Five Basic Patterns
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Five Basic Patterns with Trade M Management t Strategies St t i Copyright © 2009 Linda Raschke and LBRGroup Inc.
LBRGroup.com
Copyright Notices •
This presentation is copyrighted: © 1996 – 2009 LBRGroup / Linda Raschke. All Rights Reserved.
•
Certain chart images are copyrighted © CQG
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
2
Basic Patterns: Corrective A-B-C Simple bull or bear flag (retracement in a trend) Failed A A-B-C B C (trend reversal) Momentum Divergences in range Breakout from converging trendlines
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
3
STRUCTURE Structure dictates the context for a trade setup or chart formation. Elements of structure consists of: 1 Sideways 1. Sid lines li ( l known (also k as “value “ l areas”, ” “trading ranges”, or accumulation/distribution) 2 Length of a swing – indicates momentum or 2. lack of momentum. 3 Previous swing highs or lows – sets up 3. structure for retest functions. These most visible chart ppoints indicate where pprevious buyers y or sellers came in. LASTLY: is there volume or is it a noise environment! Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
4
TRADE functions: f ti Entry Method: Limit orders, market orders, buy/sell stops…or p a combination of limit order with stopp entryy also known as OCO (One Cancels the Other) Initial stop placement: fixed stop amount such as dollar function or ATR function function, Chart reference point such as absolutely swing high or low or a few ticks beyond. (not ggoingg into time stops for this presentation). ) Exit Strategy: Small target (.5 – 1 ATR), large target, Trailing stop, scale out function. Large target or trailing stop function should be used when there is expectation of Big Win. We will go over the patterns that lead to Big Win.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
5
Bunds….active rhythmic market with volume. Chart formations are “pleasing”. Breakout from converging trendlines and Power Buy (A-B-C)
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
6
Canadian Dollar: illiquid noise market
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
7
Sideways line - Lower high - Simple bear flag The first flag after break from sideways line – play for bigger target. All other simple flags – small target only.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
8
The power of the sideways line followed by new momentum lows. The first short op may have gotten stopped out but there was no lower high in place yet. A certain % of trades will always y gget stopped pp out due to human error, market noise, or lack of follow-through.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
9
Bear flags late in the swing: small target ONLY.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
10
Corrective A-B C or “Power Sell” in a downtrending market. Note momentum move after break from sideways line. Play for new lows.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
11
Corrective A B C or “Power Sell”. The first is at the end of a swing. The second comes after a fresh break from a sideways y line.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
12
“Failed” A-B-C or trend reversal point. Trail a stop.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
13
Momentum Divergences in a Trading Range
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
14
Momentum divergences are best for entry into corrective swings not for fading the main trend swings, trend.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
15
Breakout from converging trendlines (wedge): Trail Stop
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
16
Upside breakout from sideways line: Get the trade on. Trail stop.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
17
SP E mini 800 tick chart – “structure”
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
18
SP E mini 800 tick chart – resolution!
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
19
Buy Anti vs. Buy Div……both play for fixed small target only. both must use tight absolute stop.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
20
U-turn follows “Failure Test”. Overall structure is downtrend. (note a b c up is corrective)…Trade management – absolute stop at high, scale out.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
21
Daily EC: Failure test followed by U-turn. Aggressive traders enter on lower high, conservative traders enter on sell stop. Scale out to take profits. Stop at absolute high
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
22
Trade Management is an ACTIVE process. Pull your stops down when the trade starts to work….take your bid to the market if the price is falling short.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
23
No perfect way to trail a stop. Tighten to just above the high above the previous swing high.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
24
5 Basic Patterns: Corrective A-B-C: enter after you see your stop point, Play for big win (more then 1 ATR) or new highs or lows, if in trending market. If in range, scale out for small win. Simple bull or bear flag (retracement in a trend): Enter with limit order or market order, play for small win (.5 to 1 ATR) F il d A-B-C Failed A B C (trend (t d reversal): l) Enter E t on buy b or sellll stop, t play for big win or trail stop. Momentum Divergences in range: Enter with limit order or market order after market turns, scale out. Breakout from converging trendlines. Enter with buy or sell stop or market order order, trail stop or play for big win. win Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
25
Damon Pavlatos FuturePath Trading Summary of what I learned over the last 30 years as a Trader and from working with other Professional Traders
• • • • •
Common mistakes made byy even the best How to manage risk Keeping your focus on the real market Making a plan or strategy and executing it How to maintain the edge as a trader
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
26
This is a basic Trading Page that consists of a trade matrix on the left and on the right stacked horizontally starting from the top there is a quote box, open orders, executed orders market depth and P&L windows. orders, windows
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
27
Multiple trade matrix's. The lower right onw shows open OCO orders.
• ..\My \My Documents\screens\hotcom5 Documents\screens\hotcom5.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
28
OCO’S showing on the charts and on the Matrix simultaneously
• screens\cqg rol 3 3.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
29
When to use bracket orders
• ..\My \My Documents\screens\hotcom2 Documents\screens\hotcom2.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
30
Trailing stops
• ..\My \My Documents\screens\hotcom3 Documents\screens\hotcom3.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
31
LBRGroup.com
Copyright Notices •
This presentation is copyrighted: © 1996 – 2009 LBRGroup / Linda Raschke. All Rights Reserved.
