Hi Friends,
I will start sharing the P&L etc once I complete my entire description of certain rules to make it more effective.
We have talked about the basics & 'effective adds'. The second bit i want to explain under 'protecting capital' is 'effective SLs'.
Learning to use effective SLs is the simplest yet the most powerful piece in 'Protecting Capital'.
The way I use my SLs under this strategy is that once my initial position has moved in more than 100 points profit, I use my entry point as my SL.
Though this sounds very naive to do that but it serves two very important functions:
1. First of all it avoids whipsaws. Ideally, in a good trade, when we make an entry based on 315, I would expect our ADD to happen once my initial position is in good profit. This means that after the initial entry, the market has trended in the direction of our position, corrected to touch 15 EMA and gave us an 'ADD' without touching our initial entry point. THIS IS A STRONG SIGN OF A TRENDING MARKET HENCE MAKES OUR TRADE MORE POWERFUL.
2. It also means that we dont let a winning position become a losing one, a basic fundamental of a successful swing trader.
Please remember : If our initial entry point (or SL) is hit, we enter again based on 'effective ADD' rules i.e previous day highs/lows breached and 3 EMA still in favour. This might mean we end up shorting below our earlier entry point but thats fine.
Please take the current example now, I shorted at 4190, booked at 3930, re-entered shorts at 4040. Now when 4190 was hit again on 15/07/2009 I exited my shorts and waitied for a 'ADD' signal to get generated. 315 stayed bearish even when markets went upto 4236 close on 15/07 & 16/7 (hence no longs) but it didnt generate any 'ADD short' signal by breaching previous days lows.
Hence I couldnt short again once my 4190 SL was hit. so basically made 110 points in short on one lot.
And then on 17th July closing at around 4392 when the 315 bullish signal was confirmed I entered fresh longs. Market has closed at 4510 today however till day end 3 EMA was not touched hence i booked profits at 4508 levels. I am waiting for 3 EMA to be touched again to jump into longs again with SL 4392 (my initial entry point since it has swung up more than 100 points now).
I have now explained all my rules making 315 more effective, please use them as per your money management rules and hopefully you all will make money. to summarise the rules:
1. Build up on winning positions gradually by following 'ADD' rules.
2. Exit on candles where 3 EMA is not touching the candle body using 'effective profit booking' rule.
3. Never let a winning position become a losing one... use 'effective SL' rule.
Cheers
SH
