Intra-Week Support and Resistance - November 7, 2011

[Billy]

Billy, based on your earlier comment ("The fresh IWM weekly pivot and floor levels will likely guide intra-week support and resistance without much impact from other timeframes."), I don't see why the RR ratio should necessarily use the SS2 & 200dma as sup/res references. In general, wouldn't the robot trade timeframe (whatever it is, since it's unknown) determine which pivots are the true references?

Trader D

The RR ratio doesn’t necessarily use the SS2 & 200dma as references. These are today’s references simply because they are the strongest levels within the first clusters. They are within reach of a one-day trading session volatility, based on ATR which is used as reference for defining the clusters width. The clusters widths and strongest supports and resistances within the first clusters are changing daily. (Note that there are some proprietary exceptions, but I won’t develop these).
The robot has no timeframe constraints and will always enter at a 3:1 RR multi-timeframe limit. This is simply the logical conclusion drawn from backtesting for best risk-adjusted long term performance.
Billy

[TraderD]

The RR ratio doesn’t necessarily use the SS2 & 200dma as references. These are today’s references simply because they are the strongest levels within the first clusters. They are within reach of a one-day trading session volatility, based on ATR which is used as reference for defining the clusters width. The clusters widths and strongest supports and resistances within the first clusters are changing daily. (Note that there are some proprietary exceptions, but I won’t develop these).
The robot has no timeframe constraints and will always enter at a 3:1 RR multi-timeframe limit. This is simply the logical conclusion drawn from backtesting for best risk-adjusted long term performance.
Billy

Thank you for the enlighting answer, Billy. Is there a big difference if the strongest levels (within the first clusters, reachable with the defined volatility) happen to be daily or weekly pivots rather than, say, semester or annual? Wouldn't the RR be considered less reliable or at least render the trade to more likely be shorter-lived?

Trader D

[Billy]

Thank you for the enlighting answer, Billy. Is there a big difference if the strongest levels (within the first clusters, reachable with the defined volatility) happen to be daily or weekly pivots rather than, say, semester or annual? Wouldn't the RR be considered less reliable or at least render the trade to more likely be shorter-lived?

Trader D

Excellent question Trader D! Of course there is a big difference if the strongest levels are actually “weak” daily or weekly levels. And you are right, the RR ratio would be less reliable. This is actually when exceptions to the rule are necessary, but as I mentioned, they are proprietary.
In such occurrences, robot subscribers can be assured that the optimal 3:1 RR entries have been adjusted according to the exception rules. These have been optimized by Pascal’s rigorous backtesting.
Billy

[nickola.pazderic]

Hi Billy,

Thanks yet again for supplying clues about how professionals might trade IWM.