My trading philosophy for choosing the Holy Grail trade setup
Steve Griffiths, the developer of MTPredictor, describes a trade setup where you seek to a catch a strong move, Elliott wave 3, after major support/resistance has been found. He calls it the 'Holy Grail' trade. He has many videos about the setup, holy grail trade mtpredictor - YouTube, explaining the idea and then going through each trade from start to finish.
The idea behind it appeals to me, it is high reward to risk and importantly, it is a trade setup which you can spot in advance; You are not stuck at your desk all day. If I risk 1% of my trading capital then a winning trade can often return 4 to 10 times that level of risk. The evidence for this is in the Youtube videos, wave 3 in Elliott wave is usually the strongest and longest wave so you are taking advantage of the market in one of its few trending moments.
I wanted to see for myself how often these trade setups occur, how profitable they were, what were the results on different timeframes. I conducted a test of the setup with the Dax & FTSE futures for October and November 2012. I will post this with chart snapshots over Christmas and the New Year. I will conclude with a summary of the results I have found.
I have read many trading books on setups, ideas and trading psychology. It has taken a long time for me to sift through all the different ideas and understand what the writers were trying to say. In Jack Schwager's Market Wizard books he interviews famous traders and asks them how they achieved their success. He speaks to a currency trader who is constantly trading and by contrast he speaks to a trader who works with fundamental analysis and trades very infrequently. One central message stands out. The successful trader finds an approach that works with their personal psychology. You need a thorough understanding of who you are and what you do each day to find an approach that you will follow and be happy following now and forever more. The two traders in my example are successful with their own systems but if they swapped systems they most likely start to become less successful. If you are unhappy with your system then you are liable to introduce errors and therefore the risk of taking a bigger loss than you expected becomes more likely. Thus breaking one of tradings golden rules, cut your losses and keep them under control; Allow your winning trades to grow big.
One of the traders spoke of stalking the market, behaving like a lion in the wild. Waiting and resting in the shade, letting nature take its course, waiting for a target to come so close that you need to expend minimal effort in order to catch it. For me Learning to wait means using leading indicators not lagging indicators. My preferred nature is not to trade, I need to be persuaded to trade. I need price action to prove to me why I should trade.
When I look at the world, I see quants, HFT and unprecedented govt activity in the markets. I see uncertainty and complexity. I don't understand what is happening and I never will. I admit and accept my foolishness. Therefore I need to simplify what I do, I need to show humility in the face of the unknown and unknowable. If the market does not produce the setup I am looking for I ignore it and go about my day. It is not up to me to extract opportunity from the market and force it to my will. I see so many indicators on this site, so many opportunities to add more maths and more calculations to trading. I do not believe they will help me as they are a sense that you can understand how the market is twisting and turning. I'm not convinced that the market is that obvious except for a few occasions. I think the experience traders have with lagging indicators is that they holdout a promise that turns sour
The famous indicators out there, RSI, Stochastics, etc are lagging and not leading. If they work for you, good for you. It's not an approach that has worked for me. One of the elements of the Holy Grail trade setup is a leading indicator, the Decision Point (a set of fib clusters), from which the market price needs to react it to prove a trending direction.
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I just don't understand how anyone can give away a trade setup that generates them income time and time again. (especially if they call it the holy grail! lol)
We're in business here and trade secrets are just that, secrets. My business depends on it. I personally don't trade indicators nor have I gotten too in depth with psychology. However, I understand the psychology behind trading. i.e. Your entry is perfect, you get scared that price will reverse on you, so you take profits at 2 handles, well before your targets that your method has laid out. Next trade, you think to yourself, "Hold this time until your targets". Your entry is aligned with your method and you hold. Price reverses and you lose that trade. Where does this trader go from here? They are back to where they were in the first trade...minimizing profits. Maybe now they think "Okay, here it is, let's do it again...hold hold hold." This time price moves close to their targets but not quite. They hold. Wow, price just went below their entry and are in the red. Still holding though! Oh crap, price is past their mental stop where they said they'd get out but theY'RE stuck in this, "hold for profits" thing...They're just going to hold until it comes back. Oops, total bear trend in progress right now. Instead of -$400, they at -$1200 and counting.
I've been through that before. However, I never felt the need to pick it apart to understand it to know where I went wrong. The answer(s) is right in front of your/my face.
If you're completely honest with yourself. the psyche part of trading is very easy to understand but not always easy to fix. You know exactly what you need to do so do it.
Strategy ≥ Money
Last edited by Massive l; December 21st, 2012 at 04:48 PM.
Reason: terrible grammar! doing too many things at once right now. ha
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keep looking, you will never find it
The preceding post gives an excellent classic illustration of trade psychology run amok, how one's own mind can generate the illusion that the market can read your mind and take your money every time.
No indicator is the "holy grail" (I HATE THAT IDIOTIC PHRASE) that can substitute for watching the prices unfold bar by bar and thinking about what you are seeing. For some people the indicators provide clarifying and confirming information that is of complementary value. Especially if, as in my case, they are not based on the price of the instrument I am trading.
The model designation of my road racing bike is "Excalibur". I am extending a free offer to use it to run over the next person who uses the term, "holy grail". Claim your prize soon!
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Last edited by Zondor; December 21st, 2012 at 05:12 PM.
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Can you really blame someone for searching. Besides that...Holy Grail has a bad connotation here. In this case I think it's just the name of a system. Obviously a miracle indicator or system can't be found. It just takes people searching on their own to figure that out. We're all on the same team.
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I feel I have to come in here, and ask - what is the point of this Forum (or indeed any other public Forum), when all that its members do is to "have a go" after somebody has taken the time to research and share something that they have found helpful for others.
After all, if nobody "shared" anything worth while, then why are all you members here, when you know you will get nothing helpful from reading these posts.............
If you take the time to look at what this is all about, it is not about "being right" is is about an approach that is aimed at catching the strongest Elliott Wave swing with the lowest initial risk, so the Profits (on average) are much larger than the losses. This is the best trade setup I have found in 25 years, hence its name.
So please, I ask that if people take the time to research and post some good techniques that other people give them some respect and don't "have a go". So I ask that you give some basic respect to people wanting to share good techniques.
I am sure Mike wants this Forum to be a good place where good ideas are shared and everybody gains as a result, And also that posts are made respectfully , because if this does not happen, then (as you say) nobody will post anything good and everybody losses..........
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