Saturday, 29 July 2017
Global stock markets have been highly volatile recently, opening with big gaps up or down, then trading in a narrow range, thus making it difficult for day traders to make reasonable profits.
For successful trading, one should always adjust one’s trading style that suits the dominant market conditions. I found that in current conditions, a combination of longer time frames (swing trading) and shorter time frames (intra day trading) worked excellently as these trading strategies captured gap up and gap down openings and on weekly basis, accumulated handsome profits. with this strategy, even trading in a single lot can capture big market moves, increasing profits but reducing the big cost of brokerage.
Here is a system that I have created for myself and it has helped me tremendously in profitable trading. This includes:
– a daily note of candlestick formation in various time-frames (to know the trend),
-major Fibonacci support and resistance levels (to know the range) and
– what trading decisions to take in up/down/range bound conditions .
Now, if you know the trend, if you know the trading range, if you know what to do during different market moves, how can you not make profits?!
Take a look of my Dow Jones trading system for Monday, which is based on how it traded in the last session:
First, write down how the last candlestick looked/ indicated on Monthly/ Weekly/ Daily/ 4-Hours/ 1-Hour/ 15 Minutes/ 5- Minutes chart. Use different color for negative and positive candlesticks. Now, one look at these descriptions and you can see that the long term trend is up but the immediate trend is slowing down (indicated by red candlesticks and overbought levels.).
After that, draw Fibonacchi levels on chart, between major support & resistance levels (in this case, the index is making new highs so trend based Fib extension has been used).
This is how the chart will look:
The Fib levels and candlestick notes will clearly tell you when/ what/ how to trade in the next session. Here is the complete prepared system to follow in next trading session:
These notes will provide you with every possible moves in markets, what trading decisions will suit those moves and at what juncture you should take those decisions. With these trading notes, you should also write down your money-management steps such as how many lots you will trade in in long/ short positions, how much money will be required for those trades, what will be your stop loss level for long/ short positions.
With all these aspects of your trading having been taken care of, when markets open you won’t have to do anything but just wait and watch which of your decisions will need implementation.
Once you have entered a trade, you can let it run for a few hours till major support (for short positions) or resistance (for long positions) is reached. If the trend remain favorable for your open trades, you can let it run for longer periods (daily, weekly, monthly). Based on intra day trend, you can find suitable opportunities to add/ reduce positions, or book profit and t suitable points, start fresh trades.
Hope it helps and we all make bucketfuls of money next week 🙂
Good luck, see you in markets next week.