Four Steps Trading Course |
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Indicator Assisted Discretionary Trading
The
persistent theme throughout this entire manual and video course is one of
teaching both the experienced and novice trader logical, scientifically proven
methods of designing and implementing profitable trading strategies.
In
this manner the trader will be able to develop the confidence necessary to
execute a methodical trading plan in anticipation of a successful outcome.
To
this end we will be examining systematic trading from two separate approaches.
The
first strategy I will demonstrate will be one of trading from a discretionary
standpoint with the aid of a library of computerized indicators, which we have
developed over my many years of trading experience.
These
indicators are unique to this trading course and cannot be found as a part of
any other trading methodology or system. These tools are unique in the respect
that they are self adaptive in nature, using Parallel Function Technology to
continually evaluate their performance as measured by their activity over a
defined set of past market data.
This technique operates in much the same
fashion in which the pure market technician assesses the market. The pure
technician ignores all fundamentals, confident that all forces impacting on the
market will be reflected in price.
Likewise, this method ignores the myriad of
technical forces in the market as they impact the system and instead
concentrates only on the net effect of these changes on the system itself.
Rather than trying to determine which phase of market activity is impacting the
systems results, the system monitors changes in the market personality and makes
parameter adjustments accordingly.
This all is possible through the use of
Parallel User Functions.
Therefore, as the markets change throughout your trading days, weeks and years, your JFC Indicators & Systems will continue to function in spite of changes in market activity that occur regularly in actively traded markets.
The
flexibility and resilience of designing trading indicators in this manner allows
the trader to move forward with his or her efforts to earn profits, without the
anxiety of wondering if and when their trading tools will cease to perform.
Trading is enough of a challenge, you don’t need the worry about your technology breaking down.
The
second approach will be a strictly mechanical approach to making trading
decisions using the Spectrum System. SPECTRUM is used for position trading, it
is a totally computerized, automatic system which will issue specific buy and
sell signals at the appropriate time and price.
First,
then, let us examine the specific strategy which will govern our trading
activities when we are trading in a discretionary manner using indicators and
various market measurement strategies.
When
one begins thinking about discretionary day trading, a mental picture
immediately surfaces which involves a trader looking at a quote screen or
charting package and randomly picking and placing trades which “look good”
at the time. Often this type of trader, not having any logical method built into
his/her trading strategy, will often fall into the trap of changing their
trading strategy after each loss.
Note
that although our trading strategy is of a discretionary nature, we go about
constructing the entry and exit strategy of the trade in a logical, scientific
manner. This is not “seat of the pants” trading which gets so many traders
in trouble. Rather, it is a methodical approach to day trading which has stood
the test of time in actual market transactions.
As
Day Traders, we all have the same questions:
1.
Which way is the market moving
today?
2.
Is this move the main trend or
just a smaller move that could again pull me into a bad trade?
3.
Where do I get IN?
4.
Where do I get OUT?
The
JFC Indicator Library is specifically designed to answer these vital questions
throughout your trading session.
In
a nut shell, these indicators can tell you which way the market is going and how
far it will go with
reasonable accuracy.
Let’s
take a look at these four reoccurring day trading questions.
When
we plan and execute a trade, there are four basic determinations that need to be
accurately made to properly position a logical trade.
Step
One
We must determine the major
trend for the day. This will
allow us to place trades only in the direction of the predominant trend.
Remember the old axiom, “The Trend is your Friend”.
Tools
used to determine the Major Trend are:
JFC
Market Direction Indicator
JFC
Directional Day Filter
These
JFC Indicators are designed to tell you which way the market is going TODAY. They
clearly identify if the trend of the day is Up, Down or Sideways. Knowing the
Major Trend is crucial to your trading success.
Step
Two
We must then define the minor
trend within the major trend.
Even though we have defined the trend for the day, we can sharpen our entry
strategy markedly by determining the exact location of specific market
exhaustion. These are points at which the market is likely to end a corrective
phase and then proceed on in the direction of the major trend for the day.
Let’s
be honest, one of the biggest problems in day trading is getting “sucked into
the bad trade”, this usually happens when we loose sight of the Major Trend.
The Minor Trends or Retracements throughout the session can very often be
mistaken as the Major Trend. BUT, these Minor Trends almost always run out of
energy or reach a point “exhaustion”. Once this move has run out-of-gas, it
offers an excellent “Entry Zone” to jump back onto the Major Trend.
The
JFC Indicator Library has 4 Minor Trend Indicators. It is very important to
remember that each of these JFC Indicators approaches the same task of
identifying the exhaustion of a minor trend from 4 totally different
mathematical perspectives. If one views this problem from several vantage
points, there is a higher probability of successfully identifying a good entry
zone.
An
enormous amount of calculations are performed by these indicators, the JFC Cluster indicator for example performs over 15,000 calculations
on each price bar.
These
tools can help the trader see market nuances that are literally impossible to
see otherwise.
Tools
used to determine the Minor Trend are:
JFC
Reversal
JFC
Exhaustion & JFC Exhaustion 2
JFC
Real Time Pivot
JFC
Cluster
Step Three
We now must specifically
define the entry point. When we
have successfully defined the major and minor trends in our market of choice, we
then are able to use one final indicator which will define short term support
and resistance as an even more specific entry
point. By utilizing the long honored principles of support and resistance on a
short term basis we are able to allow the market itself to define our specific
entry as these areas are violated by market activity.
The
JFC Entry Point indicator is the tool designed for this purpose.
Step Four
Finally, we must determine an
exit point for our trade.
Again, as with all the self-adaptive tools we have developed over our years of
market research and trading, we will be using exit methods which take recent
market activity into consideration when defining an exact exit point.
We
will be using indicators which define trailing stops for protection and target
indicators, again derived from a series of support and resistance calculations,
which will give us a logical, practical point at which we can exit the market
with a profit.
Indicators
used to determine an exit price are:
JFC
Real Time Target (JFC RTT)
JFC Cluster Volatility Stop
JFC
Volatility Stop Indicator
JFC
Auto Pivot Series
Thus, the four step process is completed by defining a logical exit point. It is often stated that exiting a trade is the most difficult segment of the entire process of completing a trade. Using a set, self adaptive routine can take much of the stress and guesswork out of this critical phase.
Although one may use different portions of these selected routines for trading different stock issues or commodity contracts, learning and using the four step method outlined above can be a significant step toward more consistent, and therefore, more profitable trading.