Note: I’ve written this post not so much to promote my system, as to simply explain how I work, and what investors should expect from my system. And since some things are better explained with a screenshot — something the strategy description box doesn’t allow — I decided to post this here.
dontellanyoneabouthis trades CME index futures (MES, MYM, M2K) on the daily timeframe.
I am a discretionary price action trader. All my trading decisions are based on advanced price action analysis, as well as technical analysis.
The aim of my trading system is to identify key levels where (1) if going long, others will buy after me, driving the price higher, (2) if going short, others will sell after me, driving the price lower.
For this reason, most of my trades are executed using a buy/sell stop order, unless that key level happens to be now, in which case a buy/sell market order will be used.
Every trade comes with stop-loss — the level at which, if hit, the trade idea becomes invalid and you must get out.
Identifying the entry and the stop-loss level is just half the work. Trade management is the other half.
As mentioned, it is extremely important for the market to continue to go in my direction once the order is filled. If that doesn’t happen — I need to find a way to minimize the potential loss as much as possible.
Trade management: possible scenarios
(1) order filled, then aggressively stopped-out
This is the worst possible scenario for any trade — aggressively getting stopped out soon after the entry, without having the possibility to minimize the loss. As much as I hate getting a full loss like that, there’s nothing I can do about it. While it rarely occurs, it’s still a possibility, so be aware of it, and accept it as a part of the game.
(2) order filled, but no follow-through
As said, I buy where I expect others to buy after me, thus driving the price up. But sometimes there’s not enough bullish orderflow, and the price stalls. The market fails to go up, but can’t really go down either. Generally, the day will close either slightly above or below the entry. In such case, I will assess the probability of what can happen next, and based on that take the appropriate actions in order to minimize the potential loss.
If there is a possibility to re-enter — the current trade will be closed (small profit/loss or breakeven), and a new buy/sell stop order will be placed as a re-entry.
When re-entry is not possible — the stop-loss of the existing trade will be moved, thus reducing the risk from a full loss to a small loss (usually 1/3 or less).
re-entry not possible
(3) order filled, followed by a strong close in my direction
This is what I expect, and what should happen once I get in.
Ideally, the day should have a strong or semi-strong close above my entry (if long). Following that, the bullish momentum must continue, driving the price higher. Otherwise, I’m out. The trade management in such case will depend on market conditions, but generally, whenever we have a strong bullish close — the price can (1) continue to go up with no (or minimal) pullback, (2) go up after a reasonable pullback, or (3) the price goes back down, usually quite aggressively.
So after assessing the probabilities, the stop-loss will either be moved in breakeven or slightly below breakeven. The goal is to give the market enough room for (small) pullbacks, while at the same time minimizing or completely avoiding any potential loss.
Okay, enough about loss management… now tell me how do you manage profits!
All positions are split in half. Part one has a fixed 1:1 take profit, while part two has a 1:3/4/5 take profit (depending on market conditions), and is also actively trailed using higher lows within the trend.
Other details you should keep in mind:
$10000 — that’s the size of the model account on C2 for this trading system. The position size for every trade will be equivalent to 2 or 4 micro contracts (split in half).
That makes the risk per trade (full stop-loss) to be anywhere between $500-$1000, which is 5-10% of the model account.
As a result of this, both profits and losses will seem very large. Keep that in mind when scaling the system according to your own account size. I would recommend keeping the risk per trade at 1-2% of your available capital.
To follow, you will need to allocate at least $10000 for this strategy. As well, for best results, it’s very important to remain consistent and follow for 6+ months.
Lastly, while I do my best to keep losses as low as possible, speculative trading is still risky, so follow only with the money you can afford to lose.