Price Action Trading – How to Use Trailing Stops

Every trader should know when and how to using a trailing stop. It’s one of those fundamental trading techniques. Essentially, it’s a way to “lock in profit” when trading two or more contracts. When price meets a specific condition, you close out one of the contracts that has reached profit territory. This video is designed to answer common questions: what types of trades are compatible with trailing stops? What values should the trailing stop use? How do I go about placing these stops in my trading platform?

Some strategies work better with trailing stops than others. For example, the Roadmap strategy (taught in Mentorship) works great because it happens before the move or right in the beginning of the move. In comparison, the ATO and Blueprint strategies are less compatible because the move usually has already begun. The Atlas Line and X-5 work well, however, providing you catch the trade early. For trailing stops, you need to be using a method that finds trades very early or before they happen.

Trending conditions are great for trailing stops because of the consistent direction. When the market’s ATR (using a period value of four) is around one point, the market probably isn’t going to trend, so be careful with any trailing stops. Normal levels of volatility, when the ATR between two and three points, increase the chance of trending conditions. Normal to higher than normal volatility periods are ideal for trailing stops.

When using trailing stops, John Paul likes to use a minimum of two contracts or multiples of two. When you first start out, even if you can afford it, avoid trading many contracts because it increases the risk. Work your way up responsibly. When the market starts to move, half of the position is removed of the trade.

The best way to learn all of the strategies that work the best with trailing stops is to take part in the next Mentorship Program. Click here for details. Considering all that you get, it’s a great deal and an excellent way to learn from John Paul directly during eight weeks of live, all-inclusive coaching.

Live Webinar – Atlas Line Real-time Trade & Jan. Effect

See the real-time Atlas Line trade at about 21:00 in this live webinar.
Click here to purchase the Atlas Line

Here’s the webinar from yesterday, Nov. 28. John Paul starts off by saying he expects volatility to come back to normal levels and leads into the January Effect. In short, the January Effect is a strategy used by traders to predict, with some historical accuracy, whether the rest of the new year is expected to trend higher or lower. If on January 31, 2017 price closes higher than it opened on January 2, 2017, the market is expected to trend up during the year. Of course, there will be points when price drops heavily and consistently. The Effect simply says to expect price to be up by December 2017. You can see why this isn’t a buy and hold strategy. For small-time traders, holding a position for a hundred points is not possible, and if it was, would be incredibly risky. In the video, John Paul explains how regular, retail traders can work with it.

As usual, an ATR with a setting of 4 helps determine volatile conditions. Yes, the ATR can be used with a daily chart (useful for the January Effect). Look at how the green ATR spikes match the significant movements in price. To justify an entry based on the Jan. Effect, John Paul wants to see a minimum of 4+ days to retrace. Markets like to go where they’ve previously been. It’s good to find opportunities where the market is retracing to a high that’s previously been reached. The Fibonacci Tool (F8 in NinjaTrader 7), is handy for finding entries. It’s not used in the traditional Fibonacci sense. Instead, you can configure it to draw a horizontal line halfway (at 50%). This 50% level is what John Paul uses for the entry point in the retracement. Once the 50% midpoint is passed, the goal is to be in the trade long until the new highs are tested. You’re not going for the full 40+ points on the trade. Instead, 1x the ATR value is more reasonable.

January Effect for 2017 – What Can We Expect?

January 2017 is almost here, so that means it’s time to review the January Effect to see what it can tell us about future market conditions. While there’s no way to truly know what will happen, John Paul has been using the January Effect to improve his trading for a long time. You can go back in history to review our previous videos and see what happened with this strategy. In this video, a couple of recent years are reviewed to show you exactly what to do to find trading opportunities.

The main rule to the January Effect is if January closes higher than the price at which it opened, the market is expected to have an up year. Let’s say January 2017 does in fact close higher than the price at which it opened. We can now follow the rules of the strategy, which say for every four or more days of pulling back (not making new highs), look for a retracement opportunity. John Paul uses NinjaTrader’s Fibonacci Retracements tool to draw a 0%, 50%, and 100% line in one shot. If you need help configuring this tool to only show the three percentages, click here for instructions. This represents the recent high and low as well as the value (50%) price needs to surpass to trigger the rule for a long entry. When price retraces through the 50%, it’s time to place a long trade to capture the bullish movement. Keep in mind, these moves often extend over multiple days. Holding a position that long requires a good amount of account funding, however, you can still take advantage of intraday movement.

