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
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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!
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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.
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5
Bunds….active rhythmic market with volume. Chart formations are
“pleasing”. Breakout from converging trendlines and Power Buy (A-B-C)
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6
Canadian Dollar: illiquid noise market
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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.
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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.
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9
Bear flags late in the swing: small target ONLY.
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Corrective A-B C or “Power Sell” in a downtrending market. Note
momentum move after break from sideways line. Play for new lows.
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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.
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12
“Failed” A-B-C or trend reversal point. Trail a stop.
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13
Momentum Divergences in a Trading Range
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Momentum divergences are best for entry into corrective
swings not for fading the main trend
swings,
trend.
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15
Breakout from converging trendlines (wedge): Trail Stop
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16
Upside breakout from sideways line: Get the trade on. Trail stop.
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17
SP E mini 800 tick chart – “structure”
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SP E mini 800 tick chart – resolution!
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19
Buy Anti vs. Buy Div……both play for fixed small target only.
both must use tight absolute stop.
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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.
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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
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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.
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23
No perfect way to trail a stop. Tighten to just above the high above the
previous swing high.
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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
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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
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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
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Multiple trade matrix's. The lower right onw shows open OCO orders.
• ..\My
\My Documents\screens\hotcom5
Documents\screens\hotcom5.png
png
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OCO’S showing on the charts and on the Matrix simultaneously
• screens\cqg rol 3
3.png
png
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When to use bracket orders
• ..\My
\My Documents\screens\hotcom2
Documents\screens\hotcom2.png
png
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Trailing stops
• ..\My
\My Documents\screens\hotcom3
Documents\screens\hotcom3.png
png
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