Some will know I am not a keen forex trader as things stand presently. This is mostly because I started trading on the FTSE 100 index and have not really dabbled into other markets on the whole.

I am constantly surprise how everyone wants to trade the FX markets. Firstly I am always met with the argument that the FX market is the most liquid in the world. It is true that the forex exchange markets turnover near $4trillion a day. However, I am not sure that when it comes to day trading or swing trading liquidity is a major factor.

At the end of the day liquidity only matters when a) the market does not move enough to make a profit and b) when liquidity issues prevent you from entering or exiting a position efficiently. Neither of these are a factor in fx or in major index futures.

I think the real reason why people choose to trade FX is that it’s generic across the world. Indices are often country specific and offer no interest to some traders if they are not in that country. Forex, however, effects every nation and exchange rates are a common denominator between them.

The second argument for trading foreign exchange seems to be the notion that it trades in a bigger range than any other market on a daily basis. A bigger range, in theory, could mean more trading opportunities. For me this is all relative.

As an example, the FTSE 100 futures and USDGBP both have daily range which is about 45-50% of the weekly range. Naturally some would say that cable has daily range (currently for the last few months) averaging around 251 points a day and the FTSE only 100pts. However it’s all relative. The spread on the FTSE   is usually 0.5pts where as cable often has several pips for it’s spread.

If one could trade the FTSE at a smaller decimal level, say to one decimal pace, the daily range would be 1000 points with a spread of 5pts. Doesn’t look so small when viewed that way. Even on a tight range day of 40pts that would equate to 400pts.

The only real difference between the two is that you can trade small fractions in one compared to the other. This difference can be eliminated by varying the trade size. 1 contract on the FTSE would be roughly equivalent to say £5 per pip on cable. Obviously the greater the daily range of a trading instrument the greater the potential profit but also the greater potential loss. So if you multiply the daily ranges of the FTSE 100 and USDGBP by the suggested trade sizes you will see that the potential profit and loss over a daily range is the same.

This is why I do not consider one to be better than the other. Obviously if you are trading on a tight budget and can’t afford one contract on the FTSE futures then maybe fx is the way forward. However, with spread betting firms offering £1pp trade size on index trades these days it has become less of an issue.

Naturally, one might prefer to trade forex because simply they can trade the movements better than they personally can on another market. And I totally accept that. What I do reject is the notion that trading foreign exchange markets are better because they are more liquid and have bigger trading ranges. In my opinion those issues are non-issues and are just based on math manipulation.

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Here is my own Dax mechanical trading system I wrote late last year (2008). Very similar to my Hooya bands concept.

Enjoy

Dax 25 is a very straight forward mechanical trading system that allows the trader to place a order to buy or sell with both stops and limits in place and leave the position in place until end of day. It is called Dax 25 because is uses both a 25 point stop and a 25 point limit. This gives the system a 1:1 Risk to Reward ratio, which along with the positive strike rate is how the system is profitable.

Below outlines the simple steps of knowing which orders to place and in which direction:-

Trading Dax 25

Step 1
Identify the open price of the Dax index. This is shown on my charts below as white line. This is probably most key part of the system as you need to make sure you have the correct price level.

If you are trading using spreadbetting do not use the price quoted by your SB at the open as this will not only be based on futures prices but most likely will not show the first tick of day on the index which is what we need to determine the actual open price level. Best to use a Dax chart from a metatrader supported data feed.

Step 2

Once you have the open price level. Calculate two new price levels, one at Open Level +25 points and the other Open Level -25points. Thus in essence you have two bands 25 points away from the the open price level. Now you have all 3 price levels you need to trade.

Step 3

Assuming the market is open and you have your price level bands, you now wait for one of the bands to be hit. This usually happens within the first hour of the session so be ready for it.

Once a band has been hit we move to place our orders. If the lower band has been hit we place a buy order at the Open price level and place our limit to close for +25 at the top band and place our stop at the the lower band.

