What is the Holy Grail of Trading?
The Holy Grail of Trading is not one system or an indicator, it is a mind set, a
framework, a collection of methods, disciplines and techniques: start simple, use
a system, build knowledge, use backtesting, optimisation, risk management and money
management, find a system which suits your style and psyche, write a trade plan
and trade with it...The system is the least important part of trading and is a replaceable
part, the trading framework and psychology is the constant and vital key to your
success, that my friend is the Holy Grail of Trading!
Following Rules
As famous trader and father of the Turtles, Richard Dennis said: “I always say that
you could publish my trading rules in the newspaper and no one would follow them.
The key is consistency and discipline. Almost anybody can make up a list of rules
that are 80% as good as what we taught our people. What they couldn’t do is give
them the confidence to stick to those rules even when things are going bad.” – from
Market Wizards, by Jack D. Schwager
Learning to Trade made easy
Knowing when to trade and how much to risk is the key to trading - simply follow
any of the MicroTrends chart indicator trading signals or the auto trading signals
in simulator mode. Easy to follow on chart trade setup, entry, exit and alerts provide
any level of trader beginner or pro the exact time and direction to place a trade
order buy or sell, with the auto trade strategies it is easy to backtest and optimise
your trading, the ideal targets, risk management stop loss orders and money management
position sizing.
Earn while you learn
As you learn to trade you can introduce more trading techniques to improve your
skills to identify the high probability trades and ultimately increase your
profit and go live when you have learn to be consistent then you can can earn as
you learn to trade CFDs, Commodities, Equities, ETFs, Forex, Futures, Options and
any other asset class supported by NinjaTrader data feeds.
Equity Preservation
The first goal of trading is preserving equity - we are keeping enough powder dry
to use when we get that clear shot and make the trades that count.
The reward is following the system
The initial reward is knowing you follow the system - the bonus is when the system
rewards you for your professionalism
Stops - Risk Management
So what would be the approach for a system which you haven't traded before on an
instrument you arent familiar with? Generally Not Greater than 2% to 3% per trade.
Some types of Stops to think about
Money Management Stops
Satic standard stops of up to 2% or 3% of account equity - Can also be used to calculate
position size.
Percentage Move Stops
Exit when % has moved in one direction
Time Based Stops
Exit after a period when loosing
Technical Stops
- Levels of support +-ticks
- Moving Aveargs +- ticks
- Volatility Stops - Trend Channel/ Low or High/ MA +- Standard Deviation
- ATR % Stops
Money management
A good system can be ruined by bad money management- a bad system with good money
management lets you bleed to death slowly
Money Managment is position sizing - you need to calculate or use a tool to control
your position sizes.
- Work with 1 Lot - then increase when account grows - to a predefined level!
- Consistent gains + money management = WEALTH BUILDING
Money Managment Stops
If a good place for a stop is below the low of the day - 5 ticks and ( 2% = 20ticks)
then Postion size =4
Trading forms a habit - good or bad
Trading results are the result of habits.
It takes years to ascend to the levels of being a pro, the unfortunate thing about
new Traders with a virgin account is that could use their money wisely - choosing
a system and obeying the rules - using position sizing at the outset - consciously
repeating the correct steps over and over to learn good habits at the start - to
program the subconscious.
What actually happens is they learn bad habits from the start and start to listen
when the pain urges them to find help. A few may actually do it correctly from the
start and learn good habits on the simulator - their confidence growing - they leap
at the chance to go live and forget all the training and learn bad habits when live
trading...
The trouble with Trading
The market can reward bad trading and punish good trading.
The trouble with trading is that it rewards Traders for doing it wrong just by luck
- it teaches them they are great and that 2 year run that made them £200,000 was
due to their inate brilliance - they will loose double that next time round- picking
the lows of the next bear market, better to fail at the start in a controlled manner,
get a burnt hand from the flame for doing it wrong, preserve some equity - put the
losses down to the cost of the training and then put some gloves on...
The best training you can have is with real money -so make it last -start small.
