T2W Trading Community

Chart Settings

1-Minute Charts for DJIA
100 Exponential Moving Average
CCI 150 
RSI 14

Stake Size

The important thing, especially when you are first starting out, is to make sure that you “Stay in the Game”, as most of your learning will come when you’re actually trading.

The accepted level of risk amongst the professional traders and the trading authors is 1% of your capital on every trade. When your risk increases, any bad run that you have will be magnified. You should therefore reduce the stake size to the point where you are very comfortable with the level of loss that a triggered stop will cause.

If you decide on a gamble entry, reduce your risk. If the 100 MA later confirms your entry is correct, increase your stake to "normal size" by adding another half stake.

Entries

Safe entry and safe reversal

The safe entry is from the price crossing the 100 EMA line - and waiting for the pullback.  For reversing a position, this is also the criteria that should be used.

Exits - Tops and Bottoms

Now that we have found an entry, we need to check out RSI and CCI to see if we can pick out an exit.  If we are getting positive divergence (price down, indicators up), alarm bells need to start ringing. Would this price action continue?

Rule 1: For Positive Divergence (PD) confirmation, there should be 3 peaks lining up in the price and in either RSI, CCI, or – better still – both.

Rule 2: The timescale must be a minimum of 25 minutes across the 3 peaks.

Rule 3: If a divergence started at the open it should always be ignored.

The 3rd low is your first signal to exit the trade. Usually you will get one more chance to exit before the whole thing goes in the other direction, but don't count on it. Don't be greedy. Getting out on the 3rd peak of a 3-peak divergence is usually the very best exit.

Now we need to look for another entry. This could be a LONG or a SHORT. It doesn’t matter. Don't be pre-conditioned into thinking a short has to be followed by a long, and vice versa!  The reverse is true for Negative Divergence (ND).

PD and ND Exits

The exit decisions for both ND and PD are clearly shown in Figure 2.

The first exit is from an ND over 37 minutes.  At the same time this is forming we are looking for an entry from the open of the trading day.  Five possible entries are marked, although by around 15:45 the final peak is formed in the ND and an exit should be taken.  The next entry is a safe entry from a pull back to the 100 EMA.  Once again, a PD bottom starts forming over 45 minutes, and an exit should be taken at the third trough.