If the upper band has been hit we place a sell order at the Open price level and place out limit to close for +25 at the bottom band and place our stop at the upper band. So the we wait for the price to return to the open level to open a position.

Once in a position do nothing. Leave the orders to play out. There will be quite a few days where your orders don’t get triggered to open a trade, just make sure you cancel them at the end of day or if you have option with your brokers/ SB provider, make sure they are only good for the day and get cancelled automatically.

Also you need to check back at the end of day to make sure that you are not in a position that has not been stopped or limited out. There are only a few days in the sample period where this happened but best to check. Again your initial buy/sell order maybe able to be placed with a close at the end of day instruction but that will
depend on your provider.
_______________________________________
So that is it. A very straight forward trading method which is easy to trade and which does not require any decision making on when to open/close a position. Below, you can see two actual trades and the trades that were triggered and how they were closed out.

Chart 1 shows a trade that was triggered to buy the open price level with the trade being closed out for 25+ points profit.

Chart 2 shows a trade that was triggered to sell the open price level but which was stopped out for -25.

Chart 1

Chart 2

There are two things I would like to highlight. Firstly is, that as it is a mechanical system any changes you may make to it, like deciding to close a trade early, will effect the outcome of the system as a whole. By all means take the idea and play with it and change it if you wish but the results suggested are based on a trading it as it is above.

Personally, I am currently looking at increasing the limit target to 30pts and also taking a second trade if stopped out. Although I do not have the stats on this at the moment, it might be something you might want to look into.

Secondly, is the old adage of only trade with what you can afford to lose. Despite what some people would like you to believe trading by nature is a game where you are exchanging money for risk. If you do not want to take on the risk do not trade. I have traded in one form or another for the last 6 years and my eyes are wide open to the risks involved. Make sure you are. This system whilst profitable at the moment may not be in the future. There are no guarantees in this game. The reason why I like to trade these mechanical type systems is that they are relatively consistent over a basket of trades but you have to be able to ride out the bad times as well as the good
one. So trading full margined on each trade for example will not result in a happy ending.

I hope I have shown you a simple way to trade and wish you all the best in your trading.

Here is an MT4 indicator for the three lines needed for the DAX 25 Trading System
_________________________________________________________________
Please be aware you use this system at your own risk, it is for information purposes only and forecasts are not a recommendation to buy or sell a stock, index or future contract. The decision to trade this system is yours and yours alone. At no stage will I be liable to any profits or losses you make in your trading.
© 2008

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Are you kidding?

Why are some of the Original Turtles giving away Rules for which others have charged thousands of dollars? Are these the actual Original Turtle Trading System rules?

You probably asked yourself the same questions: “Why would anyone give away the rules to the original Turtle Trading System? How can I be sure that these are the original Turtle Trading System rules as taught by Richard Dennis and William Eckhardt?” The answer to these questions lies in the origin of this project.

The Origin of the Free Rules Project

This project had its seed in various discussions among a few of the original Turtles, Richard Dennis, and others regarding the sale of the Turtle Trading System rules by a former turtle, and subsequently, on a website by a non-trader. It culminated in this document, which discloses the Original Turtle Trading Rules in their entirety, free
of charge.

Why? Because many of us believed that we owed an obligation to Richard Dennis not to reveal the rules, even after our contractual 10 year secrecy pact ended in late 1993. For this reason, we did not look kindly upon the sale of those rules by a former turtle.

Further, we saw the sale on the web site as crass and opportunistic intellectual property theft, an act that, while technically not illegal, was certainly not honorable.

At the same time, having seen others try to follow these rules first-hand, I realized it was unlikely that their publication would result in very many people actually learning trade like the Turtles. In fact, I knew that most of those who spent thousands to learn these heretofore secret rules would end up disappointed, for three reasons:

• The rules wouldn’t be clear, since the people selling them didn’t know how to trade.
• Even if they were clearly presented, the buyers probably wouldn’t be able to follow the rules.
• Most of the Turtles are now trading even better rules.

Continue to read the full article Click Here.

