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Trading Basics – A Refresher Part 3

W.D. GANN’S
MONEY MANAGEMENT RULES

I would urge you to go and find Ganns Money Management rules as most of them apart from risking 10% of your account, still apply to this day and following his rules makes complete sense

If you don’t do this then again you are putting your business at risk – up to you – I’m not posting them as those of you that take this serious will head off to obtain

I posted them on this site years ago, too, but can’t remember where

Right – so we’ve got the KEYS to SUCCESS nailed down in the previous posts – If you set the right money management, risk and applied those strict rules then you could trade a simple coin toss – I remember testing this method years back, the rules were:

  • Every MONTH (on the 1st trading day prior to the market opening) I would toss a coin and go long if heads came up and short if tails did
  • I used a % of ATR (Average True Range) for the stop and a preset target of 3 times risk (3R)
  • The system either worked or it didn’t

It did have a positive expectancy and ended the year in profit

A good idea is having this experiment on a chart for a year just to see how a simple toss of a coin (50% probability) can work in the markets – Dr. Van Tharp (our friend) talks of the coin-toss in his book

Before I show you a couple of simple trading methods, I just want to explain a couple of things about the markets

  1. There’s ONLY 3 things a price bar can do – go UP, DOWN or end the period neutral
  2. Markets display mathematical points of force at the major turning points – I just cannot believe that people with a Scientific or Engineering background don’t dominate this industry – A market swing is just but a simple VECTOR point (start and end)!

So How do you view the markets?

UP, DOWN, SIDEWAYS?

You’re FORCED to – all you can view a price chart on is a 2 Dimensional chart – which shows price action moving in a UP/DOWN or SIDEWAYS fashion

When I understood this – things for me fell into place ( you might not be able to see it) – what if price action is actually 3 Dimensional and forced onto a 2D viewing platform – it explains why things aren’t linear and exact

Take the big weekly chart of the FTSE100 Index in the charts previosuly shown in this series – Imagine that from 2000-2003 and 2007-2009 price was coming towards you and from 2003-2007 price was moving away

Look at the chart below – TRIANGLES show up often – Anyone with a high school education knows that Triangles are the building blocks of geometric platonic solid structures

Price reaches the bottom and then reverses – If we could “twist” our view of the action, we would see it clearer

Notice the Triangles, there are NOT square on to our view, they are twisted – this is what causes uneven/unequal time between highs/lows and especially on double / triple tops and bottoms

I’ll leave this for your own research if Interested – but it is perfectly possible to trade highly successfully without knowing this – but it does help to explain those times when your stop is just hit and then prices reverse as you intended!

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Bonus Trade example:

The chart below is a zoomed in view of the chart immediately above, as it shows a highly profitable trading chart formation  – the chart is the WEEKLY chart of the FTSE100 Index

Guess What? As per WD Gann – this method came from the 1930’s / 1940’s period!

All details are on the chart – This trade worked straight away, for the RR even at the 1 app target I’d of been prepared to be stopped out 5+ times for those sorts of returns

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Load of old Bull?????

Here’s the DAILY FTSE100 Chart from 2010, showing similar formation, but the ratios are slightly different because of the 3D nature on a 2D chart – again this one would have offered you a min of 8R return:

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TIP: Notice that these shapes are like “twisted” W’s – because the price action isn’t 2 Dimensional they show up “twisted” on a 2 Dimensional price chart – hence why the range of variance for the end points the swings to form the formation can differ 

In the next post I’ll show you a couple of other high probability trading methods (basic skill level trades)

(I’ve only skimmed the surface there’s lots more methods and techniques that work in the markets – but the key thing is the EXPECTANCY and RISK aspects)

Wishing you well on your trading journey

Stay Safe

THT

 

 

THT NEW MOON Method

On the face of it this might seem totally CRAZY

but, wait……….

What happens if it works?

I’ve spoken at length about money management and risk in previous posts – this method will show you how important it is.

