ZB's Trading Trends With Momentum

Discussion in 'Journals' started by Zero Bid, Jul 25, 2010.

  1. Zero Bid

    Zero Bid

    As my first post here on ET, I'd like to start a journal on my trading. Right now its a paper trading journal BUTafter a few trades under my belt, I'll take it live, if the results are good. I havnt done much back testing other than really flipping through many charts to see how the rules of this system should be developed, and over the past few months, I think I found the right system and rules for this to work, but we shall see over the next six months if this sustainable, or back to the drawing board.

    I'll start with 70,000, even though I guess the fake amt is irrelevant.

    The Method:

    This method uses a series of indicators, however it primarily revolves around the momentum and 200ema. The list includes:

    30 momentum
    14 ATR
    30 & 75 wma
    MACD ( you could use a histogram too)
    Volume (not really used, but I just have it on there by default)

    rules (just reverse for shorts):

    1. Take a long position when

    A) Momentum closes above 0 & price bar is positive
    B) Price closes above its 30wma

    2. Take profits off table when

    A) Target 1 is 3x the ATR value at the time of the entry bar, and so is the stop loss. R/R is 1:1 however if momentum is +, the theory is that the odds are in your favor price will reach the T1. Assuming the T1 is hit, move stops to break even, and sell chunks of your position as the trade moves higher.

    B) Sell again when price closes below the 30wma and/or the MACD..sometimes this happens at the same time other times it does not.

    C) sell again if price closes below the 75wma

    D) Sell when price falls below the 200ema

    (sometimes momentum will be negative by the time "C" and "D" occure, however if price is still above the 200ema, you need to decide if you still want to stay in the trade or if you want to exit and trade against the trend.

    Trading against trend (trading against the 200ema)

    I like to view the 200ema as a divider between bull and bear territory, so if you want to go long when price is below the 200ema, here is the rule:

    1) Instead of looking for 3x the ATR, use a 1.5, and reduce risk to 1% or 1/3rd of your typical size. How much you reduce size is up to you really.

    I'll post some charts of current positions as examples:

    Currently there are no rules for re-entry or adding to a trade, but I'm working on that. The goal here is to find the beginning of trends and ride them as long as possible. Cut losers, and let winners run....isn't that rule #1 ? :D

    - ZB
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  2. Zero Bid

    Zero Bid

    There are two enemies of this system is :

    1) Small range channels

    2) Price wedges/ triangles

    The chart below is an example of a small range channel, and you can see that from the signals we got from our momentum line, got us in near the top every time. Not that buying high is the problem, because there is always a possibility of a break out, but rather from the time of entry, there was no time to time to take profits from a lack of movement. This is the risk of trying to go long/short against the 200ema, and another reason why risk should be reduced.
  3. Interesting. Hope it goes well.
  4. Zero Bid

    Zero Bid

    Here are the other positions with target/stop marked.
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  5. Zero Bid

    Zero Bid

    trades from 7/20:
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  6. Zero Bid

    Zero Bid

    DO..might be a loser.
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  7. Zero Bid

    Zero Bid

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  8. Zero Bid

    Zero Bid

    Trades from 7/23: BA and FCX
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  9. Zero Bid

    Zero Bid


    I hope that I can hold on to all these trades for at least a few months and enjoy the ride. If thats the case, I wont be posting many trades . I'm going to experiment on the 15min charts, but for now its all done on the daily.
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  10. Hey nice job on CAT, you're almost at the T1. Question, what if momentum is + but MACD hisogram is negative?

    #10     Jul 26, 2010