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Author: Phillip Hatley

I have been approached by many people wanting to get into day trading. I would say 95% of the people I talk to do not have the funds available to meet the day trading requirements. A minimum account of $25,000 is required at most brokerages.

There is a way for someone to experience day trading without having to come up with a large amount of cash. E-Mini future trading allows you to trade with amounts as low as $1,000. Most firms though require you to have at least $2500 to fund the account. I would really recommend $3,000 to start to give yourself enough cushion.

Trading the E-Mini Dow:

The brokerage house I use is MB Trading , and for this example I will use their requirements to help you understand the concept.

E-Minis are traded in contracts and each E-Mini has its own symbol which trades just like a stock. The Dow E-Mini is like watching the Dow Jones Industrial Averages (DJIA). You know that big number you see every night on the nightly news. Today DOW is 12,270 etc.. The Emini future trades just a few points ahead of that number but trends up and down right along with the DJIA.

To buy 1 contract you will need $1752 in your account. The broker will hold $1752 of your $3000 in order for you to buy that contract.

Each Contract trading the DOW Emini will make $5 a point for you, so every point the Dow Future moves in your favor, you make $5.

Example: Lets say you bought one contract to go long (you want it to go up), at 12,270, if the Dow-Mini then runs up to 12,300 and you sell the end results is 30 points.

That is 30 points x $5 = $150 profit to you. The broker charges $2 to buy and $2 to sell a contract. End results is a $146 net profit.

Now if you bought 2 contracts you would then just double the results above. But remember to buy 2 you would then need $3504 ($1752 x 2) in your account to control those 2 contracts. You can also short (this means your playing the emini to go down) as well.

Today I bought 2 contracts during the day and I made 100 points on them. I made $1,000 in little over 2 hours. After commissions I cleared $992, which is not bad for a days work.

You can trade the e-mini gold which pays $33 a point and you only need about $600 per contract to trade it. Nice leverage! You can also trade the NASDAQ, S&P 500, Russell 2000, Oil, Euros etc all with different payouts and contract minimums. Happy Trading.

About the Author:

Phillip Hatley trades the Dow Emini contract daily. Please visit his website for more information on trading the Dow Emini.

Article Source: ArticlesBase.com – Day Trading The Dow Emini Contract

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This was the basis for my mechanical intra day trading systems that I used a few years ago.

The only reason why I stopped using it was that it went into a phase where it was breaking even and as I need to generate some income from my trading I had to return to discretionary trading.

The reason why it went into break even mode, in my opinion, was due to the volatility created by the recession and the banking crisis. This resulted in a lot more breakeven trades becoming losers and winning trades becoming break even trades.

The chart set up is very simple. You can either manually mark the levels on your charts or if you are using metatrader you can use the indicator below to add to your charts. It is just and edited pivot
level indicator.

Hooya Bands

This was a FTSE 100 futures trading systems but I am sure one could adapt it for their own preferred market.

At the open a line is placed at the open price and several lines are place around it as follows.

So you would have lines as follows:

(P)=Open Price
(P)+20pts
(P)+30pt
(P)+35
(P)-20
(P)-30
(P)-35

The Way To Trade These Bands

There are a maximum of 2 trades in a day.

1)You take the first trade in your chosen direction (we will come back to this) at (p) with a stop at -20pts and a target at +30pts.

2)Then you wait.

3)If your trade goes 20pts in profit you move your stop to break even at (P).

4)Then you wait until your trade is stopped out for 0 or +30.

So, in short, your trade will either be stopped out for -20, 0 or +30 on the first trade.

The second trade is triggered if your trade has been stopped out for
-20 points.

All you do is wait for it to touch the (P) line again and you enter in the opposite direction to which you were stopped out.

This time you are looking for +35 limit target. Again if you get to +20 you move your stop to evens at (P).

This is the standard second trade and combined with the first trade it was the “system” as I traded it.

However, the next two options, depending on the outcome of the first trade, could also be taken.

