Trading Systems By Great Trading Systems
This was the basis for my mechanical intra-day trading systems that I used a few years ago.
The only reason why I stopped using it was that it went into a phase where it was breaking even and as I need to generate some income from my trading I had to return to discretionary trading.
The reason why it went into break even mode, in my opinion, was due to the volatility created by the recession and the banking crisis. This resulted in a lot more break even trades becoming losers and winning trades becoming break even trades.
The chart set up is very simple. You can either manually mark the levels on your charts or if you are using Metatrader you can from GreatTradingSystems.com to add to your charts. It is just an edited pivot level indicator.
This was a FTSE 100 futures trading systems but I am sure one could adapt it for their own preferred market.
At the open a line is placed at the open price and several lines are place around it as follows.
So you would have lines as follows:
(P)=Open Price (P)+20pts (P)+30pt (P)+35 (P)-20 (P)-30 (P)-35
The Way To Trade These Bands
There are a maximum of 2 trades in a day.
1)You take the first trade in your chosen direction (we will come back to this) at (p) with a stop at -20pts and a target at +30pts.
2)Then you wait.
3)If your trade goes 20pts in profit you move your stop to break even at (P).
4)Then you wait until your trade is stopped out for 0 or +30.
So, in short, your trade will either be stopped out for -20, 0 or +30 on the first trade.
The second trade is triggered if your trade has been stopped out for -20 points.
All you do is wait for it to touch the (P) line again and you enter in the opposite direction to which you were stopped out.
This time you are looking for +35 limit target. Again if you get to +20 you move your stop to evens at (P).
This is the standard second trade and combined with the first trade it was the "system" as I traded it.
However, the next two options, depending on the outcome of the first trade, could also be taken.
1)The second trade can also be taken if you have closed your first trade for +30. Again waiting for the price to cross the (P) line. Stops and limits are the same as the basic second trade.
2) If your first trade has been stopped for evens it is best to wait for the next 20pt band to be hit and then wait for the a reversal through the (P) line before taking the next trade with the limit target still being +35pts and stops moved to evens after 20 points.
It's a very basic system that works on the simple premise that you win more when you win than lose when you lose. This means that you only require an even strike rate (or slightly less) to generate a profit.
The hardest thing about the system is deciding which direction to take the first trade at the open. The main thing with this is that you want to choose a method that is consistent and produces a 50/50 or better strike rate. For me, I created a direction indicator in excel with open high low close data that used a formula like:-
"if yesterdays high is greater than the previous days open and yesterdays close is greater than previous days low then Long; if not then short"
Although that is not exactly what I used, you get the idea. You can then back test a basket of 100 trades of the first entry method and see what strike rate you get. Most likely it will be 50:50. If :60 then just reverse the "then long" to "short". But in my opinion, what ever the case, I think the strike rate will average out around the 50% mark anyway so don't worry too much. If you get a strike rate around 70% you will love this method.
And that is pretty much it.
Ultimately this system works because it is based on sound maths. Evens strike rate + a great win to loss ratio will always result in a profit or break even over a given time.
I traded this system with 1 Futures contract per trade and managed to increase my account but 30-40% over a few months, although I was trading a large % of my trading capital.
If you have a go a creating your own method based on this do leave a comment and let us know how you are getting on with it. I would however suggest that before you start trading live do back test (by hand) at least 100-200 trading days before you use real money on this system. It requires confidence in the numbers to walk away and not close out trades before it is time.
The hardest thing about this system is getting the open price. Sometime you do miss a trade but it often evens out that for every winner you miss you miss a loser too.
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