Daniel Gramza - Building Your E-mini Trading Strategy

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1 IntesaTrade and PRESENT Building Your E-mini Trading Strategy Prepared and Presented by Daniel Gramza

Transcript of Daniel Gramza - Building Your E-mini Trading Strategy

Page 1: Daniel Gramza - Building Your E-mini Trading Strategy

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IntesaTrade and

PRESENT

Building Your E-mini Trading Strategy

Prepared and Presented by Daniel Gramza

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Materials in this presentation are covered under current United States and international copyright laws. NO PORTION OF THIS PRESENTATION MAY BE REPRODUCED WITHOUT THE WRITTEN PERMISSION OF THE AUTHOR.

Daniel Gramza is currently completing two books:

Trading in the Eye of the Storm

The Handbook of Japanese Candle Trading Strategies

You can be notified when these books are available by contacting Daniel Gramza.

Daniel M. Gramza All Charts Created on

President Aspen Graphics Software

Gramza Capital Management, Inc. Contact

2227 Forestview Road MIKE BRODROGI

Evanston, Illinois 60201-2009 1 800 359 1121

Tel. (847) 475-4760 [email protected]

Fax (847) 475-4780

e-mail [email protected]

CME, the globe logo and E-mini are trademarks of Chicago Mercantile Exchange, Inc. All other marks are the property of their respective owners.

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Building Your E-mini Trading Strategy

• Identify market you're going to trade

• Determine your trading time frame

• Select trading approach

• Create trading strategy

• Establish trading strategy parameters

• Measure performance of trading strategy

• Implement new trading strategy

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Section 1: IDENTIFY MARKET YOU'RE GOING TO TRADE

CME E-mini™ Futures

OPTIONS on CME E-mini™ Futures

CME eFX FUTURES

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CME E-mini™ S&P 500® Futures Average Daily Volume

Increasing Volume = Increasing Product Acceptance

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CME E-mini NASDAQ-100® Futures Average Daily Volume

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OPTIONS on CME E-mini™ S&P 500® Futures Average Daily Volume

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Increasing Volume = Increasing Product Acceptance

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OPTIONS on CME E-mini™ S&P 500® Futures Month End Open Interest:

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Increasing Open Interest = Increasing Product Commitment

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CME and Growth of Electronic Trading

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Increasing Volume = Increasing Product Acceptance

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Why Trade CME E-mini™ Futures?

• Easy access

• Virtually 24-hour trading

• One central marketplace

• Highly liquid

• Tight bid/ask spreads

• Leverage

• No Margin Interest Charged

• No Inventory Required for Short Position

• No Short Position Interest Charged

Gramza Capital Management, Inc.

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Why Trade CME E-mini™ Futures?KEY BENCHMARK INDEXES

CME E-mini S&P 500® futures

Tracks large-capitalization U.S. stocks

CME E-mini NASDAQ-100® futures

Tracks technology, telecom and biotechnology issues

CME E-mini S&P MidCap 400™ futures

Tracks mid-size U.S. companies

CME E-mini Russell 2000® futures

Tracks small-capitalization U.S. stocks

CME E-mini Russell 1000® futures

Tracks 1000 largest cap companies in the U.S.

based on total market capitalization.Gramza Capital Management, Inc.

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CME E-mini™ FUTURES Contract Specifications

CME E-mini™ CME E-mini CME E-mini CME E-mini CME E-miniS&P 500® NASDAQ-100® Russell 2000® S&P MidCap 400™ Russell 1000®

Ticker Symbol ES NQ ER2 EMD RS1Contract Size* $50 x E-mini $20 x E-mini $100 x E-mini $100 x E-mini $100 x E-mini

S&P 500 NASDAQ-100 Russell 2000 S&P MidCap 400 Russell 1000$55,000 $30,000 $56,000 $58,000 $64,000

Minimum Price .25 futures index .50 futures index .10 futures index .10 futures index .10 futures indexFluctuation (Tick) points = $12.50 points = $10.00 points = $10.00 points = $10.00 points = $10.00 Trading Hours Nearly 24 hours, Sunday afternoon through Friday afternoonContract Months** H, M, U, Z Last Day of Trading 8:30 a.m. third Friday of contract monthPerformanceBond Margin*** $4,000 $3,750 $3,500 $3,500 $3,625

* Contract value fluctuates daily with market** H = March M = June U = September Z = December

Expiration Dates

Trading may occur up to 8:30 a.m. Chicago time on these dates.

