jangseohee
Long

CORN, triangle break out

CBOT:ZC1!   CORN FUTURES - ECBT
117 29 3
Structurally, corn             price broke out of the little triangle on Friday. Price found a strong buying support at the mini uptrend channel bottom & 50ema means we going to have more upside.
The next immediate target would most probably lies in filling that GAP left behind in mid-July.
Ability to fill the gap and break 394, i would expect strong downtrend resistance around 400-405'
dp
2 years ago
Beautiful.
+1 Reply
jangseohee dp
2 years ago
dp stands for Decision Point?
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dp jangseohee
2 years ago
No. Historically, I wanted to find the short nick, all the combinations were taken, and I used abbreviation of my post-grad nickname.
+1 Reply
dp
2 years ago
So far, it's a textbook triangle breakout.

My experience shows, though, that triangle breakout might be the fake one, i.e. the green candle you see be followed by red one of appx the same length returning inside the triangle.
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jangseohee dp
2 years ago
Yes, absolutely you are not wrong to emphasis the break out could be a fake out! (a DOJI would have been enough to create some alert, not to talk about an equivalent big red marubozu to push price all the way back to the triangle)

For every trade that is taken, there is 33.3% each that price would go either up, down or sideway, which is why various other supporting tools such as trendline, moving averages, BB, etc... are use to help qualitatively (not quantitatively) the odds of increasing that 33.3% to 51%.
In this break out, i see increase in volume, consolidation triangle in uptrend channel and a support at trendline & 50ema that i am at least 51% confidence of taking this "long" trade. Bearing in mind that i still need to admit if the other 49% occurs the following day.

I make an attempt not to self-sabotage/second guess my decision. If i am wrong, then i am wrong.
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dp jangseohee
2 years ago
Just on a side note, not relevant to this particular trade: the realization of probability is non-uniform in time.

Look, for example, in flipping the coin 1000 times you'll get about 20 faces a row not violating the 50/50 probability, that's the mathematical fact. Even worse -- you don't know when it'll happen.

In practical terms it means that even knowing that the probability of your setup is 75%, you should be ready to the fact that 3 wins and 1 fail will not happen uniformly -- you can expect significant "strides" both in wins and fails.

I know the guy who trades through setups probability backtesting, and "strides" are big pain in the butt for him.

Here comes money management -- not to use more than certain portion of your capital in one bet, otherwise complete loss of the capital is guaranteed for long enough game. But no-one use it, right? :)

Not to derail this particular setup :)

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jangseohee dp
2 years ago
Agreed, it is NEVER uniform, you must be a PhD in either Physics or Mathematics or Economics, very sound fundamental in calculation :-)

Based on you coin flipping stats, in fact every trade is mathematically 1/3 of up/down/sideway. The traders enforce some "self-deceiving" odds to make it 51% confidence to trade, which is why i name it qualitatively rather than quantitative.

The traders who go through the pain of backtesting came out with Expectancy Win rate and they suggest not risking 2% of capital each time to have prolong continuity in the trading business. It just doesn't work for me. I trade options (on stocks, ETFs) a lot (handfuls of futures) and the pricing sometime came <2% at times >2% so it is quite a hassle to do that unless for trader who trade the real shares. And whether the 2% is inclusive of commission fee is not specify.

I do not have total discipline in money management but i definitely record down each and every one of my losing trade, breakeven trade and winning trade :-)

Before i started trading, i took up a course "Applied TA in futures trading", my teacher shows me the 2% $$$ management spreadsheet. So he does use it daily. But he also confessed that there are times when he was tempted by greed/fear :-)

I love trend channels (though channel can be broken on the upside/downside) which is why my charts are rather boring compare to others
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jangseohee dp
2 years ago
Talking about back testing, i am sure you know Thomas N. Bulkowski :-)
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dp jangseohee
2 years ago
There is PhD in physics, but it doesn't help much in trading :)

All this coin flipping talk is rather qualitative, since probabilities are not independent, and for zillion o the reasons ...

How trade spreadsheet helps you to improve your performance?

I came across Bukowski site couple of times, but don't know anything about him. Did you find any value in him?

