THE NEW Strategy --- THe iMi Method

[immy]

Why The big change? Because I've learned that all our AIMS "Reliable" patterns, Fractal Geometrically" accurate patterns, have equivalent BAR/CANDLE formation patterns on Higher Time Frames. Nothing could be better than this. My mind has now more free "processing" resources available for me to allocate to other things such as Price levels, S/R Zones and "Price Prediction" based on
Right NOW price is at point A, where is point B, to where price is going to go in the future.
So, 1. Where is Price Now?
2. Where is it going? Where is it going to stop...

The Box Trading Strategy is Based on very simple analysis and a pattern in the market that is Fractal Geometric in Nature.

If you're like me, who gets freaked by "Paralysis of Analysis" then you know that we need a method that takes the complexity out of "Entries". We know that entries is only 5% of the equation of successful trading.

Box Seed Strategy is a trend following Breakout strategy. As per our belief, "Higher Probability Setups are Breakouts in the Direction of the Trend".


How to Define the Trend:
Trend Analysis based on "The Daily Trend". What is the daily trend?
So there is THE Daily Trade = the trend of the day, as defined by price in relation to open price. if Current Price (last close) > Price at FO = The Day's Trend = Up. If Current Price (last close) is < Open Price (Price Close at FO) = The Day's Trend is Down. We don't look at D1 chart for its trend for entry purposes however we do look at it for overall direction. We would like to trade them markets that are in clear TRENDS.

The trend of the day is defined as follows:
We will draw a Line in Sand to establish trend.
If price goes above the Frankfurt Open Price level, the trend is UP. Take only BUY signals above the line.
If price goes below the Frankfurt Open Price level, the trend is DOWN. Take only SELL signals below the line.

Entry Methods. How to enter the Market
WE will use a simple and robust entry method. Entries are important but profits depend on how you exit. Remember this. So getting an entry wrong here and there is no problem at all. Just learn from it and say NEXT

So, BOX Seed will use its Entry Methods based on Price Bars/Candles. We will use Inside Bars or Candles for entries. This is because Inside bars provide LOW RISK ENTRY spots in the markets. The smaller the Inside Bar the Higher the Reward. [Love this concept]

Long: Entry Signal (IB) should have its high above the Market Open Price at 6GMT. i.e. Frankfurt Open Price.
Short: Entry Signal (IB) should have its low below the Market Open Price at FO.

How do we add on to our Trades?
We can Add on if we like but its up to individual preference. Generally its good to add on to your winning trades.
If you see another signal in the same direction and the first entry is a FREE Trade you can take the next signal.

What is the formula of successful trading?
The formula of successful trading is simple. Find a strategy with Objective Entry Method, Risk Management and Methodical Profit Taking Techniques.

There are two types of Trading Strategies. High Win Rate and Low Win Rate.
1. A High Win Rate strategy: e.g. a strategy with over 60% win rate would do just fine with an average winner of 2R or even 1.5R.
2. A Low Win Rate but High Reward Strategy; limits Risk to 1 Unit but leaves profit open to indefinite (multiple) units of Returns.

Limit your losses and let the winners run. This strategy is actually easier to trade than the high win rate strategies. But again, it depends on a persona psychology. Higher win rate formula generally appeals to more people.

I for one have found and learned to understand and adapt that its all about Profit Factor. WE are not perfect so the second option suits me as it allows more margin for error. WE rely PF of 1.2 and above. This method could easily keep you above 1.5 PF.

What is Risk? Should we measure risk in pips or the amount of "dollars" we attack to a certain number of pips?
1R Risk on a Low Risk Entry (in pips) This Article on AIMS blog is Worth a Read Here

The second option is preferred method of the professionals such as Paul Tudor Jones, Bill Williams, George Soros.
the concept of

Asymmetric Risk Rewards

AIMS box strategy relies on this "magic" concept. Low Risk Entries for Higher Returns.

I won't go into detail but suffice to say that 1% Dollar amount Risked on 10 pips is considered to have higher risk to reward ratio as compared to the same amount of dollar risked on 20 pips.

How will we Take Profits and What type of Exits Should I Use?
Should I take profits on a certain multiple of R's such as 5R or should I use a robust trailing mechanism that I can live with for a long time.?
The answer to this question is critical and it depends on YOU and the Strategy's ability to produce profits. We know that this strategy can produce very big winners as well small winners and it stays profitable on multiple exit methods.