1)The second trade can also be taken if you have closed your first trade for +30. Again waiting for the price to cross the (P) line. Stops and limits are the same as the basic second trade.

2) If your first trade has been stopped for evens it is best to wait for the next 20pt band to be hit and then wait for the a reversal through the (P) line before taking the next trade with the limit target still being +35pts and stops moved to evens after 20 points.

It’s a very basic system that works on the simple premise that you win more when you win than lose when you lose. This means that you only require an even strike rate (or slightly less) to generate a profit.

The hardest thing about the system is deciding which direction to take the first trade at the open. The main thing with this is that you want to choose a method that is consistent and produces a 50/50 or better
strike rate. For me, I created a direction indicator in excel with OHLC data that used a formula like:-

“if yesterdays high is greater than the previous days open and yesterdays close is greater than previous days low then Long; if not then short”

Although that is not exactly what I used, you get the idea. You can then back test a basket of 100 trades of the first entry method
and see what strike rate you get. Most likely it will be 50:50. If :60 then just reverse the “then long” to “short”. But in my opinion, what ever the case, I think the strike rate will average out around the 50% mark anyway so don’t worry too much. If you get a strike rate around 70% you will love this method.

And that is pretty much it.

Below are a few example of the trades mentioned above.

Chart 1

If you were signalled long at the open you would have got your trade to break even. You would have been stopped out for 0. And you would not have been triggered into a second trade that day

Had you been short at the open you would have been stopped out for -20 on the first trade and then triggered short again at (P) and your limit would have closed your position for +35.

Chart 2

Short on the first trade would have you stopped out for evens and long would have you stopped out for -20 on the first trade.

Had you been long your second trade would have been 0 so you would have ended up with a loss of 20 points for the day.

Should you have been short you would have been entered short again
on the second trade and closed for +35. Combined with the breakeven first trade you would have made a total of 35 points for the day.

Ultimately this system works because it is based on sound maths. Evens strike rate + a great win to loss ratio will alway result in a profit or break even over a given time.

I traded this system with 1 Futures contract per trade and managed to increase my account but 30-40% over a few months, although I was trading a large % of my trading capital.

But there is definitely plenty of ideas for you to work with. You may discover such a good entry method that you only need to take the first trade.

If you have a go a creating your own method based on this do leave a comment and let us know how you are getting on with it. I would however suggest that before you start trading live do back test (by hand) at least 100-200 trading days before you use real money on this system. It requires confidence in the numbers to walk away and not close out trades before it is time.

The hardest thing about this system is getting the open price. Sometime you do miss a trade but it often evens out that for every winner you miss you miss a loser too.

Good Luck

Jason

This Page and the information contained is Copyright © 2009 by Jason Kelley and www.greattradingsystems.com

 
If you would like to reproduce it just leave a comment that you are and where it is going and copy the whole content including the web link.

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Here is a nice little trading system (method) I came across a while back on one of the many trading forums. It has 3 easy to follow steps, clear chart examples and only requires a basic chart with the option of 3 time frames and a moving average. Nice and simple in my opinion.

I have included the author,Andy Perry’s link at the bottom so you can take a look at some comments on his site. If anyone has any comments to add here feel free to do so.

