TMS Momentum Trading

Hi folks,

I did not want to hijack the original TMS thread with my variations so I decided to create a new one.

At this point I want to thank all the members in the orignial thread for their work and time.


So what is it all about?

This will be not only a strategy thread. It will be my complete business plan, trade journal and trading diary.

Introduction

I am a 37 years old engineer. First contact with trading was 17-18 years ago when I was studying, just right before the big crash. Was lucky to get out back then with a small loss.

2012 I started to get into forex trading. Since then I was reading a lot of books and a lot of threads here on FF. Basically I am a fan of the dow theory and I was also attracted by the TMS thread right from the first read.
Though I invested a lot of time into learning to trade I still failed to become a consistant winner. I had a lot of big winners (R-multiples of initial Risk) which I gave away later againand again. A lot of times also failed to lock in profits just to see the market take it away and finally knock out my SL.

It is a hard thing for humans (for some more for some less) to create rules and stick to it. So another point is to get my mindset right to follow the rules as the psychological component in trading is the most important one.

Thats why I created this thread, to set out the plan and stick to it.

Everyone is welcome to discuss because I am sure that I am not able to see all the weaknesses in my aproach.

Setting the Goals:

According to one of K. van Tharps books (Not sure which one it was) I am going to firstly define my goals.

1. Self evaluation

1. How many time do I have a day for trading:

As I am a full time employee I only have 1-2 hours a day for trading

1. How many time do I think I have to invest in the development of the trading system, the businessplan and the right mindset?

I assume that it will be between 1000 to 5000 hours of work (and maybe never end to adapt to market changes)

1. What is your knowledge of the markets?

I have quite good knowledge about the movements of the market on the longer timeframes, support and resistance (static and dynamic), etc.

Still there are a lot of things to learn.

1. What are your mental strengths and weaknesses

If i want to achieve something I can work hard and I don't quit right away if it does not work out right away.

I have troubles to stick to my rules.

2. Defining the goals

1. Are you trading full time or part time?

I am trading part time, mainly the EOD chart

1. What do you want to achieve?

The main goal is to get a steady income stream and to grow the account consistently.

1. How will you know if your plan works out and how will u know if it does not.

If it works out my average winners are way bigger than the average loss. I assume it will work well in trending markets. I have to be careful as soon as

markets start ranging.

3. Trading idea

1. which markets do you want to trade

I am going to trade FX, stocks, and cfds on indices mainly nasdaq, S&P and dax.

1. Which setups do you use to enter the markets

Mainly I am going to trade into the consolidation of an intact trend when momentum has changed direction and TDI confirms

With reduced risk I will trade the consolidation it self if i get a good indication (divergence + momentum + TDI)

1. What do you think about Entries? how important are they?

I try to find entries with high probability where I can place a tight S/L for a good R:R ratio. But more important to me is the trade management once I am in a position. Getting out of bad trades if I find out that I was interpreting the market wrong. Reduce risk as price moves in my direction. Preserve winnings and be ready to close a trade if the market turns.

1. What will be your inital Stop Loss?Are you able to re-enter the market if you get stopped out on a narrow S/L?

Initial S/L will be on the last low in an long trade and vice versa on the last high in a short trade. I am going to re-enter the market if the overall situation did not change after i got stopped out and there is a new signal.

1. How do you plan to take your winnings?

In trades with the trend I plan to let them run as long as i see a divergence between PA, momentum, TDI

In counter-trend trades, I plan to take provits earlier, like TDI is hooking, and mometum changed.

1. How do you plan your Position sizing?

I am going to use a Fixed Ratio Money Management. And my initial Risk will be around 0,50% of my account size.

In the later chapters I reserved for content I will write more about Entries, exits, position sizing etc.

Money Management

As per my opinion MM is the 2nd key to success in trading after the correct mindset, I will cover this at first.

I am using the Fixed Ration Money Management method, which was first introduced by Ryan Jones in his book "The Trading Game".

Here is a short article about Money Management which also explains the idea behind the Fixed Ration MM.

http://www.traderplanet.com/articles...ey-management/

I will start with 0,50% of my account value. I use 5% of inital equity as my initial delta value.

Enclosed you will find a sample Excel sheet if someone is interested.

Sample equity is 10000
so 5% delta value = 500
and intial risk per trade = 50

I do use not only full numers as delta multipliers. From Stage 1-19 I increase the multiplier by 0,50 which is different from original but I have the feeling it suits me better.

So after completing the first stage and having 10500 in ur account you multiply the delta and the risk with 1,5.

so in stage 2 there would be a risk of 75 and a delta of 750 and so on .....

Just enter your equity, the delta and the initial risk. You can also change the column with the delta multipliers so it fits your need better.

Workspace

So let me show me how my workspace is looking like.

When I look at a chart EOD I have 3 windows open. 1D with HA candles, 1D with japanese candles and 1W with HA candles.

Biggest windows is 1D with HA candles. 2nd day window is just so I see the actual candles right beside.

At the moment I use the following indicators.

A trend indicator according to the dow theorie, with which I can display 3 different trendsizes.

EMAs 10,50,100,200,800 to visualize dynamic support and resistance levels.