*** ALL PERFORMANCE BONDS SUBJECT TO CHANGE AND BROKERS MAY REQUIRE HIGHER MARGINS

March 18, 2005June 17, 2005

September 16, 2005December 16, 2005

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How are E-Mini S&P 500 profits and losses calculated?

The CME E-Mini S&P 500 futures contract is traded in .25 increments = a tick = $12.50 per contract or 1 full point = $50

1301.00

$12.50

1300.75

$12.50

1300.50 $50.00

$12.50

1300.25

$12.50

1300.00

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How are CME E-Mini NASDAQ-100 profits and losses calculated?

The CME E-Mini NASDAQ-100 futures contract is traded in .50 increments = a tick = $10.00 per contract or 1 full point = $20

1401.00

$10.00

1400.50 $20.00

$10.00

1400.00

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E-mini FUTURES COMPARED TO SPDRS

VALUE OF INVESTMENT $55,000(Assume S&P 500 Index value = 1100, CME E-mini S&P 500 multiplier value = $50

Value of 1 E-mini S&P 500 futures contract = 1100 X $50 = $55,000)

SPDRs CME E-mini S&P 500

Current Level $110 per share 1100.00 per contract

Quantity $55,000/$110 per share

= 500 shares 1 contract

Min. Tick Size $0.01 per share $12.50 per contract

Tick Value 500 SHARES *.01= $5.00 $12.50 per contract

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E-mini FUTURES COMPARED TO SPDRS (Cont'd)

COST TO ACQUIRE $55,000 S&P INVESTMENT

SPDRs CME E-mini S&P 500

Margin 50% = $27,500 7.3% = $4,000

Plus Margin Interest 0

If Short Plus Short Interest 0

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CME eFX Futures Average Daily Volume

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Increasing Volume = Increasing Product Acceptance

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TRADING CME FX FUTURES

Easy access

FX Futures offers portfolio diversification.• Changes in exchange rates typically have low correlations to the

stock and interest rates markets.

Tight bid/ask spreads

Highly liquid

Virtually 24-hour trading

One central marketplace

CME exchange environment, offers open and transparent FX pricing.

CME is largest regulated FX market in the world

Segregated accounts

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TRADING CME FX FUTURES

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Most liquid financial market in the world, representing more than $1.88 trillion worth of transactions each day.

Foreign Exchange = forex = FX = Currency Market = the exchange of one country’s currency for another countries currency.

Currencies are traded in pairs, such as U.S. dollar/Japanese yen(USD/JPY) or Euro/U.S. dollar (EUR/USD), or via currency indexes, such as the CME$INDEX(TM).

Currency trading is simultaneous purchase of a currency in terms of another currency.

EUR/USD = Value of 1 Euro expressed in US Dollar terms.

EUR/USD = 1.3300 = 1 Euro = US$1.3300

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How are Euro Currency profits and losses calculated?

The CME Euro Currency futures contract size is 125,000 Euro and is traded in .0001 increments = a tick = $12.50 per contract or 1 full point = $1,250.00

1.3400

$12.50

1.3399

1.3302 $1,250.00

$12.50

1.3301

$12.50

1.3300

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How are E-Mini Currency profits and losses calculated?

