trade Setups

asr: Let us collect different setup in this blog
asr: see this chart is interesting, he is using EMA(8,13,34) on intra-day chart 5-min chart. we can write small easy code for these conditions and do a scan and back test on a bunch of symbols.
- since this popular traderX guy is using EMA 8,13,34 on 5-min charts, this must be good setup for 5-min. charts.


Someone asked a few weeks ago what is my "bread and butter" setup. I don't know that I have just one, but if I do this is probably it. It is simple, which is always better:

1.) Gap up.
2.) Price breaks the opening range high (ORH).
3.) Price pulls back to the ORH with support from a rising moving average.
4.) Price rallies to the Fibonacci extension (FE).
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asr: another idea is to test this kind of GAP-ORH performance on basket of stocks in 6 different market type ( see our post ) and see which market type gives good performance , I think it is 'UP volatile' .
- similar way as Thapper said develop set of 'trading strategies' that work in each market so that you have one type of strategy to use when you identifity market as one of the 6 types. Even you can have parameter in the TS easycode while testing as input what kind of market it is out of 6 . based on this input you can change 'entry criteria' etc.

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asr: we should try to code this 'Holy Grail setup' in TS easyLang and run scanner on 5-min daily data to find statistical Edge on basket of stocks .

asr: this is same book on amazon site, see inside book , it shows 'holy grail' . It may be work trying these 15 setups with TS easycode , book it bit expensive ..
http://www.amazon.com/Street-Smarts-Probability-Short-Term-Strategies/dp/0965046109#reader_0965046109

I get questions all the time about the Holy Grail Setup: Well here it is explained and i’ll walk you thru it step by step.

First of all The “Holy Grail” trade was originally described in Linda Bradford Raschke’s Street Smarts book. This setup is VERY easy and simple, it is very spottable, and occurs very often especially during trending markets, UP or DOWN. Also, if you master this pattern, i am confident that you’ll be able to pull money out of the market a lot more often.

Tools You will Need to Day Trade the Holy Grail Setup:

1. A 5 or 10 minute chart. 1 minute charts work really well too.
2. A strongly trending stock, chart or index.
3. Volume indicator
4. The 20 Period Moving Average (simple or exponential)
5. Basic pattern recognition skills
6. Respect for Stops losses
7. An ego that can handle a small loss from time to time

First:
You need to spot a trend in a stock (i like to use the 5 minute bars). The trend can be either UP or DOWN and you can see that just by eye balling the direction of the price trend after the first hour of trading.

Second:
Once you have decided what the trend is (market direction helps a lot as well), be on the look out for clean and crisp movement in the stock. Movement with confidence i like to think of it as.

Third:
Look at volume to see conviction in the move. Lots of volume during the first hour will tell you the force of the move UP or DOWN. Volume increases the confidence in the move and gives validity of the action.

Fourth:
Now, this is the most important part of the setup and where it becomes an art moving away from the ’science’ of trading. You wanna see a slow and corrective retrace back to test the 20 bar simple moving average (20 SMA). You do NOT wanna see a hard crash into the 20 period moving average, this is NOT constructive action. You wanna see a hammer or several hammers off that 20 SMA, a pattern like a triangle, a wedge or a coiling symmetrical triangle, NR7s, or a consolidation move of some kind. The operating words here are: slow and corrective retrace to test the 20 SMA.

Really strongly trending stocks will not pullback for long, so you need to be aware of that, it will tell you what kind of demand/supply you are dealing with. I always BUY/SHORT into the pattern/pullback but some people like to wait for a complete test and breakout away from the 20 SMA.

Fifth:
ALWAYS buy HALF a position into the pattern/test and if the trade starts to work (hopefully right away, because the best trades work right away) add the other half and ride out a bigger move. I prefer to be wrong on a small amount then be wrong on a full position. If you are seeing a profit in the trade, that should tell you that the market is agreeing with your assessment and tells you to buy more because you are probably correct.

You know you are wrong when the pattern fails to hold the 20 SMA and starts to break below or above the area of consolidation which attracted to the trade to begin with. That’s when i just SELL it and MOVE ON to the next trade. Don’t get stubborn and hold on to something that isn’t working….please just sell it and move on. I always use stop losses. Trading isn’t a game for slackers, dreamers, or optimists. Please just scratch the trade and move on to the next. This pattern is very common and reliable enough that be sure you’ll have better success on the next trade.

Always trade in the direction of the overall trend of the market and I am confident you will see success from this trading setup.
http://blog.chart.ly/2009/10/29/trading-holy-grail-patterns/
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asr: above Book Review
asr: this Review author Chuck Kowalski is good author of many articles , so we can trust his review and above 'holy grail' post on chart.ly validates 1 of 15 of 'setups' of the book.
asr: may be good idea to code all of these 15 strategies and back test . Say for AMZN this holy grail worked. then back test and find out as
10/15/2007 , 5/12/2006 , 6/15/2005 , 5/15/2007 it worked
after that identify the days where this strategy worked on particular stocks and
take the aggreagate of intraday price of all those days and plot with % gains for day like commodity seasonal charts.
- finaly plot those aggrate price moment ( of all those days ) against TODAY so that you know how it progresses as day go by

Street Smarts is a no-nonsense book that provides specific trading setups and strategies designed for the short-term trader. The authors, Larry Connors and Linda Bradford Raschke, are two very recognizable figures in the futures trading industry and they each have decades of trading experience. At first, you may feel overwhelmed by the number of strategies detailed in the book, but all you need to do is focus on a couple strategies that fit your trading style.