If you want to hit the ground running in 2017 with a full bag of trading strategies, the best way to learn everything John Paul has to share with you is to take part in the upcoming Nov. 28 Group Mentorship class. Click here to enroll. By submitting the deposit, your seat will be saved and you’ll get the first week’s course to use ahead of time.

7 Trading Tips for the Holiday Season

2016 Trading HolidaysTrading during this time of year can be particularly challenging. Markets can range from being too slow to extremely volatile. Keep the following tips in mind when looking for opportunities on your favorite futures, commodities, stocks, and currencies:

1. Big traders and those running trading firms may be taking vacations. The traders who remain can cause unusual market movement. In addition, businesses are publishing annual and quarterly reports, expectations for the new year, and are looking to increase holiday sales. All of this activity can add to instability.

2. On and around holidays, markets will close early or will shut down entirely. On partial trading days and those surrounding holidays, markets tend to move slower than normal. Don’t be surprised by an early closure after you’ve been filled! Look out for these dates and times (in EST/UTC-5) as they apply to the CME (Chicago Mercantile Exchange) and the E-mini:

Wed., Nov. 23, 2016, day before Thanksgiving: Normal market hours
Thu., Nov. 24, 2016, Thanksgiving Day: Early close at 1:00 p.m. and reopens at 6:00 p.m.
Fri., Nov. 25, 2016, day after Thanksgiving / Black Friday: Early close at 1:15 p.m.
Mon., Dec. 26, 2016, Christmas Day Observed: Closed and reopens at 6:00 p.m.
Mon., Jan. 2, 2017, New Year’s Day Observed: Closed and reopens at 6:00 p.m.

Note that Christmas Day and New Year’s Day both fall on a Sunday, therefore the observation date is Monday.

3. On days when the FOMC (Federal Open Market Committee) meets, volatility lessens and price has a tendency to chop. The next dates are Dec. 13 and Dec. 14. The next meetings will occur in late January, 2017.

4. John Paul likes to use the ATR (Average True Range) to determine the profit target and stop loss for each trade. The ATR provides a measure of volatility, telling you how much the market could possibly move. It does not provide an indicator of direction, just potential. He uses the ATR with a period value of four. This means the last four bars are used in the calculation to gauge expectations. Stay out of the market when the ATR is below one point or above five points.

5. Big traders have holiday expenses just like everyone else. Trading firms need to meet annual goals. Everyone is thinking about spending and taxes. When large positions are taken and exited, this can create ripples and vacuums in the market. Be careful!

6. On average, market prices tend to increase towards the end of the year. If you’re shorting the market in a long-term position, be cautious. The Super Year pattern (look for an upcoming video) may change your expectations of long-term market direction for the coming year. Your intraday trading may be slower than normal, so account for this in your monthly performance analysis.

7. ‘Tis the season to enjoy the company of family. Take a break, refresh, and think about your trading goals for 2017. What will you do differently?

We wish you a happy Thanksgiving and holiday season!

Thanksgiving E-mini/CME, NYSE, and Nasdaq Trading Hours

Thanksgiving E-mini TradingIf you trade the E-mini S&P and similar CME markets, here is what you can expect for the U.S. Thanksgiving holiday this week:

Wed., Nov. 23
Markets close at the regular time

Thu., Nov. 24 (Thanksgiving Day)
Markets open at the regular time
Markets CLOSE EARLY at 1:00 p.m. EST (UTC-5, New York Time)
Markets RESUME trading at 6:00 p.m. EST (UTC-5, New York Time)

Fri., Nov. 25
Markets CLOSE EARLY at 1:15 p.m. EST (UTC-5, New York Time)

See the official CME Globex Trading Schedule for Thanksgiving.

The NYSE also closes early at 1:00 p.m. EST (UTC-5, New York Time) on Nov. 24 and Nov. 25. The Nasdaq is closed Nov. 24 and closes early at 1:00 p.m. (UTC-5, New York Time) on Nov. 25.

