day & swing trading strategies

Day & Swing Trading Strategiesby John F. Carter

www.TradeTheMarkets.comwww.TradeTheMarkets.com

Singapore, April 24, 2010

Disclaimer: Futures and options trading are speculative and involve risk of loss. The information in this seminar is taken from sources b li d b li bl I i i d d f i f i d d ibelieved to be reliable. It is intended for information and education only and is not guaranteed by the CME Group as to accuracy, completeness, nor any trading result. It is not intended as investment advice, nor does CME Group endorse or support any product or service represented in the presentation. The views and opinions offered by individuals or their associated firms in interactive seminars areby individuals or their associated firms in interactive seminars are solely those of the authors, and do not necessarily represent the views of the CME Group. The Rules & Regulations of the CME and CBOT i th th it ti ll t t tCBOT remain the authoritative source on all current contract specifications & regulations.

www.tradethemarkets.com2

Why Trade CME Group Futures and Options? Why Trade CME Group Futures and Options?

• Lower capital requirementsLower capital requirements than equity markets with

same exposure

•Around the clock markets

• Financial safeguards of a gregulated exchange

Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade. All references to options refer to options on futures. CME Group is a

trademark of CME Group Inc. The Globe logo, CME, Chicago Mercantile Exchange, E‐mini and Globex are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange Inc. COMEX is a trademark of Commodity Exchange Inc. Copyright © 2010 CME Group. All rights reserved.

www.cmegroup.com/resources

OutlineOutlineOut eOut e

Today I am discussing shorter term day trading Today I am discussing shorter term day trading h i I l i h f ll i CMEh i I l i h f ll i CMEtechniques I employ in the following CME techniques I employ in the following CME

Group Futures Contracts: Stock Indexes, Group Futures Contracts: Stock Indexes, Currency FX Interest Rates Gold Oil andCurrency FX Interest Rates Gold Oil andCurrency FX, Interest Rates, Gold, Oil andCurrency FX, Interest Rates, Gold, Oil andAgricultural contracts.These strategies have been developed over a 20+These strategies have been developed over a 20+These strategies have been developed over a 20+ These strategies have been developed over a 20+ year trading career, and are the same strategies I year trading career, and are the same strategies I use as a CTA (Commodity Trading Advisor) anduse as a CTA (Commodity Trading Advisor) anduse as a CTA (Commodity Trading Advisor) and use as a CTA (Commodity Trading Advisor) and Principle in Razor Trading, a private money Principle in Razor Trading, a private money management firm, as well as in trading my own management firm, as well as in trading my own

4www.tradethemarkets.com

g g yg g ypersonal account.personal account.

Overall StrategyOverall StrategyOve a St ategyOve a St ategy

There are two types of trading I focus on: There are two types of trading I focus on: di i l d d “ idi i l d d “ idirectional momentum trades and “reversion to directional momentum trades and “reversion to the mean” trades.the mean” trades.M d i i hilM d i i hilMomentum trades require more attention, while Momentum trades require more attention, while “reversion to the mean” trading is more relaxed.“reversion to the mean” trading is more relaxed.I d h d d di i i I i kI d h d d di i i I i kI do not hedge my day trading positions. I pick a I do not hedge my day trading positions. I pick a direction and use position size and stop losses to direction and use position size and stop losses to minimize my losses and maximize my gainsminimize my losses and maximize my gainsminimize my losses and maximize my gains.minimize my losses and maximize my gains.Before you can learn how to make money Before you can learn how to make money trading its important to realize how most peopletrading its important to realize how most people


trading, its important to realize how most people trading, its important to realize how most people lose money.lose money.

How to Lose Money TradingHow to Lose Money Tradingow to ose o ey ad gow to ose o ey ad gPeople who lose money trading all do, amazingly, the People who lose money trading all do, amazingly, the same thingsame thingsame thing.same thing.First, they don’t have a real plan. They just chase after First, they don’t have a real plan. They just chase after the markets.the markets.the markets.the markets.Second, they over trade with “market” orders.Second, they over trade with “market” orders.Third, they usually have one trade that wipes out a large Third, they usually have one trade that wipes out a large , y y p g, y y p gpercentage of their account value.percentage of their account value.Take small profits and hold onto big losersTake small profits and hold onto big losersIf you can do the opposite of the above, you will be If you can do the opposite of the above, you will be ahead of 90% of the traders out there.ahead of 90% of the traders out there.