The CME E-Mini Euro Currency futures contract is 62,500 Euro and is traded in .0001 increments = a tick = $6.25 per contract or 1 full point = $625.00

1.3400

$6.25

1.3399

1.3302 $625.00

$6.25

1.3301

$6.25

1.3300

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Section 2: DETERMINE YOUR TRADING TIME FRAME

• Scalping

• Micro day trading

• Macro day trading

• Swing trading

• Position trading

Your trading time frame creates demands on:

Available to trade

Trading approach

Trading technology

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Section 3: SELECT TRADING APPROACH

• Fundamental

Fundamental traders trade on the that other traders will react to the fundamental information in the same way as the fundamental trader.

• Technical

Technical traders trade the reaction to fundamentals.

Technical analysis categories:

− Direct analysis of price movement− Indirect analysis of price movement− Combination of direct and indirect

analysis of price movement

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Section 4: CREATE YOUR TRADING STRATEGY

Identify the tools that will create the foundation of your trading strategy.

• Trend Analysis

• Japanese Candle Charts

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TREND ANALYSIS

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TREND ANALYSIS

Higher Highs and Higher Lows = Uptrend

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TREND ANALYSIS

Lower Lows and Lower Highs = Downtrend

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TREND ANALYSIS

swing high

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TREND ANALYSIS

swing low

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TREND ANALYSIS

Close above previous swing high = continuation of trend = Uptrend

Close

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TREND ANALYSIS

Buy

Buy IF Close below previous

swing low = Downtrend

swing low

Failed to Close above previous swing high = Potential Change in trend

Close

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TREND ANALYSIS

Close below prev

swing low = Dntrend Close

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TREND ANALYSIS

swing high

swing low

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TREND ANALYSIS

Close below previous low = continuation of trend = Downtrend

Close

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TREND ANALYSIS

Sell

Sell Close above prev

swing high = Uptrend

swing high

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TREND ANALYSIS

Failed to Close below previous swing low = Potential Change in trend

Close

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TREND ANALYSIS

Close above prev

swing high = Uptrend

Close

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TREND ANALYSIS

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Buy

swing low

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JAPANESE CANDLE CHARTS

Japanese Candle Foundation Shape

Close High Open

Buying Body

Selling Body

Open Low Close

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Japanese Candle Construction

High

Selling Shadow

Low

Buying Shadow

Selling Body

Buying Body

OpenClose

CloseOpen

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Japanese Candle Shadow Development

High45 min Candle

Selling Shadow

Close

Buying Body

Open

Buying Shadow

Low

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Japanese Candle Shadow Development (Cont’d)

45 min Candle 15 min Candle

OpenHigh High

Selling Body

Last LastLow

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Japanese Candle Shadow Development (Cont’d)

45 min Candle 15 min Candle

Open High High Selling Body

Buying Shadow

Low

LastBuying Body

Last

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Japanese Candle Shadow Development (Cont’d)

45 min Candle 15 min Candle

High Last High Last Open

Buying BodySelling Body

Buying Shadow

Low

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Japanese Candle Shadow Development (Cont’d)

45 min Candle 15 min CandleLast Last High

Open

Selling Body

Low

Buying Shadow

Buying Body

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Japanese Candle Shadow Development (Cont’d)

45 min Candle 15 min Candle

Last High Last

Low

Selling Body

Open

Buying Body

Buying Shadow

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Japanese Candle Shadow Development (Cont’d)

45 min CandleHigh

Selling Shadow

Selling BodyBuying Shadow

Low

Buying Body

Last & Close Last & Close

Selling Body

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15 min Candle

Open

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Candle Pattern Development

The identification and analysis of the price relationships that create a reversal pattern

1. Lead up4. Follow Through

5. Confirmation

2. Set Up

3. Trigger Price

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Candle Characteristics

1) Range

2) Body Color

3) Body Size

4) Shadow Location

5) Shadow Size

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HIGH TO LOW = MEASURE OF__________

GREEN =__________RED =__________

___________________

___________________

BOTTOM =_________

TOP =_________

_________OF BUYING OR SELLING

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Candle Global Environment

1. What is the current market condition?

Is it on a yearly, monthly, weekly, daily or intra-day basis?

Is it over what period of time and what is it's magnitude?

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Candle Global Environment (Cont'd)2. Through the analysis of long-term charts what is

the of the current market?

