After a Trader Learns to Limit Losses (with radical discipline), Obtaining a Systematic Trading Process is Critical to Long Term Success. Below I Begin Explaining My Personal Trading Process.
Part Six a. of the “Freedom Traders” Series: Trade Set-ups. How-To Develop a Systematic – Predictable Process.
Provided at the bottom of this article are Parts 1 – 5 of this series. Part 1 : My Personal Stock Trading Story. How I Blew up Two Accounts and Then Learned How to Trade, Part 2 : Trading Checklist – Rules I Follow Before Triggering, Part 3: Now I’m Inspired!.A Struggling Trader That Inspired Change, Part 4: We Want (Need) You! Apply to Nearest Recruiting Station, Part 5: New Trading Challenge 10k to 1M, Part 6 b: Trading Set-ups. Video Explains Predictable Winning Process (companion to part 6 a).
This article is an overview list of the various trade set-ups I use with different types of trading I am involved in.
I will endeavor in this series of posts to first explain my trading system and then through subsequent posts I will break-out the details of each trade set-up I use.
Please note, this is part 6 of the Freedom Trader’s series and because this topic will be extensive I am going to number them 6 a, b, c and so on and other sub topics in the series will continue onward with part 7. I suspect that I will be updating part 6 and its sub posts for many years to come.
The purpose of this part of the series is to assist trader’s in developing their own predictable trading systems (a rules based trading process).
A large part of a successful trading plan is having a predictable trading system that you can rely on. Finding at least one trading system that will work the majority of the time, that is easy to use, fits your personality, is predictable and easily reproducible is key.
Perfect a trading system that works the majority of time, is easy to use, fits your personality, is predictable & easily reproducible.
My Personal Objectives.
I believe the bar to my success is directly tied to what percentage of the traders in our trading group are successful on a regular and consistent basis. Not whether I can dazzle with home-run trades like some genie that comes out of the bottle daily.
But rather how well the traders in our group can reproduce methods / components of my trading systems for their own predictable gains and how well I can assist our traders in their trading success no matter where the system is found and then duplicated.
The bar (test) of my success is directly attached to what percentage of the traders in our group are successful on a regular and consistent basis.
How Good Can a Trading System Be?
Before I explain how good a trading system can be, I will tell you there are developments in the trading industry (specifically toward algorithmic trading) that very few in retail trading and even at the professional level understand. I won’t get in to detail here, but I can tell you frankly that if you peel back the layers of the onion you will find scientific evidence of trading models that are winning near 100%.
With that considered, I discuss a system of trading in this series that provides trade set-ups with 80% to near 100% win rate (scientifically, mathematically back-tested and proven).
BUT, a near 100% win rate requires perfect trade execution in accordance with trade set-up rules AND I do not execute trades perfectly, so my win rate floats between 65% – 90%.
I would be best described as a trader that is “base hitting to wealth”. I use my base hitting skills and add the compounding affect to my portfolio (more on compound trading discipline here) and this is my way of building my portfolio.
I do not execute trades perfectly, so my win rate floats between 65% – 90%.
Once you have a winning system, then your success rate is completely determined by emotional intelligence and discipline.
Three Categories of Trading I Can Offer Set-ups For.
I utilize three categories of trading; day trading, swing trading and algorithmic model trading – each has its own disciplines (set-ups). I was for years also an investor – I do not invest anymore because the other methods of trade listed provide me higher returns.
I utilize three categories of trading; day trading, swing trading and algorithmic model trading – each has its own disciplines.
I swing trade and day trade simply because day trading or swing trading can experience periods of lull (where returns can be limited). And if I require at minimum 100% ROI per year, I cannot have periods of lull. I do not invest anymore because the best returns I was able to garner (on average) was 10% – 14% per year (all holdings considered).
I am now also involved intensely in algorithmic model trading. What is that? I am not trading with “bots” to be clear. I am trading algorthmic chart set-ups that are human executed (with the goal of concluding our development with a digital dashboard for traders – or a sophisticated “intelligent assistant” for traders).
Algorithmic charts (in our instance) are charts that use historical data to provide the highest probability of trade success for the trader.
A List of Trade Set-Ups (Systematic Processes) I Use for Day Trading, Swing Trading and Algorithmic Chart Trading.
Day Trading Set-Ups I Use:
Day trading is by far the most difficult of the three categories of trading. It requires a skill-set and emotional discipline and intelligence that goes far beyond swing trading and even more so with algorithmic chart trading.
I use a number of day trading set-ups, here are a few:
- Intra-day Halts. By far the most profitable set-up for my style are intra-day halts. Intra-day halts provide my style exceptional opportunity for return.
- Extended Hours News. Pre-market and after-market news are second most profitable, but because I don’t have a lot of extra time (specifically to trade pre-market or post market) my returns lately in these methods are limited. But when I am trading full-time and not running a number of businesses these are highly profitable for me.
- Market Open Momentum Trades. Gap and go style trades along with others at market open provide significant opportunity for profit. I will caution new trades to stay away from these for a significant amount of time when they first start trading. Too many GURU’s in my opinion sell this wayyyy to much to new traders.