How to Make Money TradingHow to Make Money Tradingow to a e o ey ad gow to a e o ey ad gHave a plan. Pick a specific market to trade on a Have a plan. Pick a specific market to trade on a specific time frame with a specific signal Example “Ispecific time frame with a specific signal Example “Ispecific time frame with a specific signal. Example, I specific time frame with a specific signal. Example, I will trade the Euro FX Futures contract on an hourly will trade the Euro FX Futures contract on an hourly chart using moving average crossovers as my entry and chart using moving average crossovers as my entry and g g g y yg g g y yexit signals.”exit signals.”Don’t over leverage. In day trading you shouldn’t lose Don’t over leverage. In day trading you shouldn’t lose

h 5% f i ih 5% f i imore than 5% of your account equity on any given more than 5% of your account equity on any given trading day. If you hit that level, have the discipline to trading day. If you hit that level, have the discipline to stop and live to fight another day.stop and live to fight another day.p g yp g yUse limit orders. Limit orders force you to plan your Use limit orders. Limit orders force you to plan your trades while market orders encourage over trading and trades while market orders encourage over trading and h i h kh i h k


chasing the market.chasing the market.

Day Trading StrategiesDay Trading Strategiesay ad g St ateg esay ad g St ateg es

TTM Trend Changes TTM Trend Changes 8/21 EMA (exponential moving average) crossovers8/21 EMA (exponential moving average) crossoversBollinger Band SqueezesBollinger Band Squeezes


TTM Trend


TTM TrendTTM TrendTTM TrendTTM Trend

The "open," "high," "low," and "close" referred to are of the The "open," "high," "low," and "close" referred to are of the p gp gcurrent bar. The prefix hacurrent bar. The prefix ha-- indicates the corresponding heikinindicates the corresponding heikin--ashi modified values.ashi modified values.

The value haOpen is always set to the midpoint of the body of The value haOpen is always set to the midpoint of the body of the previous bar, while haClose is computed as the average price the previous bar, while haClose is computed as the average price of the current bar The modified high haHigh is chosen as theof the current bar The modified high haHigh is chosen as theof the current bar. The modified high, haHigh, is chosen as the of the current bar. The modified high, haHigh, is chosen as the highest value of the set {real high (H), modified open (haOpen), highest value of the set {real high (H), modified open (haOpen), and modified close (haClose)}. The same logic applies to the and modified close (haClose)}. The same logic applies to the definition of the modified low: It is the lowest value in the setdefinition of the modified low: It is the lowest value in the setdefinition of the modified low: It is the lowest value in the set definition of the modified low: It is the lowest value in the set {real low (L), modified open (haOpen), and modified close {real low (L), modified open (haOpen), and modified close (haClose)}.(haClose)}.


TTM TrendTTM TrendTTM TrendTTM Trend

Simplified, the blue bars represent bullishSimplified, the blue bars represent bullishSimplified, the blue bars represent bullish Simplified, the blue bars represent bullish activity in a market (buying pressure)activity in a market (buying pressure)Red bars represent bearish activity in a marketRed bars represent bearish activity in a marketRed bars represent bearish activity in a market Red bars represent bearish activity in a market (selling pressure).(selling pressure).I look for a change in trend with 2 opposingI look for a change in trend with 2 opposingI look for a change in trend with 2 opposing I look for a change in trend with 2 opposing color bars. So if we have an uptrend with blue color bars. So if we have an uptrend with blue bars, I would need two red bars in a row to bars, I would need two red bars in a row to consider a change in trend and potential hedging consider a change in trend and potential hedging situation.situation.


Daily Wheat Chart – Hedging Opportunities


Daily SOYBEAN Chart – for longer term trends


8/21 EMA CROSS BASICS

14 www.tradethemarkets.com

Quick Recap on 8/21 EMA CrossQuick Recap on 8/21 EMA CrossQuick Recap on 8/21 EMA CrossQuick Recap on 8/21 EMA Cross

Described in detail in my book as theDescribed in detail in my book as theDescribed in detail in my book as the Described in detail in my book as the “Propulsion Play.”“Propulsion Play.”Great way to gain a solid entry into aGreat way to gain a solid entry into aGreat way to gain a solid entry into a Great way to gain a solid entry into a downtrending or uptrending market.downtrending or uptrending market.E h 8 EMAE h 8 EMAEnter on retracements to the 8 EMA.Enter on retracements to the 8 EMA.21 EMA makes a good trailing stop.21 EMA makes a good trailing stop.Works well with the squeeze play.Works well with the squeeze play.