Trades with charts will be produced monthly for verification and the table below updated – PLEASE NOTE, I WILL ONLY BE PAPER TRADING THIS METHOD in this thread – the process is to show you how guessing works out and I’ll be updating the charts and table when time permits me to do so – I don’t have the time to do this real-time

THT New Moon Strategy

 AIM:  To show you the effects of a stupidly simple trading method/strategy where we exploit the R value in our favour and employ strict money management / risk methods, by knowing well in advance the trade direction we’ll be taking as well as the risk and target levels – The LESSON is about managing RISK and money management!!!!

We only have to be right twice to break-even and once will result in a loss of only 6R

If 6R = 60% of your account then you could be in trouble for the next year – for the purposes of this exercise we’ll assume 1R = 2% of your account

So we KNOW right from the off, that the most we can lose is 12R or 24% of our account in a trading year if we get every single trade wrong – this then allows you to trade the following year with 76% of our original trading capital (live another day!)

Wins are obviously a bonus

Trade direction is LONG only (The stock markets have a long directional bias) – I could have spiced this up a bit and used a toss of a coin 5 mins before market open but its another level of faff that I can’t be bothered with documenting

We’ll use the SP500 Index for the exercise – DAILY Chart Time-Frame (charts will be updated)

To break even we just have to be right TWICE out of every 12 attempts – which is handy as there are 12 months in the year

We know in advance trade direction we’re taking, the £ risk, £ profit target and the exact day we’ll be trading – the only thing we do not know is if the market is going in out expected direction too!

1R below could be x% of your account

Let’s trade this for 1 year and see where we end up………………

RULES:

 

1.      Entry is LONG @ the OPEN the day of the New Moon (If this date is a weekend or Bank  holiday then we’ll open the trade when the market next re-opens)

2.      Stop 35 points (this might have to be revised slightly during high/low volatility periods) = 1R

3.      Target is 5 times risk = 175 points = 5R

4.      Once the position is UP 2 x risk or 70 points – stop gets moved to break even

5.      Once the position is UP 3 x risk or 105 points – the stop is moved to protect 40% of any open profits until stopped out or target hit

6.      Every trade will be taken regardless of whether others are still open

DATE
TRADE DIRECTION
ENTRY
STOP
RISK
TARGET
OUTCOME
Cum R value
July 20th 2020  

LONG

3224.29
3189.29
35 pts 175 pts

3399.29
Aug 19th 2020  

LONG

 

 

35 pts 175 pts
Sept 17th 2020  

LONG

35 pts 175 pts
Oct 16th 2020  

LONG

35 pts 175 pts
Nov 15th 2020  

LONG

35 pts 175 pts
Dec 14th 2020  

LONG

35 pts 175 pts
Jan 13th 2021  

LONG

35 pts 175 pts
Feb 11th 2021  

LONG

35 pts 175 pts
Mar 13th 2021  

LONG

35 pts 175 pts
Apr 12th 2021  

LONG

35 pts 175 pts
May 11th 2021  

LONG

35 pts 175 pts
June 10th 2021  

LONG

35 pts 175 pts
 

DISCLAIMER:

As we live in a world and time where you have to warn people who hold a piece of paper and a lit match close together that it could result in creating fire which burns and hurts one – The above is an example only – It is a random method designed to show you how it performs in the financial markets, it is NOT designed for you to trade, anyone trading it must accept losses as their own responsibility and if unsure, do not commit money or trade it – as one thing is for certain, the method will have losing trades and losses of some degree – this thread and post is for Illustrative purposes only

THT will not and cannot be held responsible for any losses whatsoever – trading this example is at your own risk and unless you fully understand the method and risks I would advise against committing money to it

Trade 1 update – price hit 2 x risk so stop goes to break even position

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Trade 1 update – Price hit 3 x risk so we now trail a stop that profits 40% of open profits

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Trading Basics – A Refresher Part 2

OKAY – I’m assuming that you’ll read those books, understand about expectancy, risk, position sizing etc as it’s absolutely vitally Important – It’s a massive reason that most people fail – skip learning this and you’re much more likely to balls up!