Firstly I would like to say, I did not reinvent the wheel with this system, I have just added one or two ideas to a 60 period simple moving average (sma) to make it my own and named it “The 3 Duck’s Trading System” for obvious reasons as you will find out later on. The system is fairly straight forward and easy to use. Like a lot of trading systems it will be more productive when prices are moving in one direction and not stuck in a tight trading range. Of course this system has losing trade and losing runs, but with proper money management and good discipline I’m sure this system will keep you out of bad trades and give you a great chance to make profits in the Fx market. One of the nice things about this system is it will quickly tell you if prices are in an up or down swing phase and stop you from guessing! It will also allow you to decide to be a bull or a bear and trade in the direction of that trend. There are 3 charts involved in this system: a 4hr chart, a 1hr chart and a 5min chart. There is 1 indicator, a 60 period simple moving average (60 sma) plotted on each chart. There you go, its that simple. How it works: Step 1 – First Duck The first thing we need to do is look at our largest time-frame (4hr chart) and see if current prices are above or below the 60 sma. From this chart we can see that current price is below the 60 sma. This tells us that we maybe looking to sell. Step 2 - Second Duck The second thing we need to do is drop down to our 1hr chart. We need to see the current price below the 60 sma on this chart also, this gives us confirmation. Important: If the current price was to be above the 60 sma on this chart we could not move on to step 3. Step 3 – Third Duck From step 1 and 2, current prices need to be below their 60 sma’s on each chart. We are now on the 5 min chart and we are looking to sell when price crosses below the 60 sma. For extra confirmation we should let prices break the last low on the 5 min chart. This would mean that prices will be below their 60 sma on all 3 time-frames, therefore all 3 Ducks are lined up in the same direction. Stop-Losses: This is where you can make this system your own. If you are a short term trader you may want to put your stop-loss above the highs on the 5 min or the 1 hr chart. If you are more of a positional trader you may wish to put your stop-loss above a high on the 4 hr chart. You could also use a fixed stop-loss, maybe 25-30 pips or more from entry. It all depends what type of a trader you are, so you decide! If you are a longer term trader or investor, this system can help you get a good entry point into the market. Another “trick” that may help you preserve capital, If you do sell and prices get back above the 5 min 60 sma by 10 pips (not a good sign) you may want to cut your losses short before your stop-loss. But if you are a longer term trader this may not be a big deal for you. Targets: Same again, depends what type of a trader you are but target can be support or resistance levels. Summary: The above example was carried out when the gbp/usd was trading lower so obviously we where selling – the system works just as well for buying opportunities, just look for prices to be above the 60 sma on all 3 time-frames, starting with step 1 again. I like this system a lot as it does not try to out-guess the markets movements and pick tops and bottoms. The system will quickly tell you to be a buyer or a seller. Its a good honest system that tries to follow prices. This system works better on currency pairs such as the Eur/Usd and Gbp/Usd, but there is nothing stopping you from plotting this system on any pair, but as we know some pairs act differently to others. The best time I found for trading this system is the European and US sessions. I lke to use this system as a guide in addition to my own market knowledge. Take care to watch what is going on around you – economic new releases, holidays etc. Good Luck with the 3 Duck’s Trading System. Captain Currency. Read: What Traders are saying about The 3 Duck’s Trading System © Copyright Andy Perry 2007, all rights reserved.

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The 1 day moving average came to light a few years ago on forum on which I was one of many traders. Whether others (other than those on that forum) used it before or not I do not know but I do know it was the place I heard about it first.

The 1 day moving average is exactly what it says it is; a moving average (simple) that covers the total period of one trading day on any given index.

With the introduction of 24 hr markets and markets having extended hours it seems more appropriate to use the 1 day moving average on the index charts rather than the futures as these have quite strict trading hours where most of the volume takes place.

So how do you calculate a 1 day moving average? Simply take the total number of minutes in a trading day. For example, the FTSE 100 index opens at 8:00 and closes at 16:30 which is a total of 510 minutes. Then you divide that by the chart period you wish to view. So if you want to view a 5 min chart you will need 510/5=102. That will be the number you enter as the moving average period settings. Obviously if you wanted to view it on a 10 minute chart you have doubled the time so you half the Ma length which would now be 51.

The 1 day ma will look slightly different on different time frames due to difference in how often the ma is updated. But all in all they will show the same information.

So how do you trade the 1 day moving average? The 1 day moving average is certainly no holy grail. In fact it takes a bit of time to see how the price behaves around it. The real issue is that different markets, on a day trading basis, do different things. They are different in the ranges they form, the speed of impulses, some like to retest broken moving averages some don’t. For those reasons the “way to trade the 1 day” methods I list below are what I have specifically noticed on the FTSE100 index. Some will obviously translate to other indices but some won’t.