It's hard to imaging how to backtest this specific setup (gap+triangle+channel+overhead resistance). It might be possible, though, to estimate the resulting probability from individual component ones.
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jangseohee dp
2 years ago
Spreadsheet helps me to keep track of where my starting capital is, how am i doing at the moment.

Eh, i just read to check any information i can get from Bukowski's pattern site.. but didnt proceed further to read on how many times triangle have failed...
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AlphaxRx jangseohee
2 years ago
In my opinion, you're right on your assessment. I do think this is just minor uptrend retracement in a larger monthly downtrend. There's a good chance of rejection on the 200EMA or the DTL
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jangseohee AlphaxRx
2 years ago
AlphaxRX, you have a point, 200ema can still serve as another reference for resistance.
So 1st target is 394', then 200ema and finally DTL.
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jangseohee
2 years ago
dp: the statistics for reading purpose only
http://thepatternsite.com/Blog.html#P9
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dp jangseohee
2 years ago
Thanks, good site.
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jangseohee
2 years ago
Just a few mm before reaching the target or beyond :-)
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dp jangseohee
2 years ago
Nice forecast, jangseohee. Congratulations!
+1 Reply
jangseohee dp
2 years ago
thanks to my favorite Channel (80%) of correct
qualitatively probability of having this good trade increase
but quantitatively i cant explain how 33.333% can become 100%
Took 25% profit at 394'
but it is weird, seems like commodities as a whole is moving up slowly, preempt of inflation?
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dp jangseohee
2 years ago
"...but quantitatively i cant explain how 33.333% can become 100%..." -- can you please explain what do you mean by that?

What are you expectations now -- return of the price to the tip of the symmetric triangle?
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jangseohee dp
2 years ago
Hi DP, what i mean is the probability of going up is 33.3333%, but if the price goes in my anticipating, isnt it looks like a probability of 1?

It has FILLED that purple gap and i took another 50 % profit when it hit 398.2'. By price action it is coming back to 395' to test for support, having that means final target of 400-401' which is where the Major bears are ambushing,
failing the 395' means price will look for ~390 to test for uptrend channel support.

Hence if successfully break out of that resistance, price will not fall back to tip of symmetric triangle for some time, but failing to break that resistance, price will somehow likely to go down again and fall to the tip
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dp jangseohee
2 years ago
"...the probability of going up is 33.3333%, but if the price goes in my anticipating, isn't it looks like a probability of 1? " -- it is looking like 1 indeed, that's an emotional feeling. I want to get rid of such feelings and treat it just as one success event in the sequence of fails and wins.i she probability of going up is 33.3333%, but if the price goes in my anticipating, isnt it looks like a probability of 1?
Thanks for nice explanation of the expected PA.

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jangseohee dp
2 years ago
haha, ya self-deceiving probability of 1, mathematically just stay as 33.3333% :-)
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dp jangseohee
2 years ago
The reason why only 2% of investors are not losing money.
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jangseohee dp
2 years ago
well said
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jangseohee dp
2 years ago
HI DP,
it's weird
the tradingview data seems one day late, bcoz in my thinkorswim account
it close at 406.50!
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dp jangseohee
2 years ago
I noticed that too. The thing is sometimes (don't know when exactly) it shows at the lower right corner the notice that the data are end of the day and not updated -- that's for free version of TV. You need to pay to get real data, they say. Also, there is small warning sign at the upper right corner saying what kind of data you have.

What I did on Friday -- looked at www.investing.com , they have real-time data charts for March contract. And the data were different, as you say.
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jangseohee dp
2 years ago
yup, since the data is not fully updated, by using my TOS acc, i foresee that the downtrend channel top resistance is around 420'-425' depending on speed of price movement
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dp jangseohee
2 years ago
There is some freedom in drawing upper down-sloping upper channel resistance line, so it's hard to say exactly where it'll reverse.
I don't know how to catch such reversal, frankly, even going to shorter scales and watching the volume.
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jangseohee dp
2 years ago
it is never easy or else we would be Warren Buffett or Best trader of the Century
Definitely even if the resistance turns out to be true, there must be some cushion plus minus
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dp jangseohee
2 years ago
Yes.
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