The TDI indicator.

And a momentum indicator. I took the momentum indicator smoothed it with a T3 moving average. But the momentum indicator is not using the close of the candle as input value. I wanted to sync it to the TDI, so I use the RSI(13,3) as input value.

Entries

At first lets talk about my premium setups:

These are the entries taken in trend direction which has been identified.

I want to find an entry close to the end of the retracement to get a tight SL and a good reward to risk ratio if the trade runs in my favour.

Trend identification:

Trend identification is done according the dow theory.

In the below Screenshot there are two trends visible. The bigger one is the long trend lasting for months(green lines). It is in the retracement.
What I am looking for atm is the smaller trend (red lines) which is the retracement of the bigger one. It also started to retrace. I am not thinking about entering a trade before the retracement at least touches the lower end of the red box. (See point 1 in below rules)

Why don't I want to enter earlier: odds are bigger that price will go higher again if I try to enter early. Most important is that if there is a big retracement and I can catch a good entry using the rules below, chances are high that it will result in a trade with high R:R ratio.

Emanuell in the original thread is calling it build phase and the run phase. Atm I am not using multiple entries but I am looking to get early into the trade in the build phase.



Entry Rules:

1. PA should have retraced a good portion of the last movement of the identified trend but at least 50%. (in a downtrend the retracement would just hit the last lowest low)
2. PA should find resistance at one of the EMAs. As to my observations the higher the EMA the more reliable it is, and the stronger the bounce of it would be
3. Momentum flatten out and TDI green crossing red or Momentum already turned direction and TDI hooks.
Extras: If i spot divergence between PA,TDI,Momentum this would improve the quality of the signal.

Also a good indication for the end of the retracement is when TDI punches through the bollinger bands. A lot of times i have seen that PA turns with the next hook of the TDI.

Why do I use the momentum Indicator?
Sometimes the TDI is dangeling around and with the momentum besides I get more confidence. I might be missing some good trades but I hope it will keep me out of some bad ones.

I attached a sample:
I marked 2 possible short entries. The first one would be a little more aggressive because at the TDI cross the momentum is still quite flat



Another Sample earlier in the GBPNZD

Divergence setup: TDI and PA make Higher Highs, Momentum has lower high already. Here I would enter right at the TDI hook because I have divergence on my side and a negative momentum in direction of the last strong short movement.

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Nice...........anyway you can share the template?

thx for response. No problem, i attached it. but I am using the agena trader.

Here is a possible short setup coming up within the next days in a stock which I am watching.

smaller Trend (retracement)



Bigger Trend



PA kept pushing the retracement higher. Higher highs, higher lows in smaller trend but momentum kept falling.

Looking for weakness around the 45$ round number or the 200EMA.

subscribed to this thread.....for sure
I'm timing the opening hours of each session.....I can sure use this input....just the first page here is great....


Wait, I thought of something good.....only trade the first three hours of each session....we should encourage each other in that.....I do believe, Gents

thx for subscribing. will do my very best to keep it interesting :-)

PS: wanted to continue today with how to plan the exits but to tired from work....

Today had some time after work to practice on the 1m chart. I occassionally do that because there are more setups, so i hope to improove faster.

Got lucky with my entries. made 3 trades. 2 Long, 1 short in nasdaq cfd

1.trade: entered long after retracement failed to push lower, tdi bounce up and momentum turned poistiv
closed half of position size at around 2R hoping for price pushing higher. closed rest after divergence.

2.trade: shorted right after close of 1st trade because of divergence, TDI cross and neg. momentum. closed half position at approx 2R and rest shortly after
PA failed to push deeper with momentum flattening out.

3.trade: long after TDI cross. unfortunately 1st TP at 4293 was not hit by just 1 or 2 points. As second attempt failed, TDI hooked and momentum flattened out i closed trade with small profit.

Total: approx. +2%

Have some open trades on higher TFs. Basically Stocks run quite ok but most of FX position suck. So weekend I got to do some evaluation

It's good that you're making the effort to learn, as juggling trading with a full time job is challenging .....but i really do have my doubts about all of this if you only have 1 to 2 hours a day spare to trade.

i mean there's looking for setups, and you want good setups, not any setup, also it's probably best to keep an eye on trades as sometimes they will need manual closing as it will not hit your tp.

fitting that all into 1 - 2 hours a day will be tough. There's also a great deal of reading/learning to do from the thread.

I wish you all the best.
but i would suggest to try and give yourself the best chances of success you try and up your trading time if possible, or if that's not possible perhaps try and change your work hours/find another job [I know, I know, easier said than done]

thx for your opinion. basically I will trade the EOD chart so after all it is enough to check the charts at the end of the day if there is a new setup or SL has to be moved, or position should be closed.
In the weekend an analysis of the past week will be done as well as bigger picture (higher TF analysis, which instruments are possible running into sup/res zones...)
for the next week will we done.
I have a well paid job so switching job to get more time for trading is atm not an option.

1st Video about how I plan to enter and exit the market using weekly chart and time entry on the daily chart.

this is pure theory, the future will show how I manage to make it work in real time.

Sry, my english is not the best because i am not a natural speaker. hopefully it is easy to understand and makes sense.