Here's screen 2. I didn't label anything because I want to lift off some of the pieces (it looks pretty busy). The screen is the 5 min. SP chart with the 3,10 chaikin oscillator based on volume. (I've also used the detrended price oscillator with good results). It also has the keltner channel using 20 period and 2.5. And the last piece is the 14 peiod adx. Other than the indicator everything else is the same as was used in the divergence journal. I'm using 8 bar spacing on the window. I'll try to explain what the pieces are used for on the screen next.
Ok, here's the first piece of info. on screen 2. It's the indicator. I left the ADX on the screen to take up some space so it would look better. The indicator has a upper and lower yellow line. These are yesterday's high and low of the day. They won't move throughout the day. The dotted red lines represent 1/4 of the average 10 day range. They are plotted as distance from yesterday's high/low or today's new high/low. These will move if today makes a higher high or lower low than yesterday. The yellow lines are there to indicate natural areas of possible support and resistance. If it's a rangebound day then either yesterday's high or low should become a area where there is support or resistance. What I want to see is a test of the high or low followed up with divergence or one of the two spikes on screen 1. If I see those or I have reason to believe we're in a high risk area (screen 3) then I know I'm in a good area to enter the trade. The red dotted lines are used to display 3:1 reward to risk points. If I have a test of yesterday's high and it fails to make a new top followed by divergence then I know if I enter a short between the high and the dotted red line then if the trade captures the average 10 day range then I'll have at least a 3:1 reward to risk trade. These could just as easily be written down but I like using the indicator to let me know to take action.
The next piece added is the Chaikin Osc. This is the primary tool for giving a reason to enter a trade. I use the yellow and red lines to indicate areas of interest, however without divergence I won't enter a trade. Here's a screen shot of Friday and the first entry of the day a short a few min. after the open. The market opened higher went up to Thursday's high and stalled. The Chaikin showed a divergence so I wanted to get short before the price crossed below the dotted red line. The stop was then placed at the high + .25. The idea is to capture the average daily range when I have a good trade. By keeping the reward:risk to 3:1 I can lose 3 out of 4 times and still breakeven (excluding comm.).
Here's how I use the indicator for breakouts. When the open is between the two red dotted lines and there is a gap I enter a breakout trade in the direction of the gap. If the market tests the previous day's high and starts pulling back then I move the stop to the dotted red line. That way I'd have no worse than a breakeven trade. If there is no test, then I leave the stop at my entry price +- the stop loss point. In this screen on 1/14, the market opened between the two dotted red lines with a gap up. I entered at 1123.50 and used a stop loss of 2.5 points. The high wasn't tested until late and I held to around the close 1131.50. This was a good example of a successful breakout trade.
Here's the more traditional way of entering breakout trades. I was papertrading this trade at this time so unfortunately I didn't make any money on this one. On 12/29 the opening gap was above yesterday's high. At this point I looked for a reason to get long (screen 3 was cci near -100 ....no, did rsi cross above 50? ...no...was the ending tick on 12/28 a spike? ....no...was the last bar on 12/28 a volume spike?...no). With no obvious buy signal I looked to see if the trade would stall so I could short it. It didn't ...instead it went away from yesterday's high. In this case I wait until a successful retest of yesterday's high. Once that's been done I enter and put the stop .25 below yesterday's high. The stop loss on that trade was 2.25, so as long as I could get in within 2 points of yesterday's high, I'd get long after the retest. I hope to see more of these trades in the future.
I'm getting tired and running out of gas. I'm going to stop explaining for now and take a break. Later I'll post a little more. I didn't realize how hard this would be to explain to others so I'm sorry for being so long winded. Hopefully when it's traded in realtime it'll be a little easier to explain.
Since you are using Tradestation, have you backtested your system? Or is it possible to backtest your ideas with TS? And as far as cutting profits short, why not take 1/2 off and let the other 1/2 run with a trailing stop while moving your stop to BE or BE+? And don't let anyone tell you that you are trading with scared money. That's just a psyche ploy to keep others down...
Just being honest. When I had another source of income I didn't mind sitting through lots of losers. I feel the pressure to make a living even though I have enough funds to last many years. No doubt I'll get used to the new circumstances but for now I know I'll take some profits too early. I just wanted to let everyone know I'll be doing it from the beginning.
When I didn't need to trade for a living I sized using 2% of the account on each trade. It compounded very quickly. Now I'm more concerned at reaching a certain dollar level. I know it's not optimal, but I have to trade in a way that makes me comfortable to enter each trade without hesitation. If this continues at the same level of profitability that I've seen in the past two weeks, then I'll pull a couple of years of living expenses out of the account and go back to my 2% risk level per-trade.