Blue Point Trading Market View – March 26, 2013
Trade Plan – Price Clusters. Here is another Trade Plan idea to consider. Its basic theory is to catch breakouts from price clusters – that sometimes come from wedging or flagging price action in our technical trading. This really works best on instruments that have high volatility, like Oil, Gold and some Forex paris.
Trade Plan description: For this Trade Plan we will we use a 7 tick brick wicked Renko chart, but this brick sizing will need adjustment according to the instrument – on this example we will use it on Oil. Follow the description pictorially in the thumbnail chart.
Trigger: Look for a price cluster of at least 5 Renko bricks that have a width of two Renko bricks (in our example this is 14 tick width counting only the open and close price). Take the trade in the direction of the break out from this price cluster. I used a 5 tick break out side this cluster area.
Stop: 2 bricks plus the 5 tick break amount.
Profit Target: 2 times the stop amount.
Filter: None – however this is an area for you to develop further.
Order management: Move stops to break even after 2 bricks profit.
I put this into the Ninja Trader, back test and it yields about a 1.40 to 1.60 profit factor in about a 50% win rate over 3 months. Similar results occur in other instruments – however, other non-volatile instruments, it gets chopped out for losses. Remember these results are in a back test – and do account for slippage, etc… In any case, just another idea for you to develop, perhaps you can adjust the plan to make it work better. A work in progress.
Daily Market View: (click here for the video)