The intention of this post is to help struggling traders turn their trading around. It's my way of paying it forward and contributing to a board that consistently complaints about the lack of useful trading information. The strategy works in most trending markets but with your help we can make a great thing even better. It is by no means complete but very much functional and consistently profitable once some of the trader's skills are polished. It's simply a collection of ideas, personal experience, trial and errors, backtesting and things I put together that changed my trading around over the years. I'm open to suggestions and ideas on how to improve what I consider a very good system for daytrading the market. Particularly, the e-minis. Let's try to keep it civil and friendly as my priority here is simply to help and improve the system. It's long overdo that I do some contributions and well, tonight is the night. Hope it helps and since I designed it I will indulge myself by calling it, for now... Anek's Holy Grail v 1.0 or AHG for short. As we improve it we can increase the version number. Rest assure, it's a good working strategy for trading and has been my bread and butter for quite some time. I see no reason for this changing. Help me help you and feel free to help us help more by chipping in with ideas. I shall begin by placing the first stone...... STEP 1 THE TREND - Determine if there is a MEANINGFUL TREND present There are two types. The meaningful ones: Downtrend = lower highs, lower lows Uptrend = higher highs, higher lows The ones you should ignore (for now) because they require greater skill to consistently profit from or simply, the sideway ones: Congestion/Indecision = higher lows, lower highs (Symmetric Triangle formations) Consolidation = horizontal lows/highs As you get more experienced you can profit off consolidation by fading support/resistance but for now, stick only to the meaningful trends. Again, as you get more experienced you can profit off symmetric triangles (HL LH) because they tend to give birth to POWERFUL new trends but for now I would rather you stick to the meaningful trends. STEP 2 ONCE A TREND HAS BEEN DETERMINED HOW DO WE PLAY IT - If a MEANINGFUL TREND has been found we need a logical entry. Let's start with the UPTREND. We BUY a pullback and we are nimble with our target. Where exactly ? Well, it can be a 50% Fib retracement from the recent High to Low swing, or stochastics crossing, whatever you feel comfortable with. We take advantage of minor WEAKNESS in a STRONG TREND to get a good fill. What's your target ? It can be a few ticks below previous resistance, it can be an upper bollinger band. This is entirely up to you and only in time you will master this. You could trail the stop to ride those breakouts, all very discretionary. Stop ? Whatever would make it a lower low aka a CHANGE of trend. Now, lets talk about the evil twin, the DOWNTREND. We SHORT a pop up and again, we are nimble with our target. Where exactly ? Well, it can be a 50% Fib retracement from High to Low, Stochastics Crossing, whatever you feel comfortable with. We take advantage of STRENGTH in a WEAK TREND to get a good fill. What's your target ? It can be a few ticks above previous support, it can be a lower bollinger band. This is entirely up to you and only in time you will master this. You could trail the stop to ride those breakdowns, all very discretionary. Stop ? Whatever would make it a higher high aka a CHANGE of trend. Important, we never go against the trend. When the trend is strong we buy a pullback. When the trend is weak we short a pop up. No exceptions, don't play hero or Nostradamus. There is not a soul on earth who can predict the market consistently and what we want is consistency, so be smart about this. If STOPPED OUT, meaning, a CHANGE of a trend, we stay ON THE SIDELINES until a NEW MEANINGFUL TREND is defined and we take our stop like responsible traders. If we get faked out, so be it, plan your trade and trade your plan. Losses are inevitable and quite alright as long as we limit them to small numbers. Who is our enemy ? You got it, REVERSALS. REVERSALS stop us out. Lucky for us, they are not very common which is exactly why this strategy works. Some days will be filled with them and sadly I don't know how to overcome this. On days like this, I lose money. Surprisingly so, people call reversals all the time then you wonder why 90% of traders lose money ? We never call a top, we never call a bottom, we never say "Oh it's too high" or "It's too low", the market has no boundaries. Yes, you heard that right, NO BOUNDARIES. There are so many variables in the market it is IMPOSSIBLE to predict accurately on a consistently basis therefore the best I can do is examine what is happening NOW and try to profit from some possible volatility and situate myself in a strategic place, with patience and conviction. STEP 3 INDICATORS I'm not a big fan of technical indicators, mostly because I have no interest in using something that tells me what happened 10 years ago. Price action is all I need and when using tick/share charts I don't need to use a volume indicator. However, there are some I use for strength/weakness references, entries and exits. For example: BOLLINGER BANDS with 2.5 Standard Deviation. (I feel 2.0 gets hit far too often and distracts me with noise) When price is continuously hitting a band, pay attention. It's trying to tell you which side is stronger. If you are having difficulty identifying the current trend or suspect a reversal, the constant hitting of a particular band can provide great info as to where momentum is headed. TRENDLINES, as many as you need to determine the current trend. STOCHASTICS, a cross can be a powerful tool when you are looking for an entry in a strong trend. I like 5,3,3 but use whatever you feel comfortable with. FIBONACCI RETRACEMENT LINES, my favorite. 