•
Certain chart images are copyrighted © CQG
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
2
Basic Patterns: Corrective A-B-C Simple bull or bear flag (retracement in a trend) Failed A A-B-C B C (trend reversal) Momentum Divergences in range Breakout from converging trendlines
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
3
STRUCTURE Structure dictates the context for a trade setup or chart formation. Elements of structure consists of: 1 Sideways 1. Sid lines li ( l known (also k as “value “ l areas”, ” “trading ranges”, or accumulation/distribution) 2 Length of a swing – indicates momentum or 2. lack of momentum. 3 Previous swing highs or lows – sets up 3. structure for retest functions. These most visible chart ppoints indicate where pprevious buyers y or sellers came in. LASTLY: is there volume or is it a noise environment! Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
4
TRADE functions: f ti Entry Method: Limit orders, market orders, buy/sell stops…or p a combination of limit order with stopp entryy also known as OCO (One Cancels the Other) Initial stop placement: fixed stop amount such as dollar function or ATR function function, Chart reference point such as absolutely swing high or low or a few ticks beyond. (not ggoingg into time stops for this presentation). ) Exit Strategy: Small target (.5 – 1 ATR), large target, Trailing stop, scale out function. Large target or trailing stop function should be used when there is expectation of Big Win. We will go over the patterns that lead to Big Win.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
5
Bunds….active rhythmic market with volume. Chart formations are “pleasing”. Breakout from converging trendlines and Power Buy (A-B-C)
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
6
Canadian Dollar: illiquid noise market
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
7
Sideways line - Lower high - Simple bear flag The first flag after break from sideways line – play for bigger target. All other simple flags – small target only.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
8
The power of the sideways line followed by new momentum lows. The first short op may have gotten stopped out but there was no lower high in place yet. A certain % of trades will always y gget stopped pp out due to human error, market noise, or lack of follow-through.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
9
Bear flags late in the swing: small target ONLY.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
10
Corrective A-B C or “Power Sell” in a downtrending market. Note momentum move after break from sideways line. Play for new lows.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
11
Corrective A B C or “Power Sell”. The first is at the end of a swing. The second comes after a fresh break from a sideways y line.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
12
“Failed” A-B-C or trend reversal point. Trail a stop.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
13
Momentum Divergences in a Trading Range
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
14
Momentum divergences are best for entry into corrective swings not for fading the main trend swings, trend.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
15
Breakout from converging trendlines (wedge): Trail Stop
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
16
Upside breakout from sideways line: Get the trade on. Trail stop.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
17
SP E mini 800 tick chart – “structure”
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
18
SP E mini 800 tick chart – resolution!
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
19
Buy Anti vs. Buy Div……both play for fixed small target only. both must use tight absolute stop.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
20
U-turn follows “Failure Test”. Overall structure is downtrend. (note a b c up is corrective)…Trade management – absolute stop at high, scale out.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
21
Daily EC: Failure test followed by U-turn. Aggressive traders enter on lower high, conservative traders enter on sell stop. Scale out to take profits. Stop at absolute high
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
22
Trade Management is an ACTIVE process. Pull your stops down when the trade starts to work….take your bid to the market if the price is falling short.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
23
No perfect way to trail a stop. Tighten to just above the high above the previous swing high.
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
24
5 Basic Patterns: Corrective A-B-C: enter after you see your stop point, Play for big win (more then 1 ATR) or new highs or lows, if in trending market. If in range, scale out for small win. Simple bull or bear flag (retracement in a trend): Enter with limit order or market order, play for small win (.5 to 1 ATR) F il d A-B-C Failed A B C (trend (t d reversal): l) Enter E t on buy b or sellll stop, t play for big win or trail stop. Momentum Divergences in range: Enter with limit order or market order after market turns, scale out. Breakout from converging trendlines. Enter with buy or sell stop or market order order, trail stop or play for big win. win Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
25
Damon Pavlatos FuturePath Trading Summary of what I learned over the last 30 years as a Trader and from working with other Professional Traders
• • • • •
Common mistakes made byy even the best How to manage risk Keeping your focus on the real market Making a plan or strategy and executing it How to maintain the edge as a trader
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
26
This is a basic Trading Page that consists of a trade matrix on the left and on the right stacked horizontally starting from the top there is a quote box, open orders, executed orders market depth and P&L windows. orders, windows
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
27
Multiple trade matrix's. The lower right onw shows open OCO orders.
• ..\My \My Documents\screens\hotcom5 Documents\screens\hotcom5.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
28
OCO’S showing on the charts and on the Matrix simultaneously
• screens\cqg rol 3 3.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
29
When to use bracket orders
• ..\My \My Documents\screens\hotcom2 Documents\screens\hotcom2.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
30
Trailing stops
• ..\My \My Documents\screens\hotcom3 Documents\screens\hotcom3.png png
Copyright (c) LBRGroup 1996-2009. All Rights Reserved.
31
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