Tuesday, 8 October 2013

Dow futures daily chart - testing key trend line support. Rallying? Will S&P 500 follow?

Daily chart shows the Dow futures testing key trend line support in European trade.

Zooming out begs the question, would a rally from the trend line test launch the Dow toward the top of the trend channel (off screen)?

Will the S&P 500 follow with a test of its own trend line? It's close but not there yet.

Questions, questions. Nobody knows the answers, but I do know that my system is now monitoring the hourly charts for long entries.

Silver daily chart - rallying from trend line support and through trend line resistance

My wallet sized trading plan

I keep a printed version of my main trading plan in my wallet. Not because I don't know it by heart (I do!) but because if I read it each day then I am more likely to stick to it.

Possibly the idea of keeping a copy of your own trading plan in your wallet will be of some value to you. I'll be surprised if the details of my plan are of much value to anyone other than myself, as it is tailored to my psychology and experience, which will be different to yours.

I have published my wallet sized plan below, slightly expanded for clarity and reference by future posts. By its nature the wallet sized plan is much abbreviated. Each point has a world of meaning to me, but may not mean much to you.

My wallet sized plan for trading hourly charts is as follows:

Maximum of 1*R risk to balance per trade.
Maximum of 2*R risk to balance across all trades.

Before each trading day, and before looking at hourly charts, examine daily charts (plus sometimes weekly and monthly) for each market on watch list, looking for an edge, which is any of the following:

a) An up or down trend on daily chart as determined by position of market and 18 + 40 day moving averages; or
b) The market is rebounding from daily chart trend line in the same direction as the trend line is pointed; or
c) The market is rebounding from daily chart support / resistance; or
d) Weekly or monthly charts of the market show consecutive green or red candles. I generally only examine weekly charts at the end of each week and monthlies just before the end of each month.

Only open trades on markets where you have an edge.

Time trade entries using hourly chart on trend resumption from retracements to 40 hour moving average.
Fine tune using hourly chart patterns, trend lines, channels.

Trail stops, generally behind retracements to 40 hour MA.

Never loosen a stop.

If a trade is behind going in to a weekend, close it.

As an aside, why is it difficult for some traders to stick to what they know works? Me, I Iike to explore different ideas. The Avid Chartist site has been partly an attempt to remove some of those exploratory urges from my trading, and give them another outlet. Anyway that's another topic.