This is the system which I currently use in my trading. I have
nicknamed this system "2X" because the goal is to get
2 times the daily range on ES or NQ. With proper execution of all
trades this is quite doable, but that will mean a minimum of 15
and as many as 30 trades in a day. This is too much for many people.
Really all 2X is doing is trying to get in and out at the optimum
point possible on trend reversals and trend continuations after
retracement. It is nothing more than that, except for the band trades
during chop. Failure rate on trades is very low.
- Bollinger Band - 8 simple, 1.8 std. dev.
- MACD - 7,28,7 - both lines and histogram.
- Stochastic EXP- 7,3,3 (fast) and 21,10,4 (slow) superimposed
over each other
- EMA's - 34,50,100, ADX 14
- Trend is important and defined chiefly in these ways --Higher
highs & lows, etc.- MACD - slow stochastic- EMA's. Determination
of trend is made on the higher time frame and is not subject to
strict rules. I generally use slow stochastic as my primary determinant.
EMA's will be slower to change direction and are most useful to
gauge strength of longer trends. I find that reference to a 550T
chart is often helpful if in doubt.
- The common chart combination I use is the 55T and 210T although
other combinations are sometimes used based on volatility and
range. Entries are usually based on 210T using 55T to finesse
both entries and exits.
- Buy/Sell zones are below 30 or over 70 on fast stochastic
1. Enter in the direction of the trend whenever fast stochastic
is in buy or sell zone. Entry may be made using 55 tic chart to
gain better entry point, but this is not mandatory. Don't enter
until evidence of movement in the desired direction is seen. This
entry can also be taken when there is no distinct trend, but almost
never countertrend (except for quick scalps). Continuation reentries
do not require stochastics to be in buy/sell zone as long as slow
stochastic and MACD still in same direction as the trade.
2. Enter on every slingshot (defined below)
3. To enter on apparent reversal of significant trend requires stoch
and/or MACD divergence, or other evidence of reversal such as lower
high, higher low, etc. The longer and stronger the trend, the more
clear and convincing the divergence must be. Exit method: No set
rule, but I use price action combined with the indications from
the slow stochastic and macd on the 210 to prevent early exit based
on momentary hesitations or small retracements. I will also not
attempt a reversal (countertrend) trade when ADX is over 40 without
first seeing multiple divergences or lower high (for a short). To
a lesser degree I try to consider support and resistance factors,
chart patterns (waves, etc.), time of day, and particularly the
price relationship to BB on the 210Y chart whenever those bands
have no pronounced slope. I try never to risk more than 2 points
in a trade on ES or 5 on NQ.
For slow periods and chop: I sometimes play the Bollinger Bands,
buying at the bottom of the band and selling the top. I will do
this only when the BB on 210 tick are lateral (or nearly so) provided
there is at least 2 point spread between the bands. Entries are
usually at market or limit and taken when the band is touched without
waiting for reversal to appear. Success ratio is about 3/1 and expectation
is to make 1-2 points, while risking no more than 2. Exit would
be when reaches about 2/3 of the way to the opposite band. This
kind of trading is only for narrow range slow periods and should
not be done on lower time frames such as 55 tic.
Other uses of bollinger bands were discussed in a separate presentation,
the transcript of which can be found on the dacharts.com website.
The addendum at the end of the transcript sums the methodology up
A slingshot is my name for a pattern that is made by the 7,3,3
stoch combined with the 21,10,4. It is nothing more than a visual
that highlights a tradeable pullback within a trend. For a long,
the fast stoch will dip while the slower one remains relatively
flat. Since I have them on top of each other, this will look like
a slingshot being pulled back. The higher the time frame, the more
powerful the slingshot, but they appear more often on the lower
time frames. Slingshot entries should be taken only with trend or
when there is no discernible trend, but never counter-trend.
This is not a mechanical system, but simply a trading method.
Experience with the indicators used and pattern recognition skills
are far more important than trying to devise rules for every contingency.
As with any method, it takes time and serious practice to be able
to use it to it's full potential. -Jimmer
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