Why this Stuff Works

In looking at a methodology, I need to understand the "why". There are so many ways of trading, time frames, "indicators", "Calculations" and so on, that a good understanding of the "why" makes it much easier to be disciplined and focused. It is fundamental for me to have confidence in my methodology because sometimes I go through a draw down period that is hard to sit through. Knowing the "why" makes it possible to trade through those periods.

What I do has three very simple components. Many of you have successfully duplicated what I do through the necessary work. I don't answer detailed questions about all the setups and things as I believe that unless you work them out by reverse engineering the trades shown in the blog, you will never "own" the methodology and have the confidence in it that is necessary to become CP.

The three legs to my stool are Support and Resistance, Order Flow and Money Management.

Support and Resistance can be a very subjective thing. Some work sometimes and some don't. Having a lot of them is only confusing and makes me lose confidence in them. For this reason, I only use the EMAs and the Market Profile for Support and Resistance.

When I am at such a Support and Resistance, I examine the Order Flow - it's direction and strength. Will it hold or break?

Finally, my money management strategy. I put a multi-contract position on. I have no idea how far the trade will go, so I begin taking profits at logical scale out points. If I see evidence that the order flow has run out of steam, I exit the trade in full.

This has proven to be the way that suits me as it provides a high win rate and the possibility to profit from larger moves.

Early post today and no chart because Mrs. EL and I are off to Amsterdam on a horticultural expedition................... to visit the Keukenhof Tulip Festival. The computers will be churning all weekend under Kiki's supervision ready for Monday's live real money test start, I hope.