You need to treat trading as a BUSINESS, most people can’t run a business either, so you have the double whammy of people failing to run a business properly, sticking to rules, techniques, trades when they show up (discipline basically) and a complete lack of understanding for risk and position sizing

If you end up blowing up an account It’s most likely going to be because you’ve ignored running your trading business as a business (discipline and/of following a plan of rules),  position sizing, risk, trade management or the method your trading just does not work and has a negative EXPECTANCY!

You now need to MASTER the charts – I’m a 100% chartist / Technical Analysis Trader – I do NOT look at economic activity, information or analysis – the chart reflects all that in past price data

and when I say technical analysis I mean reading the information off a chart and Indicators – I do not fully subscribe to the traditional technical analysis ways of Edwards & Magee – I suppose I’m what you would call a free spirit! There are some of their methods and formations that I do subscribe to though, so we need a little bit of licence here

We will be basically “reading” a chart – It will be how I read the chart, that might differ from yours – there’s multiple ways to read a chart – just remember, we’re looking to be able to make money fast from it – we don’t need to know why something happened

Chart below is the WEEKLY Time Frame of the FTSE100 Index

In this chart we’re using an ultra simple method of defining the trend – It’s NOT perfect though what about the times when UP transfers to DOWN, Isn’t that hugely Important? Of course is it – Buying in a down trend isn’t a profitable route to take for a short-term trader

But for some this exceptionally simple and easy method could help them to see through the ‘fog’

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Some Use Moving Averages and Indicators to confirm/determine trend

(The MA’s are: 10 Period Simple Moving Average of the H-L price bar, 21 Exponential Moving Average of the H-L (EMA), 55 EMA and 89 EMA)

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Whatever works for you

the chart below is the same FTSE100 WEEKLY chart of a 10 period Simple Moving Average of the High-Low, projected 10 bars into the future

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No one method is perfect – You just HAVE to find out what suits you and you’re style/personality

Or you can show the swings of the market

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Did you know that W.D. Gann waaaaaaaay back in 1909, 111 years agoooooo – wrote trading courses that showed swing trading with the swings I’ve shown above and in the chart below – 111 years ago!

Psst! Shush – Don’t tell anyone, but his methods still work today, in today’s markets – Anyone using swings, swing highs and lows and 50% price retracement levels, are using the same methods he used over 100 years ago!

Did I tell you just how much of a genius that man was? Some of my most treasured trading methods were “borrowed” from his works

This man’s work often crops up in my posts doesn’t! There’s a valid reason why – some of his methods work! (Not all, some)

Remember my post on Ganns Square of nine? – What a genius to have come up with that square root calculator over 100 years ago! Anyway….

What do I use?

Well I use a combination of things – I use the chart that shows the multiple MA’s and the DTF Indicator and I use the swing chart above and the one below (Not all on the same chart, I keep separate charts and I hand draw what I call a “Master Chart”

Basically this master chart is a Daily chart but with boxes around the WEEKLY and MONTHLY price action – just so that I can very easily and simply see the weekly and monthly price bars in comparison to the daily moves – when the weekly and monthly are going up, I take daily buy signals to the long side! Not rocket science is it! (chart not shown)

The swings in the charts below are determined by the software I use and they use market volatility and a special filter based on price action to move from up to down etc – There’s nothing wrong with setting the Blue swing line at say 10% and the Red/Green swing file at say 5% – this means that once price has moved up or down 5% then it will change, so in the chart below we see the swing low point in March 2020, the swing line colour was Red, that switched to green once price had risen by X% and the Blue line in the chart above would have altered its up/down swing once price exceeds 10%

For the Time being just focus on seeing their value as a trend line identifier

(We’ll look at swings later on as they have much much more use than just identifying trend direction – Remember GANN loved his Trend line filter and yes you can use these for trading)

