Wednesday, 4 April 2012

Anatomy of a Trade

There was a very nice trade today I thought I'd describe in a little more detail than usual.

DAX opened in a downtrend. I had a nice trade and was looking for a pullback for another. It came pretty quickly.

The 33EMA was resistance and everything showed a downtrend increasing order flow south.There was a small pullback after the market had been oversold. I ignored this trade as I expected the oversold condition to need some sideways movement to shake out.

In fact, there was another pullback resulting in nice 6 CCI divergence and this was my second trade that I held until the first green brick with 63 CCI divergence.


  1. Entries are easy. Exits are hard.

    When I wait for a clear change of momentum to see that I'm wrong on a trade, by then I've often lost 4-6 ES points. That wipes out a lot of profits. And a losing streak of 3 wipes out an entire week's profits when trading for a 2 point profit target. I have no trouble getting 70% winning trades, but can't make a profit because I lose so much on my losing trades. Any suggestions on exit strategies?

    1. Anon, perhaps you should reconsider your statement that entries are easy if you are going for 2 and giving up 4. Maybe your entries are so far off that you're on the wrong side.

      Why would you give it 4 for 2?

  2. Anon 08:00, By backtesting, find out what is the max target that gives you the win rate you want. Then backtest stops and work out what stops you need to achieve that win rate and profits. Often tighter targets and wider stops are the answer. Backtesting over, say, 6 months will give you some answers. Also, maybe more aggressive entries will give you an extra couple of ticks. Again, backtesting will tell you.