August 19, 2011
Identify the Highest Percentage Trades with this Simple Technique
Identify the Highest Percentage Day Trades:
– High Percentage Pattern
– High Percentage Location
– High Percentage Time of the Day
Step 1: Learn the 3 price patterns
– Breaker
– Wave
– 2Step
Step 2: Use Multiple Timeframes
– Slower timeframe
o anchor chart
o bird’s eye view of the market structure
o 89range chart is what I use
§ It’s a fib #
§ It’s a good combination of not too much info and just enough info
§ Daily chart is too slow, not enough detail.
– Medium Timeframe
o 34/21/13Range charts
o These are fib #s
o These are fast enough to show me patterns but not too fast to make price action too whippy (noisy)
– Faster timeframe
o 8/4Range
o 144tick
o Visual of price action
o Think of your time and sales window with the benefit of indicators and patterns.
Step 3: Entry trigger uses your ENTRY rules (the right time of the day)
– Make sure that when i want to take a trade it is the best time of the day to do it
Example:
Crude Oil we open the 89range chart and find a bull price channel.
– Buy pullbacks with new higher highs and buy at the support (lows) of the channel.
We use the 89range price structure to tell us what/where the high % trades will be for that day.
We know the highest percentage trade will be at the lows of this channel.
Now we simply wait for price to come down to the lows and then look for the price pattern.
The hardest part of this is WAITING for price to come to you and not over-trading before that trade comes.
Once price comes down and tests the lows of the channel, we then look for a 2-step pattern long or a wave pattern off the lows to start buying at the lows.
Trend Channel Tool:
· Load the trend channel
· Set up your templates
· Chose your default
· Practice how to use it
What order types do we use?
– Never use market orders
– I use Buy/Sell Stops for the Adv TRAP Entry
– I use Limit orders for the Fast Track entry
What is the dollar Correlation?
– Historically a negative one
– Euro rises and the US Dollar Falls
– Dollar rises and crude oil falls/gold falls/Russell falls
– At this time the correlation has been tough to use b/c of the fear in these markets.
– 2 times when the correlation does not work:
o Low volume
o Fear
– Example:
o Crude oil is falling with the US Dollar.
o As the dollar gets weaker, things becomes more expensive, and therefore they are harder to buy and prices go up.
o Today’s environment the global marketplace is viewing the falling dollar as a sign of a weak us economy and then in turn less demand on crude oil. Less demand = lower prices.
Day Trading Computer:
Also use a laptop for your trading computer
Max Loss:
– 2 full stops in a row, back to back.
– New traders need to stick to this with discipline, its the first task of following rules.
– There will always be times when you have to make a decision on this because of something different:
o 1 loss, 1 winner, then another loss
o 1 small loss, and then a full loss
o 1 loss, 3 winners, 1 loss
– Need to define if those losses came from YOUR decision to trade, or if the market isn’t working this morning.
– Did I make the mistake? If so, need to make better decisions moving forward.
– If the market made the mistake, i cant change this, so either SOH or wait for better price action later in the day.
