doug, I use Keltner bands 20 ema. In fact I papertrade this strategy for 4 weeks now and it seems very profitable. The setup is clear and the risk/reward is 1.5/1 on average with a 70% win rate but you must be in front of your screen all day long anf be very very patient. Keltner bands can be used also as target. I like the setup when keltner band is pierced with a pullback around the 20 ema. Seems to be very powerful. For real trading I use a 30 min breakout system. My stop is always 15 pts and my target is 30 pts. I move my stop to BE when 20 pts are reached. The win rate is 50%. The average daily range on DAX is +/- 80 pts. I average 150 pts/mont with 1 contract. Good trading !
Here's a example of a volatility breakout system. Please don't expect me to post my model. http://www.suntrade.it/Systems/VTYB_Volatility_Breakout_System.htm
The trend lines showing the price continuing to make lows and the same time the trend line shows the stochastic not making a new low is a signal that the downtrend has lost its momentum or control and that the trend MAY be changing to sideways or more probably up. disregard all the arrows on the right. I was messing around for the benefit of dbphoenix for his help!
I suppose you hold your positions overnight. Pay attention. Dax is very versatile. You can have opening gaps of more than 60 pts. That's a lot of money but if you can afford it, no problem ! Thanks for the explanation of the system Good luck
Nutseal, Do you consider this a divergence ? would you exit the trade and when ? Does it mean a change of trend Thanks for your help
eggs, Just want to make sure I'm understanding correctly.. You enter as soon as the market shows overbought/oversold.. you don't wait for any type of confirmation ie. canlestick reversal.. or breaking of the trendline..
Trade 1 is a pattern on the stochastics that I trade. It's a hidden or reverse divergence. That setup is actually a perfect one, the stoch flattens between 70 and 30, then heads up with the price failing to make a higher high, nice short there.