Well, then you are one among many people in the same situation.
Quite a few people have been annoyingly unfriendly towards people who like to point out which stuff you can find on this forum is useless and/or contraproductive. So facing some annoying people lately i came to the conclution that intead of pointing out over and over again repeadingly the same things which are important in trading- to give the people what they truly want:
A methode to financial sucess in trading without having to use their brains. without having to possess the necesarry knowledge to participate in markets. without having to wonder or worry if his/her "strategy" is right or wrong. Without having the need to think if he/she or hers/his "strategy" has the "edge".
For this purpose i have taken myself 1 day of time to create a simple and easy strategy and a strict set of rules, which - if you follow them consequently - your account is guaranteed to grow over the long run.
It is a variation and combination of several very successfull trading tactics that have stood the test of time over and over again. I adjusted it to the need of day traders in the form of "time" (meaning the signals come quicker).
- It is a strategy that keeps you 24/5 in the market and does not allow you to be "nervous" of missing out a trade.
- A strategy that has very strict and very precise defined entree/exit points and Stop Loss points.
- A strategy which is designed to keep you in a market when it is trending and keep you out if it is not trending.
- A strategy which is designed to keep you in a profitable trade as long as possible and force you to exit unprofitabe trades.
- A strategy which is so simple that even (my guess) a 13 years old teenager should be able easily to follow it and make profits over the long run.
- A strategy that does not use contradicting indicators or oscilators.
- A strategy that leaves no doubt of wether going long short or staying out of the market.
All You need is a clear chart and a trending market.
- You dont need indicators
- You dont need oscilators
- You dont need price action tools (Fibbonacci, Pivot Points etc etc)
- You dont need any knowledge besides on how to turn on your computer and open your trading system tool
The strategy does not necesarrily produce losses in ranging markets, but it does not perfom any surpluses either. So in a ranging market it is likely that you will have minimal losses which, compared to the gains in trending markets, are no harm to your account.
- You do need a strong discipline
- You do need to have a minimum basic knowledge of Risk management
- You do need a basic knowledge of trend analysis (i will add 3 sentences to trend identification later on. 3 sentences are more than enough to explain a trend)
Ideas, suggestions and critiques welcome. But if your critique or suggestion is that i should learn englisch- then facebook/twitter and jobcenters is more the website you should gift your everyday attention to.
What is a 'Trend'
A trend is the general direction of a market or of the price of an asset, and trends can vary in length from short to intermediate, to long term.
As the explanation says: the definition of a trend is varying when the time frames are changing.
The basic concept of a trend is:
Up= higher highs and higher lows (meaning that every new intermediate low must be higher than the last low-leg)
Down= lower lows and lower highs (meaning that every intermediate up move must be lower than the last up move)
No Trend= no clear highs and no clear lows (no ups or highs surpass the last low high or low in a significant amount)
Here are some examples of the very same chart and how trends change when you change the amount of data you are looking at (time frame stays the same, only the time changes from few months to a year and a decade- this is what is called "THE BIG PICTURE"-- so when you hear professionals say "the big picture" you should know what they are talking about. it applies to fundamental and technical analysis as well)
White Circles= confirmation of prevailing trend
White Squares= violation of prevailing trend (signs of possible reversal but not confirmed)
Yellow Squares= Trend less phases
Red Squares= Down trend
Blue Squares= Up trend
Short term (1 Year)Medium Term (4-5 years)Long Term (10 Years)
Do you see the difference?
- In the ten years chart we have 2 big trends. First a big up trend then a big down trend. Those are long term trends.
- In the Medium time frame (which consists of the down trend of the 10 years chart only) we have up and down trends. Those are considered "intermediate trends"
- In the short term chart we have up and down trends (which consists only of the -intermediate up trend of the 4 years chart). Those last a few weeks or months. Those are considered short term trend.
This scaling can be done down to the 1 minute chart and you will find a gazillion trends and trend less phases.
We focus on the daily only and the trading method focuses on the closest daily trend. Which is the short term trend in a years period.
As you notice the trends are always very clear when you categorize them into this specific style. What you as well can notice is 2 things:
- The scaling down from high trend to intermediate and short term reveals that trends are constantly interconnected. In the short term picture you see a lot of ups and downs and trend less times, in the next bigger picture those trend less and ups and down are only one or two legs of the trend shown in that next bigger chart. same goes for the connection of 4 years and 10 years chart.
