=============================TRADE LAYOUT============================
1. IDENTIFY THE TREND
a) Series of new higher high swing and higher low swing: YES
b) 10 EMA > 30 EMA > 50 EMA: YES
c) EMAs pointing upwards: YES
d) Output: UPTRENDING MARKET
e) Bias: LOOKING FOR LONG OPPORTUNITIES CLOSE TO VALUE AREAS
2. IDENTIFY THE VALUE AREA
a) 10 EMA: OFFERING SUPPORT SINCE JAN, 2023 - $228
b) 50 EMA: -
c) Support area: - $225-$235
d) Demand area: -
e) Trendline: -
3. LOOK FOR A TRIGGER IN THAT AREA
a) Candlestick pattern: BULLISH MARUBOZU
b) Break of structure in the lower timeframe: -
4. SET A STOP LOSS
a) 1 average bar size (14 periods) below the value are: $218 (10 EMA - AVERAGE BAR SIZE LAST 14 PERIODS)
b) 1 ATR below the value area: -
5. SET A TARGET
a) Resistance area:
b) Supply area: $319 - $329
c) 10 EMA: -
d) 50 EMA: -
e) Trendline: -
6. POSITION SIZE / RISK MANAGEMENT:
a) No more that 1% of your total equity at risk on an single trade, therefore: (Stop Loss (set logically as per above) / Entry Point) x 100 / Total Equity < 1
b) No more than 30% of your total equity at risk at any given moment
=============================WHY?===================================
WHY TRADING WITH THE TREND?
The trend is your friend. Trends do bend, but until that unavoidable moment comes, the odds get tacked on your side if you trade in the same direction of the trend.
WHAT IS A VALUE AREA?
Just an area where the odds are, the bulls will step up and support the price, or the bears will step up and stem a sell off.
WHAT MAKES YOU THINK YOU CAN IDENTIFY THEM?
Rational behavior from big institutions, herd behavior, quantitative anchors, qualitative anchors from other traders. These are usually translated into price movements, price movements that leave traces, even patterns.
Let me give you a couple of examples for argument's sake:
a) You want to fly to Japan, so you jump into your flight tickets' website to purchase your tickets. Today you see that the price of a ticket is 500$. You think it is too expensive, so you decide to wait for tomorrow to check if the price decreases. Tomorrow you check again, and now the price is 600$. What do you do next? Perhaps you wait another day, and then you see the price getting back to 500$, those 500$ now look cheap to you so you buy (support). Or perhaps then it becomes 700$ and the FOMO kicks in and you buy because tomorrow it might as well be 800$.
b) Investment Fund Warren Buffet and Co has done their due diligence, applied their fundamental assessments and decided stock X is cheap at 10$ and purchased stock X, which happened to be trading at 10$. Like a ton of stock, billions worth of it. A month later, after stock x rallied, it got back to trading at 10$. Unless the macro situation has dramatically changed, what do you think Hedge Fund Warren Buffet and Co will do now?
c) Richcoin is trading at all time highs. Everyone in your neighborhood holds richcoin. The cab drivers are thinking of quitting their jobs because they hold richcoin. Are you really going to be the only loser who does not buy richcoin? - Herding.
d) Investment Fund Jesse Livermore and Co has stacked loads of shares of stock Y. It has already started to conduct a marketing campaign. Since it is necessary for the public to buy and price up their stock, they can risk having an early sell off in their stock hampering their campaign. So they can't risk having the public panicking with sharp price declines … yet. So what happens when the price touches key EMAs like the 10 and the 50 (w), they support the price and the uptrend.
Behaviors like these echo through the markets. And they leave traces.
WHY DO YOU NEED TO IDENTIFY THESE AREAS?
Because you want one of two things:
1. Your idea is supported by the team you chose to support.
2. Your idea is not supported but in any case you get the chance to know that immediately and not waste further time and money with your idea
HOW ABOUT THE TRIGGER? WHY DO YOU NEED IT?
Ok, the price is trading in a value area. But can you really tell in which direction it is moving now? Well, you never, but if you identify a directional pattern springing in that area, then once again you stack the odd on your side if you just follow that direction, even though shakeout will sooner or later knock on every trader's door.
AND POSITION SIZING?
This should even have been rule number zero. Nobody, and I mean, nobody knows the future. No technical analysis or fundamental or whatsoever, will ever save you from the uncertainty of the future and the complexity of reality. That means that this is a game of stacking odds in your favor, not aiming at certainties. That means that this is a game of guaranteeing your survival in the markets each day, to make sure you have an everlasting exposure to favorable odds and positive black swans.
====================================================================
Having this said, discretionary trading is a heavy burden, so many choices, so many doubts … At a certain stage of your development as a trader you will realize that setting a quantified trading system, which translates these biases and ideas into numbers, conditions, signals and commands, and is time tested, is your next step as a trader.
If that's the stage where you're at, then feel free to drop by my store for backtested, quantified trading strategies across all markets and asset classes.
Cheers,
Tenacious Tribe - Back Tested, Quantified Trading Strategies & Studies
50% discount on all products! Use code MOX Q3C WXRX on our website to unlock this limited offer.
