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Trading notes 05/25/11
I have recently received some inquiries on how to work the entries on
phase 4 of the flow exercises so I wanted to throw up an example of how it
works. As a background this is the fourth part of the training exercises and
the first one where trades are entered. We use a volatility band to establish
direction for trades. If the price pops out and closes outside the band then
we make a trade in the direction of that pop in the middle of the band. Here
is a chart that is showing the basic concept.
For the first round of this exercise the stops go just outside the band and
the targets are the outer band in the direction of the trade. As mentioned in
the exercise material this first round is not about the results but getting
comfortable with the minimum stops and reacting to volatility expansions.
However, this makes a very workable simple method in itself and many
folks choose to just stay on those exercises for their trading without moving
forward into the other details of the system. That is fine too, but as you
work the exercise after the first round it is a good idea to start to work in
proper money management and stop placement into them. Get the stops in
meaningful places and let the trades have a chance to get started.
I have been doing this exercise daily for about 10-years now and it really
helps to improve recognition speed and decrease reaction time while
keeping things very simple. Throw in the crunchies, some wise discretion
and a modest daily goal and you are in business.
God bless you ~
Here is the prior post.
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