First of all thank you for an interesting tread. Could you suggest how much money would be required to have on a trading account in order to be able to trade your method? Regarding risk management, how much risk do you allow for a position to go against you as a % of your total capital? I am experimenting on something similar but found out that the starting capital has to be quiet large.
A larger account does give you an advantage. I don't like to go over 20% equity for futures trading but if conditions warrant it I will. If I see one of those "can't miss" setups I'll go bigger but those setups are rare and you can never be sure about the "can't miss." I started trading the fut's with $5,000 and used this method so you don't have to have 100's of thousands to do this. Just go 1 contract, then add another. Develop your risk parameters and see how it works. Best suggestion is to try this on a simulator first.
Here's another trade. Nothing really complicated.....they're selling, I'm buying. The market will probably be range bound this week with the light volume so I felt real good about this trigger. There's a lot of judgment involved in picking bottoms so this takes lots and lots of practice. I just waited until the selling seemed to ease and took the trigger on an uptick. Now look very closely at that down volume bar with approx 1400 contracts traded (arrow). This indicates sellers are probably done selling, and have thrown in the towel, at least for a short while. When I see something like that I'm getting very interested in picking the bottom. Experience has taught we'll probably go a few ticks lower after that candle has developed. Patience paid off in this case. The exit was very straight forward. Track that DT line minus 1 tick. Oh, and I'm not looking for a specific number on that down candle, just something relative to what's traded previously. This pattern doesn't always show up on bottoms.
No. I'm only <b>using</b> 20% of my capital. That doesn't mean I'm going to lose it all. For example, I have a 100k account and my position uses 20k. I take a $300 loss. I used 20% but only lost 0.30% of my account ------>>> $300/$100,000.
Here's an important concept traders usually get wrong. A break of a downward sloping support line is NOT bearish, it's bullish. However - and this is the important part - the degree of slope determines the probability of the trade. If the support line is declining rapidly and we penetrate that level I will take the trade right on support. If the support line is falling modestly (as was the case here) I will wait for it to move farther below support before I take the trigger. There were many longs throwing in the towel down there and many shorts opening positions (because of the support break). Look at the volume on that down candle -- same thing that happened yesterday. Now for the target....I wanted to get out just below that DT resistance line -- the two thin red lines (I changed the order). As time went by I became less confident about the markets ability to get up that high so I did the prudent thing and took the 2 points. As it turns out, my target would have gotten hit but I wasn't will to give the profit back if we headed back down. Sometimes you just gotta be a profit taking fool. Who cares what happens after that -- who cares! In the morning hours buy down, sell up. In the PM you can usually switch gears and buy up and sell down. The PM is where the trends usually develop.
I'm pretty good at timing the market but I know how brutal it can be so I don't put a huge emphasis on it. I give myself a margin of error under certain conditions and offset the drawbacks of that by managing my account properly. Once I do have a profit on an averaged position I'm unloading a partial to manage my exposure if I'm wrong about the overall move. If I'm right I win on what I have left. This way, I don't have to rely 100% on being right. I've been dead wrong about a move and still come away with a minor profit or minor loss because I managed risk and my account well. My real motivation for trading this way is flexibility. I try to approach the market with an open mind and realize I don't know for sure where we are heading next but I tend to have a pretty good idea. What will I do if I'm right? Ride a partial. What if I'm wrong? Well, if I've unloaded a partial or two then I may ride the move back down (assuming I'm long) and put those contracts back to work if the next support level is close by and there is enough time in the day. If not then I have to stop out but even if this is required my losses are minimized by the profits I took earlier. My ultimate goal: Free myself from the burden of having to be right!
Here I am trying to figure out how to put a chart in that isn't blurry but you caught me first with my blurry chart.