Now my charting software allows me to analyse all those individual swings too – So for any market I look at I can tell you the min-max and average swing size, BOTH the BLUE ones and the RED/GREEN ones – one use of this could be to identify the times of the year the biggest swings happen in, the day of the week with the biggest moves happen on, I could project a price rhythm zone on the chart to show me the price range the next swing up/down should conform to, I can do the same with TIME too – for a trader KNOWING the zone a low or high should arrive in can be exceptionally highly advantageous and guess what? – It throws the laws of probability massively into OUR favour

As is 100% evident – this swing file has captured ALL the swings of the market produced by the price action of the market – we can SEE and we KNOW exactly when and where (price and time) a swing stopped and reversed

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Zoomed in view of the 2014 to present section of the chart above

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But typically I’m looking for a visual quick confirmation of Rising swing lows and rising swing highs for an UPTREND and lower swing lows and lower swing highs for a DOWNTREND

go through the charts I’ve shown you and satisfy yourself of this fact, higher highs and lows etc

Also as W.D. Gann said 111 years ago – When a reactionary swing is greater in BOTH Time and Price than the other reactionary swings in a trend then watch out for the trend to potentially change – its not 100% certain but its good heads up

When price action ventures into the range of the previous swing, then it muddies the water and that’s when trading ranges can form

Gann also said to trade Double and Triple bottoms/tops etc – how easy is it to see those formations when you have a swing file on showing the swings! Answer = VERY easy

(As a bonus, I don’t plan on showing you – but I trade those Double/Triple patterns and more for some very high R profit values and returns)

Remember you can use whatever suits you to determine trend – I’m just showing you what I’ve found most useful – Remember “We’re here to make money from the markets, and that MEANS being RIGHT”

I mentioned swing file analysis – this the the SP500 Index swing file since 1962 – Used in the right way you can us the stats to trade from to your advantage!

I have NOT tweaked the swings, I’ve just let the software select them, so there’ll be a couple that you could refine to make the data more accurate – but for the purposes of this example, we don’t need to – it’s good enough as an example.

All about having the right tools to trade with as you wouldn’t expect your builder to build your house with a tea spoon and knife!

Remember its important to know and see the bigger picture here too

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As you can imagine it takes time to produce these posts so I won’t be posting for a while – as you enough to digest for the time being

And when you take price action away the swings become even more clearer

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You can use the big swings to your advantage in knowing the average size of the swings and the duration, because they are likely to happen again in the future of which you can profit from and they take time to develop and form

I’ll do a separate post after this education series has ended on trading the big swings

Stay Safe

THT

Trading Basics – A Refresher Part 1

Lets have a refresher of the Important aspects of TRADING

Be prepared because this is purely BORING but it is

ABSOLUTELY ESSENTIAL

 

KEY point to note = MOST of the **** out there on trading  DOES NOT WORK – Its why you’re not making much money from this

That’s right most of the junk you’re taught in manuals, courses, books and online – just does not work well enough for you to make money from it properly

Its most likely one of the main reasons why 95% of those that try to trade fail and lose their account – I’m guessing here as I don’t know for certain and I have no plans to spend time Investigating – I’d rather watch paint dry than waste my time doing that.

 

FIRST POINT

Do you KNOW the EXPECTANCY of your trading method?

If you don’t know or don’t know what Expectancy is – you need to STOP right now and go look it up, digest it, swallow it and be able to recite it in your sleep – it is CRITICAL to you’re success

If your trading method has a NEGATIVE Expectancy – you are going to lose and you may as well just buy and hold/Invest

I would recommend a sample of 100 trades or more to arrive at your expectancy figure

 

SECOND POINT

Get a copy of Dr. Van Tharps “Trade your way to Financial Freedom” because you NEED to UNDERSTAND the LAWS OF PROBABILISTIC RETURNS and probability

His book also covers POINT ONE above too!

 

THIRD POINT (There’s going to be lots of points!)

There’s a lot of boring stuff before we get to the good stuff I’m afraid!