Raschke and Connors cover more than a dozen trading strategies in Street Smarts as well as a question and answer section following each strategy to better explain it. The strategies are not overly complicated, but they are unique if you are fairly new to the game.

The trading strategies are the main focus of the book, but the authors like to cover the whole spectrum of trading. You will find numerous additional trading tips throughout the book that focus on what it takes to be successful in trading. Good trading strategies are only part of the game. You also have to practice solid money management and control your losses.

I believe Raschke mentions that trading is a game of holding your ground throughout the month and you will have a couple of trades that turn into a windfall. That is where you will get the majority of your profits. The key is to not take big losses.

How to Use the Trading Strategies
The trading strategies are explained in a very easy-to-understand format in each chapter. It is recommended by the authors that you pick one or a couple of trading strategies that you are comfortable with. From there, you need to research and test the strategies through paper trading until you feel comfortable to begin trading with real money.

It only takes one good trading strategy to become a successful trader. Do not try to force trades. You have to wait for your particular setup and let the probabilities take their course. Using stop losses on every trade is thoroughly stressed in Street Smarts[/link].

Street Smarts: High Probability Short Term Trading Strategies is an excellent book to learn short-term and day trading strategies. It is important to understand that this book is not just a list of trading strategies, but it is also a guide on how to trade successfully.

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What to do when Alert are triggered on a technical EVENT:

If the market is moving fast and you have a lot of preset alerts going off on your stocks, what do you look at first in order to decide what you want to do next.

You're right, price alerts tend to come all at the same times because of large-scale movement in the market. The key here is to do your work when you set those alerts. You should have a file/database that you can refer to when those alerts are triggered with exact instructions on what to do at that point to avoid confusion, double-think, over analysis, and paralysis when the time comes.

In other words, I'm reminded of the saying that every war is won or lost by the preparation. And that is true for trading. If you're waiting until the alerts are triggered to then figure out what to do, you're dead! That's why having the game plan ahead and following that plan when the alerts occur is very important.

The time to think about the trade is when you set the alert, not afterwords. There are alerts I will set to remind me of a specific technical event (like a breakout or breakdown, moving average crossover, ATR violation, etc.) but when those events occur, I already know what I want to do with that signal (i.e. buy, sell, move a stock up to my short-term watchlist, and so on).

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asr: good call for break-down of Tradermike , he also gave a day before fading of after earning gains of INTC and many others.
asr: this kind of drawing trend lines helps, note he points 'low volume on UP , high volume on DOWN days for last one week ' ...

The Nasdaq and S&P 500 have been churning just above those support levels for the last week and a half. I can't see them staying in those ranges much longer and I suspect the break will be to the downside.

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And for developers:

A discretionary trader and a mechanical trader will build a better rule base faster than either the mechanical or the discretionary trader alone

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asr: in 1996 he started building trading systems at age 34 (1996) , so for me it is high time to go into this Trading that to having found VP , tradeguider VSA , MCRI.com ( seasonal spreads), Mr. K blog kind of supporting software to find the EDGE.

Henry has degrees in Mathematics, Economics and a minor in Physics. A software engineer by training he sold his software company in 1995 and began building trading systems in 1996.

Vertical Solutions S&P Trading Strateg
http://www.verticalsolutions.com/strategies.html

asr: this kind of S&P strategy can be used as additional entry/exit criteria with a) Mr. K fundamental setups ( ATR/stochastic ) b) Vantage point c) VSA tradeguider d) Innovanalytics. d) velocitysignal.com e) worden TSV, VWMACD (telecharts )etc...
- the more the better for confirmation ...
- if we see tradermike , Mr. K etc. are trying to find out EDGE with drawdown of 5% , so with VP we can easily find EDGES with triple-EMA with 5% drawdown and stops with FUture Options.
- Have USD, EURO , OIL , S&P charts of vantgepoint on couple of screens side by side. we can not have with Vantagepoint windows software multiple screens. so dump data to .csv and READ .csv with PHP and construct chart with FUSION charts. so with FUSION charts we can see multiple VP charts.
- Key is able to view multiple VP chats with FUSION like 4 monitor setup like (Ama..sh). this is key if we see VP triple-EMA charts of above 4 for OIL we can see the trend for OIL.
- for chart setup practice ( as Mr. K said), we need to setup VP charts data for practice . With key stroke it displays next day . Have 4 charts 2 side by side on two rows and with one key stroke charts will update all 4 FUISON charts with next day data. If we practice triple-EMA like this we can learn VP setups.