1) A broken 1 day ma likes to get retested. Thus if the ma has just been breeched, jumping on in that direction at that point is not a good idea.

2) The 1 day ma is a trend indicator. So if the price is under the 1 day ma I would be looking for short trades rather than long trades, and visa-versa.

3) If under the 1 day ma look for impulses downwards and corrective 3 way moves back towards the 1 day ma.

4) The 1 day ma will usually get tested at least once a day.

5) If the price is more than 100pts away from the moving average expect price to chop sideways or correct back towards to the moving average. They will often nearly meet towards the afternoon session if this distance is caused by a gap down at the open.

6) A corrective retest of the 1 day ma will usually bounce back off it the first time or maybe have a little false break through then retreat. However if there is a second attempt expect it to go further through than the first time.

7) Watch out for the two or so sessions every few weeks where the price chops about the 1 day ma. This most likely means we are in a correction and the price will continue in the current overall trend.

Those 7 methods can help build a decent trading picture and keep you on the right side of the market more often than not. It will also help you know when a slow correction might be forming and you can decide if sitting at the trading screen is going to worth it.

It does take a bit of time to learn how the 1 day moving average moves around the price of your chosen market but I think it certainly is worth having on your chart even if you only look at it once a session just to gauge whether it is above or below price. It attracts price but it also repels price. So there is always something happening around it.

Take a look for yourself.

Check out How to trade the 1 day moving average- Part 2

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The concept of Market Profile has been promoted most effectively by J. Peter Steidlmayer. In his excellent work ‘Mind Over Markets’, Steidlmayer explains why he thinks Market Profiling is so unique. I have found it useful myself, of course, and offer here a quick overview in case you find the topic stimulating.

Central to Market Profile theory is the concept of the ‘Value Area’. This is a continuous slice of the days’s action that holds a standard deviation of the market activity (i.e. roughly two thirds of the day’s action is confined to within this area). The Value Area is determined in advance based on yesterday’s action, and can be large or small, depending on (upon other things) volatility. Markets have 2 kinds of stock trader – the short term (locals or ‘day frame’ participants) and long term (other frame) participants. To consistently make money, it is usually wisest to prepare to align with the other-frame buyers/sellers, no matter which side is actually winning the battle on a particular day. On a day when there is no strong other-frame conviction present, price is likely to rotate up and down in an essentially random support/resistance mode. The trick is to be able to determine who (if anyone) is in control, and when that control is faltering or even reversing.

There are 6 ‘types’ of day identified by using the Market Profiling technique.
* Normal Day – Not as common as the name might suggest. Typified by early entry of other-frame buyers or sellers creating a large initial price range. The action then wanders back and forward during the day in standard auction fashion as buyers and sellers struggle to get the upper hand.

* Normal Variation on Normal Day – Less extreme initial price action, as if the other-frame buyers/sellers are waiting and watching in order to build their conviction. Then the market mnakes a more dramatic move followed by standard 2 way auctioning to the close.

* Trend Day – One side of the other-frame is in control right from the open, and for the whole day. A succession of higher highs/lower lows forms. Experts at www.traders101.com have determined that this day type shows a high level of directional confidence throughout the day. The initial range is often narrow.

* Double Distribution Trend Day – This is a variation on a trend day. Looks similar to a normal variation on a normal day, except more time is spend wandering in the first range while the other-frame buyers/sellers build up conviction to make the market move. Something ‘changes’ mid session to cause a change in conviction – perhaps insider news or a report.

* Non Trend Day – Often looks like a Trend day at start (narrow range). Then meanders with no conviction in a range bound area. Often seen before a big news announcement as the market waits to see whether it should jump up or down.

* Neutral Day – Like a non-trend day, except other-frame buyers and sellers are active, they just happen to agree on value (broadly speaking). Traders at www.traders101.com say this day type is characterized by range extension beyond the initial balance during the session as the two sides test the edges of each other’s tolerances. Has 2 variations – “Neutral Center” in which price closes near the open (no resolution between buyers/sellers), and “Neutral Extreme”, one side wins, closing either up at the top of the range, or down at the bottom.