Squeeze play Squeeze play

What is a Squeeze play?What is a Squeeze play?What is a Squeeze play?What is a Squeeze play?

A h di k h h iA h di k h h iA setup that studies a market that has gone into A setup that studies a market that has gone into a quiet period. a quiet period.

The study looks to predict which way it will The study looks to predict which way it will y p yy p ymove when the quiet period is over.move when the quiet period is over.


Bollinger Bands contract and expand with market volatilty


Volatility Play Key PointsVolatility Play Key PointsVolatility Play Key PointsVolatility Play Key PointsBut how does a trader know if the next major But how does a trader know if the next major move is going to be up or down?move is going to be up or down?By using Bollinger Bands and Keltner By using Bollinger Bands and Keltner y g gy g gChannels with a Momentum Oscillator.Channels with a Momentum Oscillator.Keltner Channels stay the same whileKeltner Channels stay the same whileKeltner Channels stay the same, while Keltner Channels stay the same, while Bollinger Bands expand and contract with Bollinger Bands expand and contract with volatilityvolatilityvolatility.volatility.Momentum Oscillator indicates if market Momentum Oscillator indicates if market


movement will be up or down.movement will be up or down.

Looking for periods when the bollinger bands contract inside of the keltner channels


Keltner Channels (red lines) stay in a constant range


Volatility Play Key PointsVolatility Play Key PointsVolatility Play Key PointsVolatility Play Key PointsWhen the Bollinger Bands go inside of the When the Bollinger Bands go inside of the Keltner Channels, that is an alert that a trade Keltner Channels, that is an alert that a trade is setting up.is setting up.Once the Bollinger Bands come back Once the Bollinger Bands come back outside outside of the Keltner Channelsof the Keltner Channels, a trade is triggered., a trade is triggered.o t e Ke t e C a e so t e Ke t e C a e s, a t ade s t gge ed., a t ade s t gge ed.Use a Momentum Oscillator to tell you Use a Momentum Oscillator to tell you whether to go long or shortwhether to go long or shortwhether to go long or short.whether to go long or short.If above zero, long. If above zero, long.


If below zero, short.If below zero, short.

Add Momentum to Give You a Heads up on Market DirectionAs the market transitions from Low Volatility to High Volatility


Volatility Play Key PointsVolatility Play Key PointsVolatility Play Key PointsVolatility Play Key PointsDeveloped this into an indicator to make it Developed this into an indicator to make it easier to read and follow.easier to read and follow.Red dots mean Bollinger Bands are trading Red dots mean Bollinger Bands are trading g gg ginside of the Keltner Channels.inside of the Keltner Channels.First green dot after red dots mean a trade isFirst green dot after red dots mean a trade isFirst green dot after red dots mean a trade is First green dot after red dots mean a trade is triggered.triggered.If hi i bl l if d hIf hi i bl l if d hIf histogram is blue, go long, if red, go short.If histogram is blue, go long, if red, go short.Stay in trade until histogram loses momentum Stay in trade until histogram loses momentum


y gy gby by changing color for 2 bars in a row.changing color for 2 bars in a row.

Add Momentum to Give You a Heads up on Market DirectionAs the market transitions from Low Volatility to High Volatility


You Can Take Both Long and Short Squeezes:


Bring It All TogetherBring It All Together

Looking at all three strategies on one chartLooking at all three strategies on one chart ----

Bring It All TogetherBring It All Together

Looking at all three strategies on one chart Looking at all three strategies on one chart


Squeeze Exit StrategiesSqueeze Exit StrategiesSqueeze Exit StrategiesSqueeze Exit Strategies

1. 1. Loss of Momentum: Loss of Momentum: 2 darker colored bars on the squeeze 2 darker colored bars on the squeeze qqhistogram. PROS: This is typically the fastest exit signal. histogram. PROS: This is typically the fastest exit signal. CONS: Can sometimes leave money on the table as CONS: Can sometimes leave money on the table as market continues to run.market continues to run.

2. 2. OR: TTM Trend Change: OR: TTM Trend Change: Bars are blue, then you get 2 Bars are blue, then you get 2 red bars in a row, etc. Good “middle of the road” exit red bars in a row, etc. Good “middle of the road” exit signalsignalsignal.signal.

