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RE: My trading systems, an overview
Sure, of course. This is probably a good post to start with, it gives the general idea and explains some price action trading. It's long and boring but try to get through it :-)
https://steemit.com/trading/@tradergurl/hunting-for-two-legged-donkeys
I don't usually struggle with long reads, what I struggle with is finding good information. Thanks for sharing. Actually, I have to admit it was very entertaining a read. I take it the example that you covered in the article is number 2 and this is what you believe your strong side is, right?
Now, I get the general idea, but to me charts are still a little bit like a chess board for an inexperienced player. An experienced chess player will easily recognise the setup and will be able to create these sorts of scenarios and therefore take action to not end up a loser in that particular match. It feels there is a thousand of setups that you need to go through to start having this ability to make these interpretations. Or is there a way to reduce that thousand to a few hundred?
Do you have any other examples, people who do this kind of analysis, materials I could look at to start understanding it better?
Also, I know this is a bit of an ask considering I am just another stranger on steemit but any further comments with any constructive feedback on any of my posts of trades would be super highly very much appreciated.
All the best.
Stop hunting is pretty easy, not much to learn. Just find any newbie trading resource and see where they recommend putting their stop loss. The just do exactly the opposite.
Where someone would have a sell stop under the low of a candle pattern for example, you just put a sell order in the same place and wait... Guaranteed most people will have their stops in the same place so when they all get hit at the same time it's creates considerable momentum in your direction.
Finding trapped traders is a little more tricky but it relies on the same principle, trying to find people that are in trades but the trade is going against them, and where their stops are likely to be. Also, you can find people who are trapped out of a trade, a trend or something that they want to be in but missed it, so look for the re-entry points and jump on the momentum when their buy orders get hit.
The general idea is to stop thinking like a retail trader (who all lose money) and start thinking like a professional or institutional trader (who all make money). You just need to put yourself on the other side of the fence and try to see things from the other side.
Right, so what you said makes sense in theory but it is taking me a bit of time to digest the above in terms of how it would actually look like in practice. What I have done is I've had a look at the charts and tried seeing things from the other side where this stop hunting could be applied in practice. I have come across one chart where it makes sense. Kind of..
I've got a few shadows (marked in yellow) under which a lot of people in long positions would have placed their stops (roughly where the red line is). Blue bubble is then the time, based on your description, when the order to short could be placed (again, where the red line is). When the price drops to this assumed stop level (the first big red candle outside of the blue bubble) there is a momentum to the downside because stop losses are being activated. My order to short is filled and the only thing left for me to figure out is where to close the trade (Not sure I am using the correct terminology but trailing stop is probably the right thing to do here?).
Am I thinking in the right direction?
Kind of.. this is how I would have maybe played that chart if I'd seen it in time.
First off, the market is in an uptrend, so only look for buying opportunities, that's a no brainer.
So, look at the blue circle, see that first big red candle ? That's a signal that will make people think price could be reversing so they will be looking to go short. They'll wait for confirmation though (retail traders, of course) and have a sell order if the price goes below the recent lows, where you drew that red line.
So another big red candle happens and everyone is now in the trade short. So where would all the shorts have put their stop losses ? They will be either above the high of the signal candle (the second red one that made them enter the trade) or the recent high (above the first red candle). That's where you put your buy order !
Another location for your buy order could be just above the red line, as that would signal a trend reversal also and people might have their stop losses there instead. It's also above the 50% retracement level of that red candle which is also a popular level.
Then look what happens on the chart, the market stalls and forms a minor support level. So the people that are short are now thinking 'maybe this wasn't such a good idea' and move their stops down to just above those candles highs, just under the red line. So that's where you move your buy order to.
And look what happens, the next big green candle trips those stops and you're in the market going north. Hopefully the momentum will carry you up and on that chart it looks like it did. If you had a stop just under that minor support line then you'd have made a 1:4 trade or similar.
The beauty is, it might not even have happened. By putting stop buy orders on, they would only be triggered if the trade went in your direction. If the price had continued to drop then it doesn't matter, you didn't get the trade but you didn't lose anything either, consider that a win also !
Of course, it's very easy to look backwards and say exactly how it would have worked out, it's a lot harder when it's happening on the right hand side of the chart. Sometimes it works out, sometimes it doesn't, you just have to try it.
Always always let the market take you into a position, don't just guess and buy at market.
@tradegurl, more than a day later I realized I should have said thanks after you responded. That was very very detailed so thank you very much.