If your method results in a negative expectancy – DUMP IT

FIND A METHOD THAT ACTUALLY WORKS

The Turtles had a very very successful trading method but it only worked 30-40% of the time – the system had a positive expectancy but you’d lose on 60-70% of trades take, this leads on to POINT FOUR

 

FOURTH POINT

You NEED to use and find a trading method that suits YOU, but more importantly your PERSONALITY

I love to beat the market, I love having one over on the market, I love finding the lows and trading them (Yes it can be done)

But, I’m also a very very very very (how many can I write?) bad loser – I hate it when I lose, I’ve managed to learn how to handle it – but I hate losing

So I HAVE to have a high win rate system/method as it helps me to cope with fewer losing trades

Now If you’ve read Dr. Van Tharps book I mentioned in POINT #2 – Then you will know that to have a high win rate system comes at the price of not having a higher R profit return – for me this is perfectly fine – as my main personality type for trading purposes is to WIN

Now in real life away from trading, I could not careless about winning – I don’t need money or things to make me happy and I certainly don’t need to be the best or most popular, but when i trade I need to win often

It would also be worth your while reading Mark Douglas’s “Trading in the zone” too if you’re reading Dr. Van Tharps book as the content is crucial to your success believe it or not.

 

FIFTH POINT

When I have a losing trade – I throw something, swear at the chart/screen, swear some more and that’s it

If I have a loss when the market just, just, just nips my stop loss and then goes on to do what i was expecting – then I lose it for 5 mins and I’ll go for a walk

But ultimately I realise, accept and understand that I AM 100% RESPONSIBLE FOR MY TRADING AND EVERYTHING THAT GOES WITH IT

If you don’t accept responsibility you will blame everyone but yourself and when the game is simply win or lose if you can’t accept that walk away – if something is not perfect trading wise, you HAVE to come up with a solution yourself

I know that I’ll have losing trades – it does not mean I have to accept them as all the trading books say, they gnaw away at me

But I still take the NEXT trade

SIXTH POINT

RISK – this is huge – You need to understand RISK – again Dr. Van Tharp’s book mentioned above covers all the risk permutations – all aspects of trading are Important

We’ll cover risk management of a trade later on but for now this is mine:

  • I risk between 0.50%-2% per trade (Depends how many positions i have on, my total overall outstanding risk in the market etc)
  • That 2% is of my trading account – so  if my account is £10k then I risk £50-£200 per trade – end of story, simple as that
  • I class this 0.5-2% risk as 1R (1 x risk)
  • Trading this way lets you live many many days until the fund is gone

Here’s a theoretical example:

I find a set-up, the ENTRY is 100p, I work out where my stop is going, at say 85p – 15p is at risk (I call this my range of risk) so this 15p is 1R

So this 15p range of risk is 1R – on this trade I want to commit and risk £200 or 1R of my trading capital of £10k – £200 divided by £0.15p (15 points) = 1,333 shares to be bought or £13.33 per point spread bet I can place (if margin permits)

That’s it – if I’m wrong (barring a gap or slippage) if I set that trade in like that I’ll lose £200 if my guess, bet, gamble of direction of the trade is wrong and as I KNOW some of my trades will NOT work I’m prepared for this and happy to risk that amount of money

We’ll look at where stops should be placed later on

Someone asked me if I’m so confident on a trade why I don’t bet 5 or 10% – I DO go to 5% risk, not 10% though, but only on certain trades where I’m happy with the risk level, these tend to be buy and hold positions that I plan to hold for weeks and to get into the position that sort of stop is required

You HAVE to MASTER RISK too – if you’re risking 10% per trade then 10 consecutive losing trades and you’re out of the game – at 2% you need to lose 50 times to be out of the game

The above risk assessment is simple, but very valuable

REMEMBER – We ARE Gambling, but trying to exploit market anomalies

You need to minimise risk and maximise potential

I’m coming at this series from a small account point of view to grow it – Based on the above, when you have a £100k trading account then, it’s very easy to hit the following figures:

