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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Robert Graham who wrote (5479)	11/16/1999 7:29:00 PM
From: Matthew L. Jones	Read Replies (1) \| Respond to of 18137

Bob, Thank you for the thoughtful and extensive note. I have a feeling I may have given you the wrong idea about my "system" or whatever you call it. It is so simple it is scary. E-MINI TRADING STRATEGY The primary objective is capital preservation (not losing money) and the secondary objective is capital appreciation (making money). This will be accomplished by observing the following five trading rules: 1. Long Entry Signal. Price crosses upward over a rising 10EMA on 5 minute chart. 2. Short Entry Signal. Price crosses downward over a falling 10EMA on 5 minute chart. 3. Exit Signal. Price moves to nearest resistance level (long) or support level (short), or 10EMA on 5 minute chart changes direction, or stop loss is achieved. 4. Stop Loss. When price moves 1 full point against a new trade the trade is exited. 5. Trailing Stop. When price moves 2 full points in favor of the trade, the stop is moved to the mid point between the original stop and the high after placing the trade. That's it. To clarify things in a fluid market, I use three 10 EMA's on the 5 minute chart. One on "close" (my signal line), one on "high" (my upper band) and one on "low" (my lower band). I only enter the market within this buy-sell "zone". If long I won't chase a trade outside the "zone" (upper band), and if short I won't chase a trade ouside the "zone" (lower band). I also have a 30 minute chart open with all of my resistance and support levels drawn in. These are typically exit points. If I don't have at least a three point potential move before reaching resistance (3:1 minimum reward to risk ratio), I pass on the trade. That is pretty simple. On average I trade 9.7 round trips per day. My win/loss ratio is 76%:24% currently. On average I am seeing 1.3 times the total daily range in points gained. On one contract that is $1,198.17 per day net (after commissions). I'm a believer that simpler is better. It's hard to be simpler than that. I do watch a number of other things to confirm signals (TICK, TRIN, VIX.X, SPX, DJIA). I watch Stochastics on the 30 minute chart too, and Momentum on the 5 minute chart. But these DO NOT give me trading signals. These give me confirmation that I am doing the right thing. If TICK turns negative real fast and momentum stalls, I may exit now as opposed to waiting for the resistance target, for example. But these are trade management tools and not trade initiation tools. I can't honestly tell you that they have ever done anything other than confirm what price action was already telling me. Sorry if I gave you the idea that I had some elaborate system that was impressively complicated. I'm kind of simple minded. This is complicated enough for me. Matt