Trading Strategy Lecture Notes

Overview

• Focus on high-profit potential signals.
• Automatically filters out low probability trades.
• Based on disciplined, battle-tested strategies used by banks and institutional traders.

Moving Averages

• Purpose: Confirm the trend in the market.
• Key Moving Averages Used:
  • 100 period EMA
  • 34 period EMA
  • 5 period EMA
• Reading the Moving Averages:
  • Bullish Trend: 34 EMA above 100 EMA.
  • Bearish Trend: 34 EMA below 100 EMA.
  • Entry Signal: Price closes above 5 EMA for buy, below for sell.

Market Structure

• Indicators: Zigzag indicator to identify market structure.
• Bearish Market Structure: Sequence of highs and lows indicating a downtrend.
• Bullish Market Structure: Sequence of lows and highs indicating an uptrend.
• Importance of waiting for confirmation of structure shifts rather than assuming trend reversals.

Commodity Channel Index (CCI)

• CCI helps to identify high-probability entry signals.
• Key CCI Levels:
  • Below -100: Oversold in bullish trend.
  • Above +100: Overbought in bearish trend.
• Using CCI:
  • Bullish Trade: Enter when CCI crosses above 50 or +100 after being below -100.
  • Bearish Trade: Enter when CCI crosses below 50 or -100 after being above +100.

Strategy Components

• Combination of Indicators: Moving Averages, Zigzag, and CCI to form a high-probability strategy.
• Market Structure Analysis: Understanding market structure for high accuracy entries.
• EMA Analysis:
  • 100 EMA for support and resistance.
  • 34 EMA for short-term reversals.

Trading Examples

• Bearish Market Example:
  • Use Zigzag to confirm structure.
  • EMA Cross: 34 below 100 confirms downtrend.
  • CCI Entry: Enter sell when CCI drops from above 100 to below 50 or -100.
  • Stop Loss: Above nearest swing high or 100 EMA.
• Bullish Market Example:
  • Zigzag confirms bullish structure.
  • 34 EMA above 100 confirms uptrend.
  • CCI Entry: Enter buy when CCI moves from below -100 to above 50 or +100.
  • Stop Loss: Below nearest swing low or 100 EMA.

Key Points

• Discipline: Essential to follow the trading rules for success.
• Rarity of Signals: High probability signals are rare, focusing only on the best opportunities.
• Institutional Trading Mindset: Fewer trades but high reward opportunities.

Advanced Understanding

• Next Steps: Further study on trend analysis and the "mother of all indicators" to enhance market analysis skills.

These notes summarize a strategic approach to trading focusing on using a combination of moving averages, market structure, and CCI to identify high probability trade entries. The strategy emphasizes discipline and the importance of filtering out low probability trades to focus on signals with massive profit potential.