The most fundamentally important part of making this method work is self discipline. To be consistently profitable you need to be disciplined every trade, every day. The one time when you relax your rules, you can be sure will be the time it will come back and bite you! Having said that, the beauty of this method is that its rules are very clear, so there is no need to second guess.
On average this method provides two or three entries every day, trading the emini S&P 500 or the emini Dow. However it can be used in any market. Your only job, is to wait patiently until the set up arises and execute it precisely. Quite frankly this is the easy part. The hardest part will be overcoming the natural tendency to get caught up in price action and make trades that have nothing to do with the system!
This won’t happen to me you say! Let me tell you it probably will, its very tempting, so be prepared. You have to become as adept at seeing when the indicators are telling you not to trade (and respecting that) as you are at recognising the entries and executing them. Remember a lot of price movement is going to be passing you by, and that’s what makes it hard. Having the discipline to let moves pass you by and not jump in on a half baked signal, or enter prematurely is the real skill that needs to be mastered. If you can do that you’ll make a lot of money.
Chart Set Up
Open up new charts in 1 min, 3 min, 13 min, & 30 min time frames. On all charts place a 23 ema (exponential moving average) and a 50 ema. On all charts but the one minute place the Bressert Double Smoothed Stochastic indicator (or the Roy Kelly Two Smooth which is the same).
The Method in detail:
Step 1 – Identify trend direction
Identify the trend direction – if the 23 ema is above the 50 ema, we say the trend is long, if below it is short. We need the 3 min and the 13 minute to be in the same direction i.e. both long or both short. If they are not stop there. We don’t need to think about anything else until they are in the same direction.
Step 2 – Identify cycle direction
Suppose both 3 min and 13 min trend is in the same direction and for the sake of example suppose that they are both short.
Our next task is to identify the cycle direction which we can do using the Bressert double stochastic indicator or the Kelly Two Smooth.