” The trend overrides all other particulars of market context”. (Crabel)
“Participation in the markets is not about egos and being right or wrong, and it’s not about entertainment. Participating in the markets is about making money; it’s about decision making implemented by a plan.” (Paul)
To take each trades entry and exit with:
- A measured loss.
- A probable objective.
- Be mistake-free.
- Make money.
- Compound it.
To trade with contextual trend.
Active, swing or position?
- Traders can be defined as ‘active’, ‘swing’ or ‘position’.
- An active (or scalp) trader might exit with a small profit, usually before there are any pullbacks.
- A swing is any trade that lasts longer than a scalp and that the trader will hold through one or more pullbacks.
- A position deal is an investment rather than a trade.
- Methodically active.
- Market cycle and structure.
- Setup (reasonable)
- Indicators in-line.
- Watchlist allocation.
- News releases to be aware.
- Spread to be aware.
- Market cycle and structure.
A trend is a period in which a price moves in an irregular but persistent direction.
- Higher highs and higher lows
- Lower lows and lower highs
“Never go for perfection; always shoot for consistency”. (Pring)
If it is trending, we assume that the (contextual) trend will continue and look to enter in the same direction (with-contextual trend).
“A true trendline is a graphic way of representing the underlying [or change of] trend”. (Pring)
Macro, context, anchor and micro represent (differing) trend periods.
The crucial pieces of information that we can discern are whether the market is trending and value within that trend.
How to find the best trades
Based on contextual PA trade entry with indicator baselines and confirmation:
- By way of PA, such as:
- Three pushes
- Measured move
- H1/H2 or L1/L2
- By the drawing of TL’s and trend channel lines.
- In the diagram below the hashed line is the trend line and once established represents low value.
- The solid line is the trend channel line and once established, represents high value.
- MRT (mean reversion).
- BB (support and resistance).
- Pitch Fork.
Look to the left, it is part of the setup.
“It does not matter what you call a pattern—the important thing is whether it has bullish or bearish characteristics”. (Pring)
“When a setup is easy and clear, the (subsequent) move is usually a small, fast scalp. If the move is going to go a long way, it has to be unclear and difficult to take, to keep traders on the sidelines and force them to chase the trend”. (Brooks)
- “It’s the process that’s most important, not the results”. (Dr. Rotella)
- Trade ‘in the zone’, or ‘let it happen instead of making it happen’.
- Remove the mental barriers that prevent us from letting our subconscious govern our trades.
- Thoughts about outcomes and results come from the conscious brain.
- The conscious mind deals with trade analysis.
- We want to keep our conscious brain quiet, almost inactive, during trade execution.
- We know that to be consistently profitable as a ‘fast-money’ trader, we have to get good at waiting—to trade slow and think fast.
- We work our strategy (our plan) without fear of missing out or hesitation.
- Visualisation is an important part of our preparation.
- Calm, confident and centred.
- We accept whatever happens as it happens, we underreact to everything, we are unflappable, and we trust in our trade skills.
We have an edge when
We know the value and know which direction the market will likely go after a setup form.
- Context (with-trend).
- Baseline indicators.
- Objective (equal to or greater than the risk).
- HH HL LL LH
- Confirmation indicators are-go?
- Volume indicator.
- Prior daily aware.
- Ask, will entry be apparent later?
- Stop-loss (guaranteed or normal)?
A value setup entry requires only check items 1, 2, 4, 5, 9 and 10.
- Close beyond the 5 EMA.
- Not a setup?
- At the 50% objective indicator.
- At a channel line.
- Price Action (PA) opposing.
- Before significant news.
Context provides trade direction and is the basis of the trade-entry. It is the bars to the left.
“How I feel about a trade is not a good indicator of how the trade will end up” (Brandt)
- 2% (Overall)
Note: Drawdown, non-current or volatility necessitate a reduced risk. When more than one trade is open the combined risk per currency is not to exceed the 2% overall risk.
- At 5% drawdown percentage risked is halved.
- At 8% it is halved again.
- At 15% we stop until we feel ready to resume trading.
Place a guaranteed stop on all entries except CHF.
(CHF not to be carried overnight).
- BB and MRT are based on an average true range (ATR).
- ATR multiplier 1.8
- ATR average taken over 12 days
- Pitch Fork is based on the prior HH or LL.
“Accept, move-on, plan”. (Prof. Peters)
“A traders job is to take losses”. (Brandt)
“Every human decision can be broken down into perceived risk versus opportunity, loss versus gain. Everyone is scared of losing something, and that fear of loss tends to overshadow the potential benefits.” (Voss)
“Rationalise a losing position in the same way as a successful business pays its bills. At the level of one trade, the market cannot be predicted”. (Paul)
Body and soul
- Sleep and routine
- Nutrition (mitochondria)
- feel like doing this today?
- Move and stretch (Tai Chi)
- Immediately: Record the trade details for early lessons.
- Weekly: Analytical, entry and exit overview.
- Monthly: Last 30-day profit/loss review.
- Quarterly: Trading process review (what’s working, what isn’t?).
- Annually: Post results.
“Have an open mind rather than being fixed on a preconceived ideal.” (Weis)
“[There are] no perfect setups. Don’t worry about finding a perfect trade, just worry about trying to find a reasonable trade”. (Brooks)
“Can never be more than 60% certain. Don’t be paralysed by a 40% chance of loss. 60% is as good as it gets.” (Brooks)
“When I look at a chart, I am constantly thinking about the bullish case and the bearish case with every (pip), every bar, and every swing”. (Brooks)
“Be brave and get in at good levels. Institutional traders will use trend lines; they will use simple horizontal support and resistance levels to look for confluencies to try and place their orders. Nothing clever.” (Paul)