Option 1. Day Trade - You make entries and Exits on the same day. You will target returns of 1:2 to 1:5 (1 Unit of Risk to 5 Units of Reward)

Option 2. Swing Trade - Exits are based on trailing the H1 swings, ie. simply trail the box (intelligently) think 1:5 to 1:10. You might stay in a trade for a day or two sometimes even 3 days or more. (You may exit at 1:10 on the same day if you like, if price moved / spiked too far too fast.

Option 3. The Most Profitable but the hardest way is this one. Establish a strong opinion about longer term trend and then pursue that by finding low risk positions and pile them up and allow them to run on higher time frames. Think 1:100 to 1:250

I did analysis based on these three methods and I found that option 1 is not really viable in the long run. At least not for me but can be a starting point for a beginner. It is still profitable, don't get me wrong, but the profits are often vanished by a few mistakes so you have to be really on top of your game.

The third option created twice as much profit as the second option but requires that you find a longer term trailing mechanism such as box or gator line trail on D1 Chart. Here you will have a low win rate, plenty of BE's but 1:100 to 1:250 winners a few times a year. (Certainly enticing but one that I cannot handle or would not like to)

So my preferred option is option 2. Swing trade and look for a minimum of 1:5 winners. Anything above this would add to the kitty nicely. As long as our winners are 5R's we will NEVER lose our account, instead it will continue to grow at a steady pace. 4 Pairs traded fairly conservatively will bring home 10-15% profit without a doubt. (Strategy testing results suggests 20-40% but I know we are humans.)

How to Trail your winning positions?
Stop Loss Trailing is based on Trailing the Box. Simple. But don't trade Inside Boxes.

Exits all positions on Friday. We trade Monday to Friday.

The Average Moves of Markets, A Quick Snapshot
The markets usually move 75-150 pips in a day on the hourly time frame. e.g. the 60 day ATR (average true range) of EUR/USD is around 87 pips. And yes that includes the brexit bar as well. But ATR of the last 30 days is 73 however ATR of the past few months 12 months is 94. Hope it makes sense that these pairs keep changing their volatility but in the grand scheme of things ATR values would remain between 70-150. Some pairs have bigger ATR's those are the ones with even higher RR probability. If you look at EU D1 chart, you'll see that we have a great opportunity to find a very good value for its ATR. We see a HUGE 3 down starting in MID 2014 and then a huge (usually there are big wave 4's after big wave 3's. RULE) wave 4. So if we take all these D1 bars into account this will give us a combined atr of a wave 3 and 4 which would make more sense. And that is 610 bars. So the ATR of the last 610 days of trading is just over 100. (102) That gives us an idea. If we take a trade on EU and it goes in our direction for 2-3 days, and prints a wave structure of 3-5 we might see 100-150 pips of move. (wave 3 100, wave 5 60). We now have an idea that if we take a signal that requires a 10-12 pips SL would provide nice 5-10R winners and that's what we should be targeting here. Swissy has remained the same. However, UCAD and GU has been far more volatile with 100 and 125 ATR respectively in the last 2 years of data. Now compare that to DAX which is 198ATR during the same period. That means that statistically if you find a 10pips SL opportunity on DAX (which does not always happen) the chances of finding 10R winners is quite high. DAX and GBP/JPY have the same ATR with pound yen 181 pips but higher spread DAX is a GEM. WS30 or US30 (the dow) is highly volatile too with 201 ATR for the past 610 days and 216 within the last 200 days. Another contender for this strategy don't you think? This Friday (9th Sep 2016) it gave a signal of 12 pips Risk and 400 return at the close. WOW!!! Thanks Darren for spotting that.


What Indicators will we use?
Aims The Box Needs the following Indicators
AIMS The Box 2016
AIMS The Box - Seed [Indicator to draw Open Line, Momentum Bars (optional) and The Seeds entry signals]

[Download AIMS The Seed Indicator]

AIMS The Box - Seed.zip

And nothing else.
AIMS Wave / AO / eWave are optional.

Examples

Seed Box Entries.png

AIMS Box Seed Sell Trade Example.

BOX Seed Short Trade.png

The Box Strategy Entries 2.png

I asked Darren a question in Skype
Is this a signal we should take?

13-06-2016 13-08-00.png

His reply was good. Based on what we discussed earlier in the chatroom.

13-06-2016 13-43-38.png

Then I revealed the rest of the chart. It was Swissy short trade after the initial spike.

13-06-2016 13-44-44.png

Full Picture of the Swissy Campaign that brought 25% Growth

13-06-2016 13-45-57.png

[Darren]

Very powerful stuff - looking forward to using it from now on!

