Trading Methodology
Principles
Understanding Market Structure (Directional, Non-Directional)
Each trader must have an understanding of market structure and the ability to adapt to constantly changing market conditions. We emphasize an understanding of the underlying market structure, conditions and adapting your trading to current state of each market. Simply trend following during a period of consolidation could cost you many thousands of dollar per contract before any significant trend develops. A skilled trader should be able to recognize the potential for a consolidation cycle (range) before the crowd has spotted what is now obvious, and modify his trading strategy quickly to the expected outcome of the market. The construct of the trade set-ups taught is built around the identification and expectation of the current conditions.
You certainly would not walk outside in 100 degree heat with your winter attire on hoping that the weather would change to suit your choice...so why would you expect your trend following system to work when there is no clear market direction? The answer is when trading mechanically you must take every trade since we do not know if the next trade will be the big winner. This way of thinking may indeed lead to profits if you have created a robust system, but be prepared for the inevitable steep drawdowns that will follow each subsequent equity high. The understanding of different modes of market action alone is a significant edge for the trader who now has the skill to quantify when to trade, how to quickly structure his trade and when to stand aside.
Trade Selection
We will teach all Protege Class clients a proprietary formula to empirically measure the quality of the trade set up present in the market. Consistent trade selection is pivotal to consistent trade results, but also pivotal in allowing each trader to create the trade statistics he/she desires. Before an entry is made we have located the current market structure, conditions and then we assess the current trade.
Entry Techniques
Each trader will be taught objective entry techniques that allow you to quickly quantify an entry. Remember, you must be able to repeat the process to attain consistent results which of course requires that we have a consistent entry mechanism. Many traders overlook the importance of the entry technique, but this is a major piece of the puzzle when developing a methodology with an edge. You will be taught very aggressive entry techniques and more conservative techniques depending on your level of aggressiveness. More than one entry technique will be taught so that each trader may adapt to the market.
Exit Methodology
The exit methodology of course brings together the sum of all the analysis done beforehand in an effort to actually realize the edge we have quantified up to this point. Experienced traders understand just how pivotal a quality exit strategy is to your success. We cannot emphasize enough the importance of a clear, objective exit methodology so each trader is not left with a position in the market unsure of exactly what his purpose is. We will build the exit strategy from the ground up teaching all Protege students the last exit methodology they will ever need.
Position Sizing and Portfolio Heat
A specific position sizing algorithm is taught to all students that helps maximize the edge while minimizing the risk on any particular trade. Without proper position sizing any methodology is incomplete...this is very often one of the more overlooked area of a retail traders method. Overall portfolio risk (heat) is an important concept that is also absent from most traders radar. Traders will be taught to minimize overall portfolio heat so that we can focus closely on a small number of high quality positions as opposed to a large portfolio that is both highly leveraged and full of risk. Excessive leverage and risk will weaken your temperament and prevent high quality execution.
Preparation
A large emphasis is placed on the quality of execution shown by each trader. Practice, drilling and coaching lead to consistent improvement in execution quality. When the market volatility changes, how will you adapt your entry and exit techniques to minimize skid or slippage? We also place a large emphasis on pre-market homework to build the premise for each trading day. Knowledge is power and with the ability to clearly understand market structure you will learn to very often pick the high or low for the day within a few ticks. The trader must do his homework each day to stay in tune to the markets and maintain a rhythm. Through the process of quickly mapping out each market using simple techniques you will understand the market direction at a much higher level.
If you have specific questions regarding our trading methodology than contact us for a consultation.
Direct: 678-389-9129
E-mail: info@tradewithpride.com