Trader Tip: False Trigger Blue Point Trading provides many Trade Plan ideas in its Tool Box. Many of these trade Plans are good ideas, but could be built upon with futher refinements. Generally these refinements are in the form of Filters – when to avoid a trade, even though the trade set-up and Trigger are present. In this article we will look at one Trade Plan (Higher High and Higher Low – Click Here) and dicuss further refinements that can be used in this Trade Plan and perhaps other Trade Plans as well.
We won’t repeat this Trade Plan here (Higher High and Higher Low – Click Here), but in general this Trade Plan provides for a two wave pullback and continuation strategy. Please review this Trade Plan to understand more this article.
First let’s take a look at a successful execution of this Trade Plan (see attached insert chart). In this successful execution, we can take notice that both a 20-period moving average and a 50-period moving average are moving together, with a wide berth, in the direction of the trade – indicating that the trader reversal has been strong and could continue. Though the wave symmetry was poor, the Slope was reasonable, indicating that the trade reversal was most likely in place. Another important indicator is the trend line from the next higher time frame (4x the current time frame) has been broken. Hence, the Trigger is “better” (not necessarily excellent) than average and the trade was successful. Note that trade Triggers are rarely better than 60% where the PSR (Profit Stop Ratios) are properly applied – so don’t think that Trade Plans are magically 90% accurate.
Now let’s take a look at an unsuccessful execution of this Trade Plan (see attached insert chart) and notice the differences. In this unsuccessful execution, we can take notice that both a 20-period moving average and a 50-period moving average are NOT moving together, with a narrow berth – indicating that the trader reversal is weak and could fail. Both the wave symmetry and the Slope was reasonable, indicating that the trade reversal could work. However, the trend line from the next higher time frame (4x the current time frame) has NOT been broken. Also, the trading session for the day had ended and new data the following day could cause a reversal of the reversal. Hence, the Trigger was “poor” and the trade was unsuccessful – and with these additional trade Filters the trade should have been avoided.
As you can see the additional refinement of a Trade Plan can make a large difference, as often just avoiding 5% of your bad trades can make all the difference in your final trading results. These are just a few refinements (Filters), but perhaps you can think of even more. As a reminder, these refinements should not violate the basic premises of the original Trade Plan, rather are mere refinements. Click here, or watch below a video presentation of this article.
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