3. 3. OR: 8/21 EMA Cross: OR: 8/21 EMA Cross: PROS: Keeps you in a trade the PROS: Keeps you in a trade the longest of the three so you can maximize a trend. CON: longest of the three so you can maximize a trend. CON: This is the slowest exit signal so you can end up givingThis is the slowest exit signal so you can end up givingThis is the slowest exit signal so you can end up giving This is the slowest exit signal so you can end up giving back gains.back gains.


Best Exit Strategy is a MixBest Exit Strategy is a MixBest Exit Strategy is a MixBest Exit Strategy is a Mix

1.1. Loss of Momentum: Close out 1/3.Loss of Momentum: Close out 1/3.oss o o e t : C ose o t /3.oss o o e t : C ose o t /3.2.2. TTM Trend Change: Close out 1/3.TTM Trend Change: Close out 1/3.3.3. 8/21 EMA Cross Over: Close out 1/3.8/21 EMA Cross Over: Close out 1/3.3.3. 8/21 EMA Cross Over: Close out 1/3.8/21 EMA Cross Over: Close out 1/3.4.4. STOP: After first 1/3 off, move stop to your entry STOP: After first 1/3 off, move stop to your entry

point and then leave it alone.point and then leave it alone.pp5.5. Why? Trailing stops often get hit BEFORE the Why? Trailing stops often get hit BEFORE the

trend has run its course.trend has run its course.6.6. On a nice trend, these exit strategies will get you On a nice trend, these exit strategies will get you

out of the trade BEFORE your stop is hit.out of the trade BEFORE your stop is hit.


Ok, so what about 5 red dots or MORE? Easy . . . BRACKET!


When to Use BracketsWhen to Use BracketsWhen to Use BracketsWhen to Use Brackets

11 There needs to be at least 5 red dots toThere needs to be at least 5 red dots to1.1. There needs to be at least 5 red dots to There needs to be at least 5 red dots to establish a trading range.establish a trading range.

22 Works better on 60 minute charts and aboveWorks better on 60 minute charts and above2.2. Works better on 60 minute charts and above Works better on 60 minute charts and above (swing trades) but can be used for day trading. (swing trades) but can be used for day trading. P bl d di i h f fP bl d di i h f f3.3. Problem on day trading is they can form so fast Problem on day trading is they can form so fast you don’t have time to place the orders.you don’t have time to place the orders.

4.4. Works great on currency futures and Works great on currency futures and forexforex..


Use a TOP DOWN approachUse a TOP DOWN approachUse a TOP DOWN approach . . . Use a TOP DOWN approach . . .


SummarySummary

These tools help to keep a trader and hedger onThese tools help to keep a trader and hedger on

SummarySummary

These tools help to keep a trader and hedger on These tools help to keep a trader and hedger on the right side of the marketthe right side of the marketNo reason to hedge a cash crop until there is aNo reason to hedge a cash crop until there is aNo reason to hedge a cash crop until there is a No reason to hedge a cash crop until there is a sell signal on the week chartssell signal on the week chartsU i l i d f h d dU i l i d f h d dUse signals to ease in and out of hedged Use signals to ease in and out of hedged positionspositionsLet the charts tell you when its right to hedge Let the charts tell you when its right to hedge ––just because the price seems “too high” doesn’t just because the price seems “too high” doesn’t


mean it won’t go highermean it won’t go higher

Additional InformationAdditional InformationAdditional InformationAdditional Information


Sign up at

TradeTheMarkets.com

For free daily videos on h di i f hthe direction of the financial markets.


Book released 2006Book released 2006English Version by McGraw HillEnglish Version by McGraw HillEnglish Version by McGraw HillEnglish Version by McGraw Hill

Chinese Version available atChinese Version available atkb kkb kwww.stockbooks.com.cnwww.stockbooks.com.cn


Additional Questions Additional Questions

John CarterJohn [email protected]@tradethemarkets.com

www.tradethemarkets.comwww.tradethemarkets.com+1 512+1 512--266266--86598659

Phillip Futures Phillip Futures PtePte LtdLtdwww.phillipfutures.com.sgwww.phillipfutures.com.sg

CME GroupCME Groupwww.cmegroup.comwww.cmegroup.com


day & swing trading strategies

Documents