Holygrail trading
STOCKMARKET PREDICTIONS
STRATEGY
My simple strategy is to bet that the S&P 500 index will close above/below the entry price using the PREDICTED PRICE PATH and the daily key technical levels (pivots,support/resistance and fibonacci).I am using fixed odds bets (see below) As soon as i have placed a bet i will download the chart with a brief comment explaining why i entered the trade. Note that the chart has the date and time stamp marked at the top clearly showing you my entry.The bet expires at the close.Occasionaly i will place bets between 2 intraday times such as 10.30am to 12.30.
There will be days when no bets are placed and other days where several bets are placed.At the end of the trading day the chart will appear on the PREDICTIONS page.The relevant technical levels will be marked on the chart together with analysis. (The times of these updates will vary)
More about my strategy
My basic aim is to keep trading simple and enjoyable.I love trading but i dont want to be watching the screen all day everyday because i am worried about my trade.I have to admit that i have made all of the trading mistakes under the sun.First i was undercapitalised,which meant trading with scared money.This lead to me taking profits too early and letting losses mount up (because i couldn't afford to take the loss)This in turn,lead to revenge trading and overtrading,trying to get my money back!.You can see how this is like a house of cards.I would trade well for a while but the demons would resurface and undo all the good work. My one saving grace was that each time i would stop,re-asess my strategy and try to work out how to maintain discipline.The most frustrating thing of all,apart from the fact that a lot of my losing trades went on to win after stopping me out,was the fact that my strategies were basically good and i still use them.I could read the market pretty well but the other issues were ruining everything.I finally got to the point where i was making some money consistently but i was finding trading stressfull, and i wasn't enjoying it.I guess i felt that it was only a matter of time until the demons resurfaced.So i quit while i was ahead and took some time out to think out a way forward without the stress.
My experience demonstrates that a traders worst enemy is himself.I now believe it's critical to know your own personality and find a trading style and trading instrument that suits YOU. Trading really small size (which you can do with fixed odds) eliminates the stress because you cannot lose much,you cant let losses mount up on a single trade.Let your edge play out and your account will grow,slowly at first but with your growing confidence you can increase your trade size.As soon as emotions are involved in your trading,clear thinking goes straight out the window.So, somebody else's trading style and killer setup is not the answer,its just a part of your research/learning curve.You must find your own niche in your own way.Also,there is no magic indicator that will work 100% of the time,so a certain amount of discretion must be incorporated into any strategy,and that means experience of your market. I have watched the market for god knows how many hundreds of hours and you build up an instinct,a feel for it that sometimes tells you NO! dont sell that head and shoulders today,its gonna break resistance.Dont go for the reversal today,support is not going to hold.
Ok,now you know a bit about my past,let me tell you how i plan my trade each day.First i decide that i'm not trading today.This might sound strange,but think of it this way.A gambler goes to the casino because he has to,its an addiction,a compulsion.I dont want to be a gambler,i'm a trader and there's a world of difference.I will trade if i see an opportunity,if i see a setup that im expecting to see.In other words, let the market come to you,dont chase it.The market is repetative,that means an opportunity will not be long in coming.You dont see crocodiles chasing their prey across the plains.They wait in the water,they know all the other animals will come to drink sometime.Trust me,less is more.One trade one winner is far better than three winners three losers for lots of work and no result.
(1) Predicted pattern
(2) Range
(3) futures
My strategy demands that i buy a low or sell a high into the close of market.So first i let the predicted pattern tell me what sort of day its likely to be.Its either going to be a trending day (up or down) or a sideways consolidation/distribution day.Dont misunderstand here,i will always trade what i see rather than expect the prediction to be a blueprint.- its just one tool in the box.I will look to see where futures are trading before the open to give me a heads up.If futures are positive expect the first move to be up,and if negative we should open down.If futures are trading flat then expect a quiet open.Range is important because although i'm not trying to pick the exact high/low,if the range is 40 points on average thats a massive difference to a daily average range of say 12 points.So in a 40 point range i wont be tempted to buy a 5 point drop (but i wont rule it out if its the right thing to do at that point) The range is likely to be smaller when the market is consolidating/distributing and larger when trending.I will also consider the general mood of the market,are we bullish or bearish?
(4) Advancing/declining volume
(5) Entry points-support/resistance,pivots and fibonacci
I try to stay on the right side of the market by keeping an eye on volume.If,for example,i expect a strong up trending day but we only see 50-55% advancing volume near the open,then perhaps we might hit resistance early on and spend the rest of the day trending lower.In that case the prediction could be an inversion.Thats one scenario,but of course adv vol might grow stronger as the day progresses and we keep going long.But what im really looking for is a key technical level that the market considers important and medium term support/resistance levels when they appear are very important.So taking that same example (a strong up trending day) if the market opens down and falls to a support level and adv vol is 55% i will be more likely to buy for a reversal.If the market is bullish generally,support should hold.If the market is sideways ranging generally,again support should hold.If its bearish though,i will look to go short where support becomes resistance.
Floor traders consider pivot levels to be important.Generally they will sell if price goes below the pivot and buy when its above the pivot.Pivots have their own support/resistance levels which are treated the same as you would any support/resistance level.One thing to bear in mind is that if the daily range yesterday was much larger than the previous day then the pivot maybe too far away from the current price to be considered relevant.You might find that R-1 (pivot resistance level 1) acts as the pivot.
On the S&P 500 you rarely find a day when the intraday high,low and close are not fibonacci ratios from the previous close or todays open.If the daily range is large you will be looking at bigger ratios.You will also find ratios connecting all the intraday highs.lows,opens closes if you study the historical data.Basically my entry point will be a fib or a pivot or a support/resistance level.Often these levels will coincide making the entry point stronger.For example if i'm looking to buy into the close from a support level that also happens to be a fibonacci ratio from the previous close(or todays open) that gives me more reason to pick that entry point.
WHY FIXED ODDS BETS?
The advantages of fixed odds bets are:
(1) You dont have to worry about the price swings after you enter a trade.This allows you to target an area in price and time terms without worrying about precision entries/exits. (Good for traders who tend to get stopped out on potentially winning trades or who take profits too early.In fact,if you have a good strategy you can be right more often for consistent gains)
(2) The risk/reward is fixed,so the most you can lose is your original stake.
(3) You can double your stake if you win-(I am using the DOUBLE UP/DOWN bet on BETONMARKETS (http://www.betonmarkets.com/) In fact that means the risk reward ratio is1:1 which means you must win more bets than you lose,which suits me but might not suit your trading style.But there are different types of bets available which have a different risk/reward ratio.
(4) Bets can be placed for as low as £5 / $5 (Simulated £10,000 accounts available to practice on) With this type of bet there is a 2.5 points commission added (approx) which just means that the index must close 2.5 points above your entry price (or 2.5 points below if you are selling short) for your bet to win.
A disadvantage with fixed odds is that you cant 'let profits run' as the risk/reward is fixed.
