Let's Start with the Rules....
Richard Dennis instilled in the Turtles a belief that a trade was successful if you followed your Rules. It didn't matter if you lost money on any one specific trade because if you executed your trading rules consistently, over time you would be successful. Many traders believe the key to success is having some holy grail entry signal. The entry is really not any more important than any of your other trading rules. In my course you will develop a Trading Strategy built around the following Rules...
Rule #1 -What Markets to Trade
In the first Module of the Course we will work together to build a diversified portfolio of approximately 30 markets that you will trade. By trading, diversified, uncorrelated markets it will help smooth out your equity curve by targeting your trades within the strongest trending markets. To get started it is recommended that you build your market portfolio using Exchange Traded Funds (ETF's) within the 4 main financial markets including: Equities, Bonds, Commodities & Currencies.
Rule #2 -How to Identify Trending Markets
In this module you will learn how to identify and trade the strongest markets in your market portfolio. This goes against the conventional investing advice of buy low, sell high. When trend following trading, you want to buy high and sell higher. The majority of trend following traders will buy on a breakout from some defined level. This defined level could be a channel breakout, a breakout above a moving average, or some other level that allows you to catch the momentum of the trend.
Rule #3 -How to Enter the Trade
To be a successful systematic trader you must have a clear trigger that allows you to enter the trade without second guessing the decision. In this module you will define your entry trigger. If you are using a breakout system, the trigger could be close above the breakout level. Each day you will review your watchlist to see if any markets meet your entry trigger criteria; and if they do, you place a buy stop order at or above the high of the close with presumption that the trend will continue on the next trading day. Your buy stop would be hit, and you would be in the trade.
Rule #4 -How to Exit the Trade if you are Wrong
You need to accept the reality that with trend following trading you will be wrong more often than you are right. Before you enter any trade, you need to define the price in which you will get out if the trade does not go as originally planned. In this module you will formulate your stop loss exit. There are many ways to determine your stop loss exit. Like the rest of your trading system, it must be something you are comfortable with and clearly understand the logic behind it. You can consider using a percentage stop loss (i.e., sell if stock price drops x% below purchase price) or a stop slightly below the breakout price, a specific moving average, or some multiple of the Average True Range (ATR).
Rule #5 -How to Protect your Capital
Money management is the most important component of your Trading Strategy. In this module you will determine how much money you are willing to lose if you are wrong. Many studies have been undertaken that prove that you should not risk more than 2% of your portfolio on any one trade. In the previous trading rules you determined your entry price and stop loss exit. You can then apply your defined risk % per trade to calculate how many shares you can buy.
Rule #6 -How to Exit a Profitable Trade
Finally we will move onto the fun stuff. Your Trading Strategy has followed the successful traders mantra of "Cut your losses short and let your profits run." As such a number of your positions have continued to follow the prevailing trend, and you are making money on these positions. With a trend following trading strategy, you need to resist the urge to sell your profitable positions and let the trade continue so you can capture as much of the trend as possible. You should, however, have a trailing stop that follows your trade up and is always active; so that when the trend eventually ends, you will automatically be stopped out, so you can capture as much profit as possible.
About Me
I worked in the engineering field for over thirty years. After selling the consulting engineering company I co-founded I shifted my focus to the world of trading and investments. I saw an opportunity to utilized the analytical engineering mindset to improve investment and trading processes and results. With this goal in mind I founded "Trade Like an Engineer" to help others become a more systematic and profitable trader.