50% from last swing low/high and you got an excellent entry point. Problem is sometimes the trend is so strong it won't even give you your wish and you miss the fill. STEP 4 MONEY MANAGEMENT As you get more experienced, I highly recommend you use an average up approach. More on this later, until then, use the same car size on every play and for God's sake DO NOT AVERAGE DOWN unless you are just trying to get fills for your intended car size, never surpassing it. I previously stated and those that known me for a while know I advocate averaging up. I feel this is an advanced money management technique and for now I am not disccusing it to avoid confusion/mistakes. STEP 5 DISCIPLINE I'll be blunt. Trading is not for the irresponsible. Break the rules and you will eventually lose big, period. Trading will forgive you if you were wrong on a play even several ones, it won't forgive or tolerate idiocy and stupidity. All I need to say on this and you have been warned. STEP 6 CHART TYPES Longbars are evil, therefore I highly recommend tick/share charts so you can split that data and examine it with care. For the YM I recommend 75 or 89 tick charts. This differs greatly from one instrument to the other, the more volume/activity it has the greater the ticks size you will need. Use what you feel comfortable with. Bye for now, Anek
What risk level do you use? How do you decide to stop a loss? Can you show a long term trading track record that demonstrates how profitable this method is? The difference between a home entertainment trading center and a productive trading method <img src=http://www.sauder.com/images/product/Normal/Entertainment_Center_8159-103_1.jpg \img> is the track record.
I'm encouraged by your post, because it confirms that a successful trading system can really be that simple. Since you said you were looking to enhance the system, have you ever considered the following as filters: 1. Market Profile - Used to identify when the market is seeking new value (trending) vs. when it is within a value area (congestion). You can also look at the TPO's to find S/R areas. I'm trying to learn MP right now myself, with the intention of trying to identify higher probability trend environments. 2. Normal S/R swing lows/highs (higher timeframe, maybe a 400 tick chart) - Avoid taking signals if you're approaching a major S/R line (where reversals or stalls are likely). 3. Divergence on a higher timeframe momentum scillator to filter out lower probablity entries? I have a hard seeing/trusting these divergences myself, but I know that other people use them successfully. Please note that the above suggestions are not based on extensive experience... I've been studing futures trading for about three years now and they are simply based on what I've learned and my observations. The first two I am trying to incorporate in my simulated trading.
Hi, 1) Never found a way to consistently profit from it. 2) Yes avoid obvious areas of congestions is a good thing. Must take this into consideration when already in the trade. 3) To be honest, never found divergence to be very reliable so stopped looking for it. Yep, suggestions, questions all good in this journal. Anek
Today's scalps.... Green vertical denotes a long signal. Red vertical denotes a short signal. One of the longs was a loser, little trend change hesitation there, the rest got their targets. At this time of the day I usually close the platform. 3:21PM EST now.
Can you comment on the 4th short signal... looks like the market made a higher low, but you sold short again. Also the 2nd long signal came after a minor lower high and lower low. I'm not trying to be critical, I'm wondering if maybe you require a certain number of bars to pass or maybe a trendline break before you consider a HH/HL to be a valid change of direction when the market was previously trending down.
Mike, Glad you asked these questions. Base on the original rules you are absolutely correct but note that there are certain patterns where I advice beginners to stay on the sidelines for now, particularly trend changing areas/consolidation etc. Since Ive been trading for a while now I don't particularly qualify so in my screenshots you will see plays that sort of break the "Stay on the sidelines" rule but I feel it's important to comment on them to avoid confusion, so again, thank you for pointing them out to me. On the 4th short..... The market was making higher lows, signaling a trend change. However, these reversals, for the most part, don't happen without some hesitation/congestion so I decided to take the stochastics crossing with a very close stop as price was approaching the upper Bollinger Band. Plays like this require a very close stop or the risk is not worth it. However, notice how the stochastics were downtrending so eventhough price was uptrending stochastics were not. Staying on the same side of the MACD trend can help and eventhough it was hinting trend reversal, it was still in the red zone. Again, this type of signal requires a bit more skill than the methods described originally so not sure if it was a mistake to annotate them in the screenshot and save them for the future. Basically, when I see there is a good strategic play to make money, it's hard not to take it, that's why I daytrade. On the 2nd long.... Same reasoning but the complete opposite. Again, a very close stop to make it worthwhile. In this case, stochastics were uptrending. The lower low here was possibly "noise" as the major downtrend line from the last three tops had already been broken. Do you think in the screenshots I should stick ONLY to the basic plays to avoid confusion ? I could use your opinions here. Hope it helps, and feel free to ask. Anek