Why the early close on Friday, the day after Thanksgiving? Stock trading is usually at half the volume. Also, since 1992, the exchanges have closed early on Black Friday. Black Friday is considered the big kickoff to the holiday shopping season.

We hope you and your family have a happy and safe Thanksgiving!

Simple Trade Scalper Short Price Action Trade

Click here to purchase the Trade Scalper

Thanks to everyone for attending the recent live webinars and presentations! We like all the feedback from new traders and those who have been using our systems for a while. Here is a video of a Trade Scalper trade taken today. The Trade Scalper software is the Short and Dbl Wick Short signals with the corresponding arrows. In the retail version of this indicator, there are a few other lines drawn that help you know when a trade is about to happen. John Paul does not talk about the Dbl Wick signals often, but they refer to two consecutive wicks. The Dbl Wick here at 2181.75 is an exact entry price you want to be filled at. It’s important to use a profit target and stop loss relevant to current market conditions. With scalping, your goal is to be in and out in a short amount of time with low risk, but a higher percentage of accuracy. Staying away from the market open and news events is one way to do that. The ATR here is at about three ticks. He is using a three tick target and a six tick stop. If your target is touched, it’s time to get out of the trade. There were a number of signals provided today. He covered most during the live training class for the Trade Scalper. From 11:00 a.m. to 2:05 p.m. EST today, there were about 10 trades.

The upcoming Mentorship class that begins Nov. 28 includes the Trade Scalper and all the other courses and software. Click here for more information.

8 Points, 3 Atlas Line Trades: Today’s Price Action Reviewed

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Here is a recap of today’s Atlas Line signals, including the profit targets and stop losses. John Paul has configured the line to look a little different than what you’ve seen in other videos. The goal of the strategy is to enter short or long when the signals appear. It’s more of a price action trading tool that will tell you when and how to enter if price behaves a certain way. The profits and stops are based on the ATR (Average True Range), a trading tool built into most platforms. By loading up an E-mini S&P chart and setting it to 5-min, your candles should look similar.

The first Atlas Line trade today was a Short at 2164.25. The profit target was 2.5 points (10 ticks). The 2.5 points was exceeded (the market traveled 4 points), so this was a good trade. The second trade occurred about 40 min. later when price hit 2162.50. This was a larger move – a 3.5 point target (14 ticks). Price far exceeded the target, so that was another good trade. In the afternoon, a Long signal appeared when price reached 2158.75. The target was 2 points (8 ticks).

The Strength and Pullback signals (the small S and P letters on the chart) provided additional opportunities. John Paul teaches how to use the S and P trades in the included live training.

Webinar – High Volatility Trading – Staying Clearheaded

This webinar focuses on high volatility conditions, like those we’ve seen since the U.S. presidential election results. Traders are always faced with these questions:

• Is now the time to place a trade?
• Should I buy or sell?
• Once I’m in the trade, how much will the market move?

In the Mentorship Program that begins on Nov. 28, you can learn how to tackly all types of market conditions, plus receive all of our courses and software (including the Atlas Line and Trade Scalper). It’s the best way to save money and learn everything we have to offer. With early enrollment, we are providing the first week’s course (ATO / At the Open) ahead of time. Click here to submit your deposit and reserve your seat.

In this video, John Paul uses a CL (Crude Oil) chart to demonstrate how the ATR (Average True Range) can be used to gauge volatility as well as profit targets and stop losses. There is no need to change the ATR setting when switching between 1-min and 5-min charts. When the market is overly volatile, that would mean you have to increase the stop significantly, which increases the risk. This is why John Paul prefers to trade when the ATR is between 1 and 4 points. The election volatility pushed the E-mini and other markets well beyond normal risk levels. See the Atlas Line short trade at about 5:00 in the video. The ATR begins to exceed 6 points. When a single large candle appears (either red or green), John Paul often expects a retracement to occur. Don’t expect continuation. Very rarely do you find days that continue in one direction consistently. Markets like to go where they’ve already been, and in some cases, try to reach equilibrium. Be careful in relying on indicators. Once they “see” a large move, they can become erratic and provide very risky signals. The Atlas Line, in comparison, has rules to tell if the market is “exhausted” from making the big moves. Also, the exact rules for profit targets, stop losses, and trade management keep you objective during seductive, fast-moving market activity. Click here for more on the Atlas Line.

At about 14:40, John Paul shares the CL and the Trade Scalper. If you take a look at the Short trade at 42.82 and the accompanying signal triangle and text, you may assume this was a losing trade. The signal does indicate the entry price, but once you learn the rules, you’ll know how long to hold the trade. In this example, the rules dictated releasing the trade about three candles later (two after the fill), which would have been a winner. Fast moving markets are scary and it’s tempting to use a small stop. Remember that small stops can be hit before the big move even has a chance. Instead, John Paul increases the stop out of the regular fluctuating ATR range. At about 34:30, you can see a Trade Scalper long trade on the E-mini. The E-mini chart is revisited again at 1:03:00, so you can see what happens later. Click here for more on the Trade Scalper.

Filtering Trade Scalper Trades Using ATR and Atlas Line

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Here’s a quick example of the Trade Scalper software for NinjaTrader on a live E-mini S&P chart. As you can see, the Trade Scalper produced five trades in a little over an hour. There was one long around 11:20 a.m. followed by multiple short signals that followed a bearish trend. A short signal (Short 2142.25) appears near where price is currently trading. This is the desired fill price. However, the ATR is quite low (around a tick) and that means the market is slow. According to the risk and reward rules of this method, you want to see the ATR value at about two or three ticks. The rules and live training go into more detail on how to avoid these conditions. The Atlas Line also provides a short signal in agreement with the Trade Scalper. Even though this scalping trade would have been favorable and the Atlas Line agrees, it was not with the risk caused by a slow market.

You can get access to the Trade Scalper and Atlas Line by registering for the upcoming Group Mentorship Program that begins on Nov. 3. Early registration includes the ATO (At the Open) course. Click here to find out more.

Webinar Video – Advantages of Trading Market Open

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The focus of this webinar is trading during the morning. For us in US/Eastern time, this “day session” starts at 9:30 a.m. and continues for the next 2.5 hours. This period reflects what was once the pit session, a time when traders who place orders physically in the trading pits instead of doing so electronically.

First, John Paul does a review of the ATR and his preferred settings. The ATR provides a measure of volatility. It does not indicate price direction. In the morning, there are often more traders engaging the markets than the afternoon. If you look back in history, you will see instances where the green ATR line rises at market open, then slopes downward into the afternoon. Fridays tend to be slower. Slower markets produce choppy conditions. Choppy conditions are when price doesn’t really go anywhere – it moves back and forth and this makes for difficult trading. In the video, John Paul shows how the ATR can look when the market is choppy. The best volatility for trading is when the ATR is between 1 and 5 points.

When traders guess market direction, they can run into problems. For example, upon seeing multiple bearish candles, you may assume the market will continue downward and place a trade. You may have entered too late and missed out on the start of the move. The Atlas Line tries to signal these opportunities in advance. At about 16:00 in, you can take a look at recent Atlas Line signals. When two bars close above or below the dashed line, expect a long or short signal to appear. If a small P or an S appears next to a candle, that is a pullback or strength trade. Generally, the profit targets for these S and P signals is one point. The main Dbl Bar signal profit target is based on the ATR. The Atlas Line offers these four ways to indicate the possible direction of the market. The slope of the Atlas Line also matters. Traders often see price follow the slope of the line. These conditions are fine – the Atlas Line will produce S and P signals. John Paul prefers intersections, because this usually means a Dbl Bar trade will occur and that has a larger potential.

At about 25:00, John Paul adds the ATO signal. The ATO is one of the first trading methods we offered, and is now found in the eight week Mentorship Program. Like the Atlas Line, the ATO provides entry signals. They look a bit different – instead of Dbl Bar, you will see Long or Short along with the entry price. The ATO stands for “At the Open”, and like its namesake, the strategy focuses on finding opportunities right after the market opens. The ATO also uses the ATR to determine the profit target. Through trade management, John Paul adjusts his profit targets to reflect the current ATR value. This is because he wants the profit to be a value price action possibly reach based on current market conditions. Many other trading systems use predefined values that cause traders to take on more risk.