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【笔记】《技术分析之艺术与科学 · 5.3》  

2014-01-02 23:40:00|  分类: 汇市博弈 |  标签: |举报 |字号 订阅

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【摘】《技术分析之艺术与科学 · 5.1》 - 汇士4xAce - 残夢天涯
文源:《The Art & Science of Technical Analysis: Market Structure, Price Action & Trading Strategies》
作者: Adam Grimes



On Technical Analysis of Financial Trading [5.3]

82>>>
[5] The ANTI
Trade Type:
Trend termination

【摘】《技术分析之艺术与科学 · 5.3》 - 汇士4xAce - 残夢天涯
 
Concept
This trade is a very specific pullback variation that attempts to enter the first pullback after a potential trend change.

Setup
There are two setup conditions for this trade.
a] The first is that the market must have made a pattern that suggests the current trend could be terminating. ......: loss of momentum on successive thrusts, an extremely overextended market on the higher time frame, some type of double top or bottom formation where the market is unable to make a continuation, or perhaps a failure test.
b] The second requirement is that the market then makes a move that shows a distinct change of character, such as a shift of momentum against the old trend. In the case of an uptrend, a downswing would emerge that was much stronger than previous downswings. This move would likely register a new momentum low on momentum indicators, suggesting further that the integrity of the uptrend had been challenged.
This is the setup sequence, and both parts are important: the initial market structure that provides justification for potential countertrend trades, followed by a shift of momentum that shows that the dominant trend players have lost control of the market.

Trigger
The actual entry for this trade is in the first pullback following the strong countertrend price movement.
For example, imagine a market that has been in an uptrend and then puts in a sharp downward spike (countertrend to the uptrend). The next bounce following that spike is potentially the first pullback in a new downtrend; this trade represents an attempt to reverse, or at least to create a significant pause in the preexisting uptrend.
Price action and evolving market structure must be carefully monitored in the pullback for warning signs that the pullback could fail and that the original trend may still be intact. This structure is a pullback and, to a great extent, can be traded like any other pullback. What distinguishes this pullback is its position in the evolving market structure as the first pullback following a potential trend change; normal pullbacks are continuation patterns in established trends.

The Anti pullback may be entered via either of the two pullback entries already explored. The breakout entry may actually have a slightly better edge in this context than in a normal pullback, but it is also possible to position within the pullback using the support/resistance of the pattern itself. This is also a good example of how trading skills can be modular; the skills of trading pullbacks are applied here in another context. The third entry for this trade is probably not ideal. Because this is a countertrend trade, your risk point is clearly defined so you can simply enter anywhere into that first pullback with a stop outside the existing trend extreme ... This is a sloppy entry in most cases, but there are times and time frames when we may not want to micromanage and fight over every tick.

Stop
The general rule of stops in countertrend trades applies here: these stops must be respected without exception. There are two reasonable stops for this pattern. One choice is to simply put the stop beyond the trend extreme. Any price action inside that level (below it for an uptrend, above it for a downtrend) is consolidation and may still be supportive of trend change. If the level is violated, we know the countertrend attempt has failed and the probabilities favor trend continuation. This is the most conservative stop: farthest away from the market and at a level where the trend reversal has decisively failed. More aggressive stops, corresponding to larger position sizes, can be placed closer to the market, using any of the guidelines for stops in pullbacks.

Profit Target
The question of where to take profits is tied in to the expectations for countertrend trades in general. ... Countertrend trades demand closer profit targets and tighter risk management than with-trend trades because of the danger of exceptional volatility if the trend change fails and the old trend reasserts itself. One good profit-taking plan splits the difference, taking off a significant amount of the exposure (33 to 66 percent) at the first profit target and holding the rest for a possible extension into a new trend. The MMO is an important factor in this trade. It is very common to see the first thrust after the initial pullback exhaust itself at the MMO, and then to see the market turn back down and eventually violate the previous trend extreme.

Comments
This is a powerful trade, and the sequence should be internalized: there must be, first, a reason for even contemplating the possibility of a countertrend trade; second, an initial impulse to confirm that the trend pattern is broken, that the dominant group has lost control of the market; and third, the actual entry in the pullback. This is a reliable pattern on all time frames, and is especially powerful for intraday traders when combined with time-of-day influences.