[immy]

Awesome Post Kyle, thank you.

You can risk 2% in total splitting into two at the start by risking 1% on each or you can start with 0.5% two positions. The concept of [FREE TRADE] is good in two ways. It relieves your mind of The Risk Factor so in the absence of fear and the protective instinct, we become more objective. And secondly, it makes the equity curve smoother. The later factor might not seem like a big thing for beginners but you'll know after a while that equity curve and its smoothness are important things. The smoother the curve the easier you'll find trading. The more downward spikes you experience in your equity curve the harder it gets. So Consider it well. If you get to the stage where you are hundred percent sure about every entry you make you can risk upto 3% per trade on smaller accounts. But starting with 0.5% x 2 is a good idea. We would like to close one position as 1:1 or more if possible and let the rest run trailing boxes. But trail boxes as a "protection". There is one way to trail boxes, which is to allow a script/ATM manage it for you and another is to do it more intelligently and manually. To start with more automation will help.

Hope this helps.

ps: e..g in Fruit we just keep our SL on the other side of Fruit/box as long as we are in STAGE 1-2. and its only in Stage 3 when we start to think of moving SL closer to price action using BOX Levels to lock in profits and eventually keeping it tighter so we can get stopped out with maximum profits.

[immy]

So There will be Two Sorts of Entries on The Box Strategy... I gave you hints earliers...

Entry 1. Pure Seed (not hunt seed, just an IB) above the Open Line = Longs Only Below Zero Line = Shorts Only. Entry a pip above the bar high plus spread, SL a pip below the bar low. Risk chose between .25% to 3% depending on your risk appetite and account size but don't change it from trade to trade or day to day. Stick to on. 1% is the best. You may close at 1:1 half of the trade and leave SL at original spot. if price moves too quickly in your favour then you have better change of banking more money at closing half and then trail the box.

2nd type of Entry: INSIDE BOXES... i.e. SEED BOXES
Trade the Tight Box which has high and low within the high and low of hte boxes to the left. trade it longs if the box high is above the OL or short if the box low is below the OL

[Darren]

Nice post Immy

[immy]

Now think about the BeOB and BuOB Idea I gave in skype. The Famous Setup on Daily Bars. And trade em on Box Strategy. more onthis later

[immy]

Nice post Immy

Darren "Why thank you sire" /// :-B B-)

the concept of Inside bars and inside boxes amazes me. Its so simple yet so potent

[immy]

The Box Strategy is something where you mostly just analysis THE PRICE. Its good, it utilizes price bar patterns and levels to the left. The addiction of Be/BuOB and PinBars to your repertoire might make it even more powerful. but do we really need it? no, not really however it gives us more confidence. Just like a bit of eWave analysis makes it alot easier to trade or filter a trade.

we discussed a bit in Skype earlier

04-08-2016 14-21-41.png

Martin Pring is the "inventor" of PA bar formations (if you like) he's one of the pioneers for sure.

He says in his presentation on Day Trading some 16 y ears ago

04-08-2016 14-04-40.png

and that

"Technical analysis assumes that prices move in trends"

Then he talks about picking reversals. He says, "Look for the Weight of the evidence" In his case, serveral indicators to indicate reversal. note, he's not necessarily pointing at "indicators". These could be anything from trend lines, to price S/R zones and other bar patterns.

04-08-2016 14-05-38.png

and then he goes on about an interesting pattern which is what we call The B Trap.

The Box Strategy can utilize this pattern to their advantage .Becasue B Trap is formed with an Inside Box. The snout of the Scooby is The Inside Box.
e.g in this chart below, Scooby points out the reversal. and if it faked out through the snout further down and then reversed it would have been a b trap.

We know that successful trading requires you to predefine your exit levels before you even put your pending order. The Loss is a very strict level not to be messed with however the take profit level can be flexible but you must have an idea where would it possibly be and how will you manage your trade. This slide gives you an idea.

04-08-2016 14-10-50.png

Scooby B Trap and Where is price going.png

[immy]

What makes the trend? Apart from the Daily Trend : FO Line we can use Box for trend and reversals.

Trend on the box is formed when we have a series of stepping up or stepping down bar formations.
Note: ignore the steps that are within the previous steps. They are either suggesting reversals or continuation. The B Trap, Scooby are examples of that.

AIMS Way of Peak and Trough analysis

[immy]

A=C [How to Predict the End of Correction]