Overview

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.
- Jimmer

Chart Setup

• 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

Primary Entry Method:

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_dachart_dacharts_dachart.com website. The addendum at the end of the transcript sums the methodology up succinctly.

Slingshot defined:

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.

NOTE:

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

Charts and Files: