My Setup

These are the things I use, so keep this in mind when reading my posts:

1. Price Action
a. Moving Averages: 10, 20, 50, 200 EMA
b. Candlesticks
c. Bollinger Bands: 18, 1.9 Std Dev
d. Average True Range (20)
e. Parabolic Sars: Uppler/Lower & AF = 0.065 and MaxAF = 0.45
f. Swing Points: Strength = 6, Method = 0, Alt Mode = 1

2. RSI (7), 30 = oversold, 70 = overbought

3. Volume: 5 & 21 EMA

4. MACD: 12 (fast), 26 (slow); 9 EMA

TIMEFRAMES: 1, 3, 15, 60 min., daily, monthly (periodically I may look at other timeframes, but these are the ones I focus on)

I use Trade Navigator Gold as my trading platform & charting tool.

I have my screen that has all 4 of these panes as one complete chart.

Notes:
1. I rarely use the BB or Para Sars, except maybe as short-term stops.
2. I will often use the moving averages as stops or entry points, as well as the pivots.

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HOW I DERIVED AT MY SETUP
No one gave me this complete setup, but this setup took me months to come up with. I collaborated with a couple other traders who use the same platform as me, and took what resonated with me -- personality, goals, temperament.

Originally I just used price action with the moving averages, but found I wasn't getting it correct as much. At that time I was just a trend trader and found I kept getting whipsawed and it wasn't working for a highly volatile market.

A trader friend of mine told me that he uses the 50 and 200 EMA on the ES and it works super well, so I added these to my chart. I originally had the 10, 20 and 100 SMA, but found as I changed to EMA (S = simple, E = exponential), this worked far better. I wanted closer stops and was used to using the 10 & 20 from a previous instructor who used these and liked them.

I eliminated the 100 SMA and have tested the 10, 20, 50 & 200 EMA and found this combination works super well for me. However, this wasn't enough to help me to read the markets enough. That same trader said volume is a big indicator. When he said that, I didn't really understand what he meant.

Then, I hired my 2nd trading coach for a 3 month period and he explained the volume thing to me. My first trading coach whom I totally love and was with for 1.5 yrs or something like that, wasn't big into looking intently at volume. My 2nd trading coach said it's a huge indicator that is NOT dependent upon price and tells you a whole lot.

As he explained and I began to catch on, it all made sense. The rest of the indicators are based off of price, but volume is independent of price, so it made it a great leading indicator.

Could someone trade using just price action? Absolutely.

What about price, moving averages and volume? Yes, of course.

However, I wanted greater accuracy in what I was reading. I have another trader friend that swore by RSI. So, my 2nd trading coach began explaining RSI and the theory of trading relativity to me. I latched onto this greatly and began even some thoughts on my own here.

I was told that usually most indicators are lagging, but found depending on how you use the indicator, it can be lagging, but can also be leading. In this case with RSI, I found the way I began using it, it was a leading indicator, so I incorporated my version here.

Things were fine & dandy with 3 panes: price action, RSI, and volume.

However, a different friend said he found MACD was great. I'm thinking, ONE MORE indicator? You've got to be kidding! He said to try it, and I backtested it probably at least a thousand trades before putting it on my charts. It was a great indicator to see when bullish & bearish action was strengthening and/or weakening.

Why use so many things? Isn't it just all clutter?

Since I've now done tens of thousands of trades using this setup, it's not a big deal and each indicator tells me something different, whether it's a confirmation or not of what I'm seeing.

If RSI, Volume and price action all match, but MACD doesn't, then it means the strength of the move is less. When they are all saying the same thing, that's when the move is the strongest. The more you have saying the same thing, the better it is.

Does it mean if you have 2 saying one thing and the other 2 not, does that mean you are not to get into the trade? No, but it does mean trade with caution. You may want to set your stops closer or further away, depending on your risk tolerance.

The swing points I added probably as my last thing. This basically gives me the high & lows. How it calculates it, I don't know. I used the settings my trader friend gave me and it seems to work really well for my setup.

Some people use a RSI setting of 14. I tend to like it a bit faster and did not like it at 14 at all. That setting did not resonate with how I traded and seemed to have less % of profitable trades. I also attempted various settings for MACD, but this also decreased my profitable ratio, as well as smaller profitable trades.

The combination I have for my setup if adhered to strictly, will give 80-90% consistently profitable trades, as well as keep your costing trades to a minimum when you have them.

This is just my setup. My trading strategy is additional, and I'm not going to copy that here, but will give you the reader some homework to figure out what works for you.
1 Response
  1. Nancy Says:

    Thank you for sharing your information. This is very helpful.


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