- Technical Chart Set-Ups. Chart set-ups are my favorite, least stressful, highest probability of success way to day-trade. Not my highest ROI category but definitely my favorite. I bring over swing trade set-ups from my swing trading discipline (that are based on weekly and daily charts) to my day trading discipline – I just trade them on tighter time frames (hourly, 30 min, 15 min, 5 min, 3 min).
- And of course there are many others I day trade such as break-outs on the daily or 52 week chart, bottom plays, wash-outs with snap-backs and many other types.
Swing Trading Set-Ups I Use:
Swing trading (or power swing trading in my instances) is less stressful than day trading and it has a more predictable return on investment than day trading. All things equal, if you execute both with skill swing trading cannot match the return on investment of day trading – but day trading with consistency and not blowing up your account is radically difficult to master.
Swing trading comes down to technical and/ or fundamental set-ups. I am a technical trader so I lean on technical set-ups (on the weekly or daily charts) and use fundamental research to support my trade set up bias only.
Below are a few technical and fundamental indicators I use for swing trading:
- MACD – I rely on the MACD heavily as one of my primary indicators in swing trading entries and exits.
- Moving averages – Second to MACD I utilize moving average disciplines for my trade entries and exits.
- Fibonacci – I rely heavily on Fibonacci to confirm my bias (I do however use Fibs in a way most are unfamiliar with because of our algorthm chart modeling component).
- Squeeze Momentum Indicator – This is a custom indicator available on Trading View. I use it to confirm my trades.
- Trade Volume – Volume is an important indicator in my trade considerations.
- Stochastic RSI – I use the Stoch RSI to try and refine any given entry or exit.
- Earnings Dates – I rarely hold a trade through earnings. I recently held Google and Amazon and a few others with success, but that is rare for me.
- Insider Buying and Selling – I almost always have an eye to insider trades before taking a trade.
- Short Positions – Short positioning is important.
- Fundamental Research – Instead of doing my own research I have specific experts I defer to prior to trading (it saves time and they are the experts. They consider me a technical expert so they bounce their trade considerations off me first also – it works back and forth well).
Algorithmic Chart Model Trading Set-Ups I Use:
Algorithmic chart model trading is by far the most predictable, least stressful trading method I use – and if the models are good it can be the most profitable (in our case the models have been exceptional).
We have six models we use (Oil, Gold, Silver, SPY, VIX and the USD) – our Oil algorithmic charting is the first and farthest along in development.
Our oil algorithm is returning well over 300% consistently and has indications of being able to achieve 1200% (the profit and loss statements will be released to the world within 30 days). That far outperforms the 40% – 120% my swing trading profit/loss provides and the 80% – 240% my day trading profit/loss provides.per annum. And even better, there is zero fundamental research required and the chart set-ups are provided to the trader.
The question then is why don’t you simply trade algorithm charts? Well… we have a vision for democratizing the algorithmic trading discipline. Not the easiest path I could have chosen (democratizing our models).
If you research the topic (under the everyday thin later of research), you will find that our models are competing with the world’s best – and the world’s best are not available to the retail public. I have yet to find a high performance algorithm platform that is available to the retail public.
If the public decided or decides they don’t want our models, I will simply go dark and contract our models to dark pools – that option is presented daily. But that is not our mission. Heck I could just trade them in my own dark pool.
Below are a few of the chart set-ups I use in algorithmic chart trading:
- Primary Trading Range Support and Resistance. Our algorithm charting provides clear support and resistance for the wide / broad trading range (wide quadrant range) prior to trade even getting to the date. In other words, it is future forward charting (unlike conventional charting which is charting what has already occurred).
- Channel Support and Resistance. As with all other algorithmic chart models, our algorithms provide trading channels to our traders in advance of trade creating a channel. I trade support and resistance.
- Time Price Cycle. Time price cycles are critical in our models and trading. Huge opportunities exist as time / price cycle come to conclusion.
- Algorithm Targets. Our algorithms have specific targets for time and price future forward. This is something I consider but don’t trade heavily against.
- Conventional support and resistance in channels and more. I refer to conventional charting simply to be aware of when conventional charting is in agreement with our algorithm models – it increases my bias toward a trade.
- And of course in our work their are many other set-ups at work.
That concludes my overview with reference to the various trade set-ups I use with the various types of trading I am involved in.
As I mentioned at the outset, I will next post a series of articles to explain the fine details of each trade set-up I use and noted above.
Repetition breads success. Repetition provides laser focused trading skills that only comes from practice, practice, practice.
Our team time in the mid day chart and trade set-ups is a training ground for success through repetition and fresh trade ideas.
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Also in closing, I have had a number of people message me to get involved in our various launch initiatives – with moderating, coding and various other levels of interest. I will be writing back to those inquiries early June (in advance of our 24 Hour Oil Trading Room Launch).
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Article Topics; Compound, Trading, Freedom, Traders, Trading, Learn, How to, Set-Ups, Process.