MT Predictor for Dummies

[rabbitrun]

Hi,

I've now been using MTP for about 6 months, starting to trade with real money in Jan 2007.

I knew nothing about trading before I bought the software and I truly believe I was incredibly fortunate to make the decision to buy MTP (I've read the stories and realise that there is a lot of hot air punted out there).

The aim of this thread is to ask those really annoying questions that you wish you knew the answer to or could at least get some reassurance from other traders out there who've been there before

I'm new so my interest is focused on EOD but of course anyone should be able to ask anything.:D

[rabbitrun]

Having started the thread I thought it was appropriate to ask the first question.;)

I've had 3 loosing EOD forex trades on the bonk now. I asked Steve G how he dealt with MTP when a trade has triggered and the wave pattern then changes. His answer was short and to the point - look at the bigger picture.

So I did.

Historically, it was easy to see where these trades had gone wrong on the weekly charts. It all became a lot trickier, however, when I started trying to interpret the weeklys at the moment of decision.

I'm interested to know whether EOD traders typically look at the weekly charts before making a trade decision on a daily trade. If so, and there is no wave pattern unfolding do you rely on DP levels?

[rabbitrun]

And that got me thinking about another DP question. As an EOD trader I wondered if other EODers spent some time researching weekly charts for DP set-ups? It's not that I'd want to trade them but it would add another level of support or argument to the decision making process when thinking about a trade on the daily chart.

I'm a dummy:eek:
I think I've been a bit of a dummy. I've been spending some time now looking for DP trades on daily charts. I like the idea of a DP trade, probably more so than an ABC at the moment. I have no idea whether it's more reliable or not yet but there is a more visual sense that a market is clearly trading at a point where it might reverse, more so than for an ABC (I suspect this is more to do with my inexperience rather than the power of DP over ABC) but I haven't thought about checking weekly charts to help identify new trades - a mistake on my part.

Kingfisher
I got stopped out on a DP trade on Kingfisher last week - it just kept on going up, thoughtfully pausing long enough to pick up my sell trigger before reversing quietly and consistently northward again. Now like all good 'non-amateur' traders I've kept on watching for a chance to get even - preferably better than that if possible.

Which brings me back to my original point and the Kingfisher charts attached. The weekly chart is at a DP, marred alas by the lack of a red reversal bar; so okay, maybe no good at all.

Back to the daily. When I looked at the last major high and low swing, not the immediate shorter one, I found that the market is at a DP and we have a red reversal bar. Eureka. Well no, unfortunately not. The blue STF has crept up and we no longer have divergence, high market, high STF instead. So not an option to trade, but I for one will be watching the progress of Kingfisher next week with renewed interest.;)

[rrs]

And that got me thinking about another DP question. As an EOD trader I wondered if other EODers spent some time researching weekly charts for DP set-ups? It's not that I'd want to trade them but it would add another level of support or argument to the decision making process when thinking about a trade on the daily chart.

Hi,

1) For stocks, weekly charts will show the predominant / prevailing trend. This is the time frame that will clearly show the activity of the major forces that control the direction of the stock price (i.e. major fund managers). In addition, you will also notice that weekly charts show "cleaner and smoother" swings and price pivots that clearly stand out.

Depending on your risk tolerance (stops are larger on the weekly time frame), personal trading plan and philosophy you may wish to trade the weekly swings.

2) Based on the weekly trend you may wish to take the DP Trades that appear on a daily chart if they are in the direction of the weekly trend.

Of course, you may decide to simply disregard the weekly trend and take all the DP trades that appear on the daily chart. Only problem with this approach is that some of these trades will be counter-trend trades (counter to the weekly trend) and these often reverse in a violent and unpredictable manner.

3) Steve's excellent videos in the members' section of the MTP web site show the different types of DP trades. The type of DP trade Steve emphasizes is the DP trade with accompanying divergence in the STF oscillator. You may, at the early days, wish to focus on these trade setups. Before trading these setups, you may want to make sure that the input to STF oscillator is set to 1 so that the emergence of divergence is clearly shown on the chart of your choice.

4) You may also wish to read what Steve recently wrote about the "DP Failure" trade setup. (I think it was in the daily newsletter very recently- ? 2 or 3 days ago). Every price pattern / trade setup has a failure rate and it is important to have a plan if a particular DP level is breached by strong price action. Steve's suggested plan for a failed DP trade is a brilliant example of what I would call creative and imaginative thinking.

In my view, DP trade setups represent the best of what MTP as a trading tool has to offer to traders / investors. This is probably due to the fact that support and resistance, the foundation on which the DP trades stand, are "real" market characteristic as opposed to some "imaginary" charcteristic. These levels indicate where various groups of buyers and sellers are going to buy or sell the stock based on their own plans.

When I asked the important question, "why some decision points fail while others prevail?", I started to understand these trade setups better and have greater confidence in taking them. The two important factors I observed are:

1) the relationship of the daily DP swings to the weekly trend

2) the interaction between price momentum and a given DP level -- greater the price momentum, more likely will a given DP fail and vice versa.

Finally, looking at the charts of Kingfisher you have posted, it looks as though the prevailing / predominant trend on the weekly chart was up. This uptrend, until it is conclusively reversed, will influence the trades taken in the lower time frames. I, for one, having recorded and analysed several DP trades, tend to take the DP trades that are in the direction of weekly stock trend, mainly to increase the odds of success. This is my approach to the DP trades. Every one is different and I am sure that you will arrive at your own successful approach in the near future.

Good luck in your trading.

Rama.

[rabbitrun]

Hi Rama

Based on the weekly trend you may wish to take the DP Trades that appear on a daily chart if they are in the direction of the weekly trend.

This makes sense to me, although knowing weekly direction is often difficult to see - but that's more to do with my inexperienced eye; I hope practice will improve my prescription:cool:


2) the interaction between price momentum and a given DP level -- greater the price momentum, more likely will a given DP fail and vice versa.

I wonder if the Forex traders out there agree with this? From what I've read on the Forex thread and SG's recent comments, DP has become a great ally in bumping up the profits. And these markets thrive on momentum?

Really useful thoughts, thanks.

RR

[rabbitrun]

Today I came to another conclusion - stop trading equities (at least until the markets make up their mind).

Regardless of the art of decision point trading there is something fundamental that I remember from SG's course which I'd chosen to forget because I wanted to trade. If you look at the moving average on a weekly index chart at the moment it's basically the shape of a ski on a salt flat. Sure on the daily that had turned into a nursery slope for a while but a rookie, like me shouldn't be trying to short the market despite the sea of red that seems to be present at every scan I perform.

I will be working hard on Forex until further notice.

Happy trading,

RR

[rabbitrun]

My aim which is the same for all of us it to develop a trading system with an expectancy level that makes money.

So why all the discussion about weekly DP's and using them to help with daily decisions; why not stick to the automatic set-ups and trade like that ignoring all else for a while?

I know some of you out there are thinking, he just doesn't get it yet - he wants to be right:p not profitable.

I disagree. The aim of any beginner is to just be average; I long to have 25% winning trades. I long to be able to say what SG says in his videos, ' and then the market declined nicely for a profit of just over 4R ignoring slippage and commission'.

To get to 25% success, I have to stop taking trades like Kingfisher and lots of others which just weren't going to work from the begining and where a more experienced eye would have ignored.

And that's the challenge - to be smart enough to be average. I'd be very happy with average.