They say that 'real' traders never touch an index - they trade in Shares, Commodities, the Foreign Exchanges, etc., but never ever
an Index. So I suppose that makes me 'not a real trader'.
However over the past year I have got to know the Dow (DJI) quite well. It's almost like getting to know a new friend, you find out
their likes and dislikes, what makes them happy or sad, and it's not much different. What I didn't have however, was a trading plan
and it wasn't until a chance comment in January of this year that one started to form. Up until then I traded reversals and
sometimes they were successful and other times it was a heck of a roller-coaster ride.
It was just a comment made about an article in a trading magazine that started it. Up until that point I had never given much
thought to the effect of the previous days range or the open and close of the trading day. As I started to look into it, I could see
definite patterns emerging and started to write down the various scenarios that appeared. I back-tested the theory to see how if it
was just a random occurrence or whether it would stand up to a long testing period. Unfortunately, needing intraday 30 minute
charts to test the theory meant that I only had just over 3 months of information to test it on. Still, it performed remarkably well.
The theory takes the previous days range and the close, together with todays open and also the pre-market open activity from 8am
UK time (i.e. when the FTSE opens). I trade with CMC, who have 24 hour data available making it suited to the theory I'm working
on. So armed with 5 pieces of information the Trading Plan will give the most likely scenario for todays trading.
At the end of February this year, I started trading live with it and was amazed by the results. The only problem I suffered from was
not trusting what the 'Trading Plan' was telling me. Since the beginning of May this year I have been posting my 'predictions' for the day in my journal on Trade2Win. You can see this by visiting my journal- you'll find the link in on the left of this page..
It is still very much, work in progress, and will need months if not years of data to test against to tell if it really is successful. At the
moment it has over an 80% success rate, which I'm quite astounded with. |
