If your like me you may have found that trading off indicator based systems your succesful trades are wiped out buy whipsaws in the market. If you trade trend indicators you will be whipsawed in sideways markets. If you trade oscilators you recieve false signals when markets are breaking out of ranges this is why I decided to trade price action. If you too have had similar problems were you have experienced good results followed by bad results that offset the good with indicator based entries maybe your ready to try price action.
This trading system is based of the triple screen system. Triple screen states that the market has a tide, a wave, and a ripple, hence the system name derived from tide, and wave creating tidalwave. You can learn more detail about triple screen in Dr. Alexander elders book "trading for a living" if you want to know exact details. We will be trading daily time frames. This will be a strategy where we use SET(stop, entry, target) when we enter. The trade, we will have a stop loss where we believe the trade is no longer valid. The entry is obviously the price we buy at. The target will based on prior price action and where we believe the price will reach.
The first screen the tide, we will monitor the weekly charts and look for a trend or a range. We will take trades on our second screen the daily chart only favored in the direction of the weekly chart, this will eliminate us from trading against the larger trend. The weekly chart will be plotted with the 20SMA and the 50SMA to help us identify the trend and see if they are holding up as potential potential support or resistance. We will also look at trend lines for channels and ranges.
Second screen the waves, will be the daily charts these will show us moves against the tide and will give us the option to jump into the trend at a discounted or wholesale price. Basically we arent going to make the rookie mistakes and chase a trend and get a bad fill, we want the market to come to us. On the second screen we will be waiting for the pair to be reverting to the mean. This is done either through a pull back when the price action returns to one of its moving averages 20SMA, 50SMA or trend lines which ever a trend has been respecting. The second way we wait for the pair to revert to its mean is through consolidation, triangles and bases(tight non volatile sideways range). The consolidation should give the chance for the pairs MA or trend lines to catch up to current price giving us a safer price to enter. The second chart will be charted with moving averages 20SMA and 50SMA and trend lines to show us where the pair is likely to breakout or bounce in a correction. Most of the signals we get will be based off price action but on this chart we will use the MACD histogram to measure momentum, the RSI to potentially confirm overbought or sold signals of the pullback and the ATR(average true range) to help us manage our stops on the trade. We are trading price action so remember signals on the oscilators are only secondary confirmation. Even though this is the second screen we can actually look at this screen first. If we find a tradeable set up we will confirm back on the first screen we are not going against the trend.
The third screen is actually a buy or sell order strategy. In a bull pull back we will buy if the price breaks the prior days high, in a bear pull back we will buy if the price breaks the priors day low our stop loss will be set 10 pips below the days low or the prior days low which ever is lower in a bull pull back and 10 pips above the days high or prior days high which ever is higher in a bear pull back . In a consolidation we will buy once price breaks out of the triangle or base by 10 pips and the stop loss will be 10 pips beyond the break of the triangle in the other direction, in the case of a base the stop loss will be set 10 pips in beyond the range in the opposite direction of the trade.
This system may have some changes made over the course of time for improvement. I will try to update the the system with photos to illustrate and help clarify what pull backs, bases, breakouts and the entries look like. I know the system may sound more involved then one would like, as when we all start trading we hope to find indicators that are the holy grail and they tell us when to buy and sell and are easy to understand but my experience tells me indicators are only good for certain market conditions and if you follow them you will eventually wipe out success by a long string of losses when market changes. Some advantages of price action are we can project targets, unlike waiting for indicators to tell us where to exit. We can project good stop loss points. We can also use these to calculate our risk reward ratio all things hard to do with indicator systems. Trades with risk reward ratios of lesss then 1.5 to 1 will not be taken.
I am going to submit pictures and details of my trades so I will be at the mercy of you guys knowing when im wrong and you will see the results of the system. These trades are actually being done on a demo account now. If you decide this is a style for you I suggest you demo first also even if the results seem quit well.
This trading system is based of the triple screen system. Triple screen states that the market has a tide, a wave, and a ripple, hence the system name derived from tide, and wave creating tidalwave. You can learn more detail about triple screen in Dr. Alexander elders book "trading for a living" if you want to know exact details. We will be trading daily time frames. This will be a strategy where we use SET(stop, entry, target) when we enter. The trade, we will have a stop loss where we believe the trade is no longer valid. The entry is obviously the price we buy at. The target will based on prior price action and where we believe the price will reach.
The first screen the tide, we will monitor the weekly charts and look for a trend or a range. We will take trades on our second screen the daily chart only favored in the direction of the weekly chart, this will eliminate us from trading against the larger trend. The weekly chart will be plotted with the 20SMA and the 50SMA to help us identify the trend and see if they are holding up as potential potential support or resistance. We will also look at trend lines for channels and ranges.
Second screen the waves, will be the daily charts these will show us moves against the tide and will give us the option to jump into the trend at a discounted or wholesale price. Basically we arent going to make the rookie mistakes and chase a trend and get a bad fill, we want the market to come to us. On the second screen we will be waiting for the pair to be reverting to the mean. This is done either through a pull back when the price action returns to one of its moving averages 20SMA, 50SMA or trend lines which ever a trend has been respecting. The second way we wait for the pair to revert to its mean is through consolidation, triangles and bases(tight non volatile sideways range). The consolidation should give the chance for the pairs MA or trend lines to catch up to current price giving us a safer price to enter. The second chart will be charted with moving averages 20SMA and 50SMA and trend lines to show us where the pair is likely to breakout or bounce in a correction. Most of the signals we get will be based off price action but on this chart we will use the MACD histogram to measure momentum, the RSI to potentially confirm overbought or sold signals of the pullback and the ATR(average true range) to help us manage our stops on the trade. We are trading price action so remember signals on the oscilators are only secondary confirmation. Even though this is the second screen we can actually look at this screen first. If we find a tradeable set up we will confirm back on the first screen we are not going against the trend.
The third screen is actually a buy or sell order strategy. In a bull pull back we will buy if the price breaks the prior days high, in a bear pull back we will buy if the price breaks the priors day low our stop loss will be set 10 pips below the days low or the prior days low which ever is lower in a bull pull back and 10 pips above the days high or prior days high which ever is higher in a bear pull back . In a consolidation we will buy once price breaks out of the triangle or base by 10 pips and the stop loss will be 10 pips beyond the break of the triangle in the other direction, in the case of a base the stop loss will be set 10 pips in beyond the range in the opposite direction of the trade.
This system may have some changes made over the course of time for improvement. I will try to update the the system with photos to illustrate and help clarify what pull backs, bases, breakouts and the entries look like. I know the system may sound more involved then one would like, as when we all start trading we hope to find indicators that are the holy grail and they tell us when to buy and sell and are easy to understand but my experience tells me indicators are only good for certain market conditions and if you follow them you will eventually wipe out success by a long string of losses when market changes. Some advantages of price action are we can project targets, unlike waiting for indicators to tell us where to exit. We can project good stop loss points. We can also use these to calculate our risk reward ratio all things hard to do with indicator systems. Trades with risk reward ratios of lesss then 1.5 to 1 will not be taken.
I am going to submit pictures and details of my trades so I will be at the mercy of you guys knowing when im wrong and you will see the results of the system. These trades are actually being done on a demo account now. If you decide this is a style for you I suggest you demo first also even if the results seem quit well.