  • Risk only 1% = £1,000
  • To make a 2R profit return = £2k
  • Now most people could live off that, so people could if they wanted to reduce risk to obtain a decent income – its why I mentioned risk of 0.5%-2% – up to you, the bigger an account gets the less risk you can afford to take
  • It is definitely possible to make 1R per week net profit, which if this is at 1% risk then its a 40% profit year, if you trade a 40 week year – which smashes out of the park buy and holding, even getting half this amount smashes buy and hold over the long term – remember this interest is compound as well
  • The pressure is off

This does not mean that every week you make 1R profit or whatever, you might make 10R profit on a trade and no other trades show up until the 11th week – When we get into it, you’ll see that I trade what the market gives, not what I want from it

 

SEVENTH POINT

We ONLY trade when our method shows up

The rest of the time we do something else – we do not trade, ONLY when our method or methods (I have multiple methods I trade) (that we know works because we’ve worked out the EXPECTANCY) shows up on a chart – we ONLY trade once we are 100% certain the set-up/method is in place

We make sure that our methods have the deck of the cards stacked in OUR favour and not the houses – which is perfectly possible in trader land

This means that you ONLY trade your method when it shows up – Imagine that you’re trading method is a RED car – you’ve listed the rules to it and know EXACTLY how it looks on a chart – Now Imagine 1000 cars driving past your front door, the only time you’re going to take your wallet out if when you see a red car and when you do you might get £/$50 shoved in it or sometimes £/$10 taken out of it – If you did this on any of the other coloured cars passing it’s most likely that £/$10 will be taken out and lost – Any sane person is just going to sit quiet until a red car passes and then out comes the wallet, at all other times it’s firmly wedged in the back pocket

That’s exactly what you do with your trading method – only trade it when it definitely appears on a chart

More to come in the weeks that follow – it will give you chance to read those books!

If you really really really want to be able to trade effectively for a living then you HAVE no choice but to follow the rules – BUT, there are some “rules” that can be ignored!

That does not mean doing absolutely everything that you read about in the guides, manuals or books – Hell man, the ONLY time I’ve had a Trading “Journal” was when I was back testing and testing a presumed trading method – so that I could work out expectancy etc – I do NOT keep a trading journal, I know from the trades I’ve taken whether I’m up or down – I KNOW my methods work because I went through the pain of testing them years ago

and I know that if I trade them over the year I’ll come out on top – I just have utter faith in the techniques and methods I use and I don’t see the value in wasting minutes recording the trades, into something that I’ll never look at

We’ll get into the nitty gritty from now on in the weeks to come

READ those books!

Until next time

Stay Safe

THT

Did the Markets Top last week?

Answer is NO they did not

This is WHY it is absolutely critical to ONLY trade what you can actually SEE

283

Not what you want or expected to see!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Stay Safe

THT

Have the markets just TOPPED out this week?

As per previous posts my preferred outlook for the next year or so is a rally around these levels and then sideways to down

We’re right at these limits – I could be wrong, as everything is bullish BUT………

The rally is baseless – the whole globe is shut down, nothing is being earnt or sold at the levels required to sustain these stock market valuations!

Time will tell, but I would be cautious going forward if long – I’m all cashed in and will be looking for confirmation to go short the market or if that fails, to re-establish long side trades

Remember I do NOT Invest, I TRADE – there is a massive difference and I will only trade once confirmation to do is seen on a chart, until then i just sit in cash

For Investors now is a totally tricky time

So we have my expectation of a sideways to down market for the next 12+ months (not at all guaranteed to happen) and we have the market that is still really BULLISH – regardless of my bearish outlook, If I traded NASDAQ100 stocks (I don’t, I trade FTSE250 shares)) then I’d be looking to go long on a long trade set-up but wary that the WEEKLY chart is toppy and also my 12+ month outlook

I will NOT trade short until it is confirmed that is the market direction and trend – which as of yet has not happened

Here’s the NASDAQ100 Chart:

WEEKLY Chart – As you can see it’s BULLISH

277

DAILY Chart – Price initially REJECTED at key 87.5% Retracement level, BUT the chart is still BULLISH AND I’m expecting prices to RISE next week as the Indicators are now BULLISH too – How much I have no idea!