• Overvalued, At value, Undervalued

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Candle Global Environment (Cont'd)3. How does the market compare to:

• both domestically and internationally

• Other sectors

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Candle Global Environment (Cont'd)3. How does the market compare (Cont’d)

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Candle Global Environment (Cont'd)

4. What is the market ?

What is a relationship of the current market levels to ___________________________________candles?

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Candle Global Environment (Cont'd)

5. What is the of the trade?

• Are you trading the trend?

• Are you going current bearish or bullish candle patterns?

Buy (not rec.) Sell (better) Buy (best option)

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Candle Global Environment (Cont'd)

6. What are price_________and price___________at major highs and lows?

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Candle Global Environment (Cont'd)

7. What is the of major highs and lows?

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Candle Global Environment (Cont'd)

8. Is the trade clean?

• Does it hit you between the eyes and scream at you to the trade?

• Does current information the trade?

• Be patient and let the come to you.

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POTENTIAL OUTCOMES OF A TREND REVERSAL PATTERN

Be prepared for any outcome!

Could result in or

or or

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Essential Considerations When Combining Technical Trading Techniques

1. What are distinctive of each study?

2. What is the market environment for each study?

3. What creates the most profitable signals for each study?

4. What are of each study?

5. What are the between studies?

6. What does each study to your trading decision?

7. Do studies trigger the buy and sell signals?

8. If one study leads another study, what is the ?

CHARACTERISTICS

LEAD UP

IDEAL

STRENGTHS AND WEAKNESSES

SIMILARITIES AND DIFFERENCES

ADD

SAME

IDEAL LEAD TIME

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Essential Considerations When Combining Technical Trading Techniques (Cont'd)

9. What is the impact of an individual study and the combined studies on the of buying and selling signals?

10. What is the impact of an individual study and the combined studies on the of profits?

11. What is the impact of an individual study and the combined studies on the of profits when the mathematical study ?

12. What is the impact of an individual study and the combined studies on the of time periods to complete a trading cycle from beginning to end?

13. What is the impact of an individual study and the combined studies on the for your trades?

FREQUENCY

MAGNITUDE

MAGNITUDEFAILS

NUMBER

HEAT INDEX

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Section 5: ESTABLISH YOUR TRADING STRATEGY PARAMETERS

Trading strategy parameters are the identification and analysis of the price relationships that create a reversal pattern and it's profit potential and heat index characteristics

1. Lead up4. Follow Through

5. Confirmation

2. Set Up

3. Trigger Price

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ESTABLISH YOUR TRADING STRATEGY PARAMETERS (Cont'd)

1. The LEAD UP phase is the candles and stochastic behavior making up the

that proceeds the set up candle.

What are the characteristics of the lead up phase for profitable trades?

of lead up magnitude (minimum to maximum)

The of periods that create the lead up phase.

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ESTABLISH YOUR TRADING STRATEGY PARAMETERS (Cont'd)

2. SETUP is the candle or candles and stochastic behavior that the reversal pattern.

What are the characteristics of the set up candle and the stochastic signal?

(set up candle's body within / below / surrounding previous candle's body and or shadows etc. and stochastics is in a 0 oversold or overbought condition.)

(setup candle's body size and shadow location and size and stochastics signal lines have crossed over

(magnitude of setup candle's high to low range)

characteristics of setup candleGramza Capital Management, Inc.

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ESTABLISH YOUR TRADING STRATEGY PARAMETERS (Cont'd)

3. The TRIGGER PRICE is the price level used to the trade.

For example:

Buy higher highs

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ESTABLISH YOUR TRADING STRATEGY PARAMETERS (Cont'd)

4. FOLLOW THROUGH is the type of price action that should occur after the trade is entered.

should follow through occur?

is typical magnitude of follow through?

5. CONFIRMATION is the price action that verifies the completion of most reversal patterns.

should confirmation occur?

is typical magnitude of confirmation?