The Open often tips the Market’s hand as to what sort of day this is going to be (other things remaining equal). Four types of Open can usually be detected in any Market:-
* Drive – This is the strongest and most definite type of Open. Usually caused by other-frame buyers/sellers reaching strong conviction before the market opens. From the very start the market will auction aggressively in one direction and is unlikely to come back and test the opening range at any point. The initial large move happens in the first time period, i.e. the first half hour, but other large moves may happen later. Generally indicates a Type 3 Trend Day or a Type 2 Normal Variation Day. This Open type is uncommon.

* Test Drive – This Open starts in a similar way to the Drive Open, but stops and reverses. The market is taken lower to go higher or vice versa. The initial large move and reverse back past the Open happens in the first time period, i.e. the first half hour. This is caused by other-frame buyers/sellers wanting to test a previous support/resistance to ensure there is no remaining business there – when this has been confirmed by price rejection, it will roar off the other way. The extreme that has been tested has slightly less chance of holding than the extreme set at the start of a Drive Open, but is still strong. Generally indicates a Type 3 Trend Day or a Type 2 Normal Variation Day, obviously trending in the OPPOSITE direction to the Drive Day type. This Open type is uncommon.

* Rejection / Reverse – Like a test drive, but the initial large move and subsequent reversal take longer to develop (i.e. more than the first half hour). The initial extreme is only likely to hold during the day about half the time. The participants are less convinced than in Drive or Test Drive Opens, and the counter buyers/sellers effectively enter ‘late’ to force price to reverse. Indicates a two-sided trading day, i.e. low probability of a trend day, and that the initial extreme may be re-tested. Generally indicates a Type 1 Normal Day or a Type 2 Normal Variation Day.

* Auction – This Open falls into 2 subtypes, although both look like a market with no firm conviction in either direction. In the first subtype, if the market opens within the Value Area of the previous day, a non-convictional day is likely to develop, as market sentiment remains unchanged from the last session and other-frame buyers/sellers are not strongly present. Any extremes established early have a LOW probability of holding. Usually a Type 1 Normal Day, Type 4 Non Trend Day or Type 5 Neutral Day will develop. If on the other hand the Open is “out of balance” (i.e. outside the previous day’s Value Area) then a “big Day” is likely. Although it may appear to be wandering randomly, the mere fact that the Open was OUTSIDE yesterday’s Value Are suggests the activity of strongly convictional other-frame buyers/sellers. Usually a Type 4 Double Distribution Day will develop.

Relationship of Open to Yesterday’s Range
The Open in relation to yesterday’s range can give valuable clues as to today’s expected range. A Market that opens within the Value Range is generally in balance, and awaiting new information.

The Market can open in one of 3 ways, each of which can be accepted or rejected by the Market.
* Within yesterday’s Value Area – If the price auction spends more than 1 time period within this area, it tends to indicate an acceptance of price, i.e. balance. Range will most likely be similar to yesterdays, with one extreme forming the end to measure from. As long as the extreme holds, the range to the other end will probably be similar in size to yesterday. If the Open is rejected, i.e. it moves in the first time period beyond yesterday’s entire range, there is no way of telling how far it may go in the initiative direction.

* Outside the Value Area, but within Yesterday’s Range – Not quite as balanced as #1, but still relatively balanced. Likely to produce a range similar to a #1, but offset either to the long or short side. As in the first case, if the Open is rejected, i.e. it moves in the first time period beyond yesterday’s entire range, there is no way of telling how far it may go in the initiative direction.

* Open Outside of Range – Conditions have changed and the Market is out of balance. Other-frame buyers/sellers can often make the Market move substantial distances in short times in the direction of the initial break out WITHIN 1 TIME PERIOD. Alternatively, price may auction around the new level (typically for more than 1 time period), and has unlimited potential in EITHER direction. A trend day (3) is likely to develop from this. If this Open is rejected, and price moves back into yesterday’s range within the first time period, there is unlimited potential in the OPPOSITE direction to the initial breakout.

