Hi,
I have spent a lot of time profiling races and have identified some markets that are likely to swing.
I am also doing ok trading these markets but am struggling to differentiate between temporary reversals and changes in the trend. Often I close a position and the market continues in my direction after a temporary blip.
One of many $64,000,000 questions I know but how do you know whether change in direction is temporary or not?
Thanks,
James
Temporary Reversal or Trend Change?
Hi James,
Let's say I'm watching a steamer and waiting for a reversal. I usually use 21, 50, 200 SMA and wait for price action to cross above the SMA's. I also use Parabolic SAR to go under the price indicating a likely price reversal.
Here are some of the drawbacks of this method:
Therefore, even using Technical Analysis is not much better than guessing the next price move based on looking at the ladder and following the money.
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Another technique I tend to use sometimes is pure correlation. If runner B is drifting and runner A is steaming then I'll wait until the chart shows that they're both coming to a steady halt - that might be a cue for reversal.
The drawback with this method is that of course both runners that were previously moving in opposite direction up until now (say up to 5 mins pre-off) could very well begin to move in the same direction from this point onwards (from 5 mins to actual off), and hence that usually leaves me in a bit of a guessing game as to which runner might reverse and which runner won't.
Sometimes I've layed both runners to avoid guessing which one will reverse and which won't. But the overall effect is I end up with a scenario where the best case is a very tiny profit and worst case is a definite loss.
-----------------------------------------------------
I watched this video recently to see how this trader profited from Pullbacks going against the primary downtrend:
http://www.youtube.com/watch?v=TQGTehUM9gY
Takes an experienced trader to play such a trade. I usually make blunders playing pullbacks.
I usually work with the assumption that a Pullback can often provide the cue for a Reversal but it's never certain, therefore my best guess is to try and play the Pullback and 'hope' (a very dangerous word for me) for a Reversal.
The drawback is if you don't get out at quickly or at scratch you risk losing to the primary trend. On the other hand if you cut out quickly when in small profit during a pullback then you miss the potential for a larger profit because you didn't let the trade run.
Of the several ways I've tried to play Swings and Reversals I've never managed to come up with a concrete answer as to when something looks like a high probability trend or reversal.
At the end of the day despite trying to make educated decisions it still feels no better than random guessing.
Please pardon me if I haven't addressed your question effectively, but I've laid out my ineffective methods so that other traders may benefit from my mistakes.
Regards,
Switesh
Let's say I'm watching a steamer and waiting for a reversal. I usually use 21, 50, 200 SMA and wait for price action to cross above the SMA's. I also use Parabolic SAR to go under the price indicating a likely price reversal.
Here are some of the drawbacks of this method:
- Unsurprisingly, SMA is a lagging indicator, so by the time the price has moved you've already missed the good part of an early entry.
- The PSAR can create a whipsaw effect when the price is consolidating. Which means you end up getting mixed signals about Reversals and that accumulates many small losing trades.
Therefore, even using Technical Analysis is not much better than guessing the next price move based on looking at the ladder and following the money.
---------------------------------------------------
Another technique I tend to use sometimes is pure correlation. If runner B is drifting and runner A is steaming then I'll wait until the chart shows that they're both coming to a steady halt - that might be a cue for reversal.
The drawback with this method is that of course both runners that were previously moving in opposite direction up until now (say up to 5 mins pre-off) could very well begin to move in the same direction from this point onwards (from 5 mins to actual off), and hence that usually leaves me in a bit of a guessing game as to which runner might reverse and which runner won't.
Sometimes I've layed both runners to avoid guessing which one will reverse and which won't. But the overall effect is I end up with a scenario where the best case is a very tiny profit and worst case is a definite loss.
-----------------------------------------------------
I watched this video recently to see how this trader profited from Pullbacks going against the primary downtrend:
http://www.youtube.com/watch?v=TQGTehUM9gY
Takes an experienced trader to play such a trade. I usually make blunders playing pullbacks.
I usually work with the assumption that a Pullback can often provide the cue for a Reversal but it's never certain, therefore my best guess is to try and play the Pullback and 'hope' (a very dangerous word for me) for a Reversal.
The drawback is if you don't get out at quickly or at scratch you risk losing to the primary trend. On the other hand if you cut out quickly when in small profit during a pullback then you miss the potential for a larger profit because you didn't let the trade run.
Of the several ways I've tried to play Swings and Reversals I've never managed to come up with a concrete answer as to when something looks like a high probability trend or reversal.
At the end of the day despite trying to make educated decisions it still feels no better than random guessing.
Please pardon me if I haven't addressed your question effectively, but I've laid out my ineffective methods so that other traders may benefit from my mistakes.
Regards,
Switesh
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Will Sharpe
- Posts: 68
- Joined: Thu Jul 14, 2011 9:02 am
What a wonderful start to the daymugsgame wrote:21, 50, 200 SMA?
Parabolic SAR?
PSAR?
Pure correlation?
Pullback?
Bollocks
Thanks for this Switesh!
I can see where I am going wrong now.
The only pullback I know about is related to foreskin
Sorry Mugs. I wasn't trying to use technical jargon for namesake, but because that is actually what I use in trading.