83>>>
[6] BREAKOUT, Entering in the Preceding Base
Trade Type:
Support / Resistance breaking

【摘】《技术分析之艺术与科学 · 5.3》 - 汇士4xAce - 残夢天涯
 
Concept
Breakouts are an important class of trades and can give rise to strong price moves beyond the breakout point. Schematically, there are three places to enter breakout trades: before, after, or on the breakout. Trades entered on the breakout can incur high slippage and poor trade location due to the high volatility and low liquidity that accompany many of these trades; many traders find better success with executing either before or after the actual breakout.

Setup
For breakout trades, this is the first and most important condition: you must identify  one of those significant levels that is likely to give good action when broken......Good breakout levels are usually levels that are clearly visible to all market participants.

【摘】《技术分析之艺术与科学 · 5.3》 - 汇士4xAce - 残夢天涯
 
Trigger
The actual entry is in the consolidation preceding the breakout. Positioning in this prebreakout base allows us to avoid having to play in the extreme volatility of the breakout itself. As a rule of thumb, entries in consolidations are usually less precise than entries in trends. Conceptually, we would like to buy as close to the bottom of the base as possible, but the most important thing is to get the position on. There are at least three logical entry triggers, each with some potential drawbacks. (These examples are for long trades, but apply, reversed, to shorts as well.)

Once the base establishes itself, bid near the bottom of the smaller range. One potential drawback is that this order will be filled only in a declining market, meaning that you are buying against the short-term momentum. Another drawback is that the order may not be filled at all, so it may not be possible to get the position. Sometimes you will identify the range, bid near the bottom, and then watch the breakout as the market never returns to the bottom of the base. In these cases, you will miss the trade. However, the times that the order is filled will result in the best possible trade location, at or very near the bottom of the range.

Once the base establishes itself, wait for springs (i.e., drops below the support at the bottom of the base that immediately recover back above the support level) and enter on the close of those bars. Though you will now probably be entering with the short-term momentum due to the recovery back above support, not every range features springs or upthrusts. In addition, this is a high-maintenance execution technique that requires good focus on subtle details of price action.

Just get the position on, anywhere in the range. This one isn’t pretty, but the reality of trading is that our executions are not always at perfect, ideal points. Imagine we identify a breakout trade that has 10 points of upside potential out of a 5-point large range, with a 1.5-point base near the top of the larger range. If we can buy in that base and give it a 2-point stop, then maybe it doesn’t make sense to try to squeeze an extra half point out by bidding near the low of the range.

There is no right or wrong here, and each trader will have to make the decision based on his personality and on how he intends to manage the trade......This is also a good place to consider the adverse selection effect of entering on limit orders......This is a truism of using limit orders, and one that most people choose to ignore: if you enter on limit orders, you will price yourself out of some set of winning trades that never trade to (or, more realistically, through) your limit price while you will always participate fully in all losing trades. This is important—traders entering on limits will not be filled on some winners but will be filled on every losing trade.

Stop
There are two separate parts in the life cycle of this trade, requiring two separate approaches to trade management.....One simple strategy might be to put a stop below the lowest point reached while the market was in the base, with the plan that if you are stopped out on a temporary drop you probably must reenter the trade. Another approach is to set a much wider stop for the purposes of position sizing and risk management, with the idea to stop out before the level is reached if developing price action contradicts the trade......The second issue to consider is how you will manage the trade after the breakout occurs......My approach to stops is so consistent that it is boring—I always set stops at places where the market should not go if my trade is correct. If I set a stop there and the market reaches the stop, the trade is wrong and I must exit.

Profit Target
Some traders will set ratio-based targets for breakout trades. Common examples use, for instance, measured move objectives based on the width of the preceding range or the base......In general, I do not favor setting profit targets for breakout trades, because, in the best cases, you just entered a new trend at its inception, and it does not make sense to give up that trade location as long as the trade is working well......Just like with all my trades, I will take partial profits at a level approximately equal to my initial risk in the trade, and then will usually hold the remainder as long as the new trend appears to be intact, perhaps taking partial profits at other inflection points as the trade develops.

Comments
...take a minute to consider simple channel breakout systems.

84>>>
[6] BREAKOUT, Entering on first pullback following
Trade Type:
Support / resistance breaking

【摘】《技术分析之艺术与科学 · 5.3》 - 汇士4xAce - 残夢天涯
 
Concept
The first pullback after a breakout offers a spot to initiate a position in the direction of the new trend supported by the confirmation of a successful breakout. This entry also avoids the volatility of the actual breakout area, and the uncertainty inherent in positions established in the prebreakout base.

