Home > Uncategorized > Trading Plan – Setup #1

Trading Plan – Setup #1

With some encouragement from BigBiegs, I have decided to post some of my setups on the blog.  My primary setup is based on Price Headley’s Williams %R trade.  The main purpose of the setup is to help identify a valid trend and then give an entry on a pullback.  There are 3 steps to this setup (this for a short trade, everything is reversed for a long trade):

1.  The Setup – This is identified by Williams %R closing below -80 on a 5 minute chart (on my chart -20 is the top line and -80 is the bottom line – some vendors have this reversed).

2.  The Confirm – This happens when a bar closes below the low of the setup bar.  This must occur within 5 bars.  If this does not occur within 5 bars, the setup bar is negated.

3. The Retest – The retest is identified by Williams %R closing back above the -80 line.  Price will have to rally to cause this to happen.

There it is in a nutshell.  Notice all signals are based on closings.  No decisions are made intra-bar.  Now time to talk about trade management.

1.  The Entry – If price closes within 2 ticks of the high of the retest bar (ie – The bar closes at 825 and the high is 825.25).  Short with a market order.  If prices closes below 2 ticks  of the high, place a limit order 2 ticks below the high (ie – The bar closes at 824 and the high is 825.  A limit order will be placed at 824.50).  If you don’t get filled in the bar following the retest bar – cancel the order.  If price drops by 2.5 pts without filling you – cancel the order.

2.  Stop-Loss – A 2.5 stop loss on all trades.  Once you have reached 2.5 pts of profit, move the stop to break-even.

3.  Target – A 5 pt. target is always used.

A couple of other points.  

1.  Only the first retest for a given retest is taken.  After that all retest are ignored until Williams%R “resets”.  This is caused by Williams%R closing above 60.

2.  Williams%R is defaulted to a 30 period setting.

3.  The trade is taken between 9:30-4:00 est.  When the signal is generated at 9:30 it is considered extremely reliable.

4.  The signal is ignored Williams%R confirms into a 50% fib.  That’s because a retest is only caused by buying/selling from the “Ambush” trade.

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