Price action this coming week should tell us – a close above the most recent swing high is bullish and signals higher prices obviously, if the swing high is not closed above then warning signals should be rung

278

Stay safe

THT

My WEEKLY Market Analysis

Hi All,

Good health to you all in these scary and uncertain times – stay safe

I’m not sure that I’ve shown these charts on here – This is what I do EVERY Saturday am when I review the week gone and look ahead at the week ahead

I’ve done this ever reading John Carters “Mastering the Trade” book and I had the pleasure of talking to him over coffee, twice about his methods and especially the clear, mental thinking required to be a trader – once in Las Vegas at the Traders Expo in 2010 and then a couple of years later at the London Traders Expo

The charts explain everything and my current thinking – I am 100% flexible to moving my thinking if during Monday the markets completely goes against my outlook!

Have a look at the charts and my words – On Monday morning it literally takes me 10 seconds to scan each chart to reassert my Saturday morning analysis – I also do this same analysis for the FOREX markets that I trade, so that I have an inkling of possible market direction according to the MONTHLY/WEEKLY & DAILY pressure

Remember this outlook might not be correct but it’s what I personally currently “SEE”

I personally trade most of the stocks that make up the FTSE250 Index during the year, so I want to know the most probable direction of that Index so that I can place trades with confidence

FTSE250 Index MONTHLY CHART:

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The MONTHLY chart lets me see the big picture

FTSE250 Index WEEKLY CHART:

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I’m not a great one for support and resistance levels as I’ve seen too many supposedly S/R levels crumble – BUT, on the WEEKLY chart draw a line from Nov 2016 swing low across and it hits the Time Cycle low of Dec 2018 within pennies! It could create a resistance level just under the 50% red retracement level shown on the chart around 17060 level.

Previous weeks I’ve shown you PIN/HAMMER Bars – look on the WEEKLY chart for them too! Notice that at most turning points they are present.

FTSE250 Index DAILY CHART:

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A break of the triangle to the bear side INVALIDATES the triangle potential for me – I’m already in this trade from a previous trade set-up confirmation so it’ll be interesting going forward

My next job is now to look at the FOREX markets and the Individual stocks of the FTSE250 Index that I trade to see if any of them have formed any of my trading set-ups

Stay and Keep Safe

Market Outlook for 2020/2021

Hi All,

I forgot to publish this here – I posted it on Facebook to a group when asked out of the blue (hence the professional artwork!) and completely forgot – Apologies!!!!!!!

The date in the YELLOW box top left shows you when I created this chart pic

This is my favoured market direction for the next 12 months – I might be utterly wrong but I’m thinking that the market is going up (It has been doing this)  then for the rest of the year just sideways to down with the emphasis on the bearish side

Not sure if a new low will occur – that’s above my pay grade I’m afraid!

But I’m thinking that for the next year or so we are not going to be doing too much

I will be producing some analysis in the coming months on the next couple of Time Cycles that are due in the next couple of years

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Stay Safe

THT

Follow up to the follow up trades!

Going to be quick here as I’ve got another post coming out for you today on my perceived outlook for the market direction (NASDAQ100) for the rest of the year – it’s not detailed just a visual that is my preferred outlook

Anyway, back to these Pin Bar or Hammer trades – they WORK!