Trading Framework - Defined by the Trading Plan
When Discretionary Trading or a pure system based on an indicator or signal generator
we need to have a framework in place to utilise for the best control:
- The trade plan is what
- The System is the how -physical and logical
Trade Plan
A Trading plan will have the following and more defined within it:
- Which Market
- Which Session
- Which System
- Risk Management
- Money Management - Positon sizing
- Trading Strategy
- A Trading System
- System Viability
- Strategy Analysis
- Disastor avoidance and recovery
- Risk of Ruin?
Your Trading Availability
Example I trade Mon to Fri at 8am to 11am - i am available at that time or the market
is best at that time
Markets
Currencies mornings? Equities Afternoon, Forex Pairs Evenings?
liquidity
Trade when the market has participation - don't trade quite periods
News and Market Events risk
Flat at major news Overnight positions none
Equity preservation
What you trade when you trade, what system you will use, your risk control and position
sizing methods, For example risk no more than 2 to 3% of account per trade -by using
a stop. Plan some sort of equity freeze – for controlling daily losses and even
wins.
Red Card the Player
Have a control on your account – No point emptying the whole thing…. Maybe allow
25% loss and stop - freeze your account –take the player off the field and confiscate
their boots until they can demonstrate they have changed. Trade in Sim until 1 month
of profit and then top up the account if you can and go again
Preparation Each Day
Check your statement.
When you finish and start get a chart up on a HTF to view the market last thing
– 30 min, 60 min Daily – understand where it is going when not trading Note Weekly,
Daily levels, Pivots points, Obvious points of Support and Resistance, the trend
Check the economic calendar www.forexfactory.com - be on the sidelines when its
red….
Daily - Weekly Analysis of your trades and profit
chart them in excel. Market, time, Trade type and pl Try to get an idea of when
you are greatest
The trading system
Log every trade you take - Log every trade without fail in excel or in the ninja
trader journal. Excel is better - Note Weekly, Daily levels, Pivots points, Obvious
points of Support and Resistance, the trend, the candle pattern (1st bull candle
to close above the crossover etc)…
Rate you Trades
Define and Rate the trades: Take time to walk through your trades at the end of
the day - try and rate them on the basis of probability 1 to 3 - 3 star being the
best. Over time try to recognise the trade setups based on their probability - each
one will have even a checklist of supporting factors – multiple reasons to trade.
Back test
Give yourself a limited amount of Ticks or Trades per day for the time you want.
Try tick charts, (maybe range or renko bars) on a fibonaci setting, 89,144, 233
chart If you use your ticks up – stop and go on the simulator – if you hit your
target - stop and congratulate youserlf Win or Loose - Review and prepare tomorrow
–switch it off.
The trading Method
When trading the brain is working in parrallel with you and this can be in agreeance
or against your judegment… Try to define your logical statement in your thoughts
that leads you to a trade….especially a good one…. Write it down into a logical
statement. – it helps thrash out if you are at one with your style psychologically
too.
E.G Are you battling with yourself? Stress can lead to “Trading Sabotage” and an
end of a trading career…
HTF and TTF - See it from above and on the ground
Use several charts at once, weekly, daily, 60, 30 for a HTF view of the action -don’t
get too sucked in by TTF 5min and 3 min charts they hypnotise and fool you -try
a 10min
Identify and Execute
Define, voice, and practice the trade logic for each trade on the simulator – speak
it. Tell it to an invisible trader at your side.
- TRADE SETUP
- TRADE ENTRY
- TRADE EXIT
Mean Reversion Trading
The markets are range bound more often than they trend, so therefore Mean Reversion
Systems tend to enjoy a higher winning ratio than trend following systems.
Mean Reversion Explained
The goal of Mean Reversion trading is to enter at unsustainable levels and exit
at the mean average.
Variants of Mean Reversion Systems are:
- Non Directional Biased - enter at unsustainable levels and exit at the mean
- Directional Biased - reverting to the mean in the direction of the trend
Professional mean reversion traders discovered the best success lay in using the
discretion and inclusion of elements hard to incorporate into mechanical trading
it is possible then to filter signals and exits to match the profile of the trader-
ie let profits run.