Setup
The market has made a successful breakout of an important level. Furthermore, there is good activity (volume, volatility, and price action) beyond the level, proving that it was a valid breakout. The initial upthrust exhausts itself, the market rolls over, and a pullback begins.

Trigger
This pullback can be treated as a standard pullback, with any of the standard pullback trigger entries.

Stop
If the pullback is treated like any other pullback, the logical choice is to use the same stops you would apply to any pullback trade.
There are two other levels worth considering here: the actual breakout level itself and any prebreakout reference level (e.g., support in the base, or the highest low preceding the breakout). Many traders will work with the idea that the breakout level should be a good price for stops, but it is not. Some of the strongest continuations will drop back below the level, stopping out naive weak-hand short-term traders, and then turn to trade much higher. These traders, now trapped out of the market, will have to chase it higher, adding additional impetus to the move.

Profit Target
These are standard pullbacks, so standard pullback profit targets apply with one caveat: trends from good breakout levels tend to be exceptional trends. There is a better than average chance that any ensuing trend will extend for several legs with strong impulse moves. It still makes sense to maintain the discipline of taking partial profits, but it also makes sense to allow yourself the opportunity to participate in the potentially outsized trend run. This is another place where as a trader you will need to tailor the plan to fit your personality...

Comments
In some sense, this is a hybrid trade, combining characteristics of both breakout and pullback trades, but it can be simplified further: it is really nothing more than a simple pullback trade.

85>>>
[7] FAILED BREAKOUTs
Trade Type:
Support / resistance holding

【摘】《技术分析之艺术与科学 · 5.3》 - 汇士4xAce - 残夢天涯
 

Concept
Most breakouts fail.

Setup
When most traders think of breakout trades, they think of big, dramatic winning trades, and it is not hard to find examples like this. However, the trader actually trading breakouts quickly comes face-to-face with a harsh reality: failed breakouts are more common than winning breakouts. This is not an indictment of the breakout trading concept, because exceptional reward/risk ratios can compensate for lower probability. Furthermore, good breakout traders know how to prequalify their trades by focusing on the patterns that tend to support successful breakouts and may have a higher winning percentage than might be expected. There certainly is money to be made trading breakouts, but it is also worthwhile to spend some time thinking about the patterns associated with breakout failures.
There are two setup conditions to consider: the strength of the move beyond the breakout level, and the character of the first reaction after the breakout. Good breakouts should have strong momentum, volume, and interest beyond the level. If this does not happen, it is more likely that the breakout will fail,

Trigger
Conceptually, this is the most problematic of the trade setups because we have to strike a balance between waiting for confirmation that the breakout has failed while still getting a good trade location. In terms of actual execution, the breakout failure is nothing more than a failed pullback. Breakout traders need to understand that the pullback pattern is a critical building block for these trades, and it is important to understand the patterns that suggest pullbacks failing and continuing.

Stop
Saying most breakouts fail trivializes many of the issues we face trading these patterns because of the extreme volatility associated with breakouts and their failures. Being caught on the wrong side of a breakout trade (whether a successful or a failed breakout) is bad news. Stop placement is fairly simple, as the ultimate stop is above the extreme of the initial pullback thrust, but in this trade you must respect your stop fully and without question. If the stop is hit, get out of the trade. Do not try to trade around it; do not try to average your price. Just get out. You may play these games and get away with it 30 times in a row, but the 31st trade could wipe out many months’ profits. There is danger here—real tail risk—that is hard to comprehend and impossible to quantify.

Profit Target
There are two likely resolutions to these trades. In some markets (for instance, longer-term commodities) failed breakouts can be absorbed into a large-scale consolidation. After spending some time working off the failure, the market may make another breakout attempt and continue to grind higher. The second possibility is that the market may truly melt down and collapse after a failed breakout. This outcome is slightly more likely in shorter time frames, but what we are looking for here is a violation of the base before the breakout and wholesale panic as trapped traders scramble to adjust positions. A good trading plan will consider both possibilities, with a provision to take partial profits at a relatively close target while holding a portion for a larger swing.

Comments
This is the most complex and least well defined of the major trade setups......Awareness of how patterns fail and how trades fail can help you limit your losses and manage losing trades with equanimity. After you have traded many breakouts and internalized many variations of these patterns, you will begin to develop some intuition about them.

<<Chapter 6>>
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