The chart below contains 6 further trades on the 15 min EURUSD Forex pairing following on from my last post

BLUE DOT 1 = Big rally upwards price moved sideways and then got rejected creating the hammer/pin bar – I prefer to see the solid part of the bar a bit smaller but this still acceptable = profitable short of 2R return in 1 trading bar = Impressive

BLUE DOT 2 = Big rally upwards from low and creates a retracement to the BLUE DOT 1 trade – this trade NEARLY got stopped out – then it collapses into a 2R profit trade

BLUE DOT 3 with X = If you’d of taken this trade it would have been a 1R losing stopped out trade – but I would not be trading at that hour of the day

BLUE DOT 4 & 5 = worked but again i would not be taking a trade at that hour

BLUE DOT 6 = I have just a few mins ago exited this trade – Rally upwards then reversal for a 2R profit return

The STYLE of this bar is the important bit NOT the colour of the body – Ignore the colour – for me the trade shown bottom left from yesterday (not marked on this chart), Trade 1 and Trade 6 on this chart are just ultra high probability trades

Trade 2 is high probability but not ultra high prob as its not a new swing high – Trade 6 IS Ultra high as within the last 20 bars or more it is a new swing high

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I will not be showing any further trades of this type – you should have got the jist of it by now

Lets say you traded all the signals – 5 winners out of 6 which is good – the average for this type of trade is not this good by the way! So you have to know your stats – this is crucial

Its up to you to make your own rules

Lets say you just got Trade 1 and trade 6 – its still 4R profit! add that to yesterdays total and we have a profit of 9R

If risking 2% then 9R is a profit of 18% on your trading account! Impressive in a week!

Lets say all you did was 9R per month its still 108% per year!  108%!

Hopefully those of you that don’t understand risk, risk management and R values/profit are beginning to see the importance of why its essential to keep losing trades as close to 1R as possible

Not many people make 10% a year

Follow up to Yesterdays Trades

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I didn’t trade this one – It fired off whilst I was away from my office

We have another highly successful PIN Bar Trading set-up

As you can see it work successfully

Rather than trading the Pin Bar blindly – for me they need to be after some form of low or down trend as this one was

Your stop would be at the 50% point of the RANGE of the pin bar, with entry 1 pip above the high of the Pin bar – because when this fires off like this price does not penetrate the range of the Pin Bar too much – as can be seen

Which has easily reached a 3R profit target

Compared to Yesterdays Pin Bars, this Pin Bar WAS the LOW – more often than not when this occurrence happens (compared to yesterdays less than perfect Pin Bars) a profit of 3R is achievable – this is BECAUSE traders, whoever they may be, have utterly rejected the LOW price and a reversal of decent proportion occurs thereafter

Now take 3 minutes:

  1. you’ll notice this is a 15 min chart of the Forex ~EURUSD pairing
  2. In 2 days I’ve shown you 3 Pin Bars that would have returned you 5R
  3. If 1R = 1% of your trading account then 5R = 5% return
  4. If 1R = 2% of your trading account then 5R = 10% return
  5. Lets pretend that from 8am-5pm 5 days a week for 40 weeks of the year you just sat at your computer waiting for this Pin Bar to show up on a 15 min chart
  6. Lets now say that a few times a week the Pin Bar set-up showed up but you only managed to get 1 profitable trade result from it per week
  7. You’re happy to risk 2% which means that 1R = 2%
  8. and more often than not less than perfect Pin Bars are tradeable, this means your profit target is 2R rather than 3R on the perfect Pin Bars
  9. So, 2R @ 2% = 4% profit per week
  10. this also assumes you’ve had losing trades and end up with just 1 profitable 2R profit per week
  11. 2R x 40 weeks trading – 80R = 80% profit on your account

This is why trading is so exciting the profit returns on a method that actually works can be amazing – BUT the method HAS to work and it has to return the R value unless all the assumptions are rubbish

Now those still with me – I’ve just shown you in 2 days a 5R profit (Yes I am kicking myself that I was away from my office when it occurred!)

For those no good at maths – 5R (assuming 1R = 2%) = 10% x 40 weeks = 400% profit

Putting it all into £’s or $’s :

Trading account size = £/$10k

2% Risk = 1R = £/$200 per trade risk

Target 2R = £/$400 profit target per successful trade

£/S400 profit per week x 40 weeks = £/$16k

I’m not advocating trading full-time on an account size of just £/$10k, but you can see if it works it can produce an income, but it CAN be done – but you have to be ruthlessly disciplined

Stay Safe