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Section 6: MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY

1. Trading Strategy Evaluation

(The following Trading Strategy Evaluation techniques apply to all trading techniques. Japanese candles are being used for illustrative purposes.)

Trading Strategy being created and evaluated:

A. Trade entry

Buy new high of Japanese candle rejection pattern

B. Trade exit

Sell first lower low greater than 2 ticks

A. Buy higher highs

B. Sell 1st Lower Low greater than 2 ticks

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Cont'd)

2. For each trade what is the of profits?

The magnitude range is used to determine for the trade.

MAGNITUDE RANGE

PROFIT EXPECTATIONS

Buy 1206.00

Sell 1214.00

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Profit = 8.00

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Cont'd)

2. For example: Lowest value to the highest value of profit is 4.25 to 10.00

What is the frequency of those profits?

Are there distribution ?

4.25 4.50 4.75 5.00 5.25…………………………..10.00

IIIII IIIII IIIII IIIII IIIII I II I I II

IIIII IIIII IIIII IIIII III

IIIII IIIII IIIII IIIII

III IIIII IIIII II

IIIII IIIII

II IIII

Possible trading strategy to on a profitable trade is to Sell ½ position at 4.00 points of profit and move stop to breakeven incl. brokerage.

PRESERVE PROFITS

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Cont'd)

3. What is the heat index range?

The heat index range is used to determine point of trading strategy ,magnitude of and placement of risk management ___ orders.

There are two different types of profitable trades:

Type one is a profitable trade where the market does trade below the entry price.

Type two is a profitable trade where the market trade below the entry price.

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Heat Index Range Cont'd)

Type One Trade Type Two Trade

Exit Trade = 1289.00

Profit = 5.00

Enter Trade = 12 84.00

Heat = 1.50

Stop Loss = 2.00

Exit Trade = 1289.00

Profit = 5.00

Enter Trade = 12 84.00

No HeatHeat Level = 1282.50

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Heat Index Range Cont'd)

Buy 1206.00Profit = 8.00

Sell 1214.00

Heat .50

Heat Level 1182.25

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Buy 1172.75

Sell 1179.50

Profit = 7.25

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Buy 1201.00

Sell 1205.25

Profit = 4.25

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Buy 1183.00

Sell 1188.75

Profit = 8.00

Heat .50

Heat Level 1182.25

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Heat Index Range Cont'd)

Type One Trade Type Two Trade

For example: Lowest value to the highest value of heat is 0.25 to 1.75.

What is the frequency of the heat values?

Are there distribution ?

.25 .50 .75 1.00 1.25 1.50 1.75

IIIII IIIII IIIII IIIII IIIII I II

IIIII IIIII IIIII IIIII III

IIIII IIIII IIIII IIIII

IIIII

Potential sell stop is 2.00

Exit Trade = 1289.00

Profit = 5.00

Enter Trade = 12 84.00

Heat = 1.50

Stop Loss = 2.00

Exit Trade = 1289.00

Profit = 5.00

Enter Trade = 12 84.00

No HeatHeat Level = 1282.50

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Cont'd)

4. What is the probability of the trade working?

The probability of a profitable trade is used in the determination the of having a profitable trade and risk reward relationship of the trading strategy.

Divide the profitable trades by the total number of trades = % probability of a profitable trade.

Profitable Trades 40 66% chance of a profitable tradesTotal Number of Trades 60

= =

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MEASURE THE PERFORMANCE OF YOUR TRADING STRATEGY (Cont'd)

5. How many periods between the beginning of a trade to the end of a trade?

The number of periods is used to determine to allow the trade to work.

It provides a guide to increase the trader's level of by allowing the trade enough time to mature.

It can also be used as a to let the trader know, when the trade has not been productive in a timely fashion and the trader may be overstaying his welcome in a trade.

6. What is the of the trade?

7. Are the profits stable in markets?

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Section 7: IMPLEMENT YOUR TRADING STRATEGY

•The essential steps in the trading process

•Trading in the Eye of the Storm

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THE ESSENTIAL STEPS IN THE TRADING PROCESS.

