference material in the above post, though it is not exhaustive.

Back to the concept again.

We have talked about 30 min/one hour breakout strategy, Support/Resistance Trading. Also we are aware of Pivot Points and their use in trading. Many of us already know how to identify momentum signals using EMA crossovers, NR7, Turtle Trading concepts. Also we are aware that these strategies regularly whipsaw and give us a plenty of losses too.

Members here must be wondering why this thread is started under sub-head "Swing Trading" when most of the posts of related to intraday trading.

So, I am switching gear to Swing Trading. The concepts of intraday trading discussed in above posts can lay a good platform in understanding the concepts which are going to be unveiled from here after.

Prices trend only fifteen to twenty percent of the time. This is true in all timeframes, from 1-minute through monthly. Markets spend the balance of time absorbing instability created by trend-induced momentum. Swing traders see this process in the wavelike motion of price bars as they oscillate between support and resistance. Each burst of crowd excitement alternates with extended periods of relative inactivity. Reduced volume and countertrend movement mark this loss of energy. As ranges contract, so does volatility.
Like a coiled spring, markets approach neutral points from which momentum reawakens to trigger directional price movement. This interface between the end of an inactive period and the start of a new surge marks a high-reward empty zone (EZ) for those that can find it.

Prior to beginning each new breath, the body experiences a moment of silence as the last exhalation completes. The markets regenerate momentum in a similar manner. The EZ signals that price has returned to stability. Because only instability can change that condition, volatility then sparks a new action cycle of directional movement. Price bars expand sharply out of the EZ into trending waves.

Swing traders use pattern recognition to identify these profitable turning points. Price bar range (distance from the high to low) tends to narrow as markets approach stability. Skilled eyes search for a narrowing series of these bars in sideways congestion after a stock pulls back from a strong
trend. Once located, they place execution orders on both sides of the EZ and enter their position in whatever direction the market breaks out.

Paradoxically, most math-based indicators fail to identify these important trading interfaces. Modern tools such as moving averages and rate of change measurements tend to flatline or revert toward neutral just as price action reaches the EZ trigger point. This failure reinforces one of the great wisdoms of technical analysis: use math-based indicators to verify the price pattern, but not the other way around.

Volatility provides the raw material for momentum to generate. This elusive concept opens the door to trading opportunity, so take the time to understand how this works. Volatility is‘a measure of a stock's tendency to move up and down in price, based on its daily price history over the latest 12 months.” While this definition fixesonly upon a single time frame, it illustrates how relative price swings reveal unique characteristicsof market movement.

Rate of change (ROC) indicators measure trending price over time. Volatility studies this same information but first removes direction from the equation. It stretches waves of price movement into a straight line and then calculates the length. Volatile markets move greater distances over time than less volatile ones. But this internal engine has little value to swing traders unless it can contribute to profits. Fortunately, volatility has an important characteristic that enables accurate prediction. It tends to move in regular and identifiable cycles.

As prices ebb and flow, volatility oscillates between active and inactive states. Swing traders can apply original techniques to measure this phenomenon in both the equities and futures markets. For example, 10-and 100-period Historical Volatility studies the relationship between cyclical price swings and their current movement. And Tony Crabel's classic study of range expansion, Day Trading with Short Term Price Patterns and Opening Range Breakout, predicts volatility through patterns of wide and narrow price bars.
 
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alroyraj

Well-Known Member
#30
I have already figured out my reference material in the above post, though it is not exhaustive.

Back to the concept again.

We have talked about 30 min/one hour breakout strategy, Support/Resistance Trading. Also we are aware of Pivot Points and their use in trading. Many of us already know how to identify momentum signals using EMA crossovers, NR7, Turtle Trading concepts. Also we are aware that these strategies regularly whipsaw and give us a plenty of losses too.

Members here must be wondering why this thread is started under sub-head "Swing Trading" when most of the posts of related to intraday trading.

So, I am switching gear to Swing Trading. The concepts of intraday trading discussed in above posts can lay a good platform in understanding the concepts which are going to be unveiled from here after.

Prices trend only fifteen to twenty percent of the time. This is true in all timeframes, from 1-minute through monthly. Markets spend the balance of time absorbing instability created by trend-induced momentum. Swing traders see this process in the wavelike motion of price bars as they oscillate between support and resistance. Each burst of crowd excitement alternates with extended periods of relative inactivity. Reduced volume and countertrend movement mark this loss of energy. As ranges contract, so does volatility.
Like a coiled spring, markets approach neutral points from which momentum reawakens to trigger directional price movement. This interface between the end of an inactive period and the start of a new surge marks a high-reward empty zone (EZ) for those that can find it.

Prior to beginning each new breath, the body experiences a moment of silence as the last exhalation completes. The markets regenerate momentum in a similar manner. The EZ signals that price has returned to stability. Because only instability can change that condition, volatility then sparks a new action cycle of directional movement. Price bars expand sharply out of the EZ into trending waves.

Swing traders use pattern recognition to identify these profitable turning points. Price bar range (distance from the high to low) tends to narrow as markets approach stability. Skilled eyes search for a narrowing series of these bars in sideways congestion after a stock pulls back from a strong
trend. Once located, they place execution orders on both sides of the EZ and enter their position in whatever direction the market breaks out.

Paradoxically, most math-based indicators fail to identify these important trading interfaces. Modern tools such as moving averages and rate of change measurements tend to flatline or revert toward neutral just as price action reaches the EZ trigger point. This failure reinforces one of the great wisdoms of technical analysis: use math-based indicators to verify the price pattern, but not the other way around.

Volatility provides the raw material for momentum to generate. This elusive concept opens the door to trading opportunity, so take the time to understand how this works. Volatility isa measure of a stock's tendency to move up and down in price, based on its daily price history over the latest 12 months. While this definition fixesonly upon a single time frame, it illustrates how relative price swings reveal unique characteristicsof market movement.

Rate of change (ROC) indicators measure trending price over time. Volatility studies this same information but first removes direction from the equation. It stretches waves of price movement into a straight line and then calculates the length. Volatile markets move greater distances over time than less volatile ones. But this internal engine has little value to swing traders unless it can contribute to profits. Fortunately, volatility has an important characteristic that enables accurate prediction. It tends to move in regular and identifiable cycles.

As prices ebb and flow, volatility oscillates between active and inactive states. Swing traders can apply original techniques to measure this phenomenon in both the equities and futures markets. For example, 10-and 100-period Historical Volatility studies the relationship between cyclical price swings and their current movement. And Tony Crabel's classic study of range expansion, Day Trading with Short Term Price Patterns and Opening Range Breakout, predicts volatility through patterns of wide and narrow price bars.
The post has an excellent analytical angle. :thumb:
But how exactly to figure the Empty Zone. Is it simple range expansion or more. The thing is nowadays the Nifty for example switches from a range into a breakout or breakdown. It is primarily this switches between market states that proves to be a bit challenging since one has to combine two methods or mindsets so to speak.
 
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