As a trader struggling to understand Why and When I should enter or exit a trade was difficult without guessing, and hence I started reading about technical analysis just to give me a starting point to make 'educated' decisions about entry and exits.
Yes, traders have been (and still remain) successful long before technical analysis was introduced in a trading platform. Therefore, I realize (and am only well too aware) that my methods are not very effective.
I probably sounded stupid describing my methods, but from my standpoint how else can a trader learn without trying different things, silly as they may appear.
As a trader struggling to understand Why and When I should enter or exit a trade was difficult without guessing, and hence I started reading about technical analysis just to give me a starting point to make 'educated' decisions about entry and exits.
Yes, traders have been (and still remain) successful long before technical analysis was introduced in a trading platform. Therefore, I realize (and am only well too aware) that my methods are not very effective.
I probably sounded stupid describing my methods, but from my standpoint how else can a trader learn without trying different things, silly as they may appear.
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superfrank
- Posts: 2762
- Joined: Fri Aug 14, 2009 8:28 pm
the problem with using technical indicators (all lagging by their very nature) for fast moving markets like racing is that, by the time you've identified the entry/exit opportunity, you've missed the boat (assuming the trading is manual).
there is a contrary element to most successful trading strategies (other than technical breakouts and news events), but to catch those opportunities you have to be quick of the mark (and often rely on intuition rather than technical confirmation for entries and exits).
the trading industry makes it's money selling dreams and over-complicated nonsense. trading is essentially a simple business, and the simplest strategies are often the most profitable ones.
there is a contrary element to most successful trading strategies (other than technical breakouts and news events), but to catch those opportunities you have to be quick of the mark (and often rely on intuition rather than technical confirmation for entries and exits).
the trading industry makes it's money selling dreams and over-complicated nonsense. trading is essentially a simple business, and the simplest strategies are often the most profitable ones.
Switesh - I think you may underestimate the effectiveness of your methods. I know a pro trader who doesn't even look at WOM and isn't interested in one tick scalping - instead, he trades trends.switesh wrote:I wasn't trying to use technical jargon for namesake, but because that is actually what I use in trading.
Yes, traders have been (and still remain) successful long before technical analysis was introduced in a trading platform. Therefore, I realize (and am only well too aware) that my methods are not very effective.
I probably sounded stupid describing my methods, but from my standpoint how else can a trader learn without trying different things, silly as they may appear.
Personally, I'm not a big fan of moving averages when trading Betfair, but only because the increments mean that, when the market is going nowhere, they can cross over each other all the time.
Jeff
True, but apart from a crystal ball, what's the alternative?superfrank wrote:the problem with using technical indicators (all lagging by their very nature) for fast moving markets like racing is that, by the time you've identified the entry/exit opportunity, you've missed the boat (assuming the trading is manual).
Jeff
The single biggest revelation i ever had with trading was how easy it was to break even (before commission).
most of the methods i had until that point actually moved me away from the breakeven point not toward it
.
personally i think people over complicate things with fancy graphs and indicators that simply are not needed.
now im not saying people using them don't make money i know some do , but what im saying is that it not necessarily for the reason they think.
It's actually quite easy to make money from trend reversals simply with good money management skills.
that's something i didn't get for a long long time .
you don't have to be correct every time or even one in five times as long as the good trades out weight the bad.
If the trend continues and you get it wrong then get out and try again
. At the end of the day know one can predict anything 100% of the time.
most of the methods i had until that point actually moved me away from the breakeven point not toward it
.personally i think people over complicate things with fancy graphs and indicators that simply are not needed.
now im not saying people using them don't make money i know some do , but what im saying is that it not necessarily for the reason they think.
It's actually quite easy to make money from trend reversals simply with good money management skills.
that's something i didn't get for a long long time
.you don't have to be correct every time or even one in five times as long as the good trades out weight the bad.
If the trend continues and you get it wrong then get out and try again
. At the end of the day know one can predict anything 100% of the time.Generally it was from taking profit to soon and letting losses run.
I used to have a fixed tick offset, which makes no sense whatsoever unless it happens to be by coincidence at the high / lowest point.
I then tried to remedy this by having a short stop loss and letting the profits run,
but this also failed for the same reasons.
Getting out of trades in either direction automatically with no reasoning from my experience moves you away from breakeven.
I know this doesn’t really have anything to do with what this thread is about,
but I was just making the point that a good trader could make profit from a random entry point if they managed their exits well.
So the fancy indicator and graphs might just be a smokescreen to how they are really making their money.
But If im honest im not sure why i make money sometimes so i fully expect someone to Completely Disagree with my findings
I used to have a fixed tick offset, which makes no sense whatsoever unless it happens to be by coincidence at the high / lowest point.
I then tried to remedy this by having a short stop loss and letting the profits run,
but this also failed for the same reasons.
Getting out of trades in either direction automatically with no reasoning from my experience moves you away from breakeven.
I know this doesn’t really have anything to do with what this thread is about,
but I was just making the point that a good trader could make profit from a random entry point if they managed their exits well.
So the fancy indicator and graphs might just be a smokescreen to how they are really making their money.
But If im honest im not sure why i make money sometimes so i fully expect someone to Completely Disagree with my findings