I finally had the guts to get in, today. But, not enough guts to wait for my profit target (which would have been hit, in the end). Maybe next time! Here’s the chart of the trade, which was a short play:
… So, you can see that it had fallen below the kind of tight range it had been in so far, above 66.50 (which was also resistance on Friday). Better, it reversed weakly up to into that consolidation area to make a column with a single green box. This means I can get into the trade with a relatively tight stop. Better still, the breakdown was at round number 66.50. Better yet again, it was also breaking down through an intraday trendline from Friday’s trading.
To be conservative on these PnF plays, you have to give it a box on either side. I can’t put my stop right above that green box at 66.70, because for all I know the price had gone up to 66.78 (the box won’t fill until it gets to 66.80). So, the safe play is to put a stop at 66.80. Likewise, if I want to be sure it’s a valid PnF play like I might spot after-the fact, I must wait for the breakout box to fill down to 66.40. So, put that together, and the tightest stop you can place on a PnF play is 4-boxes wide. That’s the way I played this one.
I looked at hundreds of PnF charts this weekend, and found that even in last friday’s chop, most trades were good for about 1R when taken in this 4-box stop fashion. Knowing that, and seeing the reversal area in yesterday’s trading just under 66, I set my target at 66, or 1R.
But, I was too nervous to stick with it, and instead got out for 0.5R, reading the T&S. It did reverse back through my entry price after that, but never got anywhere close to stopping me out, and even went on to hit the target, as anticipated.
One reason I was antsy about this one, is the choppiness on the recent daily chart. I knew I wanted to go short because it was near the top of its recent upswing. But, the overall trend was still up, and I hate fighting the trend.
As you can see, I’m putting an MA and a PPO on my daily charts. I am still trying to figure out what parameters will show me what I want to see. I’ll probably look at them harder next weekend.
May 14th, 2007 at 11:29 am
i’ve been watching futures (oil, snp, nasdaq) with it all day, and am very pleased…i notice that u use a “1″ for the reversal size…am i correct? also what is PPO?
the only indicator i’m using is macd, and it seems to work…i plan on going live by the end of the week if not sooner…i also quit watching the regular candlesticks, and just focused on the pnf…support/resistance is very easy to see
May 14th, 2007 at 12:21 pm
On the PPO, the reason it would be used instead of the MACD is that it is percentage based, so you can compare high and lows to previous values. (PPO means Percentage Price Oscillator). The PPO displays the difference between the two moving averages as a percentage of the longer moving average.
This is from StockCharts.com:
With the Percentage Price Oscillator, it is possible to compare Price Oscillator levels from one security to the next. A PPO reading of +5% means that the shorter moving average is 5% higher than the longer moving average. This percentage reading is comparable against another security, regardless of the price of a security. The Percentage Price Oscillator (PPO) for SLB only reached 3% for its highs while that of the NASDAQ Composite rose above 7%.
- TraderD
May 14th, 2007 at 12:31 pm
Here are the formula differences:
PPO = (XAverage(Price, FastMA) - XAverage(Price, SlowMA))/XAverage(Price, SlowMA);
MACD = XAverage(Price, FastMA) - XAverage(Price, SlowMA);
- TraderD
May 14th, 2007 at 12:38 pm
Yeah, intraday I’ve been pretty much sticking with 1-box reversal. On the daily charts I use 2 or 3, depending on what looks cleaner.
Like TraderD said, PPO is just an MACD in percentage terms. Makes charts across different price ranges look more similar. I don’t tend to use the histogram, though it’s available just as it is with MACD.
May 14th, 2007 at 3:04 pm
D and Richard: thanks
May 15th, 2007 at 3:38 pm
[...] took my second real trade off point-and-figure charts today, for a second win. Like my GSF trade yesterday, I second-guessed it and got out early. If I had left my original stop in place, and stuck with it [...]