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I've been looking for a set-up for a while now, and I think that I'm getting close to finding something that I like- I'm now thinking that something is pullbacks into the dominant trend. Here I have added the classic 20-50-100 EMA combo. The set-up is also a classic, wait for the EMA's to fan out and trade when price pulls back into and then out of the 20 or the 50, but not the 100, which could signal either a reversal or consolidation. Next post I'll link to a YouTube that demonstrates and back tests this set-up.
This isn't a radical departure from what I've been working on, rather this is an attempt to formalize a completely objective entry. When I added the EMA combo over the top of my standard chart, I noticed that the EMA's were showing me additional areas of support and resistance that I did not see before. Other than the EMA's, I gently modified the settings of the previous day OLHC indicator so that it highlights the open (in bold dashed white) and de-emphasizes the highs and lows. This is because I think this level is totally clutch. You can really see it when you take this chart up to 4 hours.
Do you see it? the way that price consolidates at this particular level, and then trends when it leaves it? To me this could be both an objective trend filter as well as indicate key areas of support and resistance, which I have marked-up here in blue. These blue lines meander off into the future and I have personally witnessed just how reactive to price these lines are when price re-visits them in the future. By now only focusing on just the open my initial mark-up becomes even more simple and objective. This is where I start my trading day. First, I remove all drawing objects from the chart, then I lay these blue lines down. This is what I think of as the big picture. This works. You'll see.
The strategy in the video is geared more towards scalping the 5-minute chart at a 2:1 R:R, but I'm still really feeling this 15-minute chart. There are a lot of reasons for this, reasons that I hope will become apparent as I start formalizing what I have been working on for about a year now. I can clearly see the light at the end of the tunnel. In fact, I've been able to see that light for over a month now. I know it's just a matter of putting one foot in front of the other for as long as it takes.
It's been a good year, and I'm really looking forward to the next year. I believe that I'll start trading live soon. I don't have a specific date in mind, but it could be as soon as mid-January. To facilitate this, I've already re-funded my account and am now working towards making live trading a reality. The plan is to start trading the micros until I get my sea legs under me. I think right now I have the core requisites necessary to be a profitable trader- like all the Legos are there, I just need to assemble them correctly. I think that I can get this done live trading the micros.
My next step will be to formalize my process. I'm refraining from calling it a set-up, because I'm not sure if what I'm doing is consistent in the way that set-ups should be. What I am sure of is that I am pivoting away from a phase of experimentation into what I think of as formalization. I no longer lay awake at night and wonder; what kind of trader am I? What is an edge? Is day trading even legit? I've answered these questions to my personal satisfaction in this past year.
This next phase is about defining my process to set of conditions that are specific enough that I don't have to think or feel about it, it just becomes second nature, like driving a car. If you really think about it, driving is crazy risky, but you never really think about it as your hurtling 80 miles an hour past traffic in the other lane wrapped in 2 tons of steel, yet all that separates you from certain death is mere inches, a painted yellow line and a social agreement.
I had my 'ah-ha!' moment this year and not too long ago when someone told me to look for the levels and I saw them. Thank you.
I don't know if this word doc is going to display in my journal. I'm not sure exactly how I plan on using it. I think right now I'll keep it a google doc so that I can open, update and save it there. I might also turn this into a spreadsheet later and use it like that. No matter how I use it, I do think that this is how I will be initiating trades for the foreseeable future. My rational for this is it gives me a moment to review my trade idea and put that idea into a format so that I can see if it really makes sense.
I know a lot of traders track their trades and use this kind of data in post action review, and I should be able to do the same, but mine in more of a pre-trade checklist. I think this is my set-up and combined with the work I've done in technical analysis and improving my over-all discipline; I should have everything I need to start trading in earnest.
My trading plan is to use this checklist in SIM for 50 trades, and if this results in a net profit, then I will switch to trading the micros live.
Quick notes: Trade taken after nightshift and 5 hours sleep. I was expecting price to test the upper limits of an expanding range. I closed this trade when instead price rejected off the minor trend line. Not really my trade, and I was late.
I've tweaked this chart so that the EMA's are from the 4-hour time frame.