- Trends exchange itself constantly the lower time frame you go. what is considered a new trend in the 4 years chart is in the 10 years chart only a violation of the prevailing trend and yet forms no new trend.
Ok i must admit, this is more than 3 sentences only.
The basic set up:
Please do not try any time frame below the daily chart. I did not had the time to test on time frames less than daily charts. From a first glance into a few securities on the 4-hours charts i saw a tendency of too much volatility which takes you out of the trade too often. The advantage of using daily charts is as well that you pay less commission because you enter fewer positions.
But if you think you will be bored and will have nothing to do all day then you are wrong. I will tell you later why you will be busy daily and for several hours trading this method.
Charts ingredients: Nothing
No moving averages
Only clear charts.
The securities preferred for this:
All securities with enough volume to not be easily manipulated or where small transactions create a big move.
Most EUR crosses
Most GBP crosses
I was very uncreative in finding a name for this so the best i came up with is:
The High Five - Method
Risk Management and Diversification.
- You have around 30 securities you can trade. Please chose the 10 most familiar to you and concentrate on them only.
- Maximum amount of open trades simultaneously = 5 trades Max on 5 different securities
- Maximum Risk: 2% of available account balance (this means if you have 0 trades open then 2% of account balance, if you have 4 trades open then maximum 2% of "account balance minus "used margin"")
- Semi automated trading. This means you enter positions only, and exclusively only, through entrée orders. We do not use any market order at any time. never. not while opening a trade and as well not when we are closing a trade. To close a trade we use pre-set stop losses only. No matter if the trade is a profiting one or a losing one. It gets closed only through the stop loss mechanic used in this system. -----this is the backbone of this system, if you don’t poses the discipline to stick to this very important rule, it will never work for you.
I will start here with point 2 instead of point 1 of how to trade this system.- out of reasons for simplicity and clarification.
Once you have engaged a specific security and start trading in it this is how you trade:
You count. Thats all, you count and manage your automated positions.
Automated you ask? why Automated? (please refer to "Risk management and diversification" - because, once you are in a position your future actions are already planned and SETTED UP. Setted up in the way that you already entered the market orders for the future.
You already entered the stop loss.
You already entered the new "contra side"-position (if your long you define your short position on the STOP LOSS of the long position- if your short its the opposite.)
So once you are long, the only thing that matters is the high and low of the last 5 days (including the actual day which is not finished yet) you count exactly 5 candles back, not 4, not 6, not 15, not 2.....
the last 5 days matter.
The low of the last 5 days is your stop loss.
Your stop loss is the entrée order for a short position.
This means if you are doing it right then in the very same second a long gets closed automatically by your stop loss your trading desk automatically opens a new short position.
Here are some examples:
Suppose that the days after the RED ARROW do not exist. You don’t see them because the day of the RED ARROW is today.
So what is your job?
Today (every day) you cont back the last 5 daily candles. You identify the lowest point of the last 5 days and you identify the highest point of the last 5 days.
Those 2 points serve as your entrée into trades. On the highest point (price) you set up an automated entrée order.
You use the lowest point of the last 5 days as your STOP LOSS
You calculate the pip value between entrée point and stop loss and then you set the size of your position according to the 2% rule (Refer back to "Risk management and Diversification").
This means that in the difference of the entrée point and the stop loss point you must not lose more than 2% of your account size.
This is one half of your job for this pair. The other half:
You do the exact opposite in trading direction. You again count the last 5 days and have the high and low. On the lowest point you set up a SHORT position and the Stop loss is the highest value of the last 5 days.
You can use the risk management calculation (2% max) in exact the same numbers like you used in the long positions (the differences between open and stop loss don’t change in the short trade set-up)
Thats it. This is your job for this pair. You have successfully finished your job for this security for today. Tomorrow it starts over again, the same calculation in the very same style - no matter if your trade has been triggered or not.
Once it gets triggered you adjust the stop loss figures (again last 5 days lowest point) and the contra trade figures (again, you constantly - this means 24/7 - always simultaneously have a contra trade entrée setted up.
This means that every time your long has been stopped out - the very same second it gets stopped out your system opens a short position.
This means that if your short trade has been stopped out - the very same second it gets stopped out your system opens a new long position.
Your daily job (less than 5 minutes per security) is to adjust the numbers to the new day which is happening today.