1. Trade

2. Trade

3. Trade

4. Trade

• Profit and Loss• Yourself

5. Monitor above categories:

Where am I the ?

Where am I the ?

6. What am I going to do to change this?

7. When and how will I implement those changes?

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Identify and Evaluate the Trade

• What is your perspective?

• What market information is candle analysis (Candle Characteristics, Pattern Development and Global Environment) providing for the long, intermediate, and short term?

• Is the market imbalanced to the buy or sell side?

• What are major support and resistance areas?

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Identify and Evaluate the Trade (Cont'd)

• What information is being revealed by mathematical studies?

• Does the current accumulated market information support or contradict new or existing market positions?

• What are the challenges to your trade?

• Is trade location favorable?

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Trade Execution and Management

Before the trade is entered and after the trade is executed, consider the following:

• What is your mental state?

• Is this a full or partial position?

• What is considered positive or negative market activity?

• How, when, and where will the trade be entered, added to, reduced and exited?

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Evaluate and Monitor the Trading Decision Process

• What is the profit per trade production?

• Is this on target?

• What is the loss per trade production?

• Is this on target?

• What is your frequency of trades per day, week, month?

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Evaluate and Monitor the Trading Decision Process (Cont’d)

• Is this within expected parameters?

• Is there a time of day, week, month or year when you trade your best?

• Is there a time of day, week, month or year when you trade your worst?

• Are you trading to trade or are you patiently selecting high quality trades?

• Do you typically trade with or against the trend?

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Evaluate and Monitor the Trading Decision Process (Cont’d)

• Do you review your profitable and unprofitable trades at a minimum on a monthly basis?

• Is one more profitable than the other?

• Do you review your profitable and unprofitable trades at a minimum on a monthly basis?

• What have you learned from your unprofitable trades?

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Evaluate and Monitor the Trading Decision Process (Cont’d) • Are there distinctive characteristics between

profitable and unprofitable trades?

• If yes, how and when will you implement this into your trading?

• How do you feel during and after profitable or un-profitable trades?

• Does your trading time frame match your ability to execute the trade?

• Are you asking something from the market that the market cannot give?

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Evaluate and Monitor the Trading Decision Process (Cont’d)

• Does your trading strategy match the market and your trading time frame?

• What type of trade were you doing when you felt the “best” trading?

• What type of trade were you doing when you felt the “worst” trading?

• What aspect of trading do you enjoy the most?

• What aspect of trading do you enjoy the least?

• What aspect of trading concerns you the most?

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Evaluate and Monitor the Trading Decision Process (Cont’d)

• What are you doing about these concerns?

• Have you done your homework before you execute the trade?

• Are you in good physical condition?

• Does your physical trading environment support your trading business or is it a distraction?

• Would you give money to yourself to manage with your trading approach?

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TRADING IN THE EYE OF THE STORM

• High performance trading occurs in the Eye of the Storm.

• What storm?

Storm = Markets

= Trading

= Others

= Yourself

A trader's objective is to stay in the eye of the storm, free from the distractions of the storm's movement

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How does a trader stay in the eye of storm?

The trader must recognize and accept that trading is a physical business

that requires a synergy of thoughts and physical response

in a relaxed, yet totally aware state.

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THOUGHTS

• Create the trader’s reality

• Direct the body

• Basic elements of the thought process are:

Thought ChoiceThought Energy

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THOUGHT CHOICE

• The thoughts the trader allows himself to have are his thought choices.

• A trader makes a thought choice, therefore, the trader is responsible for that thought choice.

• These thought choices determine how he reacts to trading and life.

• He can choose a positive thought or a negative one, but whichever the choice, it will impact the thoughts that follow.

• What is the payoff for keeping and maintaining a thought choice?

- Power- Weakness- Self-sabotage

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THOUGHT ENERGY • The trader's thought choices have an impact on

his life.

• The amount of impact is determined by the amount of thought energy the trader gives each thought.