I found myself reading and re-reading what you said above and looking back at the trades that I have made. On some of the trades I was surprisingly close with my thinking compared to what you described. I think "Live trading 5: EOS" is a good example in case you want to have a look. Ignore the fact it was a losing one, I just was not smart enough to move my stop as the price increased...
Having though about this further I realized that others who I am learning from are using similar principles (stop-hunting - they just don't call it that) so that's encouraging.
Anyways, I'll be looking forward to your further posts and comments :)
I'll check out the post you mentioned and comment if I can think of anything useful to add.
The facts are like this - over 90% of traders fail, and lose all their money. To be in the 10% that do make money, you need to be thinking and doing the opposite to those in the 90%. That's pretty much the secret to it all :-)
Interesting fact for example, take a moving average cross system, something simple like the 9 SMA crossing above the 20SMA as a buy signal. Very common type of system that's recommended to newbie traders. Try backtesting it, it never ever works out profitable.
So what do you think happens if you always sell when you get a buy signal ? ;-)
Just to make sure I understood you correctly... You are saying I could try taking the MA cross system which would suggest going long when 9 SMA crosses and goes above 20 SMA and basically reverse it? I.e. 9 SMA crosses and goes above 20 SMA I place a short order just under the price where the SMAs crossed?
Well, "logically" thinking most of the orders I place should not get filled as price should, in theory, keep going up but the ones that do get filled will be filled with other peoples' stops.
Is this what you are saying?
Sorry no, I didn't mean in a 'trapped trader' sense, I was just making the point that if you always do something and it loses money, then it makes sense to do the opposite and see if it makes money instead... ;-) It wasn't a suggestion to actually try that system, just an example.
One of my hobbies is looking on YouTube for trading 'systems' and backtesting them to see how badly they fail (because they always do...). Then I test them again but with the signals reversed, and you'd be surprised how many are actually profitable with some minor tweeks lolol.
Careful, tradergurl hates crypto! (Or maybe she just hates MY brand of crypto! 😜)
@bitbrain, thanks for a tip. I post (currently) about trading crypto but the majority of my portfolio is in stocks. If I don't write about it - does not mean I don't do it :)
I'd be interested on hearing your opinion on the major differences between the two types of market. Do you mainly trade short-term (in which case the differences should be small) or long-term (like "hodl" strategies) crypto trades?
@bitbrain, I'd compare crypto market to a 9 year old child (nicely matches 2009). Intelligent enough to not accidentally kill itself, but still unreasonably moody at times and easily upset by bad news. In the mean time, stock market is like more like an adult person - it seems to behave in a slightly more reasonable and predictable way.
I don't trade stocks short-term yet, mainly because the platform that I use (not sure where you are from but in the UK we have tax efficient accounts called ISAs - as long as I keep my holdings there all the profits are tax free) charges a flat dealing fee which I think is really high and that has been off-putting.
Oh, I don't hate crypto, I just hate you :-) lololol (joke)
I actually love crypto, I just can't stand all the false prophets who burn feathers and wave them in the air while chanting, and then claim it's a sign from the Gods that Bitcoin is going to the moon today... all just frauds and charlatans. The whole industry is rife with them, it's such a shame.
That is true.
Oh and thanks for the reminder: I'm running out of feathers...
you could always try chicken bones or small stones cast on top of an oil drum, it works just as well :-)
I mean, obviously you still need a drop of bats blood, it would be silly otherwise !
The last time I tried that I was attacked by stray cats who stole the bones.
My local music shop has a wide variety of drums, but none of them are "oil" drums, the search continues.
After sawing my baseball bat, cricket bat and an unlucky hockey stick in half, I have yet to find one that bleeds. They must be defective. I'm still trying to find where the maid hid my rugby bat. It's been so long since I've seen it that I can't even remember what it looks like.
And if you want to hate me you'll have to pick a number. I hope you enjoy long queues! 😂
trust me, I think I beat you on that account, especially on here lol
I remember reading the Steemit tips for noobs when I signed up. One of them was do's and don't. I remember reading the "don't get into arguments or disagree with the poster" and thinking F... THAT FOR A JOKE!
Surprisingly I actually have very few real arguments here. People tend to either go silent or back down. Probably to do with fear of downvoting.
I know, I find it quite sinister !
When the platform is partly sold on freedom of speech, and decentralised and no moderators... and then everyone is afraid to speak out against anyone with higher SP because they get flagged for a difference of opinion. Bit of a joke really.
Yeah. Too many people are either bullies or chickenshits. It's BS.