Riding Big Momentum (New System)

July 24, 2019

I’m in the market for some new systems.

Of course, I’m still trading the same robots I’ve been trading for a while, but I’m looking to expand.

I want one to three more portfolios of systems to mesh with the new portfolios I’m making with my current robots.

I’m telling you that so you know that I’m not just throwing random systems into the Newsletter.

I’m looking at each one to hopefully trade it with my own money.

So what kind of systems am I looking for?

First and foremost, I want a new system to make sense.

I want the backstory.

I want to know why it might work and feel confident it will work far into the future.

Without even doing any testing.

After years of researching I’ve found I’m most comfortable (and most confident) in systems that are understandable (and make sense).

Additionally, the ones that make sense also have shown to be the most profitable.

This week we’re looking at a system that seems to make sense.

Question: What precedes a big move in a market?

If we’re looking to make big returns, it stands to reason that we’ll need big moves. If we’re just looking for something consistent, then that’s a different conversation.

But I’m in the market for a portfolio that can create big returns.

So, back to the question, what happens right before a big move?

Is price calmly sitting around? Maybe. There are systems out there that like to wait for an explosion after a dull, sideways period.

I haven’t had any luck with systems like that thus far. Those type of systems have shown themselves to be a little twitchy. That doesn’t mean we won’t come back to this concept, but not this week.

No, I would argue that a big, dramatic move in the market is a great indicator that a move is under way.

If big news comes out on Facebook, price usually moves in the direction of that big news, doesn’t it? Bad news leads to a big bar down, which leads to a downward move that can be captured.

The opposite is true also. If we look on our charts, how many times does a big bar up lead to an upward move? Lots of times.

It makes sense that price would move after a big, violent bar and we can see evidence of this.

Here’s a chart of Apple:

On the left side of the chart, I drew an ellipse around a big bar down. A downward move followed.

In the middle of the chart, I drew an ellipse around a big bar up. An upward move followed.

It doesn’t work every time but it’s a logical place to start.

It feels like if we trade in the direction of a big bar, we could capture some nice profit.

That seems like a logical conclusion.

In our next email, we’ll do just that. We’ll take trades after a large bar occurs and go in the direction of overall trend. We’ll put a target on it and also a hard stop.

And we’ll see if this logical system produces any profit.

Think it’ll work?

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.