My own feeling on this is that any interest in ‘Market Direction’ is wasted effort – watch for strong penetration or confirmation of major support/resistance – if you see it, go with it. Expect trouble at the NEXT level of support/resistance, and be prepared to jump off if it turns against you. Major support/resistance = pivot/sr123, or anything that develops during the day (e.g. the close, the high low, the fibs, whole numbers, last week’s high low – LET THE MARKET TELL YOU WHERE the levels are!).

It is probably wise to stay out of: –

* Non-trend days – The day’s range is small. Activity is scarce. Go home.
* Just before a News Day – Big News can screw up a market – witness the 150-point jump either way in the Dow in 3 minutes on news of a large interest rate cut in November 2002. Keep an eye on the calendar and go flat a safe distance before a news announcement.

General Rule – Have Patience! If the market is meandering, WAIT for real activity. Never trade because you get bored.

This article courtesy of http://www.traders101.com.

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This system is called Prada. You would have to visit the trading forum on livecharts.co.uk to understand why it was called that but lets just say someone likes her shoes.

As a simple indicator based method Prada came about out of a discussion between traders as to whether one should trade the MACD and more importantly was any profit made from trading the MACD indicator down to the indicator or trade selection.

The rules are very simple

1) Select a 5min index chart
2) Add MACD and Parabolic SARs indicators (standard settings)
3) First trade is entered when MACD crosses and is obviously taken in the direction of the cross.
4) Stop is set to and moved with the SARs indicator
5) Trade every MACD cross taking profits either at the next cross or closing when price hits the SAR (which ever is sooner)

That’s it in a nutshell. I will post below some charts of the same day on different indices using this method.

As you can see the FTSE did not perform very well on this day. However, having suffered so many losses to end up down only 19pts isn’t too bad. That could have bee reduced and maybe turned into a profit had one used the SAR as a trailing stop but a points target to lock in profit. Also it is worth noting, some days on the FTSE are very trending which is obviously benefit this trading system.

DAX Chart to follow…..

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Having traded through direct access for the last few years I can thoroughly recommend futures trading. Whilst, like most, I started trading via spreadbetting I am not sure I would every go back to it now. The benefits of futures trading seriously outweigh those of spread betting for my situation.

Spreadbetting is in comparison expensive. Even with a company that provides 1-2 point spreads, per £10 a point trade, say on the FTSE 100 futures or index equivalent, you will be spending up to £20 on the spread (per round trip) whilst with direct access that cost will be down to less than £5. The other common issue with spreadbetting is getting decent fills. With direct access contract fills are instantaneous.

The main attraction of spreadbetting over futures trading is that currently in the UK it is deemed as tax free. However, there are some notes on HMRC about this which imply that it depends on what kind of trading you do and such like which suggest that it depends on the individual circumstances whether it is tax free. Trying to get a firm ruling from the HMRC on this has not been possible so far. But for most people it will be tax free.

However, using direct access futures trading instead does not mean you are wasting away your profits to the tax man. Whether you choose to trade as a small business or as an individual you will probably not start to pay any tax until way past the £10k profit mark. And even more if you start to discount costs. If you work out how much you would have spend in “spread” via spreadbetting to earn that much you will soon see direct access futures trading may be the path for you.

But obviously it depends on your circumstance to which suits you. The problem with DA trading is that you can only trade in whole contract sizes which obviously require a bigger deposit. Spreadbetting you can start from as little as a penny per point which makes it great for when you are just starting out.

I should add one thing. If you are not profitable trading via spreadbetting then changing to direct access market trading will not make you suddenly a winner. It doesn’t work like that. It just makes the whole trading process more efficient in my opinion.

I will be posting up some links to futures brokers and spreadbet providers in the near future which I hope will be of some use to the readers. Obviously some of the trading systems out there are futures trading systems so you may need to investigate various brokers if you are to go down that route.

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