Registered: Mar 2007
07-19-07 07:21 AM
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
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
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
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.
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
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
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
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,