Pivot Trading- a new way of Trading

amandeep86

Well-Known Member
Subhadip Sir,

1.When not to trade is the more important then when to trade,Please share some examples of when not to trade.

2. As told earlier do we trade in direction of HTF ,Like 60 TF and 15 TF to enter in 5TF?
Or just see what is happening in 5TF as told in IDF ? Which is better
 

Dax Devil

Well-Known Member
Subhadip Sir,

1.When not to trade is the more important then when to trade,Please share some examples of when not to trade.

2. As told earlier do we trade in direction of HTF ,Like 60 TF and 15 TF to enter in 5TF?
Or just see what is happening in 5TF as told in IDF ? Which is better
When not to trade is FAR FAR FAR FAR more important than when to do. Infact, knowing when not to trade is THE most important thing in trading. :)
 

Subhadip

Well-Known Member
Subhadip Sir,

1.When not to trade is the more important then when to trade,Please share some examples of when not to trade.

2. As told earlier do we trade in direction of HTF ,Like 60 TF and 15 TF to enter in 5TF?
Or just see what is happening in 5TF as told in IDF ? Which is better
Well, when not to trade is the most important thing in trading.

When in sideways, please do not trade. It can be traded, I will show one day, but till you are clear what ur doing, please do not trade in sideways.

yes.I prefer still seeing 15 min TF for trades in 5 min or 3 min TF.
 

Subhadip

Well-Known Member
Originally Posted by View Post
MULTIPLE TIMEFRAMES


Multiple timeframes is a great concept even for day trading and short term trading . This concept was developed by many and Dr Alexander Elders and Robert Krauz are the two names I associate with concept of Multiple timeframes.

There are many ways multiple timeframe concept can be used in our trading.Some of the applications are as under :

1) Trade in the direction of trend on higher timeframe.....suppose you are trading 5 min bar, take all trades in the direction of higher timeframe...say 30 min timeframe. So if 30 min timeframe is in uptrend, take all long trades and no short trades.....our sequence of trades should be long...add....book profits.....stay out....again long...add....book profits. But what if the 30 min is not trending and is in sideways phase ? Either dont trade in this period or even if you take trades, be very fast to get out on first sign of trouble....We daytraders want our trades to move in our favour quickly after we enter....and we dont like hanging around in a trade which is going nowhere.

2) When longer timeframe is trending, we trade more aggressively in direction of that trend....we give bit more room for our trades to work.....but when the longer term trend is sideways.....these trades are small , choppy and frustrating ,we enter and exit fast....grab whatever profits we can.....but in trending period we play for big win.

Smart_trade
The Gem :clapping::clapping::clapping:
 

Subhadip

Well-Known Member
Originally Posted by Smart_trade View Post
The entire trading is based on two very important concepts.....1) Reward/Risk ratio or R/R and 2) Money Management ( MM )or Position sizing. Both these concepts are more important than which of our trade is successful and which is not.

I read a book called " Mathematics of Money Management " by Ralph Vince. This is one of the three finest books on MM by the author and some of the concepts in that book opened my eyes to what trading really is... I am giving below a small excercise from this book to stress a point that in final results, which of your trade made money and which lost money makes NO difference at all.....

THE POSITION SIZING AND MM GAME

Make 40 small pieces of paper,on 20 write SUCCESS and on 20 write "FAIL" and fold them and put them in a glass bowl. Then ask a small child in the family to pick up each slip from the bowl and you read whether success or fail.

The sttarting capital is Rs 1,00,000/- and At each trade you will risk 25 % of the capital. If the trade is success,you make double the amount of money risked on a trade and if it is failure,you loose the amount risked on that trade. So for first trade your cum equity balance is Rs 1,00,000/- and the amount risked is 25000/- so if the slip says success,you make 25000*2 =50,000/- and your cum equity is 1,50,000/- now and on next trade you bet 25 % of 1,50,000/-. so go on like this till 40 trades are over.

The final amount you will have is not dependent on the sequence of your winning/loosing trades,consecutuve looses,wins etc and final amount is over Rs 10,50,000/- Dont believe me ? Try it out. I have spent 3 hrs on this game early in my career and tried coin toss,various sequence of alternate win/loss,10 losses and 10 wins in sequence etc…But the final wealth is same not even a rupee more or rupee less.

What does this prove ? Have a competent system,backtest,have a good mm and trade with confidence. Your sequence of losses and gains make no difference in ultimate results of building your wealth as long as your method has a positive expectancy and edge. Hope you enjoyed the game and learnt something from it…..About expectancy, we will discuss later...

I am no way advocating risking 25% on every trade. This is just illustration because optimal f for this system is 25 %. But 25 % is way tooo high. Start with 1-2 % and put your profits to work for you….


Smart_trade
 

Subhadip

Well-Known Member
Originally Posted by Smart_trade View Post
EXPECTANCY OF TRADING METHOD :

The traders have a misconception that if they follow any method /system they will make money....nothing is further from truth. They will make money only if the method has positive expectancy...if it has negative expectancy, traders if they trade that system , they will loose "systematically"

Let us see what this expectancy is and how we can find out expectancy of the method we trade. I will explain the concept in practical terms and also give example of a real trading method, its parameters and how to find expectancy of this method.

The expectancy is the amount you’ll make on the average on every trade per rupee risked on your trading method . Expectancy can be mathematically expressed as :

Expectancy = ( Probability of win X Average win ) - ( Probability of loss x
average loss )

In our MM game posted some posts earlier, we had our winners making 2 times our loosers and we had 20 winning and 20 loosing trades so the probability of win/loss both are 50 % or 0.5 So let us solve this equation :

E = ( 0.5 X 2) - ( 0.5 X1)

= 1- 0.5

= 0.5

This expextancy is a positive figure....so the method will make money...and it will make more money if we take more trades on the same.

But if the loosers were two times the winners......then this equation will give expectancy as -0.5 ......so that method will loose money no matter how faithfully you follow it......

Readers can get more information about expectancy in a fine book titled "
'Trade Your Way to Financial Freedom’ by Dr. Van K Tharp

The method will have more expectancy if it has either higher hit rate ie higher percentage of winners or higher average amount made on a winning trade....this is where importance of staying with your winning trades ,adding to your winners and cutting your loosers early comes into play.....

In next post we will apply this concept to a real swing trade method, list the method parameters to understand the expectancy of the method based on actual trades generated by the method ......

Smart_trade
 

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