1. IDENTIFY THE TREND
a) Series of new higher high swing and higher low swing: YES
b) 10 EMA > 30 EMA > 50 EMA: YES
c) EMAs pointing upwards: YES
d) Output: UPTRENDING MARKET
e) Bias: LOOKING FOR LONG OPPORTUNITIES CLOSE TO VALUE AREAS
2. IDENTIFY THE VALUE AREA
a) 10 EMA: OFFERING SUPPORT SINCE JAN, 2023 - $228
b) 50 EMA: -
c) Support area: - $225-$235
d) Demand area: -
e) Trendline: -
3. LOOK FOR A TRIGGER IN THAT AREA
a) Candlestick pattern: BULLISH MARUBOZU
b) Break of structure in the lower timeframe: -
4. SET A STOP LOSS
a) 1 average bar size (14 periods) below the value are: $218 (10 EMA - AVERAGE BAR SIZE LAST 14 PERIODS)
b) 1 ATR below the value area: -
5. SET A TARGET
a) Resistance area:
b) Supply area: $319 - $329
c) 10 EMA: -
d) 50 EMA: -
e) Trendline: -
6. POSITION SIZE / RISK MANAGEMENT:
a) No more that 1% of your total equity at risk on an single trade, therefore: (Stop Loss (set logically as per above) / Entry Point) x 100 / Total Equity < 1
b) No more than 30% of your total equity at risk at any given moment
=============================WHY?===================================
WHY TRADING WITH THE TREND?
The trend is your friend. Trends do bend, but until that unavoidable moment comes, the odds get tacked on your side if you trade in the same direction of the trend.
WHAT IS A VALUE AREA?
Just an area where the odds are, the bulls will step up and support the price, or the bears will step up and stem a sell off.
WHAT MAKES YOU THINK YOU CAN IDENTIFY THEM?
Rational behavior from big institutions, herd behavior, quantitative anchors, qualitative anchors from other traders. These are usually translated into price movements, price movements that leave traces, even patterns.
Let me give you a couple of examples for argument's sake:
a) You want to fly to Japan, so you jump into your flight tickets' website to purchase your tickets. Today you see that the price of a ticket is 500$. You think it is too expensive, so you decide to wait for tomorrow to check if the price decreases. Tomorrow you check again, and now the price is 600$. What do you do next? Perhaps you wait another day, and then you see the price getting back to 500$, those 500$ now look cheap to you so you buy (support). Or perhaps then it becomes 700$ and the FOMO kicks in and you buy because tomorrow it might as well be 800$.
b) Investment Fund Warren Buffet and Co has done their due diligence, applied their fundamental assessments and decided stock X is cheap at 10$ and purchased stock X, which happened to be trading at 10$. Like a ton of stock, billions worth of it. A month later, after stock x rallied, it got back to trading at 10$. Unless the macro situation has dramatically changed, what do you think Hedge Fund Warren Buffet and Co will do now?
c) Richcoin is trading at all time highs. Everyone in your neighborhood holds richcoin. The cab drivers are thinking of quitting their jobs because they hold richcoin. Are you really going to be the only loser who does not buy richcoin? - Herding.
d) Investment Fund Jesse Livermore and Co has stacked loads of shares of stock Y. It has already started to conduct a marketing campaign. Since it is necessary for the public to buy and price up their stock, they can risk having an early sell off in their stock hampering their campaign. So they can't risk having the public panicking with sharp price declines … yet. So what happens when the price touches key EMAs like the 10 and the 50 (w), they support the price and the uptrend.
Behaviors like these echo through the markets. And they leave traces.
WHY DO YOU NEED TO IDENTIFY THESE AREAS?
Because you want one of two things:
1. Your idea is supported by the team you chose to support.
2. Your idea is not supported but in any case you get the chance to know that immediately and not waste further time and money with your idea
HOW ABOUT THE TRIGGER? WHY DO YOU NEED IT?
Ok, the price is trading in a value area. But can you really tell in which direction it is moving now? Well, you never, but if you identify a directional pattern springing in that area, then once again you stack the odd on your side if you just follow that direction, even though shakeout will sooner or later knock on every trader's door.
AND POSITION SIZING?
This should even have been rule number zero. Nobody, and I mean, nobody knows the future. No technical analysis or fundamental or whatsoever, will ever save you from the uncertainty of the future and the complexity of reality. That means that this is a game of stacking odds in your favor, not aiming at certainties. That means that this is a game of guaranteeing your survival in the markets each day, to make sure you have an everlasting exposure to favorable odds and positive black swans.
====================================================================
Having this said, discretionary trading is a heavy burden, so many choices, so many doubts … At a certain stage of your development as a trader you will realize that setting a quantified trading system, which translates these biases and ideas into numbers, conditions, signals and commands, and is time tested, is your next step as a trader.
If that's the stage where you're at, then feel free to drop by my store for backtested, quantified trading strategies across all markets and asset classes.
Cheers,
Tenacious Tribe - Back Tested, Quantified Trading Strategies & Studies
50% discount on all products! Use code MOX Q3C WXRX on our website to unlock this limited offer.