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IDENTIFYING YOUR NEGATIVE THOUGHT DEMONS

Thought Demons are negative thoughts that hold you back and prevent you from accomplishing your life and trading goals.

What are your first or typical thoughts when faced with challenges in your life?

How you react to these challenges is usually how you will react to the challenges of trading.

In life or trading, do you choose and energize negative thoughts?

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IDENTIFYING YOUR NEGATIVE THOUGHT DEMONS

The Negative Thought Demons Journal will help you:

examine your thought choices

identify your negative thought demons

increase your awareness of these thoughts

develop a specific target for your energy and efforts to make a change.

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NEGATIVE THOUGHT DEMONS JOURNAL

Identify your negative thought demons by answering the following questions:

• When and what was happening before you had negative thoughts?

• What were those negative thoughts?

• What type of inward and/or outward reaction did you have from these negative thoughts?

• How did you feel when you had these negative thoughts?

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NEGATIVE THOUGHT DEMONS JOURNAL (Cont’d)

• What are these negative thoughts taking away from you?

• How are these negative thoughts holding you back?

• What payoff did you get by keeping this negative thought?

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NEGATIVE THOUGHT DEMONS JOURNAL (Cont’d)

• Do you accept that you created this negative thought? If not, why not?

• Which thought management technique from the following section are you going to use to help you de-energize this negative thought and reach your ideal thought reaction?

• When are you going to implement this thought reaction?

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THOUGHT MANAGEMENT TECHNIQUES

• Thought management techniques are used to conquer your thought demons.

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The Consultant Technique

• When a problem arises, consultants are often used to provide an objective approach to finding a solution.

Imagine that you are a consultant.

You have been retained to provide consulting services to a person with a situation exactly like yours.

The key to being a good consultant is asking the right questions, so objectively review the questions found in the Negative Thought Demons Journal as if you were questioning another person as a consultant.

An objective review of the responses may provide just the point of view needed to implement positive solutions.

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The Consultant Technique (Cont’d)

Albert Einstein said

“You cannot solve a problem with the same mind that created it.”

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Situation Control Recognition Technique

• This technique allows you to control your negative thoughts by recognizing those situations you control and those you do not.

You begin to have negative thoughts relating to a situation over which you have no control.

You consciously recognize that you have done all you can, and it is now up to the situation to complete itself.

You choose not to energize the negative thoughts or allow them to overwhelm you.

The situation is not under your control and you are not going to waste your energy on unproductive thoughts.

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For example:

You have

identified a trade, executed your order to enter the trade, and placed your risk management stop order according to your strategy.

You then allow yourself to become more and more emotionally involved with each back-and-forth market movement.

The reality is that the market is in control, and you have no control over the market.

Recognize this, relax, and let your trade work.

You will either make money or lose money, and what you do control is how you react to the outcome.

Situation Control Recognition Technique (Cont'd)

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Remember, it is always within your power to change.

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PHYSICAL RESPONSE• Effortless action is confident physical response

without hesitation.

• The trader's goal is to achieve effortless action when trading.

• When he trades with effortless action, he stands a side and allows his trading strategy to work

• Examples of effortless action in your daily life:

tying your shoecombing your hairraising a fork, spoon or cup to your mouth anddriving your car

When trading, executing a properly evaluated trade should feel the same way!

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PHYSICAL RESPONSE (Cont'd)

Effortless action is the result of:

• Taking time to "practice" a strategy through properly conducted research.

• Having complete confidence in the strategy.

• Total focus on implementing the trading strategy when trading and not on issues that should have been resolved during non-trading hours.

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HOW TO BECOME AND STAY CALM AND FOCUSED

• Choose and energize thoughts that support your trading objectives.

• Create and maintain a relaxed state and stay in the present moment through:

Proper breathingRelaxation exercisesVisualization exercises.

• Develop and consistently apply a well researched trading strategy.

• Be prepared for all trading outcomes.

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IntesaTrade and

PRESENT

Building Your E-mini Trading Strategy

Prepared and Presented by Daniel Gramza