OK, so I have been involved with trading for few years (off and on) with a normal day job, so not a full time trader. Also been a member of futures.io (formerly BMT) for few years, but not contributed much.
In order to develop my trading to a more 'professional' level, I thought I would start a journal on my proposed strategy of trading the S&P Emini. In doing so I hope to be able to become accountable to myself on my trading and also maybe get some experienced feedback on my trading (method, psychology) from other traders.
How I came up with this strategy.
Although I am primarily a stock trader, I have read a few threads on Emini trading and also the course on priceactiontradingsystem.com by Mack. Then I have been watching the Es for a few months now. So just watching the price on chart every day, with no trading just to get a feel on how it behaves. And also during the day and at the close of play trying a few things out with respect to trendlines, channels etc.
So what is my proposed Strategy ?
Chart is 2000 tick candle chart with 21-period ema. In addition I mark on the premarket high's and lows. That is all i have on the chart.
It is a very bare bones (possible too crude) strategy which uses PA, the ema and my own eyes to determine when the price hits a trend and to take trades (both countertrend and with trend) at appropriate points in this trend. To help me with determining these 'appropriate' points I have coded a crude 'showme' in Tradestation to indicate a candle which closes at it's high or low and how it relates to the previous candle. I only take a trade when such a candle arises and it is in the same direction of the proposed trade. The main premise/theory here is that the closing at high or low is putting any possible momentum in my favour.
So here is my thought process as i watch the price move : I wait for price to start separating from the ema and ema to be sloping and decide if we are 'now in a trend'. There is some discretion/subjectivity here so I will explain further with charts etc as and when trades are taken. But anyway, once we are 'in a trend' I am on the lookout for two things; 1) a counter-trend trade off a signal candle to cpature the price move back to the ema , and 2) a pullback to the ema with a signal candle to capture a trend continuation move.
Entry is always 0.25 points from the signal candle and the stop is 0.25 points from other end of candle.
There are some rules/observations which I also follow as I don't trade every signal candle when it arises. These are as follows:
I only trade the first 2.5 hours from market open but usually give market 5 mins to settle down.
Very small candles with small wicks I ignore. I should alter the code to exclude these at some point, but at the moment i just exclude then visually.
For counter-trend > there must be at least a 1 point gap between entry and the move back to the ema.
For counter-trend > if the signal candle rejects a previous S/R level (premarket and current day) then it has added weight
For counter-trend > if the signal candle occurs following a quick rapid move without much pullback then it has added weight
For with-trend > the opposite end of signal candle must be at least within 0.25 points of ema
For with-trend > the signal candle must close on right side of ema to me trade direction
For with-trend > if a trend has been ongoing and already has had three pullbacks > then I don't take the 4th.
Money Management etc ?
I only trade a maxiumum of three trades a day.
I will be trading Demo > my capital is $10,000.
I will only trade 2 contracts for each signal candle.
Once a trade is entered : I close first contract at +1 point and move stop to break even for 2nd contract. The 2nd contract is left to run and will have three possible outcomes ; a) come back to breakeven , b) hit +10 pts where it will be closed , c) go to end of day where it will be closed.
The stop is kept at same level until +1 is reached then it